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https://www.courtlistener.com/api/rest/v3/opinions/2093240/ | 460 F.Supp. 949 (1978)
James B. ROBINSON, Plaintiff,
v.
PLIMSOLL MARINE, INC. and Allstate Insurance Company, Defendants.
Civ. A. No. 77-1636.
United States District Court, E. D. Louisiana.
October 12, 1978.
James A. Wysocki, New Orleans, La., for plaintiff.
Don M. Richard, New Orleans, La., for defendant Plimsoll Marine, Inc.
Edward J. Brandao, New Orleans, La., for defendant Allstate Ins. Co.
*950 CASSIBRY, District Judge:
Plaintiff is employed by defendant, Plimsoll Marine, Inc., as a seaman aboard defendant's vessel, the M/V SPANISH FORT. On February 27, 1977, while the vessel was in navigable waters, plaintiff injured his lower back. This injury occurred while plaintiff was in the service of the vessel. Since that time he has received maintenance payments from defendant and its insurer at a daily rate of eight dollars ($8.00). On March 16, 1978 plaintiff was still considered to be "not fit for service" by the United States Public Health Service Hospital in New Orleans. Plaintiff asks for an increase in the daily rate of maintenance so that the amount received will cover his expenses of daily living ashore.
The right to maintenance and cure is the seaman's version of the shorebound employee's workmen's compensation. The original policies behind the right were to protect the seaman in this perilous industry and to induce men to enlist in the merchant marine. It is possible that the original policies behind maintenance and cure have diminished in importance and vitality. However, any change in the scheme is within the power of Congress rather than federal courts. It is still my function to insure that a seaman receives medical care for his illness or injury and fair and adequate payments for their maintenance during recovery.
In the present case, plaintiff has been receiving eight dollars per day because defendants say it is the "recognized rate" in this area. Eight dollars per day is a common figure in many districts. See M. Norris, The Law of Seaman § 607 n.8 (3rd ed. 1970). That figure has appeared in holdings in the Eastern District of Louisiana since at least 1965. Murphy v. Panoceanic Faith, 241 F.Supp. 540 (E.D.La.1965).
The amount of maintenance to which an injured seaman is entitled is a factual question. Various procedures have been used to determine the amount owed. Courts have measured how much would be necessary to provide meals and lodging ashore of the same character as those furnished aboard ship; how much the seaman has actually expended for meals and lodging; how much is agreed to in maritime contracts in the area, or how much meals and lodging "of a type that the injured seaman would normally require" would cost. Hudspeth v. Atlantic & Gulf Stevedores, Inc., 266 F.Supp. 937, 944 (E.D.La.1967).
In 1968 in a similar case I took notice of the union contracts in this district as well as the frequency with which $8.00 was either stipulated or found to be reasonable here. Duplantis v. Williams-McWilliams Industries, Inc., 298 F.Supp. 13 (E.D.La.1969). Ten years later, the picture is not nearly so clear. Although evidence has been presented regarding union contracts in the area, various provisions of union disability plans and pensions are interrelated with the contracts making it difficult to determine how much a sick or injured seaman normally requires or receives. All of the evidence presented indicates that it is more than $8.00.
Evidence on actual expenditures by plaintiff was similarly inconclusive. Depending upon which party interprets the data, his daily rate of expenditure is anywhere between $4.20 per day and $25.48 per day.
In Solet v. M/V Capt. H.V. Dufrene, 303 F.Supp. 980 (E.D.La.1969), Judge Alvin B. Rubin of this district determined that the evidence before him indicated that a proper maintenance rate would be $8.00 per day. That decision was rendered in August 1969. In the instant case, an expert witness in the field of economics testified as to the effects of inflation on expenditures for restaurant food and housing since August 1969. His conclusion was that an estimate of the present cost of meals and lodging that cost $8.00 in August 1969 is between $14.50 and $15.00 per day.
Considering all of the evidence at hand, I conclude that the proper maintenance rate is $15.00 per day. Defendants are ordered to pay plaintiff an amount equal to $15.00 per day from the date of injury to the present date minus whatever amount they have already paid him. Future payments of maintenance which are due, if any, will be paid at the rate of $15.00 per day. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2119733/ | 15 S.W.3d 289 (2000)
KAJIMA INTERNATIONAL, INC., Appellant,
v.
FORMOSA PLASTICS CORPORATION, USA, and Formosa Plastics Corporation, Texas, Appellees.
No. 13-98-266-CV.
Court of Appeals of Texas, Corpus Christi.
March 23, 2000.
*290 Cynthia T. Sheppard, Houston, Marek & Griffin, Victoria, Steven John Lownds, Quilling, Selander, Cummiskey, Clutts & Lownds, Dallas, John Griffin, Jr., Houston Marek & Griffin, Victoria, Emmett Cole, Jr., Cole, McManus, Cole & Easley, Victoria, for appellant.
Neil Kenton Alexander, Porter & Hedges, L.L.P., Houston, Steve Q. McManus, McManus & Crane, Victoria, Todd A. Hunter, Hunter & Handel, Corpus Christi, John N. McCamish, Jr., McCamish & Martin, San Antonio, Donald R. Uher, Bay City, for appellees.
Before Justices HINOJOSA, YAEZ, and RODRIGUEZ
OPINION
Opinion by Justice RODRIGUEZ.
Kajima International, Inc. (Kajima) sued Formosa Plastics Corporation, USA and Formosa Plastics Corporation, Texas (Formosa) for fraud, breach of contract, quantum meruit, and negligent misrepresentation arising from work performed by Kajima at Formosa's expansion plant in Point Comfort, Texas. In a bifurcated trial, a jury found Kajima entered into one of five contracts with Formosa as a result of fraud by Formosa and, using two methods of calculation, awarded damages to Kajima in the amounts of $2,157,293 and $1,900,000. The jury found no material breach of any of the five contracts, but awarded Kajima $3,700,000 for quantum meruit. The jury further awarded Kajima $4,675,000 in attorneys' fees and $1,540,000 in exemplary damages.
The trial court ordered certain jury answers disregarded, including: the $1,900,000 fraud recovery, the $3,700,000 in quantum meruit damages, the award of $4,675,000 in attorneys' fees, and questions eleven, twelve, and thirteen,[1] which the jury did not answer. The court also included an award of $525,776 as unpaid retainage on three contracts. The resulting judgment totaled $5,591,066.65, including prejudgment interest. Kajima filed a motion for mistrial, which the trial court denied, and a motion for new trial, which was overruled by operation of law. On *291 appeal, Kajima raises nine issues. We reverse and remand.
Kajima, an industrial construction company, submitted several bids for work on Formosa's expansion plant project located in Point Comfort, Texas. Formosa awarded Kajima five contracts, some involving piping work in the olefins area and others involving piping and equipment setting work in the polypropylene plant. Each contract specified a schedule of performance. The general terms and conditions common to all contracts permitted Kajima to work overtime only if Kajima or its subcontractors delayed the work, and provided no additional compensation for such work.
Performance took much longer than provided for in the contracts, causing Kajima's costs to exceed the contract amount paid by Formosa. Kajima asserts it was required to spend this money as a result of delays caused by Formosa. In addition, Kajima asserts Formosa fraudulently induced it to enter into the contracts and make artificially low bids on the contracts by withholding information relating to the design and drawings of the polypropylene plant. Kajima further asserts Formosa provided Kajima with a false schedule concerning the olefins plant which failed to reveal that multiple contractors would be working in the same location at the same time doing incompatible work. Moreover, according to Kajima, Formosa engaged in a "string along" fraud scheme in which Formosa made repeated false promises to compensate Kajima for delays, disruptions, bid omissions, and additional costs in order to keep Kajima working.
Formosa counters that Kajima spent in excess of the contract prices because of Kajima's own bidding and contract administration mistakes. Formosa asserts the drawings were adequate for building and bidding, and when problems arose, Kajima was paid pursuant to the contract. Formosa further contends that Kajima knew other contractors would be working within its area, and that any conflict in scheduling was the result of Kajima's own mismanagement.
By its first issue, Kajima complains the trial court erroneously refused to submit a broad form fraud question. Kajima's proposed jury question broadly asked whether Formosa committed fraud against Kajima; however, the trial court limited the fraud question to whether Kajima entered into the contracts as a result of fraud by Formosa. By limiting the jury's consideration to fraud in the inducement of the five written contracts, Kajima contends the trial court precluded the jury from considering Formosa's acts of fraud to "string along" Kajima after the work was under way. As articulated by Kajima, "[it] was deprived of any submission to the jury concerning Formosa's fraudulent inducement of conduct that was not contractually required and that occurred subsequent to the execution of the original contracts."
The standard of review for an alleged error in the jury charge is abuse of discretion. See Texas Dept. of Human Serv. v. E.B., 802 S.W.2d 647, 649 (Tex.1990). An abuse of discretion occurs when the trial court acts without reference to any guiding principle. See id.; Dico Tire, Inc. v. Cisneros, 953 S.W.2d 776, 797 (Tex. App.-Corpus Christi 1997, writ denied). A trial court must submit all questions raised by the pleadings and evidence in its charge to the jury. See Tex.R. Civ. P. 278; Hyundai Motor Co. v. Rodriguez ex rel. Rodriguez, 995 S.W.2d 661, 663 (Tex.1999). When feasible, jury questions should be in broad form, accompanied by appropriate instructions and definitions. See Hyundai, 995 S.W.2d at 663-64. To determine whether an alleged error in the jury charge is reversible, we consider the pleadings, the evidence presented at trial, and the charge in its entirety. See Island Recreational Dev. Corp. v. Republic of Tex. Sav. Ass'n, 710 S.W.2d 551, 555 (Tex. 1986). Error in the charge is reversible only if harmful, that is, if it caused or was reasonably calculated to cause, and probably *292 did cause, the rendition of an improper judgment. See Tex.R.App. P. 44.1(a)(1).
The elements of fraud are: (1) a material misrepresentation was made; (2) it was false; (3) when the representation was made, the speaker knew it was false or the statement was recklessly asserted without any knowledge of its truth; (4) the speaker made the false representation with the intent that it be acted on by the other party; (5) the other party acted in reliance on the misrepresentation; and (6) the party suffered injury as a result. See DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex.1990).
In the present case, Kajima pleaded that "Formosa withheld material information from Kajima and engaged in improper conduct with regard to Kajima both before and after submission of bids and execution of the Contracts." Kajima further pleaded that Formosa engaged in a scheme of wrongful conduct through numerous misrepresentations or material omissions, and made "misrepresentations concerning its intention to reasonably compensate for delays and disruptions when, in reality, it possessed no such intention." Kajima also pleaded the occurrence of the specific elements of fraud without indicating that such fraud was committed only in the inducement of the written contracts. No special exceptions to the pleadings were filed; consequently, we construe the pleadings liberally in favor of the pleader. See Handy Andy, Inc. v. Ruiz, 900 S.W.2d 739, 742 (Tex.App.-Corpus Christi 1994, writ denied) (citing Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 186 (Tex. 1977)). We conclude Kajima's pleadings adequately raised the issue of fraud arising after execution of the contracts.
We next examine the evidence supporting the requested fraud question. Calvin Howton, an on-site project engineer for Kajima, provided evidence of Formosa's post-contract fraud. Howton testified that, in order to catch up to the targeted schedule from delays caused by other contractors and Formosa, Kajima was required to hire more people, work overtime, and perform twenty-four hour shifts, and did so pursuant to Formosa's demands and assurances that they would be compensated for the additional costs. Ronald Robichaux, Formosa's senior engineer in charge of new projects in the maintenance department, stated in a videotaped deposition that if a contractor made a claim for extras, Formosa would try to get the contractors to do the work, without authorizing payment. Kajima also provided evidence that it was not paid for the additional costs or overtime and that it suffered damages as a result. We conclude there is some evidence that: (1) Formosa promised to compensate Kajima for overtime and additional costs; (2) this promise or representation was false; (3) when the promise was made, Formosa knew it was false or made such promise recklessly without any knowledge of its truth; (4) Formosa made this promise with the intent that it be acted on by Kajima; (5) Kajima relied upon said promise or misrepresentation; and (6) Kajima suffered injury as a result. Thus, there is some evidence of fraud occurring after the execution of the contract.
Formosa cites Formosa Plastics Corp., USA v. Presidio Engineers & Contractors, 960 S.W.2d 41, 46-47 (Tex.1998), for the proposition that the only type of fraud claim which can exist in a contract setting is a claim for fraud in the inducement of contracts. We find no language in Presidio to support such an interpretation. In Presidio, the supreme court reviewed an opinion of this Court. In the Presidio opinion issued by this Court, we upheld the jury's finding that "Formosa defrauded Presidio by inducing Presidio to enter into the contract and to continue performing on the contract." Formosa Plastics Corp., USA v. Presidio Engineers & Contractors, 941 S.W.2d 138, 146-47 (Tex.App.-Corpus Christi 1995), rev'd on other grounds, 960 S.W.2d 41 (Tex.1998). We also held that the trial court did not abuse its discretion by combining several species of fraud, including *293 misrepresentation, fraudulent inducement, fraudulent concealment, and fraudulent performance, into one broad form fraud question. See id. at 146.
In Presidio, the supreme court determined that because damages for fraud were calculated improperly there was insufficient evidence to support the entire amount of fraud damages. See Presidio, 960 S.W.2d at 49-50. Nonetheless, the supreme court recognized that Presidio had a viable fraud claim. See id. at 47. In this regard, however, the court limited its consideration to whether there was sufficient evidence to support the theory that Formosa fraudulently induced Presidio to enter into the contract, and did not "consider whether any other representations Formosa allegedly made were fraudulent." Id. at 49. Thus, the supreme court neither approved nor disapproved of our upholding the jury's finding of fraud damages for fraud in the performance of a contract.
Formosa contends that by allowing recovery for fraud after execution of the contracts, every case in which breach of contract is alleged and a contracting party has asked another party for continued performance will require a fraud submission. That is, a mere statement by a contracting party that "I will pay you what I owe you under the contract" will be actionable fraud. Indeed, an unfulfilled promise does not, standing alone, constitute fraud; otherwise, every breach of contract would amount to fraud. See William B. Roberts, Inc. v. McDrilling Co., Inc., 579 S.W.2d 335, 340 (Tex.Civ.App.-Corpus Christi 1979, no writ); see also Oliver v. Rogers, 976 S.W.2d 792, 804 (Tex.App.-Houston [1st. Dist.] 1998, no pet.) (cases in which promisor had no intention of performing at time promise was made are distinguishable from cases in which promisor made promise with intent to perform and later changed his mind). However, a party's asking another party for continued performance will only trigger submission of a fraud question when the party makes a knowingly fraudulent misrepresentation to induce that performance. See Schindler v. Austwell Farmers Coop., 841 S.W.2d 853, 854 (Tex.1992) (promise of future performance constitutes fraudulent misrepresentation if promise was made with no intention of performing at the time it was made). The supreme court has held that a fraud claim may be maintained for breach of an oral agreement to pay a bonus because a "promise to do an act in the future is actionable fraud when made with the intention, design and purpose of deceiving, and with no intention of performing the act." Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex.1986). Moreover, this Court has previously allowed recovery for fraud that induced a party to do something that it was not obligated to do under the contract. See Arthur Bros., 882 S.W.2d at 925 (explaining that fraud claim pertained to representation regarding contract renewal, which was outside boundary of written agreement). We can find no opinion precluding recovery for fraud because the fraud occurred after execution of a contract, and we decline to do so here.
The promise in the instant case was not a promise to pay what was owed under the contract. Rather, the promise to pay for overtime work was outside the purview of the contract. Regardless of whether we characterize the fraud in this case as fraudulent inducement to make an oral amendment to an existing contract, fraudulent inducement to enter into a new oral contract, fraudulent misrepresentation, fraudulent inducement to continue performance, or fraud in the performance, the essential requirement that a promise was made with no intention of performing when it was made has been established by some evidence. See Central Sav. & Loan Ass'n. v. Stemmons Northwest Bank, N.A., 848 S.W.2d 232, 240 (Tex.App.-Dallas 1992, no writ) (when a promise is made with purpose or intent to deceive another, and without intention of performing, there is actionable fraud) (citing Spoljaric, 708 S.W.2d at 434).
*294 Formosa also urges that if such misrepresentations occurred as alleged, they would have amended the existing contracts. Because the jury found there was no breach as to any of the contracts, Formosa maintains, they necessarily found against any fraud in the process. However, as the supreme court observed in Presidio, fraudulent inducement, a species of intentional fraud, involves "[a]n independent legal duty, separate from the existence of the contract itself, [which] precludes the use of fraud to induce a binding agreement." Presidio, 960 S.W.2d at 47. Therefore, a finding as to whether a party breached a contract is not determinative as to whether the same party engaged in intentional fraud, such as fraudulently procuring an amendment to an existing contract.
During oral argument, Formosa directed this Court to D.S.A., Inc. v. HISD, 973 S.W.2d 662, 663-64 (Tex.1998), for the proposition that, with the sole exception of fraudulent inducement, a court may not award tort damages that involve the same injury as the breach of contract. Formosa's interpretation of D.S.A. is incorrect and its reliance on it in this case is misplaced. In D.S.A., the supreme court analyzed the tort of negligent misrepresentation, which has a narrower scope of liability than fraudulent inducement, and concluded that to recover for such a claim, there must be an injury independent of the breach of contract. See id. (citing Restatement (Second) of Torts ß 552B (1997)). In this case, there is no claim of negligent misrepresentation; the fraud theory involves intentional or reckless conduct. Thus, the requirement of an independent injury in D.S.A. is inapplicable to the facts of this case.
We conclude the trial court abused its discretion in submitting, over Kajima's proper objection and request, a fraud question that precluded consideration of fraud that occurred after execution of the written contracts.
Failure to submit a valid theory of recovery that has been pleaded and is supported by some evidence is reversible error. See Elbaor, 845 S.W.2d at 243-44; Exxon Corp. v. Perez, 842 S.W.2d 629, 631 (Tex.1992). Although the elements of fraud were included in the jury instruction, the question as phrased precluded consideration of any fraud occurring after the execution of the five written contracts.[2] Therefore, the jury was unable to consider a viable cause of action that was properly requested, pleaded, and supported by the evidence. We conclude the error probably caused the rendition of an improper judgment. See Tex.R.App. P. 44.1(a). Appellant's first issue is sustained. Because our ruling on Kajima's first issue is dispositive of the case before us, we do not address Kajima's remaining issues.
The judgment of the trial court is REVERSED and REMANDED for a new trial.
NOTES
[1] These questions addressed an alleged fraudulent misrepresentation made by Formosa that Kajima would be paid for bid omissions.
[2] We note that submission of the bid omission questions did not cure the omission of Kajima's post-contract fraud theory, as the bid omissions comprised only a portion of Kajima's post-contract fraud theory. The inclusion of the question of whether Kajima entered into the contracts because of fraud and the bid omissions questions still leave out many of the misrepresentations alleged to have occurred after execution of the contracts. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2483121/ | (2008)
PCH MUTUAL INSURANCE COMPANY, INC., Plaintiff,
v.
CASUALTY & SURETY, INC., Defendant.
Civil No. 08-282 (CKK).
United States District Court, District of Columbia.
August 5, 2008.
MEMORANDUM OPINION
COLLEEN KOLLAR-KOTELLY, District Judge.
The above-captioned action arises out of an alleged breach of an Administrative Services Agreement (the "Agreement") entered into by Plaintiff PCH Mutual Insurance Company, Inc. ("PCH") and Defendant Casualty & Surety, Inc. ("CSI"). After removing this action from the Superior Court for the District of Columbia, CSI filed a Motion to Compel Arbitration and Stay Proceedings, which PCH opposes. Despite the pending Motion to Compel Arbitration, the parties appear to have agreed to and begun discovery in this matter, without a Court order to that effect. However, recognizing that engaging in discovery might prejudice its Motion to Compel Arbitration, CSI filed a Motion to Stay Discovery pending resolution of that Motion, which PCH likewise opposes. The Court has conducted a searching review of the parties' filings in connection with the two pending motions, the exhibits attached thereto, the relevant statutes and case law, and the entire record herein. Based upon the foregoing, the Court concludes that a genuine issue of material fact exists as to whether the parties' Agreement provides for mandatory arbitration of disputes arising out of the Agreement. As "the making of the agreement for arbitration" between the parties is thus "in issue," the Court shall, as required by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, "proceed summarily to the trial" of the issue. Accordingly, the Court shall HOLD IN ABEYANCE CSI's [8] Motion to Compel Arbitration and Stay Proceedings and, as set forth in the Order accompanying this Memorandum Opinion, shall require the parties to confer and submit to the Court in a joint status report a proposal and schedule for further proceedings to resolve the arbitrability issue. Further, because the Court must resolve the threshold arbitrability issue before the litigation of this matter can continue, the Court shall GRANT-IN-PART CSI's [27] Motion to Stay Discovery and shall stay discovery related to the merits of this litigation pending a resolution of the threshold arbitrability issue. The parties may, however, conduct discovery related to the issue of arbitrability, if such discovery is appropriate in proceeding to a trial of the issue. If that is the case, the parties should submit a joint discovery plan to the Court for its approval.
I. BACKGROUND
Plaintiff PCH is a risk retention group (RRG), domiciled in the District of Columbia, whose "primary activity consists of assuming and spreading all, or any portion of the liability exposure of its group members." Pl.'s Mot. to Compel Opp'n at 1-2 (quoting 15 U.S.C. § 3901(4)). Defendant CSI is an insurance broker based in Alabama. Def.'s Mot. to Compel at 4. On March 18, 2008, after the above-captioned action was filed in Superior Court, CSI filed with the California Secretary of State to qualify to do business in California. Pl.'s Mot. to Compel Opp'n at 3 (citing Ex. B (4/7/08 Decl. of T. Thompson ¶ 3)).
On March 31, 2004, PCH and CSI entered into an Administrative Services Agreement, under which CSI was to act as PCH's managing general underwriter. Id.; Def.'s Mot. to Compel, Ex. A (Agreement). Relying upon a Declaration made by Jon Harkavy, PCH's manager, PCH asserts that CSI drafted the Agreement at issue in this case. See Pl.'s Mot. to Compel Opp'n at 11, Ex. C (4/7/08 Decl. of J. Harkavy). In contrast, CSI asserts, relying upon the Declaration of Dave Condon, that PCH drafted the Agreement. Def.'s Mot. to Compel Reply at 1, Ex. A (4/25/08 Decl. of D. Condon). Specifically, in his Declaration, Mr. Condon avers that he "was involved in the negotiations that ultimately concluded in the execution of the [Agreement]," that he "supplied [PCH] with agreements previously executed by CSI in such regard," that PCH "apparently utilized those specimen agreements in drafting the [Agreement]," such that as a result, Mr. Harkavy's declaration is allegedly false insofar as it asserts that CSI drafted the Agreement. Id.
Only a few of the Agreement's provisions are relevant to the pending motions. First, and most significantly, Paragraph 17[1] of the Agreement provides:
17. Arbitration. Any disputes concerning any aspect of this Agreement may be submitted to binding arbitration. The prevailing party shall be entitled to recover all costs incurred, including reasonable attorney's fees.
Agreement ¶ 17. In addition, Paragraph 14 of the Agreement provides:
14. Injunction. In the event that [CSI], its employees, agents, brokers and/or representatives, attempt to breach the terms of this Agreement, [PCH] shall, in addition to its rights and remedies available to it at law or in equity, have the right to seek an injunction against [CSI] to enforce the provisions of this Agreement. [CSI] agrees to be responsible for and to reimburse [PCH] for any attorney's fees and costs associated with any legal action taken by [PCH] to enforce the terms of this Agreement.
Id. ¶ 14. Finally, Paragraph 24 of the Agreement provides:
[24]. Binding Effect and Governing Law. This Agreement binds and benefits the parties, their permitted successors, assigns and transferee[s], if specifically enforceable and governed by and construed in accordance with the law of the [State of] California.
Id. ¶ 24.
On January 22, 2008, PCH filed a four-count complaint against CSI in the Superior Court for the District of Columbia (Case No. 08-00499). See Docket No. [1]. On February 19, 2008, CSI removed the case to this Court, and on February 25, 2008, CSI filed its Answer and Counterclaim. Id.; Docket No. [4]. In its Answer, CSI advised the Court that on February 21, 2008, it served notice upon PCH of CSI's intent to petition this Court for an Order compelling arbitration, and further advised that CSI would file such a petition with the Court if PCH did not consent to CSI's request. Id. at 5 n.1. CSI filed its Motion to Compel Arbitration and Stay Proceedings on March 7, 2008. See generally Def.'s Mot. to Compel. PCH filed an Opposition to CSI's Motion, and CSI filed a Reply in support of its Motion.
On May 7, 2008, PCH filed a Motion for Leave to File a Sur-Reply in further opposition to CSI's Motion to Compel Arbitration, in order to respond to CSI's citation of two Supreme Court cases for the first time in its Reply. See Docket No. [22]. Although that Motion indicates that CSI opposes PCH's request to file a sur-reply, CSI has not filed an opposition to that effect. As the Court concludes that CSI's Reply in fact raises a new argument, the Court shall grant PCH's [22] Motion for Leave to File a Sur-Reply in the Order accompanying this Memorandum Opinion, and shall consider PCH's sur-reply herein. See United States ex rel. Pogue v. Diabetes Treatment Ctrs. of Am., Inc., 238 F.Supp.2d 270, 276-77 (D.D.C.2002) ("A surreply may be filed only by leave of Court, and only to address new matters raised in a reply to which a party would otherwise be unable to respond.").
Finally, on July 15, 2008, CSI filed a Motion to Stay Discovery pending the Court's resolution of its Motion to Compel Arbitration.[2] CSI asserts that after it filed its Motion to Compel Arbitration, the parties to this action conducted a conference pursuant to Federal Rule of Civil Procedure 26(f), and subsequently exchanged initial disclosures pursuant to Rule 26(a)(1). Def.'s Mot. to Stay at 2. CSI argues, however, that engaging in further discovery is inefficient in light of the pending Motion to Compel Arbitration, and asserts that it is afraid of being viewed as having waived its right to arbitrate by engaging in further discovery. Id. at 2-3. PCH opposes CSI's Motion to Stay Discovery.
II. DISCUSSION
A. Legal Standards
The Federal Arbitration Act provides that "[a] written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract... or the refusal to perform the whole or any part thereof, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. As the Supreme Court has emphasized, the FAA "strongly favors the enforcement of agreements to arbitrate as a means of securing `prompt, economical and adequate solution of controversies,'" Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 479-80, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (quoting and overruling Wilko v. Swan, 346 U.S. 427, 438, 74 S.Ct. 182, 98 L.Ed. 168 (1953)), and requires that courts "rigorously enforce agreements to arbitrate," Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226-27, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985)). Further, where an agreement contains a valid arbitration clause, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration," Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), and "[a]n order to arbitrate [a] particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute," AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quoting Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)).
Nevertheless, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Tech., 475 U.S. at 648, 106 S.Ct. 1415 (quoting Warrior & Gulf, 363 U.S. at 582, 80 S.Ct. 1347). As such, the general presumption in favor of arbitrability "does not apply to the determination of whether there is a valid agreement to arbitrate between the parties; instead ordinary contract principles determine who is bound." Institut Pasteur v. Chiron Corp., No. Civ. A. 03-0932(JDB), 2005 WL 366968, *10 (D.D.C. Feb. 16, 2005) (quoting Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir.2002)). Once the Court concludes that a binding agreement to arbitrate exits, the presumption in favor of arbitrability applies to issues regarding the scope of the agreement to arbitrate. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944-45, 115. S.Ct. 1920, 131 L.Ed.2d 985 (1995). Determining whether a contract indicates an agreement to arbitrate is usually a task for the Court, rather than the arbitrator. See Howsam v. Dean Witter Reynolds, 537 U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) ("a gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability' for a court to decide.").
The Court applies state contract law in determining whether there is an enforceable agreement to arbitrate. See First Options, 514 U.S. at 943-44, 115 S.Ct. 1920. As such, in considering Defendants' Motion to Compel Arbitration, the Court must address an initial dispute between the parties as to which state's law applies in the instant case. Generally speaking, a federal court sitting in diversity must apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Further, "District of Columbia courts give effect to contractual choice of laws provisions `as long as there is some reasonable relationship with the state specified.'" Elemary v. Philipp Holzmann A.G., 533 F.Supp.2d 144, 153-54 n. 3 (2008) (quoting Norris v. Norris, 419 A.2d 982, 984 (D.C.1980)). In its Motion to Compel Arbitration, CSI asserts that the Agreement is governed by California law, based upon Paragraph 24 of the Agreement, which states:
[24]. Binding Effect and Governing Law. This Agreement binds and benefits the parties, their permitted successors, assigns and transferee[s], if specifically enforceable and governed by and construed in accordance with the law of the [State of] California.
Agreement ¶ 24. On its face, however, this provision does not dictate that the Agreement must be interpreted pursuant to California law. Instead, as PCH correctly explains, "it conditions the rights of successors and assigns on the enforceability of their successor rights under California law." Pl.'s Mot. to Compel Opp'n at 8.
In addition, even if Paragraph 24 purported to be a choice of law clause dictating the application of California law, PCH is correct in arguing that "[n]either the parties nor the Agreement has a reasonable connection to California" because "no portion of the Agreement was to be performed in California, neither of the parties is based in California, PCH does not do business in California and is not qualified to do so, and CSI did not even qualify to do business in California" until after it filed its Motion to Compel Arbitration. Id. Tellingly, CSI makes no effort in its Reply to press its contention that Paragraph 24 constitutes a true choice of law provision that mandates the application of California law in this case. For the foregoing reasons, the Court concludes that it does not.
Under District of Columbia law, where the parties to a contract have not agreed on a choice of law, the court uses a "constructive blending of the governmental interest analysis and the most significant relationship test," to determine which state's laws apply. Stephen A. Goldberg Co. v. Remsen Partners, Ltd., 170 F.3d 191, 194 (D.C.Cir.1999) (internal quotations omitted). Consistent with the Restatement (Second) of Conflict of Laws § 188, District of Columbia courts consider "(1) the place of contracting; (2) the place of negotiation; (3) the place of performance; (4) the location of the contract's subject matter; and (5) the domicile, residence, nationality, place of incorporation and place of business of the parties." Ideal Elec. Sec. Co. v. Int'l Fidelity Ins. Co., 129 F.3d 143, 148 (D.C.Cir.1997). Here, it is clear that the parties have a significant relationship to the District of Columbia, such that its contract law should govern the Agreement. As PCH explains, it is based in the District of Columbia, and the agreement was to be performed in part in the District of Columbia. Pl.'s Mot. to Compel Opp'n at 9. Indeed, PCH's operations are regulated entirely by the District of Columbia's risk retention group regulations. Id. at 10. Thus, while CSI is a citizen of Alabama and the Agreement was to be performed in part in that state, id. at 9, CSI offers no evidence (and does not even argue) that Alabama "has a potential interest in having its law applied" such that a "true conflict" of laws or governmental interests exists. Wachsman v. Islamic Republic of Iran, 537 F.Supp.2d 85 (D.D.C.2008). As such, the Court concludes that the Agreement is governed by District of Columbia law.
Returning, then, to the principles of District of Columbia contract law that control this Court's determination of whether the Agreement includes an enforceable agreement to arbitrate, that law provides that "arbitration is predicated upon the consent of the parties ... and the determination of whether the parties have consented to arbitrate is a matter to be determined by the courts on the basis of the contracts between the parties." Bailey v. Fed. Nat'l Mortgage Ass'n, 209 F.3d 740, 746 (D.C.Cir.2000) (quoting Ballard & Assocs., Inc. v. Mangum, 368 A.2d 548, 551 (D.C. 1977)). Further, "an enforceable contract does not exist unless there has been a `meeting of the minds' as to all material terms. In other words, a contract is not formed unless the parties reach an accord on all material terms and indicate an intention to be bound." Id. (quoting Jack Baker, Inc. v. Office Space Dev. Corp., 664 A.2d 1236, 1238 (D.C.1995)). District of Columbia law requires that the Court "closely" examine the question of the parties' intent to be bound, Jack Baker, 664 A.2d at 1239, and "the party asserting the existence of a contract has the burden of proving its existence," Bailey, 209 F.3d at 746 (citing Ekedahl v. COREStaff, Inc., 183 F.3d 855, 858 (D.C.Cir.1999) (per curiam)).
Finally, the FAA provides that a court "upon being satisfied that [an] issue [is] referable to arbitration under [a written] agreement, shall ... stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3. As such, the FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc., 470 U.S. at 218, 105 S.Ct. 1238 (emphasis in original). Thus, "the proper approach to employ in reviewing the defendant's motion to [ ] compel arbitration is to apply the same standard of review that governs Rule 56 motions" for summary judgment. Brown v. Dorsey & Whitney, LLP, 267 F.Supp.2d 61, 67 (D.D.C.2003). Accordingly, it is appropriate to grant a motion to compel arbitration when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Under that framework, the party seeking to compel arbitration bears the initial responsibility of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party must "go beyond the pleadings and ... designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. 2548. The court should draw all inferences from the supporting records submitted by the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A non-moving party, however, must establish more than the "mere existence of a scintilla of evidence" in favor of its position. Id. at 252, 106 S.Ct. 2505. "If the evidence is merely colorable, or is not sufficiently probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. 2505 (internal citations omitted).
B. Genuine Issues of Material Fact Exist Regarding the Arbitrability of the Agreement
As noted above, Paragraph 17 of the Agreement provides:
17. Arbitration. Any disputes concerning any aspect of this Agreement may be submitted to binding arbitration. The prevailing party shall be entitled to recover all costs incurred, including reasonable attorney's fees.
Agreement ¶ 17. In moving to compel arbitration and stay the proceedings in this action, CSI argues that "there is no dispute as to the validity, the revocability, or the enforceability of the Agreement," and that "[b]ecause the parties have agreed to arbitrate disputes involving `any aspect' of the Agreement, the disputes at issue in this action fall squarely within the scope of the Agreement's arbitration clause." Def.'s Mot. to Compel at 5. PCH does not dispute that the Agreement is a valid, binding, and enforceable contract as between the parties, nor does it contend that the particular issues in this action are outside the scope of the Agreement's arbitration clause. Rather, PCH argues that "the plain language of the arbitration clause, other provisions of the [Agreement] and the other evidence before this court reflect an intent to allow only permissive arbitration." Pl.'s Mot. to Compel Opp'n at 1. The Court's review of the parties' briefs reveals that a genuine issue of material fact exists as to whether the parties agreed to mandatory arbitration of disputes arising out of the Agreement.
As an initial matter, a clear dispute exists as to what should ordinarily be an easily resolved issue: identifying the drafter of the Agreement. Relying upon Mr. Harkavy's Declaration, which states without any elaboration that "CSI drafted the [Agreement] between PCH and [CSI]," see Pl.'s Mot. to Compel Opp'n, Ex. C (Harkavy Decl.) ¶ 3, PCH asserts that any ambiguity in the Agreement must be construed against CSI's interests in light of the common-law rule of contract interpretation that any ambiguous contract language should be construed against the interest of the party that drafted the contract. Pl.'s Mot. to Compel Opp'n at 10-11. This rule is certainly applied under District of Columbia law, as well as in cases considering arbitration agreements under the FAA. See Forrest v. Verizon Commc'ns, Inc., 805 A.2d 1007, 1013-14 (D.C.2002); Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995). However, as noted above, Mr. Harkavy's claim that CSI drafted the Agreement is flatly contradicted by Mr. Condon's slightly more detailed Declaration, which CSI offers in support of its claim that PCH actually drafted the Agreement. See Def.'s Mot. to Compel Reply at 1, Ex. A (Condon Decl.) ¶¶ 2-5. While identifying the drafter of the Agreement might not be material if the Agreement itself were unambiguous as to the issue of arbitrability, as discussed below, the Agreement does not clearly reveal whether the parties agreed to mandatory arbitration. As such, identifying the drafter of the Agreement may ultimately sway the Court's analysis of the arbitrability issue.
In its Reply, CSI maintains that "the parties' desire to have disputes arising under the [Agreement] subject to binding arbitration is pellucidly clear," and that, as a result, PCH may not resort to extrinsic evidence regarding the Agreement's meaning. Def.'s Reply at 3. The Court cannot agree with CSI. Significantly, as PCH stresses, the first sentence of the arbitration clause provides that any dispute concerning the Agreement "may be submitted to binding arbitration," while the second sentence of the clause provides that the party that prevails in arbitration "shall be entitled to recover all costs incurred, including reasonable attorney's fees." Agreement ¶ 17; Pl.'s Mot. to Compel Opp'n at 11. As a general matter of contract law, the word "may" is viewed as a permissive, rather than mandatory, term, particularly when used in contraposition to the word "shall." See Jama v. Immigration and Customs Enforcement, 543 U.S. 335, 346, 125 S.Ct. 694, 160 L.Ed.2d 708 (2005); Ace Constructors, Inc. v. United States, 70 Fed.Cl. 253, 288 (Fed. Cl.2006), aff'd, 499 F.3d 1357 (Fed.Cir. 2007).
Significantly, the sole court in this district that appears to have considered the effect of the use of the word "may" in an arbitration clause between private parties appears to have been swayed by the distinction between the terms "may" and "shall." In Group Hospitalization and Medical Services, Inc. v. Stubbs, Civ. A. No. 90-823, 1990 WL 183576 (D.D.C. Nov. 16, 1990), Judge Thomas A. Flannery concluded that "the use of the word `may' in the [ ] arbitration clause evinces the parties' intent not to be bound to invoke the arbitration machinery to settle their disputes.... Had the parties intended to provide for mandatory arbitration of disputes, they could have simply substituted the word `shall' for `may.'" Id. at *2 (D.D.C. Nov. 16, 1990). The Court agrees with Stubbs' reasoning insofar as it indicates that the use of the word "may" raises a question as to whether the parties intended the Agreement's arbitration clause to require mandatory arbitration.[3]
CSI nevertheless asserts that the Court should read the word "may" in the first sentence of the arbitration as requiring mandatory arbitration because the parties "already had the right to engage in consensual arbitration." Def.'s Mot. to Compel at 8. According to CSI, reading the word "may" as permissive would "amount to no more than a barren recital that the parties might in the future agree to arbitrate a dispute." Id. (quotation omitted). CSI is correct that, under District of Columbia law, "[i]t is a settled rule of contract interpretation that contract language should not be interpreted to render the contract promise illusory or meaningless." Caglioti v. Dist. Hosp. Partners, LP, 933 A.2d 800, 811 (D.C.2007) (quoting Retail Clerks Int'l Ass'n v. NLRB, 510 F.2d 802, 806 n. 15 (1975)). Moreover, based upon this principle, both the Fourth Circuit Court of Appeals and the Eighth Circuit Court of Appeals have concluded that the use of the word "may" did not render an arbitration clause permissive because such an interpretation would leave the clause devoid of meaning. See United States v. Bankers Ins. Co., 245 F.3d 315, 320-21 (4th Cir.2001); Am. Ital. Pasta Co. v. Austin Co., 914 F.2d 1103 (8th Cir.1990).
Applying that principle in this case might suggest that the arbitration clause be read as providing that either party may submit a dispute to arbitration, which becomes binding upon the parties once invoked. However, the arbitration clause at issue in this case differs significantly from the clauses considered by the Fourth and Eighth Circuits because, in addition to providing that parties "may" submit disputes to binding arbitration, it continues to provide that the party that prevails in arbitration "shall be entitled to recover all costs incurred, including reasonable attorney's fees." Agreement ¶ 17. As such, as PCH explains, another plausible interpretation of the arbitration clause is that "arbitration is permissive, not mandatory, but that if the parties agree to arbitrate, the loser pays the winner's attorneys' fees." Pl.'s Mot. to Compel Opp'n at 13. Based upon the language of the arbitration clause alone, the Court cannot determine which of these interpretations is correct.
In addition, other aspects of the arbitration clause and the Agreement demonstrate further ambiguity as to whether the parties intended to provide for mandatory arbitration of disputes. First, as PCH notes, the arbitration clause does not identify the arbitrator, a method for choosing the arbitrator, or a place of arbitration. Pl.'s Mot. to Compel Opp'n at 12. While this shortcoming does not necessarily prove that the parties did not reach a "meeting of the minds," it is probative of whether the parties actually considered or agreed upon all material terms of an agreement to arbitrate. Moreover, in addition to the arbitration clause, the Agreement contains another paragraph that addresses the handling of disputes arising out of the Agreement. Paragraph 14 provides:
14. Injunction. In the event that [CSI], its employees, agents, brokers and/or representatives, attempt to breach the terms of this Agreement, [PCH] shall, in addition to its rights and remedies available to it at law or in equity, have the right to seek an injunction against [CSI] to enforce the provisions of this Agreement. [CSI] agrees to be responsible for and to reimburse [PCH] for any attorney's fees and costs associated with any legal action taken by [PCH] to enforce the terms of this Agreement.
Agreement ¶ 14. As PCH points out, "[t]his language, which expressly permits judicial intervention, is inconsistent with mandatory arbitration." Pl.'s Mot. to Compel Opp'n at 12-13.
In the face of PCH's arguments that the Agreement does not require mandatory arbitration, CSI asserts that "the vast majority of courtsincluding the United States Supreme Courthave held these types of arbitration clauses [i.e., clauses using the word "may"] do not allow a party to avoid arbitration." Def.'s Reply at 4 (citing Republic Steel Corp. v. Maddox, 379 U.S. 650, 658-59, 85 S.Ct. 614, 13 L.Ed.2d 580 (1965); Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 204 n. 1, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985); and Nemitz v. Norfolk & Western Railway Co., 436 F.2d 841 (6th Cir.1971)). The cases CSI cites do find that the use of the term "may" is not sufficient to render an agreement to arbitrate permissive. All of those cases, however, involve the interpretation of arbitration clauses in the context of collective bargaining agreements. As such, they are distinguishable from the instant case by virtue of the "heavy presumption in favor of mandatory arbitration of disputes under collective bargaining agreements." Commc'ns Workers of Am. v. AT & T, 40 F.3d 426, 434-35 (D.C.Cir. 1994). While the D.C. Circuit has made clear that non-labor agreements to arbitrate must also be vigorously enforced, see Nat'l R.R. Passenger Corp. v. Consolidated Rail Corp., 892 F.2d 1066, 1072 (D.C.Cir.1990), as discussed above, the presumption in favor of arbitrability in the non-labor context only arises once the Court concludes that a binding agreement to arbitrate exists. Here, the foregoing discussion makes clear that the Court cannot reach such a conclusion based on the evidence before it.
As noted above, the FAA provides that the Court "upon being satisfied that [an] issue [is] referable to arbitration under [a written] agreement, shall ... stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3. The FAA also provides, however, that the Court may only do so "upon being satisfied that the making of the agreement for arbitration... is not in issue," and that "[i]f the making of the arbitration agreement ... be in issue, the court shall proceed summarily to the trial thereof." Id. § 4. In the instant case, it is not clear beyond genuine dispute that the parties agreed to mandatory arbitration of disputes arising out of the Agreement. Nor can the Court accept PCH's argument that the Agreement provides for only permissive arbitration that may be eschewed in favor of litigation. "Instead, having concluded that `the making of the agreement for arbitration' between [PCH and CSI] is `in issue,' the Court must conduct further proceedings to determine the issue." Institut Pasteur v. Chiron Corp., 315 F.Supp.2d 33, 39-40 (D.D.C.2004); see also Smith Wilson Co. v. Trading and Dev. Establishment, 744 F.Supp. 14 (D.D.C.1990); Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir.2003) ("If there is an issue of fact as to the making of the agreement for arbitration, then a trial is necessary.").
In response to the factual dispute regarding the authorship of the Agreement, CSI offers the suggestion that "to the extent that [the Court] is of the view that such issue is outcome determinative of the issue of arbitrability," "CSI should be afforded limited discovery in order to [contest the] threadbare contention raised by Mr. Harkavy." Def.'s Mot. to Compel Reply at 2. Such discovery may well be appropriate, but in light of the FAA's clear instruction that a trial of the issue of arbitrability is in order and the variety of questions raised above with respect to that issue, the Court will not, at this point, limit discovery between the parties to the authorship of the Agreement. Instead, as set forth in the Order accompanying this Memorandum Opinion, the Court shall order the parties to confer and submit to the Court a proposal and schedule for further proceedings to resolve the general issue of arbitrability.
C. Discovery as to the Merits of this Litigation Shall Be Stayed Pending Resolution of the Threshold Issue of Arbitrability
After CSI filed its Motion to Compel Arbitration, the parties to this action conducted a conference pursuant to Federal Rule of Civil Procedure 26(f) and exchanged initial disclosures pursuant to Rule 26(a)(1). Def.'s Mot. to Stay at 2. Thereafter, CSI apparently determined that engaging in further discovery before the Motion to Compel was resolved would be inefficient and might prejudice CSI's right to compel arbitration, and therefore moved to stay discovery on the merits of the litigation pending resolution of the Motion to Compel Arbitration. Id. at 2-3. PCH opposes CSI's Motion to Stay Discovery, arguing that the parties voluntarily agreed to commence discovery and that it would be inefficient to halt the discovery that has begun. See generally Pl.'s Mot. to Stay Opp'n. While it is true that under the Federal Rules of Civil Procedure parties may voluntarily seek discovery once they have engaged in a Rule 26(f) conference, the parties' voluntary agreement to engage in discovery does not have the effect of a court-ordered discovery schedule. See Fed.R.Civ.P. 26(d). Moreover, as PCH recognizes, the Court has extremely broad discretion in controlling discovery, Pl.'s Mot. to Stay Opp'n at 3 (citing Crawford-El v. Britton, 523 U.S. 574, 598-99, 118 S.Ct. 1584, 140 L.Ed.2d 759 (1998)), and the decision on whether to stay discovery is within the sound discretion of the district court, see White v. Fraternal Order of Police, 909 F.2d 512, 517 (D.C.Cir. 1990). Here, the Federal Arbitration Act requires that the Court resolve the threshold issue of whether the parties agreed to mandatory arbitration before the litigation of this matter can continue. As such, the Court shall GRANT-IN-PART CSI's Motion to Stay Discovery and shall stay discovery related to the merits of this litigation pending a resolution of the threshold arbitrability issue. The parties may, however, conduct discovery related to the issue of arbitrability, if such discovery is appropriate in proceeding to a trial of the issue. If that is the case, the parties should submit a joint discovery plan to the Court for its approval.
III. CONCLUSION
For the foregoing reasons, the Court shall HOLD IN ABEYANCE CSI's [8] Motion to Compel Arbitration and Stay Proceedings and, as set forth in the Order accompanying this Memorandum Opinion, shall require the parties to confer and submit to the Court in a joint status report a proposal and schedule for further proceedings to resolve the issue of arbitrability. Further, the Court shall GRANT-IN-PART CSI's [27] Motion to Stay Discovery and shall stay discovery related to the merits of this litigation pending a resolution of the threshold arbitrability issue. An appropriate Order accompanies this Memorandum Opinion.
NOTES
[1] The final six paragraphs of the Agreement are misnumbered, with the paragraph following Paragraph 19 erroneously labeled with number 16. As labeled, the Agreement has two paragraphs numbered 16, 17, 18, and 19. See generally Agreement. For ease of reference, the Court shall refer to the first set of paragraphs so-numbered as Paragraphs 16 through 19, and shall refer to the misnumbered paragraphs as if they had been sequentially numbered, i.e., as Paragraphs 20 through 25.
[2] CSI initially filed its Motion to Stay Discovery on July 7, 2008, however its motion failed to include a representation, as required by LCvR 7(m), that CSI's counsel discussed its motion with opposing counsel before filing it in order to determine whether the motion was opposed. Accordingly, by Minute Order dated July 9, 2008, the Court denied CSI's initial Motion to Stay Discovery without prejudice and directed CSI to refile its motion with the appropriate representation included. CSI did so on July 15, 2008.
[3] For its part CSI asserts that "no federal or state courts within the District of Columbia have relied upon, much less cited, Stubbs," and that the only court that appears to have directly considered Stubbs, the United States District Court for the Eastern District of Michigan, appears to have rejected its reasoning. Def.'s Reply at 4 (quoting Detroit Edison Co. v. Burlington Northern and Santa Fe Railway Co., 442 F.Supp.2d 387, 390 n. 2 (E.D.Mich.2006)). The fact that Stubbs is not readily cited, however, is likely attributable to the relative infrequency of arbitration clauses that use the word "may" as opposed to those that use the word "shall," and the Eastern District of Michigan's opinion is far from binding on this Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2420155/ | 22 F. Supp. 2d 353 (1998)
Hawa Abdi JAMA, Abu Bakar, Joseph Ackah, Charles Addai, Benjamin Anang, Dweku Awotowe, Yvetee Nsukami Badjoko, Gonzalo Crespo, Joseph Debrah, Cecilia Kou Jeffrey, Anantharajah Jeyakumar, Abraham Kenneh, Nagendran Manoharan, Thomas Kyeu Manu, Dennis Raji, Shamimu Nanteza, Agatha Serwaa, Jasmel Singh, Folorunsho Wasiu Alibi and Sarah Tetteh Yower, Plaintiffs,
v.
UNITED STATES IMMIGRATION AND NATURALIZATION SERVICE, Correctional Services Corporation (formerly "Esmor Correctional Services Inc."), David McLean, Norman Uzzle, Michael D. Rozos, Earline Boyer, Alan Freiss, John Doe Silva, James Slattery, Aaron Speisman, Willard Stovall, John Lima, James Pouland, Diane McClure, Richard Staley, Kevin T. Brodie, Irving Brown, Catrina Clark, Leonard Eady, John Doe Edider, John Doe Feder, Frank Figel, Luis Garcia, Darrell Gill, Winfred Hawkins, John Doe Hayes, William Higgs, Isaiah Hughes, Dorian Hunter, Willie O. Hunger, Michael Jackson, Phillip Johnson, Jon Doe Kutz, Michael Melendez, Jane Doe Michelle, John Doe Mohammed, Okay Nkenke, John Doe Phil, Robert Snead, Corey Stradford, Michael Tate, Augustus Vanderpuye, William Wallington, Norman Williams, John Doe Wilson and John and Jane Does 1-50, Defendants.
Civ. No. 97-3093 (DRD).
United States District Court, D. New Jersey.
October 1, 1998.
*354 *355 *356 *357 Frank Askin, Penny M. Venetis, Rutgers Constitutional Litigation Clinic, Rutgers Law School, Newark, NJ, Michael J. Holden, Martin Glenn, Tina Antonakakis, O'Melveny & Myers LLP, Citicorp Center, New York City, for Plaintiffs.
Frank W. Hunger, Assistant Attorney General, Faith S. Hochberg, United States Attorney, Susan C. Cassell, Assistant U.S. Attorney, Deputy Chief, Civil Division, Newark, NJ, Theodore C. Hirt, Lucinda A. Love, U.S. Department of Justice, Civil Division, Federal Programs Branch, Washington, DC, for defendant INS.
Edward R. Murphy, Murphy and O'Connor, Haddonfield, NJ, A. David Carlson, Nathan M. Rymer, Carlson & Smith, P.C., Houston, TX, for defendants INS Officials.
Daniel V. Gsovski, Chase Kurshan Suhr Herzfeld & Rubin, (a partnership including a professional corporation), Newark, NJ, for defendants Correctional Services Corporation (sued herein as "Esmor Correctional Services, Inc.") and other Esmor defendants.
OPINION
DEBEVOISE, Senior District Judge.
Plaintiffs, aliens who sought asylum and who were detained at a facility in Elizabeth, New Jersey, brought this action against defendants Correctional Services Corporation, a number of its officers and employees, the United States Immigration and Naturalization Service ("INS"), and various INS officials, alleging mistreatment while detained in that facility and asserting claims under federal, state and international law. The INS moves to dismiss the complaint under Fed. R.Civ.P. 12(b)(1) and 12(b)(6) or, in the alternative, for summary judgment.
Defendants Alan Freiss, Norman Uzzle, Mike Rozos, Earline Boyer and David McLean ("INS officials") have joined in the INS's motion. The United States has been substituted as a defendant as to the claims *358 against the INS officials based on New Jersey state law and the New Jersey constitution (counts 14, 20, 24, and 27-29). The INS officials argue for dismissal of most of the remaining claims those based upon the Religious Freedom Restoration Act (count 22); the Thirteenth Amendment to the United States Constitution (count 23); the Fair Labor Standards Act (count 25); and the International Covenant on Civil and Political Rights, customary international law, and the Alien Tort Claims Act (counts 15-18, 21, 26, and 30) leaving without challenge only claims invoking the First and Fifth Amendments to the United States Constitution (counts 19 and 13 respectively).
Defendants Correctional Services Corporation (formerly known as Esmor Correctional Services, Inc., hereinafter "Esmor") and those of its present and former officers ("Esmor officers") and employees ("Esmor guards" or "guards") who have been sued in this action (collectively "Esmor defendants") also join in the motion and argue for dismissal of several of the claims asserted against them those founded upon the Fair Labor Standards Act (counts 44, 62, and 80); the Thirteenth Amendment (counts 42, 60, and 78); the New Jersey Constitution (counts 32, 39, 43, 51, 57, 61, 69, 75, and 79); the Religious Freedom Restoration Act ("RFRA") (counts 40, 58, and 76); the Alien Tort Claims Act ("ATCA"); and the International Covenant on Civil and Political Rights ("ICCPR") and customary international law (counts 34-37, 41, 45, 49, 52-55, 59, 63, 67, 70-73, 77, 81, and 84). Count 51 was not separately listed in the Esmor motion, but the argument clearly embraces it.
BACKGROUND
I. The Amended Complaint
Plaintiffs are alien asylum seekers who were detained at a facility in Elizabeth, New Jersey, which was run by Esmor and staffed by its employees under a contract with the INS. The allegations of the amended complaint can be summarized as follows: Every moment of plaintiffs' detention was filled with abuse. They could not escape from these abuses even in their dreams, as they were not permitted to sleep bright lights shone on them 24 hours a day, and guards woke them up just to taunt them.
Esmor's layout contributed to and exacerbated the unrelenting abuses defendants inflicted on plaintiffs. Esmor was separated into several dormitories which were filthy and constantly smelled of human waste and other noxious odors. Complaint at ¶ 44. Between twenty and forty asylees were packed into each room, which lacked natural light, telephones, and recreational materials Id. at ¶ 43. The rooms were separated from each other and the communal hallways by thick dark glass so that persons in the halls could peer into the dormitories. Id. The dorms were not cleaned by defendants and were filthy. Id. In response to plaintiffs' repeated requests for cleaning materials, the guards beat plaintiffs. Id.
The shower and toilet in each dormitory were in the same room as the eating and sleeping areas, forcing the plaintiffs to eat meals only inches away from the bathroom areas. Id. at ¶ 44. Thus, as they ate, plaintiffs could observe and smell other detainees using the toilets. Id. Additionally, the bathroom facilities had no curtain or divider allowing the other asylees, guards and anyone passing in the hallway to observe the naked bodies of the plaintiffs who were using the toilets and taking showers. Id. at ¶ 44. This was traumatic, humiliating and degrading to many detainees particularly the women, many of whom had never exposed their bodies to anyone before. Id. at ¶ 45. When women detainees showered, guards made crude sexual comments about their bodies. This exacerbated the women plaintiffs' feelings of shame and humiliation. Id.
In a variety of ways defendants physically, mentally and sexually abused plaintiffs. In addition to beating them they yelled racial and ethnic epithets at them such as "African Monkeys" from the "jungle". Id. at ¶¶ 59, 67. The guards woke plaintiffs before sunrise and forced them to stand facing a wall, with their legs spread, for up to an hour at a time. Id. at ¶ 58. Upon searching male plaintiffs' genital areas the guards forcefully yanked their genitals causing severe pain. There was inappropriate touching of both male and female plaintiffs. Id. ¶¶ 70, 72. *359 Sexual favors were sought of female plaintiffs. Id. ¶ 71.
Defendants deprived plaintiffs of clothing and personal hygiene necessities. Id. at ¶ 51. Changes of clothing were infrequent and the clothing provided was often filthy and could not be worn. Id. at ¶¶ 49, 50, 52.
Defendants served spoiled food and insufficient amounts. The kitchen served rotten meat and sour milk. Id. at ¶ 47. Esmor officials and guards ordered detainees not to report food problems to INS inspectors who visited the facility. Id. at ¶ 48.
Guards regularly locked plaintiffs in solitary confinement cells without warning or explanation, without a hearing, ranging from several days to several months. The defendants often shackled plaintiffs to their beds. Id. at ¶ 76.
Guards performed strip searches and body cavity searches in a manner designed to degrade and humiliate plaintiffs. Id. at ¶ 74.
Defendants prevented plaintiffs from practicing their religious rituals. Id. at ¶ 92. Defendants forced plaintiffs to work without compensation. Id. at ¶ 85. They took plaintiffs' property and never returned it. Guards stole money from plaintiffs. Id. at ¶¶ 95, 96.
Plaintiffs were denied adequate medical treatment. Id. at ¶ 108. They were denied access to legal representation. For example, guards, without any justification, often would refuse to allow plaintiffs to use the telephone to discuss their asylum cases with their counsel. Id. at ¶ 52. Additionally, defendants continuously failed to transport plaintiffs promptly to their asylum hearings. Id. at ¶ 55. As a result, plaintiffs often missed important asylum meetings (which resulted in a postponement of their asylum hearings) and prolonged their detention at Esmor. Id. at ¶¶ 52, 55. Moreover, female detainees were forced to choose between being sexually assaulted and contacting their lawyers as guards premised using the telephones on submitting to their unwanted sexual advances. Id. at 71.
Plaintiffs allege that at all times during the events that gave rise to the complaint the individual Esmor defendants were employees and agents of both Esmor and the INS. They also assert that Esmor officers and INS officials either were or should have been aware of the pattern of abuses taking place at the Esmor facility.
The Esmor facility was closed after a revolt by the detainees on June 18, 1995. Some of the plaintiffs are still subject to detention at other facilities; some have been granted political asylum, and some have been deported.
On the basis of their factual allegations, plaintiffs assert numerous claims against each category of defendants. Counts 68-84 accuse the Esmor guards of violations of the First, Fifth, and Thirteenth Amendments to the United States Constitution, numerous provisions of the New Jersey Constitution, the ICCPR, customary international law, the ATCA, the RFRA, the Fair Labor Standards Act, and New Jersey law. With the exception of counts 80 (failure to compensate employees under the Fair Labor Standards Act) and 83 (failure to ensure the safety of plaintiffs' confiscated property under New Jersey law), all these counts assert active violations of detainees' rights by the guards themselves.
In counts 50-67 plaintiffs make corresponding allegations against Esmor officers predicating the officers' liability for the actions of the guards on "failing to curb" the pattern of abuse, on "deliberate indifference," and, in the case of the New Jersey tort law claims, on theories of respondeat superior and of negligent hiring, training, and supervision.
The claims against Esmor as a corporation (counts 31-49) are equivalent to those against the Esmor officers, with the addition of a breach of contract claim (count 33) alleging that the plaintiffs' were third-party beneficiaries of Esmor's contract with the INS and that they were harmed by Esmor's breach of that contract. The language of count 37 is a little different from that of count 55: in the former the corporation is accused simply of failing to take appropriate steps to ensure that property was protected; in the latter the officers are accused of acting with deliberate indifference to the plaintiffs' being deprived of property. Also, the distribution of *360 "failing to curb" or "failing to take appropriate steps to curb" and "deliberate indifference" is not the same in the Esmor counts as it is in the Esmor officer counts.
In counts 13-30 plaintiffs invoke the same rights against the INS officials as they do against the Esmor officers advancing theories of liability based on omissions "failing to curb" and "deliberate indifference." In their claims under New Jersey law, plaintiffs allege negligent hiring and supervision, the breach of a duty to ensure the safety of plaintiffs' confiscated property, and the breach of a duty to ensure plaintiffs' safety from abuse.
Finally, in counts 1-12 plaintiffs assert claims against the INS invoking New Jersey tort and contract law, the ICCPR, customary international law, the RFRA, and the ATCA. In all counts other than those invoking New Jersey law, INS liability is predicated upon its failure to curb abuses at the Esmor facility. In alleging violation of New Jersey tort law, plaintiffs advance theories of respondeat superior, of negligent hiring and supervision, and or failure to ensure that plaintiffs could recover their confiscated property.
The complaint requests money damages, costs, and a declaratory judgment that defendants have violated the numerous laws under which the action is brought.
II. Procedural History
On April 3, 1997, plaintiffs' attorney filed administrative claims with the INS. As the INS notes in the brief supporting its motion, Plaintiff Abraham Kenneh had previously filed a claim pro se (according to exhibits, no later than July 1996). That claim was denied in a letter signed August 12, 1997. (The INS places the denial on August 14, 1997). Thirteen of the plaintiffs claimed specific amounts for property damage but not for any other alleged harm. The remaining plaintiffs attached no specific amounts to any of their claims.
On April 22, 1997, the Assistant Regional Counsel for the INS, wrote plaintiffs' attorney advising her that none of the administrative claims had included evidence of her authority to represent the claimants, as required under pertinent regulations.
According to the declaration of the attorney, Penny Venetis, Esq., she has attempted to obtain and submit the requested evidence, but has succeeded in doing so for only six of the plaintiffs. She asserts that her failure to do so is the result of numerous difficulties in communicating with them.
The present action was instituted on June 16, 1997. On or about July 2, 1997, according to Ms. Venetis' declaration, an original summons and complaint was served upon the United States Attorney's Office. Plaintiffs also served the United States Attorney General and the INS. On December 19, 1997, in accordance with 28 U.S.C. § 2679(d), the Justice Department filed a certification with this Court to the effect that the INS officials were acting within the scope of their employment when they engaged in the conduct that is the subject of the complaint. The United States was accordingly substituted as a defendant for the INS officials as to counts 14, 20, 24, 27, 28, and 29 of the complaint.
DISMISSAL PURSUANT TO RULE 12(b)(1)
A motion to dismiss under Fed. R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction may be made at any time. Fed. R.Civ.P. 12(h)(3); Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3rd Cir.1977). A defendant may challenge whether subject matter jurisdiction exists in one of two ways. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed.1990). The first is a facial challenge to jurisdiction asserting that plaintiff's complaint, on its face, does not allege sufficient grounds to establish subject matter jurisdiction. Cardio-Medical Assoc., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir.1983). "[T]he court in assessing a Rule 12(b)(1) motion based on the pleadings must assume that the allegations contained in the complaint are true." Id. The second method is a factual attack on the jurisdictional allegations of the complaint. When this method is employed, the court may rely on affidavits and other such competent evidence. Land v. Dollar, 330 U.S. 731, *361 735, 67 S. Ct. 1009, 91 L. Ed. 1209 (1947); Tanzymore v. Bethlehem Steel Corp., 457 F.2d 1320, 1323 (3d Cir.1972); Donio v. United States, 746 F. Supp. 500 (D.N.J.1990); 2A James A Moore, Moore's Federal Practice ¶ 12.07[2.-1] (2d ed.1994). "Once the existence of subject matter jurisdiction is challenged, the burden of establishing it always remains on the party asserting jurisdiction." Moore, supra, ¶ 12.07[2.-1]. But, before an action may be dismissed, the party asserting jurisdiction must have an adequate opportunity to respond to the grounds on which the complaint was actually dismissed. Berardi v. Swanson Memorial Lodge No. 48, 920 F.2d 198, 200 (3d Cir.1990). "Trial judges enjoy substantial procedural flexibility in handling Rule 12(b)(1) motions. But `the record must clearly establish that after jurisdiction was challenged the plaintiff had an opportunity to present facts by affidavit or by deposition, or in an evidentiary hearing, in support of his jurisdictional contention.'" Id. (quoting Local 336, American Fed. of Musicians, AFL CIO v. Bonatz, 475 F.2d 433, 437 (3d Cir. 1973)); accord Tanzymore v. Bethlehem Steel Corp., 457 F.2d at 1323. The court may grant limited discovery to determine whether subject matter jurisdiction exists. Moore, supra, ¶ 12.07[2.-1]
There are two important distinctions between a dismissal under 12(b)(1) and one under 12(b)(6) for failure to state a claim. "First, a dismissal under (b)(1) is not on the merits and is thus not given res judicata effect." Id. "Second, the court is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction to hear the action." Id. (citing Land v. Dollar, 330 U.S. 731, 67 S. Ct. 1009, 91 L. Ed. 1209 (1947)).
DISMISSAL PURSUANT TO RULE 12(B)(6)
A complaint must be dismissed pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted if the court finds "beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). In analyzing motions to dismiss, all allegations set forth in the complaint must be accepted as true and all reasonable inferences must be drawn in the plaintiff's favor. Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991). A court should allow a plaintiff an opportunity to amend the complaint instead of dismissing it where "a more carefully drafted complaint might state a claim upon which relief could be granted." Friedlander v. Nims, 755 F.2d 810, 813 (11th Cir.1985); see Howze v. Jones & Laughlin Steel Corp., 750 F.2d 1208, 1212 (3d Cir.1984).
A motion to dismiss which presents the court with matters outside the pleading which are not excluded is to be treated as a motion for summary judgment and analyzed pursuant to Rule 56. Fed.R.Civ.P. 12. In such circumstances, "all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Id. However, an undisputedly authentic document attached to a motion to dismiss may be considered without converting it into a motion for summary judgment if plaintiff's claims are based upon that document. Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993), cert. denied, 510 U.S. 1042, 114 S. Ct. 687, 126 L. Ed. 2d 655 (1994).
ANALYSIS
I. Claims Under International Law
Plaintiffs rely heavily upon international law to establish claims against all of the defendants, including the INS and its officers. This might seem like an unnecessary journey in view of the state and federal law remedies which at least at the outset were available to plaintiffs. Since some of those remedies may have slipped from their grasp, however, it is necessary to examine the international law claims. This involves a two step process. The first step is to determine if plaintiffs have a claim under international law. If they do have such a claim the second step is to determine whether it may be asserted against the various categories of defendants in this case.
*362 28 U.S.C. § 1350 ("ATCA") provides that "The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." Plaintiffs have included among their papers in opposition to the motion to dismiss nineteen treaties, charters on human rights, conventions and other international instruments articulating the rights of refugees and seekers of asylum and condemning or prohibiting in general or specific terms many of the kinds of abuses which are alleged in the complaint.
In order for a treaty to confer rights enforceable by private parties it must be self-executing, that is, a treaty which requires no legislation to make it operative. Frolova v. Union of Soviet Socialist Republics, 761 F.2d 370 (7th Cir.1985). Unless a treaty is self-executing, it must be implemented by legislation before it can give rise to a private right of action enforceable in a court of the United States. Dreyfus v. Von Finck, 534 F.2d 24 (2d Cir.1976), cert. denied, 429 U.S. 835, 97 S. Ct. 102, 50 L. Ed. 2d 101 (1976).
None of the treaties or other international instruments which plaintiffs have submitted are self-executing. Plaintiffs recognize that these treaties do not per se provide a basis for suit under the ATCA. Rather, they are submitted for another purpose to support a claim under the "law of nations" or international law, which is also a basis for an ATCA action: "The complaint alleges violations of customary international law and not specific treaties. The complaint alleges that defendants' abuses of plaintiffs asylum seekers violated customary international law as informed by various international human rights treaties and other international human rights instruments." (Plaintiffs' Brief at p. 21) (emphasis on original).
The Court of Appeals for the Third Circuit has not addressed the question how the law of nations should be determined for the purpose of the ATCA. Other courts of appeals have taken varying approaches. According to Restatement (Third) of Foreign Relations Law ("Restatement Third") § 102(2) (1987), customary international law "results from a general and consistent practice of states which is followed by them from a sense of legal obligation." The law of nations "may be ascertained by consulting the work of jurists, writing professedly on public law; or by the general usage and practice of nations; or by judicial decisions recognizing and enforcing that law." United States v. Smith, 18 U.S. (5 Wheat.) 153, 160-61, 5 L. Ed. 57 (1820). Highly relevant to the inquiry whether international law confers a fundamental right upon all people are treaties (such as the United Nations Cherter), internationally or regionally adopted covenants or declarations of human rights and foreign policy goals of the United States and other countries in the field of human rights.
In Filartiga v. Pena-Irala, 630 F.2d 876 (2nd Cir.1980) the court breathed new life into the ATCA; originally enacted in 1789. It held that "[t]he constitutional basis for the Alien Tort Statute is the law of nations, which has always been part of the federal common law" Id. at 885, and that "courts must interpret international law not as it was in 1789, but as it has evolved and exists among the nations of the world today." Id. at 881. "[E]volving standards of international law govern who is within the [Alien Tort Act's] jurisdictional grant." Amerada Hess Shipping Corp. v. Argentine Republic, 830 F.2d 421, 425 (2nd Cir.1987), rev'd on other grounds, 488 U.S. 428, 109 S. Ct. 683, 102 L. Ed. 2d 818 (1989). Depending upon the nature of the offense, an ATCA claim may be brought against private individuals as well as state actors. Kadic v. Karadzic, 70 F.3d 232 (2nd Cir.1995), cert. denied, 518 U.S. 1005, 116 S. Ct. 2524, 135 L. Ed. 2d 1048 (1996).
Many courts have concluded that the ATCA provides both jurisdiction and a cause of action for claims under customary international law. See Abebe-Jira v. Negewo, 72 F.3d 844, 848 (11th Cir.1996); In re Estate of Marcos, Human Rights Litigation ("Marcos II"), 25 F.3d 1467, 1474-75 (9th Cir.1994); Xuncax v. Gramajo. 886 F. Supp. 162, 179 (D.Mass.1995); Paul v. Avril, 812 F. Supp. 207, 212 (S.D.Fla.1993); See also Tel-Oren (Edwards, J. concurring in decision to deny jurisdiction, but recognizing that the ATCA *363 provides a cause of action under international law).
Not all jurists interpret the ATCA as broadly as these courts and the Court of Appeals for the Second Circuit, see Judge Bork's concurring opinion in Tel-Oren v. Libyan Arab Republic, 726 F.2d 774 (D.C.Cir. 1984), cert. denied, 470 U.S. 1003, 105 S. Ct. 1354, 84 L. Ed. 2d 377 (1985). However, Congress has left untouched the Filartiga approach even as it legislated in this field. The Torture Victim Act, enacted in 1992, for example, creates a cause of action for official torture and extrajudicial killing. "Congress enacted the Torture Victim Act to codify the cause of action recognized by this Circuit in Filartiga, and to further extend that cause of action to plaintiffs who are U.S. citizens". Kadic, 70 F.3d at 241. The reasoning of Filartiga and cases which have followed it is sound, and it will be followed in this case.
For the purposes of the present motions, the allegations of the complaint must be accepted as true and all reasonable inferences favorable to plaintiffs must be drawn from them. When this is done, it is evident that the totality of the treatment to which plaintiffs were subjected violated customary international law as it is now established. A multitude of sources establishes this rule of international law, and the references below are by way of example only.
Restatement Third § 702 provides:
A state violates customary international law if it practices, encourages or condones: genocide, slavery or slave trade; the murder or causing the disappearance of individuals; torture or other cruel, inhuman or degrading treatment or punishment; prolonged arbitrary detention; systematic racial discrimination, or; a consistent pattern of gross violations of internationally recognized human rights.
A number of international instruments prescribe cruel, unhuman or degrading treatment. For example, the European Convention on the Protection of Human Rights and Fundamental Freedom, Nov. 4, 1950, Europ. T.S. 5, 213 U.N.T.S. 221, 224 (1956) provides that "[n]o one shall be subjected to torture or to inhuman or degrading treatment or punishment." The United States has recognized this customary international human rights norm. In United States v. Iran, 1980 I.D.J. 3, the United States argued that even though at that time neither the United States nor Iran had ratified treaties proscribing such conduct, they were nevertheless bound by the norm.
American Courts have recognized that the right to be free from cruel, unhuman or degrading treatment is a universally accepted customary human rights norm. Abebe-Jira v. Negewo, 72 F.3d 844 (11th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 96, 136 L. Ed. 2d 51 (1996); Najarro de Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385 (5th Cir.1985); Paul v. Avril, 901 F. Supp. 330 (S.D.Fla.1994); Xuncax v. Gramajo, 886 F. Supp. 162 (D.Mass.1995). Each of these cases involved extreme forms of abuse, but the entirety of the conduct in which the Esmor guards were alleged to have engaged over a considerable period of time approaches the abuses in certain of these cases and would clearly violate the Eighth Amendment's prohibition against cruel and unusual punishment. The plaintiffs in the present case were not post trial detainees; they were for the most part detainees awaiting a hearing on their applications for political asylum. (See Bell v. Wolfish, 441 U.S. 520, 99 S. Ct. 1861, 60 L. Ed. 2d 447 (1979) for a discussion of Fifth and Fourteenth due process protection of pretrial detainees).
The mental and physical abuses which are alleged to have been inflicted upon plaintiffs violate the international human rights norm of the right to be free from cruel, unhuman and degrading treatment. The ATCA confers federal subject matter jurisdiction when i) an alien sues, ii) for a tort iii) committed in violation of the law of nations (i.e., international law), Kadic, 70 F.3d at 238. The complaint sufficiently alleges all three jurisdictional requirements.
Because the ATCA provides jurisdiction over plaintiffs' claims based on international law, it is unnecessary to decide if 28 U.S.C. § 1331 (federal question jurisdiction) provides an independent basis for jurisdiction. See discussion in Kadic, 70 F.3d at 246.
*364 Defendants contend that because United States laws provide constitutional and legislative protection which afford plaintiffs adequate relief, plaintiffs are precluded from bringing international law claims under the ATCA.
Contrary to defendants' argument, there is no absolute preclusion of international law claims by the availability of domestic remedies for the same alleged harm. The cases cited by the defendants merely stand for the principle that international law is effectively pre-empted by valid acts of any of the three branches of government. See, e.g., Garcia-Mir v. Meese, 788 F.2d 1446 (11th Cir.1986). Some of the cases that support this contention might be read to indicate that the United States can occupy a field so thoroughly as to pre-empt the operation of other law for instance where Congress has manifested an intent to provide a comprehensive and exclusive scheme of legislation in a given area. See American Baptist Churches in the U.S.A. v. Meese, 712 F. Supp. 756, 771 (N.D.Cal.1989) (finding congressional intent to provide exclusive means of obtaining refuge in the United States); see also Galo-Garcia v. Immigration and Naturalization Serv., 86 F.3d 916, 918 (9th Cir.1996); Barrera-Echavarria v. Rison, 44 F.3d 1441, 1451 (9th Cir.1995). One could also construe some courts' opinions on private individuals' rights to invoke international law as rejecting application of international law in areas subject to domestic law. For instance, in Skiriotes v. Florida, 313 U.S. 69, 72, 61 S. Ct. 924, 85 L. Ed. 1193 (1941), the Supreme Court (in ruling that international law did not restrict the ability of the United States to govern the conduct of its own citizens on the high seas) stated that international law is concerned with international rights and duties, not domestic rights and duties; in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 422-23, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964), the Court observed that "[b]ecause of its [international law's] peculiar nation-to-nation character the usual method for an individual to seek relief is to exhaust local remedies and then repair to the executive authorities of his own state to persuade them to champion his claim in diplomacy or before an international tribunal." These statements, however, appear to refer more to the issue of private rights of action under international law than to any principle of preclusion applicable to actions brought pursuant to the ATCA.
Perhaps if there were domestic law in conflict with the norms of international law, domestic law should prevail. That is not the case here where domestic law is consistent with international norms. There is nothing in the ATCA which limits its application to situations where there is no relief available under domestic law. There is no reason why plaintiffs cannot seek relief on alternative grounds. cf., Patsy v. Florida Bd. of Regents, 457 U.S. 496, 102 S. Ct. 2557, 73 L. Ed. 2d 172 (1982), Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971); Monroe v. Pape, 365 U.S. 167, 81 S. Ct. 473, 5 L. Ed. 2d 492 (1961), overruled on other grounds, Monell v. Department of Soc. Serv., 436 U.S. 658, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978).
The second step in the ATCA analysis is to determine whether the various defendants are subject to suit under the statute. The defendant categories are: i) the INS, ii) officials of the INS, iii) Esmor, iv) supervisory employees of Esmor and v) the guards who are alleged to have committed the abuses.
1. INS: The INS moves to dismiss the ATCA claims against it because the United States has not waived its sovereign immunity with respect to that statute. Absent a specific waiver of such immunity the United States and its agencies are immune from suit and courts lack jurisdiction over them. FDIC v. Meyer, 510 U.S. 471, 474-75, 114 S. Ct. 996, 127 L. Ed. 2d 308 (1994).
Plaintiffs argue that the International Covenant on Civil and Political Rights ("ICCPR") read in conjunction with the ATCA constitutes the requisite waiver of sovereign immunity. The United States ratified the ICCPR in 1992. It provides in relevant part:
Each State party to the present Covenant undertakes: (a) to ensure that any person whose rights or freedoms herein recognized are violated shall have an effective *365 remedy, notwithstanding that the violation has been committed by persons acting in an official capacity; (b) to ensure that any person claiming such a remedy shall have his right thereto determined by competent judicial, administrative or legislative authorities.
ICCPR Article 2(3)(a-b).
Upon ratification of the ICCPR, the Senate attached a "declaration" (as opposed to a "reservation" entered for articles 7 and 15). The declaration stated that the provisions of Article 2 cited above are not self-executing, 138 Cong.Rec. S4783, at S4784 (Daily ed. Apr. 2, 1992). "Non-self executing" means that absent any further actions by the Congress to incorporate them into domestic law, the courts may not enforce them.
It is plaintiffs' position that the ATCA constitutes the implementing legislation with respect to ICCPR and read together ICCPR and ATCA constitute a waiver of sovereign immunity under ATCA cf. United States v. Mitchell, 463 U.S. 206, 228, 103 S. Ct. 2961, 77 L. Ed. 2d 580 (1983).
The intent to waive sovereign immunity must be expressed in clear, unambiguous language. It is difficult to discern an unambiguous waiver (or even an ambiguous waiver) when the Senate ratified the ICCPR, stated that it was not self-executing and made no mention of the 200 year old ATCA.
The United States has not waived its sovereign immunity under the ATCA. See Sanchez-Espinoza v. Reagan, 770 F.2d 202, 206-07 (D.C.Cir.1985) (citing Canadian Transp. Co. v. United States, 663 F.2d 1081, 1092, (D.C.Cir.1980)) (holding that even if customary international law may be applied to foreign sovereigns under the ATCA as interpreted in Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir.1980), it cannot be applied to the United States, as there is no waiver of immunity). The ATCA, in providing jurisdiction and a right of action under the law of nations, does nothing to displace sovereign immunity, and plaintiffs' claims against the INS based on the ATCA must be dismissed.
2. INS Officials: Plaintiffs sue the INS officials in their individual capacities, alleging that they failed to ensure that the plaintiffs were not treated in the manner previously described and that they acted with deliberate indifference to the wrongs committed against plaintiffs.
The INS officials contend that none of the acts with which they are charged constitute violations of customary international law. They allege that Esmor operated the facility under a contract and that there is no allegation in the First Amended Complaint that the INS officials either in their individual or official capacities had the authority or ability to manage the facility. At this stage in the proceedings it would be premature to hold as a matter of law that plaintiffs cannot prove that the INS officials violated customary international law. The viability of plaintiffs' ATCA claim against the INS officials had best be decided in the context of a motion for summary judgment.
The INS officials also claim the protection of sovereign immunity citing Sanchez-Espinoza v. Reagan, 770 F.2d 202 (D.C.Cir.1985). The facts of the present case are substantially different from those in Sanchez. The INS officials are being sued in their individual capacities and are not entitled to sovereign immunity. Melo v. Hafer, 912 F.2d 628, 634-35 (3d Cir.1990).
The motions of the INS officials to dismiss the ATCA claims will be denied.
3. Esmor, Its Officials, Directors and Employees: These categories of defendants move for dismissal of the claims based on international law.
Their first argument, that plaintiffs cannot bring this claim under § 1331, White v. Paulsen, 997 F. Supp. 1380 (E.D.Wash.1998), need not be addressed because it has been determined that plaintiffs' claims may be brought pursuant to the ATCA.
It should be noted that Esmor, its officers, directors and employees (including the guards) were acting under contract with the INS and were performing governmental services. Thus they were state actors and it is unnecessary to address the question raised *366 in Kadic, namely the extent to which non-state actors can be sued under the ATCA.
All of the other contentions-of the Esmor defendants were addressed above and decided adversely to them. Consequently, their motion to dismiss the ATCA claims will be denied.
II. Claims Under Federal Tort Claims Act:
The INS moves to dismiss plaintiffs' claims under the Federal Tort Claims Act ("FTCA") for lack of jurisdiction.
A. United States as Proper Party: The INS contends that the plaintiffs have failed to name a proper party defendant under 28 U.S.C. § 2679(a). There is no disputing that under the plain language of § 2679(a) the United States, and not an agency of the United States, is the only proper defendant in tort actions arising from the alleged negligent or wrongful conduct of federal employees. However, as plaintiffs suggest in their brief in opposition, this defect can be cured simply by amending the complaint. In the present case such an amendment would not need to relate back to the time of filing. While 28 U.S.C. § 2401(b) requires that an FTCA plaintiff file suit within six months of the denial of an administrative claim, in this instance there was no such denial; plaintiffs instead rely on the deeming provision of § 2675(a), whereby an administrative claim may be deemed denied if an agency does not make a final disposition within six months of its filing. In such a case a plaintiff may file suit at any time once those six months have elapsed (subject to the limitation that he or she may not file suit more than six years after the claim accrues, see 28 U.S.C. § 2401(a)). See Reo v. United States Postal Serv., 98 F.3d 73, 78 (3d Cir. 1996); Pascale v. United States, 998 F.2d 186 (3d Cir.1993).
B. Failure to Exhaust Administrative Remedies: The second general objection to subject matter jurisdiction raised by the INS is that the plaintiffs have, on several grounds, failed to exhaust administrative remedies as required under 28 U.S.C. § 2675(a) and 28 C.F.R. § 14.2(a). First, the INS asserts that the plaintiffs have failed to give proper notice of their administrative claims by (1) failing to present evidence that Penny Venetis, Esq., was the plaintiffs' duly authorized agent and by (2) failing to indicate on their claim forms a required sum certain amount of damages. Second, the INS asserts that plaintiffs failed to wait the six months after submitting their administrative claims (April 3, 1997) before filing this case in federal court (June 16, 1997) as required by 28 U.S.C. § 2675(a). Although six months has now passed since the filing of the administrative claims, the INS rightly points out that McNeil v. United States, 508 U.S. 106, 113 S. Ct. 1980, 124 L. Ed. 2d 21 (1993), mandates a strict application of the timing requirements of § 2675(a): a case filed prematurely may not loiter on the docket and spring to life once the required period has elapsed.
1. Premature Filing: The INS' premature filing argument is disposed of if it is held that plaintiffs' action against the United States will not have begun until the complaint is amended to include it as defendant. If the suit against the United States is deemed to have begun when the United States was substituted as a defendant for the INS officials (December 19, 1997), it will not be premature. Alternatively, plaintiffs' party designation error provides them with a means to cure their timing error. This approach was endorsed in dicta of the Court of Appeals for the Third Circuit in Morano v. United States Naval Hosp., 437 F.2d 1009, 1011, (3d Cir.1971).
The court in Morano stated that an amendment to substitute the United States as a party could constitute a timely beginning of a suit against the United States, even where the initial filing might have been premature. It is true that Morano was decided long before McNeil, but Morano's approach to dating the commencement of an action against the United States was at least technically not touched by the McNeil holding that a suit which had been commenced against the United States could not become timely while it remained on the docket. The Supreme Court in McNeil simply accepted the Court of Appeals' determination that McNeil's suit *367 had commenced with his initial filing and that none of his subsequent submissions to the district court constituted a new complaint. 508 U.S. at 110-11, 113 S. Ct. 1980; McNeil v. United States, 964 F.2d 647, 649 (7th Cir. 1992). Case titles suggest that McNeil's suit in district court named the United States Public Health Service, No. 89 C 1822, 1991 WL 9994 (N.D.Ill. Jan.24, 1991); the Court of Appeals title names the United States, 964 F.2d 647; the opinions do not refer to a substitution of defendants. Although some broad language from McNeil might suggest otherwise ("... Congress intended to require complete exhaustion of Executive remedies before invocation of the judicial process." 508 U.S. at 112, 113 S. Ct. 1980), Morano's definition of the commencement of suit seems to decide the issue.
The post-McNeil district court case of Krumins v. Atkinson, No. Civ. A. 96-2144, 1997 WL 22396 (E.D.Pa. Jan.17, 1997), seems to take the contrary position finding a failure to exhaust administrative remedies because an administrative claim was submitted after the initial filing in a suit in which the United States was not the original defendant. It should be noted however that in Krumins even the attempt to substitute the United States as a defendant was premature, and in any case the administrative claim was filed after the statute of limitations had run.
2. Sum Certain Requirement: The prior presentation of a proper administrative claim to the appropriate government agency is a requirement for jurisdiction in suits against the United States. See 28 U.S.C. § 2675(a); Bialowas v. United States, 443 F.2d 1047, 1049 (3d Cir.1971). The policy goal underlying the administrative claim requirement of § 2675 is "to ease court congestion and avoid unnecessary litigation, while making it possible for the Government to expedite the fair settlement of tort claims asserted against the United States," S.Rep. No. 89-1327, at 6 (1966), reprinted in 1966 U.S.C.C.A.N. 2515, 2516, along with the additional goal of "providing for more fair and equitable treatment of private individuals and claimants," S.Rep. at 5, both passages quoted in Adams v. United States, 615 F.2d 284 (5th Cir.1980), quoted in Tucker v. United States Postal Serv., 676 F.2d 954, 958-59 (3d Cir.1982). In defining the proper presentation of an administrative claim for jurisdictional purposes, courts have agreed that a claimant must (1) give the agency written notice of the claim sufficient to enable it to investigate and (2) place a value on the claim. See Tucker, 676 F.2d at 958-59 (quoting Adams, defining "minimal notice"). A claim to which a request for damages in a sum certain has not been attached is not deemed presented, and jurisdiction cannot be based upon it. See Bialowas; Tucker, Commonwealth of Pennsylvania v. National Ass'n of Flood Insurers, 520 F.2d 11 (3d Cir.1975), overruled on other grounds, 659 F.2d 306 (3d Cir.1981), (hereinafter "NAFI"). One need look no further than the statutory scheme to see the reasoning behind such a requirement. 28 U.S.C. § 2675(B) places strict limits on suits for damages in excess of amounts claimed at the administrative level; such limits would be meaningless if claimants were not required to place specific values upon their administrative claims: no sensible claimant would ever specify an amount.
Only three district courts in this circuit have arguably departed from the requirement of a sum certain. Assuming those cases were correctly decided, none presents facts that would invite a similar decision in this case. See McCallum v. United States Dep't of Hous. and Urban Dev., Civ.A. No. 85-4626, 1986 WL 14217 (E.D.Pa. Dec.15, 1986); Collins v. United States, 626 F. Supp. 536 (W.D.Pa.1985); Church v. United States, 409 F. Supp. 285 (D.Del.1976).
The requirement of a sum certain claim, however, does not amount to an endorsement of any particular mode of presentation. The court in Bialowas suggested as much in rejecting a claim which provided neither a single specific sum nor "information ... from which a specific amount could be computed." 443 F.2d at 1049. A claim may be sufficient if a total amount is "directly inferable" from information presented. See Leaty v. United States, 748 F. Supp. 268, 269 (D.N.J.1990) (quoting the same court's opinion in a related action, Civil Action No. 90-699 D.N.J. filed Sept. 14, 1990 at 5); Boyd v. United States, 482 F. Supp. 1126, 1129 (W.D.Pa.1980); Danowski *368 v. United States, 924 F. Supp. 661, 668 (D.N.J.1996). The critical issue is the claim's "utility in effecting the policy goals of § 2675(a)," Leaty, 748 F.Supp. at 271 whether the claim "enables the target agency to pursue avenues of negotiation and settlement," id. The determination is based on the facts and circumstances of each case, see id. (quoting Champagne v. United States, 573 F. Supp. 488, 494 (E.D.La.1983)).
In the present case thirteen of the plaintiffs have submitted claims demanding sums certain regarding losses of property but not regarding any other alleged harm. The remaining plaintiffs have not submitted any sum certain claims. Some of the sum certain claims do not add up figures provided as values for lost items, and almost all refer to the estimated value of the lost property; but these are not fatal defects: the INS could easily have inferred the value of claims by adding component figures, and the use of the term "estimated" in such a context refers not to any inexactitude in the claim, but rather to the imprecision inherent in defining the value of merchandise or recalling the exact amount of lost money.
Nor are the thirteen sum certain property-related claims rendered ineffective for jurisdictional purposes because they were asserted along with other defective claims. Some courts have held that the sum certain requirement applies to all claims asserted in an administrative filing so that a failure to attach a value to all claims deprives the court of jurisdiction over any, see, e.g., Robinson v. United States Navy, 342 F. Supp. 381 (E.D.Pa.1972), but such a result is not required, see Schwartzman v. Carmen, 995 F. Supp. 574, 576 (E.D.Pa.1998) (allowing a property claim for which a sum certain had been stated while excluding a personal injury claim for which one had not, reasoning that the government could have settled the property claim separately). The logic of allowing one claim while excluding another is particularly persuasive in this case, where plaintiffs' property losses do not appear to arise from the same set of facts as their other injuries.
In accordance with this reasoning, plaintiffs' FTCA claims against the United States, including those for which the United States has been substituted as a defendant under § 2679(d), must be dismissed for failure to exhaust administrative remedies, with the exception of claims relating to property losses by plaintiffs who submitted sum certain administrative claims.[1]
3. Evidence of Authority Requirement: In an additional challenge to the sufficiency of plaintiffs' administrative filings, the INS argues that most of plaintiffs' administrative claims were defective for failing to provide evidence that Ms. Venetis was their fully authorized representative. The requirement that such evidence be submitted is not explicitly statutory; rather, it is laid out in the regulations governing the content of administrative claims. See 28 C.F.R. § 14.2(a). The critical question is whether the evidence of authority requirement is jurisdictional, or whether it is simply a component of settlement procedures.
In Tucker the Court of Appeals for the Third Circuit made it clear that the regulations (including § 14.2) promulgated pursuant to 28 U.S.C. § 2672 (which defines the settlement authority of government agencies) do not define the jurisdictional requirements for submission of administrative claims under § 2675. 676 F.2d at 957 (quoting Adams at length); see also Leaty; Cf. Danowski; but see Martinez v. United States, 743 F. Supp. 298 (D.N.J.1990); Dondero v. United States, 775 F. Supp. 144, 148 (D.Del.1991) (interpreting Tucker as providing support for the point that regulations define notice under § 2675). (Adams conceded only arguendo that 28 C.F.R. § 14.2 might be an attempt to define jurisdiction, observing that plaintiffs had in any case fulfilled its requirements, falling short only as to § 14.3) To the extent that NAFI suggested that the regulations define jurisdiction, it was superseded by Tucker. The court in Livera v. First Nat'l State Bank *369 of N.J. 879 F.2d 1186 (3d Cir.1989), observed that then § 14.2(b)(1) "sets forth the content standards required for tort claims against the United States" and held that a claim which fails to state a sum certain, as the regulations require, fails to provide jurisdiction, 879 F.2d 1186, 1195 (3d Cir.1989); but these statements fall short of holding that all the regulations represent essential requirements for jurisdiction.
Given that the procedural requirements of the regulations and the jurisdictional requirements of § 2675 are not identical, the mere inclusion in the regulations of a requirement for evidence of authority does not confer jurisdictional significance upon it. Further, the presentation of such evidence would not seem essential to the minimal notice required under § 2675. The submission of a claim by an attorney "raises the presumption that the attorney has the authority to act" on behalf of the party he or she purports to represent, Leaty 748 F.Supp. at 273 (quoting Graves v. United States Coast Guard, 692 F.2d 71, 74 (9th Cir.1982)), and is therefore sufficient as the initial presentation of a claim. (Leaty suggests that a letter from an attorney at least, as in that case, in conjunction with a previously submitted claim form naming the represented party as a claimant is sufficient evidence of authority to conform not only to the statutory requirement but also to those of 14.2(a) and 14.3(b).)
Tucker observed that the failure, subsequent to the initial filing of a claim, to provide additional evidence of injury might rightly deprive a claimant of a chance to settle a claim, but held that it should not be fatal to jurisdiction. 676 F.2d at 959 (quoting Adams). The failure to supply evidence of an attorney's authority falls into the same category. The only Third Circuit Court of Appeals case which suggests that the requirement for evidence of authority may be jurisdictional is NAFI, 520 F.2d 11; but as the court in Leaty pointed out, in NAFI, the State of Pennsylvania sought to sue on behalf of a large class of unidentified claimants, and the claims asserted by the state were not entirely independent of those it sought to assert as a representative. Leaty 748 F.Supp. at 274. The present case also is distinguishable from NAFI.
4. Curing Deficient Administrative Claims: Plaintiffs suggest that they should be permitted to cure any jurisdictional defects in their administrative claims. Such curing could have no effect on this court's consideration of the present motion. With the noted exceptions, plaintiffs have failed to provide minimal notice of their claims to the appropriate agency. Under § 2675 they may not bring suit until six months after doing so or until the agency takes final action on their claims. If it were possible for a plaintiff simply to amend an administrative claim so as to relate back to his or her original submission and stay in court as a result, none of the issues discussed above need ever be argued.
Moreover, although it is not necessary to decide the issue, plaintiffs are almost certainly barred by the statute of limitations, § 2401, from any further attempts to file administrative claims. In Bialowas, before concluding that the plaintiff's administrative claim was defective, the court noted that, since the statute of limitations had run, his action would be forever barred unless he could rely on that claim to establish jurisdiction. 443 F.2d at 1049. Other courts have made the same observation. See Schwartzman, 995 F.Supp. at 576; Robinson, 342 F.Supp. at 384; LeGrand v. Lincoln, 818 F. Supp. 112, 116 (E.D.Pa.1993); Farr v. United States, 580 F. Supp. 1194, 1196-97 (E.D.Pa.1984); Leaty, 748 F.Supp. at 270 (quoting Blain v. United States, 552 F.2d 289, 291 (9th Cir.1977)). In Simms v. United States, Civ.A. No. 89-0165, 1990 WL 4416 (E.D.Pa. Jan.19, 1990), aff'd 914 F.2d 244 (3d Cir.1990), the court, denying jurisdiction, held that the submission of a proper administrative claim after the two-year statute of limitations had run could not relate back to a timely but defective filing to establish jurisdiction. See also Jordan v. United States, 333 F. Supp. 987, 989-90 (E.D.Pa.1971), aff'd 474 F.2d 1340 (3d Cir.1973). The only case to the contrary in this circuit appears to be Apollo v. United States, 451 F. Supp. 137 (M.D.Pa.1978). See also Avila v. INS, 731 F.2d 616 (9th Cir.1984); Koziol v. United *370 States, 507 F. Supp. 87 (N.D.Ill.1981); Thompson v. United States, 749 F. Supp. 299 (D.D.C.1990).
For the reasons set forth above, all of plaintiffs' FTCA claims will be dismissed except for the claims for property losses of the plaintiffs who submitted administrative property loss claims setting forth the amounts or estimated amounts of their property loss.
III. Other Claims against INS or the United States:
Plaintiffs have asserted claims against the INS based on state law, specifically, the New Jersey Constitution. If this claim is based upon the FTCA, it must fail for the reasons set forth above. Otherwise, principles of sovereign immunity preclude the claim.
Plaintiffs allege that "[d]efendant INS breached its contractual duties of care to Plaintiffs, who were intended third party beneficiaries of the Contract [between INS and Esmor]. As a result of the breach, Plaintiffs suffered severe physical and mental harm." (First Amended Complaint, ¶ 122). If this is in effect a tort claim, it fails for the reasons previously stated. If it is a contract claim, apart from the highly questionable basis for third party beneficiary status, jurisdiction has not been established. The district court has jurisdiction only over contract claims in which the amount sought is less than $10,000. 28 U.S.C. § 1346(a)(2). Plaintiffs' claims on account of the "severe physical and mental harm they suffered" are not so limited and consequently the court does not have jurisdiction of the contract claims.
Plaintiffs allege that the INS "substantially burdened their rights to the free exercise of their religion" and therefore have a cause of action under the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb, et. seq. ("RFRA"). Section 3 of RFRA provides in relevant part:
(c) Judicial Relief. A person whose exercise has been burdened in violation of this section may assert that violation as a claim or defense in a judicial proceeding and obtain appropriate relief against a government. Standing to assert a claim or defense under this section shall be governed by the general rules of standing under article III of the Constitution.
42 U.S.C. § 2000bb-1(c).
Assuming the constitutionality of RFRA, the INS does not challenge that the United States government is subject to suit under the Act[2]. It contends, however, that RFRA does not expressly create a damages cause of action and that the legislative history does not suggest that damages are available. The only relief which is "appropriate" under the statute, the INS further argues, is declaratory or injunctive relief, neither of which would be available in the present case because the Esmor facility has closed. In these circumstances the INS urges that there is no case or controversy and the RFRA claims should be dismissed.
It is not at all certain that "appropriate relief against a government" was not intended to include damages. The Act is relatively new; its construction and constitutionality are uncertain. In these circumstances the prudent course is to deny the motion to dismiss the RFRA claims without prejudice to a renewal of the motion at a time when more guidance concerning its intent may be available.
IV. Claims Against INS Officials:
Plaintiffs have alleged claims against the INS officials in addition to the ATCA claims which have been addressed above.
The INS officials claim entitlement to a qualified immunity under the principles established in Harlow v. Fitzgerald, 457 U.S. 800, 818-19, 102 S. Ct. 2727, 73 L. Ed. 2d 396 (1982). Even if such an immunity is available in a RFRA action, it is premature to decide at this point whether these defendants are entitled to its protection. That is a question *371 better decided in the context of a summary judgment motion.
For the reasons set forth above for denying the INS' motion to dismiss the RFRA claims, the INS officials' motion to dismiss that claim will be denied without prejudice to its renewal at a later date.
Plaintiffs assert New Jersey tort law and New Jersey Constitutional claims against the INS Officials. These claims must be dismissed.
On December 19, 1997 the Attorney General filed a notice of substitution and certification pursuant to which the United States was substituted for the INS Officials on all state law claims. Once the Attorney General has certified that the government employees were acting within the scope of their employment at the time of the incident out of which the state law claim arose, any civil action arising out of the incident is deemed an action against the United States. 28 U.S.C. § 2679(d)(1). By statute "[t]he remedy against the United States provided by sections 1346(b) and 2672 ... for injury or loss of property, or personal injury or death arising or resulting from the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment is exclusive of any other civil action or proceeding for money damages by reason of the same subject matter against the employee whose act or omission gave rise to the claim or against the estate of such employee. Any other civil action or proceeding for money damages arising out of or relating to the same subject matter against the employee or the employee's estate is precluded ..." 28 U.S.C. § 2679(b)(1).
Plaintiffs have asserted three Bivens claims against the INS Officials, alleging violations of the First, Fifth and Thirteenth Amendments. Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971). Such claims are not within the exclusive remedy provision of § 2679(b)(1), 28 U.S.C. § 2679(b)(2)(a). The INS Officials move to dismiss the Bivens claim based on the Thirteenth Amendment.
Plaintiffs charge that these-defendants violated their rights to be free from involuntary servitude by acting with deliberate indifference towards plaintiffs' forced, unpaid labor. These defendants contend that none of the actions attributed to them in the complaint support a claim that they subjected plaintiffs to involuntary servitude, citing Channer v. Hall, 112 F.3d 214 (5th Cir.1997). Although this basis for the claim against the INS officials as set forth in the First Amended Complaint is thin, its disposition should await a summary judgment motion after the facts have been developed. The motion will be denied without prejudice to renewal upon completion of discovery.
Plaintiffs have also asserted claims against the INS officials under the Fair Labor Standards Act, 29 U.S.C. § 203, et seq. ("FLSA"), contending that they were employees within the meaning of FLSA forced to work at the Esmor facility without compensation, that the INS officials were "employer enterprise(s) engaged in commerce," as defined in the Act, and may be sued in their individual capacities for violating FLSA. EEOC v. Blast Intermediate Unit 17, 677 F. Supp. 790, 792 (M.D.Pa.1987); Weiss v. Marsh, 543 F. Supp. 1115, 1118-19 (M.D.Ala. 1981).
It is premature to hold that plaintiffs cannot produce evidence on the basis of which a fact finder could predicate an FLSA violation. These questions also must abide development of a record and be decided in the context of a summary judgment motion. The motion to dismiss the FLSA claim will be denied without prejudice.
V. Claims Against Esmor and its Agents:
The Esmor defendants' motion to dismiss the international law claims asserted pursuant to the ATCA is denied for the reasons previously stated.
Like the INS Officials, the Esmor defendants have moved to dismiss i) claims asserted under RFRA, ii) claims asserted under the Thirteenth Amendment and iii) claims asserted under FLSA. It must be noted that by virtue of the contract with INS to perform governmental detention functions these defendants *372 became state actors and were not acting simply as a private corporation or private individuals. For the reasons that the INS officials' motion to dismiss these claims is denied, the motion of the Esmor defendants to dismiss them will be denied. This denial is also without prejudice to renewal in the context of summary judgment motions.
The Esmor defendants move to dismiss claims asserted under the New Jersey Constitution. It relies on the arguments that the INS and INS officials advanced. These arguments are not available to the Esmor defendants. It is not protected by sovereign immunity and actions against it are not limited by the FTCA. Further, the Esmor employees are not protected by 28 U.S.C. § 2679(b)(1) which makes a suit against the United States the exclusive remedy for injuries resulting from the wrongful conduct of government employees while acting within the scope of their employment.
The Esmor defendants assert that there is no right of action against private actors under the New Jersey constitution. This is not a totally correct statement of the law. Hoagburg v. Harrah's Marina Hotel Casino, 585 F. Supp. 1167, 1172 (D.N.J.1984); State v. Schmid, 84 N.J. 535, 423 A.2d 615 (1980). In any event the Esmor defendants were state actors by virtue of the responsibilities they assumed under the contract with the INS. The motion to dismiss the New Jersey Constitutional claims will be denied.
Conclusion
The INS motion to dismiss i) all claims brought against it under ATCA or otherwise based upon customary international law, ii) claims brought against it under the FTCA, iii) claims brought against it arising out of the New Jersey Constitution and iv) claims against it deriving from the contract between Esmor and INS will be granted. The INS motion to dismiss claims arising under RFRA will be denied without prejudice to renewal of the motion.
The First Amended Complaint in this action will be amended to name the United States the defendant on plaintiffs' FTCA claims, and the United States shall be deemed to have moved to dismiss plaintiffs' FTCA claims. The motion of the United States to dismiss the FTCA claims will be granted except with respect to the property claims of plaintiffs who submitted administrative property loss claims setting forth the amounts or estimated amounts of their property losses.
The motion of the INS Officials to dismiss i) claims brought against them under ATCA based upon customary international law, ii) claims brought against them arising under RFRA, iii) claims brought against them arising under the Thirteenth Amendment of the United States Constitution and iv) claims brought against them arising under FLSA will be denied without prejudice to renewal of the motion after discovery has been substantially completed. The motion of the INS officials to dismiss claims brought against them under New Jersey tort and constitutional law is granted.
The motion of the Esmor defendants to dismiss i) claims brought against them under ATCA based upon customary international law, ii) claims brought against them arising under RFRA, iii) claims brought against them arising under the Thirteenth Amendment of the United States Constitution, and iv) claims brought against them arising under FLSA will be denied without prejudice to renewal of the motion after discovery has been substantially completed.
NOTES
[1] Sufficient property claims were submitted by plaintiffs Addai, Anang, Awotwe, Badjoko, Bakar, Crespo, Jama, Jeyakumar, Kenneh, Manoharan, Manu, Raji. The exhibits accompanying plaintiffs' moving papers do not include a claim of Agatha Serwaa; if she filed a fixed sum property claim she too is entitled to the benefit of this ruling.
[2] The Supreme Court held that Congress exceeded its powers under the Amendment when it applied RFRA to the states. City of Boerne v. Flores, 521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997). The INS does not challenges its constitutionality as applied to federal actions. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2573266/ | 422 F. Supp. 2d 698 (2006)
U.S. BANK NATIONAL ASSOCIATION (Successor in Interest to State Street Bank & Trust Company), as Trustee for the Registered Holders of BTC Commercial Mortgage Pass-Through Certificates, Series BTR Trust 1991-S1, Acting by and Through its Special Servicer, GMAC Commercial Mortgage Corporation, Plaintiff,
v.
SAFEGUARD INSURANCE COMPANY, Defendant.
No. 3:04-CV-2102-D.
United States District Court, N.D. Texas, Dallas Division.
January 4, 2006.
*699 *700 *701 Randall R. Kucera, Sara Jl Wahl, Akin Gump Strauss Hauer & Feld, Dallas, TX, for Plaintiff.
Daniel E. Pellar, Beirne Maynard & Parsons, Dallas, TX, Stephen R. Wedemeyer, Beirne Maynard & Parsons, Houston, TX, Dwayne J. Hermes, Hermes Sargent Bates, Dallas, TX, for Defendant.
MEMORANDUM OPINION AND ORDER
FITZWATER, District Judge.
In this property insurance coverage dispute, the assignee of a mortgagee moves for partial summary judgment against an insurer, seeking to establish under the Texas equitable lien doctrine that it should be treated as if it were an additional insured and loss payee. The principal question the court must decide is whether the assignee has established beyond peradventure that there is a deficiency owed on the indebtedness on the insured properties so that the assignee is entitled to recover insurance proceeds. Concluding that the assignee has met its summary judgment burden, the court grants the motion.
I
This is a removed action in which plaintiff U.S. Bank National Association (successor in interest to State Street Bank & Trust Company), as Trustee for the Registered Holders of BTC Commercial Mortgage Pass-Through Certificates, Series BTR Trust 1991-S1, acting by and through its special servicer, GMAC Commercial Mortgage Corporation ("U.S. Bank"), sues defendant Safeguard Insurance Co. ("Safeguard") for breach of contract, breach of duty of good faith and fair dealing, violations of the Texas Insurance Code, and promissory estoppel arising from Safeguard's refusal to cover damage to properties in which U.S. Bank held a mortgage interest.[1] In 1998 Triad Dallas Properties IV, Ltd. ("Triad") borrowed $45.5 million from Bankers Trust Company ("Bankers") to purchase real estate.[2] Triad executed a promissory note payable to Bankers and a deed of trust, security agreement, and assignment of leases and rents, fixture filing, and financing statement in Bankers' favor. The deed of trust *702 covered four properties in or near Dallas, Texas, and there was no separate value assigned to each individual property. The properties are known as the Belvedere, the Atrium at Bent Tree ("Atrium"),[3] the Courtyard at Arapaho ("Courtyard"), and Fairway Plaza ("Fairway"). Bankers later assigned the deed of trust to U.S. Bank.[4] GMAC Commercial Mortgage Corporation ("GMAC") serviced the mortgage for U.S. Bank. A provision of the deed of trust required Triad to maintain property insurance on the mortgaged property. It also required that the insurance policy contain a mortgagee clause or loss payee endorsement for the benefit of Bankers (U.S. Bank's predecessor), the mortgagee.[5]
Safeguard provided insurance coverage for Triad's properties. Triad obtained insurance through Hilb, Rogal & Hamilton Company of Alabama ("HRH"), an insurance agent. The policy relevant to this litigation was for the period November 1, 2002 to November 1, 2003 and insured the Triad properties as a single unit compromised of the four individual properties. The policy listed Triad as the named insured. Contrary to the deed of trust provision that required that insurance policies contain a mortgagee clause or loss payee endorsement, and despite the fact that Bankers itself had paid the premium for the 2002-03 policy, the policy neither identified Bankers as an additional insured nor contained a mortgagee clause.[6]
In the spring of 2003 hailstorms damaged skylights and air conditioner coils at Atrium and damaged the roof and air conditioner units at Courtyard. Soon thereafter, U.S. Bank deemed Triad to have defaulted on its obligations under the financing arrangement,[7] it foreclosed on Atrium, Courtyard, and Belvedere, and it purchased the properties for $27 million at foreclosure on July 1, 2003. In the substitute deed of trust and bill of sale, the parties agreed that the lien and security interest of the deed of trust remained in full force and effect as to the fourth secured property (Fairway), which was not part of the foreclosure proceedings. The original deed of trust provided that, in the event of a partial sale of the mortgaged property where the proceeds amounted to less than the aggregate secured indebtedness, the deed of trust and lien remained in full force and effect as to the unsold *703 portions of the four Triad properties, as if no sale had been made.
On the same day that U.S. Bank purchased the properties at foreclosure, it also sued Triad in Texas state court for breach of contract, alleging that Triad had defaulted on its payment obligations under the promissory note and deed of trust.[8] U.S. Bank, also obtained an order placing Fairway in receivership.
Later in 2003 Courtyard's property manager submitted a property loss notice to HRH concerning the hailstorm. She separately mailed to Safeguard's counsel a copy of the substitute trustee's deed and bill of sale and notice of substitute trustee's sale. Her cover letter noted that she had enclosed documents pertaining to the ownership and foreclosure of Courtyard. Also in 2003 Atrium's property manager filed a property loss notice for damage sustained in the hailstorm. She faxed the notice to HRH and included on the coversheet a note that advised that "any claim checks representing proceeds for repairs at [Atrium] due to hail damage[ ] should be made payable to [Triad] and [GMAC]." P.App. 263. Safeguard refused to pay insurance proceeds to U.S. Bank through GMAC, contending that U.S. Bank was not a party to the insurance policy and was not an insured party under the policy. U.S. Bank responded by filing the instant lawsuit against Safeguard in Texas state court, which Safeguard removed to this court based on diversity of citizenship.
In February 2005 the state court presiding over U.S. Bank's lawsuit against Triad granted summary judgment in U.S. Bank's favor on its breach of contract claim.[9] The court determined that Triad owes U.S. Bank approximately $22 million. The judgment provides that U.S. Bank may execute on the judgment against all property that secures the note and deed of trust, including Fairway.
In the instant suit, U.S. Bank moves for partial summary judgment, contending that the Texas equitable lien doctrine compels Safeguard to treat U.S. Bank as if it were listed as an additional named insured and loss payee on the policy and that the policy provides coverage to U.S. Bank as if it were.[10] Safeguard opposes the motion, arguing that the equitable lien doctrine is inapplicable because there is no deficiency remaining on the loan as to Atrium and Courtyard (the two damaged properties), the case is not ripe, and a litany of equitable doctrines, e.g., estoppel, preclude U.S. Bank's reliance on the Texas equitable lien doctrine.[11]
II
The equitable lien doctrine provides that, where "a mortgagor is charged with the duty of obtaining insurance on a property with loss payable to the mortgagee, *704 but the policy does not contain such a provision, equity will treat the policy as having contained the loss payable provision and entitle the mortgagee to recover under the policy." Beneficial Standard Life Ins. Co. v. Trinity Nat'l Bank, 763 S.W.2d 52, 55 (Tex.App.1988, writ denied).[12]
It has been held many times by the courts of this state and practically every other state in this country that an agreement between a mortgagor and a mortgagee under which the mortgagor is charged with the duty of procuring insurance upon the mortgaged property for the benefit of the mortgagee, will encumber the proceeds of any insurance so procured by the mortgagor with a lien in favor of the mortgagee. In such cases it is the duty of the mortgagor to have a provision inserted in the policy that the proceeds shall be payable to the mortgagee as his interest might appear but, where he fails to do so, equity will treat the policy as having contained such a provision upon the principle that equity treats that as done which should have been done. Of course, if the insurer is not informed of such an agreement, it is not bound thereby, but after the information is given to it, the duty rests upon the insurer to treat the proceeds of the policy as though such a provision was written into the policy.
Fid. & Guar. Ins. Corp. v. Super-Cold S.W. Co., 225 S.W.2d 924, 927 (Tex.App. 1949, writ ref'd n.r.e.).
The equitable lien doctrine, however, does not treat the mortgagee and mortgagor as indistinctive entities. Rather, it operates to the extent necessary to preserve the mortgagee's interest. The purpose of the mortgagee clause in an insurance policy is to protect the lender who has lent money for the purchase of property. See Fireman's Fund Ins. Co. of Tex. v. Jackson Hill Marina, Inc., 704 S.W.2d 131, 136 (Tex.App.1986, writ ref'd n.r.e.). "Accordingly, when a mortgagee reduces the indebtedness by purchasing property at a foreclosure sale, the amount of the mortgagee's interest is limited to the amount of the deficiency remaining on the note after the sale." Id.; see also Smith v. Tex. Farmers Ins. Co., 82 S.W.3d 580, 584-85 (Tex.App.2002, pet.denied) (observing that mortgagee's interest is limited to indebtedness mortgagor owes); Beneficial Standard, 763 S.W.2d at 55 (holding that because lender had obtained satisfaction of loan through proceeds of foreclosure sale, lender was not entitled to any additional payment from insurance proceeds through equitable lien doctrine). Safeguard does not contest that Triad agreed to obtain insurance for Bankers' benefit or that Safeguard had notice of the agreement. Instead, Safeguard maintains that the equitable lien doctrine is inapplicable because there is no deficiency remaining on the loan as to the Atrium and Courtyard properties.
III
The court's analysis of Safeguard's claim to partial summary judgment based on the equitable lien doctrine is bipartite. First, it ascertains which party will bear the burden of proof at trial concerning the equitable lien doctrine so that it can determine what standard U.S. Bank must meet to obtain summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986) (holding that summary judgment standard varies according to whether moving party will have burden of proof on claim at trial). Second, the court applies the standard to U.S. Bank's claim that it is entitled to relief under the equitable lien doctrine.
*705 A
U.S. Bank appears to maintain in its opening brief that Safeguard bears the burden of proof to deny U.S. Bank entitlement to a lien on the proceeds. See P. Br. 8 ("After adequate time for discovery, Safeguard has been unable to establish: (a) that it is not subject to the equitable lien doctrine. . . ."). In subsequent briefing, however, U.S. Bank contends that for the doctrine to apply, it bears the burden of proving only the existence and notice of an agreement between the mortgagor and mortgagee to procure insurance. See P. Final Reply at 2. If this allocation of the burden of proof were correct, it would essentially be determinative of U.S. Bank's motion, because these two elements of the equitable lien doctrine are undisputed. As to the key issue in deciding this motion whether there exists a deficiency on the mortgageU.S. Bank does not concede that it has the burden of proof. As does Safeguard, the court thus presumes that U.S. Bank places that burden on Safeguard to establish an affirmative defense.[13] Safeguard contests this premise. It contends that U.S. Bank has the burden of proving that the necessary deficiency exists on the mortgage loan that entitles it to the insurance proceeds.[14] The court must therefore determine the required elements of proof to establish that the doctrine applies, including whether U.S. Bank has overlooked its burden with respect to a debt that has been extinguished.
Texas case law does not appear explicitly to place on either party the burden of proving the mortgage loan deficiency that is required to establish an equitable lien claim on insurance proceeds. U.S. Bank points to case law that supports its contention that it need only prove the existence and notice of an agreement between the mortgagor and mortgagee to procure insurance. See, e.g., Guarantee Ins. Co. v. First Nat'l Bank of Jacksonville, Tex., 552 S.W.2d 855, 858 (Tex.Civ.App.1977, writ dism'd w.o.j.); Fid. & Guar. Ins., 225 S.W.2d at 927. The question whether there existed a deficiency on the mortgage, however, is not addressed in any of the cases U.S. Bank cites. Safeguard relies on two cases to support its position that U.S. Bank bears the burden of proving entitlement to the insurance proceeds, including a deficiency on the loan. The first, El Fenix de Puerto Rico v. Serrano Gutierrez, 786 F. Supp. 1065 (D.P.R.1991), is not binding on this court. Moreover, it is inapposite, because the court recites in the context of a maritime dispute the general proposition that the burden of proving the existence of an insurable interest under a policy lies with the insureds. See id. at 1009. Safeguard also relies on Michael E. Black Profit Sharing Plan v. Stephens, 973 S.W.2d 451, 453 (Tex.App.1998, no pet.), in which the existence of a loan deficiency was not an issue.
*706 The dispositive question is whether the existence of a mortgage deficiency is an element of U.S. Bank's claim for relief under the equitable lien doctrine or whether the contention that the indebtedness has been extinguished is an affirmative defense as to which Safeguard bears the burden of proof. Faced with little guidance in Texas case law, the court concludes for the following reasons that U.S. Bank bears the burden of proving its entitlement to the insurance proceeds, including the burden of demonstrating the existence of a deficiency on the mortgage.
First, in Black Profit Sharing, which involved a dispute' between two mortgagees, one of whom was not named as a loss payee and sought to establish that it had an equitable lien on insurance proceeds, the Texas Court of Appeals appears to have placed the burden of proof on the mortgagee who sought to prove the existence of the equitable lien. See Black Profit Sharing, 973 S.W.2d at 453 ("Absent proof of the date of the policy's issuance, Black has not met its burden to show that the policy was made for its benefit and to evince any right to share in the policy proceeds.").[15]
Second, U.S. Bank seeks to invoke the equitable lien doctrine to establish that it has superior rights to the insurance proceeds. See Duval County Ranch Co. v. Alamo Lumber Co., 663 S.W.2d 627, 632 (Tex.App.1983, writ ref'd n.r.e.) (describing doctrine as "in pursuance of equitable principles . . . equity will treat the [insurance] policy as having contained a [losspayable] provision upon the principle that equity treats that as done which should have been done"). In Texas, complainants in equity have historically borne the burden of proof to establish superior title to propertyespecially with respect to land. See McAfee v. Wheelis, 1 Posey Unrep.Cas. 65, 71, 1879 Tex. LEXIS 156, at *10 (Tex. Comm'n App. 1879) (not precedential) ("They are seeking to set up and enforce a tacit equity against persons standing on a legal title complete and fair on its face; and, therefore, they must assert and establish the facts which constitute their equity.'"); Houston Oil Co. of Tex. v. Ainsworth, 192 S.W. 614, 616 (Tex. Civ.App.1916) (noting that "the burden of proof is always on the party asserting an equitable right or an equitable title against the holder of the legal title."), rev'd on other grounds, 228 S.W. 185 (Tex. Comm'n App.1921, holding approved). Although U.S. Bank does not in this lawsuit seek title to Atrium or Courtyard, this maxim also weighs in favor of placing the burden on U.S. Bank as the party who asks that the court do equity.
Third, the evidentiary principle that the party with access to information is commonly assigned the burden of proof with respect to that element of a claim further supports placing the burden of proof on U.S. Bank. See Int'l Bhd. of Teamsters v. United States, 431 U.S. 324, 359 n. 45, 97 S. Ct. 1843, 52 L. Ed. 2d 396 (1977) ("Presumptions shifting the burden of proof are often created to reflect judicial evaluations of probabilities and to conform with a party's superior access to the proof."); United States v. Overton, 834 F.2d 1171, 1176 (5th Cir.1987) ("[T]he party with superior knowledge of the facts is better able to prove its intent, and superior access to *707 proof is a common justification for allocating the burden of proof."). In these circumstances, the mortgagee rather than the insurer can be expected to possess superior knowledge of and access to information about a mortgage deficiency.
From the Texas case law, principles of equity, and evidence jurisprudence, the court holds that U.S. Bank as the mortgagee bears the burden of proving its entitlement to the insurance policy proceeds under the equitable lien doctrine, including the doctrinal requirement that there be a deficiency on the mortgage.
B
Because U.S. Bank is moving for partial summary judgment on an issue as to which it will have the burden of proof at trial, to be entitled to summary judgment, it "must establish `beyond peradventure all of the essential elements of the claim[.]'" Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F. Supp. 943, 962 (N.D.Tex. 1995) (Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). This means that U.S. Bank must establish beyond peradventure that there is a deficiency on the $45.5 million loan to Triad such that U.S. Bank is entitled to insurance proceeds from hail storm damage to Atrium and Courtyard.
U.S. Bank maintains that the foreclosure on the three Triad properties did not satisfy completely the mortgage obligation. It points to the state court judgment as evidence that Triad owes U.S. Bank approximately $22 million under the original deed of trust and promissory note. U.S. Bank urges that there exists a deficiency on the loan, the equitable lien doctrine applies, and it is entitled to the insurance proceeds for the two properties.
Both parties acknowledge that the existence of a deficiency on the mortgage loan from U.S. Bank to Triad is governed by the original and substitute deeds of trust. U.S. Bank contends that, because its remedies under the original deed of trust to collect the Triad debt owed are cumulative, its election to foreclose on three of the four properties did not extinguish its rights to collect the remaining loan deficiency. Specifically, Article 7.1 of the deed of trust provides: "If an Event of Default shall occur, [Bankers] may, at its option, . . . exercise one or more or all of the following remedies:" e.g., accelerate the loan, operate or sell the property, or appoint a receiver to manage it. U.S. Bank reasons that, "[t]hough the [substitute deed of trust] does expressly exclude [Fairway], the fact that it expressly reserves the lien on one item does not act to impliedly release the liens on all the various other collateral not expressly sold under the [substitute deed of trust]." P. Reply. Br. 7. It therefore argues that its recovery of $27 million through foreclosure on three of the four Triad properties does not affect its entitlement to the balance on the $45.5 million loan through all remaining remedies, including recovery of insurance proceeds, entry of a default judgment, appointment of a receiver, or otherwise.
Safeguard posits that no deficiency remains concerning the three properties foreclosed on because U.S. Bank elected to attach its security interest and any remaining debt thereunder solely against the remaining unsold property (Fairway). Exhibit A attached to the substitute deed of trust provides that the lien and security interest of the original deed of trust remain in full force and effect as to remaining real and personal property associated only with Fairway. Moreover, Article 7.1.4 of the original deed of trust similarly provides that, upon partial sale, the deed of trust and lien remain in full force and effect as to the unsold portions of the properties, "just as though no sale had been made." P.App. 373. Relying on these deed of trust provisions and, despite *708 the election of remedies provision of the original deed of trust, Safeguard maintains that, because Triad and U.S. Bank agreed that any deficiency that remained on the original mortgage loan was no longer secured by the three foreclosed-on properties, no deficiency exists as to these properties.
The facts of this casewhich involve the mortgagee's election to foreclose on some but not all of several properties that secured a single loan and to secure the balance of the loan with only the remaining propertycomplicate somewhat the otherwise basic determination of the existence of a loan deficiency. Nevertheless, the narrow question the court must decide is whether Triad still owes money on the loan, that is, whether a deficiency remains. The court concludes that the summary judgment evidence establishes beyond peradventure that there is a deficiency on the loan.
The existence of such a deficiency is apparent from an examination of the structure of the transaction between Triad and Bankers, as reflected in the two deeds of trust. Bankers loaned Triad $45.5 million on terms intended to maximize the possibility that Bankers would be repaid. The terms were written to increase the amount of collateral that secured the loan and the available remedies in the event of a default. For instance, Articles 1.21 and 1.25 of the original deed of trust listed as collateral, inter alia, land, buildings, fixtures, rents, personalty, and insurance policies and proceeds. Article 7.1 provided that U.S. Bank's remedies to recover the amount loaned were cumulative. P.App. 372 ("If an Event of Default shall occur, [Bankers] may, at its option, . . . exercise one or more or all of the following remedies:" e.g., accelerate the loan, operate or sell the property, or appoint a receiver to manage it.). Accordingly, under the terms of the original deed of trust, U.S. Bank's election to foreclose on some of the collateral had no effect on its remedial rights with respect to the remaining collateral.
By parsing the language of the substitute deed of trust, Safeguard posits that U.S. Bank has elected one remedy (foreclosure) against three of the four properties, thereby extinguished the debt as to them. This contention is fatally flawed, however, because U.S. Bank did not relinquish any right to recover its debt by exercising its contractual right to foreclose. That is, by electing one remedy, U.S. Bank did not cede others. Rather, by foreclosing, U.S. Bank simply acted to reduce the total amount of indebtedness owed to it by Triad as per the terms of the agreement.
Moreover, Safeguard's contention that U.S. Bank's $27 million bid at foreclosure extinguished the debt as to the three foreclosed-on properties incorrectly assumes that the $45.5 million debt was legally divided among the four individual properties. The loan documents indicate that the listed collateral and available remedies secured a total loan amount, and U.S. Bank's rights to repayment of the full loan amount were cumulative against all of the collateral offered as security. For example, Article 9.26 of the original deed of trust provided that each of the four properties could be "released" as collateral for the loan only if certain conditions were met.[16] And there is no evidence in the summary judgment record that would permit *709 a reasonable finding that U.S. Bank "released" the properties as collateral or even that the conditions precedent to their release had arisen. The court can thus ascertain the existence of a mortgage deficiency in these circumstances by examining the amount U.S. Bank has already recovered, i.e., $27 million at foreclosure, on its $45.5 million loan to Triad.[17]
Moreover, the court's conclusion is consistent with the policy behind the equitable lien doctrine, the purpose of which is "to protect the security interest of one who has advanced money to another for the purchase of property." Fireman's Fund Ins. Co. of Tex., 704 S.W.2d at 136. Not even Safeguard maintains that U.S. Bank's $45.5 million loan has been repaid entirely; it only contends that U.S. Bank has been repaid with respect to the three foreclosed-on properties, including the two that suffered hail damage.
Finally, if Safeguard were to retain the insurance proceeds, it would presumably obtain a windfall, because Triad is unlikely to seek recovery. See U.S. Bank Nat'l Ass'n v. Safeguard Ins. Co., No. 3:04-CV-2102-D, at 3 (N.D.Tex. Apr. 6, 2005) (order) (Fitzwater, J.) (noting that Triad "conducts no business, has a negative net worth, no employees, no resources to pay counsel, and it considers any insurance claim or proceeds to be the property of" U.S. Bank).
The court thus concludes that U.S. Bank has established beyond peradventure that a deficiency exists on the mortgage such that the equitable lien doctrine is applicable to the insurance policy proceeds.[18]
IV
Safeguard maintains that if the court determines that a deficiency exists, (1) the court lacks subject matter jurisdiction because U.S. Bank's claim of entitlement to a lien is not ripe and (2) the claim is barred by the doctrines of res judicata, collateral estoppel, judicial estoppel, election of remedies, and unclean hands.
A
Safeguard contends that, because U.S. Bank elected to place Fairway into a receivership and obtain a default judgment, the amount of the mortgage deficiency is not quantifiable and "any decision by this Court would be an advisory [opinion] and lead[ ] to potential double recovery." D. Br. 18. It posits that the amount of the mortgage deficiency is unquantifiable because the receiver who operates Fairway is to offset future rents, profits, and other income generated by the property to the mortgage deficiency until Triad's debt is extinguished pursuant to the state court default judgment.
Safeguard's contention concerning ripeness is misplaced. The state court judgment merely establishes the amount of the deficiency on which U.S. Bank is attempting to recover through permissible *710 remedies, including obtaining rents and profits from the receivership and equitable liens on insurance proceeds. The fact that U.S. Bank is proceeding through multiple, simultaneous remedies to reduce the amount of Triad's indebtedness does not preclude it from recovering based on a lack of ripeness. To determine whether a case is ripe for adjudication, the court looks to factors such as whether the plaintiff will sustain immediate injury and whether such injury would be redressed by the relief requested. See Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580, 105 S. Ct. 3325, 87 L. Ed. 2d 409 (1985) (observing that doctrine's "basic rationale is to prevent the courts, through premature adjudication, from entangling themselves in abstract disagreements") (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967)). Safeguard does not maintain that U.S. Bank lacks injury, or that its injury would not be redressed by the relief requested. There is thus no impediment to the court's acting, because U.S. Bank suffers greater injury the longer the insurance proceeds remain unpaid. Safeguard's suggestion appears to be that other relief, i.e., the receivership and default judgment, obviates the need for a decision by this court. Safeguard has not demonstrated that the case is not ripe or that the court lacks subject matter jurisdiction.
B
Safeguard maintains that U.S. Bank's claim is otherwise barred by the doctrines of res judicata, collateral estoppel, judicial estoppel, election of remedies, and unclean hands.
1
Safeguard contends that res judicata and" collateral estoppel bar this lawsuit because of the state court mortgage default lawsuit that U.S. Bank brought against Triad. In determining whether the present suit is barred by the state court judgment, the court applies state law. See Landscape Design & Constr., Inc. v. Transp. Leasing/Contract, Inc., 2002 WL 257573, at *3 (N.D.Tex. Feb.19, 2002) (Fitzwater, J.). Under Texas law, res judicata and collateral estoppel apply if this action is based on the same claims as were raised or could have been raised in state court. See Transp. Concepts, Inc. v. S.F. French Bread Co., 2000 WL 1175642, at *1 (N.D.Tex. Aug.17, 2000) (Fitzwater, J.) (describing res judicata elements under Texas law); Dittmann v. City of Garland, 1998 WL 574774, at *3 (N.D.Tex. Aug.31, 1998) (Fitzwater, J.) (same as to collateral estoppel). Neither doctrine applies to this action, which concerns an insurance dispute with an insurer. The state court judgment addressed a mortgage default action brought against the mortgagor. Furthermore, the parties are distinct; Safeguard was not a party to the state court judgment and Triad is not a party to this lawsuit.
2
Safeguard next maintains that U.S. Bank is judicially estopped from bringing its claim because, in the state court default proceeding, U.S. Bank "warranted and swore . . . that all offsets had been accounted for without any mention whatsoever of the claim for insurance proceeds at issue in this case." D. Br. 21. Moreover, U.S. Bank introduced evidence in that proceeding of the deed of trust, which acknowledged that the entire indebtedness owed under the mortgage was secured only by Fairway.
"Judicial estoppel is a common law doctrine by which a party who has assumed one position in his pleadings may be estopped from assuming an inconsistent position." In re Wakefield, 293 B.R. 372, 378 (N.D.Tex.2003) (Fitzwater, J.) (internal quotation marks and alteration omitted). *711 Courts apply the doctrine "when two requirements are met: the position of the party to be estopped is clearly inconsistent with its previous one, and the party convinced the court to accept the previous position." Id. Judicial estoppel is inapplicable in the present case. The sworn pleadings presented in the state court mortgage default proceeding merely represented that, at that time (specifically, "through January 10, 2005"), all setoffs had been accounted for. This is consistent with U.S. Bank's current position. None of the positions that Safeguard identifies is inconsistent such that judicial estoppel bars U.S. Bank's suit in equity.
3
Safeguard contends that U.S. Bank's claim is barred by the doctrine of election of remedies. It maintains that, "by voluntarily electing to for[ ]go foreclosure against Fairway[ ], and pursuing the entire debt in the [state court action], [U.S. Bank] elected its remedy and should be precluded from now arguing that it is entitled to an equitable lien on the insurance proceeds." D. Br. 22. Safeguard also posits that U.S. Bank may obtain a double recovery from this lawsuit and the state court default judgment.
Safeguard's contention is without merit. The doctrine of election of remedies will generally "bar recovery when the inconsistency in the assertion of a remedy, right, or state of facts is so unconscionable, dishonest, contrary to fair dealing, or so stultifies the legal process or trifles with justice or the courts as to be manifestly unjust.'" J&D Aircraft Sales, LLC v. Cont'l Ins. Co., 2004 WL 2389445, at *10 (N.D.Tex. Oct.26, 2004) (Boyle, J.) (quoting Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex.1980)); see also Ditmore v. Fairfield Indus., Inc., 855 F. Supp. 187, 192 (S.D.Tex.1994) ("[T]he election of remedies doctrine applies as a bar to the relief sought if it is affirmatively shown that the plaintiff has successfully exercised an informed choice between two or more remedies, rights or sets of facts which are so inconsistent as to constitute manifest injustice."). As this court has already determined supra at § III(B), U.S. Bank is owed a balance on its loan to Triad. And, pursuant to the terms and conditions of the original deed of trust, U.S. Bank may seek to recover this deficiency through multiple, simultaneous remedies until the debt is extinguished. Because U.S. Bank is still owed a debt, there is no injustice in its recovering the loan deficiency through this equitable lien action in addition to obtaining the state court default judgment and foreclosing on some of the property. See State Street Bank & Trust Co. v. Triad Dallas Props. IV, Ltd., No. 03-6662 (101st Dist. Ct., Dallas County, Tex. Feb. 10, 2005) (adjudging amount of mortgage deficiency and ordering that mortgagee may execute judgment against all property that may in the future secure the deed of trust); see also Lester v. First Am. Bank, 866 S.W.2d 361, 366 (Tex.App.1993, writ denied) ("`Mortgagees are constitutionally entitled to no more than payment in full.'") (quoting Gelfert v. Nat'l City Bank of New York, 313 U.S. 221, 233, 61 S. Ct. 898, 85 L. Ed. 1299 (1941)). Moreover, U.S. Bank obtains nothing more from a lien on these insurance proceeds than it is entitled to under the deed of trust, that is, nothing more than if it were a named insured and loss payee on the Safeguard policy. Accordingly, U.S. Bank will not obtain a double recovery in this action because it will obtain nothing more than what it was promised under the loan agreement.
4
Safeguard contends that the doctrine of unclean hands bars U.S. Bank's claim in equity. It identifies several grounds that it maintains demonstrate *712 U.S. Bank's misbehavior, including that U.S. Bank asserted in this lawsuit, before removal, that it had foreclosed on all mortgaged property, when in fact Fairway was operated by a receiver, that it may obtain double recovery as a result of this lawsuit, that it failed to advise Safeguard of the state court suit against Triad, and that it misrepresented in the state court deficiency proceeding that Triad had been awarded "credit for all setoffs and/or payments." D. Br. 23. Several of Safeguard's grounds are repetitive of those that the court has already rejected as bases precluding U.S. Bank's claim, and those that remain would not permit a reasonable trier of fact to find that U.S. Bank's conduct "`has been unconscientious, unjust, marked by a want of good faith or violates the principles of equity and righteous dealing.'" Bank of Saipan v. CNG Fin. Corp., 380 F.3d 836, 840 (5th Cir.2004) (quoting City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex.App.2003)). For example, U.S. Bank's erroneous statement as to the properties' foreclosed on in its initial factual recitation in this lawsuit, which it has corrected and made clear to the court, does not rise to the level that would permit a reasonable trier of fact to find unclean hands. The court thus concludes that U.S. Bank's claim for application of the equitable lien doctrine is not barred by the doctrine of unclean hands.
* * * * * *
U.S. Bank has satisfied its summary judgment burden of establishing beyond peradventure that it is entitled under the equitable lien doctrine to be treated as an additional named insured and loss payee. Its March 17, 2005 motion for partial summary judgment is therefore granted.
SO ORDERED.
NOTES
[1] To understand the claims that U.S. Bank asserts against Safeguard, it is necessary to consult U.S. Bank's state-court original petition and its federal-court first amended complaint. After this case was removed, the court granted U.S. Bank leave to join Royal Indemnity Company ("Royal") and Hilb, Rogal & Hamilton Company of Alabama ("HRH") as parties-defendant. U.S. Bank then filed an amended complaint that included Royal and HRH as defendants and asserted actions against them for negligent misrepresentation and promissory estoppel. Despite the fact that U.S. Bank filed a first amended complaint, it did not re-assert its claims against Safeguard. It is well settled that an amended complaint supersedes the pleading it modifies. See, e.g., 6 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1476, at 556 (2d ed.1990). Nevertheless, because it is apparent that U.S. Bank did not intend to drop all claims against Safeguard except the action for promissory estoppel alleged in the first amended complaint against all defendants, the court will read the original state-court petition and first amended complaint in tandem to allege all the claims identified above.
[2] Because Safeguard is the summary judgment nonmovant, the court recounts the evidence and draws all reasonable inferences in its favor. See, e.g., Clift v. Clift, 210 F.3d 268, 270 (5th Cir.2000).
[3] Safeguard refers to this property as the Atrium ofrather than atBent Tree. U.S. Bank, however, refers to it as the Atrium at Bent Tree, and this is the name recited in the deed of trust.
[4] The details of the assignment transaction and of other transactions that have placed U.S. Bank in the posture of a plaintiff seeking to recover the proceeds under the Safeguard policy are immaterial to the court's decision and need not be discussed in this memorandum opinion.
[5] Article 5.1.5 of the deed of trust provided, in relevant part: "All property insurance policies shall include a mortgagee clause or loss payee endorsement for the benefit of Beneficiary." P.App. 19. The deed of trust defined "Beneficiary" as "[Bankers], its successors and assigns, and the holders, from time to time, of the" accompanying promissory note. Id. at 10.
[6] U.S. Bank also maintains in its opening brief that Bankers had been identified as a mortgage holder, additional insured, and loss payee on the original 2001-02 policy but had been omitted on the policy for the renewal 2002-03 term. Safeguard disputes this contention. In reply, U.S. Bank states merely that the court "need not bother with determining" this issue. P. Reply Br. 11. Because both Safeguard and U.S. Bank agree that Bankers was not named as an additional insured in the 2002-03 policythe one relevant to this motionthe court need not resolve this dispute.
[7] The nature of the default is not clear from the briefing and is immaterial to the court's determination of this motion.
[8] State Street Bank & Trust Company, as Trustee for BTC Commercial Mortgage Pass-Through Certificates Series BTR Trust 1991-S1 ("State Street"), was the named party in the state court mortgage default proceeding. In December 2002 State Street and U.S. Bank merged. In this memorandum opinion, the court, as do Safeguard and U.S. Bank, will refer to U.S. Bank as the named insured in that litigation.
[9] See State Street Bank & Trust Co. v. Triad Dallas Props. IV, Ltd., No. 03-6662 (101st Dist. Ct., Dallas County, Tex. Feb. 10, 2005).
[10] Safeguard objects to U.S. Bank's summary judgment evidence. Because in deciding U.S. Bank's motion the court has not considered any evidence to which Safeguard objects, the objections are overruled as moot.
[11] Although the court usually addresses a subject matter jurisdiction challenge (here, ripeness) as a preliminary matter, the court defers consideration of the question because resolving U.S. Bank's contention that the equitable lien doctrine applies informs the court's answer concerning jurisdiction.
[12] Both parties maintain that Texas law controls in this diversity action.
[13] Generally speaking, affirmative or avoidance defenses are unrelated to the plaintiff's prima facie case. See AMS Staff Leasing, NA, Ltd. v. Associated Contract Truckmen, Inc., 2005 WL 3148284, at *5 n. 10 (N.D.Tex. Nov.21, 2005) (Fitzwater, J.). Avoidance or affirmative defenses include "`allegations . . . that admit the allegations of the complaint but suggest some other reason why there is no right of recovery, and . . . that concern allegations outside of the plaintiff's prima facie case that the defendant therefore cannot raise by a simple denial in the answer.'" Barrow v. Greenville Indep. Sch. Dist., 2005 U.S. Dist. LEXIS 20150, at *2 (N.D.Tex. Mar. 10, 2005) (Fitzwater, J.) (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1271, at 585 (3d ed.2004)).
[14] Safeguard also characterizes U.S. Bank's motion as an attempt to proffer a so-called "no evidence" motion. While Safeguard appears to be correct conceptually, its use of the term "no evidence" motiona Texas state-court term, see Tex.R. Civ. P. 166a(i)is misplaced.
[15] Texas courts have also observed that, once the mortgagee is put in the place occupied by the insured mortgagor, the mortgagee must establish that its claim falls within the policy's language. This proposition does not assist the court, however, in determining which party bears the burden with respect to a deficiency, because the mortgage deficiency is not a requirement of the insurance policy. See Conway v. Beltline Venture Partners, 2000 WL 254296, at *4 (Tex.App. Mar.8, 2000, no pet.) (unpublished opinion); see also Fid. & Guar. Ins., 225 S.W.2d at 927.
[16] Article 9.26 of the deed of trust provided that if any of the four properties was sold, Bankers could "release" the property from the lien of the deed of trust if several conditions were satisfied. The conditions included, inter alia, that Triad had not defaulted on the loan and that Bankers had been paid more than $38.4 million for Belvedere, Atrium, and Courtyard, collectively, to reduce the loan balance.
[17] The state court default judgment that U.S. Bank obtained against Triad establishes a loan deficiency of approximately $22 million, which includes interest. This amount is of course substantially greater than the estimated $18.5 million deficiency reached by simply subtracting the foreclosure bid from the total loan amount. The court need not determine the exact amount of the mortgage deficiency for purposes of deciding this motion, because the summary judgment evidence sufficiently establishes that the remaining indebtedness far exceeds the balance of the insurance proceeds. See D. Notice of Removal, Ex. 3 (noting that estimate for Triad's damage claim at Courtyard is approximately $100,000).
[18] U.S. Bank also advances an unclear assertion that it is entitled to the insurance proceeds by reason of its purchase of the foreclosed-on property. Because the court grants partial summary judgment motion on other grounds, it need not consider this contention. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1729274/ | 444 S.W.2d 204 (1969)
Charlie Nichol FARRAR, Appellant,
v.
COLORADO INDEPENDENT SCHOOL DISTRICT et al., Appellees.
No. 4330.
Court of Civil Appeals of Texas, Eastland.
July 31, 1969.
Rehearing Denied August 22, 1969.
*205 Dell Barber, Colorado City, for appellant.
Guilford L. Jones, Big Spring, for appellees.
COLLINGS, Justice.
This is an appeal by Charlie Nichol Farrar from an order sustaining a plea in abatement and dismissing his suit. Plaintiff brought the suit against Colorado Independent School District and James G. McMath, Superintendent of Schools of said District, alleging that he had for sometime before April 10, 1967, been employed by the defendant school district and that on such date he accepted a contract of employment as Tax Assessor and Collector of the district for a period beginning September 1, 1967, and ending on August 31, 1969, at a salary of $5,400.00 per year. Plaintiff alleged that the contract was in writing as shown by the minutes of the Board of Trustees of the district; that thereafter on or about August 9, 1967, defendant School Superintendent McMath advised plaintiff that the School Board had rescinded its action of April 10, 1967. Plaintiff alleged that he was wrongfully "fired" by the board and by reason thereof has suffered $10,800.00 actual damages; that the action of the defendants was willful, malicious and with the intent to injure plaintiff and that he is therefore entitled to recover $5,000.00 in exemplary damages. Plaintiff's first Supplemental Petition was equivalent in substance to his original petition and in addition thereto set out the minutes of the Board of Trustees rescinding the prior order concerning the contract of employment here sued upon. The minutes of the board concerning plaintiff's previous employment on May 9, 1966, the minutes of April 10, 1967, and the minutes of July 13, 1967, rescinding the action of the board on April 10, 1967, are as follows:
May 9, 1966 (Regular Session)"It was moved by Arlene Morris and seconded by O. B. Trulock, Jr., that Mr. Nick Farrar be rehired for one year as School Tax Assessor-Collector, effective September 1, 1966."
April 10, 1967 (Regular Meeting)"Motion was made by Bill Carter and seconded by Mrs. Cowan that Assessor-Collector C. N. Farrar's contract be extended to August 31, 1969. Carried."
July 13, 1967 (Special Called Meeting) "RESCIND ACTION: Motion by Bill Carter, seconded by Mrs. Cowan that the following excerpt from April 10, 1967, minutes, page 236 of the minute book, be rescinded: `Motion was made by Bill Carter and seconded by Mrs. Cowan that assessor-collector C. N. Farrar's contract be extended to August 31, 1969'. Action to rescind these minutes was taken because they were violative of Article 3995, Revised Civil Statutes of Texas. Motion carried unanimously."
The defendants denied the existence of a contract of employment as alleged by plaintiff. They alleged that the Board of Trustees *206 by its action on April 10, 1967, tendered to plaintiff an extension of his previous contract of employment, but that plaintiff never accepted the offer; that by custom and practice the duties of the plaintiff in previous years included not only those of Tax Assessor and Collector but also the duties of business manager for the school district; that plaintiff upon being informed of the action of the board on April 10, 1967, and prior to the board's action on July 13, 1967, expressed his unwillingness to continue to perform the duties of business manager; that plaintiff was presented with a proposed written contract of employment which he refused to sign, and that no contract was entered into; that if plaintiff was, in fact "fired", such action was not wrongful but under the circumstances was within the legal authority and duty of the board and of the Superintendent of Schools.
The defendants also filed a plea to the jurisdiction of the court, asserting that the controversy involved issues of fact as well as of law, and was of the kind and nature required under the laws of this state to be submitted to the Commissioner of Education for determination prior to any jurisdiction of the case by the District Court. The Court sustained the defendant's plea to the jurisdiction of the Court and dismissed the case. Charlie Nichol Farrar has appealed.
Appellant presents one point of error, contending that the Court erred in dismissing this case complaining of the action of the Board of Trustees of an independent school district which was not first submitted to the State Commissioner of Education. Appellant asserts that his pleadings in the trial court allege a cause of action which involves purely a question of law and not of fact, and that the District Court therefore had jurisdiction of the case.
It is well settled that an employee of a school district whose contract of employment has allegedly been wrongfully terminated is required to apply to the school authorities for relief before filing his suit in the District Court because the question involved is one of fact. See Articles 2654-1 et seq., 2654-7 and Article 2656, Vernon's Ann.Tex.Civ.St.; Hinojosa v. San Isidro Independent School District, 273 S.W.2d 656 (San Antonio Tex.Civ.App., 1954); Murray v. San Augustine Trustees, 307 S.W.2d 622 (Beaumont Tex.Civ.App., 1957); Daniel v. Dallas Independent School District, 351 S.W.2d 356 (El Paso Tex.Civ. App., 1961, ref. n. r. e.); James v. Board of Trustees, Eagle Pass Independent School District, 376 S.W.2d 956 (San Antonio Tex. Civ.App., 1964); Mission Independent School District v. Diserens, 144 Tex. 107, 188 S.W.2d 568, 161 A.L.R. 877.
As appellant contends, it is also well recognized that direct appeals to the Court are proper in controversies involving pure questions of law. Section 1 of Article 2654-7 which provides for appeals to the Commissioner of Education in matters of dispute under provisions of the School Laws of Texas specifically states that nothing in the Section shall deprive any party of a legal remedy. Appellant points out that the Board's reason for terminating his contract of employment as shown by the minutes, was that the contract was in violation of the Statute of Frauds, Article 3995, V.A.T.C.S. Appellant argues that since the Board then specified the reason for discharging him it cannot now in his action for damages set up a different ground for the discharge; that the question of whether the contract of employment is in violation of the Statute of Fraud is purely a question of law and no question of fact is involved. Appellant's contention is that the minutes of the school board of April 10, 1967, together with the minutes of the meeting on May 9, 1966, constitute a complete contract upon which he is entitled to recover. We cannot agree with this contention. The minutes of the Board provide for a contract of employment in general terms but do not set out in detail the full provisions and terms of a contract of employment including such matters as the amount of appellant's compensation, the duties to be performed, the working hours and conditions and numerous *207 other matters common to employment contracts. The minutes themselves do not show a complete contract. For appellant to recover the damages prayed for in his pleadings he would need to show additional terms of the claimed contract which are not shown in the minutes. Appellant admits that he refused to sign the written contract tendered to him setting out specific terms of employment but states that the tendered contract was not in accordance with the agreement between the parties. All of these matters involve questions material to appellant's right to recover herein, and are questions of fact.
It thus appears that the pleadings raise questions of fact material to a determination of the controversy as to whether any contract of employment was ever entered into, and whether appellant was rightfully or wrongfully discharged, if any contract of employment was entered into. Therefore resort must first be had to the school authorities and the method of appeal provided for in such cases exhausted before the Courts will entertain jurisdiction of a complaint with reference to such matters. The trial court properly sustained appellee's plea to the jurisdiction. Mission Independent School District v. Diserens, supra.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1784181/ | 587 So. 2d 779 (1991)
STATE of Louisiana
v.
Robert KALTENBACH.
No. Cr86-1279.
Court of Appeal of Louisiana, Third Circuit.
October 2, 1991.
*780 Robert Kaltenbach, pro se.
Robin Rhodes, Asst. Dist. Atty., Lafayette, for plaintiff-appellee.
Before STOKER, LABORDE and KNOLL, JJ.
STOKER, Judge.
Defendant, Robert Kaltenbach, was convicted by a six-person jury of the unlawful practice of law, a violation of LSA-R.S. 37:213. Defendant was sentenced to serve two years in the parish jail. Defendant appeals his conviction. We reverse.
FACTS
Defendant is a member and local leader of the Enlightened Patriots Association (EPA), a national organization whose motto is "Learn, Revive and Preserve Our Constitution". The EPA advocates learning and use of the common law, God's law and the United States Constitution, as opposed to civil law. Weekly meetings are held, open to the public, for discussion of the EPA's views.
EPA members do not approve of licensing attorneys or an organized Bar Association. They believe that attorneys represent clients rather than justice. They advocate use of the constitutional right to self-representation. EPA members attempt to advertise their beliefs through the use of the court system as pro se litigants. The EPA sponsors a law course, "The George Gordon School of Common Law" which purports to teach people how to represent themselves in court as pro se litigants. The course is taught from video tapes which the students rent. Study materials, including pleading forms, are also provided with the course. Additional pleadings are available to pro se litigants through use of the EPA's computer system which is headquartered in the Barrister's Inn School of Common Law in Boise, Idaho and in the Heritage Law Library in Velma, Oklahoma. The law course is available to anyone who is interested, and membership in the EPA is not required.
The EPA also believes that the only legal tender is gold or silver coins and that the currently issued paper money is only "credit money" and not real cash. The EPA has issued its own gold notes backed by its own gold and silver reserves. EPA members use gold, silver or their notes to pay for goods and services in order to make the public aware of their beliefs. Defendant organized a locally offered EPA law course on pro se litigation. The course was taught by George Gordon through video tapes. The students studied the tapes and materials and defendant assisted any student who had problems understanding the course. Defendant explained his involvement with his students' personal legal problems, and in particular those of student Vic Milliman, as follows:
"Q. Mr. Kaltenbach, have you ever prepared a pleading or an instrument that was filed into the Court record for Mr. Milliman or any other person between October 25, 1984 and August 20th, 1985?
A. I don't know. I prepare a lot of documents and give them to a lot of people, and what they do with them afterwards is their own business.
Q. Have you ever consulted with Mr. Milliman or anyone else about a legal problem, about a suit pending against that person, or any other legal issue during that same period of time?
A. Once a week we have a roundtable meeting in which there's thirty people, and we discuss everybody's suits. At that time I participate equal with others.
Q. Have you ever sat with someone one for one as you say and discussed a problem such as that?
*781 A. I'm very careful of that. I try not to get involved on a one to one relationship. I can't say I haven't done it, and I can't say that I've ever given any documents to anyone where there was not more than one person present.
Q. You can't say you haven't done that?
A. I have done it. I can't say that I have done it. I'm always
Q. So that means you can't say that you haven't done it either?
A. I can't recall where I've ever done it. Unless they come to the house and grab the documents and start copying them and take what they want.; that's the only way that I do it.
Q. Mr. Milliman has never gone to you with a question of law or procedure and said Mr. Kaltenbach, this is my problem, what can you tell me?
A. Many people do that.
Q. Did Mr. Milliman do that?
A. I'm sure Mr. Milliman did come and
Q. During that period of time?
A. and open up a book and ask questions about something in that book. I'm sure.
Q. About something that happened in the Court with him specifically during that period of time?
A. No, I don't know if he ever came to me for that reason. He would come to the meetings more or less and we would all participate in what we thought should be procedure.
Q. Mr. Kaltenbach, one more question. Did you ever make a statement to this effect: I teach a law course, or something similar to this; I teach a law course to individuals and sometimes they get out of hand and go beyond what they have learned, and I stand by to help them and assist them, prepare pleadings for them when they need to get out of trouble?
A. It's possible that I did say that. But what I mean when I say that is I stand by through my connections with the computer in Boise, Idaho and the law library in Velma, Oklahoma. I can get a document within twenty five minutes by making a phone call and hooking it up to a computer, and that document comes right straight over that computer and is dropped out for fifteen cents a page. Whether I give of my personal knowledge to solve their problems, no. I relay problems every day to the law library in Velma, Oklahoma and to the Barrister's Inn School of Common Law in Boise, Idaho; that's all I can say.
Q. That was going to be my last question. Mr. Kaltenbach, there is a semantical problem we have here. You say you teach law; what's the difference between teach law and advise as to the law, suggesting to someone, etcetera? What's the difference? Sharing knowledge. It's the same thing.
A. The Fifth Amendment of the Constitution of the United States gives a person the right to share and acquire knowledge. All right. If I'm teaching law, when I refer to teaching law, I'm teaching God's law. I don't teach man's law. I share man's knowledge, but I teach God's law. The first five books of the Bible, and all of the law is contained in those first five books. Our law course covers God's law versus man's law.
Q. So Mr. Kaltenbach, that tape we heard yesterday about you helping people prepare common law liens, that's God's law?
A. Common law liens?
Q. Yes, that's God's law?
A. I don't help people prepare a common law lien. We have a little packet which they can purchase for a donation and they can prepare their own common law liens. I'm not the originator of the common law lien. The common law lien originated in Wisconsin.
Q. And a person comes to you with a problem and says they're taking my house, I need some help, do you just give them the packet and that'sYour're done with it?
A. If somebody is losing their house, what we normally do is we give them some tapes to start listening to, first of all; and he goes home and listens to those tapes. And then he'll attend two *782 or three meetings and get into a group. And then he will see what others have done. And then a group of people will more or less lead him to do whatever he decides he wants to do. If he wants to save his house, then we have specific things that have been done all over the country that can be attempted.
Q. Mr. Kaltenbach, let's just limit it to theI don't want to know what was done all over the country. I want to know what was done with you. I'm asking you again, have you ever sat down with an individual where you would give them a course or something, or they come back with a question, and you're telling me you never told them what to do or suggested to them or shared your knowledge with them? Is that what you're telling us?
A. On a one on one basis, I'm very careful.
Q. You've never done that?
A. One on one basis, I'm not going to try to give anybody any secular advice.
Q. You've never done it with Mr. Milliman?
A. Common law or spiritual law, yes.
Q. You've never done it with Mr. Milliman?
A. Gee, I tell you, to the best of my knowledge, I can only tell you that I'm very careful not to do it. Now, whether I have never done it or not, I don't really say. If you'd give me a specific and ask me a question did I do this on such and such a date, I might be able to answer you.
* * * * * *
Q. Do they ask you questions about those problems?
A. Well, their problems are so varied.
Q. Do they ask you questions about those problems?
A. No, they'll tell me what their problem is, where can they get some help. I'll tell them to call a certain place and buy a packet, or go attend the Patriot meeting somewhere and see if they can't get some advice. If they're close to us, come to us, we'll take you in.
Q. You've never given them advice?
A. No, we don't give advice.
Q. Although you charge them $300, $500 for this legal course?
A. No, we charge for the rental of the tapes. Rental of the tapes. They pay
* * * * * *
Q. Mr. Kaltenbach, what are you doing?
A. I'm trying to tame a system that's gotten out of control. The law system.
Q. And by doing that, you're trying to tame the law system out of control, you're giving people tapes but you're not advising them or counselling them as to any action; that's what you're telling us?
A. NO AUDIBLE RESPONSE.
Q. So are you doing anything at all?
A. I'm teaching people their rights under the Constitution of the United States and the Supreme Court decisions; that's all
Q. And isn't the Constitution a law, sir? Isn't that correct?
A. It's the law.
Q. And you're teaching them the law?
A. That's right, and I'll teach that
Q. You're advising them as to the law?
A. I will teach that Constitution
Q. Are you not?
A. until the day I die.
Q. Are you not advising the people as to the law?
A. I teach the Constitution. If I'm guilty of teaching the Bible and the Constitution and you want to call it practicing law, then convict me right now because I'll do it in that jail until I die."
* * * * * *
OPINION
We find it unnecessary to address all of defendant's assignments of error. One assignment has merit and requires that we reverse defendant's conviction and sentence. The error involves the sufficiency of evidence. Therefore, we will not consider defendant's other assignments.
Defendant contends there is insufficient evidence to support his conviction of illegal *783 practice of law under LSA-R.S. 37:213. LSA-R.S. 37:213 provides:
§ 213. Persons, professional associations and professional corporations entitled to practice law; penalty for unlawful practice.
No natural person, who has not first been duly and regularly licensed and admitted to practice law by the Supreme Court of this State, no corporation or voluntary association except a professional law corporation organized pursuant to Chapter 8 of Title 12 of the Revised Statutes, and no partnership except one formed for the practice of law and composed of such natural persons and/or corporations and/or voluntary associations all of whom are duly and regularly licensed and admitted to the practice of law, shall:
(1) Practice law;
(2) Furnish attorneys or counsel or an attorney and counsel to render legal services;
(3) Hold himself or itself out to the public as being entitled to practice law;
(4) Render or furnish legal services or advice;
(5) Assume to be an attorney at law or counselor at law;
(6) Assume, use or advertise the title of lawyer, attorney, counselor, advocate or equivalent terms in any language, or any phrase containing any of these titles, in such manner as to convey the impression that he is a practitioner of law; or
(7) In any manner advertise that he, either alone or together with any other person, has, owns, conducts or maintains an office of any kind for the practice of law.
No person, partnership or corporation shall solicit employment for a legal practitioner.
This Section does not prevent any corporation or voluntary association formed for benevolent or charitable purposes and recognized by law, from furnishing an attorney at law to give free assistance to persons without means.
Any natural person who violates any provision of this Section shall be fined not more than one thousand dollars or imprisoned for not more than two years, or both.
Any partnership, corporation or voluntary association which violates this Section shall be fined not more than five thousand dollars. Every officer, trustee, director, agent, or employee of a corporation or voluntary association who, directly or indirectly, engages in any act violating any provision of this Section or assists the corporation or voluntary association in the performance of any such violation is subject to the penalties prescribed in this Section for violations by a natural person.
The "practice of law" is defined in LSA-R.S. 37:212 as follows:
§ 212. "Practice of law" defined
A. The practice of law means and includes:
(1) In a representative capacity, the appearance as an advocate, or the drawing of papers, pleadings or documents, or the performance of any act in connection with pending or prospective proceedings before any court of record in this state; or
(2) For a consideration, reward, or pecuniary benefit, present or anticipated, direct or indirect;
(a) The advising or counseling of another as to secular law;
(b) In behalf of another, the drawing or procuring, or the assisting in the drawing or procuring of a paper, document, or instrument affecting or relating to secular rights;
(c) The doing of any act, in behalf of another, tending to obtain or secure for the other the prevention or the redress of a wrong or the enforcement or establishment of a right; or
(d) Certifying or giving opinions as to title to immovable property or any interest therein or as to the rank or priority or validity of a lien, privilege or mortgage as well as the preparation of acts of sale, mortgages, credit sales or any acts or other documents passing titles to or encumbering immovable property.
*784 B. Nothing in this Section prohibits any person from attending to and caring for his own business, claims, or demands; or from preparing abstracts of title; or from insuring titles to property, movable or immovable, or an interest therein, or a privilege and encumbrance thereon, but every title insurance contract relating to immovable property must be based upon the certification or opinion of a licensed Louisiana attorney authorized to engage in the practice of law. Nothing in this Section prohibits any person from performing, as a notary public, any act necessary or incidental to the excercise of the powers and functions of the office of notary public, as those powers are delineated in Louisiana Revised Statutes of 1950, Title 35, Section 1, et seq.
C. Nothing in this Section shall prohibit any partnership, corporation, or other legal entity from asserting any claim, not exceeding two thousand dollars, or defense pertaining to an open account or promissory note, or suit for eviction of tenants on its own behalf in the courts of limited jurisdiction on its own behalf through a duly authorized partner, shareholder, officer, employee, or duly authorized agent or representative. No partnership, corporation, or other entity may assert any claim on behalf of another entity or any claim assigned to it.
D. Nothing in Article V, Section 24, of the Constitution of Louisiana or this Section shall prohibit justices or judges from performing all acts necessary or incumbent to the authorized exercise of duties as judge advocates or legal officers.
The right to practice law in the state courts is not a privilege or immunity of a citizen of the United States. It is limited to those who are licensed for that purpose, and it follows that for an unlicensed person to hold himself out as entitled to practice law is a species of fraud which the state may punish. State v. Rosborough, 152 La. 945, 94 So. 858 (1922). The supreme court possesses the power, irrespective of the legislature, to determine the qualifications of those who apply for admission to practice law. The scope of the power residing in the judiciary with respect to disciplining or disbarring attorneys embraces the right to define by court rules or by adjudication the acts constituting the practice of law. While statutes passed in aid of the court's inherent powers will be sanctioned, legislation which has the effect of divesting or stripping the court's inherent powers is unconstitutional. See Meunier v. Bernich, 170 So. 567 (La.App. Orl.Cir.1936), and its progeny.
In Meunier, the court struck down as unconstitutional a part of Act No. 202 of 1932 (predecessor to the current LSA-R.S. 37:212 and 37:213), which permitted laymen to enforce, settle, adjust, secure or compromise accounts or claims without resort to court proceedings. The court reasoned that the practice of law includes anything a person does in a representative capacity as an advocate in connection with pending or prospective proceedings. The court dismissed Meunier's suit to recover a fee for settling defendants' claims, holding the contract was null and void for violation of public policy.
It is also well-settled that a collection agency is unlawfully practicing law when it counsels clients regarding the prescription of their claims, gives any legal advice, threatens debtors with legal proceedings, or represents creditors in court, either directly or through an attorney engaged by a collector. See Pisarello v. Administrator's Service Corp., 464 So. 2d 917 (La.App. 4th Cir.), writ denied, 466 So. 2d 473 (La. 1985); Andrus v. Guillot, 160 So. 2d 804 (La.App. 3d Cir.1964).
In Duncan v. Gordon, 476 So. 2d 896 (La.App.2d Cir.1985), the court stated, "The practice of law relates to the rendition of services for others that call for the professional judgment of a lawyer. The essence of the professional judgment of the lawyer is his educated ability to relate the general body and philosophy of law to a specific legal problem of a client." The court held that a contingency fee contract for negotiation and settlement of a personal injury claim by a non-lawyer was null and void.
*785 Finally, in Louisiana State Bar Assoc. v. Edwins, 540 So. 2d 294 (La.1989), the court upheld the defendant's conviction for, among other things, aiding his paralegal in the unauthorized practice of law, in violation of LSA-R.S. 37:212 and 37:213. The court discussed the practice of law as follows:
"DR 3-101, a rule of this court adopted pursuant to its regulatory and disciplinary powers, provides that a lawyer shall not aid a non-lawyer in the unauthorized practice of law. The accompanying Ethical Considerations, excerpted below, offer insights into the purpose and interpretation of this rule. The prohibition against the practice of law by a layman is grounded in the need of the public for integrity and competence of those who undertake to render legal services. EC 3-1. Competent professional judgment is the product of a trained familiarity with law and legal processes, a disciplined, analytical approach to legal problems, and a firm ethical commitment. EC 3-2. A non-lawyer who undertakes to handle legal matters is not governed as to integrity or legal competence by the same rules that govern the conduct of a lawyer. The Disciplinary Rules protect the public in that they prohibit a lawyer from seeking employment by improper overtures, from acting in cases of divided loyalties, and from submitting to the control of others in the exercise of his judgment. EC 3-3. It is neither necessary nor desirable to attempt the formulation of a single, specific definition of what constitutes the practice of law. Functionally, the practice of law relates to the rendition of services for others that call for the professional judgment of a lawyer. The essence of the professional judgment of the lawyer is his educated ability to relate the general body and philosophy of law to a specific legal problem of a client; and thus, the public interest will be better served if only lawyers are permitted to act in matters involving professional judgment. EC 3-5.
* * * * * *
"Commentators and ABA Opinions in the field have added enlightenment: The condemnation of the unauthorized practice of law is designed to protect the public from legal services by persons unskilled in the law.
* * * * *
"In defining the practice of law for purposes of interpreting DR-3-101(A), this court may consider as persuasive, but not binding, pertinent legislative expressions. La.R.S. 37:213 provides, under pain of criminal punishment, that it is unlawful for a non-lawyer to practice law, hold himself out as an attorney or advertise that he alone or jointly has an office for the practice of law. La.R.S. 37:212 defines the practice of law for this purpose as including the appearance as an advocate, the drawing of papers, pleadings or documents, the performance of any act in connection with pending or prospective proceedings before any court of record; as well as the following, if done for consideration: the advising or counseling of another as to secular law, the drawing or procuring of a paper, document or instrument affecting or relating to secular rights in behalf of another, and the doing of any act, in behalf of another, tending to obtain or secure for the other the prevention or redress of a wrong or the enforcement or establishment of a right."
540 So.2d at 299, 300.
As we have already noted, defendant is a leading member of the Enlightened Patriots Association (EPA), a national group whose philosophy is directed at learning, reviving, and preserving the Constitution of the United States. The EPA holds free public meetings to expound its philosophy and offers a videotaped law course, taught by George Gordon, entitled "Barristers in a Common Law". The course purports to instruct people how to represent themselves in court as pro se litigants. As a leading EPA member in Lafayette, defendant offered the course at the usual charge of $300.00 per student. The students watched the video tapes and *786 studied the materials provided. Defendant assisted the students with their studies.
One of the students, Vic Milliman, testified at trial on behalf of the State. His testimony was given pursuant to a plea bargain. Vic testified that he became a party in two civil suits and one criminal proceeding after taking the EPA law course. He represented himself in the two civil suits. The local EPA group assisted him in his suits by suggesting what pleadings should be filed and when. Vic stated that he used "form pleadings" from the law course materials provided by defendant which he adapted to his own cases. Defendant and other EPA members assisted Vic with his pleadings but Vic testified that, with one exception, he typed, signed and filed them himself. The one exception, which arose in the criminal proceeding, was a Motion to Recuse which was drawn up during the course of the trial by someone other than defendant at Vic's request. Vic signed and filed the motion himself. The motion was suggested by defendant and other EPA members.
The State relied heavily on the fact that Vic "donated" over $5,000 to the EPA at the time he was involved in the three lawsuits. The State contends that this donation constituted payment for legal services rendered to Vic by defendant. However, Vic testified that this "donation" was made of his own accord in appreciation for the support and assistance rendered to him by the EPA. Vic stated that he put the money in the EPA donation bucket which was always set out at EPA meetings and at the law course classes. He said that he believed that defendant took care of the donation bucket, but did not know where the money actually went. The State suggests that the money went into the defendant's own pocket, but has offered absolutely no evidence to support this suggestion.
Finally, Vic testified that, during the course of his criminal trial, he decided that he no longer wanted to represent himself and needed an attorney. According to Vic, defendant and another EPA member, Byron Taylor, took him to an attorney they knew and gave him $5,500 to pay the retainer fee. The testimony of defendant and Byron Taylor supports this story.
Vic and three other witnesses, as well as defendant, testified that defendant always emphasized that he was not a licensed attorney, that he never held himself out as such in any manner, that he never represented anyone other than himself in court and that he never signed pleadings on anyone else's behalf. The State relies on the fact that defendant calls himself a "Counsellor at Common Law". This is apparently the title which all EPA members use in their advocation of pro se litigation.
Upon viewing the evidence in the light most favorable to the prosecution, we find the evidence falls far short of that necessary to support defendant's conviction of illegal practice of law. Compare, Louisiana State Bar Ass'n v. Edwins, supra; Duncan v. Gordon, supra. The State has not shown that defendant either represented others in any pending or prospective proceedings or that defendant accepted any direct or indirect consideration for any advice or assistance given to Vic Milliman in the preparation of pleadings for his suits. Vic Milliman testified that he did not pay either defendant or the EPA for their assistance. Moreover the donation he made to the EPA was "returned" in full when defendant and Taylor provided Vic with money to retain an attorney.
The fact that defendant has assisted students in their studies in the EPA-sponsored "common law" course simply does not constitute the practice of law. Nor is the ownership of a "law library" necessarily indicative of the practice of law.
Finally, we find that defendant's title of "Counsellor at Common Law", accompanied as it always was by an explanation that he is not a licensed attorney, but is, rather, a pro se litigant, does not convey a misleading impression that defendant is an attorney. Moreover, the State failed to introduce any witness who had been misled into believing defendant is a licensed attorney.
Therefore, we reverse defendant's conviction and vacate his sentence for lack of sufficient evidence to support his conviction. *787 Defendant's other assignments of error are moot and will not be discussed.
In our holding in this case we do not wish to be understood as condoning the course of conduct of the defendant or the group which calls itself the Enlightened Patriots Association. The activities of the defendant and the EPA constitute dubious practices and, perhaps, should be discouraged. However, the proceeding in this case is a criminal proceeding and is no different from any other proceeding. The State has not proved defendant's guilt beyond a reasonable doubt, even with the benefit of such presumptions established by Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979); State v. Graffagnino v. King, 436 So. 2d 559 at 563 (La.1983); State v. Duncan, 420 So. 2d 1105 (La.1982) and State v. Moody, 393 So. 2d 1212 (La.1981). While the State may be commended for its attempt to curb what approaches a fraud on the public which may serve to mislead imminent ligitants, the State failed in this case to prove that defendant committed the crime of which he is charged.
CONCLUSION
For the reasons given, defendant's conviction and sentence are reversed and vacated. Costs of this appeal are assessed to the State.
REVERSED and VACATED.
KNOLL, J., dissents and assigns written reasons.
KNOLL, Judge, dissenting.
For the following reasons, I respectfully dissent.
In my view, the record fully supports defendant's conviction of unauthorized practice of law. The majority completely ignores the payment by Vic of $5,000 for services rendered and treats this payment as a donation to EPA. I find the payment was a fee for services rendered. That is the only reason Vic made the payment. Defendant even called himself a counsellor at common law which title, by its very definition according to Webster's New Collegiate Dictionary, is "One whose profession is to give advice in law, and manage causes for clients in court." The majority places no emphasis on defendant's title because defendant explained he was not a licensed attorney. In my view, this is an admission by defendant that he was engaging in the practice of law without a license and the crime for which he was properly convicted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8326676/ | Kaplan, Mitchell H., J.
This case is a so-called “dram shop’’ case. The case arises out of an automobile crash that occurred at approximately 1:49 AM on December 27, 2009, when a Jeep Cherokee driven by Phillip Daniels struck the car that plaintiff Rene Bronfield was driving and in which plaintiff Elma Plomer’s decedent, Jose Santo Castillo, was a passenger, seriously injuring Bronfield and killing Castillo. At the time of the crash, Daniels was traveling westbound on the eastbound lane of the Massachusetts Turnpike. As a result of the crash, Daniels was indicted by a Suffolk Couniy Grand juiy on charges of manslaughter while operating a motor vehicle under the influence of alcohol, motor vehicle homicide while operating a motor vehicle under the influence of alcohol, and causing serious bodily injury while operating a motor vehicle under the influence of alcohol. On May 25, 2010, Daniels pled guilty to the latter two charges, and the District Attorney agreed to dismiss the manslaughter charge. He was sentenced to a period of incarceration in the state prison, followed by a period of probation. This action was filed by the plaintiffs on October 7, 2010. In summary, they allege that the defendant operated a bar known as Lucky’s Lounge at 355 Congress Street in Boston (Lucky’s), and, on the evening in question, Lucky’s served Daniels alcoholic beverages after he was visibly intoxicated, and defendant is therefore liable to them for the injuries and death resulting from the crash.
On November 2, 2010, the plaintiffs filed the affidavit of Rene Bronfield to meet the requirements of G.L.c. 231, §60J (the Affidavit). In the Affidavit, Bronfield sets out information contained in the Massachusetts State Police report prepared by the trooper who responded to the accident scene and arrested Daniels, and the transcript of the colloquy during which Daniels changed his plea to guilty on two of the three indictments returned against him and was sentenced. The report and transcript are identified and attached to the Affidavit as exhibits. In the Affidavit, Bronfield does not assert that he has first-hand knowledge of the facts that he asserts, other than those that refer to his actions in driving east on the turnpike at the time of the accident, but rather relies on the facts set out in the exhibits.
In the instant motion, the defendant moves to strike the affidavit and have summary judgment entered against the plaintiffs. It argues that the affidavit must meet the requirements of an affidavit filed in opposition to a Mass.R.Civ.P. 56 motion for summary judgment and that it fails this standard. It argues that information contained in the police report cannot be considered because that document is hearsay. The defendant acknowledges that Daniels admitted to the facts stated by the Assistant District Attorney during the plea colloquy, but asserts that those facts would not, by themselves, be sufficient for a jury to return a verdict against the defendant for negligently serving Daniels after he was intoxicated.
Section 60J states, in pertinent part: “The plaintiff shall file, together with his complaint, or at such later time not to exceed ninety days thereafter, an affidavit setting forth sufficient facts to raise a legitimate question of liability appropriate for judicial inquiry.” The statute does not provide any additional guidance concerning what must be in the affidavit.
In McCauliff v. O’Sullivan, Superior Ct. No. 99-2543 (Sept. 26, 2000) [12 Mass. L. Rptr. 369], Judge, now Appeals Court Justice, Fecteau was confronted with a similar argument to that raised by the defendant in this case. Justice Fecteau noted in his opinion that §60J, enacted in 1985, had then had “few opportunities for interpretation,” and eleven years later that continues to be true. He described the statutory standard that an adequate §60J affidavit has to meet, i.e., it had “to raise a legitimate question of liability appropriate for judicial inquiry,” and commented that this is the same standard imposed on plaintiffs under G.L.c. 231, §60B, which concerns complaints alleging claims of medical malpractice, except that statute refers to an “offer of proof’ rather than an “affidavit.”
Justice Fecteau then went on to state:
Generally, an affidavit is “a statement under oath by a person having direct knowledge of the facts which he verifies, except as otherwise clearly stated in the affidavit itself.” Howland v. Cape Cod Bank and Trust Co., 26 Mass.App.Ct. 948, 949 (1988). Neither the statute, nor the general definition require the same level of personal knowledge as Rule 56(e) of the Mass. R. Civil Proc., which require that an affidavit be “made on personal knowledge, shall set forth such facts as would be admissible in evidence and shall show affirmatively that the affi-ant is competent to testify to the matter stated therein.”
This court agrees with Justice Fecteau’s reasoning. The purpose of the §60J affidavit appears to be to insure at the outset of the case that there is evidence sufficient to raise a “legitimate question of liability,” on the part of the defendant dram shop, before it is forced to incur the costs of defending the claim in a court proceeding. Had the legislature intended that a plaintiff could bring a dram shop case only if he already had sufficient evidence to proceed to trial, it certainly would have expressed that requirement more directly.
This construction of the affidavit is supported by the very next paragraph of §60J:
Any party may make a motion for summary judgment pursuant to Rule 56 of the Massachusetts Rules of Civil Procedure. Any such motion shall be heard and decided promptly after issue is joined as to any party, unless the court enlarges the time for *300discovery. Said enlarged time for discovery shall not exceed ninety days, except on further order of the court.
Under Rule 56, if the moving party does not have the burden of proof at trial, as is the case here, it may demonstrate the absence of a triable issue either by submitting affirmative evidence that negates an essential element of the opponent’s case or “by demonstrating that proof of that element is unlikely to be forthcoming at trial.” Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991). “(A]ll eviden-tiary inferences must be resolved in favor of the [nonmoving party].” Boyd v. National R.R. Passenger Corp., 446 Mass. 540, 544 (2006). Defendant’s construction of the §60J affidavit, would read this basic principle of summary judgment practice out of dram shop cases. Indeed, in this case, the defendant has not submitted any materials in support of its motion that tend to negate an essential element of the plaintiffs’ case or demonstrate that proof of that element is unlikely to be offered at trial. Rather, it argues only that the Affidavit, without reference to the police report, does not set out evidence in a form that would be admissible at trial and sufficient to permit a jury could return a verdict against it.
Moreover, §60J expressly makes reference to the plaintiff having an opportunity for discovery before having to oppose the motion for summary judgment. If the §60J affidavit, standing alone, had to be sufficient to defeat summary judgment, the statute would not have expressly provided that a plaintiff could take discovery, or additional discovery, before the defendant’s motion is decided.
In the present case, the transcript of the plea colloquy and the police report, which are exhibits to the Affidavit, provide evidence that Daniels: was at Lucky’s from before 10:00 PM until 1:30 AM on the morning of the crash; had a number of drinks while he was there; blacked out at some time during the evening; entered the Mass Turnpike on a plainly marked exit ramp at Congress Street; traveled westbound for some distance before striking Bronfield’s eastbound car; and exhibited behaviors suggesting that he was very intoxicated at the scene of the accident and later at the police station. That is sufficient evidence “to raise a legitimate question of liabiliiy appropriate for judicial inquiry” as to whether Daniels was visibly intoxicated at a time when Lucky’s continued to serve him alcoholic beverages.
ORDER
For the foregoing reasons the defendant’s motion to strike the plaintiffs’ §60J affidavit and enter summary judgment dismissing the case are DENIED. Inasmuch as the question of what is the required content of an adequate §60J affidavit has not been decided by any appellate court, the denial of the defendant’s motion for summary judgment is without prejudice to its filing another Rule 56 motion pursuant to the standards and procedures that generally apply to such motions. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/2486505/ | 2 F. Supp. 2d 884 (1997)
Debra CASH, et al., individually and on behalf of others similarly situated, Plaintiffs,
v.
CONN APPLIANCES, INC., et al., Defendants.
No. 1:96 CV 432 (TH).
United States District Court, E.D. Texas, Beaumont Division.
November 18, 1997.
*885 *886 *887 *888 Brett Scott Thomas, Beaumont, TX, Paul Michael Hood, Kimberly Ann Morey, Keith H. Cole & Michael C. Dodge, Dallas, TX, for Plaintiffs.
Robert J. Hambright, George Michael Jamail & Jacqueline B. Ryall, Beaumont, TX, for Defendant.
AMENDED MEMORANDUM OPINION
HEARTFIELD, District Judge.
Plaintiffs, Debra Cash,[1] Charles Prater, Christina Stroder, Anthony Lucia, Nancy Malbrough, Roderick Harrington, Krystal Johnson, Byron Neatherly and Roger Chambers, sue defendants, Conn Appliances, Inc., Conn Credit Corporation, Conn Rental, Inc., Appliance Parts & Service, Conn Development Corporation and Merchants Acceptance Corporation, for improperly compensating them for overtime work in violation of the Fair Labor Standards Act of 1938 (FLSA). Defendants move for entry of summary judgment against plaintiffs individually as to how plaintiffs' overtime pay was calculated, limitations and damages. Plaintiffs seek permission to transform this case into a FLSA collective action. The court grants defendants' motion for summary judgment on the issue of the manner in which plaintiffs' overtime compensation was calculated and denies the motion on the issues of limitations and damages as moot. That disposition leads it to deny plaintiffs' motion for this case to proceed as a FLSA collective action to the extent that this request rests on arguments raised in opposition to the summary judgment motion.
SUMMARY JUDGMENT STANDARD
"Federal Rule of Civil Procedure 56 ฉ provides that a grant of summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Pollock v. Federal Deposit Ins. Corp., 17 F.3d 798, 803 (5th Cir.1994). "The mere existence of a factual dispute does not by itself preclude the granting of summary judgment. `[T]he requirement is that there be no genuine issue of material fact.'" St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir.1987). "The substantive law ... identif[ies] which facts are material." Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed. 2d 127 (1994); see Texas Manufactured Housing Ass'n, Inc. v. City of Nederland, 101 F.3d 1095, 1099 (5th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 2497, 138 L. Ed. 2d 1003 (1997). "There is no genuine issue of material fact if the evidence is such that, drawing all reasonable inferences in favor of the non-movant, ... a reasonable jury could not return a verdict in [her] ... favor." Atkinson v. Denton Pub. Co., 84 F.3d 144, 148 (5th Cir.1996); see Stults v. Conoco, Inc., 76 F.3d 651, 654 (5th Cir.1996).
The actual operation of the summary judgment standard depends on whether the moving or nonmoving party bears the burden of proof at trial. See Nebraska v. Wyoming, 507 U.S. 584, 590, 113 S. Ct. 1689, 1694, 123 L. Ed. 2d 317, 328 (1993); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S.Ct. *889 2505, 2513, 91 L. Ed. 2d 202, 215 (1986). When the nonmoving party bears the burden of proof at trial, the moving party can carry its summary judgment burden by either "affirmatively offer[ing] evidence which undermines one or more of the essential elements of the [nonmoving party's] ... case[] or[] ... demonstrat[ing] that the evidence in the [summary judgment] record falls short of establishing an essential element of the [nonmoving party's] ... case." International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264 (5th Cir.1991), cert. denied, 502 U.S. 1059, 112 S. Ct. 936, 117 L. Ed. 2d 107 (1992). When the moving party meets its summary judgment burden, the nonmoving party must point to evidence sufficient for a reasonable jury to return a verdict in her favor to avoid having summary judgment entered against her. See Anderson, 477 U.S. at 249-50, 106 S. Ct. at 2510-11, 91 L.Ed.2d at 212-13; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265, 273-74 (1986); see also Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc); James v. Otis Elevator Co., 854 F.2d 429, 432 n. 3 (11th Cir.1988). In contrast, when the moving party bears the burden of proof at trial, it must "come forward with evidence which would `entitle it to a [judgment as a matter of law] ... if the evidence went uncontroverted'" to satisfy its summary judgment burden. International Shortstop, 939 F.2d at 1264-65; see also Rizzo v. Children's World Learning Centers, Inc., 84 F.3d 758, 762 (5th Cir.1996). The nonmoving party responds by either presenting evidence sufficient for a reasonable jury to return a verdict in her favor or exposing the moving party's evidence as inadequate for a reasonable jury to return a verdict in its favor. See International Shortstop, 939 F.2d at 1265; see also Bailey v. McDonnell Douglas Corp., 989 F.2d 794, 802 (5th Cir. 1993). In the face of a properly supported motion, the failure to accomplish one of these feats leads to the granting of summary judgment to the moving party. See Resolution Trust Corp. v. Northpark Joint Venture, 958 F.2d 1313, 1322 (5th Cir.1992), cert. denied, 506 U.S. 1048, 113 S. Ct. 963, 122 L. Ed. 2d 120 (1993).
"The pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits in support [of] or in opposition to the motion [usually] constitute the summary judgment record." Kelley v. Price-Macemon, Inc., 992 F.2d 1408, 1415 n. 12 (5th Cir.1993), cert. denied, 510 U.S. 1043, 114 S. Ct. 688, 126 L. Ed. 2d 656 (1994). However, these "forms of evidence ... are not the exclusive ways for presenting evidence in a [summary judgment] proceeding." Duffee By and Through Thornton v. Murray Ohio Mfg. Co., 160 F.R.D. 602, 604 (D.Kan.1995). Anything that "[is] ... included in the pretrial record and that would [be] ... admissible evidence [at trial] may receive consideration." Fowler v. Smith, 68 F.3d 124, 126 (5th Cir.1995); see Turco v. Hoechst Celanese Corp., 101 F.3d 1090, 1093 (5th Cir. 1996). A court, however, is under no obligation to look beyond the materials to which the parties point to resolve a summary judgment motion. See E.D.Tex.R. CV-56(c); Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915 (5th Cir.), cert. denied, 506 U.S. 832, 113 S. Ct. 98, 121 L. Ed. 2d 59 (1992); see also Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir.1982) ("A party may not prevail in opposing a motion for summary judgment by simply overwhelming the district court with a miscellany of unorganized documentation."), cert. denied, 460 U.S. 1085, 103 S. Ct. 1777, 76 L. Ed. 2d 349 (1983).
A court's assessment of the summary judgment record must include no "evaluat[ion of] the credibility of witnesses, weigh[ing of] the evidence, [or] ... resolu[tion of] factual disputes." International Shortstop, 939 F.2d at 1263. As "long as the evidence ... is such that a reasonable jury drawing all inferences in favor of the nonmoving party could arrive at a verdict in that party's favor, [it] ... must deny the motion." Id.
FLSA
Overview
"Using its power under the [Constitution's] Commerce Clause ..., Congress enacted in 1938 the [FLSA] ... to establish labor standards in order to maintain the `minimum standard of living necessary for health, efficiency, and general well-being of workers.'" Jacksonville Prof'l Firefighters Ass'n Local 2961, IAFF v. City of Jacksonville, 685 F. Supp. 513, 517 (E.D.N.C.1987). "The two central themes of the FLSA are *890 ... minimum wage and overtime requirements." Arnold v. State, 910 F. Supp. 1385, 1392 (E.D.Ark.1995); see Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728, 739, 101 S. Ct. 1437, 1444, 67 L. Ed. 2d 641, 653 (1981) (discussing the FLSA's purpose). "Section [6] ... of the FLSA mandates [an] ... hourly minimum wage due to all employees[, while] ... Section [7] delineates maximum work hour limitations." Monahan v. County of Chesterfield, Va., 95 F.3d 1263, 1267 (4th Cir.1996).
The Wage and Hour Division of the United States Department of Labor (DOL) administers the FLSA. See 22 Federal Procedure ง 52:303 (1984) (citing 29 U.S.C. ง 204(a)). Pursuant to a delegation of authority by the Secretary of Labor, the head of that entity, known as the Administrator, issues administrative rules on the FLSA.[2]Id. He offers his interpretations of those rules in opinion letters and the Wage and Hour Division Field Operations Handbook (Handbook). See Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 417-18, 65 S. Ct. 1215, 1219, 89 L. Ed. 1700, 1704-05 (1945) see also National Medical Enterprises, Inc. v. Shalala, 43 F.3d 691, 696-97 (D.C.Cir.1995); Caro-Galvan v. Curtis Richardson, Inc., 993 F.2d 1500, 1508 (11th Cir.1993); 3 Charles H. Koch, Jr. Administrative Law and Practice ง 11.26 (2d ed.1997). He may withdraw or revise these pronouncements at any time. See 29 C.F.R. งง 775.1, 778.3; see also Taylor-Callahan-Coleman Counties Dist. Adult Probation Dep't v. Dole, 948 F.2d 953, 957-59 (5th Cir.1991).
Construction of administrative rules relating to the FLSA constitutes part of the judicial function.[3] A court undertaking this enterprise first consults the plain language of the rule at issue.[4]See Bowles, 325 U.S. at 413-14, 65 S. Ct. at 1217, 89 L.Ed. at 1702-03; see also Greyhound Corp. v. Mount Hood Stages, Inc., 437 U.S. 322, 330, 98 S. Ct. 2370, 2375, 57 L. Ed. 2d 239, 246 (1978) ("The starting point in every case involving a construction of a statute is the language itself."). When the words themselves prove inconclusive, it looks to the Administrator's reading of the rule.[5]See Bowles, 325 U.S. at 413-14, 65 S. Ct. at 1217, 89 L.Ed. at 1702-03. That interpretation possesses "controlling weight" so long as it *891 "does not violate the Constitution or federal statute ... [and] `is [not] plainly erroneous or inconsistent with the regulation.'" Stinson v. United States, 508 U.S. 36, 45, 113 S. Ct. 1913, 1919, 123 L. Ed. 2d 598, 608 (1993). If the Administrator offers no statement settling the rule's meaning, then a court resorts to other interpretive tools.[6]See 3 Koch, supra ง 11.26; cf. Rucker v. Wabash R.R., 418 F.2d 146, 149-50 (7th Cir.1969).
Overtime Requirement Background
The FLSA's provision on maximum hours, Section 7, demarcates forty as the greatest number of hours that can comprise a workweek, "unless the employee receives compensation for the hours in excess of forty at a rate not less than one and one-half times the `regular rate at which he [or she] is employed.'"[7]Donovan v. Brown Equip. & Serv. Tools, Inc., 666 F.2d 148, 152 (5th Cir.1982) (citing and quoting 29 U.S.C. ง 207(a)(1)). The Administrator defines the "regular rate" as "a rate per hour." 29 C.F.R. ง 778.109. He instructs employers to determine the regular rate "by dividing ... total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by [the employee] ... in that workweek for which such compensation was paid."[8]Id. This directive controls regardless of whether the employee receives her compensation "on a piece-rate, salary, commission, or other basis."[9]Id.; see, e.g., id. ง 778.113(b) (a monthly salary is translated into a weekly salary by multiplying the monthly salary by twelve) (i.e., the number of months in a year) and dividing the result by fifty-two (i.e., the number of weeks in a year); see also Aaron v. City of Wichita, Kan., 54 F.3d 652, 655 (10th Cir.1995) ("The regular rate is the rate per hour, but employers are not required to compensate employees on an hourly basis."), cert. denied, 516 U.S. 965, 116 S. Ct. 419, 133 L. Ed. 2d 336 (1995).
Employers can withhold employee pay for some reasons, such as discipline. See 29 C.F.R. งง 778.304(a), 778.307. However, in doing so, they must use earnings sans those pay reductions to figure the regular rate.[10]*892 Id. ง 778.304(b); see, e.g., id. งง 778.305, 778.307.
The FLSA excepts and exempts some workers from the overtime requirement. See, e.g., 29 C.F.R. งง 778.2, 778.107. For example, it excludes from coverage individuals serving in "bona fide executive, administrative, or professional capacities."[11] 29 U.S.C. ง 213(a); see Hennessey v. United States Dep't of Defense, 46 F.3d 356, 359 (4th Cir.1995). These workers, consequently, possess no entitlement to extra compensation for laboring more than forty hours in a week. See Jackson v. Commonwealth, 892 F. Supp. 923, 925 (E.D.Ky.1995); see also Balgowan v. State, 115 F.3d 214, 216 n. 1 (3d Cir.1997).
The employee who performs certain duties (duties test) and is paid on a salary-basis (salary-basis test)[12] qualifies for the white collar exemption. See Auer, 519 U.S. at ___, 117 S.Ct. at 908, 137 L. Ed. 2d at 86. The second condition fails to be met when her salary is subject to reduction because of absences of less than a day[13] or because of disciplinary violations other than those involving safety rules of major significance.[14]See 29 C.F.R. งง 541.118(a)(2)-(3), (5); Auer, 519 U.S. at ___, 117 S.Ct. at 910-11, 137 L. Ed. 2d at 89-90; Martin v. Malcolm Pirnie, Inc., 949 F.2d 611, 615 (2d Cir.1991), cert. denied, 506 U.S. 905, 113 S. Ct. 298, 121 L. Ed. 2d 222 (1992); Abshire v. County of Kern, 908 F.2d 483, 486 (9th Cir.1990), cert. denied, 498 U.S. 1068, 111 S. Ct. 785, 112 L. Ed. 2d 848 (1991); Klein, 990 F.2d at 281, 284-85; Lacey, 810 F.Supp. at 247; cf. McCloskey, 903 F.Supp. at 562-63.
The employee alleging a violation of the overtime requirement bears the burden of proving the following prima facie case by a preponderance of the evidence: "[T]hat there exists an employer-employee relationship; that there was engagement in activities within the coverage of the [FLSA] ...; that the employer violated the [overtime] wage requirements; and that a definite amount of compensation is due."[15]Fight v. Armour & Co., 533 F. Supp. 998, 1004 (W.D.Ark.1982); see Reed v. R.C. Johnson, No. Civ.A. 93-1652, *893 1995 WL 684882, at *1 (E.D.La. Nov.13, 1995); see also Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687, 66 S. Ct. 1187, 1192, 90 L. Ed. 1515, 1522 (1946); Clark v. J.M. Benson Co., 789 F.2d 282, 286 (4th Cir.1986); Reeves v. International Tel. and Tel. Corp., 616 F.2d 1342, 1351 (5th Cir.1980), cert. denied, 449 U.S. 1077, 101 S. Ct. 857, 66 L. Ed. 2d 800 (1981). If she does so, then the employer escapes liability only by showing by a preponderance of the evidence that the employee falls within an exception or exemption to the overtime requirement. See Reed, 1995 WL 684882, at *1; Fight, 533 F.Supp. at 1004; see also Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 94 S. Ct. 2223, 2229, 41 L. Ed. 2d 1, 10-11 (1974).
Fluctuating Workweek Method
The Administrator describes a method for determining the overtime pay due the employee who receives a salary and whose hours of work vary from week-to-week in Section 778.114 of Title 29 to the C.F.R. (Section 778.114).[16]See 29 C.F.R. งง 778.109, 778.114. According to him, the regular rate in this circumstance is salary divided by the total number of hours worked during the week.[17]Id. ง 778.114(a); accord Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 580, 62 S. Ct. 1216, 1221, 86 L. Ed. 1682, 1689 (1942). As the salary covers all hours at the regular rate, that sum and the product of one-half the regular rate and the number of hours over forty worked results in total compensation for the week including overtime pay equal to one-and-a-half times the regular rate.[18]See 29 C.F.R. ง 778.114(a); Condo v. Sysco, Corp., 1 F.3d 599, 605 (7th Cir.1993), cert. denied, 510 U.S. 1110, 114 S. Ct. 1051, 127 L. Ed. 2d 373 (1994); Knight v. Morris, 693 F. Supp. 439, 445 & n. 5 (W.D.Va.1988).
The fluctuating workweek method produces overtime awards lower than those resulting when a fixed hourly amount or the quotient of a salary for forty hours and forty serves as the regular rate.[19]See Gaskill, *894 supra, at 897-901, 904; see also Overnight Motor, 316 U.S. at 580, 62 S. Ct. at 1221, 86 L.Ed. at 1689 ("It is true that the longer the hours the less the rate and the pay per hour."). For the employer to use this economically advantageous approach, three conditions must prevail. See Gaskill, supra, at 900-01.
First, the employer must reach a clear understanding with the employee "that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number" (clear understanding criterion). 29 C.F.R. ง 778.114(a); see also id. ง 778.114(c). This meeting-of-the-minds usually is memorialized in writing at the outset of the employment relationship. See Highlander v. KFC Nat'l Management Co., 805 F.2d 644, 645-46, 648 (6th Cir.1986); Condo v. Sysco Corp., No. 92 C 802, 1992 WL 317199, at *3 (N.D.Ill. Oct. 28, 1992), aff'd, 1 F.3d 599 (7th Cir.1993), cert. denied, 510 U.S. 1110, 114 S. Ct. 1051, 127 L. Ed. 2d 373 (1994). In the absence of such a situation, it can arise through "employment policies, practices and procedures." Monahan, 95 F.3d at 1275 n. 12; see Mayhew v. Wells, 125 F.3d 216, 219 (4th Cir.1997) (existence of clear understanding criterion can be "`based on the implied terms of one's employment agreement if it is clear from the employee's actions that he or she understood the payment plan in spite of after-the-fact verbal contentions otherwise'").
Second, the employee's salary must be large enough to ensure that her average hourly rate never dips under the applicable minimum wage (minimum wage criterion).[20]See 29 C.F.R. ง 778.114(c). This condition exists if salary actually proves adequate to sustain an average hourly rate at least equal to the applicable minimum wage. See id. It also prevails if salary "is reasonably calculated to provide" an average hourly rate at least equal to the applicable minimum wage. Opinion Letter No. 945, [___ Wages-Hours Lab.L.Rep.(CCH) ถ 30,957 (Feb. 6, 1969)] [hereinafter Opinion Letter No. 945]; see Opinion Letter No. 1010, [___ Wages-Hours] Lab.L.Rep. (CCH) ถ 30,557 (June 12, 1969) [hereinafter Opinion Letter No. 1010]. The latter situation relates to those infrequent occasions when unforeseen events cause the employee to work so many hours that her salary fails to support an average hourly rate at least equal to the applicable minimum wage. See Opinion Letter No. 945; see also Opinion Letter No. 1010. In such a circumstance, the employer must give the employee (1) an additional amount sufficient to generate an average hourly rate equal to the applicable minimum wage when that amount is added to salary and the result is divided by the number of hours worked[21] and (2) the difference between the amount of overtime compensation yielded under the fluctuating workweek method when the product of the applicable minimum wage and the number of hours worked serves as the salary figure and the amount of overtime compensation actually paid.[22]See Opinion Letter No. 945; see also Blackmon v. Brookshire Grocery Co., 835 F.2d 1135, 1138 n. 1 (5th Cir.1988); cf. Opinion Letter No. 1010 ("For purposes of administrative settlement only, back wages *895 are computed in such a workweek by multiplying all the hours worked by the applicable minimum wage, and the overtime hours above the applicable overtime standard by half-time."). However, if breaches of the applicable minimum wage become too common, then the employer must cease using the fluctuating workweek method unless it "reach[es] a new understanding with the employee, either to work no hours above the number which would provide at least the applicable minimum wage at all times or to compute on the fluctuating workweek principle only up to the point where the minimum wage would be penetrated if more hours were worked and then compute the overtime compensation for hours above this number at full time and one-half the applicable minimum wage." Opinion Letter No. 1010.
Finally, the employee's salary must be paid even if she works less than a "full schedule of hours" in a week (full schedule criterion).[23] 29 C.F.R. งง 778.114(c), 778.306(a); Donovan v. Daylight Dairy Prods., Inc., No. 79-0666, 1984 WL 3186, at *2 (D.Mass. Oct.26, 1984), aff'd, 779 F.2d 784 (1st Cir.1985). This condition forecloses the employer from providing less than the entire salary for a week or weeks in which it assigns her less than forty hours to offset compensation due for hours over forty worked in another week in the same pay period.[24]See 29 C.F.R. งง 778.114, 778.306(a). It, however, in no way bars "occasional" deductions from salary for "wilful absences or tardiness," so long as the full salary figures in the calculation of the regular rate and the amount of salary remaining after such reductions supports an average hourly rate at least equal to the applicable minimum wage. II Wage and Hour Division Handbook, Mar. 24, 1967, ง 32b04b [hereinafter Handbook].[25]
*896 The employee alleging an improper application of the fluctuating workweek method bears the burden of proof.[26]See Reed, 1995 WL 684882, at *1; Fight, 533 F.Supp. at 1002; see also Anderson, 328 U.S. at 687, 66 S. Ct. at 1192, 90 L.Ed. at 1522. But see, e.g., Monahan, 95 F.3d at 1281 (placing the burden of proof on the employer as to the clear understanding criterion). Liability arises if the employer either miscomputes overtime pay[27] or uses the fluctuating workweek method despite the absence of one or more of the criteria for doing so.
The nature of compensatory damages due the employee proving a misuse of the fluctuating workweek method depends upon the character of the error:
โ Employer made a computational mistake. Damages equal to the difference between the amount resulting from the correct calculation of overtime compensation using the fluctuating workweek method and the amount of overtime compensation actually paid. See Mayhew, 125 F.3d at 219; Yadav v. Coleman Oldsmobile, Inc., 538 F.2d 1206, 1207-08 (5th Cir.1976).
โ Employer violated the clear understanding criterion, full schedule criterion or both. Damages equal the difference between the amount of overtime compensation owed when total remuneration is divided by forty, the result is multiplied by 1.5, and that product is multiplied by the number of hours over forty worked and the amount of overtime compensation actually paid[28] as to each week in which the fluctuating workweek method was used.[29]See Spires v. Ben Hill County, 745 F. Supp. 690, 709 (N.D.Ga.1990), aff'd, 980 F.2d 683 (11th Cir.1993).
โ Employer regularly violated the minimum wage criterion. Damages equal difference between the amount of overtime compensation owed when total remuneration is divided by forty, the result is multiplied by 1.5, and that product is multiplied by the number of hours over forty worked and the amount of overtime compensation actually paid[30] as to each week in which the fluctuating workweek method was used.[31]See Opinion Letter No. 945.
โ Employer infrequently violated the minimum wage criterion and made no effort to cure its breaches. Damages equal the sum of (1) the amount sufficient to generate an average hourly rate equal to the applicable minimum wage when that amount is added to salary and the result is *897 divided by the number of hours worked as to each week in which a violation occurred and (2) the difference between overtime compensation due under the fluctuating workweek method when the applicable minimum wage and the total number of hours worked serve as the salary figure and the amount of overtime compensation actually paid as to each week in which a violation occurred. See id.
โ Employer infrequently violated the minimum wage criterion and failed to cure its breaches fully. Damages equal the difference between the amount due under the fluctuating workweek method when the applicable minimum wage and total number of hours worked serve as the salary figure and the amount actually paid. See id.
FLSA Collective Actions
The FLSA "provides that one or more representative plaintiffs can pursue a collective action alleging violations of [its] ... provisions." Crain v. Helmerich and Payne Int'l Drilling Co., Civ.A. No. 92-0043, 1992 WL 91946, at *1 (E.D.La. Apr.16, 1992) (citing 29 U.S.C. ง 216(b)). To maintain a collective action, "the named representatives and the members of the prospective [collective action] ... must be similarly situated, and ... the action must be one of general effect, not one which is purely personal to the [individual] plaintiff[s]."[32]Wyatt v. Pride Offshore, Civ.A. No. 96-1998, 1996 WL 509654, at *2 (E.D.La. Sept.6, 1996) (numbering omitted). A showing "that there are other employees of the ... employer who desire to `opt in'" also must be made before a case can proceed as a FLSA collective action. Dybach v. State of Fla. Dep't of Corrections, 942 F.2d 1562, 1567-68 (11th Cir.1991).
Statute of Limitations
The FLSA establishes a two-year statute of limitations for violations of its provisions. 29 U.S.C. ง 255. However, if the employee can establish that the employer willfully breached the FLSA, then she can bring a claim up to three years after the transgression. See Cox v. Brookshire Grocery Co., 919 F.2d 354, 356 (5th Cir.1990). "Willfulness is a fact issue for the jury." Karr v. City of Beaumont, Tex., 950 F. Supp. 1317, 1325 (E.D.Tex.1997) (citing Fowler v. Land Management Groupe, Inc., 978 F.2d 158, 162-63 (4th Cir.1992)); see Bankston v. State, 60 F.3d 1249, 1253 (7th Cir.1995). A willful violation arises when the "employer either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA]...." McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133, 108 S. Ct. 1677, 1681, 100 L. Ed. 2d 115, 122 (1988). "Simply failing to seek legal advice concerning [a] ... pay practice does not evidence a willful violation.... Nor is a negligent violation ... a willful violation." Mireles v. Frio Foods, 899 F.2d 1407, 1416 (5th Cir.1990).
When the statute of limitations stops depends upon the type of FLSA suit. The employee seeking relief just for herself tolls the statute by filing a complaint. 29 U.S.C. ง 255(a). When a collective action is instituted, the limitations period for the employee continues to run until she consents in writing to becoming a party plaintiff. See 29 U.S.C. ง 256; Atkins v. General Motors Corp., 701 F.2d 1124, 1130 n. 5 (5th Cir.1983); see also Perella v. Colonial Transit, Inc., 148 F.R.D. 147, 149 (W.D.Pa.1991), aff'd, 977 F.2d 569 (3d Cir.), cert. denied, 507 U.S. 917, 113 S. Ct. 1275, 122 L. Ed. 2d 669 (1993).
An exception to statutes of limitations, known as the continuing violations doctrine, applies to claims brought under the FLSA. See McConnell v. Thomson Newspapers, Inc., 802 F. Supp. 1484, 1493 (E.D.Tex. 1992); see also Hodgson v. Behrens Drug Co., 475 F.2d 1041, 1050 (5th Cir.), cert. denied, 414 U.S. 822, 94 S. Ct. 121, 38 L. Ed. 2d 55 (1973). See generally Waltman v. International Paper Co., 875 F.2d 468, 474 (5th Cir.1989). It is triggered when either "the original violation occurred outside the statute of limitations, but is closely related to *898 other violations that are not time-barred ... [or] an initial violation, outside the statute of limitations, is repeated later." Hendrix v. City of Yazoo City, Miss., 911 F.2d 1102, 1103 (5th Cir.1990). In the former situation, "recovery may be had for all violations, on the theory that they are all part of one, continuing violation." Id. In the latter one, "each violation begins the limitations period anew, and recovery may be had for at least those violations that occurred within the period of limitations." Id.
Liquidated DamagesโOvertime Requirement Violation
The employer breaching the overtime requirement is liable to affected employees for "unpaid overtime compensation. ... and ... an additional equal amount as liquidated damages."[33] 29 U.S.C. ง 216(b). "The duty to award liquidated damages in an amount equal to the unpaid [overtime] wages due ... [is] ministerial, not discretionary." Mireles, 899 F.2d at 1414; see Reich, 8 F.3d at 1030. So "[a] finding that the employer did not act willfully does not preclude an award of liquidated damages." Cox, 919 F.2d at 357.
A court may reduce the amount of liquidated damages flowing from a violation of the overtime requirement "only if the employer shows .... that the act or omission giving rise to [the breach] ... was in good faith and that [it] ... had reasonable grounds for believing that [its] ... act or omission was not a violation. The employer has a substantial burden of proving [its] ... good faith." Vega v. Gasper, 36 F.3d 417, 427 (5th Cir.1994). Indeed, even when the employer's actions or omissions were in good faith and based on reasonable grounds, a court still may award liquidated damages.[34]Lee v. Coahoma County, Miss., 937 F.2d 220, 227 (5th Cir.1991); Castillo v. Givens, 704 F.2d 181, 183 n. 1 (5th Cir.), cert. denied, 464 U.S. 850, 104 S. Ct. 160, 78 L. Ed. 2d 147 (1983).
The "employer cannot satisfy its dual burden [of showing good faith and reasonable grounds] ... solely by suggesting that lower-level employees are responsible for the violations, or by professing ignorance of the requirements of the [FLSA]...." LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1263 (5th Cir.1986); see also Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 469 (5th Cir.1979) ("Apathetic ignorance is never the basis for a reasonable belief."). It has "some duty to investigate potential liability under the [FLSA]...." Barcellona, 597 F.2d at 469. "[W]hen [it] ... `knows or has reason to know that [its] ... conduct is governed by the FLSA,'" it cannot secure a reduction in liquidated damages. Reeves, 616 F.2d at 1353.
FACTUAL BACKGROUND
Coefficient Employee Compensation
Conn Appliances, Inc., operates Conn Credit Corporation, Conn Rental, Inc., Appliance Parts & Service, Conn Development Corporation and Merchants Acceptance Corporation as subsidiaries.[35]See Badon Aff. ถ 5; Defs.' Reply to Pls.' Resp. to Defs.' Mot. for Summ.J. [hereinafter Reply] (Attach. (Video Dep. of Kellye Badon at 73-74, 87, 90-91 [hereinafter Badon Dep.])). In 1978, Conn decided to use the fluctuating workweek method to determine the overtime pay of some of its employees.[36]See Badon Aff. *899 ถถ 4-5. It did so on the suggestion of Mike Michaelovich, a DOL investigator. See Badon Aff. ถถ 4-6; Badon Dep. at 67-68. At that time, Michaelovich explained the fluctuating workweek method to Conn's Chief Executive Officer, Tommy Frank. See Badon Aff. ถ 5; see also Badon Dep. at 24. He stated that a worker compensated in accordance with that calculus could not suffer a reduction in pay because of short workweek (i.e., a week in which less than forty hours of work was assigned), but could have pay withheld because of an absence from work due to illness that sick leave was insufficient to cover or because of personal business. Badon Aff. ถ 5; see Badon Aff. Attach. 1.
Conn's compensation scheme for coefficient employees entailed several practices.[37] First, each coefficient employee received a monthly salary, regardless of how many hours he or she was scheduled to work.[38] Badon Dep. at 8-11, 37. However, failure to work assigned time, whether because of tardiness, a need to conduct personal business, or illness for which no sick leave was available, sometimes resulted in the loss of a portion of a day's pay (docking policy).[39]See Badon Dep. at 31-32, 36-40; see also Badon Aff. ถถ 10-11 & Attach. 1; Defs.' Am.Ans. to Pls.' First Am.Compl. at 3 [hereinafter Ans.]; Badon Dep. at 56. Second, Conn omitted bonus and incentive payments from its regular rate computations. See Ans. at 5; Badon Dep. at 78-79. Finally, when a coefficient employee worked so many hours that his or her regular rate dropped below the applicable *900 minimum wage, Conn provided him or her with (1) extra pay sufficient to generate a regular rate equal to the applicable minimum wage when that amount was added to salary and the result was divided by the number of hours worked and (2) the difference between the amount of overtime compensation yielded under the fluctuating workweek method when the product of the applicable minimum wage and total number of hours worked served as the salary figure and the amount of overtime compensation actually paid.[40]See Badon Dep. at 65-67; see also Badon Dep. at 48, 49, 94, 130-31.
Conn developed a written example of its method of compensating coefficient employees. See Badon Aff. ถ 6. This document explained how to determine the total pay due someone earning $200 in weekly salary in each of two weeks. Badon Aff. Attach. 1. The salary figure remained the same in both weeks, but the number of hours worked over forty varied. See Badon Aff. Attach. 1. The following statement appeared after the two calculations: "Do not dock individuals on coefficient if scheduled short. If the individual takes off on personal business or is ill and has not accumulated enough sick time, you may dockโper Mr. Michaelovich at Wage and Hour." Badon Aff. Attach 1. A facsimile of the DOL's coefficient table was attached to the written example. Badon Aff. ถ 6 & Attach. 1; Badon Dep. at 17. Compare Badon Aff. Attach. 1 with Coefficient Table. Beginning in 1978, Conn gave a copy of the written example and coefficient table to all coefficient employees. See Badon Aff. ถ 6.
Each new coefficient employee was given the written example, the coefficient table and an oral description from a member of Conn's Personnel Department of how his or her compensation was calculated beginning in 1989.[41]Compare Badon Aff. ถ 7 with Badon Dep. at 11, 15-16, 21-24. When Conn's Human Resource Director, Kellye Badon, provided the oral explanation, which was usually the case, see Badon Dep. at 11, 15-16, 21-24, she said something like the following:
*901 ... The manner in which we are offering you a salary of $1500 a month.... So, you're going to make $1500 a month, which is actually $18,000 a year. You're going to earn that salary for the hours that youโ that you work, regardless of the number that you work. It's aโit's a monthly salary.
Now, let me show you how we're going to calculate anythingโin compliance with F.L.S.A., how we're going to calculate the hours that we have to pay you for over 40. The way you do it is: We've got $15,000-a-month [sic] salary that is guaranteed to you.
....
1500 a month times 12 months in a year equals $18,000 a year in annual salary that you are going to earn. Now, in order for us to calculate what we will pay you for over 40 hours, we need to derive a weekly salary. So I'm going to take the 18,000 and divide by 52 weeks in the year; and you're going to have a weekly salary of $346.15.
Now, you'll earn this weekly salary for weeks that you work 40 hours, weeks that you work 50 hours. You have a guarantee every week.
Now, we need to calculate and pay you a form of overtime. So, we're going to look atโhere's the coefficient chart from the Department of Labor, and let's say in one week that you work 45 hours. I'm going to take your weekly salary of 346.15 and come here to the chart that D.O.L. has provided and look at 45 hours; and we have a decimal here of .056. So, I multiply your weekly salary times .056; and that equals $19.38 that you will be compensated for the hours over 40 in that particular week.
Now, let's say you work a 50-hour week.... I'm going to go here to the 50 hours and take your weekly salary of 346.15 times this decimal (indicating) and we'll take 346.15 times .100 and that equals 34.61 in extra compensation that you are going to earn in that week for working 50 hours a week.
So, you can see, as long as you know the weekly salary that is guaranteed to you, based on the time records you turn in to our office, weโyou can always calculate what you're going to earn by using this chart and determining the number of hours that you worked in that week, for purposes of calculating coefficient, multiply your weekly salary times that appropriate decimal.
Now, in the event that we do not schedule you for 40 hours or for a full week, we are going to compensate you your weekly salary; and so, you will have a guarantee because sometimes you will have a fluctuating work schedule, depending on the work needs.
Badon Dep. at 18-20. After the oral explication of the coefficient employee pay system, the new hire signed the following form:
UNDERSTANDING MY METHOD OF COMPENSATION
IT IS IMPORTANT THAT EACH EMPLOYEE KNOW AND UNDERSTAND HIS/HER METHOD OF COMPENSATION.
PLEASE DISCUSS ANYTHING YOU FAIL TO UNDERSTAND WITH YOUR MANAGER AND/OR A MEMBER OF THE PERSONNEL DEPARTMENT.
MY METHOD OF COMPENSATION HAS BEEN EXPLAINED TO ME, AND I UNDERSTAND IT.
______________
NAME
______________
DATE
Badon Aff. Attach. 2 (changes to format made); see Badon Dep. at 20.
On July 5, 1996, Robert Foster, a DOL investigator, told Badon that Conn's docking policy violated the FLSA.[42]See Badon Aff. *902 ถ 13; Badon Dep. at 33-34, 56; see also Badon Dep. at 52, 159-60. In response to Foster's comment, Conn ended the docking policy and audited the coefficient employee payroll for the period running from January 1, 1994, to July 31, 1996. See Badon Aff. ถถ 13-14; Badon Dep. at 52, 56, 79-80, 98-99. In September or October, 1996, it reached several determinations regarding coefficient employee compensation after completing the audit. See Badon Aff. ถ 14. First, it decided to award compensation previously withheld pursuant to the docking policy. See Badon Aff. ถ 14; Badon Dep. at 34, 82, 107, 108-09. Second, despite already having done so, it decided to correct each minimum wage breach by giving the affected coefficient employee additional compensation sufficient to generate an average hourly rate equal to the applicable minimum wage when the amount was added to salary and incentives and the result was divided by the number of hours worked. See Badon Dep. at 97-98, 107, 108, 110. Third, it decided to pay the difference between overtime compensation based on a regular rate incorporating incentives and bonuses and the amount of overtime compensation actually paid. See Badon Dep. at 108; cf. Ans. at 5. Finally, it decided to add to each reimbursement a payment equal to 10 percent of the amount owed. Badon Aff. ถ 14.
Procedural History
Plaintiffs brought this FLSA suit in state court on June 7, 1996. Notice of Removal ((Pls.' Original Pet. at 1, 3) (state court docket sheet)). In their original petition, they pled a collective action. Notice of Removal (Original Pet. at 3).
Defendants removed this case to federal court on July 10, 1996. Notice of Removal at 1. Following that event, plaintiffs filed an amended complaint, in which they requested permission to bring a FLSA collective action on behalf of the following group:
All current and former employees of Defendants in the previous three (3) years (excluding managers, executives, bona fide administrative employees, or others who were exempt from the overtime provisions of the FLSA during the relevant time period), who were to be paid for time worked over forty (40) hours in a workweek on a "co-efficient" basis pursuant to a "Co-efficient" Chart (the "Chart"), and/or who were offered "bonuses" or other compensation in lieu of overtime....
Pls.' First Am.Compl. at 5.
On December 11, 1996, the court entered a docket control order limiting discovery to culling for "information for the past three (3) years regarding the identity (including last known address and phone numbers) of [prospective plaintiffs] ...; their rate(s) of pay; the method in which they were paid; the amount they received weekly or monthly; and other information Plaintiffs believe relevant to determining the nature of the [collective action]" and ordered Conn to file a brief on the propriety of permitting this case to proceed as a collective action (collective action question) by January 10, 1997. Docket Control Order, entered Dec. 11, 1996, at 2.
On January 10, 1997, Conn submitted a motion for summary judgment on plaintiffs' individual claims instead of a brief on the collective action question. See Modified Docket Control Order, entered Feb. 13, 1997, at 1 [hereinafter Docket Control Order II]; Mot. at 2 (claiming that the meritorious nature of the summary judgment motion "mak[es] it unnecessary to consider further plaintiffs' efforts to broaden this case into a class action"). In light of this development, the court authorized plaintiffs to file a response to the summary judgment motion and a brief on the collective action question. See Docket Control Order II at 2.
Plaintiffs filed their response and brief on July 15, 1997. Resp. at 1; Br. in Supp. of Class Certification [hereinafter Br.] (cover sheet). In their brief, they asked for this case to proceed as a FLSA collective action encompassing the following persons:
All current and former employees of Defendants (excluding managers, executives, bona fide administrative employees, or others who were exempt from the overtime provisions of the FLSA during the relevant time period), who were to be paid for time worked over forty (40) hours in a workweek on a "co-efficient" basis pursuant to a "Co-Efficient" Chart (the "Chart").
*903 Br. at 13. They refrained from requesting that the group be divided into subcategories. Br. at 13 n. 7.
Conn's summary judgment motion and plaintiffs' request for this case to proceed as a collective action question largely mirrored each other. Both focused on the question of whether Conn should have used the fluctuating workweek method to figure coefficient employee overtime compensation.[43]See, e.g., Mot. at 2 ("the named plaintiffs were paid consistent with the provisions of 29 C.F.R. ง 778.114"); Br. at 23 ("The central issue is whether the defendants' `coefficient' method of paying certain nonexempt employees was across the board improper and a violation of the FLSA.").
After reviewing all of the materials relating to the summary judgment motion and the collective action question, the court determined that resolution of the former should precede a decision on the latter. See Scheduling Order (Aug. 15โOct.15, 1997), entered Aug. 18, 1997, at 1.
DISCUSSION
Plaintiffs charge Conn with failing to pay them enough for overtime because of two errors. First, they contend that Conn omitted a necessary input, incentives, from its regular rate computations. See First Am. Compl. at 9. Second, they assert that Conn's reliance on the fluctuating workweek method to figure their overtime compensation was misplaced. See First Am.Compl. at 9-10.
Conn concedes as inappropriate its exclusion of incentives from its regular rate calculations. See Ans. at 5. It, however, disputes the claim that it wrongly used the fluctuating workweek method. See Ans. at 5-6.
Availability of Fluctuating Workweek Method
Conn maintains in its summary judgment motion that its use of the fluctuating workweek method to determine plaintiffs' overtime compensation constituted no FLSA violation. Compare Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183, 191 (5th Cir.1990) with Mot. at 6-10, 11 and Reply at 5-10. Plaintiffs disagree. According to them, Conn met none of the criterion for employing that calculus. See Resp. at 19-28; see also Mem. at 5. Conn's position proves persuasive.
Full Schedule Criterion
Conn maintains that its manner of compensating coefficient employees satisfied the full schedule criterion. See Mot. at 7-8; Reply at 4-5. Plaintiffs point to the docking policy as defeating that claim.[44]See Resp. at 22-24, 26. Specifically, they observe that Section 778.114, the rule describing the fluctuating workweek method, covers only workers employed on a "salary basis." The absence of a definition of "salary basis" in this rule prompts them to argue that the meaning of that phrase is found in Section 541.118(a), the second part of the salary-basis test for the white collar exemption. Since Section 541.118(a) bars employers from making employees subject to the kinds of salary deductions Conn imposed, they assert that the fluctuating workweek method was unavailable to their ex-employer.[45]See Resp. at 22-24, *904 26 & n. 8; Mem. at 12-13.
Plaintiffs' contention regarding how Section 778.114 employs "salary basis" focuses attention on the following issue: to which contexts Section 541.118(a) does apply? A review of materials and principles relevant to that query leads to a finding that their interpretive argument lacks merit.
Section 541.118(a)'s language proves inconclusive as to where the rule's conception of "salary basis" applies. While Section 541.118(a) states that it describes "salary basis ... within the meaning of the regulations," 29 C.F.R. ง 541.118(a) (internal quotation omitted), it gives no clue as to whether or not that pronouncement refers to all rules concerning the FLSA or just those regarding the white collar exemption. See id. But cf. Whitmore v. Port Auth. of N.Y. & N.J., 907 F.2d 20, 22 (2d Cir.1990) (Pierce, J., dissenting); Aiken, 977 F.Supp. at 395; Black v. Comdial Corp., Civ.A. No. 92-081-C, 1994 WL 70113, at *5 (W.D.Va. Feb.15, 1994).
Section 541.118(a)'s ambiguous text prompts consideration of any pronouncement by the Administrator as to whether that rule reaches Section 778.114. See Bowles, 325 U.S. at 417-18, 65 S. Ct. at 1219, 89 L.Ed. at 1704-05. He, however, apparently has never addressed that question.[46] This silence necessitates resort to other interpretive tools to resolve it. See 3 Koch, supra ง 11.26.
Three aids to understanding all point to the conclusion that Section 541.118(a) presents a definition of "salary basis" inapplicable to Section 778.114. First, the initial formulation of Section 541.118(a), which appeared in 1949, began with the following phrase: "An employee will be considered to be paid on a salary basis within the meaning of the regulations in Subpart A of this part," 14 FedReg. 7732 (1949) (emphasis added). See 2B Singer, supra ง 51.04. Because "salary basis" was only mentioned in Subpart A of Part 541 to Title 29 of the C.F.R. (Subpart A) in provisions explicating the first element of the salary-basis test, see 14 Fed.Reg. 7705-07 (1949), the original version of Section 541.118(a) explicitly restricted its applicability to the white collar exemption.[47] It contemplated playing no role in any other context.
Second, Section 825.206, the recently enacted rule on the FMLA relating to both Sections 541.118(a) and 778.114, recognizes the second part of the salary-basis test as wholly distinct from the fluctuating workweek method. See 2B Singer, supra ง 51.01-.03. It characterizes itself as a "special exception to the `salary basis' requirements *905 of the FLSA [white collar] exemption or fluctuating workweek requirements." 29 C.F.R. ง 825.206(c) (emphasis added); see also id. ("[h]ourly or other deductions which are not in accordance with 29 CFR Part 541 or 29 CFR ง 778.114") ("[n]or may deductions which are not permitted by 29 CFR 541 or 29 CFR ง 778.118"). This language clearly perceives Sections 541.118(a) and 778.114 as addressing divergent matters. See Random House, supra, at 1360 (def. 1: "or" means "used to connect words, phrases or clauses representing alternatives"); Webster's, supra, at 1585 (def. 1: "or" means "used as a function word to indicate (1) an alternative between different or unlike things, states, or actions ..."); see also Quindlen, 482 F.2d at 878. Section 825.206's structure accords with its text. See Metropolitan Stevedore, 515 U.S. at 295, 115 S. Ct. at 2148, 132 L.Ed.2d at 233. Subdivision (a) outlines this rule's relation to Section 541.118(a), while subdivision (b) explains its relation to Section 778.114. See 29 C.F.R. ง 825.206(a),(b). Section 825.206 represents a further indication that the meaning of "salary basis," as used in Section 778.114, is not found in Section 541.118(a).[48]
Finally, a fundamental interpretive principle argues for reading Section 541.118(a) as failing to inform Section 778.114's use of the phrase "salary basis." Specifically, only that construction averts disharmony between two related rules. See 2B Singer, supra งง 51.01-.03. Section 778.307, which covers employees paid overtime according to the fluctuating workweek method, see supra note 25, sanctions reductions from salary for tardiness, which Section 541.118(a) proscribes. Compare 29 C.F.R. ง 778.307 with id. ง 541.118(a)(2), (5) andAuer, 519 U.S. at ___, 117 S.Ct. at 910-11, 137 L. Ed. 2d at 89-90 and Klein, 990 F.2d at 281, 284-85 and Lacey, 810 F.Supp. at 247. If "salary basis," as used in Section 778.114, accords with Section 541.118(a)'s rendition of that concept, then a conflict arises between Sections 778.114 and 778.307, which relate to each other. See, e.g., Rice, 13 F.3d at 1568. Avoiding this circumstance supports finding the use of "salary basis" in Section 778.114 as distinct from the definition assigned to that phrase by Section 541.118(a).
Plaintiffs' claim that Section 541.118(a) is engrafted upon Section 778.118 proves unsuccessful. Indeed, pertinent interpretive sources suggest just the opposite of their contention. They establish Section 541.118(a) as a mechanism to separate salaried employees coming within the white collar exemption from salaried employees falling beyond that exclusion, such as those whose overtime compensation is calculated using the fluctuating workweek method. Compare 29 C.F.R. งง 778.2, 778.107 with McCloskey, 903 F.Supp. at 562-63 ("In contrast, an employee does lose his exempt status (and therefore must be paid overtime) when his salary is subject to reductions for, inter alia, partial-day absences for personal reasons, including lateness, sickness, ... or disciplinary reasons other than penalties imposed in good faith for infractions of safety rules of major significance.").
The failure of Section 541.118(a) to define Section 778.114's notion of "salary basis" requires that the phrase, as it appears in the latter rule, assume its plain meaning. See Bowles, 325 U.S. at 413-14, 65 S. Ct. at 1217, 89 L.Ed. at 1702-03; Louisiana Debating and Literary Ass'n, 42 F.3d at 1491. Under that reading, "salary basis" simply characterizes the following: a fixed sum paid at regular intervals of time that serves as the foundation of employee non-overtime pay.[49]See Random House, supra, at 174, 1693 (def. 4: "basis" means "a basic fact, amount, standard, etc, used in making computations, reading conclusions or the like: The nurse is paid on an hourly basis.") ("salary" means "fixed compensation periodically paid to a person for regular work or services"); Webster's, supra, at 182, 2003 (def. 2: "basis" *906 means "the principle component of anything: fundamental ingredient") (def. 1: "salary" means "fixed compensation paid regularly (as by the year, quarter, month or week) for services"). This reading comports with the example of the fluctuating workweek method presented in Section 778.114, which portrays salary as a fixed sum paid every week,[50]see 29 C.F.R. ง 778.114(b). See In re Locklin, 101 F.3d at 439. It also accords with Interpretative Bulletin No. 4, Section 778.114's ancestor, see 2B Singer, supra ง 51.04, which contemplates the compensation of employees by "a constant wage or salary from pay period to pay period," W & H Man. supra, at 132 (paragraph 28 of Interpretative Bulletin No. 4).
Resolution of plaintiffs' claim concerning the meaning of "salary basis" still leaves the following issues outstanding: (1) whether or not Conn paid coefficient employees on a "salary basis," which Section 778.114 contemplates, and (2) whether or not the docking policy accords with the full schedule criterion. As to the first matter, Conn complied. It expected to pay coefficient employees a fixed amount at regular intervals of time for their work. Its written example captures this situation.
As to the second matter, Conn committed no breach. The docking policy only called for a loss of pay for absences during scheduled time; it in no way sanctioned reducing pay because of a failure to assign a coefficient employee forty hours of work for a week.[51] Reductions to coefficient employee pay only occurred occasionally[52] and only applied to absences associated with willful behavior. All of these circumstances evince observance of, not deviation from, Section 778.114.
Minimum Wage Criterion
Conn argues that its minimum wage violations represented no breach of the minimum wage criterion. See Mot. at 7; Reply at 6. Plaintiffs counter by pointing to the reports on the amount of overtime worked by some coefficient employees during April and May, 1994, see Resp. at 11 n. 6, 26-27 (citing Exhibit G), the minimum wage violation arising as a result of a coefficient employee who labored 90.25 hours in one week, see Resp. at 11 n. 6 (citing Exhibit F), and the list of the coefficient employees to whom Conn allegedly owes overtime compensation because of minimum wage breaches, see Resp. at 11 n. 6, 26-27 (citing Exhibit I). They consider this proof sufficient to raise a reasonable inference that Conn was foreclosed from relying upon the fluctuating workweek method because of a failure to meet the minimum wage criterion. See Resp. at 26-27; see also Br. at 2 (accusing Conn of "the frequent practice of forcing employees to work so long that their regular rates of pay actually fell below the minimum wage").
Plaintiffs' evidence generates no fact issue as to whether or not so many minimum wage violations occurred that the fluctuating workweek method was unavailable to Conn. First, the disorganized character of the reports forecloses them from being persuasive. See, e.g., Zoslaw, 693 F.2d at 873. Second, the *907 minimum wage breach precipitated by the coefficient employee who toiled 90.25 hours in a week, by itself, operates as no bar on use of the fluctuating workweek method.[53]See Aiken, 977 F.Supp. at 393. Finally, the list of coefficient employees purportedly due overtime because of minimum wage violations is unhelpful because plaintiffs neither identify the persons on the list whose average hourly rate fell under the applicable minimum wage and number of times each of those individuals suffered that fate, disclose the total number of violations that the list covers, nor relate how many coefficient employee salaries were paid during the period the list encompasses. Concluding from the list that regular minimum wage violations occurred without these pieces of information constitutes nothing more than sheer speculation. Cf. Opinion Letter No. 1010 (commenting on the propriety of twenty-seven minimum wage violations during a year); Opinion Letter No. 945 (assessing the permissibility of five minimum wage violations in an annual period); Brennan v. General Motors Acceptance Corp., 482 F.2d 825, 829 (5th Cir.1973) (evidence relating to at least 16 of 37 employees sufficient to establish FLSA plaintiff's prima facie case); Reich v. Brenaman Elec. Serv., No. Civ.A. 95-CV-3737, 1997 WL 164235, at *7 (E.D.Pa. Mar.28, 1997) (testimony of 9 of 39 employees sufficient to show a FLSA pattern or practice violation). See generally Wilkins, 654 F.2d at 410; In re Food Lion Effective Scheduling Litig., 861 F. Supp. 1263, 1274 (E.D.N.C.1994) (finding no FLSA pattern or practice violation). These evidentiary shortcomings preclude plaintiffs from rebutting Conn's proof that it complied with the minimum wage criterion.
Clear Understanding Criterion
Conn asserts that it "had a clear understanding with each plaintiff that his or her salary [would] cover[] whatever hours were required to get the job done and that he or she would be paid additional half-time for all overtime hours worked per week." Mot. at 6; see also Reply at 4. Plaintiffs counter that no such meeting-of-the-minds ever arose because Conn failed to "indicat[e] that: (i) coefficient employees normally would be entitled to time-and-a-half compensation; (ii) [coefficient] employees [would] ... be required such significant hours that their hourly rate [would] fall[] below the minimum wage; or (iii) ... all coefficient employees [were] ... subject to its practice or policy of making partial day deductions for missed work, or for disciplinary reasons that are unrelated to major safety considerations." Resp. at 26.
Plaintiffs' complaints about the renditions of the fluctuating workweek method that they received ignore that the employee need only possess a clear understanding "that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number," 29 C.F.R. ง 778.114(a); see also id. ง 778.114(c). Nothing obligated Conn either to disclose to coefficient employees its preference for the fluctuating workweek method, its docking policy[54] or the possibility that, occasionally, so many hours might be worked that the average hourly rate would dip under the applicable minimum wage. Cf. Bailey v. County of Georgetown, 94 F.3d 152, 156 (4th Cir.1996) ("Neither the regulation nor the FLSA in any way indicates that an employee also must understand the manner in which his or her overtime pay is calculated.").
Conn satisfied the clear understanding criterion. First, the written example, which *908 was provided to each of the plaintiffs, unambiguously showed that a coefficient employee would receive his or her salary regardless of how many hours he or she was assigned to work in a week. The calculations in it portrayed salary as unchanging in the face of varying workweek lengths and as distinct from overtime pay. It also stated, "Do not dock individuals on coefficient if scheduled short."[55] These features related that salary, exclusive of overtime, would be provided no matter how many hours of work were scheduled in a week. See Condo, 1992 WL 317199, at *3 (clear understanding prevails where employee signed an employment contract that "contained a chart illustrating exactly how plaintiff's overtime pay would vary in relation to the number of hours he worked each week"); cf. Bailey, 94 F.3d at 156.
Second, Badon's oral explanation of the coefficient employee pay scheme accorded with the clear understanding criterion. It included a statement that the new coefficient employee would receive his or her salary, regardless of the number of hours he or she was assigned to work in a week.[56] She also secured written statements expressing an understanding of her presentation. See Condo, 1992 WL 317199, at *3 ("where an employee has signed and acknowledged an explanatory form indicating how FLSA's fluctuating workweek plan operates, a `clear mutual understanding of the parties exists'"); see also Highlander, 805 F.2d at 647-48 (no clear error in finding that employee, who signed a form acknowledging her understanding of the fluctuating workweek method, possessed a clear comprehension of how she was paid); cf. Bailey, 94 F.3d at 156 ("nor do the regulation and the FLSA in any way indicate that an employer must secure from its employees written acknowledgments indicating that the employees' pay plan has been explained to them"). Badon's explication, along with the written example, enabled Conn to fulfill the clear understanding criterion.[57]
Limitations and Damages
Conn's motion for summary judgment proves meritorious because it met all of the conditions for using the fluctuating workweek method. This outcome makes its arguments regarding limitations and damages moot. See Aiken, 977 F.Supp. at 393 (failing to reach the issue of damages because of the absence of breach of Section 778.114). It also leads to a rejection of plaintiffs' motion for this case to proceed as a FLSA collective action insofar as that request rests on arguments raised in opposition to the summary judgment motion. This latter ruling appears to preserve plaintiffs' motion only as to the question of Conn's admitted exclusion of bonuses and incentives from its regular rate calculations.
CONCLUSION
The court grants Conn's motion for summary judgment [28] on the issue of the manner in which plaintiffs' overtime compensation was calculated and denies the motion as moot on the issues of limitations and liquidated damages. It also denies plaintiffs' motion for this case to proceed as a FLSA collective action [57] insofar as that request is based on contentions asserted in response to the summary judgment motion. Finally, it defers a decision on plaintiffs' motion as to Conn's admitted omission of bonuses and incentives from regular rate computations.
NOTES
[1] Debra Cash appears once in the summary judgment record as Debra Honea. Compare Defs.' Mot. for Summ. J. [hereinafter Mot.] (Ex. B (Aff. of Kellye Badon ถ 8 [hereinafter Badon Aff.] (stating that Exhibit 2 includes a form relating to Debra Cash))) with Badon Aff. Attach. 2 (copy of "Understanding My Method of Compensation" form signed by Debra Honea).
[2] Administrative rules separate into two classes, legislative and interpretive. See Brown Express, Inc. v. United States, 607 F.2d 695, 700 (5th Cir.1979). "[I]t seems to be established that ... `legislative rules' are those which create law, usually implementary to an existing law; whereas interpretive rules are statements as to what the administrative officer thinks the statute or [legislative rule] ... means." Id. (internal quotations omitted) (quoting Gibson Wine Co. v. Snyder, 194 F.2d 329, 331 (D.C.Cir.1952)). The administrative rules central to this case, those appearing in Part 778 of Title 29 to the Code of Federal Regulation (C.F.R.) (Part 778) and Section 541.118(a) of Title 29 to the C.F.R. (Section 541.118(a)), have been construed as interpretive. See Monahan, 95 F.3d at 1273 n. 10 (Part 778 contains interpretive rules); McCloskey v. Triborough Bridge, 903 F. Supp. 558, 565 (S.D.N.Y. 1995) (Section 541.118(a) is "simply an interpretation"). See generally Sherwood v. Washington Post, 871 F. Supp. 1471, 1474-75 (D.D.C.1994) (noting that a "regulation" is the same as a legislative rule, but different from an interpretive rule).
[3] Principles of statutory interpretation guide construction of rules. See 1A Norman J. Singer, Sutherland Statutory Construction ง 31.06 (5th ed.1993).
[4] The rule's language generally takes its plain meaning. See Louisiana Debating and Literary Ass'n v. City of New Orleans, 42 F.3d 1483, 1491 (5th Cir.), cert. denied, 515 U.S. 1145, 115 S. Ct. 2583, 132 L. Ed. 2d 832 (1995); see also 3 Koch, supra ง 11.26. It, however, "must always be read in ... proper context." In re Locklin, 101 F.3d 435, 439 (5th Cir.1996); see also 3 Koch, supra ง 11.26.
[5] In contrast to Administrator's expressions, views of low level DOL officials about rules concerning the FLSA carry no weight. See 22 Federal Procedure, supra ง 52:632 (Wage and Hour Division inspectors "are not ... authorized to make any written statements expressing an interpretive position or purporting to state Wage and Hour Division or Department of Labor policy or procedure") ("determinations of a Wage and Hour Division local office will not be accorded weight by the courts"). Compare 29 C.F.R. ง 790.19(b) (advice of a Wage and Hour Division field inspector affords no entitlement to protection under Section 259(a) of Title 29 to the United States Code, which excuses from FLSA liability employers relying in good faith on any written regular, order, ruling, approval or interpretation of the Administrator or on an administrative practice or enforcement policy of the Administrator) with Roy v. County of Lexington, 928 F. Supp. 1406, 1420-21 (D.S.C.1996) ("an enforcement officer of the Wage and Hour Division cannot establish a practice or policy" of the Administrator), partially vacated on other grounds, 948 F. Supp. 529 (D.S.C.1996) and Petrlik v. Community Realty Co., 347 F. Supp. 638, 643 (D.Md.1972) ("`authoritative' rulings and interpretations of the agency needed for [the good faith] ... defense [under Section 259(a)] are those issued by the Administrator ... and not by regional or field officials").
[6] In this case, the following intrinsic aids to interpretation prove helpful: (1) the canon of statutory construction that "the use of the disjunctive in a statute indicates alternatives and requires that those alternatives be treated separately," Quindlen v. Prudential Ins. Co., 482 F.2d 876, 878 (5th Cir.1973); see also United States v. Property Known as 6109 Grubb Rd., 886 F.2d 618, 626 (3d Cir.1989), and (2) a rule's structure, see, e.g., Metropolitan Stevedore Co. v. Rambo, 515 U.S. 291, 295, 115 S. Ct. 2144, 2148, 132 L. Ed. 2d 226, 233 (1995). The following extrinsic aids also afford assistance: (1) earlier versions of the rules at issue, see 2B Singer, supra ง 51.04, (2) rules related to the rules at issue, see id. งง 51.01-.03. As to the latter extrinsic aid, its corollary, that rules regarding the same matter should be read harmoniously when the text permits, also pertains. See Jett v. Dallas Indep. Sch. Dist., 491 U.S. 701, 738-39, 109 S. Ct. 2702, 2724, 105 L. Ed. 2d 598, 628-29 (1989) (Scalia, J., concurring in part and concurring in judgment); Rice v. Martin Marietta Corp., 13 F.3d 1563 1568 (Fed.Cir.1993); 2B Singer, supra ง 51.02.
[7] For the remainder of this memorandum opinion, the court refers to the FLSA's mandate that a worker's overtime compensation equal at least to one-and-a-half times the regular rate at which she is employed as the "overtime requirement."
[8] The Administrator defines "workweek" as "a fixed and regularly recurring period of 168 hoursโseven consecutive 24-hour periods." 29 C.F.R. ง 778.105.
[9] Discussion of how the general formula for figuring overtime compensation applies to different remunerative contexts appear in Sections 778.110 to 778.122 of Title 29 to the C.F.R. See id. งง 778.110-.122; cf. infra note 19.
[10] Section 778.307 of Title 29 to the C.F.R. (Section 778.307) states that two types of deductions from compensationโthose for items such as tools and uniforms not regarded as "facilities" and those for disciplinary reasonsโmay never "reduce earnings to an average below the applicable minimum wage or cut into any part of overtime compensation due the employee." Id. ง 778.307. Although this comment appears in an illustration involving a worker paid on a piece-rate basis, see id., it appears to convey a general rule, see 48A Am.Jur.2d Labor and Law Relations ง 4314 (1994) (seeming to view the example regarding deductions from a worker paid on a piece-rate basis as declaring a general rule); see also infra note 25.
[11] The exemption for persons working in bona fide executive, administrative, professional capacities is known as the white collar exemption. See, e.g., McCloskey, 903 F.Supp. at 562. The FLSA directs the Secretary of Labor to "defin[e] and delimit" it. 29 U.S.C. ง 213(a)(1). The Secretary has delegated that responsibility to the Administrator. See 29 C.F.R. ง 541.1. (Originally, the FLSA empowered the Administrator to delineate the white collar exemption). See 1941 Wage and Hour Man. (BNA) 423 [hereinafter W & H Man.] (reprinting the original text of 29 U.S.C. ง 213(a)(1)).
[12] The following components comprise the salary-basis test: (1) a compensatory standard, which appears in the rule defining the particular type of exempt employee (i.e., executive, administrative or professional) and (2) a list of conditions that must be met for the employee to be deemed as paid on a salary basis, which appears in Section 541.118(a). See Auer v. Robbins, 519 U.S. 452, ___, 117 S. Ct. 905, 908, 137 L. Ed. 2d 79, 86 (1997); Barner v. City of Novato, 17 F.3d 1256, 1259-60 (9th Cir.1994). The first part of the test was introduced in 1940. See 5 Fed.Reg. 4077-78 (1940) (announcing new legislative rules on the white collar exemption). (The Administrator provided an extensive interpretation of this portion of the salary-basis test at that time. See W & H Man., supra, at 426-68.) The second part was announced in 1949. See 14 Fed.Reg. 7730, 7732 (1949) (presenting an explanatory bulletin on the legislative rules regarding the white collar exemption). The entire salary-basis test "has existed largely in its present form since 1954." Auer, 519 U.S. at ___, 117 S.Ct. at 908, 137 L. Ed. 2d at 86.
[13] Deductions for absences of less than a day falling within the Family and Medical Leave Act of 1993 (FMLA) constitute no breach of the salary-basis test. See 29 U.S.C. ง 2612(c). Section 825.206 of Title 29 to the C.F.R. (Section 825.206) permits the employer to "make deductions from the [bona fide executive, administrative or professional] employee's salary for any hours taken as intermittent or reduced FMLA leave within a workweek." 29 C.F.R. ง 825.206(a). (For definitions of intermittent FMLA leave and reduced FMLA leave, see id. ง 825.203.)
[14] "Safety rules of major significance include only those relating to the prevention of serious danger to the plant, or other employees, such as rules prohibiting smoking in explosive plants, oil refineries, and coal mines." Id. ง 541.118(a)(5). A requirement that the employee to come to work on time falls outside of this class. See Klein v. Rush-Presbyterian-St. Luke's Med. Ctr., 990 F.2d 279, 281, 284-85 (7th Cir.1993); Lacey v. Indiana State Police Dep't, 810 F. Supp. 244, 247 (S.D.Ind.1992).
[15] Workers can enforce their FLSA rights directly. See Barrentine, 450 U.S. at 740, 101 S. Ct. at 1444, 67 L.Ed.2d at 653 (discussing 29 U.S.C. ง 216(b)).
[16] The manner of calculating overtime compensation for the salaried employee whose hours differ from week-to-week, known as the fluctuating workweek method, is neither an exception nor an exemption to the overtime requirement. See 29 C.F.R. งง 778.2, 778.107. But see, e.g., Monahan, 95 F.3d at 1281 ("the fluctuating workweek method of payment ... is an exemption to the strict overtime requirements of the FLSA and ... results in the salaried employee receiving half-time overtime rather than time and a half overtime"). It was introduced on October 21, 1938, three days before the FLSA took effect, in a document entitled Interpretative Bulletin No. 4. See Missel v. Overnight Transp. Co., 126 F.2d 98, 108 n. 27 (4th Cir.1942), rev'd, 316 U.S. 572, 62 S. Ct. 1216, 86 L. Ed. 1682 (1942). Interpretative Bulletin was revised in December, 1939. W & H Man., supra, at 127. Some provisions were added to it in July, 1940. Id. In November, 1940, it was amended "to conform with changes in [the FLSA's] hours provisions effective Oct[ober] 24, 1940." Id. See generally id. (paragraph 1 of the version of Interpretative Bulletin No. 4 that took effect in November, 1940 (relating the change to the FLSA's maximum hour provision effective October 24, 1940)). Much of the substance of the November, 1940, version of Interpretative Bulletin No. 4 provided the basis for the Administrator's contemporary description of the fluctuating workweek method, which appears at Section 778.114. Compare id. at 127-44 (reprinting revised Interpretative Bulletin No. 4) with 29 C.F.R. ง 778.114. See generally 2B Singer, supra ง 51.04. (For the remainder of this memorandum opinion, references to "Interpretative Bulletin No. 4" allude to the November, 1940, version of Interpretative Bulletin No. 4.)
[17] When the employee receives certain types of bonuses, including awards promised in return for outstanding productivity, determination of the regular rate involves dividing the sum of salary and those bonuses by the total number of hours worked during the week. See 29 C.F.R. งง 778.114(a), 778.208-.09, 778.211; Parisi v. Town of Salem, No. 95-67-JD, 1997 WL 228509, at *2-3 (D.N.H. Feb.20, 1997); Jean Gaskill, Methods of Calculating Overtime Compensation Under the Fair Labor Standards ActโVariations on the Theme, 548 PLI/Lit 885, 901-04 (1996).
[18] A coefficient table created by the DOL facilitates computation of overtime pay under the fluctuating workweek method. Specifically, to determine overtime compensation using it, one simply multiplies weekly salary by the coefficient corresponding to the total number of hours worked during the week. See Mot. Ex. D [hereinafter Coefficient Table]; see also Hodgson v. Prior, 340 F. Supp. 386, 388 (S.D.Ohio 1972). The coefficient table also makes figuring overtime compensation due the employee who earns both salary and bonuses in a week easy. See Coefficient Table.
[19] When either a fixed hourly amount or the quotient of a salary for forty hours and forty constitutes the regular rate, overtime compensation equals the product of the number of hours over forty and one-and-a-half times the regular rate. See Gaskill, supra, at 891, 897; see also 29 C.F.R. งง 778.110, 778.113. The manner of determining overtime pay when a fixed hourly amount equals the regular rate is known as the hourly rate method, while the manner of determining overtime pay when the quotient of a salary for forty hours and forty equals the regular rate is known the flat salary method. See Gaskill, supra, at 891-92, 902. These two methods are "the traditional and most common approaches to overtime compensation." Id. at 894.
[20] For the remainder of this memorandum opinion, the court refers to specific cases in the average hourly rate was less than the applicable minimum wage as either "minimum wage violations" or "minimum wage breaches."
[21] Salary, as to the minimum wage criterion, means just salary, not salary plus other payments that together yield an average hourly rate equal to the applicable minimum wage when that total amount is divided by the number of hours worked. See 29 C.F.R. 778.114(a), (c); Aiken v. County of Hampton, 977 F. Supp. 390, 398 n. 9 (D.S.C.1997); cf. 29 C.F.R. งง 778.500-.03 (discussing pseudo-bonuses and devices to evade the overtime requirement).
[22] That the fluctuating workweek method remains available if the employer limits either the employee's hours or the amount of overtime to which the calculus applies indicates that the fluctuating workweek method remains available if the employer boosts salary permanently in response to an emerging pattern of minimum wage violations. See Opinion Letter No. 1010.
[23] Section 825.206 interacts with the full schedule criterion. It provides that the employee who works less than forty hours in a week because she takes FMLA leave must receive her full salary. See 29 C.F.R. ง 825.206(b). It, however, also creates an exception to this requirement. Specifically, the employer can withhold salary when FMLA leave results in the employee laboring less than forty hours if it uses the flat salary method to compute compensation for overtime worked during the period when the employee is taking FMLA leave. See id.; 60 Fed.Reg. 2204 (1995) ("If an employer chooses to follow this exception from the fluctuating workweek method of overtime payment, it must do so uniformly for all employees paid on a fluctuating workweek basis who take FMLA leave intermittently or on a reduced leave schedule, and may not do so for employees taking leave under circumstances not covered by FMLA.").
[24] Interpretative Bulletin No. 4 details the practice of cutting salary for a week or weeks in which less than forty hours is worked to counter-balance compensation for hours over forty worked in another week of the same pay period. See W & H Man., supra, at 133-39 (paragraphs 30, 33-52, 53 and 60-68 of Interpretative Bulletin No. 4 (discussing the "time off" and "prepayment" plans)); id. at 164 (answer of Wage and Hour Division's General Counsel to question about the "time off" plan). Compare W & H Man., supra, at 134, 139 (paragraphs 38 and 65 of Interpretative Bulletin No. 4) (discussing variations of "time off" and "prepayment" plans involving employers who customarily pay full salary regardless of absences during the week due to holidays, vacations, illnesses or other reasons) with Opinion Letter No. 479, [Wages-Hours] Lab.L.Rep. (CCH) ถ 30,997.18 (May 18, 1966) (prohibiting employers using the fluctuating workweek method from making certain kinds of salary deductions). See generally 2A Singer, supra ง 51.04. (The portion of Interpretative Bulletin No. 4 addressing this matter was issued in July, 1940. See W & H Man., supra, at 127.) The last sentence of Section 778.114(c), as well as Section 778.306(a) of Title 29 to the C.F.R., apparently refers to this compensatory stratagem. See 29 C.F.R. งง 778.114(c) ("where all the facts indicate that an employee is being paid for his [or her] overtime at a rate no greater than that which he [or she] receives for nonovertime hours, compliance with the Act cannot be rested on any application of the fluctuating workweek formula"), 778.306(a) (discussing salary reductions in short workweeks).
[25] The Handbook's sanctioning of occasional salary deductions for tardiness or willful absences, requirement that those deductions in no way affect determination of the regular rate and demand that those deductions not result in the amount of salary actually paid being unable to sustain an average hourly rate at least equal to the applicable minimum wage all accord with Section 778.307. Compare II Handbook, supra with 29 C.F.R. ง 778.307.
Since the Handbook provides no indication to the contrary, it presumably assigns "occasional" a plain meaning: infrequent or irregular intervals. See Random House Unabridged Dictionary 1339 (2d ed.1993) [hereinafter Random House] (def. 1: "occasional" means "occurring or appearing at irregular or infrequent intervals; occurring now and then ..."); Webster's Third International Dictionary 1560 (1967) [hereinafter Webster's] (def. 4: "occasional" means "met with, appearing, or occurring irregularly or according to no fixed or certain scheme: infrequent"). Likewise, it presumably assigns "wilful" a plain meaning: deliberate or intentional. See Random House, supra, at 2175 (def. 1: "willful" means "deliberate, voluntary, or intentional"); Webster's, supra, at 2617 (def. 2: "willful" means "done deliberately: not accidental or without purpose: INTERNATIONAL SELF-DETERMINED").
[26] Since the fluctuating workweek method represents neither an exception nor an exemption to the overtime requirement, the employee must bear the burden of proof. See 29 C.F.R. งง 778.2, 778.109; Friedrich v. U.S. Computer Sys., Inc., CIV.A. No. 90-1615, 1990 WL 124967, at *1-2 (E.D.Pa. Aug.23, 1990) (providing computations to show how the fluctuating workweek method meets the overtime requirement). But see, e.g., Monahan, 95 F.3d at 1281.
[27] Computational errors in the fluctuating workweek context include neglecting to add bonuses to salary before adducing the regular rate, see 29 C.F.R. ง 778.114(a), or omitting compensable hours of work, see Mayhew, 125 F.3d at 218.
[28] Dividing total remuneration by the total number of hours worked and multiplying that result by 1.5 fails constitutes an inappropriate measure of what the employer should have paid because of the fluctuating workweek method's unavailability because that set of operations leads to the overtime rate equaling two-and-a-half times the regular rate. Cf. 29 C.F.R. ง 778.114(a).
[29] When the employer has violated the full schedule criterion by making more than occasional deductions from salary, compensatory damages include no repayment of those deductions. The employer simply must provide a remedy that brings its method of paying overtime into line with its practice of reducing salary regularly. Cf. II Handbook, supra.
[30] Dividing total remuneration by the total number of hours worked and multiplying that result by 1.5 fails constitutes an inappropriate measure of what the employer should have paid because of the fluctuating workweek method's unavailability because that set of operations leads to the overtime rate equaling two-and-a-half times the regular rate. Cf. 29 C.F.R. ง 778.114(a).
[31] When the employer has regularly committed minimum wage violations, compensatory damages encompass no repayment for those breaches. The employer simply must afford a remedy that places the employee in the position of a salaried worker not paid under the fluctuating workweek method. Cf. Opinion Letter No. 945.
[32] A FLSA collective action differs from a class action brought under Federal Rule of Civil Procedure 23. Specifically, unlike the Rule 23 scenario, plaintiffs to a FLSA collective action must give written consent to participate in the case (i.e., "opt in" to the lawsuit). See Donovan v. University of Tex. at El Paso, 643 F.2d 1201, 1206-08 (5th Cir.1981); LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288-89 (5th Cir. 1975).
[33] "`As used in the FLSA, liquidated damages is something of a misnomer. It is not a sum certain, determined in advance as a means of liquidating damages that might be incurred in the future. It is an award of special or exemplary damages added to the normal damages.'" Reich v. Tiller Helicopter Servs., Inc., 8 F.3d 1018, 1030 (5th Cir.1993) (some internal quotations omitted).
[34] A finding of good faith forecloses a determination that the employer's breach of the overtime requirement was willful. See Blackmon, 835 F.2d at 1138.
[35] For the remainder of this memorandum opinion, the court refers to Conn Appliances, Inc., Conn Credit Corporation, Conn Rental, Inc., Appliance Parts & Service, Conn Development Corporation and Merchants Acceptance Corporation collectively as "Conn."
[36] Conn designated persons whose overtime compensation it chose to calculate using the fluctuating workweek method as "coefficient employees." See Badon Aff. ถ 4; cf. Badon Dep. at 8 (stating that coefficient employees "are paid a form of overtime called coefficient"). It had about 340 coefficient employees in June, 1997. See Badon Dep. at 103-04.
[37] All plaintiffs worked as coefficient employees for Conn. See Badon Aff. ถถ 7-11. Compare Defs.' Ex. 1 (admitted during hearing on motion for summary judgment) with Badon Dep. at 71-73, 87-89. Cash was employed between April 5, 1993, and March 5, 1996. Prater was employed between April 22, 1993, and June 17, 1994. Stroder was employed between October 21, 1991, and July 21, 1995. Malbrough was employed between November 5, 1991, and November 15, 1994. Harrington was employed between April 7, 1994, and July 20, 1995. Johnson was employed between January 23, 1995, and April 30, 1996. Lucia was employed between December 8, 1993, and June 1, 1996. Neatherly was employed between December 15, 1986, and November 18, 1994. Chambers was employed between September 12, 1989, and October 11, 1994. Def.'s Ex. 1. (Although Cash also worked for Conn between 1980 and 1986, see Def.'s Ex. 1, her claim in this case relates only to her tenure between 1993 and 1996, see Pls.' First Am.Compl. at 2.)
[38] Coefficient employee weekly salary was determined by multiplying monthly salary by twelve and dividing the result by fifty-two. Compare Badon Aff. Attach. 1 with 29 C.F.R. ง 778.113(b).
[39] Between May 29, 1994, and June 30, 1996, Cash, Stroder, Malbrough, Johnson and Lucia each lost salary under the docking policy. See Badon Aff. ถถ 10-11. Cash lost salary in 4 of the 92 weeks she was employed by Conn during that period (i.e., weeks covering May 29, 1994, to March 5, 1996). Stroder lost salary in 7 of the 60 weeks she was employed by Conn during that period (i.e., weeks covering May 29, 1994, to July 21, 1995). Malbrough lost salary in 6 of the 24 weeks she was employed by Conn during that period (i.e., weeks covering May 29, 1994, to November 15, 1994). Johnson lost salary in 1 of the 67 weeks she was employed by Conn during that period (i.e., weeks covering January 23, 1995, to April 30, 1996). Lucia lost salary in 2 of the 105 weeks he was employed by Conn during that period (i.e., weeks covering May 29, 1994, to June 1, 1996). Compare Written Mem. of Information in Resp. to the Ct.'s Order of Sept. 7, 1997, at 3-4 [hereinafter Mem.] (recording when Cash, Stroder, Malbrough, Johnson and Lucia, respectively, were docked salary) with Summ.J. Hr'g Tr. at 59 (Conn stipulates to the accuracy of salary deductions reported on pages 3 and 4 of plaintiffs' Written Memorandum of Information in Response to the Court's Order of September 7, 1997). The deductions occurred in irregular intervals of time as to all five of these persons. See Mem. at 4-5. (The court used the perpetual calendar to determine the number of weeks that Cash, Stroder, Malbrough, Johnson and Lucia each worked for Conn between May 29, 1994, and June 30, 1996. See The World Almanac and Book of Facts 1994, at 264-65 (1993).)
Besides the salary losses suffered by Cash, Stroder, Malbrough, Johnson and Lucia, the summary judgment record includes a ten-and-a-half page list of instances in which a coefficient employee lost weekly salary under the docking policy. See Mem.Ex. A. Neither that list nor anything else discloses either the period of time that the list covers, the total number of coefficient employee salaries paid during the period the list encompasses or the salary of each person appearing on the list. See Mem. at 4-5 & Ex. A.
Finally, nothing in the summary judgment suggests that an amount less than full salary ever provided the baseline for figuring overtime due for a week in which the employee lost pay under the docking policy but still worked over forty hours. Nor does the summary judgment record include any instance in which reductions yielded a weekly salary too low to sustain an average hourly rate at least equal to the applicable minimum wage. See Resp.; Mem.
[40] In three weeks during the summer of 1994, Harrington's regular rate fell below the applicable minimum wage, which was $4.25 per hour, 29 U.S.C. ง 206(a) (1994) (superseded). See Joint Stipulation of Parties in Resp. to the Ct.'s Order of Sept. 29, 1997 (Aff. of Kellye Badon ถ 6 & Ex. 1 (Harrington's pay record) [hereinafter Badon Aff. II]). (During none of these weeks did he receive bonuses or incentives; so his regular rate and average hourly rate was the same in each of them. See Badon Aff. II Ex. 1.) For the week of June 26, his salary yielded a regular rate $0.57 under the minimum wage. See Badon Aff. II ถ 6. For the week of July 24, his salary yielded a regular rate $0.23 under the minimum wage. See Badon Aff. II ถ 6. For the week of August 7, his salary yielded a regular rate $0.22 under the minimum wage. See Badon Aff. II ถ 6.
Conn took two actions in response to the minimum wage violations involving Harrington. First, during August and September, 1994, it gave him extra compensation totaling $160.00, which it considered enough to cover the amount of pay due to him. See Badon Aff. II ถถ 7-8. Second, in late August, 1994, it raised his salary to preclude his regular rate from again dipping below the minimum wage. Badon Aff. II ถ 9. (Harrington's salary never again was unable to sustain an average hourly rate at least equal to the applicable minimum wage. See Badon Aff. II Ex. 1.)
Besides those concerning Harrington, the summary judgment record includes the following materials relating to Conn's minimum wage violations: (1) a set of reports on the amount of overtime worked by some coefficient employees during April and May, 1994, see Resp. at 11 n. 6, 26-27 (citing Exhibit G), (2) a minimum wage violation arising as a result of a coefficient employee working 90.25 hours in a week, see Resp. at 11 n. 4 (citing Exhibit F); see also Badon Dep. at 65-67, and (3) a list of slightly more than eight pages reciting the coefficient employees to whom Conn allegedly owes overtime compensation, see Resp. at 11 n. 6, 26-27 (citing Exhibit I); see also Mem. at 5-6 (citing Exhibit B). The set of reports appear in no particular order. See Resp. Ex. G; cf. Resp. at 11 n. 6 (just detailing what certain handwritten notations on the reports mean). In her deposition, Badon characterized the week in which a minimum wage breach occurred because a coefficient employee labored 90.25 hours as infrequent event. See Badon Dep. at 66. As for the list, which covers January 1, 1994, to June 30, 1996, see Resp. at 11 n. 6, 27; Mem. at 5-6, it just gives the total amount of overtime and total amount of overtime compensation owed to each person on it. See Resp.Ex. I. Plaintiffs seem to argue that the sheer size of the overtime totals for some persons, alone, raise a reasonable inference of numerous minimum wage breaches. See Resp. at 26-27.
[41] All plaintiffs except Neatherly, who was hired before 1989, see Defs.' Ex. 1, received the written example, the coefficient table and an oral description of the manner in which their pay was figured at the outset of their employment with Conn. Compare Badon Aff. ถ 7 with Badon Dep. at 11, 23.
[42] Foster learned about the docking policy when a coefficient employee named Brenda Taylor complained to the DOL about it. Badon Dep. at 55-56. Prior to that time, he had identified denial of an entire day's pay as a permissible monetary sanction to impose on coefficient employees in Conn's Houston, Texas, delivery department for failing to work assigned times. See Badon Dep. at 27-28. Conn had responded to this opinion by instituting a policy under which $60.00 was withheld whenever someone in the Houston delivery department missed work without justification, while $60.00 was paid to the person who substituted for the derelict. See Badon Dep. at 28-31.
[43] Both sides only discussed Conn's attempts to remedy minimum wage violations as to the question of whether or not those efforts supported its use of the fluctuating workweek method. See, e.g., Resp. at 23 (arguing that Conn had to "mak[e] sure that [coefficient employee] ... pay never fell below minimum wage" to qualify for the fluctuating workweek method (emphasis added)); Reply at 13 (asserting that a minimum wage violation fails to invalidate use of the fluctuating workweek method); Br. at 27 ("The Company believes that it is entitled to work its [coefficient] employees as hard as it wants, and then retroactively reimburse those employees if their total compensation (i.e., `guaranteed salary') reduces them to working for less than minimum wage. This is simply not the law nor is it the intent behind ... 29 C.F.R. ง 778.114."). In the summary judgment context, neither one addressed the effect, per se, of Conn's failure to calculations. See Resp. at 15; Reply at 9. However, plaintiffs' brief on the collective action question identified the issue of "[w]hether `bonuses' and other remuneration should be included in [coefficient] employees' regular rate of pay for purposes of calculating overtime" as one common to all persons who would join a collective action. Br. at 22. Compare Pls.' First Am. Compl. at 6 with Ans. at 5.
[44] Plaintiffs neither make allegations nor present evidence that any coefficient employee ever lost salary under the docking policy because of being away from work on FMLA leave. See, e.g., Pls.' First Am.Compl. at 10; Resp. at 22-24, 26; cf. Mem. at 13-14.
[45] Plaintiffs' belief that a relationship exists between Sections 541.118(a) and 778.114 presumrules explaining how to compute overtime compensation explicitly defines "salary basis," see, e.g., 29 C.F.R. งง 778.109, 778.113, 778.114, and that the Administrator apparently never has explained what that "salary basis" means as to Section 778.114.
[46] Although the Administrator has never offered an opinion on whether Section 541.118(a) informs Section 778.114's conception of "salary basis," a remark made when he introduced the first element of the salary-basis test in 1940 evinces a general attitude that would seem to logically lead to a rejection of the view that such a relationship exists. On that occasion, he said, "[W]hile it is reasonable to hold that the terms `bona fide executive, administrative, and professional capacity' are properly applicable in general only to salaried workers, it does not necessarily follow that all salaried workers fall within these three categories." W & H Man., supra, at 431-32 (emphasis added); see also id. at 442 (defending the choice of $30.00 as the compensatory threshold for qualifying as an executive: "[T]here must be adequate differentiation between the salary normally earned by a worker for a standard workweek who is employed as a craftsman or machine operator or tender and the salary of a person whose exemption is sought as an executive"). This comment disclosed an understanding of the salary-basis test as a mechanism for distinguishing salaried employees falling within the white collar exemption from other workers who receive salaries. Indeed, as such, it manifested the Administrator's respect for the FLSA's express directive that he just "defin[e] and delimit[]" the white collar exemption. See W & H Man., supra, at 432 ("the Administrator does not have the power to exempt all salaried workers"); cf. Walling v. Yeakley, 140 F.2d 830, 831-32 (10th Cir.1944) ("Congress chose general phrases to describe the exempted classes of employees and delegated to the Administrator the power and duty, by regulation, to define and delimit those classifications by reasonable and rational specific criteria. Necessarily, if the classifications are limited by specific definition and delimitation, some employees who might fall within the general meaning of the phrases employed by Congress will be excluded.").
[47] Except for a special provision relating to public employees, all mentions of "salary basis" in the current version of Subpart A are in sections concerning the first part of the salary-basis test. See 29 C.F.R. pt. 541.
[48] Section 825.206 indicates that the lack of reference in Section 541.118(a) to Subpart A beginning in 1954, compare 14 Fed.Reg. 7732 (1949) and 29 C.F.R. ง 541.118(a) (1954) (superseded) with 19 Fed.Reg. 4405 (1954), signaled no change the white collar exemption's realm of applicability. (The Administrator never has discussed the effect of this omission, if any.)
[49] The conception of salary as a "fixed amount" must be qualified by the possibility it may be reduced in certain circumstances. See In re Locklin, 101 F.3d at 439; 2B Singer, supra ง 51.02.
[50] Although the example in Section 778.114 uses a week for the pay period, a pay period can cover a longer spans of time than that. See 29 C.F.R. งง 778.103, 778.109, 778.113(b).
[51] As noted earlier, the summary judgment record reveals no case in which full salary was not used as the baseline for figuring overtime due for a week in which the employee lost pay under the docking policy but still worked over forty hours. Nor does it record any instances in which reductions yielded a salary too low to sustain an average hourly rate at least equal to the applicable minimum wage.
[52] The summary judgment record fails to show more than occasional salary deductions pursuant to the docking policy. First, Cash, Stroder, Malbrough, Johnson and Lucia all suffered deductions on an irregular basis. Second, contrary to what plaintiffs presumably believe, see, e.g., Resp. at 7 (characterizing the docking policy as "an institutional, ongoing pattern or practice"), the ten-and-half page list of salary deductions made under the docking policy invites nothing more than speculation about whether salary deductions occurred regularly or infrequently because of the summary judgment record's failure to disclose the number of salaries paid to each person on the list, the total number of deductions the list presents, or the total number of coefficient employee salaries paid during the period the list covers, whatever that may be. See generally Wilkins v. University of Houston, 654 F.2d 388, 410 (5th Cir. Unit A Aug.1981) ("the day is long past ... when we proceed with any confidence toward broad conclusions from crude and incomplete statistics"), vacated on other grounds, 459 U.S. 809, 103 S. Ct. 34, 74 L. Ed. 2d 47 (1982).
[53] Plaintiffs neglect to mention the three occasions when Harrington's salary proved unable to support a regular rate at least equal to the applicable minimum wage. Compare Resp. (citing Exhibit G) with supra note 40. Those, whether standing alone or considered along with the one minimum wage breach caused by the coefficient employee who worked 90.25 hours in a week, fail to establish that minimum wage violations occur so often that the fluctuating workweek method was unavailable either as to Harrington individually or as to all plaintiffs. See Aiken, 977 F.Supp. at 393 (looking to Opinion Letter No. 945 for guidance) (in case involving eleven plaintiffs, defendant's use of the fluctuating workweek method was permissible when only five minimum wage violations occurred over two years). (Any failure by Conn to cure fully these violations would not result in the fluctuating workweek method being unavailable because such errors were few. See Opinion Letter No. 945.)
[54] Although Badon's oral explanation the coefficient employee compensation system made no mention of the docking policy, Conn's written example did.
[55] "Scheduled short" clearly referred to being assigned fewer than forty hours of work in a week because the written example showed forty hours as a workweek's standard (i.e., non-overtime) duration.
[56] Plaintiffs make no claim that difficulty arises because someone other than Badon may have explained the coefficient employee compensation scheme to Cash, Prater, Stroder, Malbrough, Harrington, Johnson, Lucia and Chambers, all of whom were hired after 1989. See, e.g., Anderson, 477 U.S. at 249-50, 106 S. Ct. at 2510-11, 91 L.Ed.2d at 212-13; Little, 37 F.3d at 1075 (en banc); James, 854 F.2d at 432 n. 3.
[57] Although Neatherly never received an oral explanation from Badon, the absence of any intimation in the summary judgment record that Conn deviated from its longtime practice of paying full salary, exclusive of overtime compensation, regardless of how many hours a coefficient employee was scheduled to work in a week, results in no fact dispute arising as to whether or not the clear understanding criterion was met in his case. See Monahan, 95 F.3d at 1275 n. 12. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2506596/ | 712 S.E.2d 189 (2011)
STATE of North Carolina
v.
Ben Earl PELL.
No. COA10-415.
Court of Appeals of North Carolina.
April 19, 2011.
Attorney General Roy Cooper, by Assistant Attorney General J. Joy Strickland, for the State.
Narron, O'Hale & Whittington, P.A. by John P. O'Hale, Smithfield; Woodruff, Reece *190 & Fortner by Mary McCullers Reece and Michael J. Reece, Smithfield, for Defendant.
BEASLEY, Judge.
Ben Earl Pell (Defendant) was indicted on sixteen counts of felony secret peeping. Defendant entered into a plea bargain with the State, and as part of his sentence was ordered to maintain registration on the North Carolina Sex Offender and Public Protection Registry. From this portion of his sentence, Defendant now appeals. For the reasons stated below, we reverse the trial court's order.
On 21 July, 5 August, and 8 September 2008, Defendant was indicted on sixteen counts of felony secret peeping under N.C. Gen.Stat. § 14-202(d). On 5 August 2009, Defendant entered into an agreement with the State whereby he pled guilty to eight of the counts, and the other eight counts were dismissed. On 3 September 2009, at the sentencing hearing, the Honorable Thomas H. Lock imposed two consecutive sentences of six to eight months imprisonment, suspended the sentences and placed Defendant on supervised probation for a period of five years. As a condition of his probation, Defendant was ordered to maintain registration on the North Carolina Sex Offender and Public Protection Registry. On 11 September 2009, Defendant filed notice of appeal. On appeal, Defendant argues that: (I) the trial court erred in requiring him to register as a sex offender because the language in N.C. Gen.Stat. 14-202(l) was unconstitutionally vague; and (II) the trial court erred in requiring him to register as a sex offender where there was no competent evidence that he was a "danger to the community," or that his conviction would further the purposes of N.C. Gen.Stat. § 14-208.5.
As a preliminary matter, we address Defendant's grounds for appellate review. In State v. White, our Court held that the sex offender registration requirement provided in Article 27A was a non-punitive civil regulatory scheme. 162 N.C.App. 183, 193, 590 S.E.2d 448, 455 (2004). Therefore, an appeal from a sentence requiring a defendant to register as a sex offender is controlled by civil procedure. See State v. Brooks, ___ N.C.App. ___, ___, 693 S.E.2d 204, 206 (2010) (holding that because a satellite-based monitoring hearing is not a criminal proceeding, notice of appeal must be given as is proper in a civil action); see also State v. Bare, 197 N.C.App. 461, 467, 677 S.E.2d 518, 524 (2009) (holding that the satellite-based monitoring provisions of Article 27A are to be considered "part of the same regulatory scheme as the registration provisions under the same article."), disc. review denied, ___ N.C.App. ___, 702 S.E.2d 492 (2010).
It is well established that a criminal defendant may appeal as a matter of right to the Court of Appeals "[f]rom any final judgment of a superior court" other than those based on a guilty plea, a plea of nolo contendere, or cases in which a defendant is convicted of first degree murder and receives a sentence of death. N.C. Gen.Stat. § 7A-27(a)-(b) (2009). In this case, Defendant specifically appeals from the portion of his sentence requiring him to register as a sex offender. While a defendant is entitled to appeal from a guilty plea in limited circumstances, see N.C. Gen.Stat. § 15A-1444(a2) (2009), Defendant's appeal does not arise from the underlying convictions, therefore these limitations are inapplicable to the current action. Accordingly, Defendant's appeal is properly before this Court for appellate review.
I.
Defendant first argues that the trial court erroneously required him to register as a sex offender because the applicable statute was unconstitutionally vague. Specifically, Defendant tends to argue that the language of N.C. Gen.Stat. § 14-202(l) is unconstitutionally vague because it does not define "danger to the community." We disagree.
"Under a challenge for vagueness, the Supreme Court has held that a statute is unconstitutionally vague if it either: (1) fails to `give the person of ordinary intelligence a reasonable opportunity to know what is prohibited'; or (2) fails to `provide explicit standards for those who apply [the law].'" State v. Green, 348 N.C. 588, 597, 502 S.E.2d 819, 824 (1998) (quoting Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S. Ct. 2294, 2298-99, *191 33 L. Ed. 2d 222, 227 (1972)). However, "[s]tatutory language should not be declared void for vagueness unless it is not susceptible to reasonable understanding and interpretation. Mere differences of opinion as to a statute's applicability do not render it unconstitutionally vague." Rhyne v. K-Mart Corp., 358 N.C. 160, 187, 594 S.E.2d 1, 19 (2004) (internal citations and quotations omitted). "We [must] apply the rules of statutory interpretation to discern the meaning of [N.C. Gen.Stat. § 14-202(l)]." State v. McCravey, ___ N.C.App. ___, ___, 692 S.E.2d 409, 418, disc. review denied, ___ N.C.App. ___, 702 S.E.2d 506 (2010).
The interpretation of a statute is governed by the central principle that the intention of the legislature is controlling. State v. Hart, 287 N.C. 76, 80, 213 S.E.2d 291, 294 (1975). "Where the language of a statute is clear and unambiguous, there is no room for judicial construction and the courts must give it its plain and definite meaning, and are without power to interpolate, or superimpose, provisions and limitations not contained therein." State v. Camp, 286 N.C. 148, 152, 209 S.E.2d 754, 756 (1974) (internal quotation marks omitted). However, "[i]f a statute is unclear or ambiguous . . . courts must resort to statutory construction to determine legislative will and the evil the legislature intended the statute to suppress." State v. Jackson, 353 N.C. 495, 501, 546 S.E.2d 570, 574 (2001). Our Court will determine the will of the legislature by:
appropriate means and indicia, such as the purposes appearing from the statute taken as a whole, the phraseology, the words ordinary or technical, the law as it prevailed before the statute, the mischief to be remedied, the remedy, the end to be accomplished, statutes in pari materia, the preamble, the title, and other like means[.] Other indicia considered by this Court in determining legislative intent are the legislative history of an act and the circumstances surrounding its adoption, earlier statutes on the same subject, the common law as it was understood at the time of the enactment of the statute, and previous interpretations of the same or similar statutes.
In re Banks, 295 N.C. 236, 239-40, 244 S.E.2d 386, 389 (1978) (internal citations and quotations marks omitted). The statute requiring Defendant to register as a sex offender is not unconstitutionally vague.
Defendant pled guilty to eight counts of the offense of felony secret peeping as prohibited by N.C. Gen.Stat. § 14-202(d) (2009). N.C. Gen.Stat. § 14-202(l) provides that:
When a person violates subsection (d) . . . of this section . . . the sentencing court shall consider whether the person is a danger to the community and whether requiring the person to register as a sex offender pursuant to Article 27A of this Chapter would further the purposes of that Article as stated in G.S. 14-208.5. If the sentencing court rules that the person is a danger to the community and that the person shall register, then an order shall be entered requiring the person to register.
N.C. Gen.Stat. § 14-202(l) (2009). The statute authorizes sex offender registration if the trial court first determines that: (1) the defendant is a "danger to the community;" and (2) the defendant's registration would further the purpose of the Article as stated in N.C. Gen.Stat. § 14-208.5 (2009).
The phrase "danger to the community" is not defined by statute and is arguably ambiguous. Therefore, we must turn to statutory construction to determine the will of the legislature. Our General Assembly has recognized that because "sex offenders often pose a high risk of engaging in sex offenses even after being released from incarceration or commitment[,] . . . protection of the public from sex offenders is of paramount governmental interest." N.C. Gen.Stat. § 14-208.5. "`[T]he twin aims' of the registration program [are] . . . `public safety and protection.'" State v. Abshire, 363 N.C. 322, 330, 677 S.E.2d 444, 450 (2009) (internal quotation marks omitted). When examining the purposes of the sex offender registration statute, it is clear that "danger to the community" refers to those sex offenders who pose a risk of engaging in sex offenses following release from incarceration or commitment.
The General Assembly also notes that the efforts of law enforcement officials to protect *192 the community from offenders who commit sexual offenses could be impaired from a lack of information about prior sex offenders who live within their jurisdictions. N.C. Gen.Stat. § 14-208.5. Accordingly, it is the purpose of the sex offender registration program to
assist law enforcement agencies' efforts to protect communities by requiring persons who are convicted of sex offenses or of certain other offenses committed against minors to register with law enforcement agencies, to require the exchange of relevant information about those offenders among law enforcement agencies, and to authorize the access to necessary and relevant information about those offenders to others as provided in this Article.
Id. The purposes of the sex offender registration are furthered when a defendant's registration would assist law enforcement officials with monitoring potential recidivists.
Though there is no North Carolina authority providing the appropriate standard of review by which we are to analyze the trial court's "danger to the community" determination, we find guidance in a similar satellite-based monitoring case. In State v. Kilby, our Court was tasked with determining whether the trial court correctly found that a defendant required the "highest possible level of supervision and monitoring" with regards to satellite-based monitoring. 198 N.C.App. 363, 366, 679 S.E.2d 430, 432 (2009). We held that whether an offender requires the "highest possible level of supervision and monitoring" was not clearly a question of fact or a conclusion of law. Id. While a conclusion of law typically requires the application of legal principles to the facts, the statute only provided for the review of factual information for a trial court to determine whether a defendant required the "highest possible level of supervision and monitoring." Id. at 366-67, 679 S.E.2d at 432. Accordingly, this Court held that "`we [will] review the trial court's findings of fact to determine whether they are supported by competent record evidence, and we review the trial court's conclusions of law for legal accuracy and to ensure that those conclusions reflect a correct application of law to the facts found.'" Id. at 367, 679 S.E.2d at 432.
Here, the trial court was required to determine whether Defendant was a "danger to the community." Similar to Kilby, N.C. Gen.Stat. § 14-202(l) (2009) provides no legal principles defining "danger to the community." Whether a trial court finds that a defendant poses a risk of engaging in sex offenses following release from incarceration will be based upon a review of the surrounding factual circumstances. Accordingly, this Court will review the trial court's findings to ensure that they are supported by competent evidence, and we review the conclusions of law to ensure that they reflect a correct application of law to the facts. Id.
II.
Defendant next argues that the trial court erred in requiring him to register as a sex offender because there was no competent evidence to support a finding that he was a danger to the community, or that his registration would further the purposes of N.C. Gen.Stat. § 14-208.5. We agree.
In this case, the trial court erroneously found that Defendant was a "danger to the community." In Kilby, our Court held that the trial court's finding that a moderate risk assessment from the Department of Correction, and that the defendant was cooperating with post-release supervision, are insufficient to support a conclusion that an offender required the "highest possible level of supervision and monitoring." Id. at 370, 679 S.E.2d at 434. The applicable satellite-based monitoring statute actually required the trial court to consider a Department of Correction risk assessment before concluding that a defendant required "the highest possible level of supervision and monitoring." N.C. Gen. Stat. § 14-208.40B(c) (2009). While distinguishable, our holding in Kilby offers guidance in the present action.
The record evidence does not support the trial court's finding that Defendant is a "danger to the community." As previously discussed, an examination of legislative intent reveals that "danger to the community" only refers to those defendants who pose a risk of engaging in sex offenses following their release from incarceration. Following the administration *193 of several evaluation procedures, the State's expert witness determined that Defendant represented a low to moderate risk of re-offending. Later at Defendant's sentencing hearing, the State's expert acknowledged that the likelihood of Defendant's re-offending may be even lower after considering a revised risk assessment scale. The trial court also reviewed letters submitted by Defendant's psychiatrist and counselor. Defendant's witnesses opined that Defendant's prior diagnoses of major depression, alcohol abuse, and paraphilia were in remission. This evidence does not support the trial court's conclusion that Defendant represented a "danger to the community."
Citing statements made by several of Defendant's victims, the State argues that the record evidence supports a conclusion that Defendant represents a "danger to the community." Victims of a crime are permitted to "offer admissible evidence of the impact of the crime" to be considered during sentencing. N.C. Gen.Stat. § 15A-833 (2009). However, the victims' statements all tended to address the manner in which Defendant committed his past offenses and the effect his actions had on each of their lives. This evidence offered very little in the way of predictive statements concerning Defendant's likelihood of recidivism. Accordingly, the victim impact statements in this case are insufficient to support the trial court's finding that Defendant represented a "danger to the community."
While the language of N.C. Gen.Stat. § 14-202(l) was not so vague as to render it unconstitutional, the record evidence does not support the trial court's conclusion that Defendant represented a danger to the community. Accordingly, we reverse the trial court order requiring Defendant to register as a sex offender.
Reversed and remanded.
Judges McGEE and HUNTER, JR., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1464822/ | 608 F. Supp. 510 (1985)
Jorge M.C.C. de ATUCHA, Plaintiff,
v.
COMMODITY EXCHANGE, INC., Comex Clearing Association, Inc., the Board of Trade of the City of Chicago, the Board of Trade of the City of Chicago Clearing Corporation, Nelson Bunker Hunt, William Herbert Hunt, Lamar Hunt, International Metals Investment Co., Ltd., Bache Halsey Stuart Shields, Inc., Bache Group, Inc., Alvin Brodsky, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Conticommodity Services, Inc., Norton Waltuch, Melvin Schnell, Gillian Financial, Conticapital Management, Inc., Conticapital Ltd., Naji Robert Nahas, Sheik Mohammed Aboud Al-Amoudi, Sheik Ali Bin Mussalem, and Banque Populaire Suisse, Defendants.
No. 82 Civ. 6546 (MEL).
United States District Court, S.D. New York.
May 9, 1985.
*511 Leonard Toboroff, P.C., New York City, for plaintiff; Leonard Toboroff, M. Fishman, New York City, of counsel.
Baer Marks & Upham, New York City, for defendants Comex and Comex Clearing; Barry J. Mandel, Thomas E. Albright, William A. Brandt, Jr., Joshua B. Parker, New York City, of counsel.
Townley & Updike, New York City, for defendants CBOT and CBOT Clearing; James K. Leader, James E. Tyrrell, Jr., Holly Stein, New York City, of counsel.
Kirkland & Ellis, Chicago, Ill., for defendant CBOT; John E. Angle, T. Webster Brenner, Chicago, Ill., of counsel.
Murphy & Boyle Chartered, Chicago, Ill., for defendant CBOT Clearing; Robert D. Boyle, Jay L. Statland, Chicago, Ill., of counsel.
Sullivan & Cromwell, New York City for defendant Bache Halsey Stuart Shields Inc. and Bache Group Inc.; Marvin Schwartz, Richard H. Klapper, New York City, of counsel.
Seyfarth, Shaw, Fairweather & Geraldson, New York City, Shank, Irwin, Conant, Williamson & Grevelle, for defendants Lamar Hunt, Nelson Bunker Hunt and W. Herbert Hunt; Daniel S. Greenfeld, Michael Hirschfeld, New York City, Roger Goldburg, Robert Wolin, Roderic G. Steakley, Dallas, Tex., of counsel.
Rogers & Wells, New York City, for defendants Merrill Lynch, Pierce, Fenner & Smith, Inc. and ACLI Intern. Services, Inc.; William L. Glendon, Guy C. Quinlan, Susan Garcia, New York City, of counsel.
Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants Conti-Commodity Services, Inc., ContiCapital Management Inc., ContiCapital Ltd., and Norton Waltuch; Mark H. Alcott, Richard A. Rosen, Peter W. Schneider, New York City, of counsel.
Skadden, Arps, Slate, Meagher & Flom, New York City, for defendant Melvin Schnell; Michael Diamond, Erskine D. Henderson, New York City, of counsel.
LASKER, District Judge.
Jorge M.C.C. de Atucha ("de Atucha") brings this suit, yet another case concerning the much publicized events in the silver market in 1979 and 1980, against The Commodity Exchange, Inc. ("Comex"), Comex Clearing Association, Inc., the Board of Trade of the City of Chicago ("CBOT"), the Board of Trade of the City of Chicago Clearing Corporation (the "exchange defendants"), as well as numerous other individuals and companies[1] (the "non-exchange defendants"). The motions are granted for lack of standing and the complaint is dismissed.
I.
On January 18, 1980, at a time when the price of silver was approximately fifty dollars per ounce, de Atucha, "a citizen and resident of Argentina", Complaint ¶ 5 (filed Oct. 1, 1982), purchased three silver contracts on the London Metals Exchange ("LME")[2] at a total cost of approximately *512 $1,500,000. Id. at ¶ 29. On April 16, 1980 de Atucha liquidated[3] his "long" position[4] at a loss in excess of $1,000,000. Id. at ¶ 40. De Atucha alleges that the price at which he purchased the silver contracts was artificially high because of an alleged conspiracy among the non-exchange defendants. Id. at ¶ 30. As for the exchange defendants, de Atucha alleges that although they took action in January 1980 to counteract the purported conspiracy and to stabilize the then volatile silver market, the corrective measures were taken too late. Id. at ¶ 38.[5]
The complaint presents five claims. Against the non-exchange defendants de Atucha asserts that the defendants (1) conspired to and manipulated silver and silver futures[6] contract prices in violation of the Commodities Exchange Act ("CEA") § 9(b);[7] (2) cheated and defrauded de Atucha and the silver markets and wilfully made false reports and statements to de Atucha in violation of CEA §§ 4b[8] and 4c;[9] (3) conspired to "unreasonably restrain interstate trade and commerce in silver and silver futures contracts in the United States and between the United States and ... England, with the intent and effect of raising and fixing the prices or [sic] silver and silver futures contracts," Complaint ¶ 47, in violation of the Sherman Anti-Trust Act, § 1, 15 U.S.C. § 1 (1982); and (4) monopolized the silver and silver futures contracts trade and commerce in the United States and England in violation of the Sherman Anti-Trust Act, § 2, 15 U.S.C. § 2 (1982). Id. at ¶ 51. Finally, de Atucha alleges that the "acts, practices and omissions" of the exchange defendants were wilfully in bad faith or negligent, and in either case, violated CEA §§ 5a(8)[10] and 5(d).[11]Id. at ¶ 55.
In support of de Atucha's claims the complaint also states, among other things:
The London Exchange, located in London, England, is also a market for silver futures contract trading. Because of the fungibility of silver and silver futures, the United States market represented by the Comex and CBOT and the London Exchange function from an economic standpoint as a single market....
Id. at ¶ 28.
Two motions are pending. The non-exchange defendants move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss *513 (1) the antitrust claims against them on the ground that plaintiff lacks "antitrust standing" and (2) the claims against them arising under the CEA on the ground that de Atucha has not established standing under that Act. The exchange defendants also move to dismiss the complaint against them pursuant to Rule 12(b)(6), Fed.R.Civ.P., on the ground that plaintiff lacks standing to sue. For the reasons set forth below the complaint is dismissed.
II.
Antitrust Claims
De Atucha seeks treble damages pursuant to the Clayton Act, § 4, 15 U.S.C. § 15 (1982), based upon the non-exchange defendants' alleged attempt to monopolize and restrain the silver and silver futures trade and commerce. The non-exchange defendants argue that de Atucha lacks standing to sue under Section 4 because de Atucha's injury occurred outside of United States commerce and his injury, if any, was too remote from the alleged violation to sustain a claim under United States antitrust law. The defendants[12] further argue that de Atucha cannot sue under Section 4 because plaintiff's alleged injury resulted from a restraint on foreign, rather than American commerce. Although the complaint alleges that the defendants attempted to monopolize (and restrain the trade of) the world silver market, see, e.g., Complaint ¶ 30(b), de Atucha's theory of standing, as we understand it, is that he may sue under American antitrust laws because the defendants' manipulation of the American silver markets produced his injury on the LME. See Transcript (Jun. 3, 1983) (oral argument) at p. 15. De Atucha further argues that as a trader in silver commodities he has standing to maintain an action under the antitrust laws against those who attempted to monopolize the world silver market since, he asserts, he is "clearly in the target area" of the antitrust violation and because he sustained direct injury.
De Atucha's reliance on the target area test, the approach to Section 4 standing previously followed in this Circuit, is misplaced. As the Court of Appeals recently explained:
This is not the proper method of analysis. With two recent elaborate Supreme Court opinions with respect to the scope of § 4 of the Clayton Act on the books, courts in this circuit should start their analysis of standing under § 4 with the Supreme Court opinions [in Associated General Contractors of California, Inc. v. California State Council, 459 U.S. 519, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983) and Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S. Ct. 2540, 73 L. Ed. 2d 149 (1982) ] rather than engage in extensive parsing of Billy Baxter, [Inc. v. Coca-Cola Co., 431 F.2d 183 (2d Cir.1970), cert. denied, 401 U.S. 923, 91 S. Ct. 877, 27 L. Ed. 2d 826 (1971)] and Calderone [Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292 (2d Cir.1971), cert. denied, 406 U.S. 930, 92 S. Ct. 1776, 32 L. Ed. 2d 132 (1972)]. The "target area" test embodied in those decisions was adopted over powerful dissents, has proved difficult to apply, and is received tepidly in the leading treatise, 2 Areeda & Turner, Antitrust Law § 334d, at 165-68 (1978). (Additional citation omitted).
Crimpers Promotions, Inc. v. Home Box Office, Inc., 724 F.2d 290, 293 (2d Cir.1983), cert. denied, ___ U.S. ___, 104 S. Ct. 3536, 82 L. Ed. 2d 841 (1984). Accordingly, despite plaintiff's reliance on a target area analysis[13] "[we] ... are compelled to follow *514 the approaches adumbrated by the Supreme Court in McCready and Associated General [Contractors] ..." in determining whether de Atucha has standing to bring his antitrust claims. Id.
Section 4 of the Clayton Act provides that "[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefore ... and shall recover threefold the damages by him sustained. ..." 15 U.S.C. § 15. The broad language of the Act notwithstanding, in both McCready and Associated General Contractors the Supreme Court has reaffirmed that it was not Congress' intent "to allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages...." Blue Shield of Virginia v. McCready, 457 U.S. at 477, 102 S.Ct. at 2547; accord Associated General Contractors of California v. California State Council, 459 U.S. at 535, 103 S.Ct. at 907. In McCready, Justice Brennan (for the majority) surveyed past Supreme Court opinions discussing restrictions on a plaintiff's standing to sue for treble damages and concluded that there are two considerations which may limit the availability of a Section 4 remedy: the prevention of duplicative recoveries and the limitation on injuries which are too remote from the alleged violation. See 457 U.S. at 476, 102 S.Ct. at 2546. Subsequently, Justice Stevens, (also writing for the majority of the Court) in Associated General Contractors, enumerated five factors against which courts should analyze the standing issue. See 459 U.S. at 536 n. 33, 103 S.Ct. at 908 n. 33. Not surprisingly, there is considerable overlap between the issues discussed in the two opinions. Indeed, despite minor differences in analytic approach, careful scrutiny reveals that with one exception, discussed below, the Associated General Contractors "factors" and the McCready "limitations" involve the same considerations. In any event, the Court's refusal to adopt a bright line rule requires that the standing determination be made on a case by case analysis. Upon evaluating the circumstances here presented in light of the relevant factors we conclude de Atucha does not have standing under American antitrust law to maintain this action.
As was true in Associated General Contractors, not all of the factors in this case are unfavorable to the plaintiff. The plaintiff correctly asserts that the limitation embodying the policy against duplicative recoveries, which focuses primarily "on the risk ... engendered by allowing every person along a chain of distribution to claim damages arising from a single transaction that violated the antitrust laws", Blue Shield of Virginia v. McCready, 457 U.S. at 475, 102 S.Ct. at 2546, is not an issue here.[14] This is not a situation in which there are "innocent middleman"; the other parties to de Atucha's transactions, for instance Merrill Lynch, the brokerage house that placed de Atucha's silver trades, are named in the complaint as defendants. De Atucha's personal loss of anticipated profits on the LME is a discrete injury which does not involve different levels of harmed individuals. Cf. Crimpers Promotions Inc. v. Home Box Office, Inc., 724 F.2d at 293-94 (limitation designed to prevent double recovery inapplicable where plaintiff's injury was "distinct and different").
The "conceptually more difficult question", Blue Shield of Virginia v. McCready, 457 U.S. at 476, 102 S.Ct. at 2546, and the critical inquiry here, is whether de Atucha's injury on the LME is too remote from the antitrust violation to serve as the gravamen of a Section 4 claim.[15] Initially, in evaluating whether *515 plaintiff's injury is too fortuitous, one must "look ... to the physical and economic nexis between the alleged violation and the harm to the plaintiff", id. at 478, 102 S.Ct. at 2548, or, as Justice Stevens characterized it "the directness or indirectness of the asserted injury." Associated General Contractors of California v. California State Council, 459 U.S. at 540, 103 S.Ct. at 910.
In Associated General Contractors, the plaintiffs, two construction unions representing individuals who worked for the defendants, alleged, among other things, that the defendants exerted pressure on builders to hire contractors and subcontractors who did not have collective bargaining agreements with the plaintiff unions. Conceding that "[t]he complaint does allege a causal connection between an antitrust violation and harm to the Union and further alleges that the defendants intended to cause that harm",[16]id. at 537, 103 S.Ct. at 908, the Court nonetheless dismissed the antitrust claim. The Court's conclusion that the Unions' injuries were "clearly indirect", was one of the factors dictating dismissal.
The Court of Appeals' opinion in Reading Industries, Inc. v. Kennecott Copper Corporation, 631 F.2d 10 (2d Cir.1980), cert. denied, 452 U.S. 916, 101 S. Ct. 3051, 69 L. Ed. 2d 420 (1981) is closer to the case at hand. The antitrust claim put forward in Reading involved three significant pricing systems for copper: (1) the "producers' price",[17] (2) quoted prices on the LME and (3) the copper scrap market price. Id. at 11. The issue raised by the plaintiff's claim was whether there was a legally significant causal relationship between the defendant's alleged antitrust violation, (a conspiracy to fix the price of domestically refined copper and to monopolize the market for its sale), id., and the plaintiff's alleged injury (payment of prices on the copper scrap market that were unduly high). The Circuit Court concluded the relationship was too attenuated to permit recovery of treble damages under the Clayton Act. Id. at 13.
De Atucha's claim is strikingly similar to the facts in Reading. Moreover, the reasoning of the Reading court applies here.[18] Indeed, by merely changing the relevant nouns the words of the Second Circuit might have been addressing the merits of de Atucha's claim:
[De Atucha]'s theory of antitrust injury depends upon a complicated series of market interactions between the two [silver markets]: the [United States market] in which defendants acted and the [London Metals Exchange] on which [de Atucha] *516 allegedly sustained injuries. To establish a causal chain, the actions of innumerable individual decision-makers must be reconstructed....
Indeed, to find antitrust damages in this case would engage the court in hopeless speculation concerning the relative effect of an alleged conspiracy in the [United States silver futures] market on the price of [LME silver forwards], where countless other market variables could have intervened to affect those pricing decisions.
Id. at 13-14.
Plaintiff himself acknowledges the indirect nature of his claim. He argues "[h]ere, the unlawful transactions on the `contract markets' caused the collapse of the U.S. silver markets which in turn caused Atucha's injury on the LME." Plaintiff's Sur-Reply Memorandum in Response to the Reply Memoranda of Defendants and in Support of the Complaint (filed Apr. 21, 1983) at p. 17. However, even recognition of the indirectness of causation involved does not reflect the numerous complex transactions which must be considered in determining the cause of the "collapse" of each market individually, and it certainly does not account for the additional factors that must be evaluated to make a determination as to how the markets interact, if they do. We conclude that the indirect relationship between de Atucha's claim and the alleged violation is a factor which strongly supports the inapplicability of the antitrust laws to de Atucha's claim.
Another factor considered in Associated General Contractors, one related to the indirectness of the injury, is the speculative nature of the damages. Associated General Contractors of California v. California State Council, 459 U.S. at 542, 103 S.Ct. at 911; see also Blue Shield of Virginia v. McCready, 457 U.S. at 475 n. 11, 102 S.Ct. at 2546 n. 11; Reading Industries, Inc. v. Kennecott Copper Corporation, 631 F.2d at 13-14. De Atucha argues that his loss is inextricably connected with the economic impact felt in the United States. The nonexchange defendants agree that as a matter of economic theory prices on the LME should not deviate substantially from prices on domestic exchanges. However, the defendants correctly assert that even in cases involving the equilibration of prices on related domestic markets the courts have rejected the damage claim as too speculative and indirect. See Reading Industries Inc. v. Kennecott Copper Corporation, 631 F.2d at 13-14; LeFrak v. Arabian American Oil Co., 487 F. Supp. 808, 824-25 (S.D.N.Y.1980). For substantially the same reasons put forth in Reading, 631 F.2d at 13-14, we find that the highly speculative nature of de Atucha's damage claim is another consideration dictating dismissal. Moreover, for reasons explained below, plaintiff's position in the silver market relative to the defendants' position in the market would further complicate the proof of damages. Plaintiff and the defendants both purchased long contracts during the period between January 18, 1980 and April 16, 1980 and de Atucha's losses occurred in the period of plummeting silver prices that also, apparently, caught the defendants by surprise. Accordingly, this is not a case where the defendants and plaintiffs held offsetting positions.[19] If it were, calculating the damages would involve an analytically uncomplicated "zero sum" formula (each dollar gained by a long trader is lost by a short trader on the other side of the contract). See Pollock v. Citrus Associates, 512 F. Supp. 711, 719 (S.D. N.Y.1981) citing Leist v. Simplot, 638 F.2d at 286-87; accord Strax v. Commodity *517 Exchange, Inc., 524 F.Supp. at 939-40 (S.D. N.Y.1981). Here, however, the damage claim would require determining the cause of the price decline on the United States market, and then, the impact of the United States market decline, if any, on the price decline on the LME, a foreign exchange subject to different regulations, rules and committees than the United States exchanges.
Another factor to be considered in the remoteness inquiry is whether plaintiff's alleged injury "reflects Congress' core concerns in prohibiting the antitrust defendants' course of conduct." Blue Shield of Virginia v. McCready, 457 U.S. at 481, 102 S.Ct. at 2549; accord, Associated General Contractors of California v. California State Council, 459 U.S. at 538, 103 S.Ct. at 909. The non-exchange defendants argue strenuously that in enacting the antitrust laws it was not Congress' intent to protect a foreign consumer injured in foreign commerce. De Atucha's not capricious response is that failure to allow him (and others similarly situated) to bring his antitrust claim will, in effect, grant a license to rig foreign markets, which would impact on American consumers (by creating the converse of the situation in this case). According to de Atucha, it was Congress' intent that our "important public markets (citing Leist v. Simplot, 638 F.2d at 298 n. 14) be kept free from pollution."
There is no doubt that the primary purpose of the antitrust laws is to protect American consumers, see Pfizer, Inc. v. Government of India, 434 U.S. 308, 314, 98 S. Ct. 584, 588, 54 L. Ed. 2d 563 (1978), and American (foreign and domestic) commerce.[20]Cf. 21 Cong.Rec. 2456 (1890) (Remarks by Senator Sherman: "The purpose of this bill is to enable the courts of the United States to apply the same remedies against combinations which injuriously affect the interests of the United States that have been applied in the several states to protect local interests.") Sections one and two of the Act, under which de Atucha brings his antitrust claims, prohibit the monopoly or restraint of "... trade or commerce among the several states, or with foreign nations...."
The Associated General Contractors Court, in addressing the issue of congressional intent, has recently stated that "[a]s the legislative history shows the Sherman Act was enacted to assure customers the benefits of price competition, and our prior cases have emphasized the central interest in protecting the economic freedom of participants in the relevant market." 459 U.S. at 538, 103 S.Ct. at 908. In denying standing to the plaintiff Union the Court further explained, "in this case, however, the Union was neither a consumer nor a competitor in the market in which trade was restrained." Id. at 539, 103 S.Ct. at 909.
In contrast to that decision, the plaintiff in McCready was permitted to sue under Section 4 where the complaint alleged restraint in the market for psychotherapy services, and the plaintiff was a consumer in that market. The Court concluded that "... McCready's injury was of a type that Congress sought to redress in providing a private remedy for violations of the antitrust laws", 457 U.S. at 483, 102 S.Ct. at 2550, and that such an injury "falls squarely within the area of congressional concern." Id. at 484, 102 S.Ct. at 2551.
Here, de Atucha is not an American consumer nor did he trade in American commerce. His injury occurred on, and was directly caused by price fluctuations on the LME. The complaint alleges that "the United States market represented by the Comex and CBOT and the London Exchange function from an economic standpoint as a single market...." Complaint *518 at ¶ 28 and for the purposes of the motion the allegations must be accepted as true. However, notwithstanding the economic interaction between the United States and London markets, in light of the purpose of the Sherman Act it is logical to conclude that the first prerequisite to a determination that a plaintiff was injured in "the relevant market" is a finding that the market is part of American foreign or domestic commerce since "[t]he antitrust laws do not extend to protect foreign markets from anticompetitive effects." Platt Saco Lowell Ltd. v. Spindelfabrik SuessenSchurr, 1978-1 Trade Cases. (CCH) ¶ 61,898, at 73,775 (N.D.Ill.1977). We conclude that Congress did not contemplate recovery under the antitrust laws by an individual who traded, and was injured entirely outside of United States commerce.
Finally, de Atucha argues that it is necessary to allow plaintiffs such as himself to sue to deter future potential market manipulators. The short answer to this contention is that scores of others have already sued these defendants in regard to the same acts.
Deterrence is one of the congressional aims of Section 4 of the Clayton Act. E.g., Pfizer Inc. v. Government of India, 434 U.S. at 314, 98 S.Ct. at 588. The Act, in effect, confers upon individuals the role of private attorney generals by providing treble damages as an incentive to potential plaintiffs and a disincentive to would-be violators. In Pfizer, supra, a case upon which plaintiff relies, added deterrence was a factor in the Court's holding that foreign governments could sue under Section 4. Id. at 315, 98 S.Ct. at 589. However, in the Court's latest and most expansive decision on Section 4 standing the Court stated that:
"[t]he existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party ... to perform the office of a private attorney general. Denying the [plaintiff] a remedy on the basis of its allegations in this case is not likely to leave a significant antitrust violation undetected or unremedied."
Associated General Contractors of California v. California State Council, 459 U.S. at 542, 103 S.Ct. at 911.
Here, individuals who traded on United States exchanges and who may have suffered injury resulting from the defendants (alleged) manipulation of the silver market are an identifiable class of persons whose claims would not be plagued with the "conceptual difficulties" presented by de Atucha's claim and have indeed brought numerous suits against all the defendants here to "vindicate the public interest."[21]
To summarize, we conclude that the relationship between de Atucha's alleged injury on the LME and the defendants' alleged violation on the United States silver exchanges is too attenuated to allow the antitrust claim, and further, that recovery for such an injury would not accurately reflect congressional intent. Finally, the existence of a readily identifiable class of plaintiffs to enforce the antitrust laws against these defendants, if it should prove appropriate to do so, diminishes the justification for permitting the cause of action. Accordingly, the antitrust claims are dismissed for lack of standing.
The Commodity Exchange Act
Both the non-exchange defendants and the exchange defendants move to dismiss the claims based on the CEA. The non-exchange defendants argue that, by their own terms, CEA Sections 4b[22] and 9(b)[23] do not proscribe fraud or manipulation on foreign commodities markets. The exchange *519 defendants move to dismiss the complaint on the ground that de Atucha cannot maintain an action against them under the CEA because he did not trade on either of the defendant contract markets nor were his trades cleared through either of the defendant Clearinghouses. They argue that plaintiff does not have standing to sue under the CEA and alternatively, that de Atucha's injuries were not proximately caused by any actions of Comex and/or CBOT.[24]
De Atucha answers that the defendants' manipulation of United States markets (and the failure to regulate them) makes them liable under the CEA; that his injuries on the LME were caused by the defendants' actions (and/or inaction); and that pursuant to the Second Restatement of Foreign Relations Law he has the right to sue for manipulation and failure to regulate.
In Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S. Ct. 1825, 72 L. Ed. 2d 182, the United States Supreme Court considered for the first time whether there was an implied private right of action under the CEA. It concluded that there was, and further, that the cause of action extended to hold accountable the exchanges who violated their own rules, as well as individuals who conspire to defraud consumers or to manipulate the markets. In finding the existence of a private right, the Court observed that "unless and until Congress acts, the federal courts must fill in the interstices of the implied cause of action under the CEA." Id. at 395, 102 S.Ct. at 1848.
The issue in the instant action falls squarely within the void left unfilled by Curran. Curran determined that a private cause of action exists, and that purchasers and sellers of commodities who suffer injury resulting from their trading have standing to sue. However, since the Curran plaintiffs/respondents traded commodities on United States exchanges the Court did not consider whether a foreign resident who trades (and is allegedly injured) on a foreign market has standing under the CEA. The question appears to be one of first impression in this Circuit.
Whether de Atucha has standing under the Act is a matter of congressional intent requiring examination of the provisions pursuant to which he brings his claims. CEA Section 4b[25] prohibits fraud "in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce made, or to be made, on or subject to the rules of any contract market, ..." (emphasis added). Under CEA Section 9(b)[26] it is a felony "to manipulate or attempt to manipulate the price of any commodity ... for future delivery on or subject to the rules of any contract market, or to corner or attempt to corner any such commodity ..." (Emphasis added). CEA Section 5a(8),[27] under which de Atucha is suing the exchange defendants, contains the language emphasized above.
We start with the proposition that the laws of any jurisdiction apply only to activities within its borders unless there is some indication to the contrary. As we interpret the plain language of the statutes, the CEA sections upon which de Atucha bases his claims do not proscribe fraudulent conduct in connection with transactions occurring on foreign markets. A leading treatise on Commodities Regulation, written by the chairperson of the Commodities Futures Trading Commission ("CFTC" or "Commission"), and the one court that appears to have considered the question have concluded that the language of the statutory provisions limits their *520 scope to the regulation of domestic transactions. See II P. JOHNSON, COMMODITIES REGULATION § 5.42 at 329 (1982) ("Sections 4b and 4o would appear adequately to cover fraud in connection with domestic futures contracts, that is, futures `on or subject to the rules of a contract market.'") (Emphasis in the original); Palmer Trading Co. v. Shearson Hayden Stone, Inc., [1977-1980] Comm.Fut.L.Rep. CCH ¶ 20,900 at 23,564 (N.D.Ill.1979) ("The statutory language is clearly limited to contracts of sale that are `made, or to be made, on or subject to the rules of any contract market'.").
The history of commodities regulation supports this reading of the statutes. The fundamental purpose of the CEA is "insuring fair practice and honest dealing on the commodity exchanges and providing a measure of control over those forms of speculative activity which often demoralize the markets to the injury of producers, consumers, and the exchanges themselves."[28] S.Rep. No. 1131, 93rd Cong., 2d Sess., reprinted in 1974 U.S.CODE CONG. & AD.NEWS 5843, 5844; accord Deaktor v. L.D. Schreiber & Co., 479 F.2d 529, 534 (7th Cir.), rev'd on other grounds, 414 U.S. 113, 94 S. Ct. 466, 38 L. Ed. 2d 344 (1973). While the quoted words do not refer specifically to United States markets and consumers, the discussions in the record on the history of the commodities market, the manner of its operation and the necessity and role of governmental regulation refer only to the United States commodities market and American investors. See e.g., S.Rep. No. 1131, 93rd Cong., 2nd Sess., reprinted in 1974 U.S.CODE CONG. & AD.NEWS 5843, 5852-60. It is reasonable to conclude that American markets and consumers were the targets of congressional concern and that the regulation of fraud in connection with trading on domestic markets, or transactions entered into by American investors was the congressional purpose.
Although the legislative history prior to and surrounding the comprehensive enactments of 1974 offers only nominal insight into Congress' intent, we have found nothing in the legislative history which suggests that the legislature intended the CEA to confer a cause of action upon foreign litigants who traded exclusively on foreign markets.[29] Indeed, it appears that the subject of foreign futures trading was first raised in connection to the 1982 amendments to the Act. The recent enactments include a section which specifically states that the amendments have no retroactive effect.[30] Accordingly, the legislation is not directly relevant to de Atucha's claim because it arises out of transactions occurring in 1980. However, the Court of Appeals of this Circuit has held that it is proper to consider the 1982 statute in examining Congress' intent as to the earlier provisions of the Act, despite the non-retroactivity provision. See Sam Wong & Son, Inc. v. New York Mercantile Exchange, 735 F.2d 653, 676 n. 30 (2d Cir. 1984); accord Jordon v. New York Mercantile Exchange, 571 F. Supp. 1530, 1540-41 (S.D.N.Y.1983), aff'd in relevant part, 735 F.2d at 653.
The 1982 legislation included a new CEA Section 22, (reprinted in full in the margin),[31] which provides for a private right of *521 *522 action against certain individuals and against the exchanges. Section 22 has two substantive subsections. Subsection (b), which allows claims against the exchanges, plainly limits the private remedy to market traders. Subsection (a) provides for causes of action against non-exchange defendants. Although, arguably, the language in Section 22(a) is not as clearly restrictive as the language in subsection (b), the House Report indicates a congressional intent also to limit this right to market traders.
The Committee is of the view that the right of an aggrieved person to sue a violator of the Act is critical to protecting the public and fundamental to maintaining the credibility of the futures market.
To that end the Committee added a new section to the bill to provide specific authority for private rights of action for recovery of actual damages against violators of the Act. In order to recover the violation must have arisen from a transaction on the futures market, a regulated option or leverage contract, or participation in a commodity pool.
H.R.Rep. No. 565, 97th Cong., 2nd Sess. 57, reprinted in 1982 U.S.CODE CONG. & AD.NEWS 3871, 3906. (Emphasis added.)
Congress also enacted a new CEA Section 4(b) in 1982, (quoted in the margin)[32] authorizing the CFTC to promulgate rules governing vendors of foreign futures contracts who are located in the United States. The purpose of the new section is clearly to protect American investors.[33] As the House report states:
A number of futures markets exist abroad and others are now under development. Protection of United States residents solicited to trade on these foreign markets may necessitate regulation of those who vend foreign futures from domestic locations. It may prove desirable, for instance, to require such vendors to comply with some of the regulatory requirements now imposed on futures commission merchants marketing domestic futures. To make explicit the Commission's authority to prevent fraud in the *523 domestic offer and sale of all future contracts, the Committee has included provisions that expressly authorize the Commission to develop, if needed, a regulatory system for those who market foreign futures from a domestic location.
Id. at 3901-02, accord id. at 3934. (Emphasis added.)
In view of Congress' explicit recognition that the domestic offer and sale of foreign commodities contracts is within the scope of the CEA, its silence with respect to wholly foreign transactions is strong evidence that such transactions were not intended to be and are not regulated under the Act. Cf. Sam Wong & Son, Inc. v. New York Mercantile Exchange, 735 F.2d at 670. ("Here again the silence of the 1982 statute is evidence that Congress has no wish for a private cause of action for failure by an exchange to exercise its discretionary power to declare an emergency as soon as a plaintiff thinks it should.") Moreover, in addressing the issue of foreign regulation the record reveals that Congress struck a balance between protecting American interests on the one hand, and not alienating foreign interests to the detriment of the domestic economy. Notably, the issue arose in the context of a report on the Silver Crisis.
[T]he Commission has under consideration various rules designed to address problems related to securing additional information of the futures accounts of foreign traders. During the silver episode, this problem arose in relation to the difficulties experienced by the Committee in obtaining reliable information on large silver futures positions held by certain foreign traders. Since effective enforcement of speculative position limits requires accurate and timely information pertaining to the accounts of both domestic and foreign traders, a clear need exists for changes in regulatory policy toward foreign accounts in this regard. However, the need for additional information must be weighed against potential adverse effects of regulatory action in this area, including potential negative market impacts associated with reduced foreign trader participation and the possibility of retaliation by foreign governments against U.S. traders. Accordingly, careful consideration of the available regulatory alternatives is still necessary before the Commission implements specific rules that address this problem.
H.R.Rep. No. 565, 97th Cong., 2nd Sess. 68, reprinted in 1982 U.S.CODE CONG. & AD.NEWS 3871, 3917. ("SILVER MARKET 1979-80").
Construing the statutes and the legislative history in light of the overall regulatory scheme we find that the reach of the CEA is limited to trading on United States exchanges and transactions involving foreign contracts when they are negotiated and/or consumated within "the United States, its territories or possessions ...". 7 U.S.C. § 6(b). Accordingly, de Atucha, an Argentinian resident who placed trades on the LME from a location in Argentina falls outside of the class of individuals who are protected by American commodities laws.[34]
*524 Curran does not suggest an opposite result.[35] After determining that Congress intended to preserve the preexisting remedy of an implied cause of action the Court focused on whether that remedy encompassed respondents' action. In deciding the issue reliance was placed upon "the law as it existed in 1974." Here, de Atucha has not pointed to, nor have we found, any pre-1974 decision in which an implied right was found in favor of foreigners engaging exclusively in foreign transactions. De Atucha correctly argues that the dearth of cases on point is not alone dispositive of the question and that the federal courts must decide questions left open by Congress. However, to extend the protection of the CEA to include de Atucha would expand the remedy beyond what we have concluded to be Congress' intent. Improvisation of such a remedy is not a proper function for the judiciary and must await such time, if any, as Congress sees fit to act.
Finally, de Atucha asserts that the Restatement, Second, Foreign Relations Law of the United States §§ 17 and 18 (1965) mandates that he be afforded relief. The defendants correctly answer that the question of jurisdiction, to which those sections of the Restatement relate, is distinct from the issue raised here, i.e., whether de Atucha has standing under the CEA. To the extent that standing and jurisdiction issues involve evaluation of the same statute and/or legislative history, the analyses of the issues may be similar.[36] Nonetheless, even if it were determined that we are empowered to hear plaintiff's claim, an issue we do not decide here, the conclusion that de Atucha has standing would not follow.
For the foregoing reasons the motions are granted. Further, since we hold that de Atucha does not have standing under the Clayton Act nor under the CEA, he is also barred from bringing such claims against the defendants who have not joined in the instant motion. Accordingly, the complaint is dismissed in its entirety.
It is so ordered.
NOTES
[1] The other defendants are Nelson Bunker Hunt, William Herbert Hunt, Lamar Hunt, International Metals Investment Co., Ltd.,* Bache Halsey Stuart Shields, Inc., Bache Group, Inc., Alvin Brodsky,* Merrill Lynch Pierce Fenner & Smith, Inc., Conticommodity Services, Inc., Norton Waltuch, Melvin Schnell, Gillian Financial,* Conticapital Management, Inc., Conticapital Ltd., Naji Robert Nahas, Sheik Mohammed Aboud Al-Amoudi, Sheik Ali Bin Mussalem and Banque Populaire Suisse. The parties highlighted by an asterisk have not joined in the motion.
[2] The complaint alleges that de Atucha purchased three silver contracts at $50 per ounce for a total cost of $1.5 million. This implies that his three contracts called for delivery of 30,000 ounces of silver. As traded on Comex or CBOT a silver futures contract calls for delivery of 5,000 ounces of silver per contract while an LME silver contract calls for delivery of 10,000 ounces. Therefore, although not directly stated in the complaint, it follows that plaintiff traded on the LME. This fact is not in dispute.
[3] Liquidation is the sale of a contract by a person holding a long position or the purchase of a contract by a person holding a short position. See complaint at ¶ 24(f). For a helpful explanation of the nature of the commodity futures markets in general see Leist v. Simplot, 638 F.2d 283, 286-88 (2d Cir.1980), aff'd sub nom. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 102 S. Ct. 1825, 72 L. Ed. 2d 182 (1982).
[4] A purchaser of a futures contracts holds a long position and a seller holds a short position. See complaint at ¶ 24(e).
[5] It is questionable whether these facts, without more, are sufficient to state a claim against the exchange defendants. See Sam Wong & Son, Inc. v. New York Mercantile Exchange, 735 F.2d 653, 671 (2d Cir.1984); Bishop v. Commodity Exchange, Inc., 564 F. Supp. 1557, 1562 (S.D.N.Y. 1983). However, we do not address this issue since the complaint is dismissed for lack of standing.
[6] Although the complaint refers to LME contracts as "futures contracts" they are actually "forward contracts", which differ from futures contracts in several respects. See note 2, supra.
[7] 7 U.S.C. § 13(b) 1982. Recent enactments to 7 U.S.C. § 13(b) in the Futures Trading Act of 1982, Pub.L. No. 97-444, § 227(2), 96 Stat. 2316 (1983) do not have a direct bearing on de Atucha's claim because they have no retroactive effect. See note 30, infra. This is also true as to 7 U.S.C. §§ 6c, 7a(8). (Pub.L. No. 97-444, §§ 206, 216(1).
[8] 7 U.S.C. § 6b.
[9] 7 U.S.C. § 6c.
[10] 7 U.S.C. § 7a(8).
[11] 7 U.S.C. § 7(d).
[12] For the purposes of the section of the opinion discussing the antitrust claims "defendants" refers to the moving non-exchange defendants.
[13] De Atucha also relies heavily upon Strax v. Commodity Exchange, Inc., 524 F. Supp. 936 (S.D.N.Y.1981) and Pollock v. Citrus Associates, 512 F. Supp. 711 (S.D.N.Y.1981) for the proposition that traders in the silver futures market who were damaged by the price manipulations brought about by defendants' anticompetitive conduct are entitled to recover damages under the antitrust laws. De Atucha's reliance on these cases is misplaced. The decisions are inapplicable to the instant action because in Strax and Pollock the plaintiffs traded on and were allegedly injured on United States Exchanges.
[14] Unlike Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977) and Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S. Ct. 885, 31 L. Ed. 2d 184 (1972), the leading Supreme Court cases on the so called "pass-on" proposition, this is clearly not such a case.
[15] Justice Brennan analogized the remoteness inquiry to the analysis utilized by the courts to determine proximate cause. He remarked that the inquiry as to what constitutes an injury for antitrust purposes is "no less elusive" than the evaluation of proximate cause. Blue Shield of Virginia v. McCready, 457 U.S. at 477, 102 S.Ct. at 2547; accord Associated General Contractors of California v. California State Council, 459 U.S. at 535-37, 103 S.Ct. at 907-08.
[16] While the specific intent of the defendants is a factor to consider, the mere fact that the complaint alleges improper motive is not "a panacea that will enable any complaint to withstand a motion to dismiss." Associated General Contractors of California, Inc. v. California State Council, 459 U.S. at 537, 103 S.Ct. at 908. Here, the statement in the complaint that the defendants deliberately manipulated all significant silver markets does not answer the question whether de Atucha has standing under the Clayton Act as a trader on the LME. See Id.
[17] The price quoted for domestically refined copper by Kennecott Copper Corporation, Phelps Dodge Corporation and Anaconda Company, the defendants in Reading and the producers of "approximately 60 percent of the refined copper used by the nation's copper fabricators." Reading Industries, Inc. v. Kennecott Copper Corporation, 631 F.2d at 11.
[18] We recognize, of course, that Reading was decided before the Supreme Court's rulings in McCready and Associated General Contractors. Courts in this Circuit have been advised to follow the approaches taken by the Supreme Court "without concern whether the results are consistent with language in earlier Second Circuit cases". Crimpers Promotions, Inc. v. Home Box Office, Inc., 724 F.2d at 293. However, the Court of Appeals also indicated that their prior decisions have not necessarily "been drained of their precedential vitality on their own or very similar facts...." Id. The Reading court's analysis of causation is based upon the same principles as the remoteness inquiry set forth in McCready and Associated General Contractors. This, in addition to the factual similarities between this case and Reading, lead us to conclude that Reading offers valid precedential guidance on the issue of standing.
[19] Defendants further argue that de Atucha is not in the target area of the violation because he and the defendants both held long positions in the market. De Atucha correctly points out decisions in which "long" plaintiffs were allowed to sue "long" defendants. E.g., Leist v. Simplot, 638 F.2d 283, 290-91 (2d Cir.1980), aff'd, 456 U.S. 353, 102 S. Ct. 1825, 72 L. Ed. 2d 182 (1982). In considering de Atucha's market position vis-a-vis the defendants we do not hold that plaintiffs can never sue individuals on the same side of commodities contracts. As previously stated, the standing determination is to be made on a case by case basis. This is merely one factor we deem appropriate to consider here.
[20] Recently, Congress modified the Sherman Act to specifically limit jurisdiction over foreign conduct to cases in which the conduct has a "direct, substantial and reasonably foreseeable effect" on American commerce. Although the amendment is not applicable to the instant action (because it relates to jurisdiction, not standing, and also because we are not faced here with "foreign conduct"), the enactment does evidence a reaffirmation of the proposition that the Sherman Act is directed to the protection of American trade. Pub.L. No. 97-290, Title IV, § 402, 96 Stat. 1246 (1982).
[21] See, e.g., Strax v. Commodity Exchange Commission, 79 Civ. 5366 (MEL) (S.D.N.Y. filed Oct. 12, 1979); Freemarket v. Commodity Exchange Commission, 82 Civ. 366 (MEL) (S.D.N.Y. filed Jan. 20, 1982); Gordon v. Hunt, 82 Civ. 1318 (MEL) (S.D.N.Y. filed March 4, 1982); Michelson v. Merrill Lynch, Pierce, Fenner & Smith, 83 Civ. 8898 (MEL) (S.D.N.Y. filed Dec. 8, 1983); Korwek v. Hunt, 84 Civ. 7934 (MEL) (S.D.N.Y. filed Nov. 20, 1984).
[22] 7 U.S.C. § 6b.
[23] 7 U.S.C. § 13(b).
[24] What constitutes legal causation under the CEA was left unanswered in Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 395, 102 S. Ct. 1825, 1848, 72 L. Ed. 2d 182 (1982). It is unnecessary for us to decide whether de Atucha's alleged injuries were "proximately caused" by actions prohibited under the CEA since we have concluded that he lacks standing to sue.
[25] 7 U.S.C. § 6b.
[26] 7 U.S.C. § 13(b).
[27] 7 U.S.C. § 7a(8).
[28] For a review of the history of the CEA see Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. at 360-67, 102 S.Ct. at 1830-34.
[29] De Atucha argues, by analogy, that under Pfizer, Inc. v. Government of India, 434 U.S. 308, 98 S. Ct. 584, 54 L. Ed. 2d 563 a decision which held that foreign nations may sue under Section 4 of the Clayton Act, foreign residents may bring a cause of action under the CEA. Our decision should not be interpreted as precluding foreigners from bringing such suits. We hold merely that a foreigner who trades exclusively on a foreign exchange does not have standing under the Act.
[30] 7 U.S.C.A. § 25(d) (CEA Section 22(d) states in relevant part:
the enactment of the Futures Trading Act of 1982 ... shall not affect any right of any parties which may exist with respect to causes of action accruing prior to such date.
[31] 7 U.S.C.A. § 25 Private rights of action
(a) Actual damages; actionable transactions; exclusive remedy
(1) Any person (other than a contract market, clearing organization of a contract market, licensed board of trade, or registered futures association) who violates this chapter or who willfully aids, abets, counsels, induces, or procures the commission of a violation of this chapter shall be liable for actual damages resulting from one or more of the transactions referred to in clauses (A) through (D) of this paragraph and caused by such violation to any other person
(A) who received trading advice from such person for a fee;
(B) who made through such person any contract of sale of any commodity for future delivery (or option on such contract or any commodity); or who deposited with or paid to such person money, securities, or property (or incurred debt in lieu thereof) in connection with any order to make such contract;
(C) who purchased from or sold to such person or placed through such person an order for the purchase or sale of
(i) an option subject to section 6c of this title (other than an option purchased or sold on a contract market or other board of trade);
(ii) a contract subject to section 23 of this title; or
(iii) an interest or participation in a commodity pool; or
(D) who purchased or sold a contract referred to in clause (B) hereof if the violation constitutes a manipulation of the price of any such contract or the price of the commodity underlying such contract.
(2) Except as provided in subsection (b) of this section, the rights of action authorized by this subsection and by sections 7a(11), 18, and 21(b)(10) of this title shall be the exclusive remedies under this chapter available to any person who sustains loss as a result of any alleged violation of this chapter. Nothing in this subsection shall limit or abridge the rights of the parties to agree in advance of a dispute upon any forum for resolving claims under this section, including arbitration.
(b) Liabilities of organizations and individuals; bad faith requirement; exclusive remedy
(1)(A) A contract market or clearing organization of a contract market that fails to enforce any bylaw, rule, regulation, or resolution that it is required to enforce by section 7a(8) and (9) of this title, (B) a licensed board of trade that fails to enforce any bylaw, rule, regulation, or resolution that it is required to enforce by the Commission, or (C) any contract market, clearing organization of a contract market, or licensed board of trade that in enforcing any such bylaw, rule, regulation, or resolution violates this chapter or any Commission rule, regulation, or order shall be liable for actual damages sustained by a person who engaged in any transaction on or subject to the rules of such contract market or licensed board of trade to the extent of such person's actual losses that resulted from such transaction and were caused by such failure to enforce or enforcement of such bylaws, rules, regulations, or resolutions.
(2) A registered futures association that fails to enforce any bylaw or rule that is required under section 21 of this title or in enforcing any such bylaw or rule violates this chapter or any Commission rule, regulation, or order shall be liable for actual damages sustained by a person that engaged in any transaction specified in subsection (a) of this section to the extent of such person's actual losses that resulted from such transaction and were caused by such failure to enforce or enforcement of such bylaw or rule.
(3) Any individual who, in the capacity as an officer, director, governor, committee member, or employee of a contract market, clearing organization, licensed board of trade, or a registered futures association willfully aids, abets, counsels, induces, or procures any failure by any such entity to enforce (or any violation of the chapter in enforcing) any bylaw, rule, regulation, or resolution referred to in paragraph (1) or (2) of this subsection, shall be liable for actual damages sustained by a person who engaged in any transaction specified in subsection (a) of this section on, or subject to the rules of, such contract market, licensed board of trade or, in the case of an officer, director, governor, committee member, or employee of a registered futures association, any transaction specified in subsection (a) of this section, in either case to the extent of such person's actual losses that resulted from such transaction and were caused by such failure or violation.
(4) A person seeking to enforce liability under this section must establish that the contract market, licensed board of trade, clearing organization, registered futures association, officer, director, governor, committee member, or employee acted in bad faith in failing to take action or in taking such action as was taken, and that such failure or action caused the loss.
(5) The rights of action authorized by this subsection shall be the exclusive remedy under this chapter available to any person who sustains a loss as a result of (A) the alleged failure by a contract market, licensed board of trade, clearing organization, or registered futures association or by any officer, director, governor, committee member, or employee to enforce any bylaw, rule, regulation, or resolution referred to in paragraph (1) or (2) of this subsection, or (B) the taking of action in enforcing any bylaw, rule, regulation, or resolution referred to in this subsection that is alleged to have violated this chapter, or any Commission rule, regulation, or order.
(c) Jurisdiction
The United States district courts shall have exclusive jurisdiction of actions brought under this section. Any such action must be brought within two years after the date the cause of action accrued.
(d) Dates of application to actions
The provisions of this section shall become effective with respect to causes of action accruing on or after the date of enactment of the Futures Trading Act of 1982 [January 11, 1983]: Provided, That the enactment of the Futures Trading Act of 1982 shall not affect any right of any parties which may exist with respect to causes of action accruing prior to such date.
[32] 7 U.S.C. § 6(b) (CEA Section 4(b)) provides:
(b) The Commission may adopt rules and regulations proscribing fraud and requiring minimum financial standards, the disclosure of risk, the filing of reports, the keeping of books and records, the safeguarding of customers' funds, and registration with the Commission by any person located in the United States, its territories or possessions, who engages in the offer or sale of any contract of sale of a commodity for future delivery that is made or to be made on or subject to the rules of a board of trade, exchange, or market located outside the United States, its territories or possessions. Such rules and regulations may impose different requirements for such persons depending upon the particular foreign board of trade, exchange, or market involved. No rule or regulation may be adopted by the Commission under this subsection that (1) requires Commission approval of any contract, rule, regulation, or action of any foreign board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market, or (2) governs in any way any rule or contract term or action of any foreign board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market.
[33] Prior to the enactment of CEA Section 4(b), (7 U.S.C. § 6(b)), the CFTC adopted Regulation 30.02, 17 C.F.R. § 30.02 (1984), which allows the CFTC to regulate against the perpetration of fraud on American consumers who purchase foreign commodities contracts. See II P. JOHNSON, supra, § 5.42 at p. 329 ("But American residents have been solicited to trade in foreign futures, principally in London. To fill this perceived regulatory gap, the Commission adopted Regulation § 30.02....") De Atucha argues he is covered by both CEA § 4(b) and Regulation § 30.02. However, de Atucha is not a United States citizen. Further, notwithstanding the fact that Merrill Lynch's principal office may be located in the United States, the fact remains that de Atucha purchased his LME contracts from Merrill Lynch in Argentina, which is not "located in the United States, its territories or possessions" as Section 4(b) requires.
[34] De Atucha argues that he should not be barred from bringing an action under the CEA because it was Merrill Lynch, his broker, who made the decision to trade his commodities account on the LME rather than a United States exchange. Affidavits submitted in support and in opposition to the motion reveal there is a factual dispute as to (1) whether de Atucha's account was a "discretionary" one and (2) who made the decision to trade it on the LME. Compare, e.g., Affidavit of Jose Maria Malbran (filed June 10, 1983) with Affidavit of Jorge M.C.C. de Atucha (filed June 22, 1983). Resolution of this dispute is not essential to disposal of the motion. Whether de Atucha specifically instructed Merrill Lynch to trade on the LME or whether he left the decision regarding which exchange to trade on to his broker's discretion does not alter the fact which we find dispositive, namely, that the market he ultimately traded on is one that is not regulated by the CEA. Moreover, we accept the proposition that one goal of strict regulation of United States commodities is to provide incentive to foreigners to trade here. See Alpa S.A. Agroindustrial Alemano v. ACLI International Inc., 573 F. Supp. 1070, 1076 (S.D.N.Y. 1983) ("The way to encourage foreign traders to trade on the Chicago futures market, rather than on foreign markets, is to maintain a regulated market with standards of care imposed on commission merchants like ACLI as well as on the exchanges themselves. These standards should be applied as long as the actual trade is made on a United States exchange....") To allow recovery under the CEA based upon trading on foreign markets would eradicate this inducement to foreign traders. Moreover, it would be inconsistent with a congressional purpose of increased economic growth on United States commodities markets.
[35] Nor, as plaintiff argues, does our decision in Strax v. Commodity Exchange, 524 F. Supp. 936 (S.D.N.Y.1981) (Lasker, J.) compel an opposite result. Although we left open the question as to whether a trader who trades on one United States exchange may hold both United States exchanges liable, Id. at 942 n. 13, Strax certainly did not hold that a foreign trader on a foreign exchange has standing under the CEA to sue the United States exchanges.
[36] Although most of the cases upon which plaintiff relies discuss jurisdiction and not standing, to the extent that the decisions provide analogous authority we find them to support the conclusion that de Atucha lacks standing. For example, in CFTC v. Muller, 570 F.2d 1296 (5th Cir.1978), the Fifth Circuit relied upon a Second Circuit opinion, British American Commodity Options Corp. v. Bagley, 552 F.2d 482 (2d Cir.), cert. denied, 434 U.S. 938, 98 S. Ct. 427, 54 L. Ed. 2d 297 (1977), to hold that the CFTC has jurisdiction to regulate the sale of London Commodity options sold in the United States, and in Psimenos v. E.F. Hutton & Co., 722 F.2d 1041 (2d Cir.1983), the Second Circuit recently held that trading on United States commodities markets was enough to sustain jurisdiction. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1485934/ | 944 F. Supp. 531 (1996)
Gila ALTER, et al., Plaintiffs,
v.
BELL HELICOPTER TEXTRON, INC., et al., Defendants.
Civil Action Nos. H-95-5046, H-96-364.
United States District Court, S.D. Texas, Houston Division.
June 17, 1996.
*532 *533 Kevin David Krist, Krist, Gunn, Weller, Neumann & Morrison, Houston, TX, Marc S. Moller, Kreindler & Kreindler, New York City, for Gila Alter.
Winstol D. Carter, Jr., Fulbright & Jaworski, Houston, TX, for Bell Helicopter Textron, Inc.
Robert F. Ruckman, Jackson & Walker, Dallas, TX, for Allison Engine Company, Inc. and General Motors Corp.
MEMORANDUM AND OPINION
ROSENTHAL, District Judge.
Pending before this court are the following motions:
defendants' motion for summary judgment based on the General Aviation Revitalization Act ("GARA"), § 2(a), 49 U.S.C.A. § 40101, Note, § 2(a) (West Supp.1995) (Docket Entry Nos. 3, 19, and 34);[1]
defendants' motion to dismiss for forum non conveniens (Docket Entry No. 16);
plaintiffs' motions to remand to state court for lack of subject matter jurisdiction (Docket Entry Nos. 21 and 35); and
defendants' motion to rule on the motion to dismiss for forum non conveniens prior to ruling on plaintiffs' motion to remand to state court (Docket Entry No. 23).
Based on the pleadings, motions, submissions, and applicable law, this court DENIES defendants' motion to have this court rule on the motion to dismiss based on forum non conveniens before ruling on plaintiffs' motion to remand; DENIES plaintiffs' motion to remand; GRANTS defendants' motion for summary judgment based on GARA; and DENIES as moot the motion to dismiss based on the doctrine of forum non conveniens, for the reasons stated below.
I. Background
On November 24, 1993, Ilan Alter and Abraham Gad were killed in the crash of a Bell 206 helicopter near Beit-Kama, Israel. Gila Alter ("Alter"), the surviving wife of Ilan Alter and next friend of Ron and Nitzan Alter, filed this wrongful death action in the state district court in Harris County, Texas, on August 31, 1995. Dalia Gad ("Gad"), the surviving wife of Abraham Gad and next friend of Danit and Ayelet Gad, filed a separate wrongful death action in the state district court in Harris County, Texas, on November 20, 1995. In those lawsuits, plaintiffs alleged that defendants negligently designed, manufactured, tested, and sold the helicopter and its component parts, and negligently drafted, edited, published, and sold maintenance manuals for the helicopter. Plaintiffs' theory of the case is that an engine compressor stator vane which had a propensity to prematurely fatigue and fail broke, which caused the engine to stall and the helicopter to crash, and that defendants failed to warn in the maintenance manual that the thickness of the engine compressor stator vane had to be checked at the root in order to determine the extent of wear.
Defendants Bell Helicopter Textron Inc. ("Bell") and General Motors Corporation *534 ("General Motors") removed the Alter case to federal court on October 27, 1995 and the Gad case on February 2, 1996.
Plaintiffs have moved to remand both the Alter and Gad cases. Defendants respond that this court has diversity and federal question jurisdiction. Defendants seek dismissal of both cases based on forum non conveniens and argue that the court should decide whether to dismiss based on forum non conveniens before deciding whether this court has subject matter jurisdiction. Defendants also seek summary judgment based on GARA.
II. Defendants' Motion for a Ruling on the Motion to Dismiss for Forum Non Conveniens Prior to a Ruling on Plaintiffs' Motion to Remand
A court must determine whether it has jurisdiction over an action before considering a motion to dismiss on the ground of forum non conveniens. Gulf Oil v. Gilbert, 330 U.S. 501, 504, 67 S. Ct. 839, 841, 91 L. Ed. 1055 (1947); Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1542 (5th Cir.), cert. denied, 502 U.S. 963, 112 S. Ct. 430, 116 L. Ed. 2d 449 (1991); Vaz Borralho v. Keydril Co., 696 F.2d 379, 385 (1983); Didi v. Destra Shipping Co., No. 93-1851, 1993 WL 488534, at *1 (E.D.La. Nov. 19, 1993); 15 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3828 n. 30 (1986). Defendants' motion for this court to rule first on the forum non conveniens motion is DENIED.
III. Plaintiffs' Motions to Remand
Plaintiffs argue that these lawsuits are not removable because the complaints do not raise a federal question and because defendant Bell is a Texas resident. Defendants argue that removal was proper because Bell was fraudulently joined and because, in the Alter case, plaintiffs waived their right to seek remand because they did not move to remand within thirty days from removal. Defendants also contend that these actions arise under federal law because: GARA completely preempts plaintiffs' claims; plaintiffs rely on a treaty with a foreign state to establish a cause of action; and plaintiffs seek to regulate foreign air space and invoke the federal common law of international relations.
A. Waiver of Procedural Defects in Removal: The Alter Case
Plaintiff Alter argues that this court does not have removal jurisdiction because Bell is a resident of the forum state. Defendants argue that Alter waived her right to object to the in-state defendant's removal of this action because Alter did not file her motion to remand within thirty days of removal. The parties agree that complete diversity exists between Alter and defendants and that Bell is a Texas resident.
28 U.S.C. § 1441(b) provides as follows:
Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. Any other such action shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.
28 U.S.C. § 1447(c) provides:
A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal ...
Defendants in the Alter case filed their notice of removal on October 27, 1995. Alter did not file her motion to remand until January 16, 1996. Alter argues that her objection to defendants' removal of this action is not based on a procedural "defect," but is "substantive" in nature.
The Fifth Circuit has held that "[d]efects in removal procedure include, inter alia, the removal of an action that could have been filed originally in federal court but could not be removed to federal court if it were filed originally in state court." Pavone v. Mississippi Riverboat Amusement Co., 52 F.3d 560, 566 (5th Cir.1995), citing Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1544 (5th Cir. 1991), cert. denied, 502 U.S. 963, 112 S. Ct. 430, 116 L. Ed. 2d 449 (1991). Because complete *535 diversity exists between Alter and defendants, Alter could have originally filed this action in federal court. The presence of an in-state defendant affects removability, not jurisdiction. Alter's motion to remand based on the presence of a defendant from the forum state is based on a procedural defect in removal. See, e.g., In re Shell Oil Co., 932 F.2d 1518, 1522-23 (5th Cir.1991), cert. denied, 502 U.S. 1049, 112 S. Ct. 914, 116 L. Ed. 2d 814 (1982). By not filing her motion to remand within thirty days, Alter waived her right to object to removal based on the presence of a defendant from the forum state.
Alter alternatively argues that she did not waive her objection to removal because she informed the court that she planned to file a remand motion. On November 15, 1995, within the thirty-day deadline, Alter filed a motion with this court which states, "[p]laintiff requires additional time to determine whether a motion to remand is appropriate." (Docket Entry No. 6, p. 2).
Alter does not cite any authority which expands the thirty-day window for filing her motion to remand. Federal courts strictly observe the thirty-day deadline for filing motions to remand. In re Shell Oil Co., 932 F.2d at 1522-23 (holding that remand was precluded when the motion to remand was filed 33 days after the removal notice); Elder v. Wal-Mart Stores, Inc., 751 F. Supp. 639, 640 (E.D.La.1990) (31 days). Strict enforcement serves the policy behind section 1447(c), to "prevent a party who is aware of a defect in removal procedure from using the defect as insurance against later unfavorable developments in federal court." In re Shell Oil Co., 932 F.2d at 1522; 14A WRIGHT, MILLER, & COOPER, FEDERAL PRACTICE & PROCEDURE, § 3739 at 261 (2d ed. Supp.1995). Alter waited over 75 days after removal to file her motion to remand. The record discloses no basis on which this court should extend the deadline as Alter seeks, and the applicable authority precludes such an extension.
The motion to remand the Alter case is DENIED.
B. Fraudulent Joinder: The Gad Case
Defendants argue that as a matter of law, GARA prevents any possibility of recovery by the Gad plaintiffs against Bell and that Bell's presence in this lawsuit therefore does not preclude removal.
1. The Fraudulent Joinder Criteria
To demonstrate that a defendant has been fraudulently joined to defeat removal jurisdiction, the removing party bears the heavy burden of proving either that: (1) there has been outright fraud in the plaintiff's recitation of jurisdictional facts; or (2) there is no possibility that the plaintiff would be able to establish a cause of action in state court against the defendants whose citizenship prevents removal. Burden v. General Dynamics Co., 60 F.3d 213, 217 (5th Cir.1995).
There is no contention that the plaintiff is guilty of actual fraud in her pleading. The only issue is whether the defendants have carried their heavy burden of showing that there is no possibility that the plaintiff has a cause of action against Bell in state court.
In determining whether a case was properly removed, a district court must not "pre-try" substantive factual issues in order to answer the discrete threshold question of whether the joinder of an in-state defendant is fraudulent. Dodson v. Spiliada Maritime Co., 951 F.2d 40, 42 (5th Cir.1992); Green v. Amerada Hess Co., 707 F.2d 201, 204 (5th Cir.1983), cert. denied, 464 U.S. 1039, 104 S. Ct. 701, 79 L. Ed. 2d 166 (1984); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 546 (5th Cir.1981). The burden of persuasion placed upon those who assert "fraudulent joinder" is indeed a heavy one. In order to establish that an in-state defendant has been fraudulently joined, the removing party must show that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court. B., Inc., 663 F.2d at 549. The district court must evaluate all of the factual allegations of the parties contained in their pleadings, depositions and affidavits in the light most favorable to the plaintiff, resolving all contested issues of substantive fact in favor of the plaintiff. Id. at 549 (collecting cases). The district court must also resolve uncertainties *536 as to the current state of controlling substantive law in favor of the plaintiff. Id. at 550.
Defendants argue that under GARA, there is no possibility that plaintiff could establish a cause of action in the Texas state court against Bell. In the Fifth Circuit, a removing party's claim of fraudulent joinder to destroy removal jurisdiction is analyzed under standards similar to a motion for summary judgment. LeJeune v. Shell Oil Co., 950 F.2d 267, 271 (5th Cir.1992); Carriere v. Sears, Roebuck and Co., 893 F.2d 98, 100 (5th Cir.), cert. denied, 498 U.S. 817, 111 S. Ct. 60, 112 L. Ed. 2d 35 (1990). The Fifth Circuit expressly authorizes consideration of evidence outside the pleadings. Burden, 60 F.3d at 217; Carriere, 893 F.2d at 100. After all disputed questions of fact and ambiguities in the controlling state law are resolved in favor of the nonremoving party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned. Burden, 60 F.3d at 217; LeJeune, 950 F.2d at 271.
2. GARA and the Failure to Warn
GARA provides as follows:
[N]o civil action for damages for death or injury to persons or damage to property arising out of an accident involving a general aviation aircraft may be brought against the manufacturer of the aircraft or the manufacturer of any new component, system, subassembly, or other part of the aircraft, in its capacity as a manufacturer if the accident occurred
(1) after the applicable limitation period [18 years] beginning on
(A) the date of delivery of the aircraft to its first purchaser or lessee, if delivered directly from the manufacturer; or
(B) the date of first delivery of the aircraft to a person engaged in the business of selling or leasing such aircraft; or
(2) with respect to any new component, system, subassembly, or other part which replaced another component, system, subassembly, or other part originally in, or which was added to, the aircraft, and which is alleged to have caused such death, injury, or damage, after the applicable limitation period beginning on the date of completion of the replacement or addition.
49 U.S.C.A. § 40101, Note, § 2(a) (West Supp.1995).
GARA "supersedes any State law to the extent that such law permits a civil action" to be brought after the eighteen-year limitation period. 49 U.S.C.A. § 40101, Note, § 2(d). Plaintiff admits that more than eighteen years passed between the first delivery of the helicopter and the engine from the manufacturer and the accident. (Docket Entry No. 32, Affidavit of Marc Moller, Counsel for Plaintiffs, ¶ 2). The summary judgment evidence includes affidavits from Bell's and General Motors's representatives, which establish the following points:
The engine component alleged to have failed causing the crash, was a compressor section, serial number 38228, part number 6853337. This compressor section was manufactured by the Allison Gas Turbine Division of General Motors Corp. ("Allison") on April 8, 1975 and shipped directly from Allison to Bell on April 14, 1975. The engine, serial number CAE-822569, was manufactured and assembled on April 7, 1995 and shipped from Allison to Bell on April 15, 1975.
Bell first sold the helicopter to Chimavir Services, Ltd. in Tel Aviv, Israel, on May 20, 1975. It was delivered on or before August 30, 1975.
After the date of delivery, neither General Motors nor Bell made any changes to the helicopter or to the compressor section of the engine.
(Docket Entry No. 3, Affidavit of Ben James Brown, Manager of Commercial Marketing Administration for Bell; Docket Entry Nos. 1 and 19, Affidavits of Jeffrey W. Edwards, Manager, Accident Investigations for Allison).
The record before this court shows that the helicopter and the engine component asserted to have caused the crash were manufactured and delivered in 1975. Under GARA, there is no possibility of recovery against Bell under Texas state law for negligent *537 design, manufacture, or testing of the helicopter and the component engine part alleged to have caused the crash. See, e.g., Altseimer v. Bell Helicopter Textron Inc., 919 F. Supp. 340, 341-42 (E.D.Cal.1996).
Plaintiff argues that GARA does not preclude recovery against Bell under Texas law for defective marketing or failure to warn. Plaintiffs assert that Bell issued maintenance manuals within the eighteen-year limitation period, and that the manuals contained a misleading statement that proximately caused the helicopter crash. Plaintiff alleges that the maintenance manual contained instructions on how to inspect the engine compressor stator vane that, if followed, would not enable a mechanic to detect serious wear and tear in that component. Plaintiff relies on the Israeli government investigation report of the accident, which stated as follows:
The manufacturer's instruction relating to the inspection of the engine compressor stator vanes erosion, during the periodical checks, was drafted in a misleading manner, which brought up the understanding that thickness had to be checked at the outer end rather than at the root of the vane.
(Docket Entry No. 30, Affidavit of David Fiol, Exhibit 1, p. 28).
Plaintiff submitted summary judgment evidence that either Bell, the helicopter manufacturer, or the General Motors subsidiary that manufactured the engine, reissued and revised the maintenance manual approximately twice a year since 1974. (Docket Entry No. 30, Affidavit of David Fiol, Exhibit 2). There is no evidence as to when the language criticized in the Israeli investigation report first appeared in the manual. Plaintiff argues that GARA does not apply because of the "delivery within the repose period of manuals which Israeli authorities have identified as misleading.... By refusing to apply the statute of repose under these circumstances, courts will ensure that defendants don't take lightly their obligation to incorporate new information as the manuals are republished, so that accidents do not repeat themselves needlessly and senselessly." (Docket Entry No. 29, p. 6).
Plaintiff asserts causes of action only under Texas law.[2] Plaintiff has asserted, or could assert, causes of action under Texas law for strict liability based on a marketing defect that made the helicopter unreasonably dangerous, see Caterpillar, Inc. v. Shears, 911 S.W.2d 379, 382 (Tex.1995); negligent failure to warn, id. at 384; negligent performance of an undertaking, see RESTATEMENT (SECOND) OF TORTS § 324A (1966); and breach of an implied and express warranty of merchantability, TEX.BUS. & COM.CODE ANN. §§ 2.314, 2.315 (Tex.UCC) (Vernon 1994).[3]
Gad alleged in her original petition that Bell and General Motors were negligent, as follows:
(1) in carelessly designing, manufacturing, testing and selling the subject aircraft and its component parts; and (2) in carelessly and negligently drafting, editing, publishing and selling the applicable maintenance manuals.
(Docket Entry No. 1, p. 4).
Gad also alleged that the helicopter engines were defectively designed, manufactured, tested and sold in that there was a: *538 propensity of the stator vane to prematurely fatigue and fail and the failure to prescribe appropriate and reasonable inspection procedures to detect such conditions prior to failure, and the defective manuals by Bell and General Motors created an unreasonably dangerous condition in the aircraft, its engines and component parts ...
(Id. at 5).
Gad also alleged a breach of an implied and/or express warranty of merchantability, which was breached by Bell and General Motors by "furnishing a helicopter and engines and relevant maintenance manuals that were not fit for the ordinary purposes for which such goods are used." (Id.).
Plaintiff first argues that GARA does not preclude the defective marketing or failure to warn claims because manufacturers' maintenance manuals are covered under section 2(a)(2) of GARA, which states that the eighteen-year repose period must be applied separately to "any new component, system, subassembly, or other part which replaced another component, system, subassembly, or other part originally in, or which was added to, the aircraft...." Plaintiff argues that a manual revision is a "new component, system, subassembly, or other part which replaced another component, system, subassembly, or other part originally in, or which was added to, the aircraft" under section 2(a)(2) of GARA.
The parties cite no Fifth Circuit or Texas case involving similar facts or law. However, a similar argument has been rejected by the Tenth Circuit in a case involving a statute of repose under state law.
In Alexander v. Beech Aircraft Corp., 952 F.2d 1215 (10th Cir.1991), a plane crashed after running out of fuel. The plaintiffs argued that the operator handbook issued by the defendant manufacturer was defective because it overstated the amount of usable fuel in the aircraft. The defendant manufacturer argued that Indiana's ten-year statute of repose barred the plaintiffs' failure to warn suit. The plaintiffs contended that the handbook was a "replacement part" under the statute of repose which, like the similar GARA provision, triggered a new limitations period. The Tenth Circuit denied plaintiffs' claim, holding that the handbook was not a "replacement part," but merely "part of the evidence proffered by plaintiffs which bears on a failure to warn theory" against the defendant. Id. at 1220.
This result is consistent with the language of GARA. Section 2(a)(2) of GARA states that a replacement "component, system, subassembly, or other part" must replace a "component, system, ... or other part" "originally in" or "added to" the aircraft. The manual was not a "part" "originally in" or "added to" the aircraft. The manual revisions are not a replacement "component, system, subassembly, or other part" that started a new limitations period under section 2(a)(2).
This result is also consistent with the holdings of a number of federal courts applying state statutes of repose similar to GARA. These courts have held that manufacturers' maintenance and repair manuals are not a "separate" product or component upon which plaintiffs may base a claim to avoid a repose statute. See, e.g., Schamel v. Textron-Lycoming, 1 F.3d 655, 657 (7th Cir.1993); Alexander v. Beech Aircraft Co., 952 F.2d 1215, 1220-21 (10th Cir.1991); Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1135 (6th Cir. 1986); Butchkosky v. Enstrom Helicopter Co., 855 F. Supp. 1251, 1257 (S.D.Fla.1993).
In Schamel v. Textron-Lycoming, 1 F.3d 655 (7th Cir.1993), the plaintiff brought a wrongful death action under Indiana law against a manufacturer of aircraft engines and parts, alleging that the defendant's failure to provide adequate information in its overhaul and service manuals led to faulty repairs that in turn caused a component to fail and the plane to crash. The plaintiff alleged that the defendant failed to provide service or fatigue limits for connecting rods in the overhaul and service manuals. The defendant contended that Indiana's product liability statute of repose barred the plaintiff's claims for failure to warn. The Seventh Circuit held that the issuance of service manuals and other sources of service information was not a separate and discrete post-sale undertaking because such information is *539 "generally necessary to satisfy the manufacturer's duty to warn." 1 F.3d at 655. The court concluded that an action for damages resulting from a manufacturer's alleged failure to warn of a latent defect in the product was barred by the Indiana statute of repose. Id. at 657. The court stated as follows:
[D]efendant had a duty to provide the service information and, thus, the provision of such information was not a voluntary undertaking distinct from the obligations inherent in the initial sale of the product. Accordingly, the plaintiff merely alleges that the defendant breached its continuing duty to warn by not establishing a safe fatigue life for the connecting rods. [H]owever, an action for damages resulting from the alleged failure of a manufacturer or seller to warn a user of its product's latently defective nature is certainly a product liability action [and covered by the Product Liability Act and its statute of repose].
Id.
In Kochins v. Linden-Alimak, Inc., 799 F.2d 1128 (6th Cir.1986), the decedent suffered severe injuries while dismantling a hoist when a sheave guard fell onto his head. The defendant argued that the lawsuit was barred by Tennessee's statute of repose for product liability actions. The plaintiff argued that the action was not barred because the defendant had sold a defective manual to the product owner within the ten-year statute of repose. The Kochins court held that the statute of repose barred the plaintiff's cause of action based on the theory that the manual failed to warn or provide proper instructions necessary for the safe use of the product. The court ruled that the instruction manual could not be considered a separate "product" issued within the limitation period. Id. at 1135.
The Sixth Circuit explained as follows:
We do not think that the Tennessee Supreme Court would interpret the word "product"... to include the instruction manual ... Although the definition of a "product liability action" includes actions based upon the "warning" or "instruction ... of any product," and, while a failure to warn or provide proper instructions are theories upon which a plaintiff may proceed, the instructions themselves are not a "product" as defined by the act. While we agree that, under Tennessee law, a manufacturer's failure to provide proper warnings or adequate instructions for the use of its product may render the product defective or unreasonably dangerous in use, even if the product contains no manufacturing or design defect, we do not agree that the warnings and instructions themselves are a "product"... Language of instruction cannot be "defective or unreasonably dangerous" in itself.
Id. (citations omitted). See also Alexander v. Beech Aircraft Co., 952 F.2d 1215, 1220-21 (10th Cir.1991) (holding that an instruction handbook was not a "product" under the Indiana Products Liability Act, IND.CODE ANN. § 34-4-20A-2).[4]
In Butchkosky v. Enstrom Helicopter Co., 855 F. Supp. 1251, 1257 (S.D.Fla.1993), the plaintiff argued that Florida's twelve-year statute of repose for product liability claims should not bar a claim against the manufacturer for helicopter repairs performed by a third party within the twelve-year repose period. The plaintiff argued that because the repairs were done according to the manufacturers' instruction manual, and the manual was issued within the repose period, the claim was still viable. The court held that the statute of repose barred the claims, stating as follows:
To hold that [the defendant] should be liable because its manuals issued within the period of repose did not provide an adequate means of correcting the design flaw of the critical component, would be to circumvent the statute of repose by providing *540 a back door to sue for the design flaw ostensibly not for the design flaw itself, but for the failure of the manuals to adequately correct the flaw. The result would be the evisceration of the statute of repose. If a plaintiff is precluded by the statute of repose from suing for a design flaw in a product, the plaintiff must also be precluded from suing for a failure to correct the design flaw, whether that failure be in the inadequacy of the text of a subsequently issued owner's manual or in repair guidelines subsequently sent to mechanics.
Id. at 1255 (emphasis added). Because the instructions were not themselves a product under the state's product liability statute, their issuance within the repose period did not recommence the running of the statute of repose.
Plaintiff relies on Driver v. Burlington Aviation, Inc., 110 N.C.App. 519, 430 S.E.2d 476, (1993), in which the plaintiffs alleged that incorrect information in the defendant manufacturer's manual concerning carburetor icing and slow-flight characteristics led to the crash of an airplane. The defendant argued that the plaintiffs' claims were barred by North Carolina's statute of repose for product liability actions. The plaintiffs contended that the statute of repose did not bar their claim because the information manual was sold separately.
The state court of appeals held that the plaintiffs' claim would not be precluded by the statute of repose if the plaintiffs could establish that the information manual had been sold within the limitations period. The court explained that the manual, and not the aircraft, was the only defective product which created the plaintiffs' cause of action. Id. 430 S.E.2d at 483. The reasoning of the state court of appeals in Driver is inconsistent with that of the other courts faced with similar claims. Moreover, in Driver, unlike the present case and unlike Schamel, Alexander, Kochins, and Butchkosky, the plaintiffs did not contend that the aircraft was in any way defective. To the contrary, the only allegation in Driver was that the manual was faulty; the aircraft was properly designed and manufactured, and there was no allegation that it functioned improperly or defectively. By contrast, the plaintiff's theory in the present case, like Schamel, Alexander, and others, is that a specific component failed because of defective design a propensity to prematurely fatigue and fail and testing, and that the manual described an inspection procedure which did not correct the design flaw or allow it to be detected. Under the authorities discussed above, the suit for a failure of the manuals to correct a design flaw is precluded by the statute of repose that bars a suit for the design flaw.
Texas has adopted the strict product liability law set out in section 402A of the RESTATEMENT (SECOND) OF TORTS (1965). As the Texas Supreme Court recently stated, under section 402A(1) of the RESTATEMENT:
A product may be unreasonably dangerous because of a defect in manufacturing, design, or marketing. See Turner v. General Motors Corp., 584 S.W.2d 844, 847 (Tex. 1979). A defendant's failure to warn of a product's potential dangers when warnings are required is a type of marketing defect. See Lucas v. Texas Indus., Inc., 696 S.W.2d 372, 377 (Tex.1984). Liability will attach if the lack of adequate warnings or instructions renders an otherwise adequate product unreasonably dangerous. Id.
Caterpillar, 911 S.W.2d at 382.
The Texas law on strict liability for manufacturing defects appears to be the same in relevant aspects as that considered by the Seventh Circuit in Schamel v. Textron-Lycoming; by the Sixth Circuit in Kochins v. Linden-Alimak; and the Tenth Circuit in Alexander v. Beech Aircraft.[5] These courts held that under state statutes of repose similar to GARA, the manufacturer's provision of maintenance and repair manuals was part of its duty to warn as a manufacturer. The *541 statutes of repose extinguished the manufacturers' liability arising from this duty the specified number of years after the first delivery of the product.
GARA clearly prohibits a lawsuit arising from design or manufacturing defects in an aircraft delivered more than eighteen years before the accident. As in Alexander and the other similar authorities noted above, plaintiff in the Gad case is asserting a claim of failure to warn concerning a condition in the aircraft as it was manufactured and delivered in 1975. The complaint attempts to assert this as a replacement part theory by claiming that Bell issued manuals within the repose period that did not adequately warn of the propensity of the stator vane to fatigue and fail prematurely and to prescribe proper inspection procedures to detect this design flaw. GARA precludes any recovery under state law for latent defects present at the time of manufacture. Applying the authorities cited above, GARA also precludes the possibility that plaintiff could establish a cause of action under Texas law for defective marketing or failure to warn against Bell based on allegedly misleading inspection instructions in the maintenance manual that failed to warn or allow detection of the design flaw.
Plaintiff also argues that GARA does not apply to accidents that occur in a foreign country, relying on Smith v. United States, 507 U.S. 197, 113 S. Ct. 1178, 122 L. Ed. 2d 548 (1993). In Smith, the Supreme Court held that the Federal Tort Claims Act, 28 U.S.C. § 2680(k), did not waive the United States's sovereign immunity for tort claims arising in Antarctica. The Supreme Court based its decision in part on the "longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States." Smith, 507 U.S. at 204, 113 S.Ct. at 1183. See also Boureslan v. Aramco, Arabian Am. Oil Co., 892 F.2d 1271, 1272 (5th Cir.1990) (en banc) (holding that Title VII does not regulate the employment practices of U.S. employers which employ U.S. citizens outside the United States), aff'd sub nom. EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 111 S. Ct. 1227, 113 L. Ed. 2d 274 (1991).
The cases relied on by plaintiff involve statutes which create a cause of action. GARA, in contrast, eliminates certain claims against aircraft and component manufacturers. Plaintiff has not cited any authority which holds that a federal statute barring enforcement of claims in courts of the United States bars only claims arising within the United States. Plaintiff's interpretation of GARA would have the anomalous effect of preventing litigants from bringing an action in the United States for an accident occurring in the United States while allowing litigants to bring the same action in the United States if the accident occurred abroad.
GARA bars civil actions arising out of accidents involving any general aviation aircraft or component part that is more than eighteen years old. Section 2(d) of GARA provides that GARA "supersedes any State law to the extent that such law permits a civil action ... to be brought after the ... limitation period." Plaintiffs state that "[t]his action is brought pursuant to the `Wrongful Death Act' and `Survival Act' of the State of Texas," TEX.CIV.PRAC. & REM.CODE ANN. §§ 71.001-71.011, 71.021 (Vernon 1986), and that Texas law applies. (Docket Entry No. 1, p. 2, and No. 29, pp. 8-9). GARA shows a clear intent to bar any claim based on state law, including claims based on accidents occurring outside the United States. GARA bars plaintiff's claims against Bell.
Because plaintiff has no possibility of recovery against Bell, Bell's presence in this lawsuit does not prevent removal. This court has subject matter jurisdiction over the Gad case.[6]
IV. Defendants' Motion for Summary Judgment Based on GARA
Having jurisdiction over both cases, and having earlier converted the motions to dismiss into motions for summary judgment, this court now considers Bell's and General Motors' motions for summary judgment.
*542 Based on the summary judgment record and the authorities, this court GRANTS the motion for summary judgment based on GARA, for the reasons stated in detail above. As the court stated in Altseimer:
Although harsh, such a result is consistent with the purpose of GARA to ... establish a Federal statute of repose to protect general aviation manufacturers from long-term liability in those instances where a particular aircraft has been in operation for a considerable number of years. A statute of repose is a legal recognition that, after an extended period of time, a product has demonstrated its safety and quality, and that it is not reasonable to hold a manufacturer legally responsible for an accident or injury occurring after that much time has elapsed.
919 F.Supp. at 342.
V. Order
This court DENIES defendants' motion to have this court rule on the motion to dismiss for forum non conveniens before ruling on plaintiffs' motion to remand; DENIES plaintiffs' motion to remand; GRANTS defendants' motion for summary judgment based on GARA; and DENIES as moot the motion to dismiss based on the doctrine of forum non conveniens.
NOTES
[1] On October 27, 1995, defendant Bell Helicopter Textron Inc. filed a motion to dismiss for failure to state a claim upon which relief could be granted pursuant to FED.R.CIV.P. 12(b)(6). (Docket Entry No. 3). On December 12, 1995, the court converted this motion to a motion for summary judgment. (Docket Entry No. 13). On February 16, 1996, defendant General Motors Corporation joined in Bell's dispositive motion. (Docket Entry Nos. 19 and 34).
The court consolidated Civil Action No. H-95-5046 with No. H-96-364 at a motion hearing on February 9, 1996. At that hearing, the parties agreed that the motions previously filed in No. H-95-5046 would also apply to No. H-96-364.
[2] (Plaintiff's Original Complaint in the Alter case, Docket Entry No. 1, p. 2; Plaintiff's Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment Based on GARA, Docket Entry No. 29, p. 8-9; Plaintiff's Original Complaint in the Gad case, Docket Entry No. 1, p. 2).
[3] Section 324A provides as follows:
Liability to Third Person for Negligent Performance of Undertaking.
One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if (a) his failure to exercise reasonable care increases the risk of such harm, or (b) he has undertaken to perform a duty owed by the other to the third person, or (c) the harm is suffered because of reliance of the other or the third person upon the undertaking.
Quoted in, Seay v. Travelers Indemnity Co., 730 S.W.2d 774, 775-76 (Tex.App. Dallas 1987, no writ); see also Johnson v. Abbe Eng'g Co., 749 F.2d 1131, 1132 (5th Cir.1984); Ponder v. Morrison-Knudsen Co., 685 F. Supp. 1359, 1366 (E.D.Tex.1988).
[4] Under Texas law, a plaintiff can predicate a products liability action on a breach of warranty under the U.C.C. Syrie v. Knoll Int'l, 748 F.2d 304, 306 (5th Cir.1984); Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 423 (Tex.1984). See also TEX.BUS. & COM.CODE ANN. §§ 2.314, 2.315 (Tex. UCC) (Vernon 1994). An operating manual, however, does not constitute "goods" within the meaning of the UCC. Rust/Lucky v. Williams Crane and Rigging, Inc., No. Civ. 90-7723, 1993 WL 405853, at *5 (E.D.Pa. Oct. 4, 1993). GARA precludes a state law claim for breach of warranty because Bell's maintenance manual is not a good, but rather part of its duty to warn.
[5] The Indiana law at issue in Schamel also followed section 324A of the RESTATEMENT (SECOND) OF TORTS. Under Texas law, like that of Indiana, the provision of maintenance and repair instructions is not a separate and discreet post-sale undertaking creating a separate cause of action, but rather part of the manufacturer's duty to warn. Schamel, 1 F.3d at 657; see also Kochins, 799 F.2d at 1135; Alexander, 952 F.2d at 1220-21.
[6] Defendants also argue that this court has subject matter jurisdiction because: (1) GARA completely preempts state law; (2) plaintiffs rely on a treaty with a foreign state to establish a cause of action; and (3) plaintiffs seek to regulate foreign air space and invoke the federal common law of international relations. The court need not, and does not, reach these issues. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1369181/ | 793 F. Supp. 627 (1992)
NATIONAL LIFE INSURANCE COMPANY, Plaintiff,
v.
PHILLIPS PUBLISHING, INC., and Richard E. Band and The Wall Street Digest, Inc., Defendants.
Civ. N-90-1374.
United States District Court, D. Maryland.
June 9, 1992.
*628 Theodore Sherbow, Michael P. Smith, and Weinberg and Green, Baltimore, Md., for plaintiff Nat. Life Ins. Co.
Lee T. Ellis, Jr., Anne R. Noble, Bruce W. Sanford, and Baker & Hostetler, Washington, D.C., for defendants Phillips Pub., Inc. and Richard E. Band.
Mary R. Craig, and Doyle & Craig, Baltimore, Md., Mary E. O'Laughlin, Jerrold V. Moss, and Rubin, Quinn, Moss, Heaney & Patterson, Philadelphia, Pa., for defendant The Wall Street Digest, Inc.
*629 MEMORANDUM OPINION
NORTHROP, Senior District Judge.
Now pending before this Court is Defendants' Renewed Motion for Summary Judgment on 1) whether Plaintiff is a Public Figure; 2) the degree of fault Plaintiff must apply to Defendants' conduct; and 3) whether Defendants' conduct constitutes malice (Paper Nos. 92 and 100). The Motion is opposed (Paper No. 98). The Motion was made and a hearing conducted pursuant to this Court's Orders (Paper Nos. 72, 84, and 96). After considering the arguments made by counsel at the hearing, in the pleadings, attachments and exhibits, this Court grants Defendants' Motion for Summary Judgment.
I. Background
A. Facts
Plaintiff, National Life Insurance Company ("National Life"), sues Defendants, Richard E. Band ("Band"), Phillips Publishing, Inc. ("Phillips"), and The Wall Street Digest ("Digest"), for statements written by Band, published by Phillips and reprinted by the Digest.
The Plaintiff is among the twenty-five largest mutual life insurance companies in the country, with 250,000 policy holders, over $4 billion in assets and over $25 billion in insurance policy coverage. Plaintiff is headquartered in Vermont but advertises nationally and has nationwide representation of insurance agents that nationally market its insurance products.
Defendant Band is a financial news analyst and editor. The alleged defamatory statements were initially printed in a newsletter he started in 1989 called Profitable Investing. At the time of the alleged defamation, Profitable Investing had a subscribership of approximately 20,000. Defendant Phillips, is a publisher of Band's newsletter, the special reports that accompany the newsletter and the marketing materials that promote Profitable Investing. Phillips publishes periodicals in the investment, health, telecommunications, banking and defense industries. Defendant, Digest, is a republisher of an article authored by Band that initially appeared in the March 1990 edition of Profitable Investing. Digest, which has a subscribership of approximately 22,000, did not publish, republish or circulate any other material that is the subject of this suit.
In the fall of 1989, Band prepared to launch Profitable Investing, and decided to offer to new subscribers, among other topics, his assessment of the insurance industry. Phillips sent new subscribers not only the newsletter, but bonus reports on selected topics. Bonus reports were intended to bring new subscribers up to date with Band's investment "tips." In addition to the newsletter and bonus reports, Profitable Investing was marketed by direct mail through various promotional packages. The promotional package included information about Band, statements from various articles printed in the newsletter, and a subscription application. Phillips mailed the marketing or promotional materials for the newsletter Profitable Investing to a select audience of persons who had previously demonstrated an interest in purchasing a financial or investment publication. The materials were not sent to the general public, but to readers and investors who had been subscribers to similar publications and whose names were obtained through purchased mailing lists.
Plaintiff's allegations of defamation may be placed into two categories. The first category, the publications, includes the newsletter, the reprinted Digest article and bonus reports.[1] The second category contains the promotional packages for the Publications which Plaintiff characterizes as commercial speech.[2]
*630 The alleged defamatory statements contained in articles authored by Band assess the insurance industry as a whole, and Plaintiff contends, National Life in particular. Although the statements differ somewhat in content, they all share a common approach in the way that Plaintiff, along with other insurance companies, was mentioned in the Publications and marketing materials. In the first of the publications, "How Safe is Your Insurance?" Band focuses on the insurance industry generally noting, that unlike bank accounts, the federal government does not guarantee insurance policies. Band then states that readers should avoid relying on the A.M. Best ("Best") insurance company rating service when evaluating an insurance company. According to Band, the Best rating service was too closely tied to the insurance industry and gave nearly all of the largest insurance companies, including the Plaintiff National Life, their highest rating when evaluating the companies' claims paying ability. Band went on to say that because of a dissatisfaction with Best, other rating services such as Standard & Poor's, were beginning to rate the claims paying ability of insurance companies. These services provided a more thorough review of the financial stability and, therefore, the claims paying ability of the insurance companies. Band then asserted that unless a company received one of Standard & Poor's highest rating grades (a grade no lower than AA), Band would not recommend it, because in his view the company was susceptible to adverse economic changes. Finally, Band listed the ten companies, out of a total of the seventy-six insurance companies, that Standard & Poor's rated, who fell below the AA grade. National Life, with an A + grade, was one of those companies. Band made additional statements concerning how insurance companies were investing in risky junk bonds and real estate. These investments coupled with an uncertain economy made those companies that Standard & Poor's rated below a AA, too dangerous to invest in or guarantee an insurance policy.
These statements by Band on the insurance industry and other investment topics were then carried in the Publications sent to current subscribers. The statements were also reprinted in the marketing materials and sent to those that Phillips and Band were attempting to obtain as new subscribers.[3]
Defendants characterize the Publications and marketing materials as merely an attempt to inform readers of ways of developing a conservative investment philosophy that would safely increase their net worth by minimizing risk and yet yielding significant gains. All of the topics on which Band wrote, including the insurance industry, were according to Defendants, designed to inform readers and help them make intelligent investment decisions.
Plaintiff has a different view. According to National Life, Defendants' statements were part of a get rich scheme whereby Band concocted sensational stories that preyed on investor and consumer fear. Plaintiff claims that Band knew generally of some risky insurance company investments and used that limited information to his benefit. Band, according to Plaintiff, simply drew an arbitrary line in the Standard & Poor's rating system and without any further thought, claimed that companies below the line were in financial disarray because of risky investments in an uncertain economy.
Plaintiff learned of Defendants' statements in March of 1990 in the article Digest reprinted shortly after it appeared in Band's newsletter. Plaintiff contacted Defendants Band and Phillips on or around early May of 1990 and asked for a retraction *631 and shortly thereafter filed this law suit.
B. Prima Facie Case for Defamation
Defendants argue that plaintiff's allegations of defamation are not actionable because plaintiff has failed to make out a prima facie case.
To make out a prima facie case of libel under Maryland law, plaintiff must show:
1) that defendants published statements of or concerning plaintiff to a third party;
2) that the statements were false and defamatory;
3) that the statements were published with the degree of fault required by the constitution;
4) that the statements resulted in harm to plaintiff. See DeLeon v. St. Joseph Hospital, Inc., 871 F.2d 1229, 1236 (4th Cir.1989); Mareck v. Johns Hopkins University, 60 Md.App. 217, 223, 482 A.2d 17 (1983), cert. denied, 302 Md. 288, 487 A.2d 292 (1985).
Where a plaintiff in a defamation suit is a "public figure", plaintiff must show actual malice on the part of the publisher in order to prevail upon his claims. New York Times v. Sullivan, 376 U.S. 254, 288-91, 84 S. Ct. 710, 730-32, 11 L. Ed. 2d 686 (1964); Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974).
Since determining Plaintiff's status is central to National Life's ability to establish its prima facie case, the Court ordered the parties to prepare briefs on National Life's public figure status, the degree of fault required of defendants in order for Plaintiff to sustain its libel case, and finally whether Defendants' conduct constitutes malice. The Court's examination of the public figure status is appropriate at this juncture, because it is a question of law. Rosenblatt v. Baer, 383 U.S. 75, 88, 86 S. Ct. 669, 677, 15 L. Ed. 2d 597 (1966) ("We remark only that, as in the case with questions of privilege generally it is for the trial judge in the first instance to determine whether [plaintiff] is ... a `public figure'"); Reuber v. Ford Chemical News, Inc., 925 F.2d 703, 708 (4th Cir.1991) ("This determination [of plaintiff's public figure status] is ultimately one of law."); Fitzgerald v. Penthouse Intern., LTD., 691 F.2d 666, 669 (4th Cir.1982) ("Once the pertinent facts are found or, as here, there is no substantial question of material fact in contention, the issue of whether plaintiff is a public figure is a question of law for the Court."); see also Waldbaum v. Fairchild Publications, Inc., 627 F.2d 1287, 1293 n. 12 (D.C.Cir.1980).
Plaintiff argues first that for purposes of this controversy, it is not a public figure. Second, Plaintiff argues that if it is a public figure, the malice standard should not apply to all of Defendant's statements. Plaintiff claims that the statements written by Band and Published by Phillips that were contained in the promotional materials are more appropriately characterized as commercial speech, and therefore, should not receive the higher First Amendment protections of the malice standard. Finally, Plaintiff argues that even if the malice standard does apply to Defendants' conduct, Defendants can be shown to have acted with malice.
Defendants disagree. Defendants claim that Plaintiff is a public figure. Further, Defendants claim that the statements in the promotional materials cannot be characterized as commercial speech and even if they could, the malice standard still applies to Defendants' conduct. Finally, Defendants' claim that their motion for summary judgment should be granted because Plaintiff cannot under any circumstances show by clear and convincing evidence that Defendants acted with malice. As such, according to Defendants, Plaintiff is unable to sustain the prima facie case for defamation.
The Court's analysis will proceed in five steps. First, the Court will examine whether National Life is a general purpose public figure that occupies a position of general notoriety in the community. Second, National Life's status as a limited purpose public figure will be reviewed, to see if *632 Plaintiff has inserted itself into the vortex of a public controversy that relates to the alleged defamatory statements. Third, as part of this public figure inquiry, National Life's status a corporation will be considered. Fourth, the Court will assess National Life's argument that Defendants' promotional materials are merely commercial speech, and as such, should be judged against a negligence standard. Finally, the Court will examine whether, as a matter of law, Plaintiff can sustain its case when the traditional malice standard is used to evaluate Defendants' conduct.
II. Legal Analysis
A. Summary Judgment
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56. Regarding materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Regarding genuineness, a dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.
The party seeking summary judgment bears the initial burden to show that there is an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 2554, 91 L. Ed. 2d 265 (1986). This burden does not require the moving party to produce evidence showing the absence of a genuine issue of material fact, but only to point out the absence of a material fact. Id. (emphasis added).
In responding to the defendant, the adverse (non-moving) party, in this case the plaintiff, "may not rest upon the mere allegations or denials of the adverse party's pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.
The Supreme Court has stated that "Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The mere existence of a scintilla of evidence in support of the non-moving party's case will be insufficient; there must be evidence on which the jury could reasonably find for the non-moving party. Id., 477 U.S. at 252, 106 S.Ct. at 2512. The evidence of the non-moving party is to be believed and all justifiable inferences are to be drawn in the non-moving party's favor. Id. (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S. Ct. 1598, 1609, 26 L. Ed. 2d 142 (1970)).
Under Rule 56, where possibly subjective evaluations are at issue, as here where a determination of whether Defendants acted with actual malice is at issue, the Fourth Circuit has cautioned against a Court taking those determinations away from a jury. Cf. Herold v. Hajoca Corp., 864 F.2d 317, 319 (4th Cir.1988) (Fourth Circuit cautioned against motion for judgment as a matter of law where motive and causation are at issue in age discrimination case). However, in this context, if Plaintiff must show that Defendants acted with malice, Plaintiff must be able to make such a showing by clear and convincing evidence. New York Times, 376 U.S. at 254, 84 S.Ct. at 710. The Supreme Court has required that a Plaintiff must meet the clear and convincing evidence standard if New York Times applies, in order to survive a motion for summary judgment. Anderson, 477 U.S. at 256-57, 106 S.Ct. at 2514-15. Therefore, determining Plaintiff's status as a public figure, as it is a question of law, as well as considering Defendants' arguments that Plaintiff cannot demonstrate that Defendants *633 acted with malice, are appropriate for Court review.
B. General Purpose Public Figure
The first step in the analysis of Plaintiff's status is to examine whether National Life is a general purpose public figure. A general purpose public figure is one who occupies a position of "general fame or notoriety in the community through pervasive involvement in the affairs of society." Gertz v. Robert Welch, Inc., 418 U.S. at 351-52, 94 S.Ct. at 3013; see also, Blue Ridge Bank v. Veribanc, Inc., 866 F.2d 681, 687 (4th Cir.1989). Determining Plaintiff's status is critical because damages for defamation where plaintiff is a public figure or public official can only be recovered upon a showing that Defendants acted with malice. While a private figure may recover for damages under a lower standard of defendant culpability. Reuber v. Food Chemical News, Inc., 925 F.2d 703, 708 (4th Cir.1991).
Erroneous statements of fact do not warrant constitutional protection. However, requiring proof of Defendants' malice where Plaintiff is a public figure stems from a recognition that error is "inevitable in free debate." Gertz, 418 U.S. at 340, 94 S.Ct. at 3007. As the Supreme Court stated, the New York Times standard embodies this nation's commitment to the principle that debate on public issues should be "uninhibited, robust and wide open and that it may well include vehement, caustic and sometimes unpleasantly sharp attacks ..." New York Times v. Sullivan, 376 U.S. at 270, 84 S.Ct. at 721. Therefore, to give freedom of expression the "breathing space" it requires, some error is tolerated. Id. at 298, 84 S.Ct. at 736.
However, First Amendment concerns must be balanced against the legitimate state interest in compensating individuals for the harm inflicted on them by defamatory statements of fact. Protecting one's good name and reputation "reflects no more than our basic concept of the essential dignity and worth of every human being a concept at the root of any decent system of ordered liberty." Rosenblatt, 383 U.S. at 92, 86 S.Ct. at 679 (Stewart, J. concurring). As such, the evidence standard for determining a general purpose public figure is a strict one, requiring clear and convincing evidence of the general fame and pervasive influence in societal affairs. Veribanc, 866 F.2d at 687.
Defendants claim that National Life is a general purpose public figure. Defendants support their claim with a number of exhibits regarding National Life's influences in the public arena, corporate size and numerous articles, primarily from Vermont newspapers, that catalogue virtually every aspect of company behavior and executive pronouncements.[4]
Plaintiff contends that properly applying Gertz to this case requires clear evidence that National Life has achieved national recognition. Plaintiff contends that the test for general public figure status involves an examination of the notoriety in the area where the defamation took place in order to meet the requirement that National Life achieved general fame in the community. According to Plaintiff, Defendants have only demonstrated at most, National Life's prominence in Vermont, a state in which only one fifth of one percent of the recipients of the publications and promotional materials reside.
Reserving judgment, at this point, on Plaintiffs' definition of community, the Court finds that Defendants have failed to meet their burden of demonstrating that National Life is a public figure on all issues. See Veribanc 866 F.2d at 687 (although the Fourth Circuit found that the local bank exercised considerable influence over the economy of the county, the Circuit Court did not find that the plaintiff exercised pervasive influence over all public *634 issues so as to elevate it to general purpose public figure status).
Here, as in Veribanc, National Life exercises considerable influence over the economy of Vermont. Further, National Life may be prominent on a variety insurance of issues in a national community of investors. See Reuber, 925 F.2d at 709 (Fourth Circuit confines definition of community to individuals familiar with the particular public controversy for purposes of limited public figure status analysis).
However, National Life's fame and pervasive influence appear confined both to the borders of Vermont on a variety of issues and to the borders of insurance related issues on a national level. As such, the Court finds that National Life is not a general purpose public figure that risked the spotlight of public comment on all aspects of its corporate life. See e.g., Carson v. Allied News Company, 529 F.2d 206 (7th Cir.1976); Buckley v. Littell, 539 F.2d 882 (2nd Cir.1976), cert. denied, 429 U.S. 1062, 97 S. Ct. 785, 786, 50 L. Ed. 2d 777 (1977). But see Martin-Marietta Corp. v. Evening Star Newspaper Co., 417 F. Supp. 947 (D.D.C.1976) (publicly held corporation characterized as public figure even though the corporation may not be "household word" like General Motors).
C. Limited Purpose Public Figure
An examination of Gertz reveals that there is more than one route to becoming a public figure. "Even though a person is not a public official or general public figure, an individual may have cast himself into the forefront of a public issue so as to become a limited purpose public figure." Fitzgerald, 691 F.2d at 668 (citing Gertz, 418 U.S. at 345, 94 S.Ct. at 3009). The Court's justification for this additional public figure category is predicated on two grounds. The Supreme Court recognizes that public figures are less vulnerable to injury from defamatory statements because of their ability to resort to effective "self-help." Second, and more importantly according to the Supreme Court, is the normative consideration, that public figures are less deserving of protection than private individuals because public figures, like public officials, have "voluntarily exposed themselves to increased risk of injury from the defamatory falsehood concerning them." Wolston v. Reader's Digest Ass'n, Inc., 443 U.S. 157, 164, 99 S. Ct. 2701, 2706, 61 L. Ed. 2d 450 (1979) (citing Gertz, 418 U.S. at 345, 94 S.Ct. at 3009).
The bifurcated approach between public-private figures adopted by the Court was bifurcated once more between "speech on matters of public concern," and speech that is of a purely private nature. Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 758-59, 105 S. Ct. 2939, 2944-45, 86 L. Ed. 2d 593 (1985); Veribanc, 866 F.2d at 686 (the imposition of liability involves a determination of whether or not the speech involves a matter of public concern). Legal precedent requires a dual inquiry regarding the subject matter of the publication and the status of the defamed entity. Veribanc, 866 F.2d at 686.
In the instant case, both National Life and the Defendants agree that the public controversy implicated the financial health of the insurance industry. Defendants, however, make a further refinement of the controversy. Defendants claim that the health of the industry was diagnosed in the public forum in light of the strength of individual insurance companies.
Either characterization places this controversy squarely within the bounds of Fourth Circuit precedent as a public controversy. Veribanc 866 F.2d at 686 ("Because of the obvious importance of banks to the financial health of our communities, an historic governmental interest in the operations and solvency of these institutions, we have no difficulty concluding that [defendants'] statements relate to a matter of public controversy.") In the instant case, as in Veribanc, the controversy was over the financial health of institutions that are regulated by the government and are of obvious importance to the community. Therefore, this Court finds that the controversy surrounding National Life was a matter of public concern.
*635 In determining whether Plaintiff is a limited purpose public figure, the Fourth Circuit has erected a five-part test:
"1) The Plaintiff has access to channels of effective communications; 2) the Plaintiff voluntarily assumed a role of special prominence in a public controversy; 3) the Plaintiff sought to influence the resolution or outcome of the controversy; 4) the controversy existed prior to the publication of the defamatory statements; and 5) the Plaintiff retained public figure status at the time of the alleged defamation."
Fitzgerald, 691 F.2d at 668. Each of these factors will be considered in turn.
National Life, Defendants contend, has ample access to effective channels of communications. Plaintiff, on the other hand, denies this access exists. National Life claims that Defendants eliminated Plaintiff's access by refusing to turn over mailing and subscriber lists or print a retraction in their publications.
This Court finds that by any traditional measure of access, National Life has effective means of communication. National Life's corporate executives command leadership positions in national trade organizations that represent insurance industry interests.[5] National Life's views on issues have been extensively reported in the media. This coverage includes articles authored by and written about Plaintiff's executives for trade publications and journals, as well as television coverage.[6] Further, virtually every aspect of National Life's corporate life is reported extensively in the Vermont media.[7] This reporting not only includes coverage on National Life's financial and insurance product interests, but also other issues on which Plaintiff chooses to comment.[8] Finally, National Life sends out a multitude of press releases, including press releases to major newspapers in each state proclaiming the dollar amount it yearly distributed in life insurance benefits in that state and touting its high A.M. Best rating.[9]
These voluntary efforts by the Plaintiff to reach out to their "community," coupled with press coverage of Plaintiff's views, constitutes more than adequate access to effective means of communication. See Reuber, 925 F.2d at 708 (Plaintiff's lectures and coverage of his views constituted access to effective means of communication).
In addition to these efforts, National Life has an annual communications budget of over $700,000, and during 1988 and 1989, National Life spent in excess of a half a million dollars on extensive advertising of its financial position. This type of budget expenditure demonstrates corporate access to effective means of communication. See, e.g., Steaks Unlimited v. Deaner, 623 F.2d 264, 273-74 (3rd Cir.1980) (corporate plaintiff's access to effective channels of communication demonstrated through their advertising spending).
*636 Finally, National Life's communication's department distributed a monthly public relations magazine called "Contact" to all policy holders, and also distributed a monthly magazine called "Showcase." This type of activity demonstrates effective means of communication. See Waldbaum, 627 F.2d at 1299 (D.C. Circuit notes that Plaintiff's corporation's monthly newsletter controlled by Plaintiff and sent to consumers was important for demonstrating media presence).
In spite of this extensive access Plaintiff asserts that effective access was denied, because Defendants would not turn over mailing and subscriber lists or print a retraction. Plaintiff's arguments are unpersuasive. Plaintiff cites no authority for this novel access argument.[10]
Indeed, National Life's characterization of its access misses the point in examining Plaintiff's potential for stating its side of the story to the "public."
The inquiry into access to channels of communications proceeds on the assumption that public controversy can be aired without the need for litigation and that rebuttal of offending speech is preferable to recourse to the courts.
Reuber, 925 F.2d at 708 (citing Gertz, 418 U.S. at 344, 94 S.Ct. at 3009). Plaintiff's commanding presence in the insurance industry, with its policyholders, investors, and in its home state provided the "fora where [National Life's] reputation was presumably tarnished and where it could be redeemed." Reuber, 925 F.2d at 708. Given Plaintiff's opportunity for effective access to rebut Defendants' claims, this Court is compelled to conclude that Plaintiff has effective access to means of communication. See Wolston, 443 U.S. at 164, 99 S.Ct. at 2705 (public figures are less vulnerable to injury because of their access to effective "self help").
The Court now turns to the second prong of the Fitzgerald five part limited public figure status test, whether Plaintiff voluntarily assumed a role of special prominence in a public controversy. The Court must define both the public controversy as well as the community wherein Plaintiff was prominent.[11]See Reuber, 925 F.2d at 707-09; Fitzgerald, 691 F.2d at 669. Defendants maintain that Plaintiff prominently embroiled itself in a public controversy over the financial health of the insurance industry and the comparative financial positions of competing insurers. National Life argues that the prominent role Plaintiff played in commenting on its own financial situation was not a public controversy.
This Court has already stated that Defendants' characterization of the controversy meets Fourth Circuit requirements for a public controversy. It is a controversy the outcome of which affects the general public or some aspect of it. Veribanc, 866 F.2d at 688. Its effects are felt by individuals beyond the litigants and direct participants. See Waldbaum, 627 F.2d at 1296.
This stage of the inquiry is more empirical, in that the contours of the controversy must be defined by examining whether persons were actually discussing some specific question. Waldbaum, 627 F.2d at 1297; see, e.g., Fitzgerald, 691 F.2d at 669 (Fourth Circuit cites the fact that the national press had covered the military application of trained dolphins as evidence of a public controversy); Reuber, 925 F.2d at 707-09 (Fourth Circuit cites the fact that use of the malathion pesticide to eradicate the medfly had been reported in publications of interest to a specialized segment of the population as evidence of a public controversy).
In support of its position, Defendants offer numerous articles from publications *637 across the country, as well as governmental reports, that all call attention to the financial instability of the insurance industry as measured by the many financially shaky companies that comprise that industry.[12] Defendants also provide extensive evidence of the Vermont media coverage on National Life's financial stability.[13]
Plaintiff attempts to rebut Defendants' arguments by redefining the controversy as a purely private matter between the litigants. National Life argues that the controversy about which it may have been involved only concerned its own financial health. Plaintiff claims that beyond the Vermont press, there were no national articles scrutinizing National Life's financial position. Plaintiff argues Defendants created the controversy themselves by publishing the libel.[14] The Court rejects Plaintiff's definition of the controversy. Similar efforts to recharacterize public controversies into purely private disputes have failed. See National Found. for Cancer Res. v. Council of Better Business Bureaus, Inc., 705 F.2d 98, 101 (4th Cir.1983) (NFCR) (Fourth Circuit rejects plaintiff's argument that the controversy was not about its solicitation efforts, but only about the reasonableness of defendant's rating of plaintiff's efforts).
Moreover, it would be inappropriate to shrink all controversies to the specific statements of which a plaintiff complains. Defendants' alleged defamatory statements here, as in other controversies, are a part of, and clearly related to, a much larger story. In characterizing the controversy in Reuber the Fourth Circuit went beyond the specific alleged libelous statements regarding plaintiff's qualifications as a scientist, and instead characterized the controversy as a broader issue over the carcinogenicity of malathion. 925 F.2d at 707. In Fitzgerald, the Fourth Circuit resisted defining the issue as simply plaintiff's particular use of dolphins for military purposes. 639 F.2d 1076-77 (4th Cir.1981). According to the Court, Defendant's article concerned the military's use of animals generally and dolphins in particular. Plaintiff's *638 work was mentioned only as part of a larger article. Id.
As in Fitzgerald, the controversy is not about the Plaintiff in particular. The alleged defamation mentions National Life as part of an article covering more ground than simply Plaintiff's situation. As the Fourth Circuit made clear in rejecting a similar effort by a plaintiff to redefine the debate, the key to the public figure test is "the party's own conduct." NFCR, 705 F.2d at 101.
Next, the Court must examine whether Plaintiff is a prominent member of the community. See Reuber, 925 F.2d at 709. The Court finds that National Life is a prominent member of the community. Here, Plaintiff's community is defined with respect to the specialized audience familiar with this controversy and who would be probable readers of the promotional materials and publications. Id. ("Someone who has not attracted general notoriety may nonetheless be a public figure in the controversy covered by the publications of specialized interest."); see, also Reliance Insurance Co. v. Barron's, 442 F. Supp. 1341, 1349 (S.D.N.Y.1977) (insurance company that is "probably ... well known among Barron's readership" is a public figure) (disagreed with on other grounds Veribanc, 866 F.2d at 688).
Defendants maintain, and it is not contradicted[15], that the promotional materials were sent to a targeted audience, i.e., those with a demonstrated interest in this type of investment newsletter. Further, the actual circulation for Profitable Investing and The Wall Street Digest is limited to the investment community. National Life, however, is among the largest mutual life insurance companies in the nation with over $4 billion in assets and $25 billion in insurance policy coverage. National Life has a nationwide network of agents marketing its products and touting its financial status. When the bald facts of Plaintiff's corporate size are coupled with its' press coverage, its' leadership in national insurance organizations, and its' extensive national advertizing, National Life's prominence in this community is undisputed. See Id.; Waldbaum, 627 F.2d at 1300 (an executive whose actions were covered by a trade publication was held to be a public figure given the size of the corporation for whom he worked, his control over a company publication, and his controversial policies).
Finally, National Life itself struts its own prominence in its advertizing and news articles.[16] Such self definition as been considered a factor for determining prominence in the community. See Reuber, 925 F.2d at 709 ("Moreover, [plaintiff] described himself as `eminent' in his field.").
The Court must next consider Plaintiff's voluntary efforts to influence the outcome of this public controversy. Evaluating Plaintiff's voluntary efforts is the most important factor in considering public figure status. Veribanc, 866 F.2d at 686-87. This conclusion rests on the "normative consideration that public figures are less deserving of protection than private persons because public figures, like public officials, have `voluntarily exposed themselves to increased risk of injury from defamatory falsehood concerning them.'" Wolston, 443 U.S. at 164, 99 S.Ct. at 2706 (citations omitted); see also Reuber, 925 F.2d at 709.
Plaintiff made extensive efforts to voluntarily inject itself into the vortex of public opinion over the comparative financial health of insurance companies. First, and *639 foremost, Plaintiff engaged in a national advertising campaign extolling its financial strength and, in particular, its strength as measured by the A.M. Best rating company.[17] These ads were sent to major newspapers and insurance industry publications in at least thirty-four states. Next, Plaintiff repeatedly informed its quarter of a million policyholders and its nationwide network of agents about its financial strength and A.M. Best rating. Finally, corporate executives defended and gave assurances in numerous articles, that Plaintiff's austerity measures, taken in the late 1980's, would improve National Life's financial health.[18] These actions have been held by the Fourth Circuit to constitute voluntary efforts. See Reuber, 925 F.2d at 710 (plaintiff voluntarily entered controversy by writing a report and disseminating his views to interested parties); NFCR, 705 F.2d at 101 (plaintiff's own solicitation efforts were an important factor in Fourth Circuit's determination that NFCR was a public figure); Steaks Unlimited, 623 F.2d at 264 (plaintiff's own advertizing efforts were a critical factor in Third Circuit determination of plaintiff's public figure status).
In response to these arguments, Plaintiff offers two counter assertions. First, Plaintiff attempts to compare its situation with the Fourth Circuit analysis in Veribanc. In Veribanc, National Life maintains that plaintiff had engaged in some advertising, but was found not to be a public figure.
However, Veribanc is distinguishable. In Veribanc, the Fourth Circuit noted the lack of a direct relationship between the promotional message in plaintiff's advertisements and the subsequent defamation. Veribanc, 866 F.2d at 687 (plaintiff's ads did not raise the bank's corporate financial health which was the subject of defendant's report).
In the instant case, the particular claims made by National Life were clearly made to influence the outcome and take advantage of the existing public controversy. At a time when much doubt was cast on the ability of insurance companies to meet financial commitments, National Life touted its asset strength, age, financial size and extolled its high A.M. Best rating, all in an effort to show that it was not encumbered by the difficulties exhibited in other companies. Such claims, and their direct relationship to plaintiff's participation in its controversy, have been important in establishing public figure status. NFCR, 705 F.2d at 101; see also Waldbaum, 627 F.2d at 1298 (an examination of plaintiff's qualifications bears a direct relationship to the public's decision over how to evaluate plaintiff's comments). Further, as in Reuber, Defendants, here, questioned Plaintiff's qualifications by criticizing the very evidence Plaintiff offered to demonstrate its claims, i.e., Defendants' criticized Plaintiff's A.M. Best rating. 925 F.2d at 707-10.
National Life also maintains that it voluntarily sought no public controversy, it was only engaged in the typical business promotional actions done by any corporation.[19] Under Fourth Circuit precedent, this argument must be rejected. The fact that Plaintiff did not realize its actions might draw critical scrutiny is irrelevant. What is relevant is that the Plaintiff voluntarily chose a course of conduct that invited public attention.[20]See Reuber, 925 F.2d at 709-10. Any other view of "voluntary efforts" would, as the Fourth Circuit points out, mean that a plaintiff could knowingly disseminate views to combatants in a public controversy and then run and hide when its credentials and views were vigorously challenged. *640 Id. The law does not provide such an artificial shield. Id.[21]
The fourth prong of the Fitzgerald test examines whether the controversy existed prior to the alleged defamatory statements. Plaintiff claims it did not. However, Plaintiff's argument rests entirely on their being able to recharacterize the controversy from the public debate this Court has already identified, to what Plaintiff considers a private controversy, solely surrounding National Life's financial status. This Court has already identified the controversy as a discussion over the financial health of the insurance industry as measured by the financial health of the companies that comprise the industry.[22]
Defendants have offered many articles from national newspapers, insurance industry trade publications and government reports that predate the alleged defamatory statements.[23] Under Fourth Circuit precedent, this constitutes the controversy's pre-existence. Reuber, 925 F.2d at 710; Fitzgerald, 691 F.2d at 669. Plaintiff counters, however, that Defendants were unaware of National Life before the institution of this suit. Whether or not Plaintiff is correct in their assertion is not relevant. See Reuber, 925 F.2d at 710. (Fourth Circuit rejects author's subjective intent in favor of an objective approach in determining whether the alleged defamation is related to a prior public controversy).
As the final prong of the Fitzgerald test, Plaintiff must retain public figure status at the time of the alleged defamation. Fitzgerald, 691 F.2d at 668. Plaintiff clearly did. Plaintiff's access to the media did not change. Further, neither did their prominence in the community. Finally, Plaintiff continued to engage in many voluntary efforts in order to influence the outcome of the controversy. Indeed, Plaintiff's efforts immediately after the first of the allegedly libelous articles clearly demonstrate the "self help" opportunities available to National Life.[24]
D. Applying the Public Figure Test to Corporations
Under the Fitzgerald standard, Plaintiff should be considered a public figure and should be required to show that Defendants acted with malice. However, Plaintiff makes two additional arguments against using the malice standard when examining Defendants' conduct. The first argument is implied by the Plaintiff, i.e., that corporations should not be subjected to the same standard as individuals when determining a public figure. The second argument is that the statements made by *641 Defendants Band and Phillips in the promotional materials should not be judged against the malice standard because they are commercial speech. Both arguments are based on Plaintiff's assertion that allegedly defamatory statements in a commercial context should receive different treatment. Each argument will be considered in turn.
Plaintiff argues that in promoting its own business enterprise through typical corporate actions it was simply responding to market competitive pressures and therefore its actions do not constitute the voluntary efforts required to establish public figure status. As the Court has already noted, such an argument fails when applying Plaintiff's efforts to the standard used for individual actions. However, whether the Gertz and Fitzgerald public figure/private figure distinction applies to a corporation has not been explicitly addressed by the Supreme Court.[25] Similarly, circuit decisions have been mixed.[26] This Court rejects Plaintiff's implied argument. At the very least, the same public figure standard that applies to individuals should apply to corporations. Corporations should not be given a greater right than an individual to protect their reputation and silence speech.
Plaintiff's argument for a stricter corporate public figure test focuses on National Life's claim that its actions were in response to market pressures and business necessity. As Plaintiff states, "every corporation is directly involved in its own financial health ... While any company's financial health is of concern to its employees, its shareholder and its creditors, that generalized concern does not amount to a particular controversy." Plaintiff's Opposition at 14. Plaintiff cites Veribanc, 866 F.2d at 688, "[T]he existence of an ongoing public interest in the stability of society's financial institutions and markets ... [does not elevate] every member of the regulated class to public figure status."[27]
Plaintiff's argument fails. First, Plaintiff's argument probably runs against Fourth Circuit precedent. Although the Fourth Circuit has not explicitly stated that Gertz applies to corporate plaintiffs, it applied the Gertz standard to a corporate plaintiff. See Veribanc, 866 F.2d at 681 (where Fourth Circuit applied the Fitzgerald/Gertz standard to a corporate plaintiff).
Second, while Plaintiff views its business actions as a purely private affair, not constituting a voluntary insertion into a public controversy, the same could be said of individual plaintiffs. In Fitzgerald, plaintiff's voluntary conduct, the Circuit Court reasoned, was done in an effort to make money. Like National Life, he was responding to market pressure. Fitzgerald, 691 F.2d at 669. However, his public statements and brochures hawking his wares did not shield him from the Fitzgerald/Gertz analysis. Id. To a certain extent, the same could be said of Reuber. See Reuber, 925 F.2d at 703. In Reuber, plaintiff's *642 actions in disseminating his scientific findings could be construed as merely attempting to respond to the dictates of his field which prospers through the spread of empirical studies. Id. Further, National Foundation for Cancer Research could also fall within National Life's argument in that, NFCR must make expansive solicitations in order to raise money to fight cancer. See NFCR, 705 F.2d at 98.
Acceptance of Plaintiff's argument that corporations should be judged by different rules leads to chaos. Using National Life's rationalizations, there is no principled way to separate corporate from individual plaintiffs. Every plaintiff would require a different standard for defining its public or private figure status.
Third, allowing corporations to play by different rules in a defamation case is simply not fair. Maintaining balance between the "breathing space" necessary for robust debate in the marketplace of speech and protecting individual and corporate reputation is admittedly difficult. The value of protecting one's reputation has long been recognized. "Who steals my purse steals trash. 'Tis something, nothing; 'Twas mine, 'tis his, and it has been slave to thousands; But he that filches from me my good name, robs me of that which not enriches him, and makes me poor indeed."[28] A state's legitimate interest in compensating harmed private figure plaintiffs is vital. See Gertz, 418 U.S. at 341, 94 S.Ct. at 3007.
But there is absolutely no reason to elevate the protection of corporate reputation interests over those of the individual. While corporate reputation interests are indeed important, it is difficult to see how the damage to the corporate bottom line is more sacrosanct than the harm defamation can cause to an individual's human dignity, a quality a corporation is unlikely to have acquired even given its stature as a "person" under the constitution. See First Nat. Bank of Boston v. Bellotti, 435 U.S. 765, 777, 98 S. Ct. 1407, 1416, 55 L. Ed. 2d 707 (1978). The marketplace of ideas should be allowed in all areas including the marketplace of commercial products. Moreover, the Supreme Court has held that corporations enjoy virtually the same right of speech as an individual. "The inherent worth of the speech in terms of its capacity for informing the public does not depend upon the identity of its source, whether corporation, association, union or individual." First Nat. Bank of Boston v. Bellotti, 435 U.S. 765, 777, 98 S. Ct. 1407, 1416, 55 L. Ed. 2d 707 (1978). Indeed, it would be an ironic twist of reasoning to hold that the principles that underlie the marketplace of ideas metaphor should be discarded when the limelight of public discussion focused on the marketplace in commerce.
Finally, a different corporate defamation standard could run afoul of clear constitutional precedent. The standard the Plaintiff suggests would make it easier for corporations to prove defamation. If the Defendants' speech, as it is in this case, is noncommercial speech commenting on corporate commercial speech, a different defamation standard would effectively elevate commercial speech over noncommercial speech. This is so because public comment on corporate action would be judged by a harsher standard than corporate commercial speech. Corporate commercial speech would be given a freer hand as public comment about it was chilled. This anomalous result could violate Supreme Court precedent because it would elevate commercial over the noncommercial speech. See Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York, 447 U.S. 557, 562-63, 100 S. Ct. 2343, 2349-50, 65 L. Ed. 2d 341 (1980). For these reasons, therefore, the Court declines National *643 Life's invitation to give special treatment to corporate plaintiffs.
E. Defamation and Commercial Speech
National Life contends that even if it is a public figure, the malice standard should not be applied to all of Defendants' statements. Band's statements and Phillips' publications that comprise the promotional or marketing materials[29] constitute commercial speech, according to National Life.[30] As commercial speech, Plaintiff argues, the publications should not be protected by the malice standard. U.S. Healthcare, Inc. v. Blue Cross, 898 F.2d 914 (3rd Cir.1990), cert. denied, ___ U.S. ___, 111 S. Ct. 58, 112 L. Ed. 2d 33 (1990). Plaintiff's argument rests, therefore, on first classifying the promotional materials as commercial speech, and second on shifting the focus of defamation analysis away from consideration of a plaintiff's status and the libel's relation to a public controversy, to an examination of the subject matter of a defendant's statements.
1) Allegedly Defamatory Statements Ensconced in Defendants' Promotional Materials are Not Commercial Speech
Plaintiff's characterization of Defendant's statements as commercial rests largely on the fact that the statements about National Life contained in the newsletter are reprinted in promotional materials. The promotional or marketing materials were sent to potential subscribers.[31] It is not the statements themselves, but rather the packaging they came in that, for Plaintiff, transforms the statements from the safe haven of protected noncommercial speech to an arena of lesser protected commercial statements. For Plaintiff, the fact that the Band statements are lodged in a marketing letter proposing a commercial transaction, i.e., buying of Band's newsletter, made the statements commercial. Plaintiff claims that the promotional materials are commercial, because they relate to economic interests of audience and speaker and refer to a specific product Profitable Investing. Plaintiff's broad definitional sweep would, if applied without further thought, transform too much noncommercial speech into commercial statements.
Defendants' promotional materials are far more than merely proposals to engage in a commercial transaction and their characterization presents a much closer question than `common sense' distinctions the Supreme Court has relied upon. Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 455-56, 98 S. Ct. 1912, 1918-19, 56 L. Ed. 2d 444 (1978).
As a starting point, the mere fact that the statements appear in advertisements does not compel the conclusion that the statements are commercial. New York Times v. Sullivan, 376 U.S. 254, 265-66, 84 S. Ct. 710, 718-19, 11 L. Ed. 2d 686 (1964) (Supreme Court held speech at issue not commercial even though it appeared in an advertisement soliciting funds in the New York Times); see also Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 66, 103 S. Ct. 2875, 2880, 77 L. Ed. 2d 469 (1983). Further, Plaintiff's assertion that the promotional materials refer to a specific product the newsletter Profitable Investing, *644 is not dispositive. Bolger, 463 U.S. at 66, 103 S.Ct. at 2880.
Moreover, Defendants' economic motivation for sending the promotional materials to the potential subscribers is not enough to turn the statements into commercial speech. Bolger, 463 U.S. at 67, 103 S.Ct. at 2880. See also Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495, 72 S. Ct. 777, 96 L. Ed. 1098 (1952) (Supreme Court rejected the contention that motion pictures should not receive First Amendment protection because they are made and exhibited for profit). The idea that financial gain is associated with matters involving protected speech does not jeopardize its standing. Murdock v. Pennsylvania, 319 U.S. 105, 63 S. Ct. 870, 87 L. Ed. 1292 (1943) ("the mere fact that religious literature is `sold' by itinerant preachers rather than `donated' does not transform evangelism into a commercial enterprise.").
While Bolger suggests that the presence of all of these qualities provides support for concluding that the speech is commercial, the Supreme Court has examined closely the purpose of the message. 463 U.S. at 67-68, 103 S.Ct. at 2880-81; New York Times, 376 U.S. at 266, 84 S.Ct. at 718.
In New York Times, the advertisement was not classified as commercial speech because it, "communicated information, expressed opinion, recited grievances, protested classified abuses, and sought financial support" on behalf of the civil rights movement. New York Times, 376 U.S. at 266, 84 S.Ct. at 718. On the other hand, in Bolger, the Court classified the speech as commercial because the advertising merely linked a product to a current public debate. Bolger, 463 U.S. at 68, 103 S.Ct. at 2881.
In the instant case, it is not the promoting of the newsletter per se which gives rise to Plaintiff's complaint. Nor is Plaintiff suggesting that Defendants here are any less entitled than the civil rights defendants in New York Times to express opinions, recite grievances, or protest classified abuses (only in this case the abuses are about the insurance industry). Unlike Bolger, but like New York Times, the appearance of Band's analysis in the promotional material is only an incidental consequence. The content of the statements bears no direct relationship to the product, the newsletter, that is being sold. Cf. U.S. Healthcare, 898 F.2d at 934 (Third Circuit applies three part test outlined in Bolger for determining whether the speech is commercial holding that the second prong requires that the speech refer to a product). The speech at issue here does not make any reference to the product.[32] Defendants' statements should not, therefore, be classified as commercial speech under the Bolger test. 463 U.S. at 66, 103 S.Ct. at 2880. See also U.S. Healthcare, 898 F.2d at 934.
Plaintiff's complaint is over the fact that the statements were made, not over where they happen to appear. These are not statements that attempt to draw or link a public controversy to a product in order to immunize its advertising from stricter scrutiny. See Central Hudson, 447 U.S. at 563 n. 5, 100 S.Ct. at 2350 n. 5. Rather, these are statements that were made, as the previous analysis on Plaintiff's status demonstrates, in the context of a public controversy, and it is only their chance appearance in the promotional materials that brings any color at all to "the cheeks" of Plaintiff's argument. Such a fortuity should not transform the character of their content into commercial speech, just as the quality of wine does not depend on the shape of the vessel in which it is carried.
As Defendants point out, this commercial speech definition would yield a result that commentators on national issues could enjoy the uninhibited, robust debate guaranteed by New York Times and Gertz only so *645 long as their statements did not happen to be reprinted in advertisements for their books, articles and television programs.[33] This definition of commercial speech would severely cloister the virtues articulated in these decisions. "If a profit motive could somehow strip communication of otherwise available constitutional protection, our cases from New York Times to Hustler Magazine [v. Falwell, 485 U.S. 46, 108 S. Ct. 876, 99 L. Ed. 2d 41 (1988)] would be little more than empty vessels." Harte-Hanks Communications, Inc. v. Connaughton, 491 U.S. 657, 667, 109 S. Ct. 2678, 2685, 105 L. Ed. 2d 562 (1989). For these reasons, this Court holds that the statements in the promotional materials are not commercial speech and should not receive any different treatment than the other statements contained in Defendants' publications.
2) The Mere Identification of Speech as "Commercial" Cannot Determine the Degree of Fault to Apply to Defendants' Conduct
Beyond Plaintiff's mistaken classification of the promotional materials, there are other compelling reasons to reject National Life's argument. National Life, relying on the Third Circuit's opinion in U.S. Healthcare, makes a novel argument that a plaintiff need not demonstrate that a defendant acted with malice when a defendant's statement is contained in commercial speech. U.S. Healthcare, 898 F.2d at 939. "In summary, the speech at issue [speech classified as commercial] does not receive heightened protection under the First Amendment. `Because this speech is chill-resistent, the New York Times standard is not ... necessary to give adequate breathing space to the freedoms protected by the First Amendment.'" U.S. Healthcare, 898 F.2d at 939 (citations omitted).
National Life's reasoning rests on a correct conclusion taken out of context. National Life correctly notes that commercial speech receives less protections than noncommercial speech, but Plaintiff's analysis is incomplete. See Central Hudson, 447 U.S. at 562-63, 100 S.Ct. at 2349-50; Virginia Pharmacy Board v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 771-72, n. 24, 96 S. Ct. 1817, 1830-31, n. 24, 48 L. Ed. 2d 346 (1976).
Since National Life would apply reduced protection to the speech regardless of Plaintiff's status as a public figure, commercial speech defines the new boundary between robust debate and reputation. See also, U.S. Healthcare, 898 F.2d at 937 ("[W]hile [commercial speech] is protected by the First Amendment, it requires no higher standard of liability than that mandated by the substantive law ..."). Commercial speech becomes the talisman Plaintiff uses for determining when First Amendment values in robust debate must yield to reputation interests. If the speech is classified as commercial it gets disparate treatment under Plaintiff's defamation scheme. According to Plaintiff, because commercial statements receive less First Amendment protection, a defendant's conduct and statements are automatically judged against a negligence standard, and not the traditional malice standard, that is applied when plaintiff is a public figure.
National Life's argument falters on its own incomplete understanding of commercial speech analysis. The classification of speech as commercial is the beginning, not the end, of the Supreme Court analysis. Before commercial speech is restricted, the value of the commercial speech is evaluated against the particular state interest the restriction is designed to foster. See e.g., Bolger, 463 U.S. at 66-74, 103 S.Ct. at 2880-84. "The protection available for particular commercial expression turns on the nature both of the expression and of the governmental interests served by the regulation." Id. (quoting Central Hudson, 447 U.S. at 563, 100 S.Ct. at 2350); see also Virginia Pharmacy, 425 U.S. at 748, 96 S.Ct. at 1819.
*646 What Plaintiff fails to recognize is that the diminished protection accorded commercial speech only justifies the application of a different test to evaluate the speech. The balancing of the substantial government interest against the restriction's limitation on commercial speech still occurs. See Central Hudson, 447 U.S. at 563-66, 100 S.Ct. at 2350-51. Weighing the value of commercial statements against the value of a restriction is done even though the restriction is identified as promoting a substantial government interest.[34]Central Hudson, 447 U.S. at 564, 100 S.Ct. at 2350 ("The State must assert a substantial interest to be achieved by restrictions on commercial speech.").
The identification of a statement as commercial does not leave it naked, without any First Amendment clothing to protect it. See Virginia Pharmacy, 425 U.S. at 748, 96 S.Ct. at 1819. If mere identification of speech as "commercial" justified its restriction, as Plaintiff argues, then many current Supreme Court decisions would have to be overturned. See e.g., Bolger, 463 U.S. at 60, 103 S.Ct. at 2877 (Supreme Court strikes government restriction prohibiting the unsolicited mailing of contraceptive advertisements); Central Hudson, 447 U.S. at 563, 100 S.Ct. at 2350 (Supreme Court strikes New York regulation that banned all public utility advertising promoting the use of electricity); Virginia Pharmacy, 425 U.S. at 748, 96 S.Ct. at 1819 (Supreme Court struck state regulation that made it illegal to advertise prescription drug prices); In re R.M.J., 455 U.S. 191, 102 S. Ct. 929, 71 L. Ed. 2d 64 (1982) (Supreme Court struck various restrictions on attorney advertising). These decisions demonstrate that commercial speech interests are not always sacrificed for the sake of a substantial government interest. Therefore, even when the compensation of individuals harmed by defamatory statements is considered a substantial state interest, that interest in reputation must be weighed against the not inconsequential value of the commercial speech.
Plaintiff's truncated commercial speech analysis would leave a stump where important speech interests once stood. In using the mere identification of commercial speech as the analytic tool, Plaintiff operates with a meat cleaver instead of a scalpel, and would amputate much of the core of protected speech from the body of the First Amendment; and all of this would be done in the name of protecting its own good name and reputation.
Plaintiff's analysis is also crippled by the incompatibility between the Supreme Court tests used to evaluate commercial speech and defamation. The Court's assessment of the validity of a restriction on commercial speech is conducted within the confines of the Central Hudson test. 447 U.S. at 563-66, 100 S.Ct. at 2350-51. The first prong of that test states that for commercial speech to receive First Amendment protection the statements, "must be neither misleading nor related to unlawful activity." Id. at 564, 100 S.Ct. at 2350.
Applying the first prong of the Central Hudson test to defamation might lead one, without more thought, to conclude that commercial speech, once identified, should always yield to any reputation interest, since defamation is always false or misleading.[35] Indeed, that appears to be, in part, *647 what Plaintiff concludes, i.e., that a defamatory commercial statement is without constitutional protection because it is false.[36] Such a conclusion, however, is wrong.
Applying the Central Hudson commercial speech test to defamation underscores an inherent difficulty when these two lines of analysis are conflated. While defamation tolerates some false statements, in order to give the First Amendment the "breathing space" it requires, commercial speech apparently does not forgive false speech so easily. Cf. Gertz, 418 U.S. at 340, 94 S.Ct. at 3007 (although erroneous statements of fact do not warrant constitutional protection, applying the malice standard to public figure plaintiffs is predicated on the recognition that error is "inevitable in free debate"); with Central Hudson, 447 U.S. at 564, 100 S.Ct. at 2350 ("... there can be no constitutional objection to the suppression of commercial messages that do not accurately inform ..."). If we are to adopt Plaintiff's reasoning and shift defamation analysis away from a plaintiff's status to a subject matter classification of defendants' statements, then more work will need to be done in order to make these two areas consistent with one another.
Indeed, Plaintiff's acceptance of negligence as the standard against which to judge Defendants' statements in the promotional materials is a generous concession. Under the commercial speech standard in Central Hudson, as applied by Plaintiff, any error, negligent vel non, would be actionable. Nothing but clear constitutional principles articulated in Gertz prevents such a conclusion if the logic of Plaintiff's position is accepted. See Gertz, 418 U.S. at 346-47, 94 S.Ct. at 3010 (states may not impose liability without fault to defamatory falsehood injurious to private figures).
Moreover, Plaintiff's use of commercial speech as the litmus test for defeating the application of the malice standard to a Defendants' conduct inappropriately equates all reputation interests. Since National Life maintains that defamation ensconced in commercial speech is automatically subject to the negligence standard, then all reputation interests are treated alike. Such a conclusion runs counter to precedent. See Gertz, 418 U.S. at 346, 94 S.Ct. at 3010. The Supreme Court has rejected the holding that a private individual could be transformed into a public figure just by association with a matter that attracts public attention. Id.; Wolston, 443 U.S. at 167, 99 S.Ct. at 2707. What Plaintiff argues is that a public figure who, like National Life, voluntarily inserts itself into the vortex of a public controversy, may still regain increased protections of private figure status if the statements are deemed commercial speech. The subject matter of the statements becomes the tail that wags the dog.
However, this conclusion is wrong. Even U.S. Healthcare recognized that a state has only a "`limited' interest in compensating public persons for injury to reputation by defamatory statements, but has a `strong and legitimate interest' in compensating private persons for the same injury." 898 F.2d at 930. Plaintiff's analysis does not recognize the different interest the state has in compensating individuals depending on their status. Plaintiff's *648 analysis clearly runs counter to Gertz and the New York Times.
The problems associated with Plaintiff's lack of sensitivity to differences in the value of different types of commercial speech, the value of different reputation interests are compounded by Plaintiff's broad definition of commercial speech. Under Plaintiff's analysis, a factually inaccurate statement about the President, or any government official, contained in a news story on "60 Minutes" could be transformed into commercial speech if that statement became part of an advertisement to promote the show. Such a holding would severely curtail core First Amendment freedoms that by any measure protect political speech.
Finally, Plaintiff's probing inquiry into the subject matter of the speech should perhaps engender an equally searching analysis into the value of the protected reputation interest. If commercial interests can so easily devalue the speech interest, why cannot those same commercial interests diminish reputation's value? A corporation's reputation interest is primarily commercial. To paraphrase Shylock, "If you prick them they do not bleed."[37] Nor do corporations have the same intense interest in dignity that so defines society's interest in protecting private individual plaintiffs. Plaintiff's desire not to sacrifice reputation for commercial interest could easily be turned around in this case. Perhaps speech should not be sacrificed when only commercial reputation is at issue.
The Supreme Court has confronted this difficult issue before. Previous attempts at making the subject matter of the speech the touchstone of defamation analysis have been rejected. See Wolston, 443 U.S. at 167, 99 S.Ct. at 2707; Gertz, 418 U.S. at 346, 94 S.Ct. at 3010 (Supreme Court rejects the Rosenbloom standard that focused on whether the defamation was of interest to the general public). Such attempts would require judges to proceed along the perilous route of weighing which topics within commercial speech are so important as to outweigh the value of a particular reputation interest. But as the Supreme Court has stated, "[w]e doubt the wisdom of committing this task to the consciences of judges." Gertz, 418 U.S. at 346, 94 S.Ct. at 3010. Perhaps in another context such a journey can be justified. Cf. U.S. Healthcare, 898 F.2d at 914 (Third Circuit refused to apply malice standard to statements made in a corporative advertising campaign).[38] Plaintiff's arguments are novel and well made, but the analysis ultimately fails. This Court finds existing precedent sufficient to protect Plaintiff's reputation and our nation's interest in free expression.
Accordingly, this Court holds that Plaintiff must evaluate Defendants' statement in both the publications and promotional materials against the malice standard. The statements in the promotional materials are not commercial, or even if so classified, the different treatment of them cannot be justified.
F. The Malice Standard
Since Plaintiff is a limited purpose public figure and Plaintiff's arguments regarding commercial speech are rejected, National Life must demonstrate that Defendants acted with malice. Plaintiff must prove that the defendant made the statement "with knowledge that it was false or with reckless disregard of whether it was false or not." New York Times v. Sullivan, 376 U.S. at 279-80, 84 S.Ct. at 726. Reckless disregard has in turn been defined as publishing with a "high degree of awareness of ... probable falsity." Reuber v. Food Chemical News, Inc., 925 F.2d 703, 714 (4th Cir.1991) (citation omitted). Further, Plaintiff must establish malice not by a preponderance of the evidence, but by "clear and convincing evidence." Reuber 925 F.2d at 714.
National Life contends that Defendants wrote, published and republished the statements *649 with actual malice. As evidence of this malice National Life states that Defendant Band, the original author of the statements, did no research and had no particular expertise in the insurance industry. First, Plaintiff states that Band's approach in drawing a line between companies that received an "A +" rating such as National Life, and those that got a "AA" rating, or higher, was arbitrary and simplistic. According to National Life, Band knew that an A + rating meant a strong capacity to pay debts and meet expenses. Band knew that National Life had a very low percentage of its portfolio invested in junk bonds. In spite of this knowledge Band published his statements that National Life was one of the weakest insurance companies.
Second, Band did no research into National Life's particular financial situation before publishing what he thought the Standard and Poors rating meant. Third, none of the Defendants printed a retraction when confronted by the Plaintiff that the publication was in their view false.
In sum, Plaintiff writes, "Taken together, this evidence of knowing falsehood, deliberate slanting and thirst for profits constitute probative evidence of constitutional malice which must be examined and evaluated by the jury." Plaintiff is incorrect.
The Fourth Circuit has held that the following types of evidence, taken alone or together do not constitute actual malice: 1) evidence of defendants' debatable analysis of a document; 2) evidence of the defendants' failure to investigate; or even conscious decision not to inquire into the truth; 3) evidence of the defendants' profit motive. See Reuber, 925 F.2d at 715-18.
As such, the fact that Band did not investigate according to National Life's satisfaction is not enough.[39]Id. Neither is National Life's assertion that Band's method is simplistic. Id. Band's reliance on one source, the S & P rating, does not constitute malice. St. Amant v. Thompson, 390 U.S. 727, 730, 88 S. Ct. 1323, 1325, 20 L. Ed. 2d 262 (1968).[40]
Further, Band's desire to make a buck is irrelevant. "The cases from New York Times v. Sullivan onward teach that evidence of a defendant printing material to increase its profits does not suffice to prove actual malice." Reuber, 925 F.2d at 716.
The Court considered the malice standard and Plaintiff's status at this juncture, because both topics are appropriate questions of law for the Court's consideration. Anderson, 477 U.S. at 256-57, 106 S.Ct. at 2514-15 (plaintiff must demonstrate malice by clear and convincing evidence to survive summary judgment if plaintiff is a public figure); Reuber, 925 F.2d at 708 (determination of plaintiff's status as a public or private figure is a question of law). Some of the statements of which Plaintiff complains are probably not actionable, either because Defendants' statements are opinion, or are not of and concerning National Life. Out of the statements that remain, National Life cannot tickle malice out of this set of facts. As malice is the standard, Plaintiff's case fails, because it cannot demonstrate by clear and convincing evidence that Defendants acted with malice. Anderson, 477 U.S. at 256-57, 106 S.Ct. at 2514-15. Defendants' Motion for Summary Judgment is granted.
III. Conclusion
The Court finds that Plaintiff, National Life, although not a general purpose public figure, is a limited purpose public figure. The Plaintiff has voluntarily injected itself into the vortex of a preexisting public controversy in order to influence its outcome. *650 Plaintiff retained its public figure status during and after the alleged defamatory statements were made.
Further, the Court finds that Defendants' statements as contained in the promotional materials are not commercial speech, and even if they could be so characterized, there is no justification for any disparate treatment of them. Finally, given these conclusions, Plaintiff must evaluate Defendants' statements against a malice standard. After review of Defendants' conduct this Court finds, as a matter of law, that Plaintiff cannot sustain a case based on the malice standard. Summary Judgment is granted for the Defendants.
A separate Order shall issue.
NOTES
[1] These Publications are entitled Profitable Investing, together with the reports "How Safe Is Your Insurance," "Thirty-Seven Blue Chip Investments To Unload Now" and the "Treasure Chest of Fortune Making Tips."
[2] The promotional packages upon which Plaintiff bases its claim of defamation are: the "Launch Package," the "April Bulletin," the "Named In This Letter Bulletin," the "May Bulletin," and the (revised) "May Bulletin."
[3] It bears noting that Band's articles on the insurance industry were presented against a backdrop of many articles that appeared in publications across the country on the financial stability of the life insurance industry as measured by the financial health of life insurance companies. There was a growing public concern about the insurance industry due to investments by some insurance companies in risky ventures and the growing number of insurance company failures. The insurance industry situation was frequently compared to the financial problems that plagued the savings and loan industry.
[4] See e.g., Exhibits A, B, G, I and M attached to Defendants' Reply Memorandum and Volume II Exhibits 21, 22, and 23 attached to Defendants Supplemental Memorandum of Defendant, The Wall Street Digest, Inc. on Public Figure status of Plaintiff (Exhibit 23 for example, is a collection of articles detailing National Life's opposition to a Vermont state initiative that would have prevented certain AIDS testing by insurance companies).
[5] This prominence existed prior to the alleged defamation. See Defendants' Exhibit 21 attached to Supplemental memorandum on Plaintiff's press release on the election of National Life C.E.O. to Board of Directors for the American Council of Life Insurance. The prominence continued after the alleged defamation. See Defendants' Exhibits C and D attached to their Reply, Depositions of National Life's C.E.O. Frederick Bertrand at 26 and National Life's President John Harding at 266-67.
[6] See, e.g., Defendant Exhibit 22 in Volume I of Exhibits in support of Supplemental Memorandum The Wall Street Digest, "Breaking New Ground The Ideas of Frederick H. Bertrand," 9/90 edition of "Life Association News" at 117 (C.E.O. of National Life "... doesn't mince words about what's wrong with the life insurance industry. He offers some unusual ideas about how to fix it.")
[7] See Defendants' Exhibit A attached to Defendants' Reply to this Motion.
[8] See, e.g., Defendants' Exhibit 25 attached to Supplemental Memorandum of The Wall Street Digest on news coverage of National Life's views on state AIDS legislative initiative.
[9] Defendants' Exhibits 8, 9, 12, 15, 16 in support of Supplemental Memorandum, The Wall Street Digest. For example, in exhibit 12 one press release sent to the Indiana press in May of 1989 states, "National Life of Vermont paid over $8,525,000 to or for its Indiana policy owners in 1988.... In business since 1850, National Life has just received notification that, for the 15th consecutive year, it has been assigned an A + rating by A.M. Best Company, the highest assessment offered by the rating firm." Similar press releases were sent to 34 states.
[10] Further, such a requirement might even be frowned upon by the Supreme Court. The Miami Herald Publishing Company v. Tornillo, 418 U.S. 241, 258-59, 94 S. Ct. 2831, 2839-40, 41 L. Ed. 2d 730 (1974) (in rejecting plaintiff's contention that a newspaper be required to print plaintiff's opposing views the Supreme Court stated, "[a] newspaper is more than a passive receptacle or conduit for news, comment and advertising.")
[11] Defining these concepts is a difficult endeavor since each can be so malleable. As one court stated, "[d]efining public figures is much like trying to nail a jellyfish to the wall." Rosanova v. Playboy Enterprises, Inc., 411 F. Supp. 440, 443 (S.D.Ga.1976).
[12] For example, the U.S. House of Representatives Committee on Energy & Commerce issued a report in February of 1990, shortly before any of the alleged defamatory statements, on "Insurance company Insolvencies." See Defendants' Exhibit E attached to their Reply. The Congressional Report cites several earlier national studies on company insolvency and compares the plight of this industry to the savings and loan situation. Other articles, Defendant lists from the New York Times and The Washington Post carry titles such as: "Insurer Insolvencies: Next Mega-Crisis" and "Will Insurance Industry Go the Way of S & L's." In Forbes, a national business magazine, an article appeared over nine months before the alleged defamation that specifically showed how numerous large insurance companies had pursued high risk strategies and consequently received lower ratings. See Defendants Exhibits F and H attached to the Reply.
[13] See Defendants' Exhibits A and G attached to Reply. See, e.g., "National Life Reaches Insurance Milestone," Rutland Herald, 12/12/87 ("National Life of Vermont has announced achievement of a new business milestone: $25 billion of life insurance in force."), "Regulators: National Life is Sound," Rutland Herald, 2/8/90 ("Cutbacks planned by National Life of Vermont are due to increased competition in the industry but the company is still in sound financial shape."); "Business Growth," Times Argus, 1/14/86 ("At a time when many of the nation's biggest corporations are squandering resources on non-productive take-overs and mergers, its refreshing to see a company put some money into expansion that will create jobs and help its community."); "National Life Hopes New Austerity Will Restore Old Grandeur," Rutland Herald, 2/14/88.
[14] The Court notes that even if Plaintiff's statement of the controversy could be considered accurate, National Life would likely be held a public figure. Plaintiff touted its financial strength in press releases across the country. Plaintiff raised the issue that its financial strength should be judged, in part at least on its A.M. Best rating. Plaintiff's creation of a controversy through its own actions does not preclude a finding that there was a public controversy. National Found. for Cancer Res. v. Council of Better Business Bureaus, Inc., 705 F.2d 98, 101 (4th Cir.1983) (NFCR); see also, Steaks Unlimited, 623 F.2d at 273-74. The Court rejects Plaintiff's characterization primarily because Defendants' publications are not about National Life in particular, but about the insurance industry and the financial health of companies that comprise it. Plaintiff took advantage of an existing controversy by casting these statements about its financial condition into the vortex of an existing controversy, Plaintiff voluntarily injected itself into a public debate.
[15] Both Plaintiff, as well as Defendants, maintain that the promotional materials were sent to a targeted audience. "The ads were specifically directed at potential purchasers of Phillips' and Band's product, encouraging these people to purchase a newsletter subscription and thereby increase Phillips' and Band's revenues." Plaintiff's Memorandum in Opposition to Supplemental Memoranda Filed by Defendants on its Public Figure Status at 13.
[16] See, e.g., Defendants' Exhibit B attached to Reply. Advertisement from the Wall Street Journal, May 1990 ("Our business is life insurancea grand old American tradition. We're secure, successful and growing, with a 140-year history of integrity and reliability. Year after year our strong financial position and performance have earned us an A + rating from A.M. Best, ... In short as big league life insurance companies go, we're batting a thousand.") (emphasis added)
[17] See supra note 9.
[18] See, Defendants' Vol. II Exhibits 37, 38 & 42 attached to Supplemental Memorandum.
[19] Arguments made by Plaintiff implying that National Life, should, as a corporation, be treated differently are examined more fully infra page 640.
[20] The Court here does not rely on the fact that National Life is part of a regulated industry or is a large corporation. Such factors were relevant for determining, along with other facts, Plaintiff's prominence and the existence of a public controversy. See Veribanc, 866 F.2d at 689 n. 13. However, these facts are insufficient to establish public figure status. Id. at 687-688.
[21] Id. In part, what Plaintiff may be arguing is that corporate plaintiffs should have a different public figure test applied when reviewing their status. Such assertions are also rejected by the Court. See infra page 640.
[22] Moreover, even if Plaintiff were correct in their redefinition of the controversy, it is likely that it existed prior to the defamatory statements. Numerous articles appeared in the Vermont media that challenged the financial health of National Life. National Life responded by issuing press releases nationally. In particular, National Life issued press releases nationally regarding its financial health as measured by its A.M. Best rating. See supra notes 9, 12 & 13 and Defendants' Exhibit A & M attached to the Reply.
[23] See supra note 11.
[24] National Life sent each policy holder a letter touting its financial strength immediately following the first of the allegedly defamatory publications. See Defendants' Exhibit J attached to the Reply. Further, National Life wrote its nationwide network of general agents advising them as to how to respond to Band's March 1990 article. See Defendants' Exhibit K attached to the Reply. National Life spent $30,000 in May of 1990, on an ad in the Wall Street Journal. In the ad, National Life identifies itself as "big league" insurance company, extols its financial strengths touts its A.M. Best rating. See Defendants' Exhibit B attached to the Reply. Finally, National Life's executives continued in prominent positions in the insurance industry and continued to speak out in national industry publications. See supra notes 5 and 36. For example, an article on Plaintiff's CEO stated, "Industry image is something Bertrand cares deeply about. It's the primary reason he chairs ACLI's committee on Public Relations. And when a national financial newsletter recently threatened the image of his own company by implying that National Life was financially unstable, Bertrand filed suit." Defendant Exhibit 22 in Volume I of Exhibits in support of Supplemental Memorandum The Wall Street Digest, "Breaking New Ground The Ideas of Frederick H. Bertrand," 9/90 edition of "Life Association News" at 118.
[25] See Bose Corp. v. Consumers Union, 466 U.S. 485, 492 n. 8, 104 S. Ct. 1949, 1955 n. 8, 80 L. Ed. 2d 502 (1984) (Supreme Court declined to pass on merits of a lower court finding that the corporate plaintiff involved was a public figure).
[26] Cf. Bruno & Stillman, Inc. v. Globe Newspaper Co., 633 F.2d 583 (1st Cir.1980); Steaks Unlimited 623 F.2d at 264 (cases applying the Gertz public figure test to corporations) and U.S. Healthcare v. Blue Cross of Greater Philadelphia, 898 F.2d 914 (3rd Cir.1990), cert. denied, ___ U.S. ___, 111 S. Ct. 58, 112 L. Ed. 2d 33 (1990) (although the corporations involved in the suit would be public figures under the traditional Gertz analysis, the Third Circuit declined to make such a finding).
[27] Lurking behind Plaintiff's argument is the Third Circuit holding in U.S. Healthcare that stated that even though Plaintiff was a public figure under the Gertz standard, that test had limited applicability when used to evaluate a corporate plaintiff in a corporative advertising campaign. U.S. Healthcare, 898 F.2d at 938-39. Plaintiff's argument, as will be discussed later, turns in part on its assertion that the promotional materials were, as the Third Circuit held in U.S. Healthcare, commercial speech. As such, that Court maintained that focusing on a plaintiff's status as Gertz requires will have limited applicability because corporations, out of business necessity, will always seek out media and place themselves in the public eye in order to respond to competitor pressure and statements. Id. at 939 ("We believe that a [plaintiff] corporation must do more than claimants have done here to become a limited purpose public figure").
[28] Shakespeare, Othello, III iii 157-61 (Iago). Oddly, in the case of corporation defamation, the damage to reputation is primarily, if not completely monetary, i.e., damage to the corporate purse. See, e.g., Bose Corp. v. Consumers U. of U.S., 508 F. Supp. 1249, 1270 (D.Mass.1981) (overturned in part, on its holding that all corporations should be considered public figures). ("... a manufacturer's interest in the reputation of its product [is] an interest not nearly as significant as an individual's interest in his personal reputation and hardly `at root of any decent system of ordered liberty'").
[29] Plaintiff refers specifically to the Launce Package, the April Bulletin, the May Bulletin, and the (revised May Bulletin).
[30] As The Wall Street Digest did not participate in writing, sending, or publishing the promotional materials, and as such National Life's argument on commercial speech does not in any way affect Defendant Digest.
[31] National Life's characterization of Defendants' analysis as commercial speech also rest on its assessment of the statements as "teasing, truncated highlights of Richard Band's investment advice." Plaintiff's Opposition to Supplemental Memorandum at 14. Defendants have stated that the "marketing letters directly summarize" the statements in Profitable Investing. The Court notes that to the extent Band's alleged defamatory statements are presented in abbreviated form in the marketing letters, they may not be actionable at all. The April Bulletin that markets the newsletter appears to mention the Plaintiff only once in a statement that seems to be inactionable opinion. "The Bonus report tells you how to check out the fiscal soundness of your own life insurance companies. It lists many of the weakest, including for example ... National Life (Vermont), ..." See Plaintiff's Exhibit 2 attached to Opposition to the Motion for Summary Judgment at 15.
[32] It is also the subject of dispute as to whether the statements meet the third prong of the Bolger test does the speaker have an economic motivation for the speech. National Life claims that Band trumped up the insurance controversy in order to sell his newsletter. Profit, Plaintiff maintains, not the desire to inform, drove him to comment on National Life. There is scant evidence for Plaintiff's claim. Further, Plaintiff's own motives for bringing suit could be impugned since a flurry of press releases from Plaintiff notifying the public of this suit followed the filing.
[33] If Gary Wills' or William F. Buckley's analysis of an issue was moved from a book or magazine interior, to the jacket cover, Plaintiff would have the speech's protection reduced simply because of the change in "venue." Such a change of location should not alter the law that governs the dispute.
[34] As the Third Circuit recognized, this evaluation of commercial speech is usually done when government action or restrictions limit or regulate the commercial speech. U.S. Healthcare, 898 F.2d at 932. However, the Third Circuit and the Plaintiff still proceed with the proposition that, "the subordinate valuation of commercial speech is not confined to the government regulation line of cases." Id. Therefore, even in a defamation case between two private litigants the diminished protection given commercial speech should apply. As such, the substantial state interest identified, in this application of the commercial speech doctrine to defamation, is the compensation for damage to one's reputation. The question is when should a defendant's statements, because they are commercial speech, yield to a plaintiff's reputation interests and be evaluated against a lower fault standard than malice.
[35] However, the alleged defamatory statements could in this case be classified as passing the first prong of the Central Hudson test, because the alleged defamatory statements do not give the promotional materials their commercial character. The commercial character, if at all, comes from being placed in the promotional materials. As such, the focus of the Central Hudson analysis could be on the terms of sale of the Defendants' publication, which is what, for the Plaintiff, turns these statements from non-commercial into commercial speech. See Bolger, 463, U.S. at 69, 103 S.Ct. at 2881 ("The state may deal effectively with false, deceptive or misleading sales techniques.") (emphasis added). There is no charge here that Defendants were misrepresenting or misleading potential subscribers in the terms of offer for the sale of the newsletter. Therefore, Defendants' publications would pass the first prong of the Central Hudson test.
[36] Plaintiff argues that "Because such commercial speech is economically motivated, precisely calculated, developed over time and unusually verifiable, First Amendment concerns are greatly diminished. Accordingly, such speech, if false or misleading, is entitled to no constitutional protection. For these reasons, the New York Times standard does not apply to The Advertisements [Defendants' promotional materials], and National Life need only prove that the defamatory statements contained therein were published negligently." Plaintiff's Opposition at 8 (citations omitted).
[37] Shakespeare, Merchant of Venice.
[38] Of course, such arguments will have to deal with the difficulties of both defining commercial speech and Supreme Court precedent. Cf. Wolston, 443 U.S. at 157, 99 S.Ct. at 2702; Dun & Bradstreet, 472 U.S. at 757, 105 S.Ct. at 2944.
[39] There is no clear and convincing evidence here of obvious reasons that called Defendants' analysis, or investigation into question. See Fitzgerald, 691 F.2d at 670. "As long as the sources of the libelous information appeared reliable, and the defendant had no doubts about its accuracy, the courts have held the evidence of malice insufficient to support a jury verdict, even if a more thorough investigation might have prevented the admitted error." Id. (citations omitted).
[40] National Life's attempt to make Defendants' conduct meet the malice standard also fails, because Plaintiff is not singled out but is mentioned as part of a group, all of whom did not receive a favorable rating from S & P in Band's view. This analysis fails to show malice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1492679/ | 104 F.2d 849 (1939)
FIELD
v.
WATERMAN S. S. CORPORATION.
No. 9045.
Circuit Court of Appeals, Fifth Circuit.
June 29, 1939.
*850 Richard B. Montgomery, Jr., of New Orleans, La., for appellant.
Gessner T. McCorvey, of Mobile, Ala., for appellee.
Before SIBLEY, HUTCHESON, and McCORD, Circuit Judges.
McCORD, Circuit Judge.
John Field, a seaman, brought this suit under the Jones Act, § 33, 46 U.S.C.A. § 688, to recover for an injury received from a fall while working as an able-bodied seaman on a vessel owned by the Waterman Steamship Corporation.
The petition alleged that Field was ordered to paint the stern of the ship; "that while mounting the jacob ladder the step slipped and caused him to fall"; and that in falling he caught on a brace line and severely wrenched his shoulder. The petition further alleged "that said injury was due solely to the negligence and carelessness of the defendant, its agents, officers, servants and employees, or the persons for whom defendant is liable, in that they did not properly rig the stages and brace lines on which the plaintiff was working at the time of the injury."
The evidence informs that plaintiff shipped as an able-bodied seaman on the Arizpa, a vessel owned and operated by the Waterman Steamship Corporation. On September 8, 1936, while the vessel was in Cuba, he and a fellow employee, one Eiland, were directed to paint the stern of the ship. This was a part of their duties as able-bodied seamen. At the same time other members of the crew were engaged in painting other portions of the ship. The plaintiff and Eiland selected a stage from several stages on the deck, and selected ropes with which to swing the stage under the stern. They also selected a jacob's ladder on which to climb down to the stage from the deck, and rigged the stage from which they were to paint. This was also a part of their duties as able-bodied seamen. Field testified that they were on the stage painting and that the rigging did not meet his approval, and that he went to the boatswain and requested additional stages, but that the boatswain did not reply to his request. It is not shown that the boatswain heard this request. He attempted to leave the stage again to go upon the deck to complain to the boatswain, but as he reached for the jacob's ladder his hand slipped, causing him to fall, and to avoid falling into the water he caught on a guard line and injured his shoulder.
Field testified further that for safety three stages should have been used, and that it was the duty of an able-bodied seaman to select the kind and number of stages to be used, and to rig them as he saw fit. Witness Eiland testified that the general custom was to use two stages lashed together, but that when two or three stages were used four or five men painted from them at the same time. No defect was shown in the guard line, the rigging, the stage, or the jacob's ladder. It is without dispute that the ship was seaworthy and the appliances without defect, and that other stages were on the deck and could have been used by Field if he so desired.
At the conclusion of this evidence by the plaintiff the trial court dismissed the petition pursuant to rule 41(b), Rules of Civil Procedure for District Courts, 28 U.S.C.A. following section 723c. It is from this ruling that plaintiff has appealed to this court.
The evidence fails to substantiate the allegations of the petition. Without amending his petition as is provided by rule 15 *851 (b), Rules of Civil Procedure for District Courts, the plaintiff abandoned his charge and now contends that defendant failed to provide him sufficient stages on which to work. However, we will assume the rule was properly complied with and decide the case on its merits.
The case upon which appellant most strongly relies in contending that he should have been allowed to go to the jury is Socony-Vacuum Oil Co. v. Smith, 305 U.S. 424, 59 S. Ct. 262, 267, 83 L. Ed. 265. Mr. Justice Stone in a very learned and exhaustive opinion in that case laid down the rule that the "responsibility of owners for the seaworthiness of vessels and the safety of their appliances will be best served by applying the rule of comparative negligence, rather than that of assumption of risk, to the seaman who makes use of a defective appliance knowing that a safe one is available."
The plaintiff puts himself without the pale of the comparative negligence rule, since he was wholly at fault when he received his injury. There was clearly no breach of duty shown on the part of the steamship company. It was, therefore, the duty of the trial court to dismiss the petition. Clarke v. Illinois Cent. R. Co., 5 Cir., 286 F. 915; Pennsylvania Railroad Co. v. Chamberlain, Adm'x, 288 U.S. 333, 53 S. Ct. 391, 77 L. Ed. 819.
Plaintiff further seeks to recover for maintenance and cure while he was disabled. The evidence is without dispute that the injury suffered by the plaintiff was a recurrence of an old injury to his left shoulder which he received while fighting in the year 1930. At that time he was treated at the San Francisco General Hospital. He next fell and hurt the same shoulder in 1934, and was sent to the U. S. Marine Hospital at New Orleans, where he remained a long time. Further injury to this shoulder appears to be the one for which this suit is brought. On his return from voyage he immediately entered the U. S. Marine Hospital at Mobile on September 18, 1936. On October 10, 1936, he was transferred to the U. S. Marine Hospital at New Orleans for observation and treatment, where he remained until he was discharged fit for duty on June 29, 1937. After his discharge he shipped twice to Europe as an able-bodied seaman on one of the Lykes ships. He returned from this service and reentered the hospital in February 1938, where he is now under treatment.
The evidence is further without dispute that appellant has never been refused or denied hospitalization, and there is no evidence of his expending any sum for maintenance and cure. We are, therefore, of opinion appellant is not entitled to recover. The Baymead, 9 Cir., 88 F.2d 144; The Balsa, 3 Cir., 10 F.2d 408.
The judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1533291/ | 987 S.W.2d 236 (1999)
METROPOLITAN LIFE INSURANCE COMPANY, Appellant,
v.
Charles G. HANEY, Appellee.
No. 14-96-01096-CV.
Court of Appeals of Texas, Houston (14th Dist.).
March 18, 1999.
Rehearing Overruled April 18, 1999.
*238 Mike M. Tabor, Theresa Mary Gegen, Dallas, John Zavitsanos, Andrew S. Golub, Houston, for appellant.
Macon D. Strother, Houston, for appellee.
Panel consists of Chief Justice MURPHY and Justices HUDSON and DRAUGHN.[*]
OPINION ON REHEARING
J. HARVEY HUDSON, Justice.
Appellant's motion for rehearing is granted, our previous opinion issued January 14, 1999 is withdrawn, and the following opinion is issued in its place.
Appellant, Metropolitan Life Insurance Company, appeals a jury verdict in favor of appellee, Charles G. Haney. In eight points of error, MetLife challenges the judgment of the trial court, while Haney brings two cross-points of error. We reverse and render judgment.
I. Background
Haney sold insurance for MetLife from August 1992, until October 1993. MetLife recruited Haney, who had twenty-eight years of experience in selling insurance, because he was one of the top sellers in the Houston area. Dennis Onda was employed by MetLife as a sales representative. Onda, who had been with MetLife for only a year, found two prospective clients, Steven Kirk and Wayne Woods, the owners PSA Pumbing Sales, who wanted to purchase "key man" life insurance for their business. Onda met with Kirk and when it appeared to Onda that Kirk wanted to purchase a substantial policy, Onda explained to Kirk that while he did not have the experience to handle a large sale, he could bring in a more experienced sales representative.
Onda talked to Douglas Sharp, MetLife's Brookhollow Branch Manager, about bringing someone in to assist him with the sale. Haney had been with MetLife for about a week when Sharp approached him about the prospective sale to Kirk and Woods. Haney agreed to assist Onda with the presentation and sale to Kirk and Woods. Haney met with Kirk. After determining what Kirk wanted in terms of life insurance, Haney said he would draft a proposal.
MetLife had a computer program known as "Quantum" for drafting sales proposals for prospective clients. MetLife had contracted with ECTA Corp., which builds sales illustration systems for life insurance companies, to *239 design Quantum. MetLife, in turn, sold the Quantum software to its agents for $25. Haney, who did not know how to use Quantum, provided Sharp with the information to use in creating a proposal for Kirk and Woods. Sharp gave Haney the proposal he generated with Quantum. Haney, in turn, used the Quantum generated proposal in drafting an overall proposal, which he presented to Kirk and Woods.
Haney ultimately sold four $1,000,000 policies to Kirk and Woods. Haney and Onda split the $25,000 commission from the sale. The policies, which Kirk and Woods purchased, were in place by November 1992.
In May 1993, Sharp learned there was a problem with the Kirk and Woods policies when they had stopped payment on their monthly bank draft. Sharp informed Onda and Haney and asked them to find out why Kirk and Woods had stopped payment on the policies. Haney unsuccessfully tried to reach Kirk and Woods by telephone and letter. When Haney had received no response, he went to Kirk and Woods's office unannounced. Rather than see Haney Kirk phoned his attorney. After speaking with his attorney, Kirk told Haney that he could not talk to him and that Haney should leave his office.
On June 25, 1993, Kirk and Woods's attorney, Gene Human, sent a demand letter to MetLife, Haney, and Onda. Alleging a number of misrepresentations, Kirk and Woods demanded that MetLife rescind the policies, refund the premiums they had paid, and pay their attorney's fees.
The letter alleged that Haney falsely represented to them that for ten years, beginning at age 65, they could withdraw $160,000 per year from each policy, for an accumulated total of $1.6 million, while the remaining net cash value in the policy would have increased. In short, the proposal presented to them did not take into consideration the $160,000 loans when calculating the policies' net cash value.
Kirk and Woods accused Haney and MetLife of using only selected information, while omitting other material information from the sales presentation. The Kirk and Woods proposal did not contain a "Standard Presentation Ledger Statement" (SPLS). The Quantum-generated "illustrative cash value column," did not take into account any outstanding loans or cash withdrawals made from the policy. The SPLS, however, contained additional columns which took into consideration loans and cash withdrawals before calculating the cash value of the policy. Each Quantum-generated page contains the statement, "This illustration is not valid unless accompanied by a Standard Presentation Ledger Statement."
Haney claims Sharp did not provide him with the SPLS and that he did not know the illustrative cash value column did not consider loans made against the policy when calculating the policy's net cash value. MetLife, on the other hand, asserts Haney had the SPLS, but chose to omit it from his proposal.
After receiving the demand letter, Haney went to Kirk and Woods's office and threatened that if they "wanted to play games, Mother Met had a lot of money." Bill Foster of MetLife investigated the matter. At Kirk and Woods's request, Haney was not involved in the investigation.
On July 15, 1993, Haney's attorney wrote MetLife demanding that MetLife write to Kirk and Woods explaining that Haney (1) did not intentionally misrepresent any figures in the proposal because he did not know the Quantum-generated proposal, provided by MetLife, did not represent the correct net cash value, and (2) did not omit select pages from the proposal. Haney also demanded that MetLife allow him to keep his commission from the sale, rather than charging it back to him.
On July 16, 1993, MetLife wrote Kirk and Woods's attorney explaining that the wrong values were inadvertently used in the illustrated sales proposal. On July 29, 1993, MetLife rescinded the policy, refunded the paid premiums, and paid Kirk and Woods's attorney's fees. Kirk testified at trial that he was satisfied with the way in which MetLife handled the matter.
On October 25, 1993, Haney filed suit against MetLife, Fred Fiegley, vice president of MetLife in Houston, Sharp, Kirk, and *240 Woods. Haney alleged claims for negligent misrepresentation and violations of the Texas Deceptive Trade Practices Act (DTPA) and the Insurance Code against MetLife, Feigley, and Sharp; negligence and breach of contract against MetLife; and defamation against Kirk and Woods. On August 9, 1994, Feigley and Sharp were nonsuited. Kirk and Woods were nonsuited on February 9, 1995.
Haney filed three amended petitions adding Onda, Lumen Systems, Inc.-which copied and distributed the Quantum disks for MetLife-ECTA, and Sharp, again. Haney also added claims for third-party breach of contract, breach of implied warranty of merchantability, and fraud.
MetLife moved for summary judgment on all of Haney's claims. On June 27, 1995, the trial court granted summary judgment on Haney's claims for third-party beneficiary breach of contract, breach of the implied warranty of merchantability, and insurance code violations. On the agreement of Haney, these same claims against Sharp and Onda were also subsequently dismissed. In the fourth amended original petition, Lumen was no longer included as a defendant.
On August 1, 1994, MetLife filed a counterclaim against Haney alleging breach of contract and seeking the recovery of $17,668.59 in cash advances. Prior to trial, ECTA settled with Haney for $17,500.
Haney and the remaining defendants-MetLife, Sharp, and Onda-proceeded to trial on Haney's claims for negligence, negligent misrepresentation, fraud, and DTPA violations. The jury found (1) Haney and MetLife each were fifty percent negligent and awarded Haney $50,000 for loss of earning capacity; (2) MetLife had made a negligent misrepresentation and awarded Haney $50,000 for pecuniary loss; (3) MetLife had violated the DTPA, but its conduct was not "knowing," and awarded Haney $50,000 for loss of earning capacity and $4,750 for mental anguish damages; and (4) MetLife had committed fraud, but had not acted with malice, and awarded Haney $27,500 for pecuniary loss. The jury did not find either Sharp or Onda liable on any of Haney's claims. The jury further awarded Haney attorney's fees in the amount of $106,000-$95,000 for preparation through trial; $3,500 for appeal to the court of appeals; $2,500 for request for or response to application for writ of error to the Texas Supreme Court; and $5,000 if writ is granted.
Prior to trial, MetLife elected the "dollar-for-dollar" credit with regard to ECTA's $17,500 settlement with Haney. See TEX. CIV. PRAC. & REM.CODE ANN. § 33.012(b) (Vernon 1997). At trial, Haney stipulated that he owed MetLife $17,668.59 for cash advances and agreed that such amount would be deducted from any recovery from MetLife. With respect to the duplicate awards for loss of earning capacity for his negligence and DTPA claims, Haney elected to proceed under the DTPA. Haney, however, chose not to make an election with regard to the jury's $50,000 award for pecuniary loss on his negligent misrepresentation claim and the award for loss of earning capacity for his DTPA claim because, according to Haney, his damages under these theories were based on separate acts. Although a review of the record does not reflect that Haney expressly made an election between fraud and negligent misrepresentation on the respective awards for pecuniary loss, apparently an election was made for negligent misrepresentation because it yielded a higher recovery.
On May 10, 1996, the trial court entered final judgment. First, the court found that because the jury did not find that MetLife's false or misleading statements in violation of the DTPA were made "knowingly," the jury's award of $4,750 for mental anguish must be disregarded. Next, the court, apparently finding loss of earning capacity under the DTPA and pecuniary loss for negligent misrepresentation and fraud to be duplicate recoveries, made an election for Haney. Therefore, the court determined Haney could recover from MetLife $14,831.41-$50,0000 under the DTPA, reduced by the $17,500 ECTA settlement credit and the $17,668.59 stipulated value for MetLife's breach of contract claim. The court finally determined the jury's award of attorneys' fees would stand.[1]
*241 On appeal, MetLife challenges the legal and factual sufficiency of the evidence that (1) Haney was a "consumer" under the DTPA, (2) Haney suffered loss of earning capacity, (3) MetLife's conduct was intentional, (4) Haney suffered pecuniary losses, and (5) Haney suffered reliance damages. MetLife further asserts Haney has no basis for the recovery of attorney's fees in the absence of recovery on his DTPA claim, and Haney cannot have additional recovery under alternative theories in the event his DTPA claim is affirmed.
Haney raises two cross-points claiming the trial court erred in denying his motion to disregard selected jury findings with respect to (1) the attorneys' fees because such findings were against the great weight and preponderance of the evidence, and (2) the reduction in the amount of damages from $100,000 to $50,000.
II. Standards of Review
A. Legal Sufficiency
When reviewing a challenge to the legal sufficiency of evidence, i.e., a "no evidence" point of error, the reviewing court may consider only the evidence and inferences that support the challenged findings and should disregard all evidence and inferences to the contrary. See ACS Inv., Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex.1997); Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex.1996). If there is more than a scintilla of evidence to support the finding, the claim is sufficient as a matter of law, and any challenges merely go to the weight of the evidence. See Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex.1993). The court may sustain a "no-evidence" point of error if the record reveals one of the following:
(1) a complete absence 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 vital fact;
(3) the evidence offered to prove a vital fact is no more than a scintilla; and
(4) the evidence established conclusively the opposite of the vital fact.
See Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.1998); Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 1799, 140 L. Ed. 2d 939 (1998). There is some evidence when the proof supplies a reasonable basis upon which reasonable minds could reach different conclusions about the existence of a vital fact. See Orozco v. Sander, 824 S.W.2d 555, 556 (Tex.1992). When the reviewing court sustains a "no evidence" point, it is the court's duty to render judgment for the appellant because that is the judgment the trial court should have rendered. See Vista Chevrolet, Inc. v. Lewis, 709 S.W.2d 176 (Tex.1986); National Life & Accident Ins. Co. v. Blagg, 438 S.W.2d 905, 909 (Tex.1969).
B. Factual Sufficiency
In reviewing a challenge that the jury's finding is against the great weight and preponderance of the evidence, we must examine the entire record to determine if there is some evidence to support the finding. See Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex.), cert. denied, ___ U.S. ___, 119 S. Ct. 541, 142 L. Ed. 2d 450 (1998); Oadra v. Stegall, 871 S.W.2d 882, 892 (Tex.App.-Houston [14th Dist.] 1994, no writ). After considering and weighing all the evidence, we shall set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); Peter v. Ogden Ground Servs., Inc. 915 S.W.2d 648, 649 (Tex.App.-Houston [14 th Dist.] 1996, no writ). The jury as trier of fact is the sole judge of the credibility of the witnesses and the weight to be given to their testimony. See Times Herald Printing Co. v. A.H. Belo Corp., 820 S.W.2d 206, 213 (Tex.App.-Houston [14 th *242 Dist.] 1991, no writ). Because the appellate court is not the fact finder, it may not substitute its own judgment for that of the trier of fact, even if a different answer could be reached on the evidence. See Maritime Overseas Corp., 971 S.W.2d at 407; Peter, 915 S.W.2d at 649; Times Herald Printing Co., 820 S.W.2d at 213. When sustaining a factual sufficiency challenge, a court of appeals must state the reason the jury's finding is so against the great weight and preponderance of the evidence supporting the trial court's judgment. See Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996).
III. Consumer Status under the DTPA
In its first two points of error, MetLife contends the evidence is both legally and factually insufficient to establish Haney is a "consumer" under the DTPA.[2]
The DTPA prohibits "[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce...." Tex. Bus. & Com.Code Ann. § 17.46(a) (Vernon 1987). To recover under the DTPA, the plaintiff must establish that (1) he was a consumer of the defendant's goods or services, (2) the defendant committed false, misleading, or deceptive acts in connection with the lease or sale of goods or services, and (3) such acts were a producing cause of actual damages to the plaintiff. See Brown v. Bank of Galveston, N.A., 963 S.W.2d 511, 513 (Tex.1998).
A "consumer" is someone who seeks to purchase or lease goods or services. See Tex. Bus. & Com.Code Ann. § 17.45(4) (Vernon 1987); Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 815 (Tex.1997). To qualify as a consumer, the plaintiff must satisfy two requirements: (1) he must have sought or acquired the goods or services by purchase or lease, and (2) the goods or services must form the basis of the complaint. See Vinson & Elkins v. Moran, 946 S.W.2d 381, 406-07 (Tex.App.-Houston [14 th Dist.] 1997, writ dism'd by agr.); Hand v. Dean Witter Reynolds, Inc., 889 S.W.2d 483, 496 (Tex.App.-Houston [14 th Dist.] 1994, writ denied) (citing Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex.1981)). The plaintiff, however, need not establish contractual privity with the defendant in a DTPA claim. See Amstadt v. United States Brass Corp., 919 S.W.2d 644, 649 (Tex.1996). A party's consumer status does not turn on whether there is a contractual relationship with the defendant, but rather, it is determined by the parties' relationship to the transaction. See Arthur Andersen & Co., 945 S.W.2d at 815. Whether a plaintiff is a consumer is a question of law. See Wright v. Gundersen, 956 S.W.2d 43, 47 (Tex.App.-Houston [14 th Dist.] 1996, no writ).
There is no dispute that Haney did not purchase the Quantum software. Haney asserts that his consumer status is established because MetLife intended for the Quantum software to be purchased and used by its agents, primarily for the benefit of the agents. In support of this contention, Haney relies on Kennedy v. Sale, 689 S.W.2d 890 (Tex.1985). In Kennedy, the board of managers for Martin County Hospital purchased an insurance policy for its employees. Id. at 891. The insurance agent, Sale, met with hospital employees to explain the new policy and its benefits. Id. After the policy was in force, one of the hospital district's employees, Kennedy, underwent surgery for a pre-existing condition. Id. The insurance company paid only part of the medical bill and Kennedy sued Sale, alleging he had violated the DTPA by misrepresenting the pre-existing condition coverage. Id.
The court held Kennedy "acquired" the policy benefits "by purchase" because the policy was purchased for his benefit by the hospital district. Id. Thus, when an employer purchases goods or services for the benefit of an employee, the employee has consumer status under the DTPA if the goods or services form the basis of his complaint. Id.
MetLife contends that any benefit Haney derived from the Quantum software was merely incidental. In Clark Equip. Co. v. Pitner, the court addressed an employee's consumer status when the employer purchases *243 the goods or services primarily for its own benefit, but incidentally benefits the employee. 923 S.W.2d 117 (Tex.App.-Houston [14 th Dist.] 1996, writ denied). A forklift manufactured by Clark Equipment Co. and shipped to Southline Equipment Co., was sold to Hughes Tool Co., Pitner's employer. Id. at 121. As Pitner proceeded down a ramp leading to the basement and tilted the forks of the forklift to keep the load level, the engine died. Id. The forklift continued traveling down the ramp and as it reached the bottom, Pitner jumped off severely injuring her right leg. Id.
Pitner brought suit against Clark and Southline alleging violations under the DTPA. Pitner argued that she "acquired" the forklift because Hughes purchased it for the use of its employees in the shipping and receiving department; therefore, Pitner, as an employee in that department, benefitted from the use of the forklift. Id. at 128. The court found that for an employee to "acquire" goods or services purchased or leased by his employer, the employee must establish that the employer's primary purpose for purchasing or leasing the goods or services is to benefit the employee. See Brandon v. American Sterilizer Co., 880 S.W.2d 488, 492 (Tex.App.-Austin 1994, no writ); see also Kitchener v. T.C. Trailers, Inc., 715 F. Supp. 798, 801 (S.D.Tex.1988); Lara v. Lile, 828 S.W.2d 536, 542 (Tex.App.-Corpus Christi 1992, writ denied). Concluding there was no evidence that Hughes purchased the forklift for the personal or individual benefit of Pitner, or any purpose other than the ordinary operation of its business, the court found the use and benefit of the forklift extended to Pitner only incidentally; therefore, she did not "acquire" it and did not qualify as a "consumer" under the DTPA. Id.[3]
Dennis Pritchard (Pritchard), an advanced underwriting consultant at MetLife, testified the purpose of developing the Quantum software was to make its agents "competitive with what the rest of the industry was able to prepare in terms of illustrations," and "to even out the competitive playing field." Pritchard further stated that even though the software would be of benefit to MetLife's agents by assisting them in the sale of MetLife products, MetLife would benefit from its agents selling more MetLife policies.
The evidence does not show that MetLife's primary purpose in developing and selling the Quantum software to its agents was for the benefit of the agents. Instead, the evidence shows that any benefit derived by the agents in using the Quantum software was merely incidental as MetLife's ultimate goal was to increase the sale of its products. We find there is no evidence Haney was a consumer in the purchase of the Quantum software. MetLife's first and second points of error are sustained.
Attorney's Fees
In its fourth point of error, MetLife claims, in the absence of consumer status, Haney cannot prevail under the DTPA and, therefore, cannot recover attorney's fees. The DTPA provides for the recovery of attorney's fees to a prevailing plaintiff. See TEX. BUS. & COM.CODE ANN. § 17.50(d) (Vernon Supp.1998). As concluded above, Haney failed to establish his status as a consumer under the DTPA and, consequently, may not recover any damages, including attorney's fees, under the DTPA. Haney's other causes of action were negligence, negligent misrepresentation, and fraud. Attorney's fees, however, are not recoverable on tort claims. See Villasenor v. Villasenor, 911 S.W.2d 411, 420 *244 (Tex.App.-San Antonio 1995, no writ). In the absence of recovery under the DTPA, there is no basis for Haney to recover attorney's fees. See Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex.1995). MetLife's fourth point of error is sustained.
Haney, in his first cross-point, asserts the jury's finding on attorney's fees in the event of an appeal is against the great weight and preponderance of the evidence. Because we are sustaining MetLife's point of error on this issue, it is not necessary to address Haney's first cross-point of error and it is overruled.
IV. Damages
A. Loss of Earning Capacity
In its third point of error, MetLife challenges the legal and factual sufficiency of the evidence supporting the jury's finding that Haney suffered lost earning capacity or the amount of such earning capacity with reasonable certainty.[4]
Because Haney is not a consumer, he cannot recover any damages for loss of earning capacity under the DTPA. Generally, an injured party is entitled to one satisfaction. See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex.1991). A party who tries a case on alternative theories of recovery and obtains jury findings favorable on two or more theories has the right to judgment on the theory entitling him to the greatest relief. See St. Paul Ins. Co. v. Rakkar, 838 S.W.2d 622, 630 (Tex.App.-Dallas 1992, writ denied). That party may seek recovery under an alternative theory if the judgment is reversed on appeal. See Boyce Iron Works, Inc. v. Southwestern Bell Tel. Co., 747 S.W.2d 785, 787 (Tex.1988). It is not necessary for the plaintiff to raise the issue of alternative grounds for recovery until the court of appeals renders judgment reversing recovery. Id. The appellate court should consider the alternative theories and, if possible, render judgment thereon instead of remanding to the trial court for rendition of judgment under an alternative theory. See Rakkar, 838 S.W.2d at 630. Because we are reversing Haney's recovery under the DTPA, we must examine MetLife's point of error on loss of earning capacity with regard to Haney's claim for negligence.
Loss of earning capacity is the diminished earning power of the plaintiff directly resulting from the injuries sustained. See Southwestern Bell Tel. Co. v. Sims, 615 S.W.2d 858, 864 (Tex.Civ.App.-Houston [1 st Dist.] 1981, no writ). Loss of earning capacity encompasses the plaintiff's ability to work after the date of trial. See Border Apparel-East, Inc. v. Guadian, 868 S.W.2d 894, 897 (Tex.App.-El Paso 1993, no writ). There are several factors to consider when ascertaining loss of earning capacity:
Factors such as stamina, efficiency, ability to work with pain, and the weakness and degenerative changes which naturally result from an injury and from long suffered pain are legitimate considerations in determining whether or not a person has experienced an impairment in future earning capacity... Our courts have consistently upheld judgments for reduced earning capacity, even though the plaintiff was making as much or even more money after the injury than before, where it was shown that pain, weakness, diminished functional ability or the like indicated that plaintiff's capacity to get and hold a job, or his capacity for duration, consistency or efficiency of work was impaired.
Tri-State Motor Transit Co. v. Nicar, 765 S.W.2d 486, 492 (Tex.App.-Houston [14 th Dist.] 1989, no writ) (quoting Springer v. Baggs, 500 S.W.2d 541, 544-45 (Tex.Civ.App.-Texarkana 1973, writ ref'd n.r.e.)). Damages for loss of earning capacity do not have to be based on any specific degree of physical impairment, but can be based on a composite of all of the factors affecting earning capacity. See id.; Goldston Corp. v. Hernandez, 714 S.W.2d 350, 352 (Tex.App.-Corpus Christi 1986, writ ref'd n.r.e.).
Haney contends he presented evidence of the nature, duration, and severity of his pain and distress, thereby establishing a *245 substantial disruption in his life. See Parkway Co., 901 S.W.2d at 444. Haney testified he was "petrified" by the possibility of Kirk and Woods filing a complaint with the state insurance commissioner and losing his license to sell insurance. Haney further feared damage to his reputation from Kirk and Woods telling others about the circumstances surrounding the policies he sold them. Haney testified he felt like he was in a "deep, dark cave" because MetLife was not keeping him informed about the Kirk and Woods matter and he had a "black cloud over [his] head," wondering who knew about this situation. Haney testified he does not have the same level of "work stamina" and feels "deflated and totally concerned about [his] career."
Dr. Tim McMahon, who holds a doctorate in Business Administration with a specialization in organizational behavior, testified for Haney as an expert on the effects of stress and work. Dr. McMahon stated the stress created by the Kirk and Woods incident would affect Haney's job performance. Dr. McMahon also stated the stress would also affect the probability of Haney's cancer recurring. His cancer is currently in remission.
MetLife claims Haney has not shown sufficient physical impairment-a requirement for recovering for loss of earning capacity. We agree. A survey of Texas cases addressing claims for loss of earning capacity reveals that a plaintiff may recover where he has shown a physical impairment affecting his ability to earn a living. See, e.g., Hanna v. Lott, 888 S.W.2d 132, 139 (Tex.App.-Tyler 1994, no writ) (determining that although there was evidence of physical pain and mental anguish from accident, there was no evidence of bodily injury impairing ability to earn living for an extended period of time); Border Apparel-East, Inc., 868 S.W.2d at 898 (concluding that plaintiff had failed to present evidence of stamina, efficiency, weakness or other degenerative changes which occurred as result of injury and, therefore, could not recover for loss of earning capacity); Tri-State Motor Transit Co., 765 S.W.2d at 492 (finding that plaintiff's evidence of continuing physical pain and limitations due to injuries sustained in accident, which interfered with job duties, supported claim for loss of earning capacity); Ceiling Fan Warehouse, Inc. No. 3 v. Morgan, 723 S.W.2d 195, 199 (Tex.App.-Houston [1st Dist.] 1986), aff'd as modified, 725 S.W.2d 715 (Tex.1987) (holding that plaintiff's evidence did not establish that degenerated physical condition was attributed solely to injury and, therefore, could not support claim for loss of earning capacity); Goldston Corp., 714 S.W.2d at 352 (finding that physician's testimony regarding plaintiff's impairment resulting from physical injury supported loss of earning capacity claim).
Furthermore, Haney's reliance on Parkway Co. is misplaced. Parkway Co. involves a claim for mental anguish, not loss of earning capacity. Moreover, the evidence Haney recites in support of his claim for loss of earning capacity is of the nature and character required to support the recovery of mental anguish damages. Thus, Haney has failed to establish damages for loss of earning capacity. MetLife's third point of error is sustained.
B. Pecuniary Loss
In its seventh point of error, MetLife claims there was legally and factually insufficient evidence that Haney suffered pecuniary losses or establishing the amount of any such losses.[5]
To recover for fraud, the plaintiff must plead and prove he suffered a pecuniary loss as a result of the false representation upon which he relied. See DiGrazia v. Atlantic Mut. Ins. Co., 944 S.W.2d 731, 735 (Tex.App.-Texarkana 1997, no writ). Under Texas common law, direct damages for fraud are measured in two ways-out-of-pocket and benefit-of-the-bargain. See Formosa Plastics Corp. U.S.A. v. Presidio Eng'r & Contractors, Inc., 960 S.W.2d 41, 49 (Tex.1998); Arthur Andersen & Co., 945 S.W.2d at 817. *246 The out-of-pocket measure computes the difference between the value the buyer has paid and the value of what he has received. See Formosa Plastics Corp., 960 S.W.2d at 49; Arthur Andersen & Co., 945 S.W.2d at 817. The out-of-pocket measure compensates for actual injuries sustained through the plaintiff's parting with something of value; it does not compensate for "loss of profits, a bid not made, and a profit never realized, in a hypothetical bargain never struck." See Formosa Plastics Corp., 960 S.W.2d at 49-50.
The benefit-of-the-bargain measure computes the difference between the value as represented and the value received. Id. at 49; Arthur Andersen & Co., 945 S.W.2d at 817. Under the benefit-of-the-bargain method, the plaintiff can recover lost profits only if they are proved with reasonable certainty. See Formosa Plastics Corp., 960 S.W.2d at 50 (citing RESTATEMENT (SECOND) OF TORTS § 549(2) (1977)). Although the benefit-of-the-bargain measure can include loss of profits, it compensates only the profits the plaintiff would have made if the bargain had been performed as promised. Id.
The benefit-of-the-bargain measure of damages is not available in a claim for negligent misrepresentation. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973 S.W.2d 662, 663 (Tex.1998). In negligent misrepresentation, generally, the plaintiff can recover only the amount necessary to compensate for direct pecuniary loss. See Williams v. City of Midland, 932 S.W.2d 679, 685 (Tex.App.-El Paso 1996, no writ).[6] Therefore, lost profits are not available in a claim for negligent misrepresentation. Id.
MetLife contends there is no evidence of out-of-pocket losses. We agree. A review of the record reflects Haney failed to assert any out-of-pocket damages, i.e., that he parted with something of value. Therefore, Haney has failed to establish damages for negligent misrepresentation. If Haney is to recover for fraud, he must establish damages under the benefit-of-the-bargain measure. MetLife asserts the only relevant profits are those from the Kirk and Woods sale. Haney, however, was allowed to keep his commission on that sale. MetLife argues that lost profits, if any, are not recoverable because Haney did not prove them by competent evidence with reasonable certainty.
Although the recovery of lost profits does not require that the loss "be susceptible to exact calculation," the plaintiff must do more than demonstrate that he suffered some lost profits. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992) (citing White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex.1983); Southwest Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097, 1098 (1938)). Rather, the plaintiff must show the amount of his loss by competent evidence with reasonable certainty. See id.
The Texas Supreme Court explained, "[t]he requirement of `reasonable certainty' in the proof of lost profits is intended to be flexible enough to accommodate the myriad circumstances in which claims for lost profits arise." Texas Instruments, Inc. v. Teletron Energy Management, Inc., 877 S.W.2d 276, 279 (Tex.1994). The court, however, cautioned the "reasonable certainty" test does not lack "clear parameters." See id. The court listed the following factors:
Profits which are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on promotion of untested products or entry into unknown or unviable markets, or on the success of a *247 new and unproven enterprise, cannot be recovered. Factors like these and others which make a business venture risky in prospect preclude recovery of lost profits in retrospect.
Id.
What constitutes "reasonably certain" evidence of lost profits involves a fact intensive determination. See Holt Atherton Indus., 835 S.W.2d at 84. At a minimum, estimates of lost profits must be based upon "objective facts, figures, or data from which the amount of lost profits can be ascertained." Id. "When a review of the surrounding circumstances establishes that the profits are not reasonably certain, there is no evidence to support the lost profits award." Formosa Plastics Corp., 960 S.W.2d at 50 n. 3 (citing Texas Instruments, Inc., 877 S.W.2d at 279-81).
Haney asserts he lost a sale to Tommy Rice, owner of Rice Construction, because of the incident with Kirk and Woods. Rice was a referral whom Haney had contacted regarding the purchase of a policy. Haney and Rice arranged a meeting. Rice told Haney to call to confirm the appointment the day before they were to meet. When Haney called, Rice cancelled the meeting. Haney testified he would have made the sale to Rice. He based this belief on his original conversation with Rice. According to Haney, Rice was going to purchase a $5 million policy and therefore, he would have earned a commission of $30,000.
Woods testified that he was in Rice's office and noticed Haney's business card on his desk. Woods mentioned to Rice that he was involved in a lawsuit with Haney. Woods, however, did not mention that Haney had made any misrepresentations to him. Rice did not testify at trial. Therefore, there is no testimony from Rice regarding whether he would have purchased the policy from Haney or his reason for canceling his meeting with Haney.
Haney further contends he lost a sale to Midwest Electric. Haney testified that while making a presentation to the owner of Midwest Electric, he discovered an error in the proposal given to him by Sharp. According to Haney, the error was similar to the one in the Kirk and Woods proposal. Midwest did not purchase any insurance from Haney. Haney presented no evidence regarding the amount of insurance Midwest purportedly was going to purchase.
Finally, Haney testified in his opinion he lost $250,000 in commissions from the joint work he was to have with other MetLife agents. Haney testified that he had written to Feigley that he had spoken to other agents in Brookhollow office about helping them with their sales, which meant the sharing of commissions, but the other agents were not receptive to Haney's offers. Haney presented no other evidence regarding the alleged loss of $250,000 in commissions from joint work.
We find Haney's contentions that he would have completed any sale to Rice or Midwest Electric are based on nothing more than conjecture. Neither Rice nor anyone from Midwest Electric testified that any purchase would have been made but for the problems Haney had with Kirk and Woods or the error in the Quantum-generated proposal. Haney further failed to establish with reasonably certainty, based upon any objective facts or figures, that he would have earned $250,000 in commissions from working with other agents, even if the other agents had been willing to share their sales with him. Because Haney has failed to prove any lost profits with reasonable certainty, there is no evidence to support any award of lost profits under the benefit-of-the-bargain measure. See Formosa Plastics Corp., 960 S.W.2d at 50 n. 3. Haney, therefore, has not established his damages for fraud. MetLife's seventh point of error is sustained.
Because Haney has failed to establish any damages for fraud or negligent misrepresentation, we need not address MetLife's remaining points of error or Haney's remaining cross-point. Accordingly, we affirm the portion of the trial court's judgment awarding MetLife $17,668.59 on its counterclaim against Haney together with prejudgment and postjudgment interest in accordance the terms of the judgment, and we reverse the remainder of the judgment and render judgment *248 that Haney take nothing on his claims against MetLife.
NOTES
[*] Senior Justice Joe L. Draughn sitting by assignment.
[1] Haney moved for the trial court to enter judgment on the $50,000 award for pecuniary loss under his claim for negligent misrepresentation and the $4,750 award for mental anguish in addition to the $50,000 award for loss of earning capacity under the DTPA. Haney also moved for the court to disregard the jury's findings on attorneys' fees with respect to the $3,500 award for appeal to the court of appeals and the $2,500 award for a request for or response to application for writ of error and, instead, award him $15,000 and $3,500, respectively. The trial court denied Haney's motion.
[2] Haney asserts MetLife failed to preserve error on appeal, but a review of the record reveals that MetLife raised this issue in its motions for directed verdict, for judgment non obstante veredicto, and for new trial, thus, preserving error. See Tex. R. App. P. 33.1
[3] The Austin Court of Appeals addressed the same issue. In Brandon, Seton Medical Center purchased two gas sterilizers from American Sterilizer Company (AMSCO). 880 S.W.2d at 490. Brandon, a Seton employee, worked as a cardiopulmonary equipment specialist. Id. Part of her duties included the loading of hospital equipment into the gas sterilizers that used ethylene oxide, a toxic gas. Id. On the occasion in question, Brandon arrived at work to find an AMSCO maintenance person working on one of the sterilizers. Id. After he left, the sterilizer began to leak and Brandon was exposed to toxic gas. Id.
Brandon sued AMSCO under the DTPA for injuries resulting from her exposure to the toxic gas. Id. at 489. The court determined when the goods or services are purchased for the primary purpose of benefitting the business, and any use or benefit of those products extends to the employee only incidentally, the employee is not a "consumer" under the DTPA and consequently, does not have standing to maintain such a cause of action. Id. at 492.
[4] Haney also asserts in response to this point of error that MetLife has failed to preserve error on this issue. A review of MetLife's motions for judgment non obstante veredicto and for new trial reflects that MetLife has preserved error. See TEX. R. APP. P. 33.1.
[5] Haney, again, contends MetLife failed to complain to the trial court on this point of error. We find MetLife raised this issue in its motions for directed verdict, for judgment non obstante veredicto, and for new trial. See Tex. R. App. P. 33.1.
[6] The Texas Supreme Court adopted RESTATEMENT (SECOND) OF TORTS § 552B (1977), limiting damages for negligent misrepresentation to pecuniary loss:
(1) The damages recoverable for a negligent misrepresentation are those necessary to compensate the plaintiff for the pecuniary loss to him of which the misrepresentation is legal cause, including:
(a) the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and
(b) pecuniary loss suffered otherwise as a consequence of the plaintiff's reliance upon the misrepresentation.
(2) the damages recoverable for a negligent misrepresentation do not include the benefit of the plaintiff's contract with the defendant.
Federal Land Bank Ass'n v. Sloane, 825 S.W.2d 439, 442 (Tex.1991). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1571798/ | 546 S.W.2d 638 (1976)
Wallace GROVES et al., Appellants,
v.
Virginia HANKS, Appellee.
No. 1086.
Court of Civil Appeals of Texas, Corpus Christi.
December 30, 1976.
Rehearing Denied January 26, 1977.
*640 Ralph Alexander, Kelley, Looney & Alexander, E. G. Henrichson, Henrichson & Smith, Edinburg, for appellants.
William E. York, McAllen, for appellee.
OPINION
BISSETT, Justice.
This is a suit to recover damages for an alleged breach of contract between Bryan Hanks and Wallace Groves, and to recover the proceeds of certain checks which were made payable to Bryan Hanks and were allegedly converted by Wallace Groves, his employees, and the defendant banks when the monies represented by the checks were deposited to Wallace Groves' accounts in the banks.
Bryan Hanks, (Hanks) died on December 18, 1972. This suit was instituted on August 30, 1973 by Virginia Margaret Wooding Hanks, (Mrs. Hanks), the widow of Hanks, who sued individually and as independent executrix of the Estate of Bryan Hanks, Deceased. The defendants are: Wallace Groves, (Groves), William Gaudet, (Gaudet), L. C. Hill, (Mrs. Hill), the First National Bank of Edinburg, Texas, (Edinburg Bank), and the First National Bank of Mission, Texas, (Mission Bank). In addition to defensive pleadings filed by all of the defendants, Groves filed a cross action against Mrs. Hanks to recover certain monies which she withdrew from a bank account standing in the name of "Bryan Hanks, Agent", which allegedly was owned by Groves.
Following a trial to the court, no jury having been demanded or empanelled, judgment was rendered in favor of Mrs. Hanks on both actions brought by her, and all relief sought by Groves on his cross action was denied. In particular, the judgment awarded Mrs. Hanks: 1) all of the money, ($72,325.29) previously escrowed with the Continental National Bank of Fort Worth and paid into the registry of the United States District Court for the Northern District of Texas, Forth Worth Division, pending the outcome of this suit, together with interest thereon; further awarded Mrs. Hanks $39,372.15, together with interest thereon from August 15, 1972 until September 29, 1975 at the rate of 6% per annum, against Groves, Gaudet, Mrs. Hill and the Edinburg Bank; and further awarded Mrs. Hanks $68,052.86, together with interest thereon from August 16, 1971 until September 29, 1975 at the rate of 6% per annum, against Groves, Gaudet, Mrs. Hill and the Mission Bank. The judgment further provided that the various sums of money awarded Mrs. Hanks would bear interest at the rate of 9% per annum from and after September 29, 1975 until paid, and that the Edinburg Bank have judgment over and against Groves, Gaudet and Mrs. Hill for the said sum of $39,372.15, together with interest thereon, and that the Mission Bank have judgment over and against Groves, *641 Gaudet and Mrs. Hill for the said sum of $68,052.86, together with interest thereon. All of the defendants have appealed from the judgment in favor of Mrs. Hanks, but the defendants Groves, Gaudet and Mrs. Hill have not appealed from the portions of the judgment which awarded judgment in favor of the banks over and against them.
Findings of fact and conclusions of law were filed by the trial judge. The findings have not been attacked in this appeal by specific points of error. At the end of the statement and argument made by Groves under point four (his last point) in his original brief and immediately preceding the prayer appears the following paragraph:
"To the extent that the Findings and Conclusions of the Court may conflict with the above, which are based upon stipulations and undisputed evidence, such Findings and Conclusions should be disregarded."
The above-quoted portion of Groves' brief is nothing more than a mere blanket assertion that at least some of the findings are contrary to the evidence, does not point out in what respect the findings conflict with Groves' asserted points of error, and does not state in what respect each particular finding is not supported by the undisputed evidence. The paragraph is a mere abstraction that does not point out anything tangible or definite. It is too general to be considered as a sufficient challenge to any particular finding of fact. See Hardeman v. Timmins 111 S.W.2d 746 (Tex.Civ.App. El Paso 1937, writ dism'd); Southern Pine Lumber Co. v. Nemer, 17 S.W.2d 852 (Tex. Civ.App.Galveston 1929, no writ); Danciger v. Wood, 240 S.W. 694 (Tex.Civ.App. Amarillo 1922, no writ).
Mrs. Hanks, as plaintiff, admitted in her pleadings that her husband and Groves, prior to May 6, 1946, entered into "a business arrangement ... to be carried entirely under the name of Bryan Hanks", and that Groves "paid the purchase price and operating expenses of the properties purchased, including any losses"; that "Hanks was to devote his time to the management of the properties, and was to own a 10% Interest in and to receive 10% of any net profits on the sale of any of said properties plus a salary of $36,000.00 per year". She alleged that Groves owed Hanks "well over $400,000.00". The agreement dated May 13, 1971, by and between Hanks and Groves, hereinafter discussed in detail, which terminated the business relationship between Hanks and Groves, was made a part of her petition; she alleged that Hanks complied with all terms and conditions imposed upon him by the termination agreement; that Groves, with the exception of the payment of $400,000.00 to Hanks, breached the agreement; and that as a result thereof, she was entitled to 10% of the net profits accruing to Groves from the sale of certain properties which were sold by Groves after May 13, 1971.
Mrs. Hanks also sought to recover the proceeds of certain checks which were made payable to Bryan Hanks, and which were deposited by Mrs. Hill, the employee of Groves, to the account of Groves in the defendant banks. She alleged that while Hanks was managing the properties Mrs. Hill was the office manager for the business and that she was given "a power of attorney in connection therewith"; that the power of attorney was cancelled by the termination agreement; that Mrs. Hill, from and after May 13, 1971, "was the employee solely of Wallace Groves"; that she endorsed the name of Bryan Hanks to the checks and deposited them in Groves' bank accounts, entitled "Monte Christo Ranch", in the defendant banks without the authority of Hanks; and that such action by Mrs. Hill amounted to a conversion of the checks to her damage in at least the sum of $107,425.01.
Certain evidentiary facts were conceded by a written stipulation of the parties. The other facts which were proven were established by undisputed evidence. In that state of the record, it was the duty of the trial judge, in this a non-jury trial, to determine the legal effect of the stipulated facts and the undisputed evidence and to correctly apply the law to the conceded or *642 undisputed facts. Southland Life Ins. Co. v. Egan, 126 Tex. 160, 86 S.W.2d 722 (Tex. Com.App., 1935); Employers Casualty Company v. American Employers Insurance Company, 397 S.W.2d 292 (Tex.Civ.App. Amarillo 1965, writ ref'd, n. r. e.). See also Dallas General Drivers, Warehousemen And Helpers v. Wamix, Inc., of Dallas, 156 Tex. 408, 295 S.W.2d 873, 879 (1956).
Sometime prior to May 6, 1946, Hanks and Groves entered into a contract whereby Hanks agreed to act as agent and attorney in fact for Groves in the acquisition, operation and sale of certain properties. Thereafter, properties were purchased and operated pursuant to the contract, including certain lands in Hidalgo County, Texas, designated by the parties as the "Valley Lands", and certain lands in the City of Fort Worth, Texas, designated by them as the "Summit Avenue Property".
The business arrangement between Hanks and Groves was terminated by an instrument in writing which was dated May 13, 1971. The instrument was introduced into evidence without objection. It was agreed:
(1) Hanks, would execute and deliver to Groves deeds and assignments covering all property standing in his name pursuant to the contract and powers of attorney theretofore existing;
(2) Hanks would cancel the existing powers of attorney when he completed the transactions required by the termination agreement;
(3) Hanks would execute "any and all other instruments necessary to effectuate the sense of these agreements";
(4) Groves would pay Hanks the sum of $400,000.00 in full settlement of unpaid salary due Hanks;
(5) Groves would pay Hanks 10% of all profits resulting from the sale of any property in Texas standing in the name of Hanks or jointly in the names of Hanks and Groves, which might be received by Groves from any party with whom Hanks was then negotiating for either a sale or lease.
Hanks conveyed the Hidalgo "Valley Lands" and the "Summit Avenue Property" to Groves on June 2, 1971. Groves then entered into exclusive possession of the "Valley Lands", and thereafter operated the same through his agent Gaudet, a defendant herein, under the name of "Monte Christo Ranch". Hanks did not formally cancel any of the then existing powers of attorney. Groves paid $400,000.00 to Hanks.
THE SUIT FOR BREACH OF CONTRACT
The action for damages because of breach of contract is based on a refusal by Groves to pay Hanks or Mrs. Hanks 10% of the profits from the sale of the "Summit Avenue Property", which amounted to $72,325.29. It was stipulated: 1) Hanks, prior to May 13, 1971, contacted the real estate firm of Ferree & Searcy concerning the sale of certain portions of the "Summit Avenue Property", and also contacted the real estate firm of Yager & Co. concerning the sale of all of it; 2) In February, 1972, Groves listed the property for sale with Ferree & Searcy, Realtors; 3) because of confusion created by this listing, Ferree & Searcy stopped offering the property at $800,000.00; 4) thereafter, Edward Yager, the President of Yager & Co., contacted a Fort Worth Insurance Company President who referred him to another brokerage house which, in turn, referred him and his associate, Albert Komatsu, to its associate, Century Development Corporation (CDC), who entered into an Option Agreement with Groves on July 31, 1972 to purchase the property for $880,000.00; 5) CDC, however, decided not to go through with the purchase of the property; 6) Harry D. Lane, who had been an agent of CDC, terminated his relationship with CDC, and acquired an assignment of the option from it; 7) Yager, Komatsu and Lane, then, as incorporators, formed Summit Office Park, Inc., the stock of which was owned 1/3 by each of them; 8) Groves conveyed the "Summit Avenue Property" to Summit Office Park, Inc., by Deed dated March 18, 1973; 9) an escrow agreement was executed on February *643 21, 1973, by Groves, Mrs. Hanks and the Continental National Bank of Fort Worth; 10) a correct copy of the escrow agreement, marked Exhibit 8, was attached to the stipulation.
The copy of aforesaid escrow agreement was introduced in evidence. It provided that a sum of money "equal to ten per cent of the net profits resulting from the sale of any or all of the property" would be deposited in the Continental National Bank of Fort Worth, "to be held by it as Escrow Agent pursuant to the terms of this Agreement".
The trial court found:
"... Following the escrow agreement, Stipulation Exhibit 8, ten per cent of the net profits from the sale, $72,325.29, was escrowed with Continental National Bank of Fort Worth ... Subsequently, this amount, with accrued interest, was paid by that Bank into the registry of the United States District Court for the Northern District of Texas, Fort Worth Division ...."
* * * * * *
"The sale was a sale to `parties and their assigns' with whom HANKS was negotiating directly or through agents under the terms of the dissolution agreement of May 13, 1971, since HANKS was the direct procuring cause, ... of the subsequent sale ...."
Groves' third point of error reads, as follows:
"The trial court erred in holding that under the dissolution contract between BRYAN HANKS and WALLACE GROVES, appellee was entitled to recover a percentage or commission out of the net proceeds from the sale of the Summit Avenue Property in Forth Worth here in question, because such holding is contrary to the undisputed evidence and stipulations."
The point cannot be sustained. There is no finding or conclusion that Mrs. Hanks was entitled to a "percentage or commission out of net proceeds from the sale of the Summit Avenue Property", as asserted in the point. A "commission" of 10% out of the "net proceeds" of the sale is different from 10% of the "net profits" of the sale. The findings by the trial court are amply supported by the stipulation, Exhibit 8 thereto, coupled with the depositions of Yager and Komatsu, both of which were introduced into evidence without objection.
It is conclusively established by the record that Hanks, prior to May 13, 1971, set in motion the forces which ultimately brought about the sale of the "Summit Avenue Property" to Summit Office Park, Inc. The line between cause and effect was not broken by the interposition of Summit Office Park, Inc., into the picture. The causal chain is unbroken and runs directly from Hanks to Summit Office Park, Inc. There is no question but that Mrs. Hanks, under the terms of the termination agreement, is entitled to 10% of net profits realized in the sale of the "Summit Avenue Property". Trinity Gravel Co. v. Cranke, 282 S.W. 798 (Tex.Com.App., 1926); Finlay-Tampico Oil Co. v. Robbins, 246 S.W. 1047 (Tex.Civ.App. El Paso 1923, no writ); Wright v. Griffith & Griffith, 227 S.W. 1115, 1116 (Tex.Civ. App.Texarkana 1921, writ dism'd). The net profit was found to be $72,325.29. That finding was not attacked by a point of error. Groves' third point is overruled.
THE SUIT FOR CONVERSION
With respect to the suit for the conversion of checks, Mrs. Hanks, in her trial petition, alleged, in substance: 1) during the time that Hanks managed the properties for Groves he gave Mrs. Hill a power of attorney, but that the same was cancelled by the termination agreement of May 13, 1971; 2) that Mrs. Hill, the employee of Groves, without the authority of Hanks, endorsed the name of "Bryan Hanks" to certain checks that were made payable to him, and deposited the same to Groves' accounts in the defendant banks; 3) the total amount of money represented by the checks was $107,425.01; 4) the unlawful and unauthorized endorsement of the checks constituted conversion, to her damage in the sum of $107,425.01.
*644 Groves, in addition to pleading the two-year statute of limitation, filed a general denial, and specially pled that "Hanks was never entitled to any of the money represented by such checks".
The following facts were established by either stipulation or by undisputed evidence, to-wit:
(1) On February 26, 1964, in the furtherance of the business enterprise of Hanks and Groves, Hanks signed a "United States Department of Agriculture, Agricultural Stabilization and Conservation Service (ASCS) Power of Attorney" to Mrs. Hill, who, for the years 1971 and 1972, pursuant to said power of attorney, made application to the ASCS for participation of the "Valley Lands" in the Upland Cotton Set Aside Program;
(2) Money was paid to the participants in the above-mentioned program in accordance with certain allotment formulas;
(3) The power of attorney made in Mrs. Hill's favor was never revoked by Hanks during his lifetime;
(4) The hereinafter-mentioned checks which were issued by the United States Commodity Credit Corporation (USCCC) for the years 1971 and 1972 were issued pursuant to applications that were signed by Mrs. Hill;
(5) The power of attorney to Mrs. Hill was effectively cancelled by the power of attorney executed by Groves on September 29, 1972 and filed with the ASCS on October 6, 1972, wherein Gaudet was appointed agent for Groves;
(6) Following the execution of a deed by Hanks to Groves on June 2, 1971, Groves then entered into the exclusive possession of the "Valley Lands", and thereafter operated the same through his agent Gaudet, under the name of "Monte Christo Ranch";
(7) The USCCC issued a check payable to the order of Bryan Hanks in the sum of $39,123.24 for participation in the Upland Cotton Set Aside Program for the year 1971; the check was endorsed "Bryan Hanks" by Mrs. Hill and was deposited in Groves' "Monte Christo Ranch" account in the Mission Bank on August 16, 1971;
(8) The USCCC 1972 payment for participation of the same properties in the Upland Cotton Set Aside Program was made by check, dated August 3, 1972, in the amount of $36,921.02, payable to the order of "Bryan Hanks", which was also endorsed "Bryan Hanks" by Mrs. Hill and was deposited by her in Groves' "Monte Christo Ranch" bank account in Edinburg Bank on August 15, 1972;
(9) Mrs. Hill also endorsed the name of "Bryan Hanks" on a number of other checks, hereinafter referred to as "other checks", totalling $31,280.19, made payable to Hanks, and deposited them in Groves' "Monte Christo Ranch" bank accounts ($28,829.06 in the Mission Bank and $2,451.13 in the Edinburg Bank) between June 4, 1971 and October 21, 1971;
(10) All of the "other checks" were issued subsequent to the date of the deed from Hanks to Groves, and were in payment for grain, citrus fruit or cotton harvested from the "Valley Lands" except a check for caliche ($94.50) and a hunting lease ($3,500.00);
(11) In endorsing and depositing all checks, Mrs. Hill was acting within the course and scope of her employment by Groves, and Groves received the benefit of those deposits.
Groves, in his first point, contends that the trial court erred in granting judgment against him and the other appellants for the conversion of all of the checks in question, save and except the USCCC check for $36,921.02, dated August 12, 1972, (the 1972 payment for Groves' participation in the Upland Cotton Set Aside Program), because actions to recover on all such checks, except the said USCCC check, were barred by the two-year statute of limitations "under the undisputed evidence and stipulations". This point involves: 1) the USCCC check for $39,123.24, deposited on August 16, 1971, for participation by Groves in the 1971 Upland Cotton Set Aside Program, and 2) the "other checks", totalling $31,280.19.
*645 The action for the alleged conversion of the USCCC check was instituted on September 13, 1973, when Mrs. Hanks filed her first amended original petition. The action for the alleged conversion of the "other checks" was instituted on April 28, 1975, when Mrs. Hanks filed her fifth amended original petition, her trial petition.
Tex.Rev.Civ.Stat.Ann. art. 5526 (1958) provides, in part:
"There shall be commenced and prosecuted within two years after the cause of action shall have accrued, and not afterward, all actions or suits in court of the following description:
* * * * * *
2. Actions for detaining the personal property of another, and for converting such property to one's own use."
Tex.Rev.Civ.Stat.Ann. art. 5538 (1958) reads, as follows:
"In case of the death of any person against whom or in whose favor there may be a cause of action, the law of limitation shall cease to run against such cause of action until twelve months after such death, unless an administrator or executor shall have sooner qualified according to law upon such deceased person's estate; in which case the law of limitation shall only cease to run until such qualification."
It was also stipulated that Hanks died on December 18, 1972, and that Mrs. Hanks "is Independent Executrix of the Estate of Bryan Hanks". The suit was instituted on August 30, 1973 by Mrs. Hanks who stated that she brought "this suit individually and as independent executrix of the estate of `BRYAN HANKS, deceased'".
The death of Hanks did not suspend the running of the statute of limitations. It merely tolled the running of the statute until the date that an executor or administrator of his estate was duly qualified, or until 12 months after his death, whichever was first in time. Under the facts of this case, the statute was tolled from December 18, 1972, when Hanks died, until August 30, 1973, when Mrs. Hanks, who, by that date, had already qualified as executrix of Hanks' estate.
The conversion, if any, of the USCCC check occurred on August 16, 1971, when it was deposited in Groves' account in the Edinburg Bank. The elapsed time from that date until December 18, 1972, was 16 months and 3 days, and from August 30, 1973 until September 13, 1973, when suit was filed asserting conversion, was 13 days. The total elapsed time from the date of the alleged conversion until suit was filed for conversion, taking into consideration the time that the running of the statute was tolled, was less than two years. Therefore, the suit for the alleged conversion of the USCCC check was not barred by the two-year statute of limitations.
Concerning the action for conversion of the "other checks", the elapsed time from the deposit of those checks until the death of Hanks and from August 30, 1973 until April 28, 1975, when the fifth amended original petition was filed, which, for the first time, alleged conversion of those checks, totalled more than two years from the date of conversion until suit was filed for the conversion thereof.
Tex.Rev.Civ.Stat.Ann. art. 5539b (1958), in part, provides:
"Whenever any pleading is filed by any party to a suit embracing any cause of action, cross-action, counterclaim, or defense, and at the time of filing such pleading such cause of action, cross-action, counterclaim, or defense is not subject to a plea of limitation, no subsequent amendment or supplement changing any of the facts or grounds of liability or of defense shall be subject to a plea of limitation, provided such amendment or supplement is not wholly based upon and grows out of a new, distinct or different transaction and occurrence...."
In the present case, the action for conversion of the "other checks" did not grow out of the transaction set out in the original petition, which allegedly constituted conversion of a single USCCC check. Mrs. Hanks, in her fifth amended original petition, in *646 addition to suing for conversion of both USCCC checks, also sued for conversion of the "other checks", all of which (except the USCCC checks) were issued by different drawers, for different amounts, on different dates, and in payment of different items. The alleged conversion of the "other checks" was based upon different and distinct transactions, and therefore, barred by the applicable limitation statute. Leonard v. Texaco, Inc., 422 S.W.2d 160 (Tex.Sup. 1967); Jirovec v. Maxwell, 483 S.W.2d 852, 856-7 (Tex.Civ.App.Corpus Christi 1972, no writ); Childre v. Childre, 417 S.W.2d 464, 467 (Tex.Civ.App.San Antonio 1967, no writ). The cause of action for the alleged conversion of the "other checks" was barred by the two-year statute of limitations.
Groves' first point as to the August, 1971 USCCC check is overruled, but it is sustained as to the "other checks".
Groves' second point of error reads, as follows:
"The trial court erred in awarding appellee judgment against each of these appellants on all of the checks in question for the reason that under the undisputed evidence and stipulations, while the checks were made payable to BRYAN HANKS, neither he, his wife nor his estate had any beneficial ownership therein, but same at all times were beneficially owned by WALLACE GROVES, and therefor, there could have been no conversion of same."
After examining the statement and argument in Groves' brief with reference to the point, we treat the same as a "no evidence" point, in that it is contended that there is no evidence that Hanks or Mrs. Hanks had any beneficial ownership in the monies represented by the checks.
The stipulations and undisputed evidence which have already been set out in our discussion generally of the suit for conversion are applicable to the disposition of this point. It is not necessary that they be repeated.
It is conclusively established that on June 2, 1971, the legal title to the "Valley Lands" was conveyed to Groves by Hanks, and from that day forward Hanks had no title, legal or equitable, to the "Valley Lands", and was not, at any time after June 2, 1971, the operator of the lands, nor was he in possession thereof, nor did he own a beneficial interest therein.
Under the provisions of the applicable regulations of the Department of Agriculture, in order for a person to participate in the Upland Cotton Set Aside Program, and to be paid any money for such participation, that person must be a producer who shares in the crops grown on the land, or in the proceeds of the sale of such crops, in the year in which application for participation was made. Hanks did not meet that requirement. He was neither producer, owner, tenant nor operator of the "Valley Lands" at the time the aforesaid USCCC checks were issued or deposited.
The governmental regulations further provided that when a person who was a producer is succeeded on the farm by another producer, the governmental payments for participation in the program for that particular year shall be divided as the purchaser and seller may agree. There is no evidence that any such agreement was ever made by and between Hanks and Groves. Hanks did not share in the crops or in the proceeds thereof at any time during the business arrangement. Payment for participation in the Upland Cotton Set Aside Program was not compensation to which Hanks was entitled in any capacity.
Under the facts developed, there is no legal basis which will support a finding, conclusion or holding that the checks constituted the personal earnings of Bryan Hanks. The USCCC checks represented payment for overall participation of the "Valley Lands" in a government price support system, and were made payable to Bryan Hanks long after he had conveyed his interest in the "Valley Lands" to Wallace Groves pursuant to the termination agreement of May 13, 1971. The "other checks" were also connected with such lands and were issued after May 13, 1971.
*647 Clearly the parties contemplated that Bryan Hanks, from and after June 2, 1971, no longer had any right, legal or equitable, to monies derived from the property which he had previously conveyed away.
In 1964, Hanks filed with the ASCS a power of attorney, executed by him, that authorized Mrs. Hill to act in connection with all programs of the United States Department of Agriculture that affected the "Valley Lands". The instrument recited, in part:
"This power of attorney shall remain in full force and effect until written notice of its revocation has been duly served upon the Hidalgo County ASC County Committee, Edinburg, Texas."
The power of attorney was never revoked or cancelled by Hanks, as required by the termination agreement. The payments which were made in 1971 and 1972 by the USCCC were made pursuant to applications made by Mrs. Hill, and were made by the maker of the checks without written notice of either the termination agreement or of the deed from Hanks to Groves. It is certain that had Hanks seasonably cancelled the said power of attorney and so notified ASCS Committee at Edinburg, Texas, the USCCC would not have issued the checks in the name of "Bryan Hanks".
The "other checks" were issued in payment for products harvested from the "Valley Lands" by Groves subsequent to June 2, 1971, the date of the deed from Hanks to Groves, except for one check for caliche and one check for a hunting lease, which were also issued after June 2, 1971. The record supports the inference that the caliche was sold off of the "Valley Lands" and that the hunting lease covered those lands. There is no evidence that will support any inference to the contrary.
There were no reservations to Hanks in the deed to Groves. Therefore, all growing crops and future revenues from the "Valley Lands" were conveyed to Groves, effective June 2, 1971. Ray v. Foutch, 50 S.W.2d 380 (Tex.Civ.App.Amarillo 1932, no writ); Armstrong v. Gifford, 196 S.W. 723 (Tex.Civ.App.San Antonio 1917, no writ); 17 Tex.Jur.2d, Crops, § 12.
Conversion is the unlawful exercise of dominion and control over personal property to the exclusion or exercise of those rights by the owner, Cantrell v. Broadnax, 306 S.W.2d 429, 433 (Tex.Civ.App.Dallas 1957, no writ).
In order for Mrs. Hanks to recover in her suit for conversion of the checks, it was necessary that she establish a right of property in the checks. 89 C.J.S. Trover & Conversion § 72-73; 14 Tex.Jur.2d, Conversion § 79. This she did not do.
Had the checks been actually delivered to Hanks, he would have been duty-bound to deliver either the checks themselves or the proceeds thereof (in the event he negotiated them) to Groves, since the termination agreement clearly shows the intent and purpose to terminate their previous business arrangement in its entirety and to vest the legal title to all properties therein described in Groves absolutely. Hanks' promise "to execute all other instruments necessary to effectuate the sense of these agreements" required that Hanks, had he received the checks, endorse the same over to Groves or account to Groves for the monies represented thereby.
The damages in an action for conversion are measured by the sum of money necessary to compensate the plaintiff for all actual losses or injuries sustained as a natural and proximate result of the defendant's wrong. 89 C.J.S. Trover and Conversion § 162 (1955).
The undisputed facts of this case show that neither Hanks nor Mrs. Hanks suffered any actual monetary loss as a result of the unauthorized endorsement of the checks and their subsequent deposit in Groves' bank account, to the exclusion of Hanks. Neither Hanks nor Mrs. Hanks had an interest, general or special, in the funds represented by the checks and never had the right to the possession of those funds. At best, Hanks had only a legal right to the possession of the checks themselves, occasioned solely by the fact that he was named *648 payee therein. That right is different from a legal right to the possession of the funds represented by such checks. That right did not, of itself and itself alone, furnish a legal basis for the award of $107,425.01 as damages for the conversion of those checks. Groves, being the beneficial owner of the monies represented by the check, was the only person entitled thereto. To award Mrs. Hanks such a recovery that is grounded solely on the technicality that Hanks had legal title to the checks because he was the payee named therein would amount to a windfall to Mrs. Hanks that is manifestly unjust and without regard to the beneficial ownership of the monies represented by the checks.
Mrs. Hanks did not allege or prove that she was entitled to special damages as a result of the conversion. There is no pleading or proof that she suffered a loss of profits as a result of the endorsements and depofits to Groves' accounts, nor that the loss of use of the monies resulting thereby was in any way harmful to her. 14 Tex. Jr.2d Conversion §§ 31, 32 (1960). The cause of action for conversion, if any, of the checks, at best, would be for a technical conversion, and the amount of money as damages to which Mrs. Hanks, under this record, would be entitled to, would be nominal. 89 C.J.S. Trover and Conversion § 161.
It is established by the undisputed evidence and stipulations that the beneficial ownership of the checks was in Groves at all times. Groves' second point is sustained.
THE CROSS ACTION
By a trial amendment that was filed on July 10, 1975, Groves filed a cross action against Mrs. Hanks and alleged that she was indebted to him in the sum of $6,302.75, being the money on deposit "in the Continental National Bank of Fort Worth, Texas, bank account styled Bryan Hanks, Agent, Account No. XXX-XXX-X, which said cross-defendant has in her possession". The transcript does not contain any pleadings of Mrs. Hanks with respect to the cross action. However, she states in her brief that she "pleaded a general denial and the release clause of the dissolution contract" as defenses to the cross action. Groves, in his reply brief, does not dispute that statement. We, therefore, consider the defenses.
The "release clause" pled by Mrs. Hanks provided:
"It is mutually agreed by and between the parties that each shall and each does hereby release the other from any and all claims, causes of action and liabilities that have arisen or may hereafter arise in the future, whether known or unknown, growing out of or in any way incident to the relations of principal and agent heretofore existing between them over the period of years commencing with the execution of the Contract, it being intended by the parties that this agreement and the consideration paid and action taken hereunder shall be in full and final settlement of all accounts as between themselves."
Groves' fourth point of error reads, as follows:
"The trial court erred in failing to award to appellant WALLACE GROVES the agency bank account identified in (Stipulation 25, T.R. 60) for the reason that the undisputed evidence and stipulations discloses that BRYAN HANKS was holding said account as agent for WALLACE GROVES, and never had any actual ownership of such account, but that at all time it was beneficially owned by appellant, WALLACE GROVES."
An examination of the Statement and Argument under the point reveals that the thrust of the point is that there is no evidence to support either the finding or the conclusion by the trial court that "Wallace Groves is precluded by the contract of May 13, 1971 from asserting his $6,302.73 claim", for the reasons set out in the point itself. We so consider the point.
There is no evidence outside of the stipulations that pertains in any way to either the cross action or the defenses thereto. The only stipulations which bear on the cross action are two stipulations (25 and 32) *649 and the accompanying Exhibit 24 to Stipulation 32 which was introduced in evidence. The stipulations read, as follows:
"25. At the time of the death of Bryan Hanks on the 18th day of December, 1972, there existed a bank account in the Continental National Bank of Fort Worth, Texas, styled `Bryan Hanks, agent', Account No. XXX-XXX-X which had a balance of $6,302.73."
* * * * * *
"32. Commencing prior to January 30, 1970, Bryan Hanks maintained an account in the Continental National Bank of Fort Worth, Texas, in the name of `Bryan Hanks Agent.' A copy of the bank statements pertaining to such account, covering the time from January 30, 1970, to April 30, 1973, is attached hereto as Exhibit 24. All monies deposited in said account as reflected on said bank statements during such period, were from rents and other revenues, derived from the properties involved in the business transactions between Bryan Hanks and Wallace Groves described in Paragraph 1 above, or else were derived as an incident to the business transactions and agreement existing by and between them. Further, all the sums expended from said account were expended in the necessary furtherance of said business relationship between the parties which had existed between the parties. After the death of Bryan Hanks, Plaintiff, Virginia Margaret Wooding Hanks, withdrew said funds from the said bank without the consent of Wallace Groves and continues to hold and withhold said sum from Wallace Groves."
The several bank statements, which made up Exhibit 24, showed: 1) that from January 30, 1970 until October 2, 1972 numerous deposits were made to the account and a number of checks were written thereon; 2) on October 2, 1972, the balance in the account was $6,302.75; 3) no deposits or withdrawals were made between October 2, 1972 and April 30, 1973, the date of the last bank statement contained in the Exhibit. The record makes no mention of the date when Mrs. Hanks withdrew the $6,302.75.
The "agency account" was in existence at the time the termination agreement was executed by Hanks and Groves. The account was not mentioned therein. The termination agreement expressly recognized that under the terms of the previously existing contract, Hanks was to act as agent for Groves in the "acquisition, operation and sale of properties" acquired by them. The stipulations show that all monies deposited in the "agency account" were derived from the "properties involved in the business transactions between Bryan Hanks and Wallace Groves", that all disbursements from the account "were expended in the necessary furtherance of said business relationship", and that Mrs. Hanks withdrew the balance after Hanks" death and without the consent of Groves. No reason is given for the withdrawal.
The "mutual release" clause, above-quoted, which Mrs. Hanks says precludes Groves from asserting any claim to the $6,302.75 balance, concerns only claims, known or unknown, which Hanks or Groves had against the other "growing out of or in any way incident to the relations of principal and agent heretofore existing between them". There is no evidence that the money on deposit in the agency account was ever claimed by Hanks for any reason.
The stipulations and Exhibit 24, when considered together, tend to negate the findings and conclusions of the trial court concerning the cross action, and will not support such findings and conclusions. Therefore, Groves' fourth point is sustained.
As a general rule, when a "no evidence" point is sustained, the appellate court will reverse and render the judgment of the trial court. However, it is the prerogative of the appellate court to reverse and remand the cause where it is believed that the case has not been fully developed and the ends of justice would be better served by reversing and remanding the cause for a new trial rather than to reverse and render it. That is the situation here. The cross action portion of the suit was *650 never fully developed, and we feel that in the interest of justice, the judgment of the trial court which denied Groves any relief on his cross action should be reversed, and the cross action remanded to the trial court for a new trial. See Uhlhorn v. Reid, 398 S.W.2d 169, 176 (Tex.Civ.App.San Antonio 1965, writ ref'd n.r.e.); Parker v. Schuler Corporation, 379 S.W.2d 421 (Tex.Civ. App.Eastland 1964, writ dism'd); Kansas City Southern Railroad Company v. Guillory, 376 S.W.2d 72, 77 (Tex.Civ.App.Beaumont, 1964, writ ref'd n.r.e.).
Moreover, a Court of Civil Appeals is authorized by Rule 434, T.R.C.P., to reverse and remand a cause for a new trial where there is a matter of fact to be obtained, the damages to be assessed are uncertain, or the matter to be decreed is uncertain. Uncertainty enshrouds Groves' cross action and the decree rendered thereon. Since the error of the trial court affects only a part of the matters in controversy and that such part is clearly separable from the actions brought by Mrs. Hanks, and a severance would not be unfair to any party, the judgment which was rendered on the cross action will be reversed, and a new trial ordered as to the cross action.
DISPOSITION OF THE APPEAL
The judgment insofar as it decreed that Mrs. Hanks "is entitled to the fund including interest, deposited in the Registry of the United States District Court for the Northern District of Texas, Fort Worth Division, in Cause No. CA-4-2403" is affirmed.
The judgment insofar as it decreed that Mrs. Hanks have and recover from Groves, Mrs. Hill, Gaudet and the Edinburg Bank the sum of $39,372.15, together with interest thereon as provided in the judgment, and that the Edinburg Bank have judgment over and against Groves, Mrs. Hill and Gaudet for said amount of money is reversed, and judgment is here rendered that Mrs. Hanks take nothing against those defendants, and that the Bank take nothing against Groves, Hill and Gaudet.
The judgment insofar as it decreed that Mrs. Hanks have and recover from Groves, Mrs. Hill, Gaudet and the Mission Bank the sum of $68,052.86, together with interest thereon as provided in the judgment, and that the Mission Bank have judgment over and against Groves, Mrs. Hill and Gaudet for said amount of money is reversed, and judgment is here rendered that Mrs. Hanks take nothing against those defendants, and that the Bank take nothing against Groves, Hill and Gaudet.
The cross action is severed from the actions brought by Mrs. Hanks. The judgment insofar as it denied Groves any relief on his cross action is reversed, and the cross action is remanded to the trial court for a new trial.
The costs of this appeal are taxed 50% to Groves and the other defendants (appellants), and 50% to Mrs. Hanks, the plaintiff (appellee).
AFFIRMED IN PART, REVERSED AND RENDERED IN PART, AND REVERSED AND REMANDED IN PART. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1682999/ | 469 So. 2d 1072 (1985)
Chris STOLL, Plaintiff-Appellant,
v.
GOODNIGHT CORPORATION, d/b/a International Tours of Bossier, Defendant-Appellee.
No. 16937-CA.
Court of Appeal of Louisiana, Second Circuit.
May 8, 1985.
Rehearing Denied June 7, 1985.
*1073 Peters, Ward, Bright & Hennessy by J. Patrick Hennessey, Shreveport, for plaintiff-appellant.
Mayer, Smith & Roberts by Alex F. Smith, Jr., Shreveport, for defendant-appellee.
Before MARVIN, SEXTON and NORRIS, JJ.
MARVIN, Judge.
Ms. Stoll appeals a judgment rejecting her demands to recover $778.75 she paid her former employer, a travel agency, for an NSF, or "hot" check, which she accepted in payment for airline tickets purchased by a customer of the agency about three months before her employment was terminated.
We affirm the judgment, finding that Ms. Stoll freely paid her employer in response to her natural obligation to do so and cannot reclaim the payment on the grounds that the obligation could not have been enforced by judicial action. CC Arts. 1760-62, 2303. Marigny v. The Union Bank of Louisiana, 12 Rob. 283 (La.1845); United States Fidelity & Guaranty Co. v. Murphy, 163 So. 724 (La.App.Orl.1935).
*1074 Ms. Stoll contends that defendant, by requiring her to reimburse it for the bad check loss, either has assessed a fine against her contrary to LRS 23:635, or has withheld wages due her at termination contrary to LRS 23:631.[1] She argues that she was not negligent in accepting the check, as the trial court found, and that she did not freely or voluntarily pay the $778 to her employer but did so only because she understood she would lose her job if she did not make the payment.
We agree that LRS 23:631 is not applicable because defendant did not fail to pay Ms. Stoll wages that were due her upon termination. We assume for the sake of argument that Ms. Stoll was not negligent in accepting the check as she contends, but find that LRS 23:635 is not applicable because she was not assessed with a fine within the meaning of the statute.
FACTS
Ms. Stoll began working as a travel counselor at defendant's Bossier City office in November 1981. On November 2, 1983, a customer desired to purchase an airline ticket with a check drawn on an account in the name of C.E. Jones. Ms. Stoll testified that the customer verbally identified herself as Beverly Yoder and produced an Arkansas driver's license bearing that name. The customer explained that she had recently married C.E. Jones and had not yet changed the name on her driver's license. She also told Ms. Stoll that she was "authorized" to sign the check on behalf of her "husband." In Ms. Stoll's presence, the customer wrote the check for $778.75 and signed it "C.E. Jones."
Following the "employee's procedure manual" of defendant, Ms. Stoll wrote Beverly Yoder's Arkansas address, phone number, and driver's license number on the back of the check. The manual also instructs employees to consult a manager when in doubt about any check transaction.
No manager or supervisor was in the office on that day. Even though one of the agency co-owners conceded that some of the travel associations to which defendant belonged require that member agencies have managers on duty in each office at least 35 hours per week, it is established that Ms. Stoll was usually alone in defendant's Bossier office.
When the check was returned unpaid, the agency manager referred Ms. Stoll to the provision in the manual regarding an employee's responsibility for failure to follow *1075 check handling procedures. Ms. Stoll was told that "it would be to her advantage" if she reimbursed the company for the loss.
Because the amount of the returned check was greater than her net monthly salary, Ms. Stoll paid the loss in two equal installments. On the next two paydays, Ms. Stoll received her normal paycheck and immediately gave defendant her personal check for one-half of the $778. Each of her checks to the agency was greater than her net salary for the pay period.
Appellant's employment was terminated in January 1984, about two weeks after she had fully reimbursed the agency for the loss. She was paid her wages for the period ending on the date of her dismissal and was paid two weeks severance pay.
The circumstances of this case, unfortunate as they may seem to Ms. Stoll, do not fall within the statutory protections she seeks to invoke. We find Ms. Stoll's payments were in response to her natural obligation to reimburse her employer for the loss resulting from her conduct. We make this finding even with the assumption that her conduct, as she argues, was not of a character that would have rendered her civilly responsible to her employer for a violation of company procedure.
Payment freely performed to satisfy a natural obligation cannot be reclaimed. CC Arts. 1761, 2303. See former CC Arts. 2133, 1759. The trial court, therefore, did not err in rejecting each of her demands.
AMOUNTS DUE UNDER THE TERMS OF EMPLOYMENT: APPLICATION OF LRS 23:631-2
These statutes provide an unpaid employee recourse against his or her former employer when the employer no longer has the incentive of a continuing employment relationship to pay amounts due under the terms of employment. By requiring an employer to pay these sums within three days of discharge or resignation, the statute also insures that an employee will not have to wait until the next scheduled payday to receive remuneration for personal services already performed. The statute is designed to insure that an employee receives promptly his or her last paycheck. C.G. Pearce v. Pete Austin, dba Austin Construction Company, 465 So. 2d 868 (La.App. 2d Cir.1985); Stell v. Caylor, 223 So. 2d 423 (La.App. 3d Cir.1969); Robertson v. International Motor Co. of Houma Inc., 314 So. 2d 531 (La.App. 1st Cir.1975).
Ms. Stoll argues that defendant, at least indirectly, "withheld wages" by requiring her to "give back" each paycheck even though defendant did not deduct the loss from her wages. Defendant does not dispute that the source from which Ms. Stoll paid the loss may have consisted of her wages. We emphasize that Ms. Stoll paid by her personal checks, each of which exceeded her paycheck.
The statute does not indirectly or otherwise speak in terms of "withholding wages." It requires an employer to pay, upon demand by the employee after termination, amounts due under the terms of employment. Cases denying plaintiff's recovery under LRS 23:631 include Stell, supra, where employees sought to recover deposits made to secure issuance of company money and equipment to them, and Yancey v. Dickson Ice Cream Co., 190 So. 837 (La.App. 2d Cir.1939), where the employee agreed in advance to be responsible for shortages in the accounts of his subordinates. These cases demonstrate that the statute does not contemplate as a wage dispute a dispute over an amount that does not represent remuneration for personal services nor those where the amount claimed may not be due under the terms of employment.
Because Ms. Stoll has not brought a "well founded suit for unpaid wages" under LRS 23:631, she is likewise not entitled to § 632 penalties and attorney fees. Haywood v. Salter, 421 So. 2d 1190 (La.App. 2d Cir.1982); Carriere v. Pee Wee's Equipment Co., 364 So. 2d 555 (La.1978); McFarland v. Texhoma Contractors, Inc., 449 So. 2d 1106 (La.App. 5th Cir.1984); Smith v. Burden Const. Co., 379 So. 2d 1135 (La. App. 2d Cir.1980).
*1076 APPELLANT'S NEGLIGENCE: APPLICABILITY OF LRS 23:635
This statute proscribing the fine of an employee "shall not apply" to employers damaged by willful or negligent acts of employees.
The trial court found that Ms. Stoll breached her duty that was imposed by the defendant's employee manual. Each employee is required to
Ensure that when a passenger pays you a check his name and address, phone number and drivers license number are printed clearly on the reverse of his check. You must write the drivers license number on the check after checking that it is that of the holder. We are not able to take a claim to court unless this has been done. If you are in doubt as to whether or not you should accept a check, particularly if it is being mailed to you, seek the approval for same from your management. * * *
If ever you are in doubt about any of the aforementioned please consult your manager.
The trial court found that the language "his name" and "his check" should have alerted Ms. Stoll or any reasonable person of her experience and position to notify a manager or to refuse the check when confronted with Beverly Yoder's explanation of the discrepancy between her name and the name she signed on the printed check.
Ms. Stoll admitted that she "looked through" the manual but had not "read every page." Ms. Stoll had also attended a seminar where the provisions of the manual were explained to agency employees. Ms. Stoll had also been verbally instructed by management to write the information required by the manual on the back of each check she handled.
The record reveals that Ms. Yoder, the maker of the check, was living with C.E. Jones and that the bank on which the check was written had, on one prior occasion, honored a check written by Ms. Yoder on C.E. Jones' account. Detectives used the information Ms. Stoll wrote on the back of the check to find her. Ms. Yoder was later convicted of issuing worthless checks, not forgery.
Ms. Stoll is not without experience in the business world. She had worked in real estate for 18 years before 1981, but apparently did not routinely handle checks. Defendant's manager testified that, when first approached about the bad check, Ms. Stoll said she felt "terrible" and realized that she made a "serious mistake."
The provisions of LRS 23:635 making unlawful the assessment of fines against employees and LRS 23:631-2 making unlawful the withholding of employee wages are penal in nature and must be strictly construed. Hanks v. Shreveport Yellow Cabs, 187 So. 817 (La.App. 2d Cir. 1939); Stell v. Caylor, supra; Washington v. Buffalo Mills Lumber Co., Inc., 451 So. 2d 665 (La.App. 1st Cir.1984).
The trial court's finding of negligence to preclude application of LRS 23:635 presupposes that a fine was imposed. This finding is not necessary to resolution of the case. A fine, within the meaning of the statute, is a pecuniary penalty imposed for the violation of some law, rule, or regulation. Hebert v. State, Office of Employ., 448 So. 2d 882 (La.App. 3d Cir.1984); Hanks, supra. The defendant's manager conceded that Ms. Stoll was asked to reimburse the company because she violated manual provisions, but it is not contended that the request was to penalize Ms. Stoll or was for any purpose other than to cover defendant's loss.
In Hanks, supra, a cab driver agreed to be responsible for damage to vehicles caused by his negligence. Charges against the driver for damages to a cab were not considered fines because the employer covered its loss with the money. The court said
A penalty in its primary sense denotes a punishment imposed for the commission of an offense or for some violation. The charges in the instant case were not made as a punishment and arbitrarily fixed and assessed aginst plaintiff because he failed to perform a duty or *1077 committed an improper act or violated a rule or regulation. The constituted sums of money actually expended by the defendant company, pursuant to the employee's agreement, in caring for damages that arose and existed by reason of plaintiff's operation of his cab. 187 So. at 819
Hanks did not base its holding squarely on the finding that the employee breached his duty. The court said that the charge was not a fine in the first instance because the written regulations of the company, which were explained to the driver, made the driver responsible for damages to company vehicles under his control.
Hebert, supra, questioned whether a pay deduction gave sufficient cause to an employee to resign so as to entitle the employee to unemployment benefits. There the employer charged a supervisory employee for wages erroneously paid to workers that the supervisor had ordered and not used. The court said that a fine had been imposed because the employer did not make it clear to the supervisor that the workers must be used when ordered.
Ms. Stoll strenuously argues that a fine was imposed because her payment was not "voluntary" or "freely performed." CC Art. 1761. She says she "understood" that she would lose her job if she did not pay the loss. She also said that defendant refused to extend less burdensome terms of payment. She argues that she had "less than no pay" during the pay periods in which she paid defendant. These circumstances, however, do not tend to show that defendant sought to impose a monetary fine or other sanctions simply by seeking reimbursement for its loss. Although Ms. Stoll's allegations may suggest that defendant somehow unjustly terminated her, she does not seek damages or equitable relief for wrongful discharge.
While defendant's employee manual cannot be raised to the status of an employment contract, there is ample evidence that Ms. Stoll was aware of the manual provisions regarding check procedure and employee responsibility for bad check losses. Ms. Stoll's awareness of these provisions seriously enervates her contention and instead reflects "voluntariness" of her decision to pay the loss without serious challenge. There is no evidence that her payment was anything other than a mutual acknowledgement of what the parties then viewed as Ms. Stoll's responsibility under the manual provisions.
As in Hanks, our decision not to apply LRS 23:635 need not squarely rest on a determination that Ms. Stoll was negligent in breaching the manual provisions. We simply hold that, under a strict construction of the statute, a fine was not imposed. Even when an employee may not be civilly responsible for a loss to his employer, the employer who obtains reimbursement for the loss has not imposed a fine where the employer does not unilaterally deduct the amount from the employee's wages, but obtains an agreement from the employee to pay the loss directly, and the amount paid does not exceed the amount of the loss.
APPELLANT'S NATURAL OBLIGATION TO PAY THE LOSS
A natural obligation is not enforceable by judicial action. CC Art. 1761. It arises from circumstances in which the law implies a particular moral duty to render a performance. CC Art. 1760. The debtor who pays a natural obligation does so, not out of a sense of liberality, but out of a sense that a debt is truly due, and although enforcement of that debt may not be positively sanctioned by the Legislature or the courts. "It follows that the existence of a natural obligation will serve to characterize as onerous a certain contract that would otherwise be considered gratuitous ..." 1 Litvinoff, Obligations § 305 in 6 Louisiana Civil Law Treatise 551 (1969).
CC Art. 1762 states examples of circumstances giving rise to a natural obligation. The official revision comment (b) notes that the flexible language of the article indicates, in accord with progressive *1078 continental doctrine and later Louisiana jurisprudence, that the listing of the article is illustrative.
French doctrine provides detailed criteria to aid in determining whether and when a moral duty becomes a natural obligation.
1. The moral duty must be one of justice and not of simple charity ...
2. The moral duty must be recognized and assumed by the obligor through voluntary payment or the promise to pay, as he is not legally compelled to fulfill it.
3. Recognition of the moral duty must not impair the public order. The obligor is not allowed to make an arbitrary discharge of a moral duty. 1 Litvinoff, supra, § 320.
Additionally, a natural obligation of this sort has been recognized in French doctrine to support voluntary payment to cover damage to another where the loss occurred without fault of the natural obligor or where it is not clear whether the natural obligor would be civilly responsible.
An engagement undertaken or payment made in the circumstance (of loss without fault), having no other object than to repair the injury caused by the act of one of the parties and to indemnify the other party for this damage, should not be considered as dictated by a simple sentiment of liberality and as constituting in favor of the other party a veritable donation destined to enrich him ... (the French equivalent to our former CC Art. 2133), by declaring that there can be no action with respect to voluntarily discharged natural obligations, does not mean to indicate that payment in the absence of a veritable natural obligation is always without cause and must necessarily give rise to a claim for the recovery of a thing thus paid. 1 Litvinoff, supra, § 318.
Ms. Stoll's payment to defendant satisfies each criterion explained by the cited authorities. We again emphasize that Ms. Stoll paid the loss without serious challenge after the agency manager referred her to the manual provisions. Without inquiring whether she could have been held civilly responsible, Ms. Stoll agreed, however reluctantly, to reimburse the agency for its loss. Ms. Stoll's payment obviously arose not from coercion but from "duty of conscience," the common denominator of all natural obligations that distinguishes them from acts of charity. 1 Litvinoff, supra.
A natural obligation cannot be enforced by judicial action, but once a debtor recognizes and freely performs in response to a natural obligation, she cannot recover or reclaim what she has done or paid. CC Arts. 1761, 2303. Former CC Arts. 1759(1), 2133. To acquire the right to recover payment of a thing not due, the thing paid by mistake must not be due "in any manner, either civilly or naturally." CC Arts. 2302, 2303, our emphasis.
The reference in former CC Art. 2133 to voluntary payment has been interpreted to allow recovery only when the natural obligation was paid under the effects of fraud or violence. Payment is nevertheless voluntary when made in error. 1 Litvinoff, supra, § 356. See also comment (b) under CC Art. 1761, discussing the change in the former phrase "voluntarily given" to the phrase "freely performed" in CC Art. 1761.
The effect of an employee's voluntary payment of a loss to his employer was demonstrated in Marigny v. The Union Bank of Louisiana, 12 Rob. 283 (La.1845). There, a bank cashier's conduct that caused a deficit was said to have created a natural obligation, the result of which was that a surety on the note given by the cashier to satisfy the bank's loss could not recover what he had paid the bank on grounds of error or failure of consideration.
United States Fidelity & Guaranty Co. v. Murphy, supra is likewise analogous. There, a homeowner prevailed upon his home repair contractor to pay him $300 to compensate him for whiskey the homeowner contended was stolen from the home because of the contractor's negligence. The homeowner persuaded his lender to withhold payment to the contractor until *1079 the whiskey dispute was settled. When the contractor's surety was called on to pay various workmen, the contractor's surety became subrogated to the claims the contractor might have had against the homeowner, including the $300 the homeowner was paid for the whiskey loss. The contractor explained to his surety that the $300 represented a "deposit."
The subrogated surety then sued the homeowner to recover the $300, contending that it was paid in error by the contractor. The court said
The settlement has already been made; the contractor may or may not have been legally responsible for the disappearance. But when, with full knowledge of the facts, he agreed that he was liable and made full settlement for the loss, he cannot at this time be heard, nor can his assignee be heard, to claim restitution of the amount paid. It may well be that he could have successfully defended a suit for the value of the lost liquor, but that is not the question which is now before us. It may be that he could have shown that he was the gratuitous bailee and was, therefore, not responsible under the circumstances under which the whisky disappeared, but he did not choose to set up that defense, but agreed that under the circumstances he was responsible. There was at least a natural obligation on his part, since the whisky had been left in his possession by the owner. He recognized this natural obligation and made settlement. He therefore cannot be heard to claim the return of the amount so paid. 163 So. at 727.
Other instances where recovery of sums paid has been precluded by a natural obligation include erroneous interest paid but not prayed for in an expropriation judgment (Shell Pipe Line Corp. v. Sarver, 442 So. 2d 884 (La.App. 3d Cir.1983)), and payment above a contract price to a contractor for work done arguably beyond the terms of the contract (Banta v. McSpadden, 147 La. 847, 86 So. 287 (1920)).
We do not consider Ms. Stoll's perceived fear of losing her job sufficient to render her decision to pay the loss either erroneous or involuntary and not freely performed within the meaning of the Civil Code so as to allow her recovery. When the bad check was returned and the manager approached Ms. Stoll with the manual provisions regarding employee responsibility for loss, Ms. Stoll apparently considered herself a debtor and the agency a creditor. After the fact of payment, under these circumstances, the accuracy of Ms. Stoll's evaluation of her legal liability to the agency is immaterial to the issue of whether the natural obligation was freely performed or paid voluntarily.
Ms. Stoll is also not entitled to penalty wages or attorney fees in connection with her claim under LRS 23:635, even assuming that defendant imposed a fine on her in violation of that section. LRS 23:632 allows penalties and attorney fees only for violations of LRS 23:631. An employer that assesses a fine faces the penalty imposed under LRS 23:636 and we have found that Ms. Stoll was not "fined."
We AFFIRM the judgment at appellant's cost.
SEXTON, J., dissents and assigns written reasons.
SEXTON, Judge, dissenting.
I respectfully dissent. While I agree with the majority that LSA-R.S. 23:631 and 635 do not avail plaintiff, I do not agree that plaintiff has voluntarily discharged a natural obligation and thus cannot recover. On the contrary, I would find for plaintiff on the basis that she paid a thing not due.
A natural obligation is the payment or promise to pay an obligation for which a party has accepted responsibility but which cannot be civilly enforced. LSA-C.C. Art. 1761. On the record before us I cannot determine that plaintiff voluntarily accepted this obligation. In fact, I believe the defendant demanded her repayment under the implicit threat of termination.
The central issue here should be whether or not this plaintiff/employee followed company policy. If she did not follow company *1080 policy, she had a real obligation to repay which is civilly enforceable and therefore not a natural obligation by definition. If she did follow company policy, her payment of the value of the check is the payment of a thing not due. LSA-C.C. Arts. 2302 and 2304.
The company policy manual states that the employee is obligated to return funds lost from a bad check if the employee does not obtain the information required by the manual or does not obtain managerial approval. Managerial approval was impossible here and the plaintiff indeed got all of the information available. As the manual states, the purpose of obtaining information is so the company can "go to court." As a result of the information obtained, the presenter was readily identified and criminal charges were brought. Thus, the plaintiff substantially complied with company policy and the stated purpose of that policy was realized.
Therefore, I would find for the plaintiff in the amount of her payment to the company. I respectfully dissent.
NOTES
[1] LRS 23:635 provides:
"No person, acting either for himself or as agent or otherwise, shall assess any fines against his employees or deduct any sum as fines from their wages. This section shall not apply in cases where the employees wilfully or negligently damage goods or works, or in cases where the employees wilfully or negligently damage or break the property of the employer, but in such cases the fines shall not exceed the actual damage done."
LRS 23:631(A) provides:
"Upon the discharge or resignation of any laborer or other employee of any kind whatever, it shall be the duty of the person employing such laborer or other employee to pay the amount then due under the terms of employment, whether the employment is by the hour, day, week, or month, not later than three days following the date of discharge or resignation. Said payment shall be made at the place and in the manner which has been customary during the employment, except that payment may be made via United States mail to the laborer or other employee, provided postage has been prepaid and the envelope properly addressed with the employee's or laborer's current address as shown in the employer's records. In the event payment is made by mail the employer shall be deemed to have made such payment when it is mailed. The timeliness of the mailing may be shown by an official United States postmark or other official documentation from the United States Postal Service."
LRS 23:632 provides:
"Any employer who fails or refuses to comply with the provisions of R.S. 23:631 shall be liable to the employee either for ninety days wages at the employee's daily rate of pay, or else for full wages from the time the employee's demand for payment is made until the employer shall pay or tender the amount of unpaid wages due to such employee, whichever is the lesser amount of penalty wages. Reasonable attorney fees shall be allowed the laborer or employee by the court which shall be taxed as costs to be paid by the employer, in the event a well-founded suit for any unpaid wages whatsoever be filed by the laborer or employee after three days shall have elapsed from time of making the first demand following discharge or resignation." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1768457/ | 231 So. 2d 532 (1970)
June DuPUIS, Joined by Carl DuPuis, Appellants,
v.
79TH STREET HOTEL, INC., a Florida Corporation and Able-Central Exterminators, Inc., a Florida Corporation, Appellees.
Nos. 69-292, 69-413.
District Court of Appeal of Florida. Third District.
January 27, 1970.
On Rehearing March 6, 1970.
*533 Horton & Schwartz, Miami, and Raymond VanderZeyde, Miami Shores, for appellants.
Fuller & Brumer, Bolles, Goodwin, Ryskamp & Ware and Howard Hirsch, Miami, for appellees.
*534 Before PEARSON, C.J., and CHARLES CARROLL and SWANN, JJ.
SWANN, Judge.
We have previously consolidated interlocutory appeal #69-292 with full appeal #69-413 and will discuss both appeals in this opinion.
This action started when the plaintiff, 79th Street Hotel, Inc., filed a complaint against Carl DuPuis and Able-Central Exterminators, Inc., a Florida corporation.
Later plaintiff filed an amended complaint adding June DuPuis, the wife of Carl, as a party defendant. She was served with the proper papers but failed to answer within the time required. On January 23, 1969, plaintiff recovered a default judgment against June DuPuis. On March 25, 1969, June DuPuis filed a motion to set aside the default with a proposed answer in which she raised three affirmative defenses.
The trial judge denied the motion of June DuPuis to set aside the default. An interlocutory appeal was taken by June DuPuis, challenging the denial of her motion to vacate the default. Shortly thereafter the case came on for trial against all defendants and the trial judge permitted it to go to the jury as if no default had been entered and the defendant June DuPuis was permitted to testify in her own defense. The court directed a verdict for the defendant exterminating company which was not challenged by appeal. One of the instructions to the jury at the conclusion of the trial was:
"The issues for your determination on the claim of the plaintiff against the defendant are whether the defendants falsely made representations to the plaintiff and whether such false misrepresentations was a legal cause of damage. If the greater weight of the evidence does not support the claim of the plaintiff, then your verdict should be for the defendants." Emphasis added.
Although the court refused to set aside the default judgment against June DuPuis, the jury was never told that a default judgment had been entered against her and the case was tried as if no default had been entered. Under these circumstances, it appears that June DuPuis was not harmed or prejudiced by the failure of the trial court to set aside the default and that the issues raised by her interlocutory appeal are moot. See 2 Fla.Jur. Appeals §§ 291-293.
Assuming arguendo, that the issues raised on the interlocutory appeal are not moot, we conclude that the failure to set aside the default judgment would be harmless error under these circumstances. See § 59.041, Fla. Stat., F.S.A.
After trial, the jury returned a final verdict for the plaintiff against the defendants Carl and June DuPuis. The verdict and final judgment was against Carl and June DuPuis for $50,000 compensatory damages and against Carl DuPuis for $20,000 punitive damages.
The first point on appeal asserts that the defendant wife, June DuPuis, was not liable for the alleged independent tort of her husband Carl. This suit was based on the alleged fraud, deceit and/or false representation of these defendants in connection with a sale of a hotel owned by them by the entirety to the plaintiff. The wife never had any direct conversations with the plaintiff concerning the sale, but it is claimed that the husband acted as her agent and that she ratified his acts.
Fla. Stat. § 708.03, F.S.A., provides, generally, that the property of a wife shall remain in the care and management of the husband. This statute has been construed as to create a principal and agent relationship between the wife and husband. Flash Bonded Storage Co. v. Ades, 152 Fla. 482, 12 So. 2d 164 (1943); Gentry-Futch Co. v. Gentry, 90 Fla. 595, 106 So. *535 473 (1925). In addition, in Craft v. American Agricultural Chemical Co., 81 Fla. 55, 87 So. 41 (1921), the court stated on page 42:
* * * * * *
"When a married woman knowingly permits her husband to manage or control her property, or allows him so to deal with it as to induce others to believe that he is acting as her authorized agent, such facts are sufficient to establish the agency in favor of persons who deal with him in such belief. * * *"
* * * * * *
In Petersen v. Brotman, Fla.App. 1958, 100 So. 2d 821, the court ruled that a married woman's interest or property right in an estate by the entirety is her separate property. It would appear proper for a jury to find that a husband may act as an agent for the wife in the sale of property owned by the entirety in cases involving an intentional tort (as distinguished from a negligent tort), such as fraud, deceit and/or misrepresentation of an existing fact when such tort was committed in the course of his agency for her; or was ratified by her. See 41 Am.Jur.2d Husband and Wife, §§ 436-38. There was sufficient, competent and substantial evidence in this record from which a jury could have determined that the husband, Carl DuPuis, was acting as the agent of the wife in the sale of this hotel and that she ratified or confirmed his acts as her agent in the sale. See 37 Am.Jur.2d Fraud and Deceit, § 316.
We have reviewed the record and find that there was sufficient, competent and substantial evidence to go to the jury on the question of liability and that there was sufficient evidence for the jury to return a verdict finding both defendants liable.
The evidence as to the damages sustained by the plaintiff was set forth in appellant's brief as follows:
* * * * * *
"* * * Mr. Spector, a contractor of 35 years' experience in Miami, was asked approximately how much it would run to remedy the damages if his firm was hired by the appellee and he estimated it would be $75,000 to $100,000. $65 was paid to an exterminating company and the bill was submitted as an exhibit in evidence plaintiff's Exhibit #6. In addition, the appellee testified from a statement admitted in evidence as plaintiff's Exhibit #7, that he expended $985 in replacing furniture in the hotel. Mr. Nelson of Truly Nolen Exterminating Co. estimated that the cost of placing a tent over the property to effect an eradication of termites in the property would be $3,675. There was no other testimony or evidence offered as to any other out-of-pocket expenses, nor was there even any attempt on the part of the appellee to prove what the value of the property would have been if the alleged representations made by the appellant Carl DuPuis were true. * * *"
* * * * * *
There was other evidence relating to damages but it does not appear to be substantially different or more material than that set forth above.
It, thus, appears that there was insufficient evidence of "out-of-pocket" expenses to uphold the verdict of $50,000 compensatory damages and that there was no evidence to support a verdict of $50,000 for compensatory damages based on the "benefit of the bargain" rule.
We find insufficient competent, substantial evidence in the record on which the jury could return a verdict for $50,000 compensatory damages against the defendants. See Strickland v. Muir, Fla.App. 1967, 198 So. 2d 49.
We find, therefore, that the verdict and final judgment in the sum of $50,000 compensatory damages against Carl and June *536 DuPuis is not supported by sufficient competent, substantial evidence and the same must be and the same is hereby reversed.
We find there was sufficient, competent and substantial evidence in the record to justify the jury in returning a verdict for $20,000 punitive damages against Carl DuPuis.
We, therefore, reverse and remand this case for a new trial on the issue of compensatory damages only, and as to liability and punitive damages the judgment is affirmed.
Inasmuch as it is necessary to remand this case to the trial court for a new trial on the issue of compensatory damages only, it is necessary for us to comment on one other point raised by this appeal. The appellant sought reversal because the judge instructed the jury on what has been termed the "benefit of the bargain rule"; See West Florida Land Co. v. Studebaker, 37 Fla. 28, 19 So. 176 (1896); Williams v. McFadden, 23 Fla. 143, 1 So. 618 (1887); Evans v. Gray, Fla.App. 1968, 215 So. 2d 40; and Strickland v. Muir, Fla.App. 1967, 198 So. 2d 49; and that they could also take into consideration, in assessing damages, those damages which are commonly characterized as "out-of-pocket" expenses. The objections by the defendant to these instructions were general and not specific and are, therefore, insufficient to preserve this point for appellate review on this appeal. See Henningsen v. Smith, Fla.App. 1965, 174 So. 2d 85.
On remand, however, the issue may again be before the trial court as to the proper instruction to be given to the jury. Florida has followed the "out-of-pocket rule". See Strickland v. Muir, supra. It would appear that the Florida courts have adopted and followed both rules in order to do such justice as the circumstances may demand.
This is in accordance with the flexibility theory set forth in 37 Am.Jur.2d Fraud and Deceit, § 352. This formula is stated as follows:
* * * * * *
"* * * (1) if the defrauded party is content with the recovery of only the amount that he actually lost, his damages will be measured under that rule; (2) if the fraudulent representation also amounts to a warranty, recovery may be had for loss of the bargain, because a fraud accompanied by a broken promise should cost the wrongdoer as much as the latter alone; (3) where the circumstances disclosed by the proof are so vague as to cast virtually no light upon the value of the property had it conformed to the representations, the court will award damages equal only to the loss sustained; and (4) where the damages under the `benefit of the bargain' rule are proved with sufficient certainty, that rule will be employed. * * *"
* * * * * *
This cause is, therefore, affirmed in part and reversed in part.
It is so ordered.
ON REHEARING GRANTED
PER CURIAM.
The court has determined that better practice and procedure requires that one jury determine both the compensatory and punitive damages. See Stevens Markets, Inc. v. Markantonatos, Fla. 1966, 189 So. 2d 624.
Whereupon, we modify our opinion of January 27, 1970, to eliminate therefrom the affirmance of the punitive damages portion of the judgment, and modify the directions on remand to provide for new trial on compensatory and punitive damages. In other respects our opinion and judgment of January 29, 1970, is adhered to.
The cause is accordingly reversed and remanded for a new trial on the issue of compensatory and punitive damages.
It is so ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1780714/ | 941 S.W.2d 76 (1997)
EDINBURG HOSPITAL AUTHORITY d/b/a Edinburg General Hospital, Petitioner,
v.
Shirley TREVINO and Oscar Trevino, Respondents.
No. 95-0939.
Supreme Court of Texas.
Argued April 18, 1996.
Decided February 6, 1997.
Rehearing Overruled April 18, 1997.
*77 Kenda B. Dalrymple, Marian Jeu, C. Dean Davis, Austin, for petitioner.
Preston Henrichson, David P. Kallus, Edinburg, John David Franz, McAllen, Richard D. Schell, E.R. Fleuriet, Harlingen, for respondents.
SPECTOR, Justice, delivered the opinion for the Court, in which PHILLIPS, Chief Justice, and HECHT, CORNYN, ENOCH, OWEN and BAKER, Justices, joined, in Parts I and IV of which GONZALEZ, Justice, joined, and in Parts I, III, and IV of which ABBOTT, Justice, joined.
In this medical malpractice case we consider whether a mother and father may recover mental anguish damages resulting from the delivery of a stillborn fetus. The jury found that Edinburg Hospital Authority, d/b/a Edinburg General Hospital, and its employees had negligently caused the mother and father mental anguish resulting from the loss of the fetus, and the trial court awarded damages to both. The court of appeals affirmed. 904 S.W.2d 831. We hold that the mother has *78 stated a negligence cause of action but failed to present adequate proof of mental anguish damages under this Court's decision in Krishnan v. Sepulveda, 916 S.W.2d 478 (Tex. 1995). We hold also that neither the mother nor the father is entitled to mental anguish damages as a bystander to the loss of the fetus. Accordingly, we reverse the judgment of the court of appeals, remanding in part and rendering in part.
I.
Shirley Mora (formerly Trevino) and Oscar Trevino were expecting their first child in the spring of 1989. Mora's water broke, indicating the start of labor, on May 27, 1989. For unexplained reasons, Mora waited a day before admitting herself to Edinburg General Hospital. Dr. Carl Gruener was the attending physician for the delivery.
After Mora had been in the hospital several hours, Dr. Gruener determined that labor was progressing too slowly and ordered the administration of Pitocin, a drug used to augment labor. Mora soon began to hemorrhage, and Dr. Gruener performed an emergency caesarean section. The fetus was stillborn. Trevino was with his wife in the hospital up until the time she was taken into surgery, but he did not witness the actual delivery.
Mora sued Dr. Gruener and the hospital, alleging that their negligent treatment caused the stillbirth. Mora contended that the doctor and the hospital negligently monitored the administration of the Pitocin and the fetal heartbeat equipment. Trevino intervened, claiming that he suffered mental anguish as a bystander witnessing the events leading up to the stillbirth. Dr. Gruener eventually settled with both Mora and Trevino before the trial.
The jury found that the hospital employees' negligence in the use of the hospital's tangible personal property caused Mora's and Trevino's mental anguish as a result of the stillbirth. The jury awarded Mora and Trevino $750,000 each in damages. The trial court reduced the damages to $250,000 each under the Texas Tort Claims Act. See TEX. CIV.PRAC. & REM.CODE § 101.023(c).
II.
Initially, we must determine if Mora asserted a valid cause of action against the hospital and its employees. Because the hospital is a governmental unit, sovereign immunity prevents liability unless Mora can show property damage, personal injury, or death "caused by a condition or use of tangible personal or real property if the governmental unit would, were it a private person, be liable to the claimant according to Texas law." TEX.CIV.PRAC. & REM.CODE § 101.021(2).
In her first amended petition, Mora pleaded two causes of action in support of her mental anguish damages. First, she alleged that the hospital's treatment of her resulted in the loss of her fetus and constituted negligent infliction of mental anguish. Second, Mora alleged that she "was a bystander at the death of her infant," and that witnessing this event caused her great mental anguish. She alleged no other claims against the hospital or its employees in the trial court.
No cause of action for wrongful death existed at common law; the right to sue for wrongful death is "purely a creature of statute." Witty v. American Gen. Capital Distribs., Inc., 727 S.W.2d 503, 504 (Tex.1987). In Witty, we explained that the Texas Wrongful Death Act precludes recovery for the loss of a fetus when there has been no live birth. Id. This holding was based on the language of the Act viewed in light of the longstanding common law rule that the rights of a fetus were contingent on live birth. Id. at 505. Similarly, there is no survival cause of action for the loss of a fetus or for negligent medical treatment of a fetus not born alive. Id. at 506; see Pietila v. Crites, 851 S.W.2d 185, 186 (Tex.1993); Yandell v. Delgado, 471 S.W.2d 569, 570 (Tex.1971). Without these causes of action, parents "are precluded from recovering damages for their loss of society, companionship, and affection suffered as a result of the loss of the fetus." Krishnan, 916 S.W.2d at 482.
In Krishnan, this Court addressed "whether a mother may recover mental anguish damages suffered because of the loss of her fetus resulting from an injury to the mother which was caused by the physician's allegedly negligent treatment of the mother." Id. at *79 840 (emphasis added). We held that, because mental anguish damages are available in personal injury actions generally, they are recoverable when suffered as a result of a negligently inflicted injury to the woman "which includes the loss of her fetus." Id. at 481-82. Because Mora pleaded that she suffered a personal injury including the loss of her fetus resulting from a breach of a legal duty owed to her, she has stated a valid cause of action.
Although Mora has a negligence claim against the hospital for the personal injury she sustained in losing the fetus, she does not have a viable cause of action as a bystander for the loss of her fetus. We adopted the bystander cause of action in Texas based on guidelines set forth in a California case. See Dillon v. Legg, 68 Cal. 2d 728, 69 Cal. Rptr. 72, 441 P.2d 912 (1968), construed in Freeman v. City of Pasadena, 744 S.W.2d 923, 923 (Tex.1988). As we stated in Boyles v. Kerr, "[b]efore a bystander may recover, he or she must establish that the defendant has negligently inflicted serious or fatal injuries on the primary victim." 855 S.W.2d 593, 598 (Tex.1993). The hospital could not be held liable for a negligent injury to Mora's fetus because, under established law, it does not owe a duty to a fetus that is not born alive. See Krishnan, 916 S.W.2d at 479; Yandell, 471 S.W.2d at 570. Additionally, Mora cannot be a bystander to her own personal injury. The hospital thus cannot be held liable to Mora under a bystander cause of action. Mora's only viable cause of action must be for the hospital's negligent treatment that resulted in personal injury to her.
At trial, Mora sought to prove mental anguish damages in part by presenting evidence that she had made preparations in expectation of the arrival of her baby: she had set aside a room in her home for the baby and purchased furniture for the room. She also testified that the loss of the fetus "still hurts [her] like it was yesterday," that she carries a clipping of the funeral service with her, and that her marriage deteriorated after the loss of the fetus. This evidence relates to the grief that Mora felt over the loss of the fetus as a separate individual and not as part of her own body. Krishnan and our decision today clarify that a woman can recover mental anguish damages resulting from negligent treatment that causes the loss of a fetus as part of the woman's body. Mora did not have the guidance provided by Boyles and Krishnan in this area of law, since both opinions were released after the trial in this case had occurred. This Court has broad discretion to remand for a new trial in the interest of justice when a party may have proceeded under the wrong legal theory. See Boyles, 855 S.W.2d at 603; American Title Ins. Co. v. Byrd, 384 S.W.2d 683 (Tex.1964). We therefore reverse the judgment of the court of appeals as to Mora and remand this part of the cause to the trial court for a new trial under the cause of action we recognized in Krishnan.[1]
III.
We next determine whether Trevino may recover mental anguish damages against the hospital. In his petition in intervention, Trevino alleges that he suffered severe mental anguish after witnessing the negligent treatment of his wife, Shirley Mora. Under Krishnan, the hospital owes no legal duty to Trevino to provide competent medical care to Mora or the fetus. 916 S.W.2d at 482; see also Cathey v. Booth, 900 S.W.2d 339, 342 (Tex.1995). Trevino instead argues that he should be permitted to recover mental anguish damages against the hospital as a bystander to Mora's treatment.[2]
*80 Trevino's bystander cause of action alleges that he was injured because he witnessed the nurses negligently administering the Pitocin and failing to timely administer anesthesia to Mora. He also witnessed the "failure of the nursing personnel to recognize signs of placental abruption as indicated on the contraction monitor." Trevino also saw Mora bleed heavily after some contractions and testified that he noticed blood clots in her bedpan that he thought were the fetus. Additionally, Trevino alleges mental anguish as a result of waiting for his wife to undergo an emergency caesarean section that resulted in the stillbirth. Trevino was not present for the stillbirth, however, and learned of it from a doctor only after the surgery.
A bystander may recover mental anguish damages under Texas law after witnessing a close relative suffer a traumatic injury because of a defendant's negligent action. See Freeman, 744 S.W.2d at 923. This recovery is permitted because we recognize that there are certain situations in which a tortfeasor will owe a bystander a duty of care beyond that owed to the public in general. See id. at 924. A bystander who witnesses a negligently inflicted serious or fatal injury may recover for mental anguish if:
(1) The bystander was located near the scene of the accident as contrasted with one who was a distance away from it.
(2) The shock resulted from a direct emotional impact upon the bystander from the sensory and contemporaneous observance of the accident, as contrasted with learning of the accident from others after its occurrence.
(3) The bystander and the victim were closely related, as contrasted with an absence of any relationship or the presence of only a distant relationship.
Freeman, 744 S.W.2d at 924 (citing Dillon, 69 Cal.Rptr. at 80, 441 P.2d at 920); see also Boyles, 855 S.W.2d at 597-98. These factors are to be interpreted flexibly, however, and the court should determine in each case "whether the accident and harm was reasonably foreseeable." Freeman, 744 S.W.2d at 924.
This Court has never considered whether a bystander to medical malpractice can recover mental anguish damages. To recover damages under the Dillon standard, a bystander must show a contemporaneous sensory perception of an accident. See Freeman, 744 S.W.2d at 924. In Ochoa v. Superior Court, 39 Cal. 3d 159, 216 Cal. Rptr. 661, 703 P.2d 1 (1985), the California Supreme Court determined that a medical malpractice plaintiff did not need to witness a sudden and brief occurrence to recover emotional damages as a bystander. Id. 216 Cal.Rptr. at 666-67, 703 P.2d at 7. Instead, the court held that the bystander had stated a valid cause of action "when there is observation of the defendant's conduct and the [patient's] injury and contemporaneous awareness [on the part of the bystander that] the defendant's conduct or lack thereof is causing harm to the [patient]." Id. 216 Cal.Rptr. at 668, 703 P.2d at 8. This relaxed standard permitted the plaintiff in Ochoa to recover mental anguish damages after she had repeatedly requested that a doctor examine her sick son, only to have her requests ignored and her son's condition deteriorate. Because the plaintiff in Ochoa witnessed her son's condition deteriorate as a direct result of the defendant hospital's conduct, and because she connected her son's injury with the hospital's conduct, the court found she had stated a valid bystander cause of action. Id. New Jersey has followed California's lead and relaxed the standard for bystander recovery in the medical malpractice context. See Gendek v. Poblete, 139 N.J. 291, 654 A.2d 970 (1995) (allowing medical malpractice bystander recovery when malpractice was connected with an injury and bystander suffered severe emotional distress).
Other jurisdictions, however, have refused to recognize a bystander cause of action in medical malpractice as the likelihood of hospitals' substantially curtailing patient visitation to prevent bystander suits. See, e.g., Maloney v. Conroy, 208 Conn. 392, 545 A.2d 1059, 1064 (1988). Other courts have decided *81 to allow recovery for only those bystanders who are within the zone of danger and suffer emotional distress as a result of a reasonable fear of a physical injury to themselves. See Asaro v. Cardinal Glennon Mem. Hosp., 799 S.W.2d 595, 599 (Mo.1990); Vaillancourt v. Medical Ctr. Hosp. of Vermont, Inc., 139 Vt. 138, 425 A.2d 92, 95 (1980). Because medical malpractice cases rarely involve a situation in which the bystander would fear physical injury, the zone of danger standard effectively precludes bystander recovery in these cases. See Asaro, 799 S.W.2d at 600. There are still other jurisdictions that have limited bystander recovery in medical malpractice cases by holding that the hospital has no duty of care to nonpatients. See O'Hara v. Holy Cross Hosp., 137 Ill. 2d 332, 148 Ill. Dec. 712, 714, 561 N.E.2d 18, 20 (1990).
We believe that the better-reasoned approach is not to permit bystander recovery in medical malpractice cases. The very nature of medical treatment is often traumatic to the layperson. Even when a medical procedure proves to be beneficial to the patient, it may shock the senses of the ordinary bystander who witnesses it. A bystander may not be able to distinguish between medical treatment that helps the patient and conduct that is harmful. A physician's primary duty is to the patient, not to the patient's relatives. Guided by these policy concerns, we hold that Texas' bystander cause of action precludes bystander recovery in medical malpractice cases.
We do not doubt that Mora's labor and the subsequent stillbirth were difficult and traumatic for Trevino, but Trevino claimed that he was injured as a bystander who witnessed malpractice upon his wife. Because we do not recognize bystander recovery in medical malpractice cases, Trevino has failed to state a valid cause of action. We accordingly reverse the judgment of the court of appeals as to Trevino.
IV.
We next consider whether a settlement must be offset before or after applying the Tort Claims Act's damages cap. Although resolution of this issue is not essential to our disposition of this case, we address it to provide the trial court with guidance in the retrial of Mora's case. See Palestine Contractors, Inc. v. Perkins, 386 S.W.2d 764, 773 (Tex.1964); Parker v. Bailey, 15 S.W.2d 1033, 1035 (Tex. Comm'n App.1929, holding approved).
Before the trial of this case, Mora's doctor, Carl Gruener, settled with Mora for $44,000. Mora then obtained a jury verdict against the hospital authority for $750,000. The trial court offset the verdict by the settlement amount. Because this $706,000 amount was greater than the hospital authority's liability limit under the Tort Claims Act, the trial court then reduced Mora's recovery down to what it determined to be the authority's liability cap and held it liable for that maximum amount. Edinburg Hospital Authority argues that the trial court should have first reduced the verdict down to the liability limit and then offset the settlement amount, thus holding the authority liable for its liability cap minus the settlement amount. We disagree.
Before the Legislature enacted the Tort Claims Act, Tex.Civ.Prac. & Rem.Code chapter 101, governmental liability was limited to proprietary functions. See Joe R. Greenhill & Thomas V. Murto III, Governmental Immunity, 49 Tex.L.Rev. 462, 462 (1971). The Legislature enacted the Tort Claims Act to provide a limited waiver of sovereign immunity. Id. at 467; see TEX.CIV. PRAC. & REM.CODE § 101.025. The Act's waiver of immunity is limited in at least two ways: by the types of claims that can be brought against a governmental unit, TEX. CIV.PRAC. & REM.CODE § 101.021, and by a cap on damages. Id. at § 101.023. Section 101.023 does not circumscribe a plaintiff's total recovery for a given injury. Instead, it delineates the extent of the government's waiver of immunity from liability for that injury. See University of Texas at El Paso v. Nava, 701 S.W.2d 71, 72 (Tex.App.El Paso 1985, no writ). When a plaintiff suffers an injury that falls within the Tort Claims Act, the Legislature has agreed to hold the government liable up to a specified dollar amount. That a plaintiff may have settled with some defendants does not affect the *82 degree of waiver of sovereign immunity that the Legislature has prescribed.
Thus, while the dollar amount of a settlement must be reduced from the verdict under the "one satisfaction" rule, Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 5-7 (Tex.1991), the settlement does not affect the maximum dollar amount to which the government has agreed to waive its immunity. A settlement with one tortfeasor should thus be offset before the verdict against the governmental unit is reduced to the statutory maximum. A contrary rule, taken to its logical end, would completely bar recovery against a tortfeasing municipal hospital authority when a plaintiff settles with another defendant for more than the hospital authority's damages cap. Such a result cannot be the intent of the Legislature. On remand, should Mora be awarded a verdict against the hospital authority greater than its statutorily-imposed liability limit, the settlement with Dr. Gruener must be deducted from the verdict before the trial court reduces the verdict to the statutory limit.
V.
Mora alleged negligent treatment of her that resulted in the loss of her fetus, as well as her own injury as a bystander; only the former is a cognizable cause of action in Texas. Mora failed, however, to prove mental anguish damages in accordance with our opinions in Krishnan and today. Trevino claimed to be a bystander to the medical malpractice allegedly committed upon his wife, which is not a valid cause of action against the hospital. We accordingly reverse the judgment of the court of appeals. We render judgment that Trevino take nothing on his bystander claim, and remand only Mora's portion of the case for a new trial in the interest of justice.
HECHT, Justice, concurring, joined by PHILLIPS, Chief Justice, and GONZALEZ, ENOCH, OWEN, BAKER and ABBOTT, Justices.
PHILLIPS, Chief Justice, GONZALEZ, ENOCH, OWEN, BAKER and ABBOTT, Justices and I join in this opinion, making it the opinion of the Court on the issue addressed. In addition, PHILLIPS, Chief Justice, ENOCH, OWEN and BAKER, Justices, and I join in, Justice SPECTOR'S opinion for the Court. GONZALEZ, Justice, joins only in Parts I and IV of Justice SPECTOR'S opinion and dissents from the Court's judgment. ABBOTT, Justice, joins only in Parts I, III, and IV of Justice SPECTOR'S opinion and concurs in the Court's judgment.
The court of appeals held that under the Tort Claims Act, a hospital authority created under the Hospital Authority Act is subject to the liability limits for municipalities rather than the lower limits for units of local government. 904 S.W.2d at 840-841. The court of appeals' holding conflicts with Huckabay v. Irving Hospital Authority, 879 S.W.2d 64 (Tex.App.Dallas 1993, writ dism'd by agr.). We consider this issue, as the Court considers the question of the settlement offset in Part IV of its opinion, "[t]o provide additional guidance to the trial court upon remand." Ante at 81. We disagree with the court of appeals.
The Tort Claims Act provides for a limited waiver of governmental immunity. One limit is on the dollar amount of liability. The limit has changed over time. When the Act was first passed in 1969, it contained a single limit on the liability of all "units of government": "Liability hereunder shall be limited to $100,000 per person and $300,000 for any single occurrence for bodily injury or death." Act of May 14, 1969, 61st Leg., R.S., ch. 292, §§ 2, 3, 1969 Tex.Gen.Laws 874, 875. In 1973 the Act was amended to add a limit of "$10,000 for any single occurrence for injury to or destruction of property." Act of April 11, 1973, 63rd Leg., R.S., ch. 50, § 1, 1973 Tex.Gen.Laws 77.
In 1983 the Act was amended to distinguish between state and local governments, to provide a higher $250,000/$500,000 cap on state government liability for bodily injury and death, and to set the property damage cap for both state and local governments at $100,000. State government was defined as "an agency, board, commission, department, or office, other than a district or authority created under Article XVI, Section 59, of the Texas Constitution, that: (1) was created by the constitution or a statute of this state; *83 and (2) has statewide jurisdiction." Act of May 28, 1983, 68th Leg., R.S., ch. 530, § 1, 1983 Tex.Gen.Laws. 3084. In 1985 the Act was recodified as part of the Civil Practice and Remedies Code. Act of May 17, 1985, 69th Leg., R.S., ch. 959, 1985 Tex.Gen.Laws 3242. The definition of state government was moved verbatim to section 101.001(5) of the Code, where it remains unchanged. The provisions limiting liability became section 101.023, as follows:
(a) Liability of the state government under this chapter is limited to money damages in a maximum amount of $250,000 for each person and $500,000 for each single occurrence for bodily injury or death and $100,000 for each single occurrence for injury to or destruction of property.
(b) Liability of a unit of local government under this chapter is limited to money damages in a maximum amount of $100,000 for each person and $300,000 for each single occurrence for bodily injury or death and $100,000 for each single occurrence for injury to or destruction of property.
Act of May 17, 1985, 69th Leg., R.S., ch. 959, 1985 Tex.Gen.Laws 3242, 3303.
While the state and its subdivisions created for purely public purposes are immune from liability for all their actions, a municipality or other governmental unit created only partly for public purposes is immune from liability only for its governmental conduct, not for its proprietary conduct. City of Galveston v. Posnainsky, 62 Tex. 118, 125 (1884). Prior to 1987 the line between a municipality's governmental and proprietary conduct was judicially drawn. In 1987 the Constitution was amended to authorize the Legislature to exercise this power, TEX. CONST. art. 11, § 13, and the Legislature did so by adding section 101.0215 to the Tort Claims Act. Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, § 3.02, 1987 Tex.Gen.Laws 37, 47-48. The Legislature defined almost all the functions of a municipality as governmental, thus shrouding them with immunity from liability. Id. In exchange for this added protection, the Legislature increased the liability limits on bodily injury and death liability for municipalities by amending section 101.023(b) to begin, "Except as provided in Subsection (c)," and adding subsection (c) as follows:
(c) Liability of a municipality under this chapter is limited to money damages in a maximum amount of $250,000 for each person and $500,000 for each single occurrence for bodily injury or death and $100,000 for each single occurrence for injury to or destruction of property.
Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, § 3.03, 1987 Tex.Gen.Laws 37, 48. In effect, the Legislature separated municipalities from other units of local government. This legislation was part of a "tort reform" package enacted as Senate Bill 5.
The court of appeals held that "municipality" in the context of section 101.023(c) includes hospital authorities created under the Hospital Authority Act, chapter 262 of the Health and Safety Code. (The Code also authorizes municipal hospitals in chapter 261, county hospitals in chapter 263, county hospital authorities in chapter 264, joint municipal and county hospitals in chapter 265, and hospital districts in subtitle D. We consider only hospital authorities under chapter 262.) Hospital authorities were first permitted by the Legislature in 1957. Act of May 17, 1957, 55th Leg., R.S., ch. 472, 1957 Tex.Gen. Laws 1379, formerly Tex.Rev.Civ.Stat. ann. art. 4437e (West 1976). A hospital authority is a "body politic and corporate" that "does not have taxing power", created by ordinance by one or more municipalities. Tex.Health & Safety Code § 262.003. It is governed by a board of directors, id. § 262.011, appointed with certain exceptionsfor two-year terms by the governing body of the municipality that created it (governing bodies, if more than one municipality), id. § 262.012. A hospital authority may sue and be sued, id. § 262.021(b)(2), may own, operate and maintain hospitals, id. § 262.022, may issue revenue bonds to fund its purposes, id. § 262.041, and may exercise the power of eminent domain under the Property Code as if it were a municipal corporation, id. § 262.028.
Nothing in the history or purpose of Senate Bill 5 suggests that the Legislature intended to raise the liability caps on hospital authorities when it raised them on municipalities. *84 The purpose of Senate Bill 5 was to give municipalities greater certainty as to the extent of their liability. It did so by reclassifying many of a municipality's proprietary functionsfor which it had unlimited liabilityas governmental functionsfor which its liability is limited by the Tort Claims Act. Tex.Civ.Prac. & Rem.Code § 101.0215. In exchange, the Legislature raised the limits of municipalities' liability. Id. § 101.023(c). As a result, municipalities enjoyed immunity for more of their functions even though their maximum liability exposure when immunity was waived increased. Unlike municipalities, hospital authorities have only governmental functions and thus have always been immune from liability for all their actions, except to the extent immunity is waived by the Tort Claims Act. See Classen v. Irving Healthcare Sys., 898 S.W.2d 300 (Tex.1995); Childs v. Greenville Hosp. Auth., 479 S.W.2d 399 (Tex.Civ.App.Texarkana 1972, writ ref'd n.r.e.). Hospital authorities therefore could not benefit from a reclassification of proprietary functions as governmental. If Senate Bill 5 raised the limits on hospital authorities' liability, it did so without giving them the same benefit of broader immunity that it gave municipalities. It is unlikely that the Legislature would have done this without comment.
The court of appeals based its holding on the control a municipality has over a hospital authority it creates, and the dependency of the authority on the municipality: "A hospital authority is formed by the municipality, governed by directors appointed by that municipality, and subject to dissolution by the municipality. It has no ability to raise money through taxes." 904 S.W.2d at 841. Thus, the court concluded, a hospital authority "is an extension of the municipality and is not a `unit of local government.'" Id. But the interrelationship between a municipality and a hospital authority does not lessen the fact that the two entities are separate. In the Local Government Code "municipality" means a city. Tex.Loc.Gov't Code § 1.005(3). In chapter 29 of the Government Code "`municipality' means an incorporated city, town, or village." Tex.Gov't Code § 29.001. We are not aware of an instance when "municipality" is used to describe a governmental unit with a special, limited purpose, like a hospital authority. Three statutes list municipalities and hospital districts as separate governmental entities. Tex.Civ. Prac. & Rem.Code § 9.002(b); Tex.Health & Safety Code 61.002(7); Tex.Loc.Gov't Code § 271.021. Many other statutes list municipalities separately from authorities generally. E.g., Tex.Gov't Code §§ 419.021(4), 431.035(b), 431.045(b), 431.056(a), 441.031(3), 441.151(8), 554.001(2), 609.001(6), 810.001(1), 2251.001(4), 2252.001(2), 2254.002(1); Tex. Health & Safety Code § 773.003(17); Tex. Lab.Code §§ 22.001(6), 92.002(5); Tex.Loc. Gov't Code § 201.003(7), 201.007, 271.003(4), 271.903, 391.002(1); Tex.Rev.Civ.Stat.Ann. art. 601i, § 1(5) (Vernon Supp.1996). So consistently do the statutes treat municipalities and authorities separately that it is most unlikely that the Legislature should have intended to treat them the same in one statute absent some clear indication to the contrary. No evidence of such intent can be found in Senate Bill 5.
Perhaps the most persuasive indication of legislative intent is found in section 262.035 of the Health and Safety Code. That statute, enacted in 1993 (Act of May 27, 1993, 73rd Leg., R.S., ch. 558, 1993 Tex.Gen.Laws 2068), "applies only to an authority created in a county with a population of at least 350,000 in which a hospital district is not located." Tex.Health & Safety Code § 262.035(a). (Seven countiesBexar, Dallas, El Paso, Harris, Hidalgo, Tarrant, and Travis have more than 350,000 in population. Dallas Morning News, Texas Almanac 133-283 (1995). It appears that two of them, Hidalgo and Travis, presently do not have hospital districts.) The statute authorizes a municipality to lease a hospital and other facilities owned by the municipality to a hospital authority. In that event, the municipality has more control over the authority than it would have otherwise. For example, the municipality may retain the power to appoint all directors of the authority, notwithstanding the exceptions set out in section 262.012, and if the municipality retains this power, it may remove any member at any time for cause. Id. § 262.035(b)(1), (c). The authority must perform specified services on the municipality's *85 behalf and cannot eliminate them without the municipality's approval. Id. § 262.035(b)(2), (4). The authority cannot contract for management of the hospital without the municipality's consent. And authority employees may participate in the municipality's employee benefit plans.
Nevertheless, section 262.035(d) expressly provides that for purposes of the Tort Claims Act "a municipal hospital authority subject to this section is a unit of local government and not a municipality". Id. § 262.035(d). It is implausible that the Legislature would treat the more independent hospital authorities as municipalities, but hospital authorities that are subject to greater control by municipalities as other units of local government. The result would be that hospital authorities least like municipally owned hospitals would still be subject to the liability caps for those hospitals, while hospital authorities most like municipally owned hospitals would not be. There is no indication in the statutes that the Legislature intended this result.
The Trevinos argue that to treat a hospital authority as a unit of local government but a municipally owned hospital as a municipality, subjecting them to different liability caps under the Tort Claims Act, denies the Trevinos equal rights in violation of Article I, Section 3 of the Texas Constitution. The Court rejected a similar argument in Guillory v. Port of Houston Authority, 845 S.W.2d 812, 815 (Tex.1993): "one governmental unit cannot be denied the immunity to which it would otherwise be entitled simply because the Legislature has waived immunity for another governmental unit. One may disagree with the choices made by the Legislature, but one can hardly deny its power to choose."
Nor will we infer from the Legislature's possession of discretion that it has acted arbitrarily or irrationally, especially when a logical explanation for its action is apparent. It is clear to us that the Legislature intended only municipalitiescities and townsto be subject to higher liability limits under section 101.023(c) of the Tort Claims Act. Thus, we hold that hospital authorities continue to be units of local government within the meaning of section 101.023(b) of the Tort Claims Act.
ABBOTT, Justice, concurring.
I join Parts I, III, and IV of the Court's opinion. I also join Justice Hecht's concurring opinion holding that the Edinburg Hospital Authority is a unit of local government subject to the liability limits imposed by section 101.023(b) of the Texas Civil Practice and Remedies Code. I do not join Part II of the Court's opinion. Instead, for the reasons articulated in Part I of Justice Gonzalez's dissenting opinion in this case and in Justice Kilgarlin's dissent in Witty v. American Gen. Capital Distribs., Inc., 727 S.W.2d 503, 506 (Tex.1987), I would be inclined to overrule Witty and allow recovery for the wrongful death of a fetus. However, the Trevinos have not made any argument to this Court that Witty should be overruled. Accordingly, based on the arguments presented to us by the parties, I concur in the Court's judgment as to Part II.
GONZALEZ, Justice, dissenting.
I join in Parts I and IV of the Court's opinion. However, I do not join the remainder of the opinion for three reasons: First, it perpetuates the harsh, antiquated, "born alive" rule that allows recovery for the wrongful death of a child only if the child survives the womb. In my opinion, there should be no difference in tort law whether the child's death occurs just before or just after birth. I would correct the errors the Court made in construing the Wrongful Death Statute in Witty v. American General Capital Distributors, Inc., 727 S.W.2d 503, 506 (Tex.1987), and its progeny and hold that Edinburg General owed a duty to the mother, the father, and the baby. Second, the Court perpetuates the fiction that a full-term, pre-birth baby is nothing more than a glob of tissue that is part of the mother's body and thus not worthy of legal protection. While I concur in the Court's judgment allowing Mrs. Trevino a cause of action for negligence, I disagree with the Court's reasoning. Furthermore, I would also allow Mr. Trevino to assert a cause of action for negligence to recover damages for the mental anguish he suffered as a result of his unborn baby's death, though not under a bystander theory. Third, for the reasons stated in Justice *86 Hecht's concurring opinion, 941 S.W.2d at 90, I would hold that Edinburg Hospital Authority is a unit of local government subject to the bodily injury liability limits imposed by section 101.023(b) of the Texas Civil Practices and Remedies Code.
I.
The Court continues to perpetuate the flaw in this State's jurisprudence which holds that parents cannot recover for the wrongful death of their unborn child. See Krishnan v. Sepulveda, 916 S.W.2d 478, 479 (Tex.1995); Pietila v. Crites, 851 S.W.2d 185, 187 (Tex. 1993); Blackman v. Langford, 795 S.W.2d 742, 743 (Tex.1990); Witty v. American Gen. Capital Distribs., Inc., 727 S.W.2d 503, 506 (Tex.1987); Tarrant County Hosp. Dist. v. Lobdell, 726 S.W.2d 23, 23 (Tex.1987). I wish we would not continue to follow this anachronistic rule of law and instead join the overwhelming majority of jurisdictions that recognize some form of action to recover damages for an unborn child's death.[1]
The Court considers what other states have done in this regard, and concludes that it is up to our Legislature to create a cause of action for the wrongful death of a fetus. 941 S.W.2d at 79 n. 1. I agree with that principle, but the Legislature has already done its job. It has enacted a Wrongful Death Statute that allows a cause of action for damages "arising from an injury that causes an individual's death." TEX.CIV.PRAC. & REM.CODE § 71.002(a). However, in Witty, we erred in our interpretation of the statute by ignoring precedent and abdicating our responsibility in a manner that perpetuates inequity. See Witty, 727 S.W.2d at 506-12 (Kilgarlin, J., dissenting). In Witty, we also ignored the maxim that "[t]his court should not be bound by the prior legislative inaction in an area like tort law which has traditionally been developed primarily through the judicial process." Sanchez v. Schindler, 651 S.W.2d 249, 252 (Tex.1983).
At common law, the rights of a human being existed despite its unborn status. As Sir William Blackstone stated:
Life ... begins in contemplation of law as soon as an infant is able to stir in the mother's womb. For if a woman is quick with child, and ... if anyone beat her, whereby the child dieth in her body, and she is delivered of a dead child; this, though not murder, was by the [ancient] law homicide or manslaughter.... An infant... in the mother's womb, is supposed in law to be born for many purposes. It is capable of having a legacy, or a surrender of a copyhold estate made to it. It may *87 have a guardian assigned to it; and it is enabled to have an estate limited to [its] use, and to take afterwards by such limitation, as if it were then actually born.
1 WILLIAM BLACKSTONE, COMMENTARIES *125-26.
Our Legislature has restricted the rights of a pre-born baby to protection under our state's criminal law by specifically defining "individual" as "a human being who has been born and is alive." TEX.PENAL CODE § 1.07(26); Collins v. State, 890 S.W.2d 893, 897-98 (Tex.App.El Paso 1994, no pet.). However, in a civil context, no such limitation exists with regard to the Wrongful Death Statute. Therefore, nothing precludes us from overruling Witty and its progeny to correct the errors our Court made in those cases. See Boyles v. Kerr, 855 S.W.2d 593, 595-96 (Tex.1993) (overruling St. Elizabeth Hosp. v. Garrard, 730 S.W.2d 649 (Tex.1987) due to its erroneous interpretation of an earlier case and because it was out of step with most American jurisdictions); Moser v. U.S. Steel Corp., 676 S.W.2d 99, 101 (Tex. 1984) (overruling Reed v. Wylie, 597 S.W.2d 743 (Tex.1980) and Acker v. Guinn, 464 S.W.2d 348 (Tex.1971) due to the uncertainty in determining title to minerals that resulted from those cases); Sanchez, 651 S.W.2d at 251 n. 2 (overruling J.A. Robinson Sons, Inc. v. Wigart, 431 S.W.2d 327 (Tex.1968) and related cases).
II.
Because of advances in medical technology, it is no longer debatable that life begins before birth. Legal scholars have recognized as much: "So far as duty is concerned, if existence at the time of the tortious act is necessary, medical authority has long recognized that an unborn child is in existence from the moment of conception." KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 55, at 367 (5th ed. 1984). One can debate the meaning and purpose of life, and what life is worth protecting, but under contemporary scientific standards, it is beyond dispute that a fetus is a human being from the moment of conception.[2] It can be nothing else. See Klasing, The Death of an Unborn Child: Jurisprudential Inconsistencies in Wrongful Death, Criminal Homicide, and Abortion Cases, 22 PEPP.L.REV. 933, 974 (1995). By eight weeks, the baby has its own beating heart, internal organs, external features, and a unique genetic code. See REECE ET AL., MEDICINE OF THE FETUS AND MOTHER 43-44, 48, 53-54, 117 (1992); HARRISON ET AL., THE UNBORN PATIENT 43 (2d ed. 1990). Besides the heart, brain, internal organs, and limbs, which are clearly not part of the woman's body, there are other parts such as the umbilical cord that are uniquely part of the baby's body. CUNNINGHAM ET AL., WILLIAMS OBSTETRICS 137 (19th ed. 1993). Human embryos may be removed from the uterus and implanted in a surrogate mother who is then able to deliver a baby at full term. See generally, SCOTT ET AL., DANFORTH'S OBSTETRICS AND GYNECOLOGY 739-55 (7th ed. 1994). Thus, "it is absurd to extend the legal fiction... that an unborn child is `a part of the mother's bowels' until the fetus is viable." Rambo v. Lawson, 799 S.W.2d 62, 69 (Mo. 1990) (Holstein, J., dissenting). I therefore reject the nonsensical view that within the realm of Texas tort law a dead unborn child is worth nothing, but an injured child born alive may sue and recover damages. See Witty, 727 S.W.2d at 507 (Kilgarlin, J., dissenting). As the Louisiana Supreme Court wisely stated:
*88 The loss to the parents of a child who otherwise would have been born normally is substantially the same, whether the tortfeasor's fault causes the child to be born dead or to die shortly after being born alive, and a cause of action for the loss should be recognized in either event, at least in the absence of specific legislation expressing a contrary intent. Moreover, a decision not to recognize a cause of action when the child is born dead would benefit the tortfeasor who causes a more serious injury, since the tortfeasor would have to pay damages if his fault causes a child to be born disabled, but would not have to pay any damages if his fault causes prenatal death.
Danos v. St. Pierre, 402 So. 2d 633, 638 (La. 1981) (on rehearing) (footnote omitted).
We should admit the error of our ways. "[A] judicious reconsideration of precedent cannot be as threatening to public faith in the judiciary as continued adherence to a rule unjustified in reason...." Moragne v. States Marine Lines, Inc., 398 U.S. 375, 405, 90 S. Ct. 1772, 1790, 26 L. Ed. 2d 339 (1970). We should not let the mechanical application of stare decisis prevent us from overruling our earlier decisions such as Witty wherein we erroneously determined the meaning of a statute. See Monell v. Department of Soc. Servs., 436 U.S. 658, 695, 98 S. Ct. 2018, 2038, 56 L. Ed. 2d 611 (1978) (holding that municipalities are "persons" under 42 U.S.C. § 1983 and are subject to liability, overruling Monroe v. Pape, 365 U.S. 167, 81 S. Ct. 473, 5 L. Ed. 2d 492 (1961)). We have even done so in this particular area of the law. In Leal v. C.C. Pitts Sand & Gravel, Inc., 419 S.W.2d 820, 821 (Tex.1967), this Court held that parents of a viable infant born alive have a cause of action under the Wrongful Death Statute if the baby later dies from injuries inflicted while in utero. In the process, we overruled Magnolia Coca Cola Bottling Co. v. Jordan, 124 Tex. 347, 78 S.W.2d 944 (1935), citing one legal writer who remarked that "[s]eldom in the law has there been such an overwhelming trend in such a relatively short period of time as there has been in the trend towards allowing recovery for prenatal injuries to a viable infant." Leal, 419 S.W.2d at 822. In Leal, we recognized an "impressive contemporary trend," and should do so again now. Id. Thus, I would hold that Mr. and Mrs. Trevino can assert a cause of action to recover damages for the wrongful death of their unborn child without forcing plaintiffs and sympathetic courts to look for creative ways to get around this harsh law and the fictions our Court has created.
III.
Additionally, while I agree with the Court that neither Mr. Trevino nor Mrs. Trevino can recover damages as a bystander, I do not believe that this conclusion should bar Mr. Trevino's recovery. In the absence of a wrongful death cause of action that would allow fathers and mothers to recover for the loss of their unborn children, I would hold that Mr. Trevino can recover under a negligence theory based on the duty owed to him as the father of the unborn baby.
When a pregnant woman establishes a doctor-patient relationship with a physician for the prenatal care and delivery of a baby, the doctor owes a duty of care to the mother and baby. See Yandell v. Delgado, 471 S.W.2d 569, 570 (Tex.1971) (creating a duty to not inflict injury upon an unborn baby). Therefore, in reality, the unborn child is the doctor and hospital's "second patient." See PRITCHARD ET AL., WILLIAMS OBSTETRICS xi (17th ed. 1985). However, in Krishnan, the Court concluded that because there is no doctor-patient relationship between an obstetrician and the father of an unborn child, no duty is owed to the father. Krishnan, 916 S.W.2d at 482. This conclusion is wrong and serves only to perpetuate the myth that a father does not suffer mental anguish because of the death of his unborn child, and it amounts to unlawful gender discrimination. Id. at 483 (Gonzalez, J., dissenting). I believe that the better view is to recognize a duty to the father.
As we stated in Boyles v. Kerr, 855 S.W.2d 593, 600 (Tex.1993), "certain relationships may give rise to a duty which, if breached, would support an emotional distress award." We then stated in Krishnan that "[t]he physician/patient relationship is one such relationship." Krishnan, 916 S.W.2d at 482. *89 Under Yandell, a fetus injured while in utero, regardless of viability at the time of injury, has a cause of action for personal injuries provided the child is born alive and survives. Yandell, 471 S.W.2d at 570. Therefore, an expansion of the physician's duty is only necessary with regard to the expectant father. Otherwise, fathers are the only individuals in the father-mother-unborn child relationship to whom physicians owe no duty, and thus they are left without a remedy despite their painful loss.
The father should, in this narrow context, be owed a duty because of the special relationship that arises when a physician is entrusted by both parents to bring their child into the world. Texas courts have recognized in contractually based situations that a special relationship may "arise[] from the element of trust necessary to accomplish the goals of the undertaking." English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983) (Spears, J., concurring). It is my view that such a relationship exists between a father of an unborn baby and his wife and baby's physician, and that the father should be able to recover mental anguish damages for his loss. See Stuart v. Western Union Tel. Co., 66 Tex. 580, 585, 18 S.W. 351, 353 (1885) (holding that telegraph company's failure to deliver a death message gave rise to mental anguish damages for brother of the deceased); Pat H. Foley & Co. v. Wyatt, 442 S.W.2d 904, 907 (Tex.Civ.App.Hous. [14th Dist.] 1969, writ ref'd n.r.e.) (allowing mother of deceased to recover mental anguish damages for funeral home's negligent handling of her son's corpse).
Other courts have recognized a cause of action by concluding that a father is a third-party beneficiary of the doctor-patient relationship. For example, California recognizes an extension of duty to a father as a third-party beneficiary of his wife's doctor-patient relationship. Andalon v. Superior Court, 162 Cal. App. 3d 600, 208 Cal. Rptr. 899, 905 (1984). In Andalon, the court concluded that both parents were direct victims of the doctor's negligent prenatal care. Id. The court reasoned:
[The father's] injury is not merely derivative of Mrs. Andalon's injury but flows from his role as a participant in the reproductive life of the marital couple and its lawful choices. The burdens of parental responsibility fall directly upon his shoulders. The tort duty arising from the contract, between defendant and Mrs. Andalon, runs to him, not merely because of the foreseeability of emotional harm to him, but because of the nexus between his significant interests and the `end and aim' of the contractual relationship. He is manifestly a direct beneficiary of tort-duty imposed by virtue of the doctor-patient relationship.
Id. This reasoning has been echoed in Louisiana. See, e.g., Skorlich v. East Jefferson Gen. Hosp., 478 So. 2d 916, 918 (La.Ct.App. 1985). In Skorlich, a father sued his wife's doctor and the hospital for injuries his child received during the birth process. Id. at 916. The court concluded that the hospital and the doctor owed a duty of care to both the mother and the father. Id. at 918. The court reasoned:
In essence, the object of the undertaking is for the physician to treat the pregnancy which was created by the joint efforts of the father and mother. Although the father does not carry the fetus within his own body, it is his seed which created the fetus and thus imposed on him the obligation to care, protect and raise the fetus to adulthood. For that reason, the duty of the physician not to negligently injure the child during the birth process is a duty owed to the father as well as the mother. There is no reasonable basis for distinguishing between the father and mother.
Id. I agree with the results reached by these courts and would hold that doctors and hospitals owe fathers the same duty they owe to mothers in the context of prenatal care and delivery based on the special relationship created when a physician is entrusted by parents to bring a baby into the world.[3]
*90 The evolution of tort law has made the concept of legal duty a particularly ripe area for continued judicial consideration. Indeed, "[t]he entire history of the development of tort law shows a continuous tendency to recognize as worthy of legal protection interests which previously were not protected at all." Restatement (Second) of Torts § 1 cmt. e (1965). As Dean Prosser observed, "[c]hanging social conditions lead constantly to the recognition of new duties. No better general statement can be made, than that the courts will find a duty where, in general, reasonable men would recognize it and agree that it exists." Prosser, Handbook of the Law of Torts § 53, at 327 (4th ed. 1971), quoted in Otis Eng'g Corp. v. Clark, 668 S.W.2d 307, 310 (Tex.1983) (imposing a duty on employers to act with reasonable care when exercising control over servants); see also Sanchez, 651 S.W.2d at 252 (allowing parents who lose minor child to recover for loss of society and mental anguish in response to the needs of modern society); Parker v. Highland Park, Inc., 565 S.W.2d 512, 514-15 (Tex.1978) (extending to tenants' guests a landlord's duty owed to tenants to maintain portions of leased premises). It is only reasonable to conclude now that a duty is owed to a father by his unborn baby's physician.
The recognition of such a duty is also justified under the balancing test this Court uses when deciding whether a duty exists. Under that test, the Court must balance the risk, foreseeability, and likelihood of injury against the social utility of the actor's conduct, the magnitude of the burden of guarding against the injury, and the consequences of placing that burden on the defendant. Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex.1990).
Mr. Trevino's injury was foreseeable to Edinburg General. In its Policy and Procedure Manual for Labor and Delivery, Edinburg General lists its Standards of Nursing Care. The first standard states: "Patients and/or significant others can expect nursing care to be provided within a safe environment by protection from untoward events (falls and other incidents, errors in the administration of medications and treatments, cross contamination, and patient abuse)" (emphasis added). The fact that it set forth such standards shows that Edinburg General could foresee the risk that treatment errors posed not only for the patient, but also for the patient's "significant other."
I recognize that the social utility of Edinburg General's actions is great and that the magnitude and consequences of placing this burden on Edinburg General are significant. Nevertheless, these considerations are outweighed by the risk, likelihood, and foreseeability of the injuries involved. Thus, these factors weigh in favor of imposing a duty on Edinburg General. I would therefore hold that Edinburg General owed Mr. Trevino the same duty of care with respect to prenatal care and delivery that it owed his wife and baby, and I would allow him to assert a cause of action to recover damages for mental anguish. See Boyles, 855 S.W.2d at 598.
IV.
This modification of the law is necessary to eliminate confusion and gamesmanship, to clarify those events that justify mental anguish damages and those that do not, and to promote intellectual honesty in our courts. Because of the Court's adherence to the view that there can be no recovery for the death of an unborn child, judges and lawyers are forced to craft rationales to maneuver around existing precedent. An example of this maneuvering is the decision in Krishnan. The Court concluded that Mrs. Sepulveda had pleaded physical injury to herself when in fact there was no mention of a physical injury to her in the pleadings. Krishnan, 916 S.W.2d at 489-90 (Gonzalez, J., dissenting). The reality is that in Krishnan, Mrs. Sepulveda's pleadings contained no more an allegation of physical injury than Mrs. Trevino's pleadings in this case. The Court read such an allegation into Mrs. Sepulveda's pleadings to allow her a chance to recover, and does the same in this case.
Mr. and Mrs. Trevino seek to be compensated for their emotional harm suffered as a result of the loss of the child they expected to have. As the Court notes, Mrs. Trevino (Mora)
sought to prove mental anguish damages in part by presenting evidence that she *91 had made preparations in expectation of the arrival of her baby: she had set aside a room in her home for the baby and purchased furniture for the room. She also testified that the loss of the fetus `still hurts [her] like it was yesterday,' that she carries a clipping of the funeral service with her, and that her marriage deteriorated after the loss of the fetus. This evidence relates to the grief that Mora felt over the loss of the fetus as a separate individual and not as part of her own body.
941 S.W.2d at 79.
Mr. Trevino also suffered emotional harm. His mother testified that he took the death of the baby "very hard. He wouldn't eat. He would spend a lot of time crying like a baby.... He started drinking a lot and started having ... problems like drinking and like crying.... He was not the same person anymore." 904 S.W.2d at 839. Oscar Trevino suffered as a result of this ordeal. He testified that the pain and anger he felt that day have continued to the present. Id.
As is evident, the Trevinos' claims are indistinguishable from the plaintiffs' claims in Krishnan, 916 S.W.2d at 479, Pietila, 851 S.W.2d at 187, Blackman, 795 S.W.2d at 743, Witty, 727 S.W.2d at 506, and Tarrant County Hospital District, 726 S.W.2d at 23, which we have held not to be actionable. The Court today reaffirms these cases but does so in doublespeak that is bound to confuse the bench, the bar and juries: While "Mora (Mrs. Trevino) has a negligence claim against the hospital for the personal injury she sustained in losing the fetus," 941 S.W.2d at 79, "[t]he hospital could not be held liable for a negligent injury to Mora's fetus." 941 S.W.2d at 79.
The result of our case law is so harsh and inequitable that once again, as in Krishnan, the Court finds a way to circumvent precedent to reach the desired result. The Court is allowing plaintiffs to do through the back door what they cannot do through the front door. With a wink and a nod, the Court today asks judges and juries to pretend that the emotional harm and loss to the mother are caused by two injuries, one which is actionable and the other not. I believe juries will now compensate both injuries within one calculation, unable to perform the mental gymnastics the Court asks of them.
In truth, there is only one injury, one "occurrence in question." It is unreasonable to expect the trier of fact to ascertain damages for mental anguish due to the mother's personal injury (from the loss of her baby), while at the same time not consider any anguish the baby's death itself might have caused. As I wrote in Krishnan:
What will the jury charge for this kind of case read in the future? Since this Court leaves Pietila, Blackman, Witty, and Tarrant County Hosp. Dist. on the books, of necessity a trial court will have to instruct the jury not to award damages to the mother "by way of consolation for the death" of the unborn baby or for "any sorrow, anguish, or grief suffered as a result" of the baby's death. See TEX.PATTERN J. CHARGES § 81.04 (1982). This instruction was made obsolete in the context of parents' wrongful death actions for the death of a child following its birth, see id. cmt. (Supp.1984) (citing Sanchez v. Schindler, 651 S.W.2d 249 (Tex.1983)), but it must be resurrected again to respond to the Court's writing today. Moreover, in light of today's opinion holding that a mother is not entitled to recover damages for the loss of society, companionship, and affection due to the unborn child's death, 916 S.W.2d at 482, a careful trial judge may well add the following instruction:
Do not include any pecuniary loss resulting from the death of [the baby]. Do not consider the love, comfort, companionship, and society that [the mother] would have received from [the baby]. Disregard any mental anguish suffered by [the mother] in the past or which will be suffered in the future resulting from the death of [the baby].
See id. § 83.03A (Supp.1984) (stating the elements of recovery that the surviving parents of a minor child are entitled to in a wrongful death action). Although this instruction will be generally troublesome, the mental anguish component will probably be the most problematic. This Court holds that the injury resulting in the death of an unborn child due to a physician's *92 negligent prenatal care is a personal injury to the mother. Presumably, therefore, a trial judge will ask the general question for personal injury damages recoverable for a physician's negligence. The definition of mental anguish will also appear in the charge. The definition could state:
Mental anguish means an emotional pain, torment, and suffering experienced by [the mother] as a result of the occurrence in question.
Alternatively, it could state:
Mental anguish is a relatively high degree of mental pain and distress. It is more than mere disappointment, anger, resentment or embarrassment, although it may include all of these. It includes a mental sensation of pain resulting from such painful emotions as grief, severe disappointment, indignation, wounded pride, shame, despair and/or public humiliation.
See Trevino v. Southwestern Bell Tel. Co., 582 S.W.2d 582, 584 (Tex.Civ.App.Corpus Christi 1979, no writ). This Court today rules that the "loss of the fetus" is a recoverable injury to the mother, 916 S.W.2d at 482, but that the death of the baby itself is not. Therefore, a trial judge probably should also add an exclusionary instruction, to wit: "Do not include any amount for mental anguish not resulting from the injury to the mother, if any, that resulted from the occurrence in question."
... It will not be surprising if the forgoing [jury charge] profoundly confuses juries, attorneys, and trial and appellate courts.
Krishnan, 916 S.W.2d at 488-89 (Gonzalez, J., dissenting).
The approach I propose today is necessary to correct two grave harms. First, Krishnan and this case cause confusion due to the Court's recognizing a cause of action that looks and feels like a claim for the wrongful death of an unborn baby, while simultaneously denying the existence of such a claim. Second, we must dispel the fiction that an unborn child is simply a mass of tissue or just another part of its mother's body somehow not worthy of legal protection. One would think that an enlightened Court would recognize that at some point along the continuum from conception to birth, the unborn baby is worthy of legal protection.[4] The medical evidence undermining the notion that emotional harm from the death of one's unborn baby is caused by two distinct injuries is too great to continue this legal fiction any longer. In developing tort law, this Court is empowered to decide that Texas has an important, if not compelling, interest in protecting the life of an unborn child throughout all stages of pregnancy. See, e.g., Planned Parenthood v. Casey, 505 U.S. 833, 869-76, 112 S. Ct. 2791, 2816-20, 120 L. Ed. 2d 674 (1992); Webster v. Reproductive Health Servs., 492 U.S. 490, 519, 109 S. Ct. 3040, 3057, 106 L. Ed. 2d 410 (1989); Roe v. Wade, 410 U.S. 113, 162-63, 93 S. Ct. 705, 731-32, 35 L. Ed. 2d 147 (1973). This interest has both a logical and biological justification, Roe, 410 U.S. at 163, 93 S.Ct. at 731-32, and its importance is not diminished merely because it is enforced in an action for damages at common law rather than by other regulatory means. I would therefore concede our errors, overrule Witty and its progeny, and join the overwhelming and growing majority of jurisdictions which allow recovery for the death of an unborn child.
For the foregoing reasons, I would affirm in part and reverse in part the judgment of the court of appeals.
NOTES
[1] In his dissent, Justice Gonzalez admonishes the Court for failing to allow a wrongful death cause of action for the loss of a fetus. 941 S.W.2d at 86-88. His voluminous footnote purporting to cite caselaw supporting his position, however, is almost wholly inapposite. At least 33 of the 38 cases he cites allow recovery for this type of loss solely under a state wrongful death statute. The Texas Wrongful Death Act does not allow recovery for the loss of a fetus. Witty, 727 S.W.2d at 506. If the law is to change, it would be up to the Legislature, not this Court, to rewrite that statute to allow the cause of action that Justice Gonzalez seeks to create.
[2] Trevino also alleges that the hospital owed him a duty of care arising from both his contractual relationship with the hospital as the guarantor of Mora's payment and the contract between Mora and the hospital, of which he was the third-party beneficiary. Trevino claims that the hospital breached these contracts by committing negligence, and he is therefore entitled to damages. These allegations are distinct from Trevino's bystander cause of action and were not alleged in the pleadings or tried by consent in the trial court. Trevino therefore waived these arguments, and we need not pass on their merits. See Tex.R.Civ.P. 45(b); Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 186-88 (Tex.1977).
[1] See Tenn.Code Ann. § 20-5-106 (1994); Wade v. United States, 745 F. Supp. 1573, 1579 (D.Haw. 1990); Espadero v. Feld, 649 F. Supp. 1480, 1484 (D.Colo.1986); Simmons v. Howard Univ., 323 F. Supp. 529, 529 (D.D.C.1971); Eich v. Town of Gulf Shores, 293 Ala. 95, 300 So. 2d 354, 358 (1974); Summerfield v. Superior Court of Maricopa County, 144 Ariz. 467, 698 P.2d 712, 724 (1985); Hatala v. Markiewicz, 26 Conn.Supp. 358, 224 A.2d 406, 407-08 (1966); Worgan v. Greggo & Ferrara, Inc., 128 A.2d 557, 558 (Del.Super.Ct.1956); Greater Southeast Community Hosp. v. Williams, 482 A.2d 394, 397-98 (D.C.1984); Volk v. Baldazo, 103 Idaho 570, 651 P.2d 11, 15 (1982); Seef v. Sutkus, 145 Ill. 2d 336, 164 Ill. Dec. 594, 583 N.E.2d 510, 511 (1991); Britt v. Sears, 150 Ind.App. 487, 277 N.E.2d 20, 26-27 (1971); Dunn v. Rose Way, Inc., 333 N.W.2d 830, 833-34 (Iowa 1983); Hale v. Manion, 189 Kan. 143, 368 P.2d 1, 3 (1962); Mitchell v. Couch, 285 S.W.2d 901, 906 (Ky.1955); Danos v. St. Pierre, 402 So. 2d 633, 639 (La.1981); State ex rel. Odham v. Sherman, 234 Md. 179, 198 A.2d 71, 73 (1964); Mone v. Greyhound Lines, Inc., 368 Mass. 354, 331 N.E.2d 916, 920 (1975); O'Neill v. Morse, 385 Mich. 130, 188 N.W.2d 785, 786 (1971); Verkennes v. Corniea, 229 Minn. 365, 38 N.W.2d 838, 841 (1949); Terrell v. Rankin, 511 So. 2d 126, 127 (Miss.1987); Connor v. Monkem Co., 898 S.W.2d 89, 92 (Mo.1995); Strzelczyk v. Jett, 264 Mont. 153, 870 P.2d 730, 733 (1994); White v. Yup, 85 Nev. 527, 458 P.2d 617, 623-24 (1969); Poliquin v. MacDonald, 101 N.H. 104, 135 A.2d 249, 251 (1957); Salazar v. St. Vincent Hosp., 95 N.M. 150, 619 P.2d 826, 830 (App.1980); DiDonato v. Wortman, 320 N.C. 423, 358 S.E.2d 489, 495 (1987); Hopkins v. McBane, 359 N.W.2d 862, 865 (N.D.1984); Werling v. Sandy, 17 Ohio St. 3d 45, 476 N.E.2d 1053, 1056 (1985); Evans v. Olson, 550 P.2d 924, 927-28 (Okla.1976); Libbee v. Permanente Clinic, 268 Or. 258, 518 P.2d 636, 640 (1974); Amadio v. Levin, 509 Pa. 199, 501 A.2d 1085, 1089 (1985); Presley v. Newport Hosp., 117 R.I. 177, 365 A.2d 748, 754 (1976); Fowler v. Woodward, 244 S.C. 608, 138 S.E.2d 42, 45 (1964); Wiersma v. Maple Leaf Farms, 543 N.W.2d 787, 792 (S.D.1996); Vaillancourt v. Medical Ctr. Hosp., 139 Vt. 138, 425 A.2d 92, 95 (1980); Moen v. Hanson, 85 Wash.2d 597, 537 P.2d 266, 268 (1975); Farley v. Sartin, 195 W.Va. 671, 466 S.E.2d 522, 535 (1995); Kwaterski v. State Farm Mut. Auto. Ins. Co., 34 Wis. 2d 14, 148 N.W.2d 107, 112 (1967).
[2] Excerpts from medical textbooks illustrate the present scientific view that a baby's life begins at the moment of conception:
Human development begins at conception or fertilization, the process during which a male gamete or sperm (spermatozoon) unites with a female gamete or oocyte (ovum) to form a single cell called a zygote (Gr. zygótos, yoked together). This highly specialized, totipotent cell marked the beginning of each of us as a unique individual.
MOORE & PERSAUD, THE DEVELOPING HUMAN 14 (5th ed. 1993).
In the first pairing, the spermatozoon has contributed its 23 chromosomes, and the oocyte has contributed its 23 chromosomes, thus re-establishing the necessary total of 46 chromosomes. The result is the conception of a unique individual, unlike any that has been born before and unlike any that will ever be born again.
KRIEGER, THE HUMAN REPRODUCTIVE SYSTEM 88 (1969).
[3] Today the Court does not pass on the merits of a third-party beneficiary claim. Thus, this is an open question. 941 S.W.2d at 79. Perhaps there is hope that in the future the Court will allow fathers to assert such a cause of action to recover mental anguish damages.
[4] Indeed, the high courts of several states now allow wrongful death protection for nonviable fetuses. See Farley v. Sartin, 195 W.Va. 671, 466 S.E.2d 522, 533-34 (1995) (18-22 week old fetus); Wiersma v. Maple Leaf Farms, 543 N.W.2d 787, 791 (S.D.1996) (7½ week old fetus); Connor v. Monkem Co., 898 S.W.2d 89, 92-93 (Mo.1995) (16 week old fetus). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1789258/ | 837 S.W.2d 73 (1992)
The STATE of Texas, Petitioner,
v.
Jerry WINDHAM, et al., Respondents.
No. D-0619.
Supreme Court of Texas.
June 10, 1992.
Rehearing Overruled October 21, 1992.
*74 Mark Heidenheimer, Dan Morales, Austin, for petitioner.
Vaughan E. Waters, A.W. Davis, Bryan, for respondents.
OPINION
CORNYN, Justice.
We decide in this condemnation action involving a partial taking whether the trial court erred by excluding evidence offered by the condemnor, controverting that offered by the landowner and admitted by the court, regarding the appropriate economic unit to be considered by the jury for determining the market value of the part taken. We hold that the trial court reversibly erred by excluding such evidence. Because the court of appeals affirmed the trial court's erroneous exclusion of the condemnor's evidence, 803 S.W.2d 340, we reverse the judgment of the court of appeals and remand this case for a new trial.
This dispute arose when the petitioner, the State of Texas acting through its Department of Highways and Public Transportation, condemned approximately two acres out of a nineteen acre tract belonging to respondents, Jerry Windham and Frank Thurmond (collectively referred to as "Windham"). The part taken consists of a 110 foot deep strip of Windham's land lying immediately adjacent to State Highway 6 to be used for widening the existing highway. The county court appointed a panel of special commissioners to determine the amount of adequate compensation to be paid by the State to Windham. See Tex. Prop.Code § 21.014. The commissioners awarded Windham $60,250.00 in damages. See Tex.Prop.Code § 21.042. Windham objected to the commissioners' award and appealed to the county court.
Prior to trial, Windham filed a motion in limine in which he stipulated to the State's right to condemn the 2.12 acres sought by the State and expressly waived his right to damages to the 16.88-acre remainder. However, Windham purported to unilaterally designate a larger strip of land, 200 feet wide and consisting of 3.84 acres immediately adjacent to the existing highway, as the economic unit upon which he contended the market value of the part taken should be based.
Windham contended the 2.12 acres taken by the State was configured in such a manner that it could not be considered a self-sufficient economic unit for commercial development purposes which, in Windham's opinion, was the highest and best use of his property. Windham argued that a 200 foot wide strip could be used for commercial development and thus, an additional 1.64 acres should be added to that sought by the State to comprise the appropriate economic unit to be considered by the jury in assessing the market value of the land condemned. Windham's motion in limine sought to exclude evidence of the market value of the 19-acre tract as a whole, and of the value of the condemned tract as a percentage of the whole, because he contended such an "averaging" method of valuation would not constitutionally compensate him for his loss.
The trial court granted Windham's motion in limine and ordered that all testimony regarding the market value of the part taken be based on the 3.84-acre tract designated by Windham as the appropriate economic unit. The court did not allow the State to present evidence to support its contention that the market value of the condemned land should be based on an economic unit consisting of the entire 19acre tract, which it contended had a highest and best use of being held for investment purposes. Thus the only evidence of the appropriate economic unit to be used for *75 valuation purposes that the jury heard was Windham's.
After the trial court excluded the State's proffered evidence of the appropriate economic unit, the State perfected a bill of exception consisting of the testimony of its expert, Clemo Ray. Ray's testimony disputed Windham's economic unit analysis; he testified instead that the entire 19 acres formed the appropriate economic unit based on the highest and best use of the property and he proffered his opinion of the market value of the condemned property based on this analysis. In Ray's opinion, the highest and best use of the land was to hold it for investment purposes because high density commercial development was not at that time economically feasible. Ray testified that because each acre of the 19 acres was of equal value, in his opinion, the land in close proximity to the highway was of equal value to that farther away from the highway. Moreover, Ray also disagreed with Windham's claim that the 3.84 acres adjacent to the highway comprised an independent economic unit because there was no current demand to subdivide the property into tracts of that size. Based on these premises, Ray appraised the value of the entire 19-acre tract at $0.77 per square foot. Because each acre had an equal value in his opinion, he valued the 2.12-acre part taken by the State at $0.77 per square foot for a total value of $71,000.00.
Ray was, however, allowed to present some expert testimony before the jury. His testimony was confined by the court's ruling on the motion in limine to a valuation based on the economic unit designated by Windham. Using comparable sales in the area as his method of determining market value, Ray testified that the value of the 3.84-acre tract was $1.00 per square foot. Experts testifying on behalf of Windham appraised the designated 3.84acre tract at a figure between $1.50 and $2.00 per square foot. Ultimately, the jury found the market value of the 2.12-acre tract taken by the state to be $1.50 per square foot, or $138,520.50.
The trial court rendered judgment in accordance with the jury's verdict.[1] The court of appeals affirmed the trial court's judgment based on its interpretation of Buffalo Bayou, Brazos & Colorado R.R. Co. v. Ferris, 26 Tex. 476 (1863), which construed the precursor of Article I, section 17 of our constitution. That section provides: "[n]o person's property shall be taken, damaged or destroyed for or applied to public use without adequate compensation being made, unless by the consent of such person...." TEX. CONST, art. I, § 17. In Buffalo Bayou, this court construed the phrase "adequate compensation" in a virtually identical provision in the 1861 Texas Constitution to require the payment of money for the property taken without reference to any profit or advantage to any remaining property by construction of the improvements for which the property was taken. 26 Tex. at 488-89 (construing Tex. Const, art. I, § 14 (1861, amended 1876)). We later reaffirmed this construction as applied to article I, section 17 of our current constitution in Dulaney v. Nolan County, 85 Tex. 225, 20 S.W. 70, 71 (1892) and State v. Carpenter, 126 Tex. 604, 609, 89 S.W.2d 194, 197 (1936).
In Carpenter[2] we held that when only a part of the land is taken, the "just compensation" *76 to which the owner is entitled consists of two elements: 1) the market value of the part taken, and 2) the damage to the remainder due to the taking and construction of the improvement for which it was taken. 89 S.W.2d at 197. Carpenter established the rule that the market value of the part taken is determined by considering it as "severed land" at the time it was condemned. Id. at 201. The court's primary concern was one of duplication of damages if the value of the part condemned is considered in relation to the whole property when damages to the remainder are also claimed. This is because when the market value of the part taken is considered as a part of the whole it "necessarily involve[s] the idea of damage to the remainder separate element of damages when sought. Id. at 196. (citing Jeffery v. Chicago & M. Elec. R.R. Co., 119 N.W. 879, 884 (Wis.1909)).
Thirty years later, in State v. Meyer, we recognized the right of the landowner in a condemnation case to waive his claim for damage to the remainder and proceed to trial solely on the issue of the market value of the land taken. 403 S.W.2d 366, 374 (Tex.1966). Therefore, when the landowner waives his claim for damage to the remainder, the trial court properly excludes evidence of any enhancement of value to the remainder because it is legally irrelevant to the issue of the market value of the part taken. Id. Further, Meyer expressly disapproved calculation of fair market value based on the "average" unit value of the entire tract when it is undisputed that the land taken has a higher unit value than the remainder at the time of its condemnation. Id. at 375.
When the severed portion of the land can be considered as an independent economic unit, the market value can be determined without reference to the remainder. See City of Tyler v. Brogan, 437 S.W.2d 609, 613 (Tex.Civ.App.Tyler 1969, no writ). A different situation arises, however, when the portion of the land taken by the State, considered without reference to the remainder, cannot be considered an independent economic unit reflecting the highest and best use of the property and would thus deprive the land owner of adequate compensation for the part taken if considered solely as severed land. Tex. Const, art. I, § 17; City of Richardson v. Smith, 494 S.W.2d 933, 936 (Tex.Civ. AppDallas 1973, writ ref'd n.r.e.). In such instances the market value must necessarily be determined by considering some portion or all of the remainder in order to construct an economic unit.
The State contends that it has a right to offer competing evidence of the appropriate economic unit for the jury to consider based on its opposing view of the highest and best use of the land. Windham did not seek damages to part or all of his remainder as such. To the contrary, he contends that the 2.12 acres the State took must be valued based on the per square foot value of a 3.84-acre economic unit he designated.[3] This, Windham asserts, is because the highest and best use of the property cannot be accomplished on the 2.12 acres of condemned property as configured, and that the law reserves only to the condemnee the right to designate the economic unit under these circumstances. The State counters that when the highest and best use of the land is disputed, it is for the jury to decide which use is appropriate, and thus whether the condemnee's evidence of valuation is correct, when it determines the market value of the condemned tract. It disagrees that the landowner has the legal right to designate unilaterally an economic unit for valuation purposes that the condemnor cannot controvert. We agree with the State.
*77 Market value is "the price which the property would bring when it is offered for sale by one who desires, but is not obligated to sell, and is bought by one who is under no necessity of buying it." Carpenter, 89 S.W.2d at 202. In deciding market value the jury is permitted to consider all of the uses to which the property is reasonably adaptable and for which it is, or in all reasonable probability will become, available within the foreseeable future. City of Austin v. Cannizzo, 153 Tex. 324, 334, 267 S.W.2d 808, 815 (1954). Here the trial court properly instructed the jury to consider all uses to which the property is reasonably adaptable, including its highest and best use. If Windham is permitted to present evidence of the market value of the part taken utilizing a larger tract than that sought by the condemning authority based on its theory of the highest and best use of the property, then the State should be allowed to present evidence based on its competing theory of the highest and best use of the property. It is then for the jury to decide which evidence to accept and which to reject in deciding the ultimate issue of market value.
Windham contends that the condemnee has the absolute right to designate the appropriate economic unit to determine the market value of the severed land, relying on Southwestern Bell Telephone Co. v. Ramsey, 542 S.W.2d 466 (Tex.Civ.App Tyler 1976, writ ref'd n.r.e.). But this reliance is misplaced. In Ramsey, the condemnee owned a 320-acre tract used entirely for grazing purposes. Id. at 470. The condemnor took an easement to run utility lines measuring 10 x 3,515 feet, or 0.807 acre. The landowners first sought, and the jury awarded, damages for the 10 foot strip taken by the telephone company. Additionally, the landowners sought, and the jury awarded, severance damages for a part of the remaining land consisting of a 240 foot strip of land adjacent to and running the entire length of the easement, comprising 19.36 acres. By motion in limine, the landowners disclaimed any right to damages to the rest of the remaining land. The trial court entered judgment for the landowner based on this theory and the jury's findings. Neither party disputed that the highest and best use of the land taken as well as the 240 foot strip of land immediately adjacent to that taken was for commercial or industrial purposes. Id.
On appeal, the telephone company claimed that the exclusive method of valuation when the part taken was not a "selfsufficient economic unit," as both parties agreed the condemned 10 foot wide strip was not, was to consider the average price per acre of the entire remainder. Id. at 470. The court of appeals disagreed. It held that the trial court did not err when it allowed the condemnee to designate a 240 foot strip of land adjacent to the 10' strip condemned for which it sought remainder damages. The court held:
Ordinarily a landowner has a right to claim severance damages to the entire remainder provided it is contiguous and there is unity of use. (cases cited). This is not to say, however, that a landowner is compelled to claim severance damages to his entire remaining land. In instances where a substantial portion of the remainder is suitable and adaptable to commercial or industrial use, or some other specific use, and the other part of the remainder is not suitable or adaptable to the same purpose, the landowner is permitted to claim severance damages to only that portion thereof suitable and adaptable to specific uses, (case cited).
Id. at 472. The Ramsey court noted that when the landowner claimed damages to the remainder, the landowner has the burden of proving those damages. And, since the landowner had that burden to prove damages, the Ramsey court found nothing wrong, under the facts of that case, with allowing the condemnee to waive his claim for damages to part but not all of the remainder. Id. at 472. Ramsey, however, is readily distinguished from this case by the fact that Windham claims the right to limit the jury's consideration to what he believes to be the appropriate economic unit. Windham did not, like the landowners in Ramsey, seek damages for the 2.12 acres the State condemned and additional, remainder damages for part but not all of *78 the remaining 19 acres. Windham was able, under the trial court's erroneous ruling on the motion in limine, to limit the expert testimony to the 3.84-acre tract it designated as the appropriate economic unit and thus apply the value found per square foot to the 2.12 acres it concedes could not constitute an independent economic unit. Because of this distinction, Ramsey plainly does not control our disposition of this case.
Because the trier of fact should be able to consider all competing evidence of valuation supported by otherwise admissible expert testimony, the trial court erroneously excluded the State's evidence of the economic unit to be considered by the jury in deciding the market value of the part taken[4]. Because such error obviously substantially affected the jury's finding on the only contested issue in the case, we hold that such exclusion was harmful error. See Tex.R.App.P. 81(b)(1). Therefore, we reverse the judgment of the court of appeals which affirmed the judgment of the trial court and remand this cause for a new trial.
DOGGETT, J., concurs.
MAUZY, J., dissents.
DOGGETT, Justice, concurring.
I concur in today's judgment because of my confidence in the jury system. In this case, the jury should be able to consider evidence of a common value between the portion of property taken and that not taken. In State v. Meyer, 403 S.W.2d 366 (Tex.1966), a valuation based on the worth of the entire property was rejected because "it is beyond dispute that the land being condemned had, at the time of the taking, a significantly higher per acre market value than the land not being condemned...." Id. at 375 (emphasis in the original). Here, the State seeks to offer evidence that all of the property, the taken as well as the untaken, shared an equal value. See 803 S.W.2d at 340. Whether that evidence supports a finding of a shared value is properly determined by a jury. See City of Richardson v. Smith, 494 S.W.2d 933, 938-39 (Tex.Civ.App.Dallas 1973, writ ref'd n.r.e.).
MAUZY, Justice, dissenting.
The court today legitimizes a mechanism that dramatically enhances the State's power to deprive Texas landowners of their property without full compensation. At issue is whether a landowner has the right to designate an economic unit reflecting the highest and best use of property condemned by the State. Because today's opinion compromises that right, I dissent.
The Texas Constitution prohibits the State from taking property for public use without "adequate compensation." Tex. Const, art. I, § 17. This provision, we have held, entitles a landowner to be compensated for the full value of the land taken, without reference to any effect the taking might have on the remaining property. State v. Carpenter, 126 Tex. 604, 609, 89 S.W.2d 194,197 (1936); see Buffalo Bayou, Brazos & Colorado R.R. Co. v. Ferris, 26 Tex. 476 (1863) (construing the predecessor of art. I, § 17).
Since Buffalo Bayou, courts have enforced the constitutional guarantee of adequate compensation by allowing the landowner to choose the method by which the value of the land taken is determined. Under one such method, recognized and approved in State v. Meyer, 403 S.W.2d 366, 374 (Tex.1966), the landowner may waive all severance damages and seek an appraisal *79 of the part taken as a severed unit.[1] If the part taken is not a self-sufficient economic unit, the landowner may designate a larger area subsuming the part taken for the purpose of determining a fair per-acre value. Southwestern Bell Tel. Co. v. Ramsey, 542 S.W.2d 466, 472 (Tex.Civ. App.Tyler 1976, writ ref'd n.r.e.).
The law as developed in Meyer and Ramsey recognizes the landowner's right to focus the jury's attention exclusively on the part taken, or on a designated area subsuming that part. This approach is consistent with the axiom of State v. Carpenter: the landowner's compensation for the part taken is to be determined without reference to the remainder.
The law was thus clear on this point until 1983, when the Texas Legislature, apparently dissatisfied with Carpenter, decided to change this basic rule. With its enactment of section 21.042(e) of the Texas Property Code, the legislature sought to mandate consideration of "any special and direct benefits that arise from the highway improvement ... that are peculiar to the property owner and that relate to the property owner's ownership, use, or enjoyment of the particular parcel of remaining real property." Texas courts have rightly rejected this statute as a legislative attempt to circumvent the constitution by denying the condemnee adequate compensation. State v. Enterprise Co., 728 S.W.2d 812 (Tex.App.Houston [14th Dist] 1986, writ ref'd n.r.e.); see also Roberts v. State, 754 S.W.2d 477, 481 (Tex.App.San Antonio 1988, writ denied).
With today's opinion, the court effectively resurrects the statute held unconstitutional in Enterprise and Roberts. Even when a landowner waives damages to the remainder, a court will now be obligated to allow evidence concerning the remaining land whenever the State offers a land valuation theory based on the whole tract. This approach undercuts the protections articulated in Meyer and Ramsey, and effectively deprives the landowner of the right to choose a method of valuation.
The method chosen by the landowner in this case is essentially the same as the method chosen by the landowner in Ramsey.[2] In both cases, the condemned land abutted a highway, and was thus substantially more valuable than the rest of the tract. In both cases, the land condemned was too small to be a self-sufficient economic unit, so the landowner designated a larger area subsuming the part taken for the purpose of determining a fair per-acre value. And in both cases, the trial court properly excluded any evidence concerning the remaining land.
This time, though, this court steps in to change the rules. No longer will a landowner have the right to choose an appropriate economic unit for the highest and best use of his or her own property. Nor will the landowner be able to prevent the admission of evidence concerning the entire remainder. All the State need do is assert that the highest and best use of the property would result in a constant value per acre throughout the tract, and the trial court will be obligated to admit evidence that clearly would have been inadmissible under Meyer and Ramsey.
*80 I would adhere to the case law that has long guaranteed Texas landowners the right to adequate compensation for the taking of their property. I would affirm the judgment of the court of appeals.
NOTES
[1] The State deposited the sum of $60,250.00, the amount of the commissioners' award, into the registry of the court for the use and benefit of Windham. Windham withdrew this amount by order of the court. The judgment deducted the amount already received by Windham from the amount found by the jury to be the market value of the condemned property for a net award of $78,270.50 plus pre-judgment and post judgment interest and all costs of court.
[2] We recognize that Carpenter was disapproved in part in State v. Meyer, 403 S.W.2d 366, 375 (Tex.1966). However Carpenter was disapproved only to the extent "there is language therein inconsistent with the rule of valuation announced in this opinion", 403 S.W.2d at 375, referring only to the impermissibility of averaging the value of the land taken with that of the remainder; we do not cite Carpenter for the disapproved purpose. This court has otherwise repeatedly affirmed the standard of "just compensation" pronounced in Carpenter, and upon which we rely, both before and after Meyer. See, eg., Uselton v. State, 499 S.W.2d 92, 97-98 (Tex.1973); City of Pearland v. Alexander, 483 S.W.2d 244, 247 (Tex. 1972); State v. Walker, 441 S.W.2d 168, 175 (Tex.1969); City of Austin v. Cannizzo, 153 Tex. 324, 329, 267 S.W.2d 808, 812 (1954).
[3] Question No. 1, the only jury question submitted, inquired as follows:
From a preponderance of the evidence, what do you find was the market value of the 2.12 acre (92,347 square feet) strip of land condemned for highway purposes on February 28, 1986, considered as severed land?
Answer in dollars and cents. ANSWER: 138,520.50 ($1.50 sq. ft.)
[4] The State also relies on section 21.042(e) of the Texas Property Code which requires the special commissioners appointed to assess damages in a condemnation case to do so "regardless of whether the property owner makes a claim for damages to the remaining property." Tex.Prop.Code § 21.042(e).
Windham contends that this section of the Property Code is unconstitutional in reliance on State v. Enterprise Co., 728 S.W.2d 812 (Tex. App.Houston [14th Dist.] 1986, writ ref'd n.r.e.). Because of our disposition of this case we do not reach this issue. We will not pass on the constitutionality of a statute when the case may be decided on independent, alternative grounds. Baptist Hosp. of Southeast Texas, Inc. v. Baber, 714 S.W.2d 310, 310 (Tex.1986); San Antonio General Drivers, Helpers Local No. 657 v. Thornton, 156 Tex. 641, 647, 299 S.W.2d 911, 915 (1957) (orig. proceeding).
[1] In Meyer, the State had sought to introduce evidence that the landowners retained access rights on thd condemned property. We upheld the trial court's granting of a motion in limine excluding the evidence, noting that admission of the testimony would have improperly permitted the jury to consider an element of enhancement to the remainder. Id. at 374.
[2] One court has held that, under Ramsey, a landowner has "an absolute right to the exclusion of evidence of the existence and potential uses of the non-designated remainder," provided that "the highest and best use of the designated remainder is one to which no part of the nondesignated remainder is suitable or adaptable." State v. Oak Hill Joint Venture, 815 S.W.2d 827, 831 (Tex.App.Austin 1991, no writ). Here, Windham showed that the highest and best use of the designated remainder was as commercial frontage propertya use for which the rest of the property was clearly not suitable. Thus, the trial court properly excluded the State's evidence regarding the non-designated remainder. See also City of Richardson v. Smith, 494 S.W.2d 933, 938-39 (Tex.Civ.App.Dallas 1973, writ ref'd n.r.e.) (if part taken differs materially from remainder, all references to remainder must be excluded). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1835565/ | 727 So. 2d 655 (1999)
Bobby R. CASSEY and Gwen Cassey, Plaintiffs-Appellants,
v.
Michael STEWART, et al., Defendants-Appellees.
No. 31,437-CA.
Court of Appeal of Louisiana, Second Circuit.
January 20, 1999.
Rehearing Denied February 18, 1999.
*656 Johnson & Placke By Don H. Johnson, West Monroe, for Appellants.
Robert I. Baudouin, New Orleans, for Appellees.
Before NORRIS, C.J., GASKINS and PEATROSS, JJ.
GASKINS, Judge.
The plaintiffs, Bobby R. Cassey and his wife, Gwen Cassey, object to the trial court's granting of summary judgment in favor of the defendants, Michael Stewart and Commercial Union Insurance Company. In ruling for summary judgment, the trial court found that the individual who shot Mr. Cassey was not Mr. Stewart's employee and therefore, not covered by his insurance. For the following reasons, we affirm the trial court judgment.
FACTS
Michael Stewart and/or Stewart Wright, Inc. owned a building in Jonesboro, Louisiana. One portion of the building housed a liquor store operated by Mr. Stewart called Leon Drive Grocery. The other portion of the building housed a club called Fred's Spot. The club did not sell liquor. However, customers frequently purchased liquor at the grocery and then walked around to Fred's Spot to drink.
Mr. Stewart had an arrangement with Terry Cottonham whereby Mr. Cottonham operated Fred's Spot and had the concession on hamburgers, hot dogs, french fries and soft drinks. Mr. Cottonham kept all the money from the sale of food. Mr. Stewart did not pay Mr. Cottonham anything and Mr. Cottonham did not share the food proceeds with Mr. Stewart. Mr. Cottonham also worked at a furniture company during the day and hired Ricky Nichols to operate Fred's Spot *657 during his absence. Mr. Nichols kept a gun in the club.
On April 25, 1992, Mr. Cassey went to the club to play dominoes. According to Mr. Nichols, Mr. Cassey was intoxicated and picked up a bottle of alcohol that belonged to another club patron. When Mr. Nichols informed Mr. Cassey that he had picked up a drink that did not belong to him, words were exchanged. Mr. Nichols claimed that when Mr. Cassey began reaching for his pocket, Nichols assumed Cassey was armed. Mr. Nichols then drew his own weapon and shot the plaintiff three times. It was later determined that Mr. Cassey did not have a gun.
On March 22, 1993, Bobby Cassey and his wife, Gwen, filed suit against Michael Stewart, d/b/a Leon Drive Grocery, Commercial Union Insurance Company and Ricky Nichols, claiming that Mr. Cottonham and Mr. Nichols were employees of Mr. Stewart and that Ricky Nichols shot Mr. Cassey during the course and scope of his employment. Mr. Cassey claimed that he was permanently disabled. Mrs. Cassey asserted a loss of consortium claim.
All three defendants were originally represented by Thomas Zentner. Mr. Zentner filed an answer on behalf of the defendants "admitting the status as alleged" but denying liability. However, on December 9, 1994, Mr. Zentner withdrew as counsel for Mr. Stewart and Commercial Union and continued to represent Mr. Nichols. Another lawyer enrolled to represent Mr. Stewart and Commercial Union. Shortly after suit was filed, Mr. Stewart died and his wife, Vicki Stewart, was substituted as party defendant.
On March 29, 1995, Commercial Union and Stewart filed the present motion for summary judgment, claiming that Fred's Spot was not owned personally by Michael Stewart, but by Stewart Wright, Inc.[1] and that Ricky Nichols was not an employee of Mr. Stewart. Therefore, Mr. Stewart was not liable for Mr. Cassey's injury and his insurance with Commercial Union did not cover this incident.[2]
On October 26, 1995, Commercial Union and Stewart filed a supplemental and amending petition adopting the coverage defenses asserted in the motion for summary judgment and averring that Ricky Nichols was not an employee of Michael Stewart, Stewart Wright, Inc. or Leon Drive Grocery. They also claimed that Nichols is not covered by the policy of insurance due to the intentional tort exclusion.
The plaintiffs objected to the motion for summary judgment, claiming that the defendants waived any coverage defenses they might have by representing Mr. Nichols for nineteen months without denying coverage.
Hearing on the motion for summary judgment was held on February 5, 1998. The court filed reasons for judgment on February 6, 1998, granting the motion for summary judgment in favor of Mr. Stewart and Commercial Union. The court found that there was no employee relationship between Mr. Stewart and either Mr. Cottonham or Ricky Nichols. The court found that the relationship between Mr. Stewart and Mr. Cottonham was either landlord/tenant or that of an independent contractor. A judgment granting summary judgment was filed February 12, 1998. The plaintiffs appealed the trial court judgment.
On appeal, the plaintiffs contend that the trial court erred in allowing Commercial Union to urge a coverage defense by way of a motion for summary judgment after the company had already admitted the status of the insured in its answer, admitted coverage in responses to interrogatories and had provided a defense to Mr. Nichols without obtaining a nonwaiver agreement.
The plaintiffs also dispute the trial court's finding that Mr. Cottonham and Mr. Nichols were not employed by Mr. Stewart. They further contend that Ricky Nichols was acting *658 within the course and scope of his employment when this incident occurred.
WAIVER OF NONCOVERAGE DEFENSE
The plaintiffs contend that the trial court erred in allowing Commercial Union to urge the defense of noncoverage by way of a motion for summary judgment where the company had represented Ricky Nichols for nineteen months without obtaining a nonwaiver agreement.[3] This argument is without merit.
Waiver is generally understood to be the intentional relinquishment of a known right, power or privilege. Steptore v. Masco Construction Company, Inc. 93-2064 (La.8/18/94), 643 So. 2d 1213. Waiver occurs when there is an existing intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished. Steptore v. Masco Construction Company, Inc., supra. A waiver may apply to any provision of an insurance contract, even though this may have the effect of bringing within coverage risks originally excluded or not covered. Steptore v. Masco Construction Company, Inc. supra.
It is well established that an insurer is charged with the knowledge of the contents of its own policy. In addition, notice of facts which would cause a reasonable person to inquire further imposes a duty of investigation upon the insurer, and failure to investigate constitutes a waiver of all powers or privileges which a reasonable search would have uncovered. Steptore v. Masco Construction Company, Inc., supra.
Waiver principles are applied stringently to uphold the prohibition against conflicts of interest between the insurer and the insured which could potentially affect legal representation in order to reinforce the role of the lawyer as the loyal advocate of the client's interest. Steptore v. Masco Construction Company, Inc., supra.
The duty of an insurer to defend an insured is determined by the allegations of the plaintiffs petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. When a conflict of interest arises, and the insurer has knowledge of facts indicating noncoverage, it must obtain a nonwaiver agreement to reserve its right to deny coverage. Vargas v. Daniell Battery Manufacturing Company, Inc., supra. Accordingly, when an insurer, with knowledge of the facts indicating noncoverage under the insurance policy, assumes or continues the insured's defense without obtaining a nonwaiver agreement to reserve its coverage defense, the insurer waives such policy defense. Steptore v. Masco Construction Company, Inc., supra; Leflore v. Coburn, 95-0690 (La.App. 4th Cir. 12/28/95), 665 So. 2d 1323, writs denied 96-0411, 96-0453 (La.3/29/96), 670 So. 2d 1234. Furthermore, the insurer's notice of its intent to avail itself of the defense of noncoverage must be timely. Foret v. Terrebonne Towing Company, Inc., 632 So. 2d 344 (La.App. 1st Cir.1993), writ denied 94-0734 (La.5/13/94), 637 So. 2d 1067.
In this case, the record demonstrates that Commercial Union Insurance Company timely obtained a nonwaiver agreement from its insured, Michael Stewart, and also timely informed Ricky Nichols of its reservation of rights in this matter. The record contains a nonwaiver agreement executed by Michael Stewart on August 14, 1992. Also, when the possibility of noncoverage became apparent, Commercial Union obtained counsel different from Mr. Nichols. On November 3, 1994, the insurance company sent a reservation of rights letter to Mr. Nichols through his attorney of record, stating in essence that the company intended to assert the defense of noncoverage. The letter informed Mr. Nichols that, "If it is found that you were not an employee of Leon Drive Grocery at the time of the incident and/or you were not in the course and scope of your duties when the incident occurred, then Commercial *659 Union will not provide either a defense or indemnity to you." Mr. Nichols has not objected to Commercial Union's actions.
The present case is distinguishable from Hiser v. Rajki, 97-2208 (La.App. 1st Cir. 9/30/97), 700 So. 2d 1302, where there was apparently no nonwaiver agreement and the defense of noncoverage was asserted twenty-two days before trial. In the present case, there was a nonwaiver agreement with the insured and a reservation of rights as to Ricky Nichols. Further, the defense of noncoverage was asserted timely. Therefore, Commercial Union has not waived its right to assert the defense of noncoverage as the plaintiffs argue.
EMPLOYEE STATUS
The plaintiffs assert that the trial court erred in granting summary judgment in this case based upon an affidavit and depositions submitted by Commercial Union to show that Ricky Nichols was not an employee of Michael Stewart and therefore, was not covered under the policy of insurance. This argument is without merit.
In evaluating this issue, the arguments and documentation provided by the defendants must be evaluated under the principles governing motions for summary judgment. The summary judgment procedure is designed to secure the just, speedy and inexpensive determination of every action allowed by law. Traweek v. Jackson, 30,248 (La.App.2d Cir.2/25/98), 709 So. 2d 867. Appellate courts review summary judgments de novo under the same criteria that govern the district court's consideration of whether summary judgment is appropriate. Schroeder v. Board of Supervisors of Louisiana State University, 591 So. 2d 342 (La.1991); Smith v. Our Lady of the Lake Hospital, Inc., 93-2512 (La.7/5/94), 639 So. 2d 730. Thus, an appellate court questions whether a genuine issue of material fact exists and whether the mover is entitled to judgment as a matter of law. Orea v. Brannan, 30,628 (La.App.2d Cir.6/24/98), 715 So. 2d 108.
Summary judgments are governed by La. C.C.P. art. 966, which was amended in both the 1996 and 1997 legislative sessions. See Acts 1996, 1st Ex.Sess., No. 9 and Acts 1997, No. 483. The effect of these amendments is to establish that summary judgment is now favored. La. C.C.P. art. 966(A)(2); Short v. Giffin, 96-0361 (La.App. 4th Cir. 8/21/96), 682 So. 2d 249, writ denied 96-3063 (La.3/7/97), 689 So. 2d 1372. A motion for summary judgment should be granted if the pleadings, depositions, interrogatories, admissions on file and affidavits show that there is no genuine issue of material fact and the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966; Traweek v. Jackson, supra.
La. C.C.P. art. 966 now states that if the moving party points out that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense, and the nonmoving party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact and summary judgment should be granted. Traweek v. Jackson, supra.
Further, La. C.C. art. 967 provides that when a motion for summary judgment is made and supported as above, an adverse party may not rest on his pleadings, but his responses, by affidavits or otherwise provided above, must set forth specific facts showing that there is no genuine issue for trial. If he does not so respond, summary judgment is appropriate and shall be rendered against him. Traweek v. Jackson, supra; Goodrich v. Caterpillar, Inc., 30,762 (La. App.2d Cir.8/19/98), 717 So. 2d 1235.
Regarding the determination of whether an individual is an employee, in Savoie v. Fireman's Fund Insurance Company, 347 So. 2d 188 (La.1977), the court stated that the word "employee" is one used in common parlance and readily understood by men of ordinary intelligence. In discussing the various definitions of "employee" the court noted that it is one who works for an employer, a person working for salary or wages.
In determining whether an employment relationship exists in other contexts, the jurisprudence of this state has uniformly held that the most important element to be considered is the right of control and supervision *660 over an individual. Savoie v. Fireman's Fund Insurance Company, supra; Fuller v. United States Aircraft Insurance Group, 530 So. 2d 1282 (La.App. 2d Cir.1988), writ denied 534 So. 2d 444 (La.1988), cert. denied 490 U.S. 1046, 109 S. Ct. 1954, 104 L. Ed. 2d 424 (1989). Factors to be considered in assessing the right of control are the selection and engagement of the worker, the payment of wages and the power of control and dismissal. Savoie v. Fireman's Fund Insurance Company, supra; Pitcher v. Hydro-Kem Services, Inc., 551 So. 2d 736 (La. App. 1st Cir.1989), writ denied 553 So. 2d 466 (La.1989); Felan v. F & F Trucking Inc., 97-983 (La.App. 3d Cir.2/4/98), 708 So. 2d 430, writ denied 98-0595 (La.4/24/98), 717 So. 2d 1172.
Although the plaintiffs argue strenuously that Mr. Cottonham and Mr. Nichols were employees of Michael Stewart, the record does not support that conclusion. Mrs. Vicki Stewart executed an affidavit which was attached to the motion for summary judgment, stating in essence, that she is familiar with the business records of Leon Drive Grocery and Stewart Wright, Inc., and that neither Mr. Cottonham nor Mr. Nichols were on the payroll at the time the shooting occurred. The plaintiffs attack this affidavit, arguing that these men were not on the payroll because Mr. Stewart had a cash relationship with Mr. Cottonham to run Fred's Spot. However, the depositions of Mr. Cottonham and Mr. Nichols fail to offer any support for the argument that they were employed by Mr. Stewart, Leon Drive Grocery or Stewart Wright, Inc.
According to Mr. Cottonham, he had previously worked as a cashier in the Leon Drive Grocery, but asked to take over Fred's Spot when it became available. Mr. Stewart did not pay anything to Mr. Cottonham and Mr. Cottonham did not pay rent for the space. Mr. Cottonham's only remuneration from the arrangement was the proceeds from the sale of food and soft drinks. Mr. Cottonham stated that he opened, closed and cleaned the club and served food while it was open. However, the record fails to show that Mr. Stewart exercised any control over Mr. Cottonham. Mr. Stewart did not specify the hours of operation, the hours that Mr. Cottonham worked, what was served or how much was charged for the food. Mr. Cottonham's deposition shows that his status as an employee ended when he stopped working at the Leon Drive Grocery. In his deposition, he stated, "I was checking out when I was employed over in that side. When I left there, I was no longer employed." Mr. Nichols' deposition also demonstrated that he did not think that Mr. Cottonham was an employee of Mr. Stewart, but thought that Mr. Cottonham leased the club from Mr. Stewart. Therefore, in support of their motion for summary judgment, the defendants have demonstrated that Mr. Cottonham was not Mr. Stewart's employee. There was no payment of wages nor did Mr. Stewart exercise control or supervision over Mr. Cottonham's activities. Rather, as found by the trial court, the relationship was more closely akin to that of a landlord/tenant or an owner/independent contractor. Mr. Stewart exercised no control over the manner in which Mr. Cottonham ran the club or who he hired to work there.
Similarly, Mr. Nichols' deposition demonstrates even more clearly that he was not an employee of Mr. Stewart, Leon Drive Grocery or Stewart Wright, Inc., nor did he presume himself to be so employed. Mr. Cottonham hired Ricky Nichols to look after the club while Mr. Cottonham worked at a furniture store during the day. Mr. Cottonham paid Mr. Nichols out of the proceeds of the food and soft drink sales. Both Mr. Cottonham and Mr. Nichols stated in their depositions that Mr. Stewart was not aware that Ricky Nichols was working at Fred's Spot. Therefore, Mr. Stewart did not hire Mr. Nichols, did not pay him, did not control his duties and had no power to dismiss him from Mr. Cottonham's employ.
We find that the defendants, Michael Stewart and Commercial Union Insurance Company, sufficiently supported their claim that neither Terry Cottonham nor Ricky Nichols were employees of Michael Stewart, Leon Drive Grocery or Stewart Wright, Inc. Therefore, Mr. Nichols was not covered under the Commercial Union insurance policy. The plaintiffs then failed to sufficiently dispute *661 that assertion and failed to show that a genuine issue existed for trial. Therefore, the trial court properly rendered summary judgment against the plaintiffs and in favor of the defendants on the issue of insurance coverage.
Because we find that the trial court correctly granted summary judgment in favor of the defendants on this issue, we do not reach the question of whether Nichols acted in the course and scope of his employment when he shot Mr. Cassey.
CONCLUSION
For the reasons stated above, we affirm the trial court ruling granting summary judgment in favor of the defendants, Michael Stewart and Commercial Union Insurance Company. Costs in this court are assessed to the plaintiffs, Bobby Cassey and Gwen Cassey.
AFFIRMED.
NORRIS, C.J., concurs with reasons.
NORRIS, C.J., concurring.
While agreeing with the analysis and outcome in this case, I write separately to clarify that the 1996 and 1997 revisions to Article 966 do not "establish that summary judgment is now favored." The article actually states that the procedure is favored. La. C.C.P. art. 966 A(2), as amended. I do not interpret this proviso as soliciting wide and indiscriminate rendition of summary judgments, but as overruling jurisprudence which held the procedure in disfavor and restoring it to an integral role in overall scheme of the Code. See, Mark Tatum and William Norris III, Summary Judgment and Partial Judgment in Louisiana: The State We're In, 59 La. L.Rev. ___, at p. 12 (1998).
With this clarification, I respectfully concur.
APPLICATION FOR REHEARING
Before NORRIS, C.J., STEWART, CARAWAY, GASKINS and PEATROSS, JJ.
Rehearing denied.
NOTES
[1] The defendants note that, for the purposes of this motion for summary judgment, they have abandoned the argument that Stewart Wright, Inc. owned the building and not Michael Stewart personally.
[2] The insurance policy in this case includes in the definition of "insured" employees of the named insured when acting within the course and scope of their duties as such.
[3] A nonwaiver agreement, made between the insurer and the insured, is an agreement whereby the insurer undertakes the insured's defense with the stipulation that the insurer does not waive its right to deny coverage. See Vargas v. Daniell Battery Manufacturing Company, Inc., 93-2282 (La.App. 1st Cir. 12/29/94), 648 So. 2d 1103. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2613717/ | 6 Kan. App. 2d 66 (1981)
626 P.2d 1198
DEBRA M. TAPLIN, a minor, by and through her Mother and Father and next of friends, GAIL H. TAPLIN and JEANEEN TAPLIN, Plaintiffs-Appellees,
v.
SANDRA CLARK; VERNON CLARK and JOAN CLARK, husband and wife, Defendants-Appellants.
No. 51,603
Court of Appeals of Kansas.
Opinion filed April 24, 1981.
John W. Mize, of Clark, Mize & Linville, Chartered, of Salina, for appellants.
John F. Stites, of Stites, Hill & Wilson, of Manhattan, for appellees.
Before JUSTICE PRAGER, presiding, ABBOTT, J., and J. PATRICK BRAZIL, District Judge, assigned.
PRAGER, J.:
This is an action by a passenger against the driver of an automobile to recover damages for personal injuries sustained in a one-car accident. The plaintiff, Debra M. Taplin, was a passenger in the rear seat where a seat belt was installed and available for use. She failed to "buckle up." The district court sustained plaintiff's motion for summary judgment on the issue of liability. The district court had previously sustained plaintiff's motion in limine which had the effect of precluding defendant from introducing evidence of plaintiff's failure to use the available seat belt. Failure of plaintiff to use her seat belt was the only act of negligence asserted against plaintiff by defendant. The case was submitted to the jury on the issue of damages only and plaintiff was awarded substantial damages.
The basic issue raised on the appeal is essentially this: Under the Kansas comparative negligence law (K.S.A. 60-258a), may a jury consider as a negligence factor to reduce a negligent driver's liability for damages the failure of a passenger in an automobile to use an available seat belt? Prior to the adoption of comparative negligence, effective July 1, 1974, the Kansas Supreme Court held that a driver had no legal duty to use an available seat belt and that evidence of nonuse was not admissible on the issue of either *67 contributory negligence or mitigation of damages. In Hampton v. State Highway Commission, 209 Kan. 565, 579, 498 P.2d 236 (1972), the court, after noting a decision of the Alabama Supreme Court in Britton v. Doehring, 286 Ala. 498, 242 So. 2d 666 (1970), reasoned as follows in rejecting the seat belt defense:
"Our own legislature has required new cars sold after October, 1966, to be equipped with seat belts (K.S.A. 1971 Supp. 8-5,135) but it has not made their use mandatory, nor has it required them to be installed on older vehicles. Plaintiff was therefore not violating any statutory duty. Neither, we believe, was he falling below the standard required of the reasonable, prudent man. We have nothing before us on which we could confidently base a finding that the accepted community standard of care requires one to buckle up routinely; experience dictates to the contrary. Some people, in fact, deliberately refuse to wear seat belts for fear of aggravating an injury or being trapped in a collision. If such persons are to be declared unreasonable in their concern for their own safety as a matter of law, we believe with the Alabama court that at this stage the declaration should be legislative and not judicial.
"While as a general rule one must use reasonable diligence to mitigate one's damages once the risk is known (Atkinson v. Kirkpatrick, 90 Kan. 515, 135 P. 579), one is not required to anticipate negligence and guard against damages whish might ensue if such negligence should occur (Rig & Reel Co. v. Oil & Gas Co., 111 Kan. 37, 205 P. 1020). So likewise the traveler has the right to assume the highway is reasonably safe for travel as the jury here was instructed without objection.
"In short, there was no duty to use a seat belt, either under the common law standard of due care or to mitigate damages. That being so, the trial court did not err in excluding evidence of plaintiff's nonuse for it was not relevant to any issue to be determined." pp. 580-81.
The factual circumstances in this case are somewhat different from those in Hampton, because here the defendant made an offer of proof prior to the determination of the issue by the trial court. The evidence proffered by the defendant would have shown that, prior to the accident, plaintiff had completed a driver's education course where she had been instructed to wear a seat belt when occupying a vehicle. The only window broken in the accident was the front windshield. Kenneth Razak, an automobile accident reconstruction expert, examined all pertinent data relating to the accident. He researched the numerous and exhaustive studies which had been made demonstrating that seat belts are effective protective devices to guard occupants of automobiles against injuries in automobile collisions. He testified in a deposition that, in his expert opinion, had the plaintiff been wearing the seat belt which was installed in the automobile, she *68 would not have sustained facial lacerations in the accident and her injuries would thus have been reduced.
The defendant concedes that, under the former contributory negligence doctrine, evidence of plaintiff's nonuse of the seat belt was inadmissible under Hampton. Defendant argues, however, that Hampton is no longer valid law because of the adoption of the system of comparative negligence in Kansas in 1974. She contends, in substance, that the rule barring evidence of nonuse of seat belts in automobile negligence cases, as espoused in the Hampton case, is obsolete and should be abandoned. Defendant maintains that, since Kansas no longer adheres to the harsh contributory negligence doctrine which barred a plaintiff completely from recovery if she were in the slightest degree negligent, much of the underlying rationale of Hampton has disappeared. Defendant further contends that Hampton is distinguishable on its facts from the present case because of defendant's proffered evidence that plaintiff would not have sustained the injuries of which she complains, if she had been wearing her seat belt, and that, under comparative negligence, the question of whether a passenger in a motor vehicle who fails to wear his seat belt has exercised reasonable care for his or her own safety is a question of fact which should be left for the jury to determine. The defendant cites cases from other states which have adopted the system of comparative negligence and which have suggested the seat belt defense might be asserted, either to reduce the percentage of fault or to mitigate damages. Bentzler v. Braun, 34 Wis. 2d 362, 149 N.W.2d 626 (1967); Harlan v. Curbo, Guardian, 250 Ark. 610, 446 S.W.2d 459 (1971); Fischer v. Moore, 183 Colo. 392, 517 P.2d 458 (1973).
Counsel for the plaintiff takes a contrary position, maintaining, in substance, that Hampton declares the established law in Kansas and that any claim that Hampton is distinguishable from the present case is without merit. The plaintiff, in her brief, although recognizing the decisions referred to by the defense, points out that it is the established majority rule that the failure of a passenger in an automobile to use a seat belt is not available as a defense either in establishing a cause of the accident or in mitigation of damages. There is an annotation on the subject in 95 A.L.R. 3d 239, which discusses the reported cases where courts have considered whether the nonuse of an available seat belt is *69 evidence of comparative negligence. That annotation lists comparative negligence states which reject the seat belt defense as including Connecticut (Melesko v. Riley, 32 Conn. Supp. 89, 339 A.2d 479 [1975]), Mississippi (D.W. Boutwell Butane Company v. Smith, 244 So. 2d 11 [Miss. 1971]), New York (Bartlett v. State of N.Y., 40 App. Div.2d 267, 340 N.Y.S.2d 63 [1973]), and Washington (Amend v. Bell, 89 Wash.2d 124, 570 P.2d 138 [1977]). There is obviously a split of authority on the issue, with a slight majority of the comparative negligence jurisdictions rejecting the seat belt defense.
As noted above, the basic question which we must determine is whether the adoption of the system of comparative negligence in Kansas in 1974 requires a change in the rule followed in Hampton. We hold that it does not, and that the rule established by Hampton is sound and should be retained. In the first place, we have concluded that the comparative negligence statute (K.S.A. 60-258a) did not change the basic duties required of drivers and passengers to be considered in automobile tort litigation. In Hampton, the opinion points out that the Kansas statute pertaining to the installment of safety belts then in effect, K.S.A. 1971 Supp. 8-5,135), although requiring new cars sold after October, 1966, to be equipped with seat belts, did not make their use mandatory or require them to be installed on older vehicles. It was further declared in the opinion that there was no accepted community standard of care requiring one to buckle up routinely and that experience dictated to the contrary. The court concluded that the existence of such a duty should be left up to the legislature.
Since Hampton was decided in 1972, the legislature in 1974 adopted the revised uniform act to regulate traffic on the highways which greatly expanded the former statutory scheme. The uniform act is now found at K.S.A. 8-1401 et seq. The present statute pertaining to the installation of safety belts and shoulder harnesses is K.S.A. 8-1749, which requires every passenger car manufactured or assembled after January 1, 1968, to be equipped with a lap-type safety belt assembly for all passenger seating positions and with at least two shoulder harness-type safety belt assemblies for the front seating positions. Subsection (d) authorizes the Secretary of Transportation to except specified types of motor vehicles or seating positions from these requirements when *70 compliance "would be impractical." At the time these statutory changes were adopted in 1974, the decision in Hampton had been in the books for a period of two years. It appears that by failing to so provide, the legislature decided that it should not impose upon drivers or passengers in automobiles a duty to use an available safety belt.
It is also important to note that K.S.A. 8-1598 prohibits a person from operating or riding upon a motorcycle unless wearing protective headgear and an eye-protective device. This section is mentioned to illustrate that where the legislature in its wisdom desires to make it mandatory for drivers or occupants of motor vehicles to use certain protective devices and equipment, it has not hesitated to do so. Apparently, it did not decide to do so in the case of safety belts. Hampton declares, without equivocation, that there is no statutory or common-law duty requiring a passenger in an automobile to use a seat belt. We find no provision in the comparative negligence law (K.S.A. 60-258a) which creates such a duty. We thus are constrained to follow the reasoning of the Kansas Supreme Court in Hampton as set forth above. We also adhere to the holding of the court in Hampton that the doctrine of avoidable consequences or mitigation of damages does not place a duty on a passenger to use a seat belt in anticipation of his driver's negligence.
For the reasons set forth above, we hold, in accordance with Hampton v. State Highway Commission, 209 Kan. 565, that, under the Kansas system of comparative negligence, it is not proper for a jury to consider as a negligence factor to reduce liability and damages the failure of a passenger to use an available seat belt.
The judgment of the district court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2093405/ | 90 N.J. 126 (1982)
447 A.2d 173
ROSE K. CROWE, A/K/A ROSE K. DE GIOIA, PLAINTIFF-APPELLANT,
v.
SERGIO DE GIOIA, DEFENDANT-RESPONDENT.
The Supreme Court of New Jersey.
Argued January 12, 1981.
Decided July 8, 1982.
*128 Anthony B. Vignuolo argued the cause for appellant (Borrus, Goldin & Foley, attorneys).
Carl J. Palmisano argued the cause for respondent (Palmisano & Goodman, attorneys).
The opinion of the Court was delivered by POLLOCK, J.
*129 The basic issue on this appeal is whether temporary relief can be awarded in a suit to enforce an agreement between unmarried cohabitants. The Chancery Division awarded interim support and other relief to plaintiff, Rose K. Crowe. With one judge dissenting, the Appellate Division vacated the support order and remanded the case for trial in the Law Division. Crowe v. DeGioia, 179 N.J. Super. 36 (1981). We granted leave to appeal from that interlocutory order and reinstated temporary relief during the pendency of this appeal. 87 N.J. 412 (1981). We now reverse the Appellate Division, thereby continuing the temporary relief pending the outcome of the underlying action, which we remand to the Chancery Division.
I
In a verified complaint filed in the Chancery Division, plaintiff, Rose K. Crowe (who states she is also known as Rose K. De Gioia), claimed that defendant, Sergio De Gioia, breached his non-marital agreement to support her for life. Her complaint alleged the following facts pertaining to their twenty-year relationship. She met De Gioia in February 1960 when she was 38 and separated from her husband, whom she has since divorced. She was the mother of seven children ranging in age from five to seventeen years. He was 26 and single. Starting in 1960, she and her children lived with and were supported by him. From 1967 to 1980, when De Gioia left, they lived in his house in Perth Amboy. Most significantly, he declared that "he would take care of her and support her for the rest of her life, and that he would share with her his various assets."
In return for his support, she acted like his wife: cooking, cleaning, caring for him when he was ill, helping in his various business ventures, and accompanying him socially. Their relationship was akin to a marriage. Even at the end of their relationship, when De Gioia told her he was leaving to marry a woman 22 years his junior, he promised to give her a "good *130 settlement" so that she would not have to be concerned with her own support. That settlement, however, did not materialize. Crowe asked the court to enforce her alleged agreement with De Gioia for support, to compensate her for her services, and to award her a share of his assets, costs and counsel fees.
In support of her request for interim relief, Crowe certified the following further facts. She was unskilled, unemployable, and completely dependent on De Gioia for support. She owned no assets except her clothes, personal effects, an inoperable automobile, and jewelry De Gioia had given her. De Gioia, by contrast, had become a wealthy man over the years, acquiring substantial property and business interests, including the Perth Amboy home.
Crowe asked for $385 per week in support and payment of medical, dental and related costs. Furthermore, she requested the right to remain in the Perth Amboy home, protection from removal by De Gioia of any property from the house, and payment of all expenses pertaining to the maintenance of the house, such as the mortgage, insurance and utilities. She also wanted the use of an operable automobile at De Gioia's expense. Finally, she sought an order restraining De Gioia from transferring or otherwise disposing of any of his assets.
In his answer, De Gioia denied most of the allegations of the complaint, but admitted that he had met Crowe in 1960 and had allowed her and her children to live in the Perth Amboy house since 1967. Nonetheless, he denied ever having lived with Crowe or having supported her and her children. He described their relationship as one of friendship and stated that any services she provided to him were meretricious. Furthermore, he denied her allegation that he had promised to support her for the rest of her life or to share his assets with her.
The Chancery Division denied a motion by De Gioia for transfer of the action to the Law Division and granted Crowe's motion for temporary relief. Fearing the infliction of a grave injustice on Crowe if temporary relief were denied, the Chancery *131 Division awarded her "minimal support, enough to keep her alive...." While recognizing that De Gioia denied the underlying support agreement, that court found "some evidence" to infer "there was some type of arrangement between the parties." Accordingly, the Chancery judge awarded Crowe $125 per week in support, permitted her to remain in the house, restrained De Gioia from transferring any of his assets, but denied Crowe's request for an automobile.
The Appellate Division granted De Gioia's motion for leave to appeal. On appeal, the majority concluded that matrimonial precedents were of no value to Crowe in seeking pendente lite relief because she was not married to De Gioia. Moreover, the majority found that the trial court had no authority to order any interim relief under Kozlowski v. Kozlowski, 80 N.J. 378 (1979), where we recognized that a woman had a cause of action in contract against a man with whom she had cohabited for 15 years in exchange for his agreement to support her for the rest of her life ("palimony"). Because the only relief granted in Kozlowski was money damages, the majority of the Appellate Division here concluded that preliminary relief was not available. 179 N.J. Super. at 40. Thus, the Appellate Division vacated the order granting support and restraining De Gioia from transferring his assets. Id. at 48. Additionally, the majority held that the action is "of a traditionally legal character ... and the relief can and should be obtained in the Law Division." Id. at 41.
The dissenting judge agreed that matrimonial laws offered no foundation for pendente lite relief. Instead, he found a basis for temporary relief in "settled equitable principles relating to preliminary relief in emergent situations requiring the preservation of the status quo and the prevention of irreparable harm, after balancing conveniences and the interests of the parties, until the final determination of the litigation involved." Id. at 45. The dissent concluded that jurisdiction in the Chancery Division was proper because the claim was basically for "specific performance of a unique type of agreement to support and the *132 enforcement of newly judicially created rights impliedly recognized in Kozlowski as basically equitable in nature." Id. at 47.
II
We begin by affirming that plaintiff is not entitled to alimony. Kozlowski v. Kozlowski, supra, 80 N.J. at 383. The power of a court to award alimony is purely statutory, and alimony may be awarded only in a matrimonial action for divorce or nullity. O'Loughlin v. O'Loughlin, 12 N.J. 222, 229, cert. den., 346 U.S. 824 (1953). Under the relevant statute, alimony may be ordered on an interim basis only in a "matrimonial action," N.J.S.A. 2A:34-23 (Supp. 1981-1982), which does not embrace an action on a contract between unmarried cohabitants. See R. 4:75. The Legislature has proscribed common law marriages. N.J.S.A. 37:1-10. We continue to decline to view non-marital relationships as if they were lawful marriages. Kozlowski v. Kozlowski, supra, 80 N.J. at 387. Consequently, we conclude that plaintiff is not entitled to alimony, either permanent or temporary. Kozlowski v. Kozlowski, supra, 80 N.J. at 383.
The unavailability of statutory alimony pendente lite, however, does not foreclose all temporary relief. To the contrary, New Jersey has long recognized, in a wide variety of contexts, the power of the judiciary to "prevent some threatening, irreparable mischief, which should be averted until opportunity is afforded for a full and deliberate investigation of the case." Thompson, Attorney General v. Paterson, 9 N.J. Eq. 624, 625 (E. & A. 1854). We recognize that the determination to authorize preliminary relief summons the most sensitive exercise of judicial discretion. In exercising that discretion, courts have been guided traditionally by certain fundamental principles.
One principle is that a preliminary injunction should not issue except when necessary to prevent irreparable harm. Citizens Coach Co. v. Camden Horse R.R. Co., 29 N.J. Eq. 299, 303 (E. & A. 1878). Harm is generally considered irreparable in *133 equity if it cannot be redressed adequately by monetary damages. In certain circumstances, severe personal inconvenience can constitute irreparable injury justifying issuance of injunctive relief. Hodge v. Giese, 43 N.J. Eq. 342, 350 (Ch. 1887) (one tenant temporarily granted right to enter other tenant's premises to service heater). Pecuniary damages may be inadequate because of the nature of the injury or of the right affected. Outdoor Sports Corp. v. A.F. of L. Local 23132, AFL, 6 N.J. 217, 229-30 (1951); Scherman v. Stern, 93 N.J. Eq. 626, 631 (E. & A. 1922) (seller of business temporarily ordered to abide by agreement not to compete). In this case, Crowe was threatened with the loss of her home of 14 years and her only means of support. The interest of an unmarried cohabitant in enforcement of a support agreement and the trauma of eviction from one's home may well justify the intervention of equity. Neither an unwarranted eviction nor reduction to poverty can be compensated adequately by monetary damages awarded after a distant plenary hearing.
A second principle is that temporary relief should be withheld when the legal right underlying plaintiff's claim is unsettled. Citizens Coach Co. v. Camden Horse R.R. Co., supra, 29 N.J. Eq. at 304-05. Here, however, the underlying legal claim, the enforceability of a support agreement between unmarried cohabitants, was settled as a matter of law in Kozlowski v. Kozlowski, supra.
A third rule is that a preliminary injunction should not issue where all material facts are controverted. Citizens Coach Co. v. Camden Horse R.R. Co., supra, 29 N.J. Eq. at 305-06. Thus, to prevail on an application for temporary relief, a plaintiff must make a preliminary showing of a reasonable probability of ultimate success on the merits. Ideal Laundry Co. v. Gugliemone, 107 N.J. Eq. 108, 115-16 (E. & A. 1930). That requirement is tempered by the principle that mere doubt as to the validity of the claim is not an adequate basis for refusing to maintain the status quo. See Naylor v. Harkins, 11 N.J. 435 *134 (1953) (international union temporarily restrained from reporting members of expelled local to employers under union shop contracts); Haines v. Burlington County Bridge Comm'n, 1 N.J. Super. 163, 175 (App.Div. 1949) (temporarily restraining county's efforts to acquire bridges). Indeed, the point of temporary relief is to maintain the parties in substantially the same condition "when the final decree is entered as they were when the litigation began." Peters v. Public Service Corp. of N.J., 132 N.J. Eq. 500 (Ch. 1942), aff'd o.b., 133 N.J. Eq. 283 (E. & A. 1943) (bus company enjoined from proceeding with motion to dismiss suit when statute of limitations barred new action).
On this application, Crowe contends that DeGioia had supported her for some 20 years, and it is uncontroverted that Crowe and her children had been living rent-free in a house owned by De Gioia for some 14 years. Furthermore, Crowe certified to De Gioia's agreement to support her for life. Although De Gioia's answering affidavits cast doubt on that contention, the trial court found sufficient evidence to justify temporary relief. That court determined Crowe's interest in maintaining a minimal standard of living to be sufficient to justify the preservation of the status quo pending the determination of her right at a final hearing. Christiansen v. Local 680 of the Milk Drivers and Dairy Employees of N.J., et al., 127 N.J. Eq. 215 (E. & A. 1940) (company union granted temporary injunction barring enforcement of rival's closed shop contract with employer).
The final test in considering the granting of a preliminary injunction is the relative hardship to the parties in granting or denying relief. Isolantite Inc. v. United Elect. Radio & Mach. Workers, 130 N.J. Eq. 506, 515 (Ch. 1941), mod. on other grounds, 132 N.J. Eq. 613 (E. & A. 1942). DeGioia, apparently now a person of substantial means, would suffer relatively inconsequential expense if relief is granted. By contrast, withholding support from Crowe would be devastating. On balance, the equities favor the grant of temporary relief to maintain the status quo pending the outcome of a final hearing.
*135 Thus, applying traditional equitable principles, we conclude that the record supports the trial court's authorization of preliminary relief. Our dissenting colleague, Justice Schreiber, who would deny preliminary relief, differs not with our determination of the applicable principles, but in the application of those principles to the facts of this case. Although we approve the grant of preliminary relief, we take no position on the ultimate resolution of the factual dispute, which must await a plenary hearing.
Furthermore, the inability to fit plaintiff's claim for temporary relief into the conventional category of a matrimonial action is not a bar to relief. To achieve substantial justice in other cases, we have adjusted the rights and duties of parties in light of the realities of their relationship. See, e.g., McGlynn v. Newark Parking Authority, 86 N.J. 551, 559 (1981); State v. Shack, 58 N.J. 297, 307 (1971). Increasing numbers of unmarried couples live together. The number of households comprised of unmarried partners rose from approximately 12,000 in 1960 to more than 1.5 million in 1980. U.S. Bureau of Census, Commerce Dep't, 1960 Census of Population, "Persons by Family Characteristics," Table 15 (1960) and Current Population Report, Series P-20, No. 365, "Marital Status in Living Arrangements," Table 7 (1980). Although plaintiff need not be rewarded for cohabiting with defendant, she should not be penalized simply because she lived with him in consideration of a promise for support. Our endeavor is to shape a remedy that will protect the legally cognizable interests of the parties and serve the needs of justice. See generally Restatement (Second) of Contracts, § 359 at 169 (1981).
Nonetheless, the relief granted should be no broader than necessary to preserve the status quo pending a plenary hearing on the merits. On the showing made before the trial court, a reasonable basis existed to permit Crowe to remain in the Perth Amboy home. See Ferraiuolo v. Manno, 1 N.J. 105 (1948) (landlord temporarily restrained from interfering with tenant's *136 business on leased premises); Marjer v. Layfmen, 140 N.J. Eq. 68 (Ch. 1947) (landlord enjoined from prosecuting dispossess action against tenant who failed to properly exercise option to renew lease). Furthermore, Crowe is entitled to continuation of the support payments ordered by the trial court of $125 per week. Although substantially less than her demand of $385 a week, that sum should provide her with her minimal needs and prevent the necessity of her seeking public welfare. Consistent with the alleged agreement to "care for" Crowe, De Gioia should continue to pay the costs of all necessary medical, dental and pharmaceutical bills. Because an automobile is not essential for Crowe, we agree with the trial court that De Gioia need not provide her with a car. We agree with the Appellate Division that the defendant should not be restrained from transferring assets during the pendency of this proceeding. 179 N.J. Super. at 48. In addition, we disapprove the allowance of costs and counsel fees in an application for temporary relief in an action for support between unmarried cohabitants. In general, counsel fees may not be awarded except as expressly provided by R. 4:42-9. Although that rule permits the allowance of counsel fees pendente lite in a matrimonial action, R. 4:42-9(a)(1), no such provision exists in a non-matrimonial action.
III
Another issue is whether an action of this nature should be brought in the Law or Chancery Division of the Superior Court. Under our unified court system, all issues, whether legal or equitable, can be resolved in a single proceeding in either division. Massari v. Einsiedler, 6 N.J. 303, 313 (1951); Fleischer v. James Drug Stores, Inc., 1 N.J. 138, 150 (1948). Nonetheless, the orderly administration of justice suggests that we determine the more appropriate division in which to bring an action for breach of contract between unmarried cohabitants.
Plaintiff's choice here, as in Kozlowski, was the Chancery Division. In this case, however, the Appellate Division remanded *137 the matter for trial in the Law Division. The Appellate Division reasoned that the essential nature of the action was a breach of contract for which the appropriate remedy was money damages, an action at law. 179 N.J. Super. at 41-42. The dissenting judge concluded, however, the matter belonged in the Chancery Division because the complaint, in effect, sought specific performance of a unique kind of agreement. Id. at 47.
As an abstract proposition, a breach of contract action between unmarried cohabitants might be brought in either the Law or Chancery Division. In many such actions, the only remedy sought may be money damages, an interest in a pension or the like, and the Law Division will be the appropriate forum. In many other cases, where the principal relief is equitable in nature, the action should be brought in the Chancery Division. R. 4:3-1(a)(1).
In her application for preliminary relief, Crowe seeks an order maintaining the status quo during the pendency of the action. Moreover, the ultimate relief sought includes an order enforcing the alleged agreement between the parties and compelling De Gioia to transfer to Crowe "a reasonable share of all property, both real and personal."
Whether one views the complaint as requesting specific performance or an injunction, it summons the infinite variety and flexibility of equitable remedies. 1 Pomeroy, Equity Jurisprudence, § 109 at 131. Equity preserves that flexibility to devise new remedies "to meet the requirements of every case, and to satisfy the needs of a progressive social condition, in which new primary rights and duties are constantly arising, and new kinds of wrongs are constantly committed." 1 Pomeroy, supra, § 111 at 144. Other kinds of cases involving contracts for personal support have been brought in the past in equity. E.g., Soper v. Cisco, 85 N.J. Eq. 165 (E. & A. 1915) (action in Chancery Division to set aside conveyance from mother to daughter in exchange for agreement to support for life; held, conveyance made for valid consideration and agreement to support is enforceable); *138 Giacobbi v. Anselmi, 18 N.J. Super. 600 (Ch.Div. 1952) (enforcing oral promise to support grantor in return for conveyance of real property to him and his wife, grantor's daughter). Moreover, a similarity exists between many of the issues and proofs in this type of case and those in a matrimonial action, the exclusive province of the Chancery Division under R. 4:75. Consequently, in this case, as we anticipate will be true in the majority of such cases, the Chancery Division is the appropriate forum. Selection of the Law or Chancery Division in future cases should reflect the responsible exercise of judgment by counsel, subject to the control of the court, to best achieve a just result in this evolving cause of action.
We reverse the judgment of the Appellate Division; continue, as modified, the order of the Chancery Division for interim relief; and remand the matter to the Chancery Division for a plenary hearing on an accelerated schedule.
SCHREIBER, J., dissenting.
In Kozlowski v. Kozlowski, 80 N.J. 378 (1979), we recognized the possible existence of an agreement between consenting adults who desire to live together. However, Judge Halpern, writing for the Court, carefully noted that "our decision today has not judicially revived a form of common law marriage which has been proscribed in New Jersey since 1939 by N.J.S.A. 37:1-10." Id. at 387. He also observed: "Alimony may be awarded only in actions for divorce or nullity, and equitable distribution is awarded only in actions for divorce. N.J.S.A. 2A:34-23 et seq." Id. at 383. Today's decision, only three years later, has drained those words of meaning. The majority requires that defendant provide pendente lite monetary support, pay all necessary medical, dental and pharmaceutical bills, and furnish a home. It also acknowledges that plaintiff may maintain a suit for specific performance for continued support for the rest of her life and for a reasonable share of all property, both real and personal, acquired by defendant while the parties *139 lived together. In so doing, the majority has significantly closed the gap between the married and unmarried.
The legislative proscription against common law marriage remains on the books, but is rendered meaningless and ineffectual by this Court. The majority today has created a de facto marriage and distorted traditional equitable standards for interim relief in order to grant a remedy the Legislature has provided only for married persons. I do not deny the right of consenting adults to live together, but until the Legislature decides otherwise I would not grant pendente lite relief under the circumstances here.
In a situation not involving marriage, the Court would do well to follow settled equitable principles in determining whether interim relief should be granted for an alleged breach of contract. In Citizens Coach Company v. Camden Horse Railroad Company, 29 N.J. Eq. 299 (1878), the Court of Errors and Appeals codified the rules governing the granting of preliminary injunctive relief. These guidelines have proved workable and useful. They may be summarized as follows: (1) Is there an urgent necessity for the relief? The injury threatened should be a material one that cannot be adequately redressed by pecuniary damages. If the plaintiff has an adequate remedy at law, namely, an action for damages, interlocutory relief should be denied. (2) Is the right on which the plaintiff founds his claim settled? In other words, does it involve a novel legal problem? Compare Public Bancorporation v. Atlantic City Wimsett Thrift Co., 112 N.J. Eq. 367 (E. & A. 1933), with General Investment Co. v. American Hide & Leather Co., 98 N.J. Eq. 326 (E. & A. 1925). (3) Are the facts constituting the basis of the claim controverted? It is the general rule that a preliminary injunction will not issue where the material facts are met by a full, explicit and circumstantial denial under oath. Ferraiuolo v. Manno, 1 N.J. 105, 108 (1948).
A court may also intervene to protect the res from "destruction, loss or impairment, so as to prevent the decree of the court, *140 upon the merits, from becoming futile or inefficacious in operation, and particularly so where it appears that the damage resulting to the complainant by a continuance of the status may prove to be irreparable." Guangione v. Guangione, 97 N.J. Eq. 303, 305 (E. & A. 1925). See Naylor v. Harkins, 11 N.J. 435, 446 (1953); Christiansen v. Local 680 of the Milk Drivers, 127 N.J. Eq. 215, 219-20 (E. & A. 1940). So, too, a court should consider whether maintenance of the status quo will result in no material or only comparatively slight damage to defendant's rights, pending the final hearing, Peters v. Public Service Corp. of N.J., 132 N.J. Eq. 500, 512 (Ch. 1942), aff'd, 133 N.J. Eq. 283 (E. & A. 1943). This involves a balancing of the conveniences. Where the plaintiff's right is very doubtful, the balance of convenience in his favor must be extremely strong. This weighing process ultimately reaches the point where only destruction of the subject matter of the suit will move the court.
Lastly, courts should act cautiously in granting temporary injunctive relief, particularly when the matter is presented only on affidavits. Citizens Coach admonishes us:
There is no power, the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, and which is more dangerous in a doubtful case, than the issuing of an injunction. [29 N.J. Eq. at 303]
When tested by these guidelines, pendente lite relief should have been denied in this case. The facts are sharply controverted and plaintiff's claim for relief is not clear. The relief sought arises out of the "agreement" between the parties and plaintiff's basic demand in her complaint calls for its enforcement. The defendant categorically denies the existence of that agreement.
All the proofs were in the form of pleadings and affidavits, which disclose the following facts:
Rose Crowe had been living in an apartment in Perth Amboy with her seven children, ages 5 to 17, when in 1960 she met the defendant, Sergio De Gioia. At that time she was separated from her husband. She alleges in her complaint that within a few weeks the defendant moved into her apartment and began to live with her and her family. In 1967, they moved to a *141 one-family residence at 40 Lewis Street, Perth Amboy. She also asserts that they lived together for 20 years during which time "the plaintiff used the defendant's surname and was known as Rose K. DeGioia." Mrs. Crowe obtained a divorce three years after their relationship began. According to the plaintiff, De Gioia supported her and her seven children thereafter. All Mrs. Crowe's children have become adults and left the household except a 27 year-old son who suffers from an emotional disability and receives Social Security payments. He advanced his mother $1,500 to pay her attorneys' retainer in this action.
Plaintiff alleged in her complaint that "from time to time" during the 20-year period of cohabitation, the defendant "expressly declared to the plaintiff that he would take care of her and support her for the rest of her life, and that he would share with her his various assets." It is this general declaration, uncertain as to when it was made or under what circumstances, that is the heart of the complaint. No other agreement or promise is asserted. The defendant's answer denied the alleged living arrangements and specifically denied that he had ever made the declaration of life support or sharing his assets with her. Defendant's supplemental affidavit stated that "[a]t no time did I tell Rose Crowe that I would support her for the rest of her life or share any of my assets...." The defendant also claimed to be "so outraged at the assertion contained in the plaintiff's affidavits that I feel that this matter can only be resolved surely with a plenary hearing and I request that the Court set up a convenient date when testimony can be taken."
The trial court on the motion for pendente lite relief also had before it other material. The defendant produced an affidavit of Frank Simonelli who had known defendant for approximately 40 years and had been defendant's business partner. He averred that, contrary to plaintiff's assertion, neither plaintiff nor defendant had represented themselves as husband and wife and that the defendant had always maintained his own residence separate and apart from plaintiff and her children. An affidavit of Simonelli's former wife, Adelaide Spitsbergen, confirmed *142 these facts. Peter and Vera Yuresko's joint affidavit stated that they had known defendant since 1974, when the defendant purchased the Holmdel Motor Inn from them. They had met defendant and plaintiff on a number of occasions, and plaintiff was never introduced as or represented to be the defendant's wife.
The defendant also showed that plaintiff had not been using his surname throughout the 20-year period, as she had certified, because her telephone, Blue Cross and Blue Shield, State Unemployment Insurance, various bills, election records, and magazine subscriptions were listed under and addressed to plaintiff as Rose Crowe. These items brought into question the plaintiff's credibility.
A fair appraisal of all this information raises a serious doubt as to whether the parties had ever entered into an agreement that defendant would support plaintiff for life and share all his property acquired during the 20-year period that he allegedly lived with her. Interestingly, the trial court never found that that agreement existed. The most that it was willing to say was "there seems to be sufficient evidence for me to at least believe that there was some type of arrangement between the parties." (Emphasis added). That is a far cry from finding that a contract had been made under which the defendant bound himself to furnish lifetime support to the plaintiff and to share upon separation all property acquired while they lived together. It is most unlikely that the parties would have made such an agreement and not married.
Moreover, the plaintiff has an adequate remedy of money damages for breach of lifetime support. We recently so held in Kozlowski v. Kozlowski, supra. In Kozlowski, after a plenary hearing the trial court found that the parties made a contract under which the woman was to provide housekeeping, shopping and social services and, in return, the man was to furnish the funds for those purposes, and was to support her for the rest of *143 her life. We held the contract was enforceable. The legal theory was simply the existence of a contract, for the breach of which monetary damages would be available. Accordingly, she was awarded a lump sum. Kozlowski made it clear that "[p]laintiff is not entitled to alimony or equitable distribution." 80 N.J. at 383.
The force motivating the trial court here to grant interim support was the fact that the plaintiff was poor. The court stated that if she had had $10,000, it would not have granted any pendente lite relief. Underlying the majority's rationale is the similar thought that defendant is "a person of substantial means" and if he failed to support her, the result "would be devastating." In the absence of a necessary foundation a clear right to relief whether we grant or deny relief should not depend on the wealth of the parties. A judge should not yield to the subtle temptation to render an unjust judgment out of pity for the poor.
Furthermore, plaintiff had the burden of showing that she would not be able to maintain herself. In that respect, she made no allegations of her inability to work or to receive support from six of her children.[1]See N.J.S.A. 44:1-140(a) (requiring children to support a parent who applies for and is eligible to receive public assistance).
Under traditional principles, plaintiff is not entitled to interim relief. Unless this action be classified in the same category as a matrimonial matter, a pendente lite remedy should not be made available. Yet the majority, without articulating any reason, has done exactly that. By clothing the action in equitable terms specifically enforcing the agreement it has transformed the action from one for damages for breach of contract *144 and deprived the defendant of the right to a jury trial.[2]Steiner v. Stein, 2 N.J. 367 (1949); Associated Metals & Minerals Corp. v. Dixon Chemical & Research, Inc., 82 N.J. Super. 281 (App.Div. 1964). The Kozlowski rationale is now moribund. Support and equitable distribution are no longer awarded "only in actions for divorce." Kozlowski v. Kozlowski, supra, 80 N.J. at 383. I conceive of nothing that has occurred since our decision in that case to justify departing from its holding and underpinning. Therefore, I would affirm the judgment of the Appellate Division.
For reversal and remandment Justices PASHMAN, CLIFFORD, HANDLER, POLLOCK and O'HERN 5.
For affirmance Justice SCHREIBER 1.
NOTES
[1] The majority asserts plaintiff certified that she was unskilled and unemployable. The record does not indicate that. She did assert that she actively participated and worked with the defendant in his business.
[2] The two cases relied upon by the majority to support its proposition that this suit is properly in chancery because equity has granted affirmative relief in contracts for personal support are not appropos. In Soper v. Cisco, 85 N.J. Eq. 165 (E. & A. 1915), and Giacobbi v. Anselmi, 18 N.J. Super. 600 (Ch. 1952), the actions were to set aside conveyances of realty. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1902709/ | 748 So. 2d 399 (1999)
Lonnie J. FALGOUT
v.
DEALERS TRUCK EQUIPMENT CO.
No. 98-C-3150.
Supreme Court of Louisiana.
October 19, 1999.
*400 Robert Carswell Lowther, Covington, Counsel for Applicant.
Christopher Marc Landry, Blue Williams, Metairie, Counsel for Respondent.
KIMBALL, Justice.[*]
We granted certiorari to determine whether the prescriptive period contained in La. R.S. 23:1209 applies to actions to modify a workers' compensation award pursuant to the version of La. R.S. 23:1310.8 in effect prior to August 15, 1999. After considering the language in the statutes, the legislature's purpose in enacting the Workers' Compensation Act and the history of La. R.S. 23:1209 and La. R.S. 23:1310.8, we hold that absent express legislative intent to the contrary, prescription does not apply to claims for modification of a workers' compensation award.
FACTS AND PROCEDURAL HISTORY
On November 7, 1990, Lonnie Falgout, an employee of Dealers Truck Equipment, injured his left knee while in the course and scope of his employment, which required surgery on July 3, 1991. Mr. Falgout filed a timely claim for workers' compensation benefits and the parties stipulated to weekly benefits in the amount of $282.00 a week. By judgment dated January 22, 1993, the workers' compensation hearing officer held that Mr. Falgout was entitled to 46 weeks of benefits as he had sustained a 26½% anatomical loss of the lower extremities. He underwent a second surgery on September 27, 1993 and his condition seemed to improve. A lump sum payment for weekly benefits was thereafter made in the amount of $8,393.01 by Dealers Truck *401 Equipment's workers' compensation insurer on January 6, 1994.
Subsequently, Mr. Falgout's condition deteriorated. He underwent additional arthroscopic surgeries in 1995 and 1996 and also underwent an osteotomy of his left knee in September 1996. At this point, his disability rating was set by doctors at 75% and his medical impairment of the lower extremities at 35%. He was scheduled for additional surgery in October 1997. Defendant provided coverage for each of the surgeries performed on Mr. Falgout.
In April 1997, Mr. Falgout filed a 1008 Claim Form requesting indemnity benefits based on his worsened condition. The form was subsequently amended to seek a modification of the 1993 judgment in accordance with La. R.S. 23:1310.8. Defendant and Louisiana Insurance Guaranty Association[2] urged an exception of prescription on the action. After a hearing on the matter, the hearing officer held that the prescriptive period of one year from the date of the last payment contained in La. R.S. 23:1209 applied to La. R.S. 23:1310.8. Thus, in order to modify his judgment award, Mr. Falgout should have filed his action within one year from the date of his lump sum payment from defendant, or by January 6, 1995. The fourth circuit affirmed. In so doing, the court read La. R.S. 23:1310.8, which is silent regarding the time limitation in which a claim must be brought, in conjunction with the prescriptive period found in La. R.S. 23:1209 and concluded Falgout's claim had prescribed since it was filed more than one year from the date of the last compensation payment. We granted certiorari in this matter to consider the issue of whether the prescriptive period contained in La. R.S. 23:1209 applies to actions to modify brought pursuant to La. R.S. 23:1310.8 and therefore bars Mr. Falgout's claim for modification. Falgout v. Dealers Truck Equip. Co., 98-3150 (La. 6/4/99), 743 So. 2d 1246.
LAW
Under the general rules of statutory construction, courts begin with the premise that legislation is the solemn expression of legislative will and, therefore, the interpretation of a law involves, primarily, the search for the legislature's intent. La. Civ. C. art. 1; Fontenot v. Chevron U.S.A. Inc., 95-1425 p. 6 (La. 7/2/96), 676 So. 2d 557, 562. Thus, on the one hand, when a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature. La. Civ. C. art. 9; Breaux v. Hoffpauir, 95-2933 p. 2-3 (La. 5/21/96), 674 So. 2d 234, 236. On the other, when the language is susceptible of more than one meaning "it must be interpreted as having the meaning that best conforms to the purpose of the law, and the meaning of ambiguous words must be sought by examining the context in which they occur and the text of the law as a whole." La. Civ. C. arts. 10 and 12; Hutchinson v. Patel, 93-2156 p. 5 (La. 5/23/94), 637 So. 2d 415, 420.
The starting point for the interpretation of any statute, then, is the language of the statute itself. Touchard v. Williams, 617 So. 2d 885, 888 (La.1993). In this case, the two workers' compensation statutes at issue are La. R.S. 23:1310.8, which provides hearing officers with continuing jurisdiction over cases in order to modify previous awards or orders, and La. R.S. 23:1209, which provides the prescriptive period for filing a claim. The version of La. R.S. 23:1310.8 in effect during the relevant time period provides, in pertinent part:
*402 A. (1) The power and jurisdiction of the workers' compensation judge over each case shall be continuing and he may, upon application by a party and after a contradictory hearing, make such modifications or changes with respect to former findings or orders relating thereto if, in his opinion, it may be justified....
B. Upon application of any party in interest, on the ground of a change in conditions, the workers' compensation judge may, after a contradictory hearing, review any award, and, on such review, may make an award ending, diminishing, or increasing the compensation previously awarded, subject to the maximum or minimum provided in the Workers' Compensation Act....[3]
Clearly, at the time of claimant's accident and on the date he received his workers' compensation award, La. R.S. 23:1310.8 did not contain a prescriptive limit within which claims for modification must be filed. Because of this, defendant urges the application of the prescriptive period found in La. R.S. 23:1209. La. R.S. 23:1209 provides, in pertinent part:
A. In case of personal injury, including death resulting therefrom, all claims for payments shall be forever barred unless within one year after the accident or death the parties have agreed upon the payments to be made under this Chapter, or unless within one year after the accident a formal claim has been filed as provided in Subsection B of this Section and in this Chapter. Where such payments have been made in any case, the limitation shall not take effect until the expiration of one year from the time of making the last payment ....
(emphasis added).
Defendant argues the phrase "in any case" literally applies to limit the time period in which all workers' compensation actions, including those to modify compensation awards pursuant to La. R.S. 23:1310.8, must be filed. If this assertion is correct, then prescription has run against Mr. Falgout because his action for modification was filed more than one year after the date the last payment was made. Conversely, plaintiff argues that La. R.S. 23:1209 applies only to original filings of claims and not to modifications of awards received from those claims. He asserts the phrase "in any case" applies only to those cases in which voluntary payments have been made. If this interpretation is correct, Mr. Falgout's action is timely because, by its own terms, La. R.S. 23:1310.8 does not impose a time limit in which to file an action to modify a compensation award.
Each party finds support for his differing arguments in the opinions of our courts of appeal. The first and fourth circuits have held that actions to modify workers' compensation awards must be filed within the prescriptive period provided in La. R.S. 23:1209. See Adams v. Cajun Disposal, Inc., 96-1304 (La.App. 1 Cir. 3/27/97), 691 So. 2d 296 (holding that the prescriptive period contained in La. R.S. 23:1209 applies to La. R.S. 23:1310.8); Schultz v. Katz & Besthoff, Inc., 499 So. 2d 1243 (La.App. 4 Cir.1986) (holding that the prescriptive period contained in La. R.S. 23:1209 applies to La. R.S. 23:1331, the predecessor to La. R.S. 23:1310.8). In contrast, the third circuit has held that the prescriptive period in La. R.S. 23:1209 applies only to initial filings of claims and therefore does not apply to actions to modify previously entered workers' compensation judgments. See Montgomery v. Lafayette Parish Sch. Bd., 95-1613 (La.App. 3 Cir. 7/3/96), 677 So. 2d 162 (holding La. R.S. 23:1209 does not apply to R.S. 23:1331 *403 and stating, in dicta, nor does it apply to La. R.S. 23:1310.8); Townsend v. PPG Indus., 628 So. 2d 1204 (La.App. 3 Cir.1993) (holding La. R.S. 23:1209 applies to original filings of claims only and not to La. R.S. 23:1331, the predecessor to La. R.S. 23:1310.8). In light of the different conclusions reached by the courts of appeal on this issue and coupled with the facts that La. R.S. 23:1310.8 is silent as to when a claim for modification of a workers' compensation award must be filed and that La. R.S. 23:1209 is not clear as to whether it applies to such claims, we find that an ambiguity has been created in this specific area of the law. Consequently, this court may look to the reason or reasons that prompted the legislature to enact the law. Breaux, 92-2933 p. 3, 674 So. 2d at 236.
LEGISLATIVE HISTORY
Initially, in considering the legislature's reasons in enacting the statutes at issue to determine whether the prescriptive period contained in La. R.S. 23:1209 applies to La. R.S. 23:1310.8, it is helpful to consider the development of both statutes in workers' compensation history. Workers' compensation was first established by the Louisiana Legislature as the "Burke-Roberts Employers' Liability Act" in 1914. Enacted as Act No. 20 of that year, the legislation contained §§ 20 and 31, which evolved into La. R.S. 23:1310.8 and La. R.S. 23:1209, respectively. As originally enacted, § 31, which is now La. R.S. 23:1209, read:
Be it enacted, etc. That in case of personal injury (including death resulting therefrom) all claims for payments shall be forever barred unless within one year after the injury or death the parties shall have agreed upon payments to be made under this act, or unless within one year after the injury proceedings have been begun as provided in Sections 17 and 18 of this act. Where, however, such payments have been made in any case, said limitations shall not take effect until the expiration of one year from the time making the last payment.
As can be seen, the pertinent language of La. R.S. 23:1209 has been virtually unchanged since 1914.
Originally, § 20 of Act No. 20 of 1914, which is now La. R.S. 23:1310.8 read:
Be it enacted, etc. That a judgment of compensation may be modified at any time by subsequent agreement between employer and employee, with the approval of the Judge of the Court that rendered the judgment sought to be modified, or any time after one year when said judgment of compensation shall have become operative, it may be reviewed by the Judge of the Court that rendered the judgment sought to be modified upon the application of either employer or employee, on the ground that the incapacity of the injured employee has subsequently increased, such increase growing directly out of the injury for which compensation had been allowed or diminished. In such case the provisions of paragraphs 1 and 2 of Section 9 with reference to medical examination shall apply.
With Act No. 85 of 1926, the one year waiting period was shortened to provide that actions to modify workers' compensation judgments could be filed six months after the rendition of the judgment. Until the 1980s § 20, which was re-enacted as La. R.S. 23:1331, remained largely unchanged.
In 1983, however, legislation was passed that significantly revamped workers' compensation in this state. With Act No. 1 of the 1st Ex.Sess. of that year, the Office of Workers' Compensation Administration (OWC) was created to aid in the informal resolution of claims. In 1988, Act No. 938 eliminated the role of the district courts in workers' compensation claims and created administrative hearing officers within the OWC who were vested with original exclusive jurisdiction over all claims filed *404 pursuant to workers' compensation law.[4] Act No. 938 also repealed La. R.S. 23:1331 (formerly § 20) and replaced it with La. R.S. 23:1310.8. As originally enacted, La. R.S. 23:1310.8 read, in pertinent part:
A. The power and jurisdiction of the hearing office over each case shall be continuing and he may, from time to time, make such modifications or changes with respect to former findings or orders relating thereto if, in his opinion, it may be justified....
B. Upon its own motion or upon the application of any party in interest, on the ground of a change in conditions, the hearing officer may at any time review any award, and, on such review, may make an award ending, diminishing or increasing the compensation previously awarded, subject to the maximum or minimum provided in the Workers' Compensation Act....
The substantive changes made by La. R.S. 23:1310.8 are significant. The most drastic change, of course, is that La. R.S. 23:1310.8 provides hearing officers, not district courts, with continuing jurisdiction over workers' compensation cases in order to modify a previous award. Moreover, La. R.S. 23:1310.8 does not require a waiting period of six months after the initial award before the parties can file an action for modification. In addition to the substantive changes, Act 938 of 1988 also changed the language used in the modification statute. Instead of the word "judgment," La. R.S. 23:1310.8 uses the word "award." Also, the "at any time" language of La. R.S. 23:1331 was replaced by "from time to time" in La. R.S. 23:1310.8(A), although the "at any time" language was retained as to La. R.S. 23:1310.8(B). In 1989, Act No. 454 deleted the words "from time to time" from subpart A and the "upon its own motion" and "at any time" language was deleted from subpart B. However, despite the significant changes made to workers' compensation law during this time, La. R.S. 23:1310.8 remained silent as to a prescriptive period for modification, just as its predecessor had.
For the first sixty-one years that a modification statute existed, the courts of this state did not apply the prescriptive period contained in La. R.S. 23:1209 to limit the time in which a claim for modification of a workers' compensation award could be filed. Instead, they consistently held that a claim for modification could only be made while the judgment was alive and that once it had been extinguished nothing existed to modify. Thus, once the judgment was satisfied, it was deemed extinguished under La. Civ. C. art. 1854 and an action to modify could not be filed because nothing was left to modify. See Lindsey v. Twin City Motor Co., 181 So. 598 (La.App. 2 Cir.1938); Faircloth v. Stearns-Roger, 147 So. 368 (La.App. 2 Cir.1933); Sweeny v. Black River Lumber Co., 4 La.App. 244 (2 Cir. 1926). In Lacy v. Employers Mut. Liab. Ins. Co. of Wisconsin, 233 La. 712, 98 So. 2d 162, 164 (1957), this court held that the modification statute required that the original judgment of compensation be extant in order for a plaintiff to seek modification of his workers' compensation judgment.
In Landreneau v. Liberty Mut. Ins. Co., 309 So. 2d 283, 285-86 (La.1975), this court opined, in dicta,[5] that the prescriptive period contained in La. R.S. 23:1209 would apply to modification claims to provide stability of judgments. In Schultz v. Katz & Besthoff, Inc., 499 So. 2d 1243,1245 (La. App. 4 Cir.1986), the fourth circuit relied *405 on this dicta from Landreneau to hold that "as a general rule, modification of a worker's (sic) compensation award cannot be sought unless proceedings have begun within one year from the date of the last payment." In Adams v. Cajun Disposal, 96-1304 (La.App. 1 Cir. 3/27/97), 691 So. 2d 296, the first circuit, relying on that same language from Landreneau, held that the purpose of La. R.S. 23:1209 is to protect employers from stale claims, whether initial ones or ones for modification. Further, the court held that La. R.S. 23:1209 "clearly applies to suits for modification of judgment." 96-1304 p. 6, 691 So. 2d at 299. In the instant case, the court of appeal relied on Adams in concluding that the prescriptive period in La. R.S. 23:1209 applied to claims for modification of workers' compensation made pursuant to La. R.S. 23:1310.8. Falgout v. Dealers Truck Equip. Co., 98-0611 (La.App. 4 Cir. 11/18/98), 724 So. 2d 252. Historically, then, it seems that the courts in this state first began to read the prescriptive period contained in La. R.S. 23:1209 as applying to claims for modification based on the dicta contained in Landreneau.
In Jackson v. Iberia Parish Gov't, 98-1810 at 7 (La. 4/16/99), 732 So. 2d 517, which was handed down during the time this court was considering whether to grant Mr. Falgout's application for certiorari, we recognized the language in Landreneau stating that La. R.S. 23:1209 applied to La. R.S. 23:1310.8 as dicta. Jackson overruled Lacy and held that the principles of res judicata did not bar a claimant from seeking to modify a previous award of compensation even when the award was satisfied. Id. at 525. However, Jackson specifically noted that it applied only to the issue of res judicata and not to the issue of prescription, which was not raised in that case. Id. at n. 5.
DISCUSSION
The purpose of the Workers' Compensation Act is to set up a court-administrated system to aid injured workmen by relatively informal and flexible proceedings that are to be interpreted liberally in favor of the workmen. Landreneau, 309 So.2d at 284. "The entire compensation scheme instigated by the Legislature strongly envisions that compensation shall be made during the entire period of disability so long as the maximum period is not exceeded." Id. at 285, (citing Malone & Johnson, Treatise on Workmen's Compensation, § 281, at 57-58 (1st ed. 1964 Supp.)). Within the entire scheme, the concept of modification is unique because it allows a case to be reopened and the award amended after the judgment becomes final. Denis Juge, Louisiana Workers' Compensation, § 3:7 (2nd ed.1999). "The power of modification, while not a substitute for the appellate process, exists for the purpose of modifying awards due to a change in the workers' condition." Jackson, 98-1810 p. 9, 732 So. 2d at 524 (citing Malone & Johnson, Treatise on Workmen's Compensation, § 284, at 770 (3rd ed.1994)). The purpose of the modification statute is to allow adjustments to be made after judgment "to insure that the employee will be paid compensation during the full period of his disability and that the employer will not be required to pay for any longer than this period of disability." Landreneau 309 So.2d at 285, (citing Malone & Johnson, Louisiana Workmen's Compensation Law and Practice § 281, at 57-58 (1st ed. 1964 Supp.)).
Usually, once a judgment has become final and definitive, parties are bound by it, regardless of any future change of circumstances. See La. C. Civ. Pro. arts. 1841, 425. Workers' compensation judgments, however, are treated differently from ordinary judgments. This is due to the fact that if the rules of finality applied to ordinary civil judgments are applied to workers' compensation judgments, the flexibility of the workers' compensation system would be greatly restricted. Landreneau, 309 So.2d at 284. This court has recently reaffirmed the validity of this *406 policy in holding that where the legislature has expressly provided that an award or judgment can be subject to a claim of modification res judicata does not apply. Jackson, 98-1810 p. 9, 732 So. 2d at 524.
An example, for illustrative purposes only, of another area of law that allows for modification of a prior award is child custody, in which the law grants courts continuing jurisdiction for modification of the award. Imperial v. Hardy, 302 So. 2d 5, 8 (La.1974) (citing Davis v. Davis, 238 La. 293, 115 So. 2d 355 (1959)). In cases of child custody awards, an award of custody to one party may be modified upon a showing of a change in circumstance sufficient to warrant a custodial change. Evans v. Lungrin, 97-0541 p. 12 (La. 2/6/98), 708 So. 2d 731, 738. The principle behind this policy is the best interest of the child. La. C.C. art. 122; Evans, 97-0541 p. 7, 708 So. 2d at 735. Thus, a court is able to award custody of a child without having to be forever bound by that judgment. By allowing awards of custody to be reopened upon a change of circumstance, the overriding principlethat custody be awarded in the best interest of the childis ensured.
Likewise, since the inception of workers' compensation in this state, the legislature has "expressly provided that a compensation award can be subject to modification based on a change in the worker's condition." Jackson, 98-1810 p. 9, 732 So. 2d at 524. Workers' compensation law is designed so that when the hearing officer estimates the extent of the disability at the time of the original award he does so "without having to worry about being forever bound by the first appraisal." Id. (citing 8 Larson's Workers' Compensation Law § 81.3(a), at 1127, 1132-35 (1998)). By allowing awards of compensation to be reopened, the overriding purpose of the statutory schemethat a worker receives compensation for as long as he is disabled, but not longeris ensured.
Theoretically, then, under the concept of workers' compensation, courts ought to exercise perpetual and unlimited jurisdiction to reopen cases as often as necessary to make benefits meet current conditions. 8 Larson's Workers' Compensation Law § 81.10, at 1045 (1998). In Jackson, this court recognized that because the modification statute is to be liberally construed in favor of the claimant the principles of res judicata are at odds with the concept of modification in the workers' compensation arena. 98-1810 p. 9, 732 So. 2d at 524. In terms of social utility, the function of prescription is analogous to that of res judicata. Baudry-Lacantinerie & Tissier, Prescription, Ed. 4, 1924, updated in Volume 5, Civil Law Translations, no. 29, at p. 19. The social utility of prescription contravenes the policy behind the modification of workers' compensation awards as the applicability of the defense of prescription would limit the amount of time within which such an award could be modified. This limitation would prevent the reopening of cases as often as necessary to ensure the injured worker receives compensation as long as he is disabled, but no longer. Therefore, absent express legislative intent to the contrary, the concept of modification of a workers' compensation award is incompatible with that of prescription.
Thus, the question becomes whether the legislature has expressed an intent to subject modifications of compensation awards to a defense of prescription. The history of the modification statute under Louisiana workers' compensation law shows that the prescriptive period contained in La. R.S. 23:1209 does not automatically apply to claims of modification. First, until recently, the modification statute did not contain a prescriptive period nor did the courts apply La. R.S. 23:1209 to claims for modification, at least for the first sixty-one years of its existence. Second, nothing in the legislative history shows that the legislature ever intended to apply La. R.S. 23:1209 to claims for modification of compensation.[6]*407 The original language of the statute read that modification of a workers' compensation judgment could be had "at any time," which rules out a prescriptive period applying to the statute from its conception. Although this language was eventually deleted, the subsequent versions do not give any indication that the legislature intended, by the mere deletion of this language alone, to impose the prescriptive limit contained in La. R.S. 23:1209 to the modification statute. Further, in 1975, after Landreneau was handed down, the legislature understood the "present law" under La. R.S. 23:1209 to be that "all claims for payment must be made within one year after the accident or death except where voluntary payments are being made the year does not begin to run until the payments cease." Act No. 583, Regular Sess., Digest (1975).[7] Thus, in 1975, at least, the legislature understood that the prescriptive period of one year from the date of the last payment contained in La. R.S. 23:1209 applied only to cases where voluntary payments had been made before a claim was initiated. There is no indication the legislature envisioned La. R.S. 23:1209 as applying to claims for modification of workers' compensation awards. Third, the legislative history of the 1999 session shows that the original purpose of Act 323, which amended La. R.S. 23:1310.8 to provide that La. R.S. 23:1209 applies to claims for modification, was to clarify that claims for modification of compensation could be made "at any time." Senate Committee on Labor & Industrial Relations, 1999 Regular Session, Minutes (5/6/99). However, it was not until after a compromise between the house and senate that the bill was enacted as applying a prescriptive period for claims for modification of compensation. Id.
Thus, after considering the language in the statutes, the legislature's purpose in enacting the Workers' Compensation Act and the history of La. R.S. 23:1209 and La. R.S. 23:1310.8, we hold that absent express legislative intent to the contrary, prescription is not applicable to claims for modification of a workers' compensation award.
RETROACTIVE EFFECT OF La. R.S. 23:1310.8
Act 323 of the 1999 Regular Session amended La. R.S. 23:1310.8 to create a prescriptive period for claims of modification under the statute. La. R.S. 23:1310.8(D), which is new, provides:
A petition to modify a judgment awarding benefits shall be subject to the prescriptive limitations established in R.S. 23:1209.
Thus, with this amendment, the legislature has expressly provided for a prescriptive period for modifications of compensation awards. Defendant argues that this provision applies retroactively to bar Mr. Falgout's claim. We disagree and hold that it does not.
Prescriptive limitations relate to the remedy and are usually treated as procedural and applied retroactively. Lott v. Haley, 370 So. 2d 521, 523 (La.1979). However, prescriptive statutes cannot, consistently with state and federal constitutions, apply retroactively to disturb a person's pre-existing right. Id. at 524. When a party acquires a right, either to sue for a cause of action or to defend himself against one, that right becomes a vested property right and is protected by the due process guarantees. Cole v. Celotex, 599 So. 2d 1058, 1063 (La.1992). However, this Court has held that a newlycreated statute of prescription that "shortens existing periods of limitation will not violate the constitutional prohibition *408 against divesting a vested right provided it allows a reasonable time for those affected by the act to assert their rights." Lott, 370 So.2d at 524 (citing Cooper v. Lykes, 218 La. 251, 49 So. 2d 3 (1950); State v. Recorder of Mortgages, 186 La. 661, 173 So. 139 (1937)). When the legislature enacts a prescriptive statute that potentially affects existing causes of action and fails to require parties to exercise their vested rights within a reasonable time, "the courts should refrain from supplying this legislative lapse." Maltby v. Gauthier, 506 So. 2d 1190, 1193 (La.1987).
In the present case, Mr. Falgout acquired his right to file a claim for modification pursuant to La. R.S. 23:1310.8 when he received his initial workers' compensation award in 1993. At that time, no prescriptive limit applied to La. R.S. 23:1310.8. Now, with Act No. 323 of the 1999 Regular Session, the legislature has amended La. R.S. 23:1310.8 to create a prescriptive period limiting the time in which a claim for modification can be filed pursuant to La. R.S. 23:1310.8. However, to apply the prescriptive period retroactively would divest Mr. Falgout of his vested property right because the amendment does not provide a reasonable time for those affected by the act to assert their rights. We decline to supply a shortened period within which vested rights must be asserted in the absence of an indication of such a legislative intent. Thus, because to apply newly amended subpart D of La. R.S. 23:1310.8 retroactively would divest Mr. Falgout of his vested property right to file a claim for modification of his compensation award, we hold that the amendment applies prospectively only.
CONCLUSION
After considering the language in La. R.S. 23:1209 and the version of La. R.S. 23:1310.8 in effect prior to August 15, 1999, the legislature's purpose in enacting the Workers' Compensation Act and the history of the statutes, we hold that absent express legislative intent to the contrary, prescription does not apply to claims for modification of a workers' compensation award. Further, Mr. Falgout acquired his right to file a claim for modification before the amendment to La. R.S. 23:1310.8 creating a prescriptive period for modification claims came into effect and because the legislature did not allow a reasonable time frame in which he could assert that right, we hold that the amendment applies prospectively only. Thus, Mr. Falgout's claim for modification is not barred by prescription and defendant's exception of prescription should have been denied. Whether Mr. Falgout can prove his claim of a change in his condition relating to his work injury warranting modification is not before this Court and we specifically decline to address this issue. Therefore, the judgment of the court of appeal is hereby reversed and this case is remanded to the office of workers' compensation for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
MARCUS, J., dissents and assigns reasons.
VICTORY, J., dissents for the reasons assigned by MARCUS, J.
MARCUS, J. (dissenting).
The issue in this case is whether plaintiffs claim for modification of workers' compensation benefits is prescribed. The majority holds that it is not. I disagree.
In 1994 plaintiff accepted a court approved lump sum settlement for workers' compensation benefits in connection with a knee injury sustained in 1990. In 1997, three years after receipt of the last benefit payment, plaintiff filed a workers' compensation claim seeking to have his weekly benefits modified. The trial judge and the court of appeal found that plaintiff had one year from the date of the last benefit payment to file a claim for modification. Both courts held that the one year prescriptive period set forth in La. R.S. 23:1209 applies to requests for modification made pursuant to La. R.S. 23:1310.8. In *409 my view, this was the correct interpretation of the law.
The version of La. R.S. 23:1310.8 in effect at the time of plaintiffs injury and at the time of receipt of the last benefit payment permitted a claimant to seek modification of former findings and orders. However, the section on modifications did not itself stipulate a specific period of limitations for such claims. In 1999, La. R.S. 23:1310.8 was amended to expressly provide that a claim for modification of a former award is subject to the prescriptive limitations established in the Act's general prescription provision, La. R.S. 23:1209.[1] In my view, this amendment was no more than a clarification of existing law. Thus, whether or not the amended version of the statute is applied to this case, the result is the same.
In Lacour v. Hilti Corporation, (La.5/18/99), 733 So. 2d 1193, we noted that the Workers' Compensation Act must be viewed as a symmetrical whole. In that case we held that the prescriptive period stipulated in La. R.S. 23:1209 applies to claims for occupational disease, even though the section on occupational disease itself is silent on a period of limitations. Likewise in this case, even though the section of the Act addressing modification of a prior claim is silent as to prescription, it does not follow that such claims are imprescriptable. Rather, we should look to the fountainhead prescriptive provision of the Act for the appropriate period of limitations. La. R.S. 23:1209 provides that where workers' compensation payments have been made:
... in any case, the limitation shall not take effect until the expiration of one year from the time of making the last payment ... (emphasis added).
In my view, the time for applying for modification of benefits expires one year after the date of last payment. Moreover, that is the view that was espoused by this court in Landreneau v. Liberty Mutual Insurance Co., 309 So. 2d 283 (La.1975), albeit in dicta. In Landreneau we recognized that if modifications could be made without any period of limitations, claimants would be able to relitigate benefits years after payments had ceased and judgments had been satisfied. We concluded that employers are protected from stale claims by the prescriptive period in La. R.S. 23:1209. There is no reason to depart from that reasoning in this case. Plaintiff's claim for modification of benefits came too late and is prescribed.
For the foregoing reasons, I respectfully dissent.
NOTES
[*] Traylor, J., not on panel. See Rule IV, Part 2, § 3.
[2] LIGA took over handling this matter after the insolvency of defendant's workers' compensation insurer.
[3] In Act No. 323 of the 1999 session, the Louisiana legislature amended 23:1310.8 to provide a prescriptive limit in which an action to modify a prior award of compensation must be filed. This amendment was effective August 15, 1999. Subpart D of that statute now reads:
A petition to modify a judgment awarding benefits shall be subject to the prescriptive limitations established in R.S. 23:1209.
[4] In Moore v. Roemer, 567 So. 2d 75 (La.1990), this court held Act 938 of 1988 unconstitutional in that it violated Art. 5, Sec. 15(A) of the Louisiana Constitution, which provides district courts with original jurisdiction over all civil claims. In response, the constitution was amended in 1990 to the effect that hearing officers are granted the same judicial power, as to workers' compensation claims only, as the district court. La. Const. art. 5, §§ 10(A), 10(B), 16(A).
[5] See Jackson v. Iberia Parish Gov't, 98-1810 at p. 7, n. 5 (La. 4/16/99), 732 So. 2d 517, 523, n. 5.
[6] Given the recent 1999 amendments to La. R.S. 23:1310.8, of course, this is no longer an issue.
[7] While the Digest does not form part of the law, it is prepared together with proposed legislation and, in this case, it serves to elucidate the understanding and intent of the legislators. See Conerly v. State, 97-0871 p. 8 (La. 1998), 714 So. 2d 709, 714.
[1] La. Acts. 323 (1999). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1992055/ | 23 S.W.3d 389 (2000)
HARCO ENERGY, INC., Larry D. Cotten and Prime Western Development, Inc., Appellants,
v.
THE RE-ENTRY PEOPLE, INC., Appellee.
No. 07-98-0194-CV.
Court of Appeals of Texas, Amarillo.
February 2, 2000.
Rehearing Overruled April 5, 2000.
*391 Winstead, Sechrest & Minick, P.C., F. Franklin Honea, Dale E. Butler, Christine Moseley, Peter Lando, Dallas, Melvyn C. Bruder, Dallas, for appellants.
Wheeler & McCray, P.L.L.C., Thomas M. Wheeler, Abilene, for appellee.
Before QUINN and REAVIS and JOHNSON, JJ.
PHIL JOHNSON, Justice.
Appellants Harco Energy, Inc., Larry D. Cotten and Prime Western Development, Inc., appeal from a judgment in favor of The Re-Entry People, Inc., based on an agreement for Re-Entry to perform oilfield services in Hardeman County. We affirm in part and reverse and render in part.
Factual and procedural Background
In late 1994 and early 1995, The Re-Entry People, Inc. (Re-Entry), entered into an agreement to perform drilling and associated services and to provide materials in connection with oil wells on the Ruth Hatcher Lease in Hardeman County, Texas. Re-Entry's agreement was made through Rock Thomas (Thomas), a shareholder and representative of the corporation. Thomas negotiated the agreement with appellant Larry D. Cotten (Cotten). During the relevant time periods Cotten was the president of Harco Land, Inc. (Land), Harco Energy, Inc. (Energy), and Prime Western Development, Inc. (Prime). Re-Entry was not paid for all its work on the Hatcher No. 2 well, and suit was eventually filed against Cotten, individually, *392 Land, Energy and Prime. Re-Entry based its suit on a sworn account with Land, and on allegations against all defendants for breach of contract, fraud, fraudulent transfer of assets, operation of the corporations as alter egos, and negligent misrepresentation. Re-Entry claimed that it should be able to pierce the corporate veil of Land and thereby hold Cotten, Energy and Prime liable for the actions and debts of Land. Liability of Land, Energy, and Prime was also claimed by reason of Cotten's agency status for the corporations when he made allegedly false representations to Re-Entry.
Following a bench trial, judgment was rendered for Re-Entry against Cotten, individually, Land, Energy, and Prime. The judgment was joint and several for the amounts remaining unpaid on the invoices from Re-Entry to Land, attorneys' fees, punitive damages, and pre- and post-judgment interest. No findings of fact and conclusions of law were requested and none were filed. Land did not appeal.[1] Cotten, Energy and Prime appeal from the judgment and urge by multiple issues that the evidence was both legally and factually insufficient to support judgment against them based on (1) breach of contract, (2) fraud, (3) fraudulent transfers and damages to Re-Entry from fraudulent transfers, (4) negligent misrepresentation, and (5) liability for actions or obligations of Land based on a piercing of Land's corporate veil.
Standard of Review
In a bench trial, when findings of fact are neither requested or filed, the appellate court presumes all questions of fact were determined in support of the judgment, "provided that the proposition is raised by the pleadings, supported by the record, and sustainable on any reasonable theory consistent with the evidence and applicable law." Employers Cas. Co. v. Texas Ass'n of School Boards Workers' Compensation Self-Ins. Fund, 886 S.W.2d 470, 473 (Tex.App.-Austin 1994, writ dism'd w.o.j.).
In reviewing legal insufficiency issues we examine only the evidence which tends to support the finding, viewing the evidence in the light most favorable to the finding, giving effect to all reasonable inferences that may be drawn from the evidence, and disregarding all conflicting evidence. King v. Bauer, 688 S.W.2d 845, 846 (Tex.1985).
In reviewing factual insufficiency issues, we consider all relevant evidence. In re King's Estate, 150 Tex. 662, 664-65, 244 S.W.2d 660, 661 (1951). A factual insufficiency issue will be sustained only if the finding of fact is so contrary to the great weight and preponderance of the evidence as to be clearly wrong and unjust. Id.
Law
For a contract to exist, there must be an offer, an acceptance, and valid consideration. Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 408-09 (Tex.1997); Hyman Farm Serv., Inc., v. Earth Oil & Gas, Inc., 920 S.W.2d 452, 457 (Tex.App.-Amarillo 1996, no writ); Williford Energy Co. v. Submergible Cable Servs. Inc., 895 S.W.2d 379, 384 (Tex.App.-Amarillo 1994, no writ). To determine whether both parties have assented to the terms of a contract, a court must rely on objective standards. Fuqua v. Fuqua, 750 S.W.2d 238, 245 (Tex.App.-Dallas 1988, writ denied); Gordin v. Shuler, 704 S.W.2d 403, 407 (Tex.App.-Dallas 1985, writ ref'd n.r.e.). A person who acts as an agent for another when making a contract must disclose the agency capacity and identify the principal in order to avoid being held personally liable for the contract. Hideca Petroleum Corp. v. Tampimex Oil Intern., Ltd., 740 S.W.2d 838, 842 (Tex.App.-Houston [1st Dist.] 1987, no writ). Although circumstances may exist which would put a party *393 with whom an agent is contracting on notice that a principal-agent relationship exists, the agent is not relieved from liability just because the party with whom he is contracting could have conceivably discovered that the agent was working only in a representative capacity. J. Parra e Hijos, S.A. de C.V. v. Barroso, 960 S.W.2d 161, 168 (Tex.App.-Corpus Christi 1997, no writ); Tampimex, 740 S.W.2d at 842.
To recover for fraud of another, a party must prove that (1) a material misrepresentation was made, (2) the representation was false, (3) the speaker knew that it was a false representation, (4) the speaker intended that it be acted upon by the other party, (5) the other party did indeed rely on the representation, and (6) the other party suffered damages as a result. T.O. Stanley Boot Co., v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex.1992); Campbell v. C.D. Payne and Geldermann Sec., Inc., 894 S.W.2d 411, 425 (Tex.App.-Amarillo 1995, writ denied). In order for a promise to perform in the future to be fraudulent it must be proved that the allegedly defrauding party had no intention of performing the act or promise at the time the promise was made. T.O. Stanley Boot Co., 847 S.W.2d at 222.
The elements for a negligent misrepresentation cause of action are (1) a representation made by the defendant in the course of the defendant's business, or in a transaction in which the defendant has a pecuniary interest; (2) the defendant supplied false information for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation. Federal Land Bank Ass'n. v. Sloane, 825 S.W.2d 439, 442 (Tex.1991). The damages recoverable for a negligent misrepresentation do not include the benefit of the plaintiff's contract with the defendant. Id.
One purpose of the corporate structure is to shield its shareholders from liabilities of the corporation. Menetti v. Chavers, 974 S.W.2d 168, 171 (Tex.App.-San Antonio 1998, no pet.). Texas case law and various statutory provisions allow for piercing the veil of a corporation or otherwise provide avenues for shareholders or others to be held liable for actions of the corporation. E.g., Tex. Bus. Corp. Act Ann. art. 2.21 (Vernon Supp.2000) (hereinafter TBCA); Tex. Tax Code Ann. § 171.255 (Vernon 1992); Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.1986). No liability for corporate contractual obligations may be imposed on a shareholder or affiliate of the corporation or shareholder under an alter ego or similar theory unless it is shown that the person on whom liability is sought to be imposed (1) caused the corporation to be used for the purpose of perpetuating, and (2) perpetrated an actual fraud on the obligee for the direct personal benefit of the person on whom liability is sought to be imposed. TBCA art. 2.21(A),(B); Menetti, 974 S.W.2d at 173-74.
The Uniform Fraudulent Transfer Act (UFTA) provides remedies to creditors of debtors who fraudulently transfer assets under certain circumstances as set forth in the statute. Tex. Bus. & Com.Code Ann. §§ 24.005, 24.006, 24.008 (Vernon 1987 & Supp.2000). A transfer of assets is fraudulent as to a creditor whose claim arose before or within a reasonable time after the transfer was made if the debtor made the transfer (1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) the debtor did not receive a reasonably equivalent value in exchange for the transfer and the debtor (a) was or was about to be engaged in transactions for which the remaining assets of the debtor were unreasonably small in relation to the transaction, or (b) intended to incur, or believed or reasonably should have believed the debtor would incur debts beyond the debtor's ability to pay as they became due. UFTA § 24.005(a). A transfer of assets is also fraudulent as to a creditor *394 whose claim arose before the transfer was made if the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer and the debtor was insolvent at the time of or became insolvent as a result of the transfer of the assets. UFTA § 24.006(a). Unless displaced by its provisions, the UFTA supplements other principles of law and equity. UFTA § 24.011. The term "asset" under the UFTA does not include property to the extent it is encumbered by a "valid lien" as defined in the statute. UFTA § 24.002.(2)(A).
Analysis
Re-Entry claimed actual damages because its bills were not paid pursuant to an agreement that it would be paid for its work. Re-Entry claimed that Land was liable on a sworn account. Re-Entry based its other various theories against Land, Cotten, Energy and Prime on the unpaid bills as its damages. Its claims, in substance, were that (1) Cotten agreed before the work on the Hatcher No. 2 well that if Re-Entry performed work on Hatcher No. 2, then Cotten would be responsible for Re-Entry's bills; (2) after Re-Entry did the work on Hatcher No. 2, Cotten represented that Re-Entry was going to be paid at some point when Land obtained money through loans or other transactions. Re-Entry asserts that it was damaged by the latter representations because it did not file an affidavit to secure its contractor's lien[2] on the Hatcher lease and thereby receive payment for its unpaid invoices, as did some other contractors. Thus, all actual damages[3] claimed by Re-Entry arise from its failure to receive payment which it contracted to receive for its work on Hatcher No. 2.
A. Larry D. Cotten, Individually
Cotten does not deny negotiating an agreement for Re-Entry to work on Hatcher No. 2, but claims that the agreement was made on behalf of Land, and not in his individual capacity. He asserts that he always made it clear to Thomas that Land was the principal in the agreement. Cotten's position also is that if Re-Entry did not protect its claim by securing a lien on the Hatcher lease, it was not because Cotten asked or recommended that a lien not be secured, but rather because Re-Entry simply chose not to file an affidavit to secure a lien. Cotten also contests Re-Entry's having proved damages from reliance on any misrepresentations he made after Re-Entry completed its work on Hatcher No. 2.
Re-Entry emphasizes that Cotten was in control of Land, Energy, and Prime, thus he should be liable for breach of contract because of that control, as well as because of his personal agreement for Re-Entry to do the Hatcher No. 2 work. In considering the objective evidence as to whether Cotten is personally liable for breach of contract, however, our focus is not on Cotten's control of the corporations, but on his actions in obtaining Re-Entry's agreement to work on Hatcher No. 2. In this regard, Thomas and Cotten testified as to the original agreement which was made for Re-Entry to work the Hatcher No. 2 well. Their testimony conflicted. Cotten did not dispute that an agreement existed and that Re-Entry was owed money for its work. He testified, however, that he fully disclosed he was acting on behalf of Land in contracting with Re-Entry for the Hatcher No. 2 work. He consistently maintained that he did not negotiate on his own behalf and he never agreed to be responsible for Re-Entry's bills. In contrast, Thomas was unequivocal in his testimony that his agreement for the Hatcher work was with Cotten personally. Thomas testified that he did not agree for Re-Entry to work for Land or *395 any other company on Hatcher No. 2; that he had Re-Entry bill Land because Cotten told him to bill Land; and who Re-Entry billed was Cotten's prerogative because "I'm working for him." Thomas had previously known and worked with Cotten in the oilfield. He moved the Re-Entry rig to the Hatcher lease because he was contacted by Cotten and Felix Thomas, who was working with Cotten. Land and Energy were corporations which had been newly incorporated at the behest of Cotten for the specific purpose of re-entering, drilling and operating wells in Hardeman County. Neither Re-Entry nor Thomas had any prior dealings with or knowledge of Land or Energy.
Thomas' testimony is some evidence that (1) Re-Entry and Cotten agreed for Re-Entry to do work on Hatcher No. 2; (2) Cotten agreed to be responsible for payment to Re-Entry for the work; and (3) Cotten breached the agreement. Further, Cotten's denial that he ever made an agreement to pay for Re-Entry's work is some evidence that he did not intend to perform when he made the agreement. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986). The evidence is legally sufficient to support a finding by the trial court that Cotten defrauded Re-Entry by entering an agreement to pay for its work on Hatcher No. 2 with the intent not to perform. Cotten's acknowledged failure to pay Re-Entry is legally sufficient evidence to support a finding by the trial court of damages to Re-Entry from both breach of contract and fraud.
It was the province of the trial judge sitting as fact finder to resolve conflicts in the evidence. The trial court presumably found that Cotten agreed to pay Re-Entry if Re-Entry would work on Hatcher No. 2, Cotten made such agreement with the intent not to perform, Cotten breached the agreement, and Re-Entry was damaged in the amount of its unpaid invoices as a result of relying on Cotten's representations. After considering the evidence, inferences which may be reasonably drawn from the evidence, and the record as a whole, we do not find the trial court's presumed findings in support of its judgment to be so contrary to the great weight and preponderance of the evidence as to be clearly wrong and unjust. Because we find the evidence to be legally and factually sufficient to support the trial court's judgment against Cotten, individually, on the causes of action for breach of contract and fraud, we need not and do not consider the remainder of Cotten's issues challenging the judgment. Tex.R.App. P. 47.1.
B. Harco Energy, Inc. and Prime Western Development, Inc.
Energy and Prime assert that they were not parties to an agreement for Re-Entry to work the Hatcher No. 2 well, that Cotten was not acting as actual agent for either of them in making the agreement for Re-Entry to work on Hatcher No. 2, that Re-Entry did not rely on Cotten's being an apparent agent for either of them in making the original agreement with Re-Entry, that no misrepresentations were made to Re-Entry after its work on Hatcher No. 2 was completed, and that in any event Re-Entry did not detrimentally rely on any representations made by Cotten on behalf of Energy or Prime after completion of Re-Entry's work on Hatcher No. 2.
Thomas testified that he did not know Energy existed until Re-Entry was already working on Hatcher No. 2. He further testified that he did not look to Energy for payment of Re-Entry's invoices, as his agreement was with Cotten and Re-Entry was working for Cotten. It was Thomas' understanding that Energy was an entity in which Cotten held "his production" from drilling and operating programs. Thomas did not know if Prime Western even existed at the time he made the agreement for Re-Entry to work Hatcher No. 2. Nor did Thomas claim that in making agreements or taking actions on behalf of Re-Entry he at any time relied on Prime or on Cotten's authority to represent *396 Prime. The only reason Thomas believed Prime had possible liability to Re-Entry was because Cotten possibly owned or had assets in Prime.
Karen Martin (Martin) testified as the President of Re-Entry. Martin's duties with Re-Entry included sending bills and invoices for work done by Re-Entry, then following up to collect unpaid amounts due. She began contacting Cotten in June, 1995, about the unpaid invoices for Hatcher No. 2. By that time Re-Entry had completed its work on Hatcher No. 2. Martin testified that in numerous conversations from June, 1995, through June, 1997, Cotten assured her that "he was going to get us paid." She, like Thomas, did not claim that either Energy or Prime (or Cotten acting for them) made an agreement with Re-Entry to pay Re-Entry's bills, either before Re-Entry began work on Hatcher No. 2 or after the bills became due. Neither Thomas nor Martin claimed that Re-Entry failed to file a lien affidavit to secure its claim for work on the Hatcher lease because Cotten, individually or on behalf of the corporations, or because anyone else on behalf of Energy or Prime asked that a lien not be secured. After reviewing the record, we find the evidence legally insufficient to support a finding that Energy or Prime, because of the actions of Cotten or otherwise, entered a contract with, breached a contract with, or defrauded Re-Entry either as to the original agreement for Re-Entry to work on the Hatcher No. 2 well, or as to subsequent actions or statements. Consequently, Energy and Prime cannot be held liable to Re-Entry for breach of contract or fraud.
Nor do we find legally sufficient evidence to support a finding that Re-Entry relied to its detriment on any misrepresentations of Cotten acting as actual or apparent agent of Energy or Prime. Without evidence that Re-Entry relied on a misrepresentation attributable to Energy or Prime and which reliance proximately caused damages other than its contract damages, Re-Entry cannot recover from Energy or Prime on a negligent misrepresentation cause of action. D.S.A., Inc. v. Hillsboro Indep. School Dist., 973 S.W.2d 662, 663-64 (Tex.1998).
Re-Entry's pleadings alleged that fraudulent transfers of assets were made by defendants Cotten, Land, Energy, and Prime within the meaning of the UFTA. Appellants urge that termination of the Hatcher lease was not a "transfer" of an asset within the meaning of the UFTA, and that the record contains no evidence to support a finding of the value of the seismic information and Infiniti automobile which were transferred by Land. At oral submission, Re-Entry disclaimed any attempt in this proceeding to cause specific assets allegedly transferred fraudulently by appellants to be subjected to liability for its claims. See UFTA § 24.008. In its brief, Re-Entry references four occurrences which it asserts support a finding of and judgment based on fraudulent transfers of assets: (1) Energy allowed its Hatcher lease to expire in August, 1995, and Prime "top leased" the Hatcher lease, thereby allowing Prime to acquire the lease; (2) in October, 1995, Land transferred an Infiniti automobile to Cotten's ex-wife, Virginia Cotten (Virginia); (3) Land transferred seismic data to Energy and Prime; and (4) in October, 1995, Cotten, acting individually and as agent of Land, Energy, and Prime, discharged Land from its position as operator of the Hatcher lease and hired Prime as operator, and also removed Land from its position as operator of a well, to the benefit of Tango Investment, Inc., a corporation owned by Virginia and Cotten's daughter, Ginger.
Regardless of whether allowing a lease to expire and discharging Land as operator of a lease and wells would qualify as "transfers of assets" under the UFTA, we agree with appellants that the record contains no evidence of the value of such "assets." Nor do we find evidence of the value of the Infiniti automobile transferred to Virginia or of the seismic data transferred *397 by Land. To compound Re-Entry's evidentiary difficulties on its theory of fraudulent transfer of assets, the record contains evidence that the Infiniti was subject to some amount of debt which was assumed by Energy when the vehicle was transferred to Virginia, and evidence that Energy paid for at least some of the seismic information when it was furnished to Land originally. The record does not reflect the amount of debt on the vehicle nor the amounts previously paid by Energy for the seismic information. Without evidence of value of the assets in question, and Land's equity in the assets, a fact finder would have to speculate as to damages, if any, caused to Re-Entry by the actions and transfers referenced. We need not and do not decide if evidence supports a finding that assets were fraudulently transferred under provisions of the UFTA, because even if all the claimed "transfers" were fraudulent transfers of assets within the meaning of the UFTA, the evidence is legally insufficient to support a finding of damages to Re-Entry caused by such transfers. We conclude that Energy and Prime are not liable to Re-Entry for fraudulent transfers of assets under the UFTA.
Appellants Energy and Prime assert that article 2.21 of the TCBA preempts any theory of liability against them serving to pierce the corporate veil of Land, such as alter ego or common business enterprise, unless Re-Entry proved they committed an actual fraud resulting in their direct personal benefit. Energy and Prime advance the position that Re-Entry's claim is for a contractual obligation of Land, or that the claim relates to or arises out of such an obligation, and is foreclosed by TBCA art. 2.21. Re-Entry responds that its claim against Energy and Prime for the amounts due from Land is not preempted because it is based on fraud by Energy and Prime. As we have noted above, however, Thomas did not claim that in making the agreement for Re-Entry to work on Hatcher No. 2 he relied on representations by or as to Harco Land, much less Energy or Prime. Martin's testimony does not support a finding of detrimental reliance by Re-Entry on Energy or Prime or on Cotten acting as a representative or agent of either corporation. Re-Entry points out that by a document dated in early 1994, Energy and Prime authorized Land to represent that it owned the Hatcher lease when it did not in fact own the lease. Re-Entry, however, points us to no evidence that it relied to its detriment on a representation by Land that it owned the lease, nor to evidence that Re-Entry even knew of the 1994 document when Re-Entry made its agreement relating to the Hatcher No. 2 work. We find the evidence legally insufficient to support a finding that either Energy or Prime actually defrauded Re-Entry. Therefore, neither Energy nor Prime can be held liable to Re-Entry for the contractual obligations of Land or matters arising from such obligations based on the theories of alter ego, common business enterprise, sham to perpetuate a fraud, or similar theories. TBCA art. 2.21(A), (B); Menetti v. Chavers, 974 S.W.2d 168, 174 (Tex.App.-San Antonio 1998, no pet.).
We affirm the trial court's judgment against Larry D. Cotten, individually. We reverse the judgment as to Harco Energy, Inc., and Prime Western Development, Inc., and render judgment that Re-Entry take nothing against Harco Energy, Inc. and Prime Western Development, Inc.
NOTES
[1] Thus, our decision does not affect the trial court's judgment against Land.
[2] See Tex. Prop.Code Ann. § 56.021 (Vernon 1995).
[3] Re-Entry also claimed exemplary damages based on appellants' alleged fraud relating to the contract for Re-Entry to provide services on Hatcher No. 2. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2293721/ | 168 F. Supp. 2d 541 (2001)
In re MICROSOFT CORP. ANTITRUST LITIGATION.
Gravity, Inc., et al.,
v.
Microsoft Corp.
No. MDL 1332.
United States District Court, D. Maryland.
September 28, 2001.
*542 Stanley M. Chesley, Waite, Schneider, Bayless & Chesley, Cincinnati, OH, Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll, Washington, DC, Ben Barnow, Barnow and Goldberg, P.C., Joseph P. Danis, Carey and Danis, L.L.C., St. Louis, MO, Robert L. Lieff, Lieff, Cabraser, Heimann, & Bernstein, San Francisco, CA, Christopher Lovell, Lovell & Stewart, New York City, Alice McInerney, Kirby, McInerney & Squire, New York City, Leonard B. Simon, Milberg, Weiss, Bershad, Hynes & Lerach, San Diego, CA, Douglas G. Thompson, Finkelstein, Thompson & Loughran, for plaintiffs.
Gordon Ball, Law Office of Gordon Ball, Nicholas E. Chimicles, Chimicles & Tikellis, Haverford, PA, John J. Cummings, III, Cummings, Cummings & Dudenhefer, New Orleans, LA, Dianne M. Nast, Roda & Nast, Lancaster, PA, Linda P. Nussbaum, Pomerantz, Haudek, Block, Grossman & Gross, Lynn L. Sarko, Keller & Rohrback, L.L.P., Seattle, WA, Howard J. Sedran, Levin, Fishbein, Sedran & Berman, *543 Philadelphia, PA, David D. Shelby, Shelby & Cartee, Birmingham, AL, Robert A. Skirnick, Meredith, Cohen, Greenfogel & Skirnick, Philadelphia, PA, Executive Committee.
OPINION
MOTZ, Chief Judge.
Earlier this year, I dismissed counts I and II of the first amended complaint filed by Gravity, Inc., and Mark H. Dickson, against Microsoft Corporation and three original equipment manufacturers ("OEMs"), Compaq Computer Corporation, Dell Computer Corporation, and PB Electronics, Inc. In re Microsoft Corp. Antitrust Litig., 127 F. Supp. 2d 728 (D.Md. 2001). These counts asserted class claims on behalf of consumers who had purchased computers from named OEMs on which Microsoft software products had been pre-installed. Plaintiffs now seek leave, pursuant to Federal Rule of Civil Procedure 15, to file a second amended complaint[1]. Although plaintiffs have recast some of their allegations in an attempt to address some of the points upon which my prior opinion turned, they have not cured the fundamental defects in their claims. Accordingly, their motion for leave to amend will be denied on the ground of futility.
I.
The primary holding in my prior opinion had three parts: (1) plaintiffs' claims under section 1 of the Sherman Act "coalesced" with their claims under section 2 of the Act; (2) plaintiffs were therefore required to allege facts supporting the averment required by section 2 that the OEM defendants specifically intended to perpetuate Microsoft's monopolies; and (3) plaintiffs had failed to allege sufficient facts to meet this pleading requirement. I also noted that although plaintiffs asserted that the OEM defendants were part of a single conspiracy to maintain Microsoft's monopolies, they made no allegation that those defendants made any agreement among themselves, i.e., that the most plaintiffs had alleged was a "rimless" wheel conspiracy which, under the rule of Mylan Labs., Inc. v. Akzo, N.V., 770 F. Supp. 1053, 1066 (D.Md.1991), was not actionable.
In an attempt to cure these perceived deficiencies, plaintiffs have added counts alleging a series of separate bilateral conspiracies between Microsoft and Compaq alone and Microsoft and Dell alone that are said to be in violation of section 1. Compaq and Dell are each alleged to have entered into these conspiracies either because they had the specific intent to maintain Microsoft's monopolies or because they were coerced by Microsoft to do so. Plaintiffs have also added in the second amended complaint tying claims based upon the bundling of Internet Explorer and Windows 95 or Windows 98.[2]
II.
Although plaintiffs now assert section 1 restraint of trade claims that allegedly are separate and distinct from one another and from plaintiffs' section 2 monopolization claims, the changes they have made in the second amended complaint are *544 only cosmetic. This can be seen by scrutinizing the nature of the damages that plaintiffs assert. Plaintiffs do not claim any damages that might arise directly from any agreement between Microsoft and either Compaq or Dell alleged to be in restraint of trade, such as the cost to consumers who preferred Netscape as their browser and who therefore allegedly overpaid for their Windows licensing agreement since Internet Explorer was bundled with Windows 95 or Windows 98. Rather, plaintiffs assert that they were damaged by having to pay supracompetitive prices for Microsoft's operating software and applications software because defendants, by virtue of their exclusionary conduct, suppressed competition in the operating and software markets and in the middleware market, thereby stifling the development of other products that would have driven prices down.
Plaintiffs' damage theory necessarily assumes, insofar as their section 1 claims are concerned, that Compaq and Dell (either alone or together) had sufficient shares of the consumer market in which they sold their products that, but for the allegedly unlawful agreements into which they entered with Microsoft, competition in the relevant software markets would not have been suppressed and the development of alternative products would not have been stifled. But plaintiffs make no such allegation. Nor could they do so in light of their concessions that the consumer computer market is fiercely competitive and that Microsoft entered into exclusionary agreements with other OEMs that were the same or similar to the ones it made with Compaq and Dell about which they complain. Thus, under the allegations in the second amended complaint there is a lack of any causal nexus between the alleged section 1 conspiracies and the damages plaintiffs seek to recover.
In other words, in the final analysis, according to plaintiffs' allegations, Microsoft was calling the shots on an industry-wide basis. Therefore, Microsoft's agreements with Compaq and Dell alone could not have had the suppressive effects that plaintiffs allege. It may be assumed, as plaintiffs allege, that Microsoft entered into a series of multiple conspiracies for its own purpose of perpetuating its monopolies. If it did so, it violated both section 1 and section 2. However, that fact alone does not convert the aggregation of multiple conspiracies into a single overriding conspiracy, the purpose and effects of which can be attributed to the members of the alleged separate conspiracies other than Microsoft itself. Under black-letter conspiracy law, a conspirator is responsible only for acts undertaken in furtherance of the conspiracy of which he is a member. Here, the damages claimed by plaintiffs cannot be said to have been caused by any single section 1 conspiracy between Microsoft and either Compaq or Dell. They could only have been caused by a wide section 2 conspiracy of which Microsoft and numerous OEMs were members. Thus, the "coalescing" problem remains, and the second amended complaint which alleges no new facts demonstrating that Compaq and Dell shared Microsoft's monopolistic goals does not cure it.
III.
Defendants also renew the argument they made in their motion to dismiss the first amended complaint that plaintiffs' class claims are barred by the indirect purchaser rule of Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977). I declined to reach that argument in my earlier opinion, and I recognize that I need not do so here. However, I have concluded that the Illinois Brick rule does apply and that it is in *545 the interest of the expeditious resolution of this litigation that I so declare.
Plaintiffs contend that they are not seeking "pass through" overcharges exacted by a monopolist from another innocent party the type of damages to which Illinois Brick applies but rather damages that all of the defendants directly caused to plaintiffs by raising barriers to competition. Of course, there is no question that plaintiffs are seeking "pass through" overcharges. The very essence of their damage theory is that when they purchased computers from Compaq and Dell, they paid too much for their licenses to Microsoft software because Microsoft was able to sell inferior products at supracompetitive prices by suppressing competition in the relevant software markets.[3] Therefore, it is not the nature of their alleged damages but rather Compaq's and Dell's alleged lack of innocence that is the key to plaintiffs' argument. In effect, they are invoking what has been characterized as the "co-conspirator" exception to Illinois Brick recognized by many courts. See Lowell v. American Cyanamid Co., 177 F.3d 1228, 1231 (11th Cir.1999), State of Arizona v. Shamrock Foods Co., 729 F.2d 1208, 1211-12 (9th Cir.1984), Abrams v. Interco Inc., 1980 WL 1822, *2 (S.D.N.Y. 1980), Reiter v. Sonotone Corp., 486 F. Supp. 115, 119 (D.Minn.1980), In re Anthracite Coal Antitrust Litig., 1978 WL 1341, *3 (M.D.Pa.1978), Florida Power Corp. v. Granlund, 78 F.R.D. 441, 443-44 (M.D.Fla.1978), Gas-A-Tron v. American Oil Co., 1977 WL 1519, *2 (D.Ariz.1977); see also In re Mid-Atlantic Toyota Antitrust Litig., 516 F. Supp. 1287, 1295 (D.Md. 1981) (acknowledging that numerous courts have recognized "at least the possibility" of a co-conspiracy exception).
According to plaintiffs, Illinois Brick does not apply since the two concerns that gave rise to its holding the potential for double recovery and the complexities presented by price tracing are absent.[4] Their first contention is not without force since their joinder of Compaq and Dell does appear to resolve the "double recovery" issue. Plaintiffs themselves could make only one recovery, and Compaq and Dell could assert cross-claims against Microsoft for contribution and indemnity. If they chose not to do so, presumably collateral estoppel would prevent them from doing so in any future action. Several courts have found these considerations regarding double recovery persuasive where the alleged co-conspirators have been joined or could have been joined as defendants. See, e.g., McCarthy v. Recordex Service, Inc., 80 F.3d 842, 854-55 (3d Cir. 1996) (noting obligation to fully join defendants in order for co-conspirator exception to apply), In re Beef Indus. Antitrust Litigation, 600 F.2d 1148, 1163 (5th Cir.1979) (declining to apply co-conspirator exception, without deciding the merits of the exception, where alleged co-conspirators *546 were not named as defendants), In re Mid-Atlantic Toyota, 516 F.Supp. at 1294-96 (discussing liability in context of price-fixing case where all alleged conspirators had been named as defendants).
It is less clear that plaintiffs' claims eliminate the complexities of price tracing. Cf. Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 213, 110 S. Ct. 2807, 111 L. Ed. 2d 169 (1990) (noting that resolution of the multiple recovery issue still leaves issues of complexity). Microsoft software constituted only a small part of the many components of the computers sold by Compaq and Dell. Plaintiffs' claims assume not only that the prices that Microsoft was charging to the OEMs for licenses to its software were supracompetitive, but also that these overcharges were passed through dollar for dollar to the consumers to whom the OEMs sold their products. The fiercely competitive market in which the OEMs operated would seem to belie that assumption: presumably the market drove down the prices the OEMs could charge and may have caused them to absorb part of the Microsoft overcharges. Self-evidently, analysis of that issue would be complex.
Plaintiffs respond that this analysis is unnecessary since it must be assumed that, as culpable co-conspirators, Compaq and Dell passed through all of the Microsoft overcharges to their customers. Otherwise stated, according to plaintiffs, if Compaq and Dell were forced to absorb a portion of their component costs, the law establishes a presumption that they did so on component parts other than Microsoft products. Thus, according to plaintiffs, all they need prove is the extent of the Microsoft overcharges. But plaintiffs were injured only if they paid too much for the products they purchased, i.e., computers on which Microsoft software had been installed. Therefore, at the least they would have to present some evidence to demonstrate that the OEMs would have sold computers at even lower prices than those enforced by the fiercely competitive market and that the guilty OEMs' profits were greater than the amount of the Microsoft overcharges. This analysis too is self-evidently complex.
These complexities aside, I am persuaded that there is a more fundamental fallacy in plaintiffs' position. Their argument would provide a means for circumventing the Illinois Brick rule in any vertical conspiracy case in which a plaintiff could meet the relatively low pleading threshold of alleging that a distributor had been coerced into entering into a conspiracy with a powerful manufacturer to maintain the latter's monopoly. To open this door would be inconsistent with the teaching of Illinois Brick and its progeny that the Illinois Brick rule is intended to have broad force and effect and that departures from it must be narrow in scope. See UtiliCorp, 497 U.S. at 216-17, 110 S. Ct. 2807; see also, e.g., In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 605 (7th Cir.1997) (explaining that "Utilicorp implies that the only exceptions to the Illinois Brick doctrine are those stated in Illinois Brick itself..."), Jewish Hosp. Ass'n of Louisville, Ky., Inc. v. Stewart Mech. Enters., 628 F.2d 971, 975 (6th Cir.1980) (commenting on the "narrow scope of exemptions to the indirect-purchaser rule"). Although, as I have indicated, many courts have recognized a "co-conspirator exception" to the rule, the vast bulk of these cases have involved price-fixing, where the very purpose of the alleged conspiracy is to pass through an agreed upon overcharge to the indirect purchaser. See, e.g., Lowell, 177 F.3d at 1229, Shamrock Foods, 729 F.2d at 1210, Abrams, 1980 WL 1822 at *1, In re Anthracite Coal, 1978 WL 1341 at *1, Gas-A-Tron, 1977 WL 1519 at *1; see also 2 *547 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 371h (Rev. ed.1995) (discussing price-fixing cases that employ the co-conspirator exception). Here, plaintiffs' theory of conspiracy is far more nebulous and the alleged nexus between the conspirators' alleged wrongful conduct and the harm suffered by the plaintiffs is far more indirect. In my view, Illinois Brick therefore bars their claims.
A separate order denying plaintiffs' motion for leave to file a second amended complaint is being entered herewith.
NOTES
[1] Plaintiffs have dropped PB Electronics as a defendant in the second amended complaint.
[2] In addition, in the second amended complaint, plaintiffs allege that the per processor and long term license agreements between Microsoft and the OEM defendants remained in force after the signing of the July 15, 2001 consent decree between Microsoft and the Justice Department. This allegation is made in response to a limitations argument made by the OEM defendants. I do not find it necessary to address that argument or the efficacy of the amended allegation.
[3] Plaintiffs seek to represent a series of classes who purchased computers sold to class members by Compaq or Dell on which Microsoft operating software or applications software had been installed. If they were not seeking "pass through" damages, there is no reason their proposed classes would be so limited. Instead, presumably they would seek to represent all persons who had allegedly been damaged by the alleged conspirators, whether or not they had purchased their computers from Compaq or Dell.
[4] Plaintiffs quarrel with the "exception" terminology, contending that the absence of these two concerns in a conspiracy case renders Illinois Brick inapplicable ab initio, rather than providing a basis for the creation of an exception to its holding. I recognize the logic of plaintiffs' argument but will refer in the text to the "co-conspirator exception" since that is the term that has become conventional in the case law. My conclusion remains the same whatever phraseology is used. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2337196/ | 40 S.W.3d 544 (2001)
Donell COLEMAN and Sylvia Coleman, Individually, and as next Friend of her Minor Children, Donell Coleman, Jr., Monique Coleman, Denzell Coleman, and Dominique Coleman, Appellants,
v.
CINTAS SALES CORPORATION d/b/a Cintas Corporation, Appellee.
No. 04-00-00176-CV.
Court of Appeals of Texas, San Antonio.
January 10, 2001.
Rehearing Overruled February 7, 2001.
*546 Steven B. Fisher, Daar, Fisher, Kanaris & Vanek, P.C., Chicago, IL, Timothy E. Gehl, King & Pennington, L.L.P., Houston, for Appellant.
Kelly J. Friedman, Randy L. Fairless, Johanson & Fairless, L.L.P., Sugarland, for Appellee.
*547 Sitting: PHIL HARDBERGER, Chief Justice, PAUL W. GREEN, Justice, KAREN ANGELINI, Justice.
OPINION
PAUL W. GREEN, Justice.
In this product liability case, appellants, Donell Coleman and family, sued appellee, Cintas Sales Corporation, after Coleman's uniform caught fire at work, resulting in severe burns. On appeal, Coleman challenges the trial court's grant of summary judgment in favor of Cintas. Coleman argues summary judgment was improper because (1) Cintas failed to prove the design of the uniform was not defective, (2) Cintas failed to prove the uniform was not the producing cause of Coleman's injuries, and (3) Cintas failed to prove there was no marketing defect. We affirm the trial court's judgment in part and reverse and remand in part.
Background
Coleman worked for The Quarry at Lincoln Heights Golf Club (The Quarry) as a groundskeeper. The Quarry leased uniforms for its employees from Cintas. The contract between Cintas and The Quarry states:
Unless specified otherwise, the garments supplied under this agreement are not flame retardant or acid resistant and contain no special flame retardant or acid resistant features. They are not designed for use in areas of flammability risk or where contact with hazardous materials is possible. Flame retardant and acid resistant garments are available from Company [Cintas] on request. Customer [The Quarry] warrants that none of the employees for whom garments are supplied pursuant to this agreement require flame retardant or acid resistant clothing.
In the course of his employment, Coleman used equipment with gas motors, such as lawnmowers and weed eaters, but he did not weld, burn trash, or use tools that required an open flame. He testified he was never asked to work around an open flame, excessive heat, or sparks. The fire occurred during an employee barbeque when the cookfire flared as Coleman was placing steaks on the grill. The sleeve of Coleman's 65% polyester35% cotton shirt caught fire and he tried to smother the flame by rubbing the sleeve across his chest. This caught the body of his shirt on fire. According to Coleman, he then tried to smother the flames by rolling on the ground but the fabric continued to reignite. Finally, a supervisor smothered the fire with a large pile of uniforms. Coleman testified the fabric of his uniform melted, fusing to his skin.
Standard and Scope of Review
We review a summary judgment de novo. To prevail on summary judgment, the movant must show there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Nixon v. Mr. Property Management, Co., 690 S.W.2d 546, 548-49 (Tex.1985). Under Tex.R.Civ.P. 166a, once the movant has established a right to summary judgment, the burden shifts to the non-movant to present issues which preclude summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979); Garcia v. John Hancock Variable Life Ins. Co., 859 S.W.2d 427, 430 (Tex.App.-San Antonio 1993, writ denied). We review the evidence in the light most favorable to the nonmovant, disregarding all contrary evidence and inferences. Weiss v. Mechanical Associated Servs., Inc., 989 S.W.2d 120, 124 (Tex.App.-San Antonio 1999, pet. denied). When a defendant moves for summary judgment, it must negate at least one *548 element of the plaintiff's cause of action or conclusively establish an affirmative defense. Zale Corp. v. Rosenbaum, 520 S.W.2d 889, 891 (Tex.1975).
Discussion
The law of products liability does not guarantee a completely risk free product. However, liability is imposed on a manufacturer for products "in a defective condition unreasonably dangerous to the user or consumer." Robins v. Kroger Co., 982 S.W.2d 156, 160 (Tex.App.-Houston [1st Dist.] 1998), pet. denied per curiam, 5 S.W.3d 221 (Tex.1999) (citing Restatement (Second) of Torts § 402A (1965)). A product may be unreasonably dangerous because of a defect in manufacturing, design, or marketing. Id. Coleman alleges the uniform was defective in design and marketing.
A. Design defect
A product is defectively designed when the design itself causes the product to be unreasonably dangerous. Id. at 161. Determining whether the design is unreasonably dangerous requires balancing the utility of the product against the risk involved in its use. Id.; see Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 433 (Tex. 1997). The risk-utility analysis involves consideration of several factors, including:
(1) the utility of the product to the user and to the public as a whole weighed against the gravity and likelihood of injury from its use; (2) the availability of a substitute product which would meet the same need and not be unsafe or unreasonably expensive; (3) the manufacturer's ability to eliminate the unsafe character of the product without seriously impairing its usefulness or significantly increasing its costs; (4) the user's anticipated awareness of the dangers inherent in the product and their avoidability because of the general public knowledge of the obvious condition of the product, or of the existence of suitable warnings or instructions; and (5) the expectations of the ordinary consumer.
Hernandez v. Tokai Corp., 2 S.W.3d 251, 256 (Tex.1999). Although this risk-utility analysis is generally a question of fact for the jury, the issue may be a legal question if reasonable minds cannot differ on the risk-utility analysis considerations.[1]Id. at 260-61.
A product's utility and risk must be measured with reference to the product's intended use. Id. at 258-59. Foreseeability of risk of harm is a requirement for a defectively designed product; a product need not be designed to reduce or avoid unforeseeable risks of harm. Id. at 257. Thus, the Texas Supreme Court has held a product that is safe for its intended use is not defectively designed merely because it is unsafe in other circumstances. Id. at 259 (citing Caterpillar, Inc. v. Shears, 911 S.W.2d 379, 384 (Tex.1995)).
In this case, Cintas specifically marketed the uniforms in question for employees who would not be exposed to a risk of flammability in the workplace. Cintas provided its customer with an alternate choice of flame-retardant uniforms if the *549 work involved exposure to a risk of flammability. The Quarry, having been offered the option of flame-retardant uniforms, was entitled to choose the material most comfortable and economically feasible for employees who would not be exposed to a risk of fire. See id. (consumer entitled to consider risks and benefits of different designs and choose among them). Cintas is not required to provide only flame-retardant uniforms when there is no foreseeable risk of exposure to fire associated with the product's clearly intended use. Because Cintas proved the uniform was not defectively designed, we overrule Coleman's first issue and affirm the trial court's judgment with regard to Coleman's design defect claim.
B. Marketing Defect
Coleman claims Cintas failed to address the marketing defect claim in its motion for summary judgment. Cintas's original summary judgment motion addressed (1) whether the uniform was defective because its composition made it unreasonably dangerous, and (2) whether the alleged defect was a producing cause of Coleman's injuries. Coleman's response to the motion for summary judgment pointed out to the trial court that Cintas had not challenged Coleman's failure to warn claim. Thereafter, Cintas filed a reply to Coleman's response, presenting a single legal argument that Cintas had no duty to warn of an unforeseeable risk. Cintas's sole contention was that because it leased the uniforms for a specific purpose, any other use was unforeseeable.
In its brief on appeal, Cintas urges (1) the flammability of the uniform was not a producing cause of Coleman's injury, (2) Cintas had no duty to warn because the risk was unforeseeable, (3) Cintas was entitled to rely on The Quarry to advise its employees of any flammability risk associated with the uniform (the learned intermediary doctrine), and (4) Cintas had no duty to warn because the risk of flammability was open and obvious. Only the first two of these contentions were raised in the trial court.
(1) Elements of the Duty to Warn
A product may be unreasonably dangerous if a manufacturer fails to warn of a foreseeable risk arising from the use of the product, and the "lack of adequate warnings or instructions renders an otherwise adequate product unreasonably dangerous." Smith v. Aqua-Flo, Inc., 23 S.W.3d 473, 480 (Tex.App.-Houston [1st. Dist.] 2000, pet. denied); accord Robins, 982 S.W.2d at 160. The existence of a duty to warn of danger or instruct as to the proper usage of a product is a question of law. Robins, 982 S.W.2d at 160 (citing Grinnell, 951 S.W.2d at 426). The duty to warn is determined when the product leaves the manufacturer; however, there is no duty to warn when the risk associated with a product is within the "ordinary knowledge common to the community." Id. The duty to warn, if it exists, extends directly to the employee-user, not merely the employer-purchaser. Rourke v. Garza, 530 S.W.2d 794, 800-01 (Tex.1975); Lopez v. Aro Corp., 584 S.W.2d 333, 335 (Tex.Civ.App.-San Antonio 1979, writ ref'd n.r.e.).
(2) Producing Cause
Cintas argues the flammability of Coleman's uniform was not a producing cause of his injuries. Instead, Cintas says the sole cause of the injury was Coleman's decision to light a cooking fire in a make-shift barbeque pit in windy conditions and his failure to exercise caution to stay away from the open flame. Coleman contends that even if his own negligence contributed to cause the fire, the material make-up of *550 the uniform caused his injuries to be more severe than they should have been.
In a product liability case, the plaintiff need only show that the product defect was a producing cause of the damages or injuries. General Motors Corp. v. Castaneda, 980 S.W.2d 777, 781 (Tex. App.-San Antonio 1998, pet. denied). There may be more than one producing cause. Id. The Texas Supreme Court has held there is no valid distinction between a defect causing an accident and a defect causing an injury. Turner v. General Motors Corp., 584 S.W.2d 844, 848 (Tex.1979) (defect in automobile did not cause accident but caused injury); see Castaneda, 980 S.W.2d at 780 (defect caused injuries, not accident); Boatland of Houston, Inc. v. Bailey, 609 S.W.2d 743, 745 (Tex.1980) (defect in boat propeller did not cause boat to hit stump but caused injury after accident); see also Davidson v. Stanadyne, Inc., 718 F.2d 1334, 1340-41 & n. 11 (5th Cir.1983) (plaintiff accidentally hit faucet and turned it to full hot; alleged defect of failure to have temperature regulator caused injury not accident). In an accident where the injury involved is made worse by the product defect, the defect and the injury are interdependent and should be viewed as a combined event. Turner, 584 S.W.2d at 848.[2] Thus where the design defect enhances an injury, the defect is considered one of the producing causes of injury.
In a marketing defect case applying Texas law, the Fifth Circuit found alleged failure to warn was not merely a cause of enhanced damages, but could be viewed as actual causation of the accident. See Koonce v. Quaker Safety Prods. & Mfg. Co., 798 F.2d 700, 717-18 (5th Cir.1986). In Koonce, the plaintiff claimed he would have acted differently had there been an adequate warning. Absent evidence to the contrary, the court presumed the plaintiff would have heeded a proper warning and exercised adequate care, thus the accident itself, not merely the injury, would not have occurred. Id. at 718.
As in Koonce, Coleman made two claims regarding producing cause. First, he claimed the composition of the fabric with its tendency to burn and melt made his injury worse than would normally be expected. This goes to the alleged design defect, not the failure to warn. However, Coleman also testified he was unaware of this heightened danger and he would have exercised additional caution had he been properly warned. Therefore, with regard to the marketing defect claim, Coleman raised a fact issue of actual causation rather than enhanced injury.
(3) Foreseeability
The parties disagree on whether Coleman's use of the uniform while barbequeing was foreseeable. Cintas says this activity was not foreseeable because the uniforms were specifically provided for jobs that did not entail risk of fire. Coleman says it is foreseeable an employee might be wearing his uniform while performing non-work-related tasks.
"If a manufacturer knows or should know of potential harm to a user because of the nature of its product, the manufacturer is required to give an adequate warning of such dangers." Bristol-Myers Co. v. Gonzales, 561 S.W.2d 801, 804 (Tex.1978). A manufacturer may be held liable for foreseeable misuse of its *551 product. Where the product is not defective if used as intended, a foreseeable misuse may still give rise to a duty to warn. USX Corp. v. Salinas, 818 S.W.2d 473, 484 (Tex.App.-San Antonio 1991, writ denied); Blackwell Burner Co., Inc. v. Cerda, 644 S.W.2d 512, 516 (Tex.App.-San Antonio 1982, writ ref'd n.r.e.).
It is undisputed in this case the fabric would burn and melt if exposed to open flame. It is reasonably foreseeable that employees may perform non-work-related tasks in their work uniforms, whether at work or at home. Those tasks could involve an open fire, a foreseeable misuse of the uniform. At the very least, Coleman raised an issue of fact on this question. Therefore, he established a risk that may have been foreseeable to Cintas and a concurrent duty to warn.
(4) Waiver
A manufacturer does not have a duty to warn if the danger is "so well known to the community as to be beyond dispute." Joseph E. Seagram & Sons, Inc. v. McGuire, 814 S.W.2d 385, 388 (Tex. 1991). Additionally, a manufacturer may fulfill its duty to warn by proving that an adequate warning was given to an intermediary who would then pass the warning along to the user. Aluminum Co. of Am. v. Alm, 785 S.W.2d 137, 138-39 (Tex.1990); Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 592 (Tex.1986). Both "commom knowledge" and "learned intermediary" are defenses that must be pled and proved by the manufacturer in the trial court. See Grinnell, 951 S.W.2d at 428 (defendant must establish danger was common knowledge when consumer began using product); Aluminum Co. of Am., 785 S.W.2d at 138-39 (manufacturer can satisfy duty by proving adequate warning through intermediary).
Cintas may be entitled to summary judgment if it proves an affirmative defense of "common knowledge" or "learned intermediary." However, neither of those defenses was presented to the trial court in the motion for summary judgment or the reply filed by Cintas. Rule 166a(c) requires the grounds for a motion for summary judgment to be set forth specifically in the motion, not merely in a brief. Tex.R.Civ.P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex.1993). We may not affirm summary judgment on a ground not presented in the motion. Travis v. City of Mesquite, 830 S.W.2d 94, 99-100 (Tex. 1992); Roberts v. Southwest Tex. Methodist Hosp., 811 S.W.2d 141, 145-46 (Tex. App.-San Antonio 1991, writ denied) (summary judgment could not be granted on grounds raised in brief and in response to plaintiff's motion for summary judgment, but not in defendant's summary judgment motion).
Because Coleman raised an issue of fact on the duty to warn and Cintas failed to present its affirmative defenses, the trial court erred when it granted summary judgment for Cintas on the marketing defect claim.
Conclusion
Cintas conclusively proved there was no defect in the uniform, given the specific use for which it was provided. However, Coleman raised a preliminary fact question on the duty to warn which potentially supports his claim for a marketing defect. Cintas failed to negate the element of producing cause on the marketing defect claim and waived the defenses of common knowledge and learned intermediary by failing to raise them in the motion for summary judgment in the trial court. Accordingly, the trial court's judgment is affirmed as to Coleman's claim for design *552 defect and reversed and remanded to the trial court for further proceedings on Coleman's marketing defect claim.
NOTES
[1] The parties provided extensive briefing on the applicability of the Flammable Fabrics Act, 15 U.S.C. § 1191 (1990). However, both parties agree compliance with the Act is not conclusive evidence a product is not defectively designed, although such compliance does constitute strong and substantial evidence of non-defective design. See Sims v. Washex Machinery Corp., 932 S.W.2d 559, 565 (Tex.App.-Houston [1st Dist.] 1995, no writ). Since compliance with the Act is not dispositive, compliance cannot constitute grounds for summary judgment.
[2] Because these cases where the defect does not cause the accident but does contribute to the injury so often involve automobile accidents, they are referred to as "crashworthiness" cases. See Koonce v. Quaker Safety Prods. & Mfg. Co., 798 F.2d 700, 717-18 (5th Cir.1986). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1087768/ | 169 U.S. 466 (1898)
SMYTH
v.
AMES.
SMYTH
v.
SMITH.
SMYTH
v.
HIGGINSON.
Nos. 49, 50, 51.
Supreme Court of United States.
Argued April 5, 6, 7, 1897.
Decided March 7, 1898.
APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF NEBRASKA.
*478 Mr. John L. Webster for appellants. Mr. A.S. Churchill, attorney general of the State of Nebraska, was on his brief.
Mr. William J. Bryan for appellants.
Mr. J.M. Woolworth for appellees.
Mr. James C. Carter for appellees.
*515 MR. JUSTICE HARLAN, after stating the case as above reported, delivered the opinion of the court.
The first question to be considered is one common to all the cases. While it was not objected at the argument that there had been any departure from the 94th Equity Rule, it was contended that the plaintiffs had an adequate remedy at law, and that the Circuit Court of the United States, sitting in equity, was therefore without jurisdiction. This objection is *516 based upon the fifth section of the Nebraska statute authorizing any railroad company to show, in a proper action brought in the Supreme Court of the State, that the rates therein prescribed are unreasonable and unjust and, if that court found such to be the fact, to obtain an order upon the Board of Transportation permitting the rates to be raised to any sum in the discretion of that Board, provided that in no case should they be fixed at a higher sum than was charged by the company on the first day of January, 1893. This section, it is contended, took from the Circuit Court of the United States its equity jurisdiction in respect of the rates prescribed and required the dismissal of the bills.
We cannot accept this view of the equity jurisdiction of the Circuit Courts of the United States. The adequacy or inadequacy of a remedy at law for the protection of the rights of one entitled upon any ground to invoke the powers of a Federal court, is not to be conclusively determined by the statutes of the particular State in which suit may be brought. One who is entitled to sue in the Federal Circuit Court may invoke its jurisdiction in equity whenever the established principles and rules of equity permit such a suit in that court; and he cannot be deprived of that right by reason of his being allowed to sue at law in a state court on the same cause of action. It is true that an enlargement of equitable rights arising from the statutes of a State may be administered by the Circuit Courts of the United States. Case of Broderick's Will, 21 Wall. 503, 520; Holland v. Challen, 110 U.S. 15, 24; Dick v. Foraker, 155 U.S. 404, 415; Bardon v. Land & River Imp. Co., 157 U.S. 327, 330; Rich v. Braxton, 158 U.S. 375, 405. But if the case in its essence be one cognizable in equity, the plaintiff the required value being in dispute may invoke the equity powers of the proper Circuit Court of the United States whenever jurisdiction attaches by reason of diverse citizenship or upon any other ground of Federal jurisdiction. Payne v. Hook, 7 Wall. 425, 430; McConihay v. Wright, 121 U.S. 201, 205. A party by going into a national court does not, this court has said, lose any right or appropriate remedy of which he *517 might have availed himself in the state courts of the same locality; that the wise policy of the Constitution gives him a choice of tribunals. Davis v. Gray, 16 Wall. 203, 221; Cowley v. Northern Pacific Railroad, 159 U.S. 569, 583. So, "whenever a citizen of a State can go into the courts of a State to defend his property against the illegal acts of its officers, a citizen of another State may invoke the jurisdiction of the Federal courts to maintain a like defence. A State cannot tie up a citizen of another State, having property rights within its territory invaded by unauthorized acts of its own officers, to suits for redress in its own courts." Reagan v. Farmers' Loan & Trust Co., 154 U.S. 362, 391; Mississippi Mills v. Cohn, 150 U.S. 202, 204; Cowles v. Mercer Co., 7 Wall. 118; Lincoln County v. Luning, 133 U.S. 529; Scott v. Neely, 140 U.S. 106; Chicot County v. Sherwood, 148 U.S. 529; Cates v. Allen, 149 U.S. 451.
In these cases the plaintiffs, stockholders in the corporations named, ask a decree enjoining the enforcement of certain rates for transportation upon the ground that the statute prescribing them is repugnant to the Constitution of the United States. Under the principles which in the Federal system distinguish cases in law from those in equity, the Circuit Court of the United States, sitting in equity, can make a comprehensive decree covering the whole ground of controversy and thus avoid the multiplicity of suits that would inevitably arise under the statute. The carrier is made liable not only to individual persons for every act, matter or thing prohibited by the statute, and for every omission to do any act, matter or thing required to be done, but to a fine of from one thousand to five thousand dollars for the first offence, from five thousand to ten thousand dollars for the second offence, from ten thousand to twenty thousand dollars for the third offence, and twenty-five thousand dollars for every subsequent offence. The transactions along the line of any one of these railroads, out of which causes of action might arise under the statute, are so numerous and varied that the interference of equity could well be justified upon the ground that a general decree, according to the prayer of the bills, would avoid a multiplicity *518 of suits, and give a remedy more certain and efficacious than could be given in any proceeding instituted against the company in a court of law; for a court of law could only deal with each separate transaction involving the rates to be charged for transportation. The transactions of a single week would expose any company questioning the validity of the statute to a vast number of suits by shippers, to say nothing of the heavy penalties named in the statute. Only a court of equity is competent to meet such an emergency and determine, once for all and without a multiplicity of suits, matters that affect not simply individuals, but the interests of the entire community as involved in the use of a public highway and in the administration of the affairs of the quasi-public corporation by which such highway is maintained.
Another question of a preliminary character must be here noticed. The answer of the officers of the State in each case insists that the real party in interest is the State, and that these suits are, in effect, suits against the State, of which the Circuit Court of the United States cannot take jurisdiction consistently with the Eleventh Amendment of the Constitution of the United States. This point is, perhaps, covered by the general assignments of error, but it was not discussed at the bar by the representatives of the State Board. It would therefore be sufficient to say that these are cases of which, so far as the plaintiffs are concerned, the Circuit Court has jurisdiction not only upon the ground of the diverse citizenship or alienage of the parties, but upon the further ground that, as the statute of Nebraska under which the State Board of Transportation proceeds is assailed as being repugnant to rights secured to the plaintiffs by the Constitution of the United States, the cases may be regarded as arising under that instrument. But to prevent misapprehension, we add that, within the meaning of the Eleventh Amendment of the Constitution, the suits are not against the State but against certain individuals charged with the administration of a state enactment, which, it is alleged, cannot be enforced without violating the constitutional rights of the plaintiffs. It is the settled doctrine of this court that a suit against individuals for *519 the purpose of preventing them as officers of a State from enforcing an unconstitutional enactment to the injury of the rights of the plaintiff, is not a suit against the State within the meaning of that Amendment. Pennoyer v. McConnaughy, 140 U.S. 1, 10; In re Tyler, 149 U.S. 164, 190; Scott v. Donald, 165 U.S. 58, 68; Tindal v. Wesley, 167 U.S. 204, 220.
An important question is presented that relates only to the Union Pacific Company. That company is a corporation formed by the consolidation of several companies under the authority of acts of Congress, one of the constituent companies being the Union Pacific Railroad Company incorporated by the act of July 1, 1862, c. 120, 12 Stat. 489. United States v. Union Pacific Railway, 160 U.S. 1, 6. Neither that company nor the Union Pacific Railroad Company is named in the Nebraska statute, but the statute is interpreted by the State Board of Transportation as embracing the present defendant corporation. It is contended that the State is without power to fix or limit the rates that the Union Pacific Company may charge for the transportation of freight on its lines between points within Nebraska. This contention rests: 1. Upon the provisions of the acts of Congress showing that the Union Pacific Railroad Company was created for the accomplishment of national objects, namely, to secure the safe and speedy transportation of the mails, troops, munitions of war and public stores of the United States; 2. Upon the eighteenth section of the above act of July 1, 1862, 12 Stat. 489, 497, c. 120, providing that "whenever it appears that the net earnings of the entire road and telegraph, including the amount allowed for services rendered for the United States, after deducting all expenditures, including repairs and the furnishing, running and managing of said road, shall exceed ten per centum upon its cost, exclusive of the five per centum to be paid to the United States, Congress may reduce the rates of fare thereon, if unreasonable in amount, and may fix and establish the same by law." The argument is that Congress by this enactment has reserved to itself exclusive control of rates, interstate and local, to be charged on the Union Pacific Railroad. As this view, if maintained, would require *520 an affirmance of the decree so far as the Union Pacific Company is concerned, whether the Nebraska statute of 1893 be constitutional or not as to the other railroad corporations, it cannot properly be passed without examination.
In Reagan v. Mercantile Trust Co., 154 U.S. 413, 416, the question arose whether the Texas and Pacific Railway Company, a corporation organized under the laws of the United States, was subject to the laws of Texas with respect to rates for transportation wholly within that State. The ground upon which exemption from state control was there asserted by the company was that it received all its franchises from Congress, including the franchise to charge and collect tolls. This court, conceding, for the purposes of that case, that Congress had power to remove the corporation in all its operations from state control, held that the act creating it did not show an intention upon the part of Congress to exempt it from the duty to conform to such reasonable rates for local transportation as the State might prescribe, and that the enforcement by the State of reasonable rates for such transportation would not disable the corporation from performing the duties and exercising the powers imposed upon it by Congress. The court said: "By the act of incorporation Congress authorized the company to build its road through the State of Texas. It knew that, when constructed, a part of its business would be the carrying of persons and property from points within the State to other points also within the State, and that in so doing it would be engaged in a business, control of which is nowhere by the Federal Constitution given to Congress. It must have been known that, in the nature of things, the control of that business would be exercised by the State, and if it deemed that the interests of the nation and the discharge of the duties required on behalf of the nation from this corporation demanded exemption in all things from state control, it would unquestionably have expressed such intention in language whose meaning would be clear. Its silence in this respect is satisfactory assurance that, in so far as this corporation should engage in business wholly within the State, it intended that it should be subjected to the ordinary control *521 exercised by the State over such business. Without, therefore, relying at all upon any acceptance by the railroad corporation of the act of the legislature of the State, passed in 1873 in respect to it, we are of opinion that the Texas and Pacific Railway Company is, as to business done wholly within the State, subject to the control of the State in all matters of taxation, rates and other police regulations."
This conclusion, as may be observed from the opinion, was based in part upon the reasoning in Thomson v. Pacific Railroad, 9 Wall. 579, and in Railroad Company v. Peniston, 18 Wall. 5, in which cases it was held that the property of certain railroad companies was not exempt from state taxation by reason alone of the fact that they were organized under acts of Congress for the accomplishment of national objects, and that the imposition of such taxes was not, in a constitutional sense, an obstruction to the exercise of the powers of the General Government, nor an interference with the discharge of the duties required of the companies by their charters.
In the present case the question is more difficult of solution by reason of the declaration in the above act of July 1, 1862 (no similar declaration being made in the act incorporating the Texas and Pacific Railway Company), that Congress may reduce the rates of fare on the Union Pacific Railroad if unreasonable in amount, and may fix and establish the same by law whenever the net earnings of the entire road and telegraph, ascertained upon a named basis, should exceed ten per centum upon its cost, exclusive of the five per centum to be paid to the United States.
Undoubtedly Congress intended by that act to reserve such power as was necessary to prevent the corporation from exacting rates that were unreasonable. But this is not equivalent to a declaration that the States through which the railroad might be constructed should not regulate rates for transportation begun and completed within their respective limits.
It cannot be doubted that the making of rates for transportation by railroad corporations along public highways, *522 between points wholly within the limits of a State, is a subject primarily within the control of that State. And it ought not to be supposed that Congress intended that, so long as it forbore to establish rates on the Union Pacific Railroad, the corporation itself could fix such rates for transportation as it saw proper independently of the right of the States through which the road was constructed to prescribe regulations for transportation beginning and ending within their respective limits. On the contrary, the better interpretation of the act of July 1, 1862, is that the question of rates for wholly local business was left under the control of the respective States through which the Union Pacific Railroad might pass, with power reserved to Congress to intervene under certain circumstances and fix the rates that the corporation could reasonably charge and collect. Congress not having exerted this power, we do not think that the national character of the corporation constructing the Union Pacific Railroad stands in the way of a State prescribing rates for transporting property on that road wholly between points within its territory. Until Congress, in the exercise either of the power specifically reserved by the eighteenth section of the act of 1862 or its power under the general reservation made of authority to add to, alter, amend or repeal that act, prescribes rates to be charged by the railroad company, it remains with the States through which the road passes to fix rates for transportation beginning and ending within their respective limits.
We are now to inquire whether the Nebraska statute is repugnant to the Constitution of the United States.
By the Fourteenth Amendment it is provided that no State shall deprive any person of property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws. That corporations are persons within the meaning of this Amendment is now settled. Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, 396; Charlotte, Columbia & Augusta Railroad v. Gibbes, 142 U.S. 386, 391; Gulf, Colorado & Santa Fé Railway v. Ellis, 165 U.S. 150, 154. What amounts to deprivation of property without due process of law or what is a denial of the equal *523 protection of the laws is often difficult to determine, especially where the question relates to the property of a quasi public corporation and the extent to which it may be subjected to public control. But this court, speaking by Chief Justice Waite, has said that, while a State has power to fix the charges by railroad companies for the transportation of persons and property within its own jurisdiction, unless restrained by valid contract, or unless what is done amounts to a regulation of foreign or interstate commerce, such power is not without limit; and that, "under pretence of regulating fares and freights, the State cannot require a railroad corporation to carry persons or property without reward, neither can it do that which in law amounts to the taking of private property for public use without just compensation, or without due process of law." Railroad Commission Cases, 116 U.S. 307, 325, 331. This principle was recognized in Dow v. Beidelman, 125 U.S. 680, 689, and has been reaffirmed in other cases. In Georgia Railroad & Banking Co. v. Smith, 128 U.S. 174, 179, it was said that the power of the State to prescribe the charges of a railroad company for the carriage of persons and merchandise within its limits in the absence of any provision in the charter of the company constituting a contract vesting it with authority over those matters was "subject to the limitation that the carriage is not required without reward, or upon conditions amounting to the taking of property for public use without just compensation; and that what is done does not amount to a regulation of foreign or interstate commerce." In Chicago, Milwaukee & St. Paul Railway v. Minnesota, 134 U.S. 418, 458, it was said: "If the company is deprived of the power of charging reasonable rates for the use of its property, and such deprivation takes place in the absence of an investigation by judicial machinery, it is deprived of the lawful use of its property, and thus, in substance and effect, of the property itself, without due process of law and in violation of the Constitution of the United States; and in so far as it is thus deprived, while other persons are permitted to receive reasonable profits upon their invested capital, the company is deprived of the equal protection *524 of the laws." In Chicago & Grand Trunk Railway v. Wellman, 143 U.S. 339, 344, the court, in answer to the suggestion that the legislature had no authority to prescribe maximum rates for railroad transportation, said that "the legislature has power to fix rates, and the extent of judicial interference is protection against unreasonable rates." In Budd v. New York, 143 U.S. 517, 547, the court, while sustaining the power of New York by statute to regulate charges to be exacted at grain elevators and warehouses in that State, took care to state, as a result of former decisions, that such power was not one "to destroy or a power to compel the doing of the services without reward, or to take private property for public use without just compensation or without due process of law."
In Reagan v. Farmers' Loan & Trust Co., 154 U.S. 362, 399, which involved the validity of certain rates for freights and passengers prescribed by a railroad commission established by an act of the legislature of Texas, this court, after referring to the above cases, said: "These cases all support the proposition that while it is not the province of the courts to enter upon the merely administrative duty of framing a tariff of rates for carriage, it is within the scope of judicial power and a part of judicial duty to restrain anything which, in the form of a regulation of rates, operates to deny to the owners of property invested in the business of transportation that equal protection which is the constitutional right of all owners of other property. There is nothing new or strange in this. It has always been a part of the judicial function to determine whether the act of one party (whether that party be a single individual, an organized body or the public as a whole) operates to divest the other party of any rights of person or property. In every constitution is the guarantee against the taking of private property for public purposes without just compensation. The equal protection of the laws which, by the Fourteenth Amendment, no State can deny to the individual, forbids legislation, in whatever form it may be enacted, by which the property of one individual is, without compensation. wrested from him for the benefit of another, or of the *525 public. This, as has been often observed, is a government of law, and not a government of men, and it must never be forgotten that under such a government, with its constitutional limitations and guarantees, the forms of law and the machinery of government, with all their reach and power, must in their actual workings stop on the hither side of the unnecessary and uncompensated taking or destruction of any private property, legally acquired and legally held. It was, therefore, within the competency of the Circuit Court of the United States for the Western District of Texas, at the instance of the plaintiff, a citizen of another State, to enter upon an inquiry as to the reasonableness and justice of the rates prescribed by the railroad commission. Indeed, it was in so doing only exercising a power expressly named in the act creating the commission."
So, in St. Louis & San Francisco Railway v. Gill, 156 U.S. 649, 657, it was said that "there is a remedy in the courts for relief against legislation establishing a tariff of rates which is so unreasonable as to practically destroy the value of property of companies engaged in the carrying business, and that especially may the courts of the United States treat such a question as a judicial one, and hold such acts of legislation to be in conflict with the Constitution of the United States, as depriving the companies of their property without due process of law, and as depriving them of the equal protection of the laws." In Covington & Lexington Turnpike Road Co. v. Sandford, 164 U.S. 578, 584, 594-5, 597, which involved the validity of a state enactment prescribing rates of toll on a turnpike road, the court said: "A statute which, by its necessary operation, compels a turnpike company, when charging only such tolls as are just to the public, to submit to such further reduction of rates as will prevent it from keeping its road in proper repair, and from earning any dividends whatever for stockholders, is as obnoxious to the Constitution of the United States as would be a similar statute relating to the business of a railroad corporation having authority, under its charter, to collect and receive tolls for passengers and freight." And in Chicago, Burlington & Quincy Railroad v. Chicago, *526 166 U.S. 226, 241, it was held that "a judgment of a state court, even if it be authorized by statute, whereby private property is taken for the State or under its direction for public use, without compensation made or secured to the owner, is, upon principle and authority wanting in the due process of law required by the Fourteenth Amendment of the Constitution of the United States, and the affirmance of such judgment by the highest court of the State is a denial by that State of a right secured to the owner by that instrument."
In view of the adjudications these principles must be regarded as settled:
1. A railroad corporation is a person within the meaning of the Fourteenth Amendment declaring that no State shall deprive any person of property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.
2. A state enactment, or regulations made under the authority of a state enactment, establishing rates for the transportation of persons or property by railroad that will not admit of the carrier earning such compensation as under all the circumstances is just to it and to the public, would deprive such carrier of its property without due process of law and deny to it the equal protection of the laws, and would therefore be repugnant to the Fourteenth Amendment of the Constitution of the United States.
3. While rates for the transportation of persons and property within the limits of a State are primarily for its determination, the question whether they are so unreasonably low as to deprive the carrier of its property without such compensation as the Constitution secures, and therefore without due process of law, cannot be so conclusively determined by the legislature of the State or by regulations adopted under its authority, that the matter may not become the subject of judicial inquiry.
The cases before us directly present the important question last stated.
Before entering upon its examination, it may be observed that the grant to the legislature in the constitution of Nebraska *527 of the power to establish maximum rates for the transportation of passengers and freight on railroads in that State has reference to "reasonable" maximum rates. These words strongly imply that it was not intended to give a power to fix maximum rates without regard to their reasonableness. Be this as it may, it cannot be admitted that the power granted may be exerted in derogation of rights secured by the Constitution of the United States, or that the judiciary may not, when its jurisdiction is properly invoked, protect those rights.
What are the considerations to which weight must be given when we seek to ascertain the compensation that a railroad company is entitled to receive, and a prohibition upon the receiving of which may be fairly deemed a deprivation by legislative decree of property without due process of law? Undoubtedly that question could be more easily determined by a commission composed of persons whose special skill, observation and experience qualifies them to so handle great problems of transportation as to do justice both to the public and to those whose money has been used to construct and maintain highways for the convenience and benefit of the people. But despite the difficulties that confessedly attend the proper solution of such questions, the court cannot shrink from the duty to determine whether it be true, as alleged, that the Nebraska statute invades or destroys rights secured by the supreme law of the land. No one, we take it, will contend that a state enactment is in harmony with that law simply because the legislature of the State has declared such to be the case; for that would make the state legislature the final judge of the validity of its enactment, although the Constitution of the United States and the laws made in pursuance thereof are the supreme law of the land, anything in the constitution or laws of any State to the contrary notwithstanding. Art. VI. The idea that any legislature, state or Federal, can conclusively determine for the people and for the courts that what it enacts in the form of law, or what it authorizes its agents to do, is consistent with the fundamental law, is in opposition to the theory of our institutions. The duty rests upon all courts, Federal and state, when their *528 jurisdiction is properly invoked, to see to it that no right secured by the supreme law of the land is impaired or destroyed by legislation. This function and duty of the judiciary distinguishes the American system from all other systems of government. The perpetuity of our institutions and the liberty which is enjoyed under them depend, in no small degree, upon the power given the judiciary to declare null and void all legislation that is clearly repugnant to the supreme law of the land.
We turn now to the evidence in the voluminous record before us for the purpose of ascertaining whether looking at the cases in the light of the facts as they existed when the decrees were rendered the Nebraska statute, if enforced, would, by its necessary operation, have deprived the companies, whose stockholders and bondholders here complain, of the right to obtain just compensation for the services rendered by them.
The first and most important contention of the plaintiffs is that, if the statute had been in force during any one of the three years preceding its passage, the defendant companies would have been compelled to use their property for the public substantially without reward or without the just compensation to which it was entitled. We think this mode of calculation for ascertaining the probable effect of the Nebraska statute upon the railroad companies in question is one that may be properly used.
The conclusion reached by the Circuit Court was that the reduction made by the Nebraska statute in the rates for local freight was so unjust and unreasonable as to require a decree staying the enforcement of such rates against the companies named in the bill. Ames v. Union Pacific Railway, 64 Fed. Rep. 165, 189. That conclusion was based largely upon the figures presented by Mr. Dilworth, while he was a secretary of the State Board of Transportation, as well as a defendant and one of the solicitors of the defendants in these causes. He was a principal witness for that Board. His general fairness and his competency to speak of the facts upon which the question before us depends are apparent on the record. He stated that the average reduction made by the statute on all the "commodities of local rates" was 29.50 per cent; and this *529 estimate seems to have been accepted by the parties as correct. He estimated that the percentage of operating expenses on local business would exceed the percentage of operating expenses on all business by at least ten per cent, and that it might go as high as twenty per cent or higher. And this view is more than sustained by the evidence of witnesses possessing special knowledge of railroad transportation and of the cost of doing local business as compared with what is called through business. Indeed, one of those witnesses states that the cost of carrying local freight is four times as much as the cost of through freight per ton per mile; another, that the cost of the short haul is "reasonably double the long haul." If due regard be had to the testimony and we have no other basis for our judgment we are not permitted to place the extra cost of local business at less than ten per cent greater than the percentage of the cost of all business.
In answer to questions propounded to him by the defendants constituting the State Board of Transportation, Mr. Dilworth stated that he had prepared himself with an estimate showing the number of tons of freight, commonly spoken of as local freight, hauled on the respective railways in Nebraska, and the amount received by the railway companies by way of tariff on tons of freight hauled, including through as well as local freight, and was qualified to speak as to the amount received by the companies for both passengers and freight within the State, and the reduction that would take place in rates under the statute in question. He presented various tables showing the results of his investigations. One is known as Exhibit 4, and is an "Estimate of local business, and the effect of House Roll 33" on the Burlington, St. Paul, Fremont, Union Pacific, Omaha, St. Joseph and Kansas City Companies for the year 1892. Another is called Exhibit 19, and is a like estimate in respect of the same companies for the years 1891 and 1893. Another is known as Exhibit 20, and shows "Tons carried, tonnage per mile and percentage of expenses for the years ending June 30, 1891, 1892 and 1893 (Nebraska)." These exhibits are as follows:
*530
Exhibit "4."
Estimate of Local Business and the Effect of House Roll 33 on the Following-named Railroads:
===========================================================================================================================================================
| | | | | | Amount | |
| Number of | Average amount | Total amount | Total amount | Amount | received for | Total amount | Per cent of
1892. | tons hauled | received for | received for | of reduction | received from | freight hauled in | realized on all | reduction on all
| locally. | each ton hauled. | tons hauled | caused by | passenger | Nebraska including | business done | business done
| | | locally. | H.R. 33. | business. | through | in the State. | in the State
| | | | | | and local. | | by H.R. 33.
-------------------|-------------|------------------|--------------|--------------|---------------|--------------------|-----------------|-----------------
Burlington Co... | 574,653 | $2.15416 | $1,237,884 | $365,175 | $2,369,714 | $5,538,766 | $7,908,242 | .044
St. Paul Co... . | 65,762 | 1.87089 | 123,033 | 36,294 | 263,458 | 472,051 | 763,509 | .047
Fremont Co. ... | 158,350 | 2.12633 | 336,714 | 99,310 | 598,219 | 1,495,468 | 2,093,687 | .047
Union Pacific Co. | 192,865 | 2.06498 | 398,262 | 117,487 | 977,264 | 4,284,793 | 5,262,057 | .022
Omaha Co. ... . | 63,999 | 1.38026 | 88,335 | 26,043 | 305,668 | 955,626 | 1,261,294 | .022
St. Joseph Co... | 39,657 | .63051 | 31,004 | 8,836 | 71,083 | 216,395 | 287,478 | .030
Kansas City Co. . | 10,823 | .61261 | 6,630 | 1,889 | 41,123 | 125,530 | 166,653 | .011
===========================================================================================================================================================
*531
Exhibit "19."
Estimate of Local Business and the Effect of House Roll 33 on the Following-named Railroads for the
Years ending June 30, 1891 and 1893.
=================================================================================================================================================================
| | | | | | Amount | |
| Number of | Average amount | Total amount | Total amount | Amount | received from | Total amount | Per cent of
| tons hauled | received per | received per | of reduction | received from | freight carried | received on all | reduction on all
| locally. | each ton hauled. | ton [for tons] | caused by | passenger | in Nebraska including | business done | business done
| | | carried locally. | H.R. 33. | business. | local | in the State. | in the State
| | | | | | and through. | | by H.R. 33.
------------------|-------------|------------------|------------------|--------------|---------------|-----------------------|-----------------|-----------------
1891. | | | | | | | |
| | | | | | | |
Burlington Co. . | 538,824 | $1.98 | $1,066,871 | $314,726 | $2,321,983 | $3,942,078 | $6,264,061 | .05
St. Paul Co. . . | 64,496 | 1.72 | 110,933 | 37,725 | 225,264 | 506,470 | 731,734 | .044
Fremont Co... . | 141,056 | 2.47 | 348,408 | 102,780 | 876,583 | 1,969,242 | 2,845,825 | .036
Union Pacific Co. | 152,028 | 1.83 | 278,211 | 82,072 | 1,509,331 | 3,791,849 | 5,301,108 | .015
Omaha Co... . . | 61,448 | 1.23 | 75,581 | 22,296 | 311,130 | 580,834 | 891,964 | .025
St. Joseph Co. . | 25,078 | .87 | 21,817 | 6,245 | 86,036 | 178,529 | 264,565 | .024
Kansas City Co. . | 8,743 | .77 | 6,732 | 1,985 | 41,837 | 67,946 | 109,783 | .018
| | | | | | | |
1893. | | | | | | | |
| | | | | | | |
Burlington Co. . | 583,294 | 2.13 | 1,242,416 | 366,512 | 2,581,564 | 5,973,356 | 8,554,920 | .042
St. Paul Co. . . | 78,753 | 1.81 | 142,542 | 42,049 | 267,535 | 650,109 | 917,644 | .045
Fremont Co... . | 177,804 | 2.26 | 424,437 | 125,208 | 816,239 | 2,237,044 | 3,053,283 | .041
Union Pacific Co. | 220,061 | 1.88 | 413,714 | 122,045 | 1,551,877 | 4,313,204 | 5,865,081 | .020
Omaha Co... . . | 68,237 | 1.18 | 80,519 | 23,753 | 332,497 | 887,616 | 1,220,113 | .019
St. Joseph Co. . | 50,452 | .67 | 33,802 | 9,971 | 99,396 | 263,516 | 362,912 | .027
Kansas City Co. . | 15,485 | .61 | 9,445 | 2,786 | 41,667 | 135,824 | 177,491 | .015
=================================================================================================================================================================
*532
Exhibit "20."
Tons carried, Tonnage per Mile and Percentage of Expenses for Years ending June 30, 1891, 1892 and 1893
(Nebraska).
==============================================================================================================================================================
| | | | | | Total number |
| | Number of | Number of | Number of tons | Total number | of passengers, | Percentage
NAME OF ROAD. | Number of | tons of interstate | tons of local | of interstate | of tons, local and | local and interstate, | of expenses to
| tons carried | freight | freight carried | freight carried | interstate, | carried | earnings.
| locally. | carried. | 1 mile. | 1 mile. | carried 1 mile. | 1 mile. |
------------------------|--------------|--------------------|------------------|-----------------|--------------------|-----------------------|---------------
| | | | | | |
1891. | | | | | | |
| | | | | | |
Burlington Co. ... . | 538,824 | 1,448,229 | 73,075,310 | 106,415,962 | 269,491,272 | 69,594,747 | 66.24
St. Paul Co. ... . . | 64,496 | 228,671 | 10,267,118 | 36,397,629 | 46,664,747 | 7,403,263 | 70.78
Fremont Co... ... . | 141,056 | 654,400 | 21,863,680 | 101,644,999 | 123,508,679 | 24,898,729 | 49.87
Union Pacific Co... . | 152,028 | 1,908,045 | 28,908,124 | 362,966,694 | 391,874,818 | 66,072,597 | 68.94
Omaha Co... ... . . | 61,448 | 409,270 | 4,579,104 | 30,499,041 | 35,078,145 | 10,295,137 | 120.26
St. Joseph Co. ... . | 25,078 | 178,169 | 1,497,658 | 10,640,979 | 12,138,637 | 2,308,918 | 96.44
Kansas City Co... . . | 8,743 | 78,694 | 403,751 | 3,634,082 | 4,037,833 | 912,210 | 99.54
| | | | | | |
1892. | | | | | | |
| | | | | | |
Burlington Co. ... . | 574,653 | 1,996,437 | 91,139,965 | 316,552,193 | 407,692,158 | 70,038,243 | 64.23
St. Paul Co. ... . . | 65,762 | 264,403 | 11,028,287 | 44,321,384 | 55,349,671 | 8,833,405 | 65.96
Fremont Co... ... . | 158,350 | 846,312 | 24,069,200 | 128,425,903 | 152,495,103 | 21,874,987 | 70.71
Union Pacific Co... . | 192,865 | 1,882,112 | 42,970,322 | 419,300,773 | 462,271,095 | 56,926,269 | 56.44
Omaha Co... ... . . | 63,999 | 628,351 | 4,659,127 | 45,745,647 | 50,404,774 | 10,058,442 | 93.12
St. Joseph Co. ... . | 39,657 | 303,550 | 2,005,851 | 15,355,015 | 17,360,866 | 2,472,538 | 74.23
Kansas City Co... . . | 10,823 | 194,089 | 481,515 | 8,635,016 | 9,116,531 | 864,030 | 75.19
| | | | | | |
1893. | | | | | | |
| | | | | | |
Burlington Co. ... . | 583,294 | 2,221,005 | 93,703,675 | 357,131,753 | 450,925,428 | 83,091,418 | 65.51
St. Paul Co. ... . . | 78,753 | 279,218 | 12,848,551 | 45,554,417 | 58,402,968 | 9,074,093 | 64.58
Fremont Co... ... . | 187,804 | 800,158 | 26,855,972 | 114,511,328 | 141,367,300 | 23,209,212 | 53.66
Union Pacific Co... . | 220,061 | 2,068,568 | 45,948,736 | 431,949,561 | 477,898,297 | 63,422,117 | 58.51
Omaha Co... ... . . | 68,237 | 683,868 | 4,257,988 | 42,706,297 | 46,964,285 | 11,028,131 | 94.14
St. Joseph Co. ... . | 50,452 | 337,647 | 2,774,860 | 18,576,845 | 21,351,705 | 2,834,169 | 62.05
Kansas City Co... . . | 15,484 | 205,725 | 658,534 | 8,750,126 | 9,408,660 | 875,415 | 76.50
==============================================================================================================================================================
*533 It may be here stated that the words in these exhibits, "number of tons hauled locally," refer to freight that started and ended in the State; the words in Exhibit 4, "amount received for freight hauled in Nebraska, including through and local," and the like words in Exhibit 19, refer not only to freight starting and ending in the State, but to all freight hauled by the railroad company in Nebraska, regardless of its destination or origin that is, "freight that begins in the State and goes out of the State, freight that begins out of the State and comes into the State and freight which begins and ends in the State." The words, "per cent of reduction on all the business done in the State by House Roll 33," in Exhibits 4 and 19, mean the percentage of the total amount of all business, passenger and freight, done in the State, whatever its origin or destination, and do not indicate the percentage of reduction on local business when considered alone. It should be stated also that the words, "percentage of expenses to earnings," in Exhibit 20, refer to all business, through and local, done by the railroad company within the State. Mr. Dilworth, as we have seen, testified that if the local business alone were considered, the percentage of expenses to earnings upon such business would be at least ten per cent more than the general percentage of expenses to earnings on all business, both through and local. It is important here to note that his estimates are of business from July 1st to the succeeding June 30th. So that when allusion is made presently to his estimates for 1891, 1892 and 1893, it will be understood to refer to the years ending the 30th days of June, 1891, 1892 and 1893, respectively.
From July 1, 1890, to June 30, 1891, as shown by Exhibit 20, the percentage of expenses to earnings on all business on the Burlington road was 66.24; on the St. Paul road, 70.78; on the Fremont road, 49.87; on the Union Pacific road, 68.94; on the Omaha road, 120.26; on the St. Joseph road, 96.44; and on the Kansas City road, 99.54;
From July 1, 1891, to June 30, 1892, as shown by the same Exhibit, the percentage of expenses to earnings on all business on the Burlington road was 64.23; on the St. Paul *534 road, 65.96; on the Fremont road, 70.71; on the Union Pacific road, 56.44; on the Omaha road, 93.12; on the St. Joseph road, 74.23; and on the Kansas City road, 75.19; and,
From July 1, 1892, to June 30, 1893, as shown by the same Exhibit, the percentage of expenses to earnings on all business on the Burlington road was 65.51; on the St. Paul road, 64.58; on the Fremont road, 53.66; on the Union Pacific road, 58.51; on the Omaha road, 94.14; on the St. Joseph road, 62.05; and on the Kansas City road, 76.50.
In view of the reduction of 29.50 in rates prescribed by the statute and of the extra cost of doing local business, as compared with other business, what do these facts show?
Take the case of the Burlington road from July 1, 1890, to June 30, 1891. Looking at the entire business done on it during that period within the limits of the State, we find that the percentage of operating expenses to earnings on all business which, as stated, does not include the extra cost of local business was 66.24. Add to this the extra cost of local business, estimated at at least ten per cent, and the result is that, under the rates charged during the period stated, the cost to the Burlington Company of earning $100 would have been $76.24. Now, if the reduction of 29½ per cent made by the act of 1893 had been in force prior to July 1, 1891, the company would have received $70.50 as against $100 for the same service, showing that in that year the operating expenses would have exceeded the earnings by $5.74 in every $100 of the amount actually received by it.
By like calculations, it will appear that each of the railroad companies would have conducted its local business at a loss during the periods stated, except that in the year ending June 30, 1891, and in the year ending June 30, 1893, the earnings of the Fremont Company, and in the years ending the 30th days of June, 1892 and 1893, respectively, the earnings of the Union Pacific Company, would have slightly exceeded their operating expenses.
Under the rates prescribed by the act of 1893 the cost to the respective companies of local business in Nebraska would have exceeded the earnings for the years ending June 30, *535 1891, 1892 and 1893, respectively, in every one hundred dollars of the amount actually received, as follows: To the Burlington Company, by $5.74, $3.73 and $5.01; to the St. Paul Company, by $10.28, $5.46 and $4.08; to the Omaha Company, by $59.76, $32.62 and $33.64; to the St. Joseph Company, by $35.94, $13.73 and $1.55; and to the Kansas City Company, by $39.04, $14.69 and $16. The cost to the Union Pacific Company for the year ending June 30, 1891, of its local business, under the rates prescribed by the statute of 1893, would have caused a loss of $8.44 in every one hundred dollars of the amount actually received.
In order to show these results at a glance, the table on page 536 is inserted upon the basis of one hundred as representing the amounts actually charged and received by the respective railroad companies for the years given.
There are other views of the case suggested by the above exhibits and table which show the same results.
In the year ending June 30, 1891, under the rates then in force, the Burlington Company received $1,066,871 for tons carried locally. If the business had been done under the rates prescribed by the act of 1893, it would have received 29½ per cent less, that is, only $752,145 or $314,726 less than it did receive. The percentage of expenses to earnings, including the extra cost of local business, was 76.24; that is, it cost $813,382 to earn $1,066,871. So that the difference between $813,382 and $752,145 shows that, if the rates prescribed by the statute of 1893 had been in force during the year ending June 30, 1891, the amount received would have been less than the operating expenses of the Burlington Company by $61,237.
During the year ending June 30, 1892, the same company received for tons carried locally $1,237,884. If the act of 1893 had been in force, it would have received, because of the reduced rates prescribed by that act, only $872,709 less by $365,175 than it did receive. The percentage of expenses to earnings, including the extra cost of local business, was 74.23; that is, the $872,709 would have been earned at a cost of $918,881. So that under the rates prescribed by the act
*536
==============================================================================================================================
| Cost by percentage | Extra cost of local | Total cost of local | Earnings as reduced | |
NAME. | of all business. | business. | business. | by act of 1893. | Loss. | Gain.
------------------------|--------------------|---------------------|---------------------|---------------------|-------|------
1891. | | | | | |
| | | | | |
Burlington Company . . | 66.24 | 10 | 76.24 | 70.50 | 5.74 |
St. Paul Company ... | 70.78 | 10 | 80.78 | 70.50 | 10.28 |
Fremont Company ... . | 49.87 | 10 | 59.87 | 70.50 | ... | 10.63
Union Pacific Company . | 68.94 | 10 | 78.94 | 70.50 | 8.44 |
Omaha Company ... . . | 120.26 | 10 | 130.26 | 70.50 | 59.76 |
St. Joseph Company . . | 96.44 | 10 | 106.44 | 70.50 | 35.94 |
Kansas City Company . . | 99.54 | 10 | 109.54 | 70.50 | 39.04 |
| | | | | |
1892. | | | | | |
| | | | | |
Burlington Company . . | 64.23 | 10 | 74.23 | 70.50 | 3.73 |
St. Paul Company ... | 65.96 | 10 | 75.96 | 70.50 | 5.46 |
Fremont Company ... . | 70.71 | 10 | 80.71 | 70.50 | 10.21 |
Union Pacific Company . | 56.44 | 10 | 66.44 | 70.50 | ... | 4.06
Omaha Company ... . . | 93.12 | 10 | 103.12 | 70.50 | 32.62 |
St. Joseph Company . . | 74.23 | 10 | 84.23 | 70.50 | 13.73 |
Kansas City Company . . | 75.19 | 10 | 85.19 | 70.50 | 14.69 |
| | | | | |
1893. | | | | | |
| | | | | |
Burlington Company . . | 65.51 | 10 | 75.51 | 70.50 | 5.01 |
St. Paul Company ... | 64.58 | 10 | 74.58 | 70.50 | 4.08 |
Fremont Company ... . | 53.66 | 10 | 63.66 | 70.50 | ... | 6.84
Union Pacific Company . | 58.51 | 10 | 68.51 | 70.50 | ... | 1.99
Omaha Company ... . . | 94.14 | 10 | 104.14 | 70.50 | 33.64 |
St. Joseph Company . . | 62.05 | 10 | 72.05 | 70.50 | 1.55 |
Kansas City Company . . | 76.50 | 10 | 86.50 | 70.50 | 16.00 |
==============================================================================================================================
of 1893 the loss during the period named would have been $46,172.
During the year ending June 30, 1893, that company received $1,242,416 for tons carried locally; whereas, under the 29½ per cent reduction prescribed by the statute of that year, it would have received only $875,905, that is, less by $366,512 than it did receive. The percentage of its expenses to earnings in that year, including the extra cost of local business, was 75.51; that is, under the statutory rates $875,905 would have been earned at a cost of $938,147; which would have been a loss of $62,243.
*537 By the same mode of calculation, it will be found that, if the statute of 1893 had been enforced during the years ending the 30th days of June, 1891, 1892 and 1893, respectively, the other companies would have lost, that is, their expenses would have exceeded their earnings during those years by the following amounts: The St. Paul Company, $11,403, $6716 and $5814; the Fremont Company, $34,377 for the year ending June 30, 1892; the Union Pacific Company, $23,480, for the year ending June 30, 1891; the Omaha Company, $45,166, $28,813 and $27,085; the St. Joseph Company, $7840, $4256 and $523; and the Kansas City Company, $2627, $974 and $1510; while the earnings of the Union Pacific Company would have exceeded its expenses for the years ending the 30th days of June, 1892 and 1893, respectively, by $16,170 and $8234; and those of the Fremont Company by $37,037 and $29,036 for the years ending the 30th days of June, 1891 and 1893, respectively.
These results will be seen in the table on page 538, based upon the above exhibits, and assuming that 10 per cent was the very lowest amount of the extra cost of business beginning and ending in the State.
Counsel for the appellants contend that the railroad companies in Nebraska derived a profit from their local tonnage of nearly 100 per cent over and above operating expenses. This contention is based upon the evidence given by William Randall, freight and ticket agent as well as auditor of the Burlington road in Nebraska, on his first examination as a witness. He then stated that the earnings of the company for the year 1892 meaning for the year beginning January 1, 1892 upon freight starting and ending within the State were $1,853,036.59, and that the operating expenses, including taxes, on that business were $972,183.70. These figures, counsel say, show that "there was a clear profit over operating expenses, including taxes, of nearly one hundred per cent on the local business of the Burlington Company in 1892." But counsel overlook the fact that, upon his second examination, Mr. Randall stated that his first figures were not correct, and that the operating expenses on local business in 1892 were
*538
==========================================================================================================================================================
| | | What would | Amount to be | Amount to be | | |
| Total amount | Total amount | have been received | deducted to pay | taken out of | | |
| received for | of reduction by | under | expenses (reckoned | earnings to pay | Total expense | Gain. | Loss.
NAME OF ROAD | tons carried | act of 1893, 29½ | rates fixed by | by per | 10 per cent extra | of local business. | |
| locally. | per cent. | act of 1893. | cent of cost of | cost of local | | |
| | | | all business). | business. | | |
------------------|--------------|------------------|--------------------|--------------------|-------------------|--------------------|---------|--------
| | | | | | | |
1891. | | | | | | | |
| | | | | | | |
Burlington Co. . | $1,066,871 | $314,726 | $752,145 | $706,695 | $106,687 | $813,382 | ... | $61,237
St. Paul Co. . . | 110,933 | 32,725 | 78,208 | 78,518 | 11,093 | 89,611 | ... | 11,403
Fremont Co... . | 348,408 | 102,780 | 245,628 | 173,751 | 34,840 | 208,591 | $37,037 | ...
Union Pacific Co. | 278,211 | 82,072 | 196,139 | 191,798 | 27,821 | 219,619 | ... | 23,480
Omaha Co... . . | 75,581 | 22,296 | 53,285 | 90,893 | 7,558 | 98,451 | ... | 45,166
St. Joseph Co. . | 21,817 | 6,436 | 15,381 | 21,040 | 2,181 | 23,221 | ... | 7,840
Kansas City Co. . | 6,732 | 1,985 | 4,747 | 6,701 | 673 | 7,374 | ... | 2,627
| | | | | | | |
1892. | | | | | | | |
| | | | | | | |
Burlington Co. . | 1,237,884 | 365,175 | 872,709 | 795,093 | 123,788 | 918,881 | ... | 46,172
St. Paul Co. . . | 123,033 | 36,294 | 86,739 | 81,152 | 12,303 | 93,455 | ... | 6,716
Fremont Co... . | 336,714 | 99,330 | 237,384 | 238,090 | 33,671 | 271,761 | ... | 34,377
Union Pacific Co. | 398,262 | 117,487 | 280,775 | 224,779 | 39,826 | 264,605 | 16,170 | ...
Omaha Co... . . | 88,335 | 26,058 | 62,277 | 82,257 | 8,833 | 91,090 | ... | 28,813
St. Joseph Co. . | 31,004 | 9,146 | 21,858 | 23,014 | 3,100 | 26,114 | ... | 4,256
Kansas City Co. . | 6,630 | 1,955 | 4,674 | 4,985 | 663 | 5,648 | ... | 974
| | | | | | | |
1893. | | | | | | | |
| | | | | | | |
Burlington Co. . | 1,242,416 | 366,512 | 875,904 | 813,906 | 124,241 | 938,147 | ... | 62,243
St. Paul Co. . . | 142,542 | 42,049 | 100,493 | 92,053 | 14,254 | 106,307 | ... | 5,814
Fremont Co... . | 424,437 | 125,208 | 299,229 | 227,750 | 42,443 | 270,193 | 29,036 | ...
Union Pacific Co. | 413,714 | 122,045 | 291,669 | 242,064 | 41,371 | 283,435 | 8,234 | ...
Omaha Co... . . | 80,519 | 23,753 | 56,766 | 75,800 | 8,051 | 83,851 | ... | 27,085
St. Joseph Co. . | 33,802 | 9,971 | 23,831 | 20,974 | 3,380 | 24,354 | ... | 523
Kansas City Co. . | 9,445 | 2,786 | 6,659 | 7,225 | 944 | 8,169 | ... | 1,510
==========================================================================================================================================================
*539 $1,221,742.84, and not $972,183.70. This agrees with the figures given by Mr. Taylor, another auditor of the Burlington Company. Now, if the act of 1893 had been in force during 1892, the earnings in the latter year, $1,853,036.59, would have been reduced by 29½ per cent, that is, by $546,645.79, leaving $1,306,390.80 as the total receipts on local business, which, after deducting operating expenses, $1,221,742.84, would leave a profit of $84,567.97. If, as counsel for appellees contend, 10 per cent be added as the extra cost of local business, the result would show an actual loss on that business during the whole of 1892. But if that mode of calculation be not adopted, the utmost that can be said to be established by the evidence of Taylor and Randall would be that if the rates fixed by the act of 1893 had been in force during 1892, the company would have received on local business, in the latter year, $84,647.96 over and above operating expenses, or a little over 6 per cent of the amount of those expenses. The difference between the figures of Dilworth and Taylor and Randall, as to the earnings of the Burlington Company, arises, so far as we can perceive, from the fact that their calculations cover different periods. Dilworth gave the earnings from July 1, 1891, to June 30, 1892, and speaks of them as the earnings for 1892, while Taylor and Randall gave the earnings from January 1, 1892, to December 31, 1892. There may have been an unusual amount of business during the last six months of 1892 embraced in the estimates of Taylor and Randall, and not embraced by Dilworth's estimates. We cannot, therefore, say that the testimony of Taylor and Randall overthrows the estimates of Dilworth.
It is said by the appellants that the local rates established by the Nebraska statute are much higher than in the State of Iowa, and that fact shows that the Nebraska rates are reasonable. This contention was thus met by the Circuit Court: "It is, however, urged by the defendants that, in the general tariffs of these companies, there is an inequality; that the rates in Nebraska are higher than those in adjoining States, and that the reduction by House Roll 33 simply establishes an equality between Nebraska and the other States through *540 which the roads run. The question is asked, Are not the people of Nebraska entitled to as cheap rates as the people of Iowa? Of course, relatively they are. That is, the roads may not discriminate against the people of any one State, but they are not necessarily bound to give absolutely the same rates to the people of all the States; for the kind and amount of business and the cost thereof are factors which determine largely the question of rates, and these vary in the several States. The volume of business in one State may be greater per mile, while the cost of construction and of maintenance is less. Hence, to enforce the same rates in both States might result in one in great injustice, while in the other it would only be reasonable and fair. Comparisons, therefore, between the rates of two States are of little value, unless all the elements that enter into the problem are presented. It may be true, as testified by some of the witnesses, that the existing local rates in Nebraska are 40 per cent higher than similar rates in the State of Iowa. But it is also true that the mileage earnings in Iowa are greater than in Nebraska. In Iowa there are 230 people to each mile of railroad, while in Nebraska there are but 190; and, as a general rule, the more people there are the more business there is. Hence, a mere difference between the rates in two States is of comparatively little significance." 64 Fed. Rep. 165. In these views we concur, and it is unnecessary to add anything to what was said by the Circuit Court on this point.
It is further said, in behalf of the appellants, that the reasonableness of the rates established by the Nebraska statute is not to be determined by the inquiry whether such rates would leave a reasonable net profit from the local business affected thereby, but that the court should take into consideration, among other things, the whole business of the company, that is, all its business, passenger and freight, interstate and domestic. If it be found upon investigation that the profits derived by a railroad company from its interstate business alone are sufficient to cover operating expenses on its entire line, and also to meet interest, and justify a liberal dividend upon its stock, may the legislature prescribe rates for domestic *541 business that would bring no reward and be less than the services rendered are reasonably worth? Or, must the rates for such transportation as begins and ends in the State be established with reference solely to the amount of business done by the carrier wholly within such State, to the cost of doing such local business, and to the fair value of the property used in conducting it, without taking into consideration the amount and cost of its interstate business, and the value of the property employed in it? If we do not misapprehend counsel, their argument leads to the conclusion that the State of Nebraska could legally require local freight business to be conducted even at an actual loss, if the company earned on its interstate business enough to give it just compensation in respect of its entire line and all its business, interstate and domestic. We cannot concur in this view. In our judgment, it must be held that the reasonableness or unreasonableness of rates prescribed by a State for the transportation of persons and property wholly within its limits must be determined without reference to the interstate business done by the carrier, or to the profits derived from it. The State cannot justify unreasonably low rates for domestic transportation, considered alone, upon the ground that the carrier is earning large profits on its interstate business, over which, so far as rates are concerned, the State has no control. Nor can the carrier justify unreasonably high rates on domestic business upon the ground that it will be able only in that way to meet losses on its interstate business. So far as rates of transportation are concerned, domestic business should not be made to bear the losses on interstate business, nor the latter the losses on domestic business. It is only rates for the transportation of persons and property between points within the State that the State can prescribe; and when it undertakes to prescribe rates not to be exceeded by the carrier, it must do so with reference exclusively to what is just and reasonable, as between the carrier and the public, in respect of domestic business. The argument that a railroad line is an entirety; that its income goes into, and its expenses are provided for, out of a common fund; and that its capitalization is on its entire line, within and without *542 the State, can have no application where the State is without authority over rates on the entire line, and can only deal with local rates and make such regulations as are necessary to give just compensation on local business.
Touching the suggestion that the reduction on rates made by the state law was reasonable, if regard be had to all the business, through and local, done in the State by the railroad companies, the Circuit Court said:
"But again, as Mr. Dilworth testified, the average reduction on local rates caused by House Roll 33 is 29½ per cent. The tariff which was in force at the time of the passage of this act had been, for some three or more years, fixed by the voluntary action of the railroad companies, and the reduction of 29½ per cent was from their rates. It must be remembered that these roads are competing roads; that competition tends to a reduction of rates sometimes, as the history of the country has shown, below that which affords any remuneration to those who own the property. Can it be possible that any business so carried on can suffer a reduction of 29½ per cent in its receipts without ruin? What would any business man, engaged in any business of a private character, think of a compulsory reduction of his receipts to the amount of 29½ per cent? The effect of this testimony is not destroyed by the table offered of the percentage of reduction on the total amount of business done by these companies in the State as follows:
"B. & M. R. ............................ 4.2 per cent.
"C., St. P., M. & O. ................... 4.5 per cent.
"F., E. &. M. B. ....................... 4.1 per cent.
"Union Pacific ......................... 2.0 per cent.
"O. & R. V. ............................ 1.9 per cent.
"St. J. & G. I. ........................ 2.7 per cent.
"K. C. & O. ............................ 1.5 per cent.
"For such a table only indicates, as is further shown by Defendants' Exhibit 4, how small a proportion of the total amount of business done in the State comes from purely local freight. Nor is it weakened by any comparison between the amount of reduction and the total receipts from all business. *543 It may be, as stated by counsel, that the annual earnings of the Chicago, Burlington and Quincy Company are $27,916,128, and that the total amount of reduction caused by this House Roll 33 is only $365,175. It may be that the capital stock of the company is $76,407,500, and that $365,175 distributed among the stockholders may not be for any of them a great sum; but the entire earnings of the C., B. & Q. are more than twenty times the receipts from local freight in Nebraska; and to reduce such earnings by twenty times $365,175 would make a startling difference in their amount. The fact that the State of Nebraska can reach only one twentieth of the total earnings, gives it no greater right to make a reduction in respect to that one twentieth than it would have, had it the power over the total earnings, and attempted in them a like per cent of reduction. If it would be unreasonable to reduce the total earnings of these roads 29½ per cent, it is at least, prima facie, equally unreasonable to so reduce any single fractional part of such earnings."
It appears, from what has been said, that if the rates prescribed by the act of 1893 had been in force during the years ending June 30, 1891, 1892 and 1893, the Fremont Company, in the years ending June 30, 1891, and June 30, 1893, and the Union Pacific Company, in the years ending June 30, 1892, and June 30, 1893, would each have received more than enough to pay operating expenses. Do those facts affect the general conclusion as to the probable effect of the act of 1893? In the discussion of this question, the plaintiffs contended that a railroad company is entitled to exact such charges for transportation as will enable it, at all times, not only to pay operating expenses, but also to meet the interest regularly accruing upon all its outstanding obligations, and justify a dividend upon all its stock; and that to prohibit it from maintaining rates or charges for transportation adequate to all those ends will deprive it of its property without due process of law, and deny to it the equal protection of the laws. This contention was the subject of elaborate discussion; and, as it bears upon each case in its important aspects, it should not be passed without examination.
*544 In our opinion, the broad proposition advanced by counsel involves some misconception of the relations between the public and a railroad corporation. It is unsound in that it practically excludes from consideration the fair value of the property used, omits altogether any consideration of the right of the public to be exempt from unreasonable exactions, and makes the interests of the corporation maintaining a public highway the sole test in determining whether the rates established by or for it are such as may be rightfully prescribed as between it and the public. A railroad is a public highway, and none the less so because constructed and maintained through the agency of a corporation deriving its existence and powers from the State. Such a corporation was created for public purposes. It performs a function of the State. Its authority to exercise the right of eminent domain and to charge tolls was given primarily for the benefit of the public. It is, under governmental control though such control must be exercised with due regard to the constitutional guarantees for the protection of its property. Olcott v. The Supervisors, 16 Wall. 678, 694; Sinking Fund cases, 99 U.S. 700, 719; Cherokee Nation v. Southern Kansas Railway, 135 U.S. 641, 657. It cannot, therefore, be admitted that a railroad corporation maintaining a highway under the authority of the State may fix its rates with a view solely to its own interests, and ignore the rights of the public. But the rights of the public would be ignored if rates for the transportation of persons or property on a railroad are exacted without reference to the fair value of the property used for the public or the fair value of the services rendered, but in order simply that the corporation may meet operating expenses, pay the interest on its obligations, and declare a dividend to stockholders.
If a railroad corporation has bonded its property for an amount that exceeds its fair value, or if its capitalization is largely fictitious, it may not impose upon the public the burden of such increased rates as may be required for the purpose of realizing profits upon such excessive valuation or fictitious capitalization; and the apparent value of the property and franchises used by the corporation, as represented by its *545 stocks, bonds and obligations, is not alone to be considered when determining the rates that may be reasonably charged. What was said in Covington & Lexington Turnpike Road Co. v. Sandford, 164 U.S. 578, 596-7, is pertinent to the question under consideration. It was there observed: "It cannot be said that a corporation is entitled, as of right, and without reference to the interests of the public, to realize a given per cent upon its capital stock. When the question arises whether the legislature has exceeded its constitutional power in prescribing rates to be charged by a corporation controlling a public highway, stockholders are not the only persons whose rights or interests are to be considered. The rights of the public are not to be ignored. It is alleged here that the rates prescribed are unreasonable and unjust to the company and its stockholders. But that involves an inquiry as to what is reasonable and just for the public... . The public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends. The legislature has the authority, in every case, where its power has not been restrained by contract, to proceed upon the ground that the public may not rightfully be required to submit to unreasonable exactions for the use of a public highway established and maintained under legislative authority. If a corporation cannot maintain such a highway and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by imposing unjust burdens upon the public. So that the right of the public to use the defendant's turnpike upon payment of such tolls as in view of the nature and value of the services rendered by the company are reasonable, is an element in the general inquiry whether the rates established by law are unjust and unreasonable."
A corporation maintaining a public highway, although it owns the property it employs for accomplishing public objects, must be held to have accepted its rights, privileges and franchises subject to the condition that the government creating it, or the government within whose limits it conducts its business, may by legislation protect the people against unreasonable *546 charges for the services rendered by it. It cannot be assumed that any railroad corporation, accepting franchises, rights and privileges at the hands of the public, ever supposed that it acquired, or that it was intended to grant to it, the power to construct and maintain a public highway simply for its benefit, without regard to the rights of the public. But it is equally true that the corporation performing such public services and the people financially interested in its business and affairs have rights that may not be invaded by legislative enactment in disregard of the fundamental guarantees for the protection of property. The corporation may not be required to use its property for the benefit of the public without receiving just compensation for the services rendered by it. How such compensation may be ascertained, and what are the necessary elements in such an inquiry, will always be an embarrassing question. As said in the case last cited: "Each case must depend upon its special facts; and when a court, without assuming itself to prescribe rates, is required to determine whether the rates prescribed by the legislature for a corporation controlling a public highway are, as an entirety, so unjust as to destroy the value of its property for all the purposes for which it was acquired, its duty is to take into consideration the interests both of the public and of the owner of the property, together with all other circumstances that are fairly to be considered in determining whether the legislature has, under the guise of regulating rates, exceeded its constitutional authority, and practically deprived the owner of property without due process of law... . The utmost that any corporation operating a public highway can rightfully demand at the hands of the legislature, when exerting its general powers, is that it receive what, under all the circumstances, is such compensation for the use of its property as will be just both to it and to the public."
We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value, the *547 original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case. We do not say that there may not be other matters to be regarded in estimating the value of the property. What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. On the other hand, what the public is entitled to demand is that no more be exacted from it for the use of a public highway than the services rendered by it are reasonably worth. But even upon this basis, and determining the probable effect of the act of 1893 by ascertaining what could have been its effect if it had been in operation during the three years immediately preceding its passage, we perceive no ground on the record for reversing the decree of the Circuit Court. On the contrary, we are of opinion that as to most of the companies in question there would have been, under such rates as were established by the act of 1893, an actual loss in each of the years ending June 30, 1891, 1892 and 1893; and that, in the exceptional cases above stated, when two of the companies would have earned something above operating expenses, in particular years, the receipts or gains, above operating expenses, would have been too small to affect the general conclusion that the act, if enforced, would have deprived each of the railroad companies involved in these suits of the just compensation secured to them by the Constitution. Under the evidence there is no ground for saying that the operating expenses of any of the companies were greater than necessary.
In concluding this opinion, it may not be inappropriate to say that the conclusions reached by us as to the effect of the Nebraska statute find some support in the report of the Board of Secretaries of the Nebraska Board of Transportation made in September, 1891, to the Board itself, and signed by Mr. Dilworth *548 and his colleagues. That report was made pursuant to a resolution of the Board requiring the Secretaries to prepare a statement of facts in reference to the rates of transportation in Nebraska. It contains a brief history of what it characterizes as "the controversy on the question of freight rates between the people and the railroads of the State," and embodies such facts, figures and arguments as the Secretaries gathered from both sides. The report says: "The present controversy between the people and the railroads of this State originally grew out of the question, not of rates or reduction of rates, but of control. The people, recognizing the railroads as common carriers, not entitled under the state constitution to the same broad liberty of action in business that the individual citizen has, wanted to control the roads. The roads, impatient of interference, wanted to control themselves and manage their business in their own way." It further states: "We have given you in the foregoing a brief history of the rate matter as we have found it, and from that history and from the evidence and reports on file in our office we beg leave to submit in conclusion the following findings of fact: First. We find from the evidence and sworn statements and reports, on file in our office, and from personal inspection, that the railroads in this State could not be duplicated for a less sum than $30,000 per mile, taking into consideration their equipments and depot and terminal facilities." Here follow a mass of figures and calculations, and the report concludes: "We further find that the railroads are not in a condition to stand, nor do their earnings, figured on a basis cost of $30,000 per mile and not what they claim they cost, justify any cut in local rates of this State at the present time; and further, that a reduction in the local rates in this State would increase the through rates to market for our grain and would be a blow at the industry of the State. This last finding is fully established by the fact that the Board of Transportation reduced the local rates on hard coal 60 per cent, and yet the price to the consumer was not lowered nor the price at the mines raised, which shows conclusively that the through rates must have been raised. In submitting this report we have presented the facts *549 and figures as we find them from evidence obtainable, from sworn reports now on file in our office. And we would respectfully recommend that no action be taken that will in any way jeopardize the interests of the producers of Nebraska, but that all interests be protected in the fullest manner possible, as provided by the foregoing findings."
To this report of the Secretaries is appended the "Findings of the Board," from which we make this extract: "After a careful and quite thorough investigation of the question of freight rates in Nebraska, which has occupied much time, and has taken a wide range, the state Board of Transportation has arrived at the conclusion that the rates now in force in this State cannot be generally reduced without doing violence to the business interests of the State, and at the same time injuring the shipping and producing classes. We have come to this conclusion, not by taking the cost of construction and equipments, nor the amount of stock and bonds issued per mile, but by making our computations upon the basis of what it would cost to duplicate the property at the present time. It has been our endeavor to deal fairly and justly with the question, and in arriving at a conclusion we have been governed only by the evidence, statements and facts produced for our consideration. A candid examination and comparison of the figures presented to us in the unanimous report of the Board of Secretaries, in the opinion of this Board, fully justifies the conclusion reached: That a general reduction of rates, as now in force over the State, is not practical at this time."
So that we have the judgment of the state Board of Transportation, as constituted in 1891, that a general reduction of rates could not then have been made without injury to the business of the State, to say nothing of the interests of those whose means were invested in railroad property. We are unable to find from the record before us that the situation in Nebraska had so changed in 1893 as to justify that being done in that year which it was not safe or just to do in 1891.
But it may be added that the conditions of business, so far as railroad corporations are concerned, have probably changed *550 for the better since the decree below, and that the rates prescribed by the statute of 1893 may now afford all the compensation to which the railroad companies in Nebraska are entitled as between them and the public. In anticipation, perhaps, of such a change of circumstances, and the exceptional character of the litigation, the Circuit Court wisely provided in its final decree that the defendants, members of the Board of Transportation, might, "when the circumstances have changed so that the rates fixed in the said act of 1893 shall yield to the said companies reasonable compensation for the services aforesaid," apply to the court, by bill or otherwise as they might be advised, for a further order in that behalf. Of this provision of the final decree the state Board of Transportation, if so advised, can avail itself. In that event, if the Circuit Court finds that the present condition of business is such as to admit of the application of the statute to the railroad companies in question without depriving them of just compensation, it will be its duty to discharge the injunction heretofore granted, and to make whatever order is necessary to remove any obstruction placed by the decrees in these cases in the way of the enforcement of the statute.
Perceiving no error on the record in the light of the facts presented to the Circuit Court,
The decree in each case must be affirmed.
The CHIEF JUSTICE took no part in the consideration or decision of these cases.
MR. JUSTICE McKENNA was not a member of the court when they were argued and submitted, and took no part in their decision. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1107970/ | 542 So.2d 777 (1989)
Deborah SLOCUM, et ux., Plaintiffs-Appellants,
v.
SEARS ROEBUCK & COMPANY, etc., Defendants-Appellees.
No. 88-3.
Court of Appeal of Louisiana, Third Circuit.
April 19, 1989.
*778 Davis & Saybe, Michael H. Davis, Alexandria, for plaintiffs-appellants.
Gist, Methvin, Charles O. Lacroix, Alexandria, for defendants-appellees.
Before FORET, DOUCET and YELVERTON, JJ.
YELVERTON, Judge.
This is an appeal from a judgment dismissing plaintiffs' claims for damages stemming from an invasion of privacy. The trial court found at the conclusion of the presentation of the plaintiffs' case at trial, that the plaintiffs had shown no right to relief and rendered a judgment of involuntary dismissal. La.C.C.P.Art. 1672. The plaintiffs appealed. We affirm.
The facts are these. In 1985 Deborah Slocum, the mother of 3½ month old Ashley Belle Slocum, responded to an advertisement and had the child's photograph taken at the Sears photography studio in a store in Alexandria. Pleased with the results, the mother purchased prints of all the poses. Later, Ms. Slocum learned that a photograph of the child was in a display case in the photography studio. Another print was displayed on an advertising bulletin board in the Sears credit department. The child's photograph was later found displayed in a Sears Store in the Cortana Mall in Baton Rouge.
The parents sued Sears on behalf of their child, and also on their own behalf, for damages.
The basis for the claim for damages on behalf of the child was an invasion of the privacy of the child. The alleged basis for the claim for damages on behalf of the parents was mental anguish occasioned by the defendants' unauthorized use of the photographs of the child.
The trial court's dismissal of the suit was based on findings that no damages to the child had been proved, and that the parents could not recover damages for the invasion of privacy of their child.
After the plaintiffs filed their appeal the defendants answered asking for damages for frivolous appeal.
Tort actions for invasion of privacy are recognized in Louisiana. The right of privacy embraces four different interests, each of which may be invaded in a distinct fashion: (1) the appropriation of an individual's name or likeness for the use or benefit of the defendant; (2) an unreasonable intrusion by the defendant upon the plaintiff's physical solitude or seclusion; (3) publicity that unreasonably places the plaintiff in a false light before the public; and (4) unreasonable public disclosure of embarrassing private facts. Jaubert v. Crowley Post-Signal, Inc., 375 So.2d 1386 (La.1979). The facts of the present case place it in the first category, the appropriation *779 of the child's likeness for the use or benefit of the defendant. The facts show that there was an appropriation (a taking without consent) by Sears of the child's photograph, and its limited use for the benefit of Sears.
An actionable invasion of privacy occurs only when the defendant's conduct is unreasonable and seriously interferes with the plaintiff's privacy interests. Id. The reasonableness of the defendant's conduct is determined by balancing the conflicting interests at stake; the plaintiff's interest in protecting his privacy from serious invasions, and the defendant's interest in pursuing his course of conduct. Id.
In the present case Sears was guilty of a technical invasion of the privacy of the infant. Consent was not obtained from the parents for the exhibition of the photographs. However, the exhibitions were limited to Sears' stores and its photography business. They were exhibited only briefly, and the exhibition was promptly discontinued when requested by the parents. The photograph was not identified by name. The photographs were of apparent high quality and the child was evidently very pretty. In fact, the mother testified that these were some of the best pictures ever taken of her daughter. This case is not at all like McAndrews v. Roy, 131 So.2d 256 (La.App. 1st Cir.1961), where the invasion of privacy was the newspaper publication of "before and after" photographs of a plaintiff's participation in a health studio's physical education course. Nor can this case be compared to one in which an unpleasant medical photograph of a body injury was shown without approval, as in Lambert v. Dow Chemical Co., 215 So.2d 673 (La.App. 1st Cir.1968). This is not like the case where 150,000 photography advertising postcards were mailed across the state with the unauthorized photograph of the plaintiff on them, which is what happened in Olan Mills, Inc. of Texas v. Dodd, 234 Ark. 495, 353 S.W.2d 22 (1962). Nor is this a case where the defendant went into the business of selling copies of a photograph. Mendonsa v. Time, Inc., 678 F.Supp. 967 (D.R.I.1988). Damages were awarded in those cases because the invasions were serious.
Concerning the demand for damages on behalf of the child, we repeat that this was a very pretty photograph, characterized by the mother as one of the best the child had ever taken. Undoubtedly the reason it was selected for display by the store was its quality and the beauty of its subject. Its limited display without an identifying name, and the fact that the child was less than a year old during the time these events took place, show that the child could not have suffered any injury as a result of the invasion of her privacy. Unquestionably it was an invasion of privacy as an appropriation of the child's likeness for use or benefit of the defendant, and was therefore a technical invasion of the privacy of the child, but it could hardly be said that there was a serious interference with the child's privacy interest.
In Louisiana Civil Law Treatise, Vol. 12, Tort Doctrine, (1977), at pp. 22, 23, Professor Stone tells us:
Louisiana unlike common law does not award nominal damages for the mere invasion of a right, no actual damage having resulted.
* * * * * *
The burden of proving the damage is on the plaintiff. It is not presumed.
When a plaintiff fails to prove that an accident caused an injury, she cannot recover. Napoli v. State Farm Mut. Auto. Ins. Co., 395 So.2d 720 (La.1981). As stated in United Pentecostal Church v. Interstate Surplus Underwriters, 368 So.2d 1104, at p. 1109 (La.App. 2d Cir.1979):
Fault alone does not produce recovery. It is the fault which causes some damage that produces recovery or reparation for the damage under CC 2315. When this cause in fact element is not proved, even though the negligence or fault is proved, recovery of damages is not allowed.
The trial court found that the child suffered no damages and we agree with that finding.
We next consider the parents' claim for mental anguish they themselves suffered *780 as a result of the invasion of privacy of their child.
Louisiana now recognizes a cause of action in tort for mental distress experienced by a claimant resulting from injury sustained by a third person. LeJeune v. Rayne Branch Hospital, 539 So.2d 849 (La.App. 3rd Cir.1989). However, we do not reach any questions regarding the application of that case to the instant facts because, having found that the child suffered no injury in the instant case, there is no tort basis for the parents' claim for their mental anguish suffered as a result of that injury.
There is some indication in the pleadings and arguments in brief that the parents are seeking to recover damages based on contract. We find no evidence in the record to prove the existence of any contract, other than a contract of sale, having to do with the photographs, and there was no contractual basis shown upon which the parents might have a claim for damages.
Finally, we consider the claim that this appeal was frivolous. This argument is based largely upon the fact that the father entered the case as a plaintiff rather late, never testified, never gave a deposition, and did not appear in court on the day of trial, but that he nevertheless joined in the appeal. We would consider that this argument has merit but for the fact that the father, although he appeals his own meritless claim for damages, is also an appellant in his capacity as administrator of the estate of his child, urging recovery for his child for the invasion of the child's privacy. There was an invasion of the child's privacy. However, we are affirming the trial court's conclusion that no damages were proved. Still, the father's contention on this appeal that damages were proved is a serious, not a frivolous contention. Accordingly, we refrain from branding the entire appeal as frivolous.
For the foregoing reasons the judgment of the trial court is affirmed, appellants to pay costs of this appeal.
AFFIRMED.
FORET, J., concurs in affirmation of trial court judgment, but dissents from majority's denial of damages for a frivolous appeal, being of the opinion that the appeal was frivolous. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1700270/ | 331 So.2d 44 (1976)
Richard P. GUIDRY, Plaintiff-Appellant,
v.
Charles William ROBERTS et al., Defendants-Appellees.
No. 10693.
Court of Appeal of Louisiana, First Circuit.
April 12, 1976.
Rehearing Denied April 15, 1976.
Writ Granted May 27, 1976.
*46 David W. Robinson, Baton Rouge, for plaintiff-appellant.
Wm. J. Guste, Jr., Atty. Gen., Kenneth DeJean, and Steve George, Asst. Attys. Gen., Baton Rouge, for defendants-appellees.
Before SARTAIN, LOTTINGER and EDWARDS, JJ.
SARTAIN, Judge.
Plaintiff instituted this suit seeking a declaration of invalidity and an injunction against the enforcement of the Louisiana Election Campaign Finance Disclosure Act. Acts 1975 No. 718, R.S. 18:1481-1493. He attacked the legislation, alleging violation of various provisions of the Louisiana Constitution of 1974, including infringement on certain rights contained in Article I, and usurpation of powers vested in other branches of government by the legislature as condemned by Article II. The trial court rejected the contentions of invalidity and plaintiff has appealed therefrom.
It is asserted that the plaintiff-appellant does not have standing to question the validity of the act.
*47 The legislation in question purports to require the reporting of information regarding contributions and expenditures pertinent to campaigns for elective state and local public office, decries certain activities as illegal campaign practices, condemns violation of the act to be a misdemeanor, and establishes the machinery and procedure for administration and enforcement of the provisions of the act.
R.S. 18:1486C(2) requires the reporting of the full name and address of each person making one or more contributions to a political committee or candidate which singly or in the aggregate exceeds the reporting amount specified in R.S. 18:1482(11). Section H of R.S. 18:1486 requires that the reports shall be made available for public inspection.
Appellant alleged and testified to being a citizen and taxpayer who had been and was active in the financing of political campaigns. He stated that the fact of disclosure of such a role prevented him from contributing in excess of the reporting amount to any candidate he favored.
C.C.P. 1872 grants to those who are affected by a statute the right to seek a judicial determination of its validity, stating:
"A person interested under a deed, will, written contract or other writing constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder."
Standing is a concept utilized to determine if a party is sufficiently affected so as to ensure that a justiciable controversy is presented to the court. The requirement of standing is satisfied if it can be said that the plaintiff has a legally protectible and tangible interest at stake in the litigation. See, Hainkel v. Henry, 313 So.2d 577 (La.1975); Abbott v. Parker, 259 La. 279, 249 So.2d 908 (1971).
We find that the plaintiff falls within the class of individuals affected by the statute. His right to participate in the political process through the utilization of property as well as through his vote is a legally protectible and tangible interest which is, and will continue to be, affected by Act 718 of 1975. Therefore, he has standing to contest the validity of the disclosure provisions of the act.
The appellees argue further, however, that even if the appellant has standing to controvert the disclosure provisions of the act as being in violation of the guarantees of personal liberty contained in Article I of our constitution, his status as a mere campaign contributor and citizen does not establish standing to question the validity of the administrative and enforcement provisions. This contention is without merit for two reasons. First, the administrative provisions are the instrumentality through which the disclosure provisions are made operative. As such, they affect the appellant just as the disclosure provisions do. It is untenable to say that one has standing to attack the substantive provisions of a statute but does not have standing to controvert the procedural provisions effectuating the substantive provisions. Considering a similar contention the court said in Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976):
"Party litigants with sufficient concrete interests at stake may have standing to raise constitutional questions of separation of powers with respect to an agency designated to adjudicate their rights."
Second, as we shall subsequently amplify, the disclosure provisions are not severable from the administrative and enforcement provisions. Standing to contest *48 one facet of an unseverable legislative act, of necessity, constitutes standing to contest all facets of the act. State ex rel. Kemp v. City of Baton Rouge, 215 La. 315, 40 So.2d 477 (1949). We, therefore, find that the plaintiff-appellant has standing to prosecute this action.
Since we find merit in the allegations that the administrative and enforcement provisions of Act 718 of 1975 are unconstitutional, we do not consider the other assertions of the appellant.
The following is a survey of the pertinent provisions of Act 718.
The reports required by the act are to be filed with reporting officials. R.S. 18:1483(A). The reporting official with respect to candidates for the Senate and political committees supporting only such candidates is designated to be the secretary of the Senate. The clerk of the House of Representatives is designated as the reporting official for candidates for the House and political committees supporting only such candidates. The reporting official for all other candidates, political committees and other persons required to file reports is the legislative auditor. R.S. 18:1482(12).
After receipt the reports are to be referred to supervisory committees for review. The supervisory committee with respect to candidates for the Senate is designated to consist of the secretary of the Senate, the legislative auditor and the executive director of the legislative council. The committee supervising candidates for the House of Representatives consists of the clerk of the House, the legislative auditor and the executive director of the legislative council. The committee supervising all other candidates and other persons required to report consists of all the persons occupying the above named positions. R.S. 18:1492(A)(1).
If, after review of a report or upon sworn complaint, the appropriate supervisory committee determines there is substantial reason to believe the act has been violated, it shall make a thorough investigation. If the results indicate a knowing and willful violation has occurred, the committee is directed to forward the matter to the attorney general. The attorney general shall make such investigation as is deemed necessary; and if he determines there is substantial reason to believe a violation has occurred, he shall forward the matter to the appropriate district attorney who is directed to proceed with such criminal action as is justified.[1] R.S. 18:1492(B)(1).
The second paragraph of R.S. 18:1492(B)(1) specifically prohibits a district attorney from instituting a criminal action under the act except on the basis of information forwarded to him.
The executive director of the legislative council is appointed by the legislative council which consists of seventeen members of the legislature and the lieutenant governor. He may not be a member of the legislature, and he serves at the pleasure of the legislative council. See R.S. 24:401; 404.
The clerk of the House of Representatives and the secretary of the Senate are clerical officers of the respective houses of the legislature. Article 3, § 7(C), Louisiana Constitution of 1974. According to testimony adduced in this matter, each is elected by the house he serves.
The office of legislative auditor is created by the Constitution. Article III, § 11, Louisiana Constitution (1974). The person holding that office is elected by the legislature and serves at its pleasure. Article XIV, § 27(C), Louisiana Constitution (1974); Article VI, § 26(2), Louisiana Constitution (1921).
*49 Article II, §§ 1 and 2, Louisiana Constitution (1974) provide:
"Section 1. The powers of government of the state are divided into three separate branches: legislative, executive, and judicial.
"Section 2. Except as otherwise provided by this constitution, no one of these branches, nor any person holding office in one of them, shall exercise power belonging to either of the others."
The history of Article II, §§ 1 and 2, Louisiana Constitution (1921), which are substantially the same as the current provisions, was set forth in Saint v. Allen, 169 La. 1046, 126 So. 548 (1930), where the court said:
"To illustrate, we quote from The Federalist, vol. 1, No. 51 (Hamilton or Madison) pp. 353, 354, viz.:
"`In order to lay a due foundation for that separate and distinct exercise of the different powers of government, which to a certain extent is admitted on all hands to be essential to the preservation of liberty, it is evident that each department should have a will of its own, and consequently should be so constituted that the members of each should have as little agency as possible in the appointment of the members of the others. * * *
"`It is equally evident that the members of each department should be as little dependent as possible on those of the others, for the emoluments annexed to their offices. Were the executive magistrate, or the judges, not independent of the Legislature in this particular, their independence in every other would be merely nominal.'
"We find also in the same volume of The Federalist, p. 340, No. 48, the intention of Madison, viz.:
"`As the legislative department alone has access to the pockets of the people, and has in some constitutions full discretion, and in all a prevailing influence over the pecuniary rewards of those who fill the other departments, a dependence is thus created in the latter, which gives still greater facility to encroachments of the former.'
"And in No. 47, at page 338 of the same volume, we find Madison's admonition, with regard to the preservation of the independence of each department of government, viz.:
"`It is equally evident that, in reference to each other, neither of them ought to possess, directly or indirectly, an overruling influence in the administration of their respective powers. It will not be denied that power is of an encroaching nature, and that it ought to be effectually restrained from passing the limits assigned to it.'
"In No. 47, on pages 330 and 332 of the same volume, Madison refers to Montesquieu as the author of this doctrine of the independence of each department of government, viz.:
"`The oracle who is always consulted and cited on this subject is the celebrated Montesquieu. If he be not the author of this invaluable precept in the science of politics, he has the merit at least of displaying and recommending it most effectually to the attention of mankind. Let us endeavor, in the first place, to ascertain his meaning on this point. * * *
"`The reasons on which Montesquieu grounds his maxim are a further demonstration of his meaning, "When the legislative and executive powers are united in the same person or body," says he, "there can be no liberty, because apprehensions may arise lest the same monarch or senate should enact tyrannical laws to execute them in a tyrannical manner." *50 * * * Some of these reasons are more fully explained in other passages; but, briefly stated as they are here, they sufficiently establish the meaning which we have put on this celebrated maxim of this celebrated author.'
"The excerpt quoted from Montesquieu by Madison appears in the Analysis by D'Alembert of The Spirit of Laws, vol. 1, Book 11, chap. 11, page 174.
"According to article 18 of the Civil Code, the universal and most effectual way of finding the true meaning of a law, if its expressions are doubtful, is to consider the reason and spirit of it, and the cause which induced its adoption. Hence, for an accurate understanding of this article in the Constitution of Louisiana, and its applicability to the case before us, we must trace the history of the article, and consider the reason which induced its authors to write itthe object which they intended to accomplish, and the evils which they intended to avoid.
"The importance of sections 1 and 2 of article 2 of the Constitution of Louisiana is manifested in some measure by their being the whole article; which, in substance, appeared in every Constitution Louisiana has had, except that of 1868, which is generally referred to as the Carpet Bag Constitution. Louisiana's first Constitution, adopted in 1812, was virtually copied from the Constitution of Kentucky. In her first Constitution, that of 1792, and in her Constitution of 1799, article 1 was as follows:
"`Section 1. The powers of the government of the State of Kentucky shall be divided into three distinct departments, and each of them be confided to a separate body of magistracy, to wit: those which are legislative, to one; those which are executive, to another; and those which are judiciary, to another.
"`Section 2. No person or collection of persons, being of one of those departments, shall exercise any power properly belonging to either of the others; except in the instances hereafter expressly directed or permitted.'
"That language was copied literally as article 1 of Louisiana's Constitution of 1812; and, by the jurisprudence of the state of Kentucky, particularly the opinions rendered in Commissioners of Sinking Fund v. George, 104 Ky. 260, 47 S.W. 779, 84 Am.St.Rep. 454, and Pratt v. Breckinridge, 112 Ky. 1, 65 S.W. 136, 66 S.W. 405, we are reminded that article 1 of the first Constitution of Kentucky, which afterwards became article 1 of the first Constitution of Louisiana, was written by Thomas Jefferson himself. Having returned from France, and having been appointed Secretary of State, on being informed that the state of Virginia was about to permit Kentucky to become a separate state, and that Kentucky was about to adopt a Constitution, he advised that the first safeguard to be put into the Kentucky Constitution should be to confine absolutely and exclusively to each one of the three departments of government the powers belonging to it alone. He went so far as to say that there was danger in the Federal Constitution in that the clauses defining the powers of each department of the government were not a sufficient safeguard against an exercise by one department of powers properly belonging to another; and so he wrote the provision which he recommended, and which became article 1 of the Constitution of Kentucky, and sent it to the Convention, in session at Danville; and, when the delegates learned who was the author of the article, says Judge Du Relle, `the respect of Kentucky for the great name of Jefferson carried it through, and it was at once adopted.'
*51 "It is observed in the course of the opinion which we have referred to, in the Kentucky case, that the Constitution of the United States merely provides, in one article (article 1, § 1), that `all legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and a House of Representatives'; and it provides, in another article (article 2, § 1), that the executive power shall be vested in the President of the United States; and it provides in another article (article 3, § 1), that the judicial power shall be vested in the courts. Commenting thereon, the author of the opinion (104 Ky. 260, 47 S.W. 779, page 785, 84 Am.St.Rep. 454) says:
"That is the extent of the departmental division under the federal constitution. The Kentucky constitution goes much further; and, had Mr. Jefferson been in America at the time of the adoption of the federal constitution, that instrument would, in all probability, have contained the enactment which we find only in the constitution of Kentucky, with its three distinct provisions: First, that the government shall be divided into three distinct departments; second, that each of them shall be confided to a separate body of magistracy; and, third, that no person or collection of persons shall exercise any power properly belonging to either of the others, except in the instances thereinafter expressly directed or permitted.'
"We note that Judge Du Relle, in his opinion in the Kentucky case, characterized those provisions as `the enactment,' which he found only in the Kentucky Constitution. Judge Du Relle's opinion, when rendered, was not authority, except for the historical information which it contained, because the majority of the members of the court did not then agree with him that the Kentucky statute in question was unconstitutional; but Judge Du Relle's opinion afterwards became authority, for it was adopted as the prevailing opinion in Pratt v. Breckinridge, 112 Ky. 1, 65 S.W. 136, 66 S.W. 405; where it was held that the Legislature had not, under its authority to create a public office, the power to elect or appoint the officer or officers to fill it.
"The `Constitution or Form of Government for the Conmmonwealth of Massachusetts,' as it was originally styled, and as adopted in 1780, was written by John Adams, substantially as adopted; and it has ever since remained the Constitution of that state. In article 30 of part the first, the safeguard, of which section 2 of article 2 of Louisiana's Constitution is intended to be the counterpart, is expressed thus:
"`30. In the government of this commonwealth, the legislative department shall never exercise the executive and judicial powers, or either of them: the executive shall never exercise the legislative and judicial powers, or either of them: the judicial shall never exercise the legislative and executive powers, or either of them: to the end it may be a government of laws and not of men.'
"That lofty ideato the end that it may be a government of laws and not of menwas in the mind of the statesmen who afterwards wrote the Constitution of the United States, although the idea was not specifically expressed. John Marshall, in Marbury v. Madison, in 1803 (1 Cranch, 163, 2 L.Ed. 69), said:
"`The government of the United States has been emphatically termed a government of laws, and not of men. It will certainly cease to deserve this high appellation, if the laws furnish no remedy for the violation of a vested legal right.'
*52 "And we may say, as appropriately, that the government of Louisiana will certainly cease to deserve this high appellationa government of laws and not of menif the laws furnish no remedy for a violation of the very article of the Constitution which that appellation comes from."
We are confronted with the question of whether the persons designated to administer and enforce this act may properly do so considering their affiliation with the legislative branch.
As discussed above, each reporting official and the supervisory committees consists of the persons holding designated positions within the legislative branch. Do these positions constitute "offices" within the meaning of the constitution so as to prevent those holding them from exercising executive or judicial functions? As we noted earlier, the clerk of the House and the secretary of the Senate are declared to be clerical officers by the constitution, the position of legislative auditor is created by the constitution and the executive director of the legislative counsel is a position created by statute.
A state office has been defined simply as one created by the constitution or the legislature. State v. Titus, 152 La. 1011, 95 So. 106 (1922); State v. Rogers, 138 La. 867, 70 So. 863 (1916). See, State ex rel. Porterie v. Jones, 181 La. 390, 159 So. 594 (1935). We cite with approval the definition found in Cherry v. Hall, 270 So.2d 626 (La.App.2d Cir. 1972), which states:
"In certain aspects or for particular purposes, one may or may not be considered a public officer or a public figure, but, where the Constitution or an act of the Legislature creates a position, fixes the compensation therefor, and prescribes the duties thereof, and these duties, not occasional or temporary in character but of a continuing and permanent nature, pertain to the public, such position or employment is an office, and the one who occupies it is an officer."
The considerations cited by the court in Saint v. Allen, supra, require that a broad definition be given the term "office" where utilized in the context of separation of powers. The definition found in Cherry, supra, is of sufficient breadth and is also sufficiently rigorous to set a readily ascertainable standard. Applying this standard to the various positions enumerated in Act 718 of 1975, we find that each satisfies the definition and is thus an office within the meaning of Article II, § 2 of our current constitution.
We first consider if the functions of the supervisory committees constitute an exercise of the judicial power. Article V, § 26(B), La.Const. (1974), provides:
"Except as otherwise provided by this constitution, a district attorney, or his designated assistant, shall have charge of every criminal prosecution by the state in his district, be the representative of the state before the grand jury in his district, and be the legal advisor to the grand jury. He shall perform other duties provided by law." (Emphasis added).
Even before the district attorneys were expressly granted the power to control criminal prosecutions it was held that they were constitutionally vested with the primary authority to institute and prosecute criminal actions. Kemp v. Stanley, 204 La. 110, 15 So.2d 1 (1943). The measure of the power of a district attorney to control a criminal prosecution is indicated by Article IV, § 8, which prohibits the attorney general, the chief legal officer of the state, from instituting, prosecuting or intervening in a criminal action except for cause when authorized by a court having original jurisdiction. It is clear that a district attorney has the sole authority to *53 determine when and against whom a criminal charge shall be instituted subject only to the power vested in the attorney general to supercede that authority upon a showing of cause.
The concluding paragraph of R.S. 18:1492(B)(1) states:
"Criminal actions shall be initiated under the provisions of this Part only by the district attorney and only on the basis of information forwarded to him by a supervisory committee through the attorney general, or directly, as provided in this Part, except in the case of campaigns for district attorney, in which case criminal actions shall be initiated under the provisions of this Part only by the attorney general as provided in this Part and only on the basis of information forwarded to him by a supervisory committee as provided in this Part."
The preceding paragraph of this section makes review of the required reports discretionary and requires an investigation of a complaint or possible violation disclosed by a report where there is substantial reason to believe a violation has occurred. After investigation the committee shall forward the results to the attorney general if the investigation indicates a knowing and willful violation has occurred. If the attorney general determines there is substantial reason to believe a violation has occurred he shall forward the information to the appropriate district attorney for the institution of criminal proceedings.
The clear intent of R.S. 18:1492(B)(1), as evidenced by its language, is to preclude a district attorney from instituting a criminal action thereunder until after the committee and the attorney general have determined there is cause to proceed. A district attorney does not have the authority to proceed under the act until authorized by others.
The power to institute a criminal action includes necessarily the authority to determine who such actions shall be instituted against. This power belongs solely to the district attorney who is part of the judicial branch. Thus, Act 718 of 1975 constitutes an attempt to transfer the exercise of powers belonging to the judicial branch to persons holding office in the legislative and executive branches and is unconstitutional to the extent that it authorizes such exercise of power. See, Kemp v. Stanley, supra.
Next, we consider whether the reporting officials and supervisory committees, who consist solely of persons holding office in the legislative branch, may administer this law aside from the provisions pertinent to the institution of criminal actions.
Act 718 of 1975 purports to affect all campaigns for state and local elections. The ministerial duties regarding receipt, public inspection and forwarding of campaign reports are placed in reporting officials. Even without the objectionable provisions struck down above the supervisory committees would retain the authority to review reports and investigate possible violations.
It has been recognized that the administration of laws is an executive function. See, State ex rel. Porterie v. Smith, 184 La. 263, 166 So. 72 (1935). More specifically, it has been recognized that administration of a law similar in many respects to that before us is an executive function. Buckley v. Valeo, supra. Article IV, § 1(A), La.Const. (1974), provides:
"The executive branch shall consist of the governor, lieutenant governor, secretary of state, attorney general, treasurer, commissioner of agriculture, commissioner of insurance, superintendent of education, commissioner of elections, and all other executive offices, agencies, and instrumentalities of the state. (Emphasis added).
*54 We can only construe the emphasized language to mean that an officer, agency or instrumentality exercising an executive function is included within the executive branch. Administration or execution of a law is an executive function and those who administer or execute laws are part of the executive branch.[2] If exercise of a particular function is sufficient to bring an instrumentality within the executive branch it is apparent that the function is a power belonging to the executive branch.
We therefore find that the reporting officials and supervisory committees are exercising an executive power by administering the provisions of Act 718. Since we have already found these to be persons holding office in the legislative branch, their duties and functions under the act are in violation of Article 2, § 2 of our constitution. Further, it would be violative of Article 2, § 2, of our constitution for the legislature to designate any position or appoint any individual over which it exercises control and authority to any board, commission, agency or position which is to perform any function or exercise any authority over either the executive or judicial branches of state government.[3]
Of equal significance is the fact that in the enactment of Act 718, the Legislature by designating the composition of the supervisory committees in the manner set out above in effect reserved unto itself the power of appointment. This the legislature can not do.
It appears that considerable portions of Act 718 are modeled after the Federal Election Campaign Act (1971, as amended by 1974). 2 U.S.C.A. § 431 et seq. In the federal act, there is created the Federal Election Commission (F.E.C.). This commission is composed of eight members, viz.: the Secretary of the Senate and the Clerk of the House, as ex-officio and without the right to vote, two members appointed by the President Pro-tempore of the Senate, two members appointed by the Speaker of the House, and two members appointed by the President of the United States, all to be confirmed by majority vote of both houses of the Congress. In Buckley v. Valeo, supra, the United States Supreme Court held that the appointment of members to the F.E.C. by either house of the Congress violated the appointments clause of the federal constitution. U.S. Constitution, Art. II, Sec. 2, cl. 2. Our legislature fell into the same error.
Article 4, § 5(H) of the Louisiana Constitution of 1974, provides in pertinent part:
"(1) The governor shall, appoint, subject to confirmation by the Senate, the head of each department in the executive branch whose election or appointment is not provided by this constitution and the members of each board and commission in the executive branch whose election or appointment is not provided by this constitution or by law."
Thus, it is clear that our present constitution vests appointing authority in the governor in all cases where such appointment is not provided for in the constitution itself or "by law."
"By law" is a limiting factor on the power of appointment. It is not, however, a blanket loophole whereby the power of appointment may be completely usurped.
*55 The Legislature in the creation of a board or commission to oversee the function of an agency may prescribe that a certain appointee(s) be from a designated group(s) or otherwise possessed of certain qualifications so as to bring to that board or agency a given viewpoint(s) or expertise as will aid the board or commission in the discharge of the purpose for which the agency was created. In the instant matter it is not contended that such is the case.
We now turn to the question of whether the unconstitutional portions of this act are severable from the remaining provisions. Act 718 of 1975 contains a severability clause which states:
"If any provision or item of this Act or the application thereof is held invalid, such invalidity shall not affect other provisions, items or applications of this Act which can be given effect without the invalid provisions, items or applications, and to this end the provisions of this Act are hereby declared severable."
We have found the legislative appointment of the reporting officials and supervisory committees to be invalid as well as the role of the supervisory committees in instituting criminal proceedings. We must consider whether the remainder of the act can reasonably function without the offending provisions, or, if not, must the entire act fall. In Roy v. Edwards, 294 So.2d 507 (La.1974), the court, quoting with approval from Gaudet v. Economical Supermarket, Inc., 237 La. 1082, 112 So.2d 720 (1959), said:
"Of course, it is well established that the unconstitutionality of a portion of a statute (or ordinance) does not necessarily invalidate the whole, particularly where there is a severability clause as here. But it is equally well settled that such rule applies only when the inconstitutional part is independent of and separable from the rest. If it is so interrelated and connected with the other portions as to raise the presumption that the legislative body would not have enacted one part without the remainder, then the entire enactment is null."
It is apparent that the act before us cannot function without the supervisory committees and reporting officials. The required reports are meaningless without someone to receive and review them. To require such reports under the circumstances would ask candidates and others to do a vain and useless thing. We can not say that the legislature would have enacted this legislation without the offending portions. These offending portions are so interrelated as to clearly justify the presumption that the legislature would not have enacted this legislation without them.
For the reasons assigned above, Act 718 of 1975 is declared null and the enforcement of its provisions should be prohibited and enjoined. Accordingly, the judgment appealed is reversed and this matter is remanded for the purpose of having the district court issue appropriate injunctions enjoining its enforcement.
All such costs as are permitted by law are assessed against the defendants.
REVERSED AND REMANDED.
NOTES
[1] This sequence is altered if a campaign for the office of attorney general or district attorney is involved; however, the difference is not material here.
[2] We expressly do not rule that administration of an act with a legislative purpose is an executive function. The legislature may always perform those acts necessary or helpful to its function. See, e. g. R.S. 24:401; 404. However, the act before us obviously does not have as its purpose the furtherance of the legislative function.
[3] For an excellent discussion on separation of powers and more particularly "extra-legislative control statutes" in the federal scheme, see Watson, Congress Steps Out; A Look at Congressional Control of the Executive, 63 Cal.L.R. 983. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1831454/ | 209 B.R. 188 (1997)
In re Perry Paul SIMOS, Debtor.
MBNA AMERICA, Plaintiff,
v.
Perry Paul SIMOS, Defendant.
Bankruptcy No. 95-50238C-7W, Adversary No. 95-6016.
United States Bankruptcy Court, M.D. North Carolina, Winston-Salem Division.
January 15, 1997.
*189 *190 Larry W. Pearman, Greensboro, NC, for plaintiff.
J. Brooks Reitzel, Jr., Wheeler & Hauser, High Point, NC, for defendant.
MEMORANDUM OPINION
WILLIAM L. STOCKS, Chief Judge.
This dischargeability action came before the court for trial on November 14, 1996. The plaintiff, MBNA America, alleges that the defendant, Perry Paul Simos, is indebted to plaintiff in the amount of $9,757.84, plus interest and attorney fees, pursuant to a credit card account with the plaintiff and that such indebtedness is nondischargeable under § 523(a)(2)(A), § 523(a)(2)(B) and § 523(a)(2)(C) of the Bankruptcy Code.
JURISDICTION
This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and the General Order of Reference entered by the United States District Court for the Middle District of North Carolina on August 15, 1984. This is a core proceeding within the meaning of 28 U.S.C. § 157(b) which this court may hear and determine.
The court has considered fully the evidence offered by the parties and the arguments of counsel for the parties. Having done so, findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052 are hereinafter set forth.
FACTS
The relationship between plaintiff and defendant began in September of 1994 when the defendant completed and returned to the plaintiff a credit card application. On September 29, 1994, plaintiff opened a credit card account for the defendant and issued a credit card to the defendant. The transaction apparently was handled entirely by mail.
Defendant began using the credit card on October 25, 1994. Between October 25, 1994, and February 23, 1995, the defendant used the credit card on sixteen occasions involving charges and cash advances totaling $9,927.96. The defendant was a resident of Winston-Salem, North Carolina, during this period and all of the charges and cash advances obtained with the credit card occurred in Winston-Salem. Defendant obtained a $3,000.00 cash advance on October 25, 1994, a $3,000.00 cash advance on December 15, 1994, and a $2,000.00 cash advance on February *191 13, 1995. All of these cash advances were obtained at Southern National Bank. The remainder of the indebtedness resulted from thirteen separate charges which the defendant made at various businesses located in Winston-Salem.
For several years prior to 1992 the defendant was employed by a restaurant owned by his family in Winston-Salem. In 1992 the defendant decided to go into business for himself. The defendant formed Sigma Food Service, Inc. for the purpose of acquiring a restaurant in Winston-Salem. Following the acquisition of this restaurant the defendant's only employment was at the restaurant which he was operating through Sigma Food Service, Inc. This employment, which in essence amounted to being self-employed, continued until the middle of February of 1995, when ongoing financial difficulties involving the restaurant reached the point at which the restaurant closed suddenly. Thereafter, Sigma Food Service, Inc. filed for relief under Chapter 7, followed by the defendant who filed a Chapter 7 case on March 15, 1995. The defendant resumed working at the restaurant owned by his family and was so employed at the time of the trial of this action. Additional facts are set forth in the following section of this opinion.
Discussion
A. Claim under § 523(a)(2)(A)
Section 523(a)(2)(A) excepts from discharge any debt for money, property, or services "to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's . . . financial condition." Courts generally agree that the following traditional elements of fraud must be proven to sustain a claim under § 523(a)(2)(A): (1) That the debtor made a representation; (2) That at the time the representation was made, the debtor knew the representation was false; (3) That the debtor made the false representation with the intention of deceiving the creditor; (4) That the creditor relied on such representation; and (5) That the creditor sustained the alleged loss and damage as the proximate result of the false representation. E.g., In re Valdes, 188 B.R. 533, 535 (Bankr. D.Md.1995); In re Carrier, 181 B.R. 742, 746 (Bankr.S.D.N.Y.1995). As to the reliance requirement, § 523(a)(2)(A) requires justifiable, but not reasonable reliance. Field v. Mans, ___ U.S. ___, ___, 116 S.Ct. 437, 446, 133 L.Ed.2d 351 (1995); In re Burdge, 198 B.R. 773 (9th Cir. BAP 1996). The objecting creditor has the burden of proving each of the foregoing elements by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991); In re Stanley, 66 F.3d 664, 667 n. 4 (4th Cir.1995).
A majority of the courts considering the question, have concluded that under some circumstances, the use of a credit card can give rise to a nondischargeable debt under § 523(a)(2)(A). Although the use of a credit card does not involve a direct transaction between the debtor and the issuer of the credit card, the cases generally find that the use of the credit card by the debtor gives rise to a "representation" for purposes of § 523(a)(2)(A). Most of the cases find that by using the credit card the debtor impliedly represents that he or she has the intention of paying the charges for the goods or services purchased with the credit card. E.g., In re Faulk, 69 B.R. 743 (Bankr.N.D.Ind.1986); In re Carrier, 181 B.R. 742, 747 (Bankr. S.D.N.Y.1995); In re Anastas, 94 F.3d 1280, 1285 (9th Cir.1996). This, of course, leaves the question of whether such a representation should be regarded as fraudulent within the meaning of § 523(a)(2)(A).
In deciding whether fraud has been shown in a credit card case brought under § 523(a)(2)(A), the focus should be upon the nature of the representation arising from the use of the credit card. The more recent and better-reasoned cases emphasize that the representation arising from the use of a credit card is that the user intends to pay the charge when the credit card is used. These cases emphasize that the representation made by the card holder in a credit card transaction is not that he or she has the ability to repay the debt, but that he or she has the intention of repaying the debt. Using a credit card and incurring indebtedness with no intention of attempting to pay the indebtedness constitutes utmost bad faith which is sufficient to satisfy the requirements *192 of § 523(a)(2)(A). However, it is quite another matter where a person in financial distress incurs indebtedness before realizing that his or her financial condition is hopeless and that bankruptcy is dictated by the circumstances which exist at the time of such realization. In re Anastas, 94 F.3d 1280, 1283-84 (9th Cir.1996); In re Alvi, 191 B.R. 724, 733-734 (Bankr.N.D.Ill.1996); In re Fulginiti, 201 B.R. 730, 735 (Bankr.E.D.Pa.1996). In emphasizing that the correct focus in a credit card case brought pursuant to § 523(a)(2)(A) is the intention of the debtor rather than his or her ability to repay, the court in In re Anastas, stated:
Thus, the focus should not be on whether the debtor was hopelessly insolvent at the time he made the credit card charges. A person on the verge of bankruptcy may have been brought to that point by a series of unwise financial choices, such as spending beyond his means, and if ability to repay were the focus of the fraud inquiry, too often would there be an unfounded judgment of nondischargeability of credit card debt. Rather, the express focus must be solely on whether the debtor maliciously and in bad faith incurred credit card debt with the intention of petitioning for bankruptcy and avoiding the debt. A finding that a debt is nondischargeable under § 523(a)(2)(A) requires a showing of actual or positive fraud, not merely fraud implied by law. . . . While we recognize that a view to the debtor's overall financial condition is a necessary part of inferring whether or not the debtor incurred the debt maliciously and in bad faith, and that the twelve factors we set out in Eashai are useful for arriving at a finding of bad faith, the hopeless state of a debtor's financial condition should never become a substitute for an actual finding of bad faith.
In re Anastas, 94 F.3d at 1285-86 (citations omitted).
This court concludes that the representation arising from the use of a credit card is that the debtor has the intention of paying the charge. If the evidence establishes that the debtor did not have such intention when the debt was incurred, then fraud exist for purposes of § 523(a)(2)(A) and the debt is nondischargeable. The debtor's financial condition is one of the circumstances which should be evaluated and considered in making the difficult determination of the debtor's subjective state of mind when the charge was made. Extremely poor financial condition at the time of the charge may be strong evidence of a lack of true intent to pay the charge. However, the debtor's financial condition is only one of the circumstances to be considered and the inquiry certainly does not end by looking only at the debtor's financial condition. In some instances, the examination of the twelve "objective" factors[1] referred to in the Anastas case will be helpful. While resort to these "objective" factors may be helpful in some cases, in other cases, the debtor's subjective intent regarding payment of the debt can be determined without doing so. In re Fulginiti, 201 B.R. at 735.
In the present case, the plaintiff relied primarily upon evidence relating to the defendant's poor financial condition as satisfying the requirements of § 523(a)(2)(A). The defendant admitted that during the latter part of 1994 and the early part of 1995, his company was experiencing financial problems and that during a portion of that time, the company was not paying him a salary. The Debtor further admitted that, as shown on his schedules, he owned few tangible assets during 1994 and early 1995. However, there was no evidence that the defendant was aware that his restaurant would have to close as suddenly as it did, nor was there any evidence to refute defendant's position that *193 he put the money into the company with the intention and belief that he could save the company. Furthermore, the fact that the restaurant was experiencing problems and did not pay the defendant a salary for several months does not establish that the defendant did not have any intention of repaying the charges which he made on his credit card.
There was no evidence that the defendant had consulted counsel before making the charges on his credit card or that he had decided to file bankruptcy before the charges were made. Further, this is not a case in which the Debtor made most of the credit card charges on the brink of bankruptcy. To the contrary, during January of 1995, the defendant made no charges and only one cash advance and three small charges during the first part of February. There also was no evidence that the defendant used the credit card to purchase luxury items or services. Regarding the cash advances which were obtained on October 25, 1994, and on December 15, 1994, respectively, the unrefuted testimony of the defendant was that these cash advances were deposited into the checking account of his company and used in the operation of the business. The defendant at no time exceeded the credit limit of his credit card account with the plaintiff and there was no evidence of the defendant's buying habits changing suddenly. The evidence in this case suggests a situation in which the defendant's financial condition was tied closely to his restaurant business and that his financial condition gradually worsened as the problems with the restaurant grew worse. The evidence supports the defendant's contention that he placed the cash advances in the corporate checking account while he still felt that the business was viable and could be saved. In summary, it was the plaintiff's burden to show that when the charges by the defendant on his credit card were made, he had no intention of paying the plaintiff. The evidence relied upon by the plaintiff fell short of carrying this burden. Hence, there was no showing of fraud, false pretenses or false representation on the part of the defendant in this case. Absent such a showing, the plaintiff is entitled to no relief under § 523(a)(2)(A).
The remaining requirement for a showing of fraud in a credit card case is justifiable reliance on the representation of intent to pay and resulting loss to the creditor. In light of the Supreme Court's decision in Field v. Mans, supra, cases which earlier required a showing of reasonable reliance by the creditor are no longer sound. Instead, the requirement in a credit card case, just as in other cases under § 523(a)(2)(A), is justifiable reliance and not reasonable reliance. Under the decision in Field v. Mans, unless the qualities and characteristics of a particular debtor or the circumstances of the particular case warrant otherwise, the creditor is under no duty to investigate. In re Burdge, 198 B.R. 773 (Bankr.9th Cir.1996). What this means in the context of the typical credit card case, is that the issuer of a credit card justifiably relies on a representation of intent to repay as long as the account is not in default and any initial investigation which was made when the card was issued did not raise red flags that would make reliance unjustifiable. In re Eashai, 87 F.3d 1082, 1091 (9th Cir.1996); In re Anastas, 94 F.3d 1280, 1286 (9th Cir.1996).
Returning to the evidence in the present case, there is no basis upon which this court could find justifiable reliance on the part of the plaintiff. The plaintiff offered no evidence regarding the circumstances under which it issued the card or the information which the plaintiff had when the card was issued and when the charges were made by the defendant. Without some evidence regarding the information which was known to the plaintiff at the time that the credit card was issued and at the time the charges were made, there is no basis for this court to find that there was justifiable reliance on the part of the plaintiff. It is not clear why no such evidence was offered in this case. If evidence had been offered that at the time the card was issued, the plaintiff was not aware of any poor credit history on the part of the defendant and that no such information was received by the plaintiff prior to the charges in question, then the court would have a basis for finding justifiable reliance, assuming that the account was not in default when the charges in question were made. *194 On the other hand, had the evidence shown that a credit investigation was done and that the investigation revealed that this defendant had a number of credit cards which were in default and which had been used in excess of the credit limits, justifiable reliance would not exist in this case. In any event, this is the type of information obviously within the knowledge of the plaintiff who is the party in a position to produce such evidence. The fact that less is required for a showing of justifiable reliance than for a showing of reasonable reliance does not mean that no evidence whatever is needed in order for the court to make a finding of justifiable reliance. Without some supporting evidence, a finding of justifiable reliance is not warranted which means that the plaintiff failed to satisfy another of the essential requirements under § 523(a)(2)(A).
B. Claim under § 523(a)(2)(B).
The plaintiff also argues that the application submitted by the defendant is materially false and that the indebtedness owed to the plaintiff is nondischargeable pursuant to § 523(a)(2)(B). Under § 523(a)(2)(B) a debt is nondischargeable if it is for money or an extension, renewal or refinancing of credit obtained by the use of a statement in writing (1) that is materially false; (2) respecting the debtor's financial condition; (3) that is reasonably relied upon by the creditor; and (4) that was published by the debtor with intent to deceive. In an action under § 523(a)(2)(B) the creditor has the burden of proof on each of the elements required under that section. In re Booker, 165 B.R. 164 (Bankr.M.D.N.C.1994); In re Showalter, 86 B.R. 877 (Bankr.W.D.Va.1988); In re Criswell, 52 B.R. 184 (Bankr.E.D.Va. 1985). However, just as with § 523(a)(2)(A), the requisite elements under § 523(a)(2)(B) need be shown only by a preponderance of the evidence and not by clear and convincing evidence or any other heightened burden of proof. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
During his testimony, the defendant admitted that he submitted an application for a credit card to the plaintiff. The defendant also admitted that he indicated on the application that he had an annual income of $40,000.00. However, the copy of the application relied upon by the plaintiff is illegible, leaving only the defendant's admission that he listed a $40,000.00 annual income on the application. The plaintiff did not offer any evidence regarding the receipt of the application nor regarding the role, if any, that the application played in granting a credit card to the defendant. Specifically, there was no evidence as to the procedure which was followed by the plaintiff in processing the application, no evidence whether a credit history was obtained, no evidence whether a credit history was relied upon in granting the credit card and, most importantly, no evidence whether the application submitted by the defendant was relied upon in granting a credit card to the defendant. Absent such evidence, there is no basis for the court to find that the plaintiff relied on the application in extending a credit card to the defendant. Since reliance in fact is an essential element of reasonable reliance which, in turn, is a necessary ingredient under § 523(a)(2)(B), it follows that the plaintiff in this case is not entitled to any relief under § 523(a)(2)(B) without regard to whether the application accurately stated the defendant's annual income. In re Carrier, 181 B.R. 742, 747 (Bankr.S.D.N.Y.1995).
C. Claim under § 523(a)(2)(C).
In arguing against the dischargeability of the indebtedness owed by the defendant, the plaintiff also has invoked § 523(a)(2)(C) which provides:
(C) for purposes of subparagraph (A) of this paragraph, consumer debts owed to a single creditor and aggregating more than $1,000 for "luxury goods or services" incurred by an individual debtor on or within 60 days before the order for relief under this title, or cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title, are presumed to be nondischargeable; "luxury goods or services" do not include goods or services reasonably acquired for the support or maintenance of *195 the debtor or a dependent of the debtor; an extension of consumer credit under an open end credit plan is to be defined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act;
The defendant charged goods and services on his credit card on three occasions during the 60 days preceding the order for relief in this case. However, these charges in the aggregate were only $253.83. Since these purchases total less than $1,000 in the aggregate, § 523(a)(2)(C) is not applicable to this portion of defendant's indebtedness.
On February 13, 1995, which also was within the 60 days preceding the filing of defendant's Chapter 7 case, the defendant obtained a $2,000.00 advance on his credit card. This portion of the indebtedness is subject to § 523(a)(2)(C) and therefore is presumed to be nondischargeable under § 523(a)(2)(A). This requires that the court consider the effect of the presumption arising under § 523(a)(2)(C).
The presumption created by § 523(a)(2)(C) is rebuttable. Moreover, the existence of the presumption does not shift the burden of proof from the creditor, it shifts the initial burden of going forward with the evidence to the debtor. See In re Fulginiti, 201 B.R. 730, 733 (Bankr.E.D.Pa. 1996); Matter of Sparks, 154 B.R. 766, 768 (N.D.Ala.1993); In re Vernon, 192 B.R. 165, 171 (Bankr.N.D.Ill.1996); In re Johannsen, 160 B.R. 328, 331 (Bankr.W.D.Wis.1993); In re McDonald, 129 B.R. 279, 283 (Bankr. M.D.Fla.1991); In re Leaird, 106 B.R. 177, 179-80 (Bankr.W.D.Wis.1989); In re Koch, 83 B.R. 898, 902 (Bankr.E.D.Pa.1988); In re Faulk, 69 B.R. 743, 752 (Bankr.N.D.Ind. 1986).
In the present case the testimony of the defendant regarding the $2,000.00 cash advance was sufficient to rebut the § 523(a)(2)(C) presumption that the defendant obtained the advance with fraudulent intent. The defendant testified that he obtained the $2,000.00 cash advance on February 13, 1995, in order to put the money into his restaurant business. Although he acknowledged that the business was experiencing financial problems at that time, the evidence showed that he felt that the business had a chance and was doing all that he could to save the business. The defendant indicated that he intended to keep operating the restaurant and felt that he could save the business right up to the time that it closed, which he testified occurred suddenly. The defendant may have been a poor businessman and perhaps could have seen earlier that his business was doomed. However, the testimony of the defendant satisfied the court that the defendant is not a dishonest businessman and did not obtain the cash advance with the intent of not repaying the plaintiff.
Section 523(a)(2)(C) was enacted primarily to deal with the situation in which a debtor "loads up" with debt by going on a buying or spending spree in contemplation of bankruptcy. See In re Faulk, 69 B.R. at 751. It was not intended to punish poor business judgment exercised without any fraudulent intent. In the present case the evidence did not show that the defendant loaded up on credit card debts just prior to bankruptcy. To the contrary, the defendant had only three other charges on his credit card during the 60 days preceding bankruptcy and these charges totaled only $253.83. The defendant gave credible testimony which rebutted the presumption of fraudulent intent created under § 523(a)(2)(C) regarding the $2,000.00 cash advance on February 13, 1996. Therefore, that portion of the indebtedness, as well as the remainder of the indebtedness owed to the plaintiff is outside of § 523(a)(2) and is subject to discharge under § 727 of the Bankruptcy Code.
CONCLUSION
A judgment will be entered denying any relief to the plaintiff in accordance with this memorandum opinion.
NOTES
[1] These factors are: (1) the length of time between the charges made and filing of bankruptcy; (2) whether or not an attorney has been consulted concerning the filing of bankruptcy before the charges were made; (3) the number of charges made; (4) the amount of the charges; (5) the financial condition of the debtor at the time the charges are made; (6) whether the charges were above the credit limit of the account; (7) whether the debtor made multiple charges on the same day; (8) whether or not the debtor was employed; (9) the debtor's prospects for employment; (10) the financial sophistication of the debtor; (11) whether there was a sudden change in the debtor's buying habits and (12) whether the purchases were made for luxuries or necessitates. In re Anastas, 94 F.3d at 1286. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1862199/ | 237 B.R. 423 (1998)
MERCANTILE BANK, Plaintiff,
v.
Michael CANOVAS, Defendant.
Bankruptcy No. 97 B 25310. Adversary No. 97 A 1600.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
June 12, 1998.
*424 *425 *426 Peter Francis Geraci, Chicago, IL, for debtor.
Deborah Ebner, Chicago, IL, for trustee.
DECISION ON ADVERSARY COMPLAINT FOR JUDGMENT OF NONDISCHARGEABILITY
JOAN H. LEFKOW, Bankruptcy Judge.
This adversary complaint, filed November 21, 1997, is before the court on a prove up of liability and damages after entry of default against defendant, Michael Canovas. The complaint to determine dischargeability of a debt alleges that the defendant, beginning approximately March, 1996, incurred credit card charges on an account issued to him by plaintiff, Mercantile Bank ("Bank"), in the amount of $35,773.74, knowing that he was falsely representing his intention and ability to repay the debt, rather, intending to "resolve" his obligation by filing a petition in bankruptcy. Bank alleges that it relied on Debtor's misrepresentations and as a result has been damaged in the amount due to Bank on the account. Plaintiff asks the court to infer from these facts that the defendant incurred the charges through false pretenses or representations or through actual fraud, within the meaning of 11 U.S.C. § 523(a)(2)(A), and therefore find the debt to plaintiff non-dischargeable.
The district court has jurisdiction over this matter under 28 U.S.C. § 1334. The matter is properly before a bankruptcy judge under 28 U.S.C. § 157(a). This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(I).
FINDINGS OF FACT
The uncontroverted facts set out in the court record, the affidavit of Stephanie Fircz, Recovery Supervisor for Card Services of Bank, and exhibits appended to the complaint[1] are accepted as true:
On or about December 30, 1994, defendant, Michael Canovas, was issued Mercantile Bank credit card account number XXXXXXXXXXXXXXXX (the "account"). Defendant represented on his application for credit that his gross monthly income was $3,000. Mercantile issued the card with a credit limit of $5,100. The credit card agreement mailed with the card provided that by using the card, the cardholder accepted the terms and conditions of the agreement, including the assumption of responsibility for all credit extended through the use of the credit card.
Defendant filed a petition in bankruptcy on August 19, 1997. The schedules attached to the petition reflect that defendant had no interest in real property, assets valued at $1,300, and $122,300 in debts, many thousands of which were identified as attributable to credit card purchases. Debtor was unemployed, had no income, and reported living expenses of $1,260 per month.
The first statement of record is dated February 7, 1995, and indicates charges of $95.00 in January 1995. Debtor timely paid the account in full on March 2, 1995. There is no evidence of delinquency on the account through May of 1996. On the June 7, 1996 statement, the balance was $1,354.21 and $40.00 was past due. The balance grew slightly to $1,407.02 on the July 7 statement, no payments having been made in May and June, 1996. Suddenly, during the period July 5 through *427 August 6, 1996, defendant incurred $10,543.08 in new charges. Apart from a rental car charge of $520.66 and a merchandise charge of $152.21, all of the many entries on the August 7, 1996 statement were in amounts less than $100. The merchants reflected were largely service stations, food stores, pharmacies, and restaurants. (Curiously, of approximately 330 transactions, 195 appear to have occurred at oil company service stations, as many as 15 transactions and as much as $422 on a single day, and at least one transaction daily.) The August 7 statement included a notice that the account was seriously delinquent and had been closed.
Despite the notice that the account was closed, during the following month a similar pattern occurred and defendant incurred new charges totaling $15,364.23, a total balance of $27,379.03. $364.00 was noted as past due on the September 7, 1996 statement. Only one charge exceeded $100 in amount. The Bank warned defendant, "Our records show your account is seriously past due. Please . . . make payment arrangements. An over limit fee was assessed when your account balance exceeded the established credit limit on 08/08/96." The October 7 statement reflects a balance of $26,740.00 and $889.00 past due. (No purchases were made; payments and credits totaled $1,118.71.) While asking defendant to send payment immediately, warning defendant that "the delinquency on this account may affect [his] ability to obtain credit in the future," Bank in the next breath invited defendant to "get a jump on the holiday" by shopping early with his Mercantile credit card. The November 7 statement reflects $5,240.20 in new purchases, only two entries exceeding $100, a balance of $27,008.80, and $1,237.18 past due. The statement recites for the second time, "Your account is seriously delinquent and has been closed." It also invites defendant to "take advantage" of his credit line. Defendant made two additional charges totaling $52.00 during the next month and no payment. Thereafter, no additional charges were incurred. The account balance, including finance charges, at the time the adversary complaint was filed was $34,710.93.
Bank did not deny defendant's transactions nor notify the merchants involved to deny said transactions. Bank explains that industry standards do not require merchants to report transactions of $100 or less. Charges in the amount of $100 or less that were incurred by the defendant were not submitted to Mercantile Bank for authorization.
There is no evidence regarding when, or over what period of time, any of the other unsecured, nonpriority debt was incurred.
DISCUSSION
Entry of a judgment of default is discretionary with the trial judge and may be denied where there are insufficient facts to support a cause of action. Peerless Industries, Inc. v. Herrin Illinois Cafe, Inc., 593 F.Supp. 1339 (E.D.Mo. 1984), aff'd, 774 F.2d 1172 (8th Cir.1985); see In re Sziel, 206 B.R. 490, 493 (Bankr. N.D.Ill.1997)("[E]ven though entry of a default results in admission of the allegations of the complaint, the plaintiff is not automatically entitled to entry of a default judgment.") The policy underlying these decisions is to minimize the "risk that the card issuers may coerce settlements from unrepresented consumers or obtain default judgments, regardless of the merits of the complaint." Id. at 492. "Under Fed. R. Bank. P. 7055, courts have broad discretion to `conduct such hearings . . . as it deems necessary and proper' to determine whether a default judgment should be entered." Id., citing, In re Beltran, 182 B.R. 820, 824 (9th Cir. BAP 1995), In re Villegas, 132 B.R. 742, 746 (9th Cir. BAP 1991). In order to accommodate the policy concern, the court will enter judgment only if the evidence submitted establishes a prima facie claim for dischargeability.
Bank believes that the facts set out above demonstrate nondischargeability *428 under § 523(a)(2)(A).[2] "To succeed [in] a proceeding under this section, the plaintiff must prove: (1) the debtor made a representation to the creditor; (2) the debtor's representation was false; (3) the debtor possessed scienter, i.e., an intent to deceive; (4) the creditor relied on the debtor's misrepresentation, resulting in a loss to the creditor; and (5) the creditor's reliance was justifiable." In re Christensen, 193 B.R. 863, 865 (N.D.Ill.1996). Exceptions to discharge are to be strictly construed against the creditor, and the burden of proof is on the creditor. Id. at 866.
A great deal has been written on what evidence fulfills these elements in the context of credit card debt. See, e.g., In re Sziel, 206 B.R. 490, motion to reconsider denied, 209 B.R. 712 (Bankr.N.D.Ill. 1997)(Judge Barliant); In re Murphy, 190 B.R. 327 (Bankr.N.D.Ill.1995)(Judge Barliant); In re Alvi, 191 B.R. 724 (Bankr. N.D.Ill.1996) (Judge Ginsberg); Christensen, 193 B.R. 863 (Judge Alesia). The court believes that Judge Barliant's analyses in Sziel and Murphy are sound. Under these cases, the first element of proof is established if the debtor presented a credit card for the extension of credit. See Murphy, 190 B.R. at 332 (Presentation of a credit card for the extension of credit is a representation of intention to pay in the future).[3]
The second element, that the debtor's representation was false, can be established only if at the time the statement was made, the debtor did not intend to honor his statement.[4]See Id. ("Under the common law a promise to perform a statement of future intention is actionable as fraud only if, at the time the statement was made, the debtor never intended to honor his statement.") Proof of intent to deceive is measured by the debtor's subjective intention at the time the representation was made, that he knew it to be false or made it with such reckless disregard for the truth as to constitute willful misrepresentation. Id. at 333, citing, In the Matter of Sheridan, 57 F.3d 627, 635 (7th Cir.1995). A finding of fraudulent intent can never be based solely on inability to pay, although such evidence is relevant to the issue. Sziel, 209 B.R. at 714; Christensen, 193 B.R. at 866. Other factors that may bear on intent include such things as the debtor's employment and credit history, changes in his financial condition and practices and the reasons for those changes, circumstances surrounding the debtor's use of the credit cards, efforts to improve his condition, and whether facts suggest that the debtor was contemplating bankruptcy when he incurred the charges. Sziel, 209 B.R. at 714. See Alvi, 191 B.R. at 733 (lists twelve factors). Although these factors bear on the question, the court must look at the totality of the circumstances in order to "determine whether all the evidence leads to the conclusion that it is more probable than not that the debtor had the requisite fraudulent intent." Murphy, 190 B.R. at 334.
The court finds that Bank has demonstrated the elements of nondischargeability under § 523(a)(2)(A) with respect *429 to a portion of the debt at issue. In incurring the credit charges, defendant represented that he intended to pay the charges in the future. Although there is essentially no evidence in the record elucidating the circumstances under which defendant incurred the debt, the court concludes that where the debtor incurred nearly $26,000 in small charges in the course of two months, in a highly unusual pattern (e.g., multiple service station charges on a nearly daily basis), at a time when the debtor's income was modest, and when he likely had enormous debt from many other credit cards and many other obligations, a reasonable jury who heard nothing from the defendant could conclude that the defendant either intentionally or recklessly misrepresented his intention to pay in the future.
The next elements require proof of "justifiable" reliance. Field v. Mans, 516 U.S. 59, 74-75, 116 S.Ct. 437, 446, 133 L.Ed.2d 351 (1995). The court in Field elaborated at some length regarding the meaning of justifiable reliance. Justifiable reliance is a common law term that entails consideration "`of the qualities and characteristics of the particular plaintiff, and the circumstances of the particular case, rather than of the application of a community standard of conduct to all cases.'" Id. at 70, 116 S.Ct. at 444, quoting RESTATEMENT (SECOND) OF TORTS ("RESTATEMENT"), § 545A cmt. b (1976). "[A] person is justified in relying on a representation of fact `although he might have ascertained the falsity of the representation had he made an investigation.'" Field, 516 U.S. at 70, 116 S.Ct. at 444, quoting RESTATEMENT § 540. A person is "`required to use his senses, and cannot recover if he blindly relies upon a misrepresentation the falsity of which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation. . . .'" Field, 516 U.S. at 71, 116 S.Ct. at 444, quoting RESTATEMENT, § 541, cmt a. "[J]ustifiable reliance is the standard applicable to a victim's conduct in cases of alleged misrepresentation . . . `[i]t is only where, under the circumstances, the facts should be apparent to one of his knowledge and intelligence from a cursory glance, or he has discovered something which should serve as a warning that he is being deceived, that he is required to make an investigation of his own.'" W. Prosser, LAW OF TORTS § 108, p. 718 (4th ed.1971); accord, W. Keeton, D. Dobbs, R. Keeton, & D. Owen, PROSSER AND KEETON ON LAW OF TORTS § 108, p. 752 (5th ed.1984). Field, 516 U.S. at 71-72, 116 S.Ct. at 444.
In this instance, Bank pleads merely that "Defendant has willfully converted the within described property by . . . false representations . . . for obtaining money or property on credit, whereby Plaintiff relied on Defendant's conduct, implied representations and overt acts. . . ." Complaint, ¶ 8. The only evidence related to reliance is the Fircz affidavit's reference to Bank's not being alerted to the excessive charges based on an industry standard that a merchant is not required to obtain authorization of a credit charge from a bank unless the amount exceeds $100.
The court believes that Bank's reliance was justifiable during the month of July, 1996, when defendant ran up $10,543.08 in mostly small charges (August 7 statement). In other words, Bank had no knowledge or warning that would have made it obvious that the defendant had substantially exceeded his credit limit. Under the instruction of Field, Bank in those circumstances justifiably relied on defendant's representations that he would pay. On the other hand, the court takes a contrary view with respect to succeeding charges. Bank, on the August 7 statement, notified defendant that his account was closed. It was, therefore, obvious to Bank that defendant had far exceeded his credit limit. Yet Bank, while terminating defendant's charging privilege, invited him to incur more charges and indeed allowed defendant to continue to charge on the account for another three months. The *430 court finds that Bank did not justifiably rely on defendant's misrepresentation after August 7, 1996 because it relied on a misrepresentation, the falsity of which was obvious upon cursory examination.
Finally, there is no evidence that the debt incurred prior to July 5, 1996, was obtained by fraud. To the contrary, the account balance was well below the credit limit until the July charges were made. For these reasons, the court finds the debt incurred for the period July 5 to August 7, 1996, in the amount of $10,543.08, nondischargeable. The court finds that the complaint is not supported by the evidence with respect to the remainder of the amount claimed.
ORDER
For the reasons stated above, the court finds that plaintiff has established the allegations of the complaint to the extent of $10,543.08, plus properly calculated finance charges on that amount until the filing of the adversary complaint. Plaintiff is directed to submit a proposed judgment order reflecting the amount of the judgment according to this decision.
NOTES
[1] Although the exhibits appended to the complaint are not authenticated, no objection having been made by the defaulting defendant, and there being no indication of inauthenticity, the court considers them as evidence for purposes of this decision.
[2] Section 523(a)(2)(A) provides in relevant part, as follows:
(A) A discharge under section 727 . . . does not discharge an individual debtor from any debt
(2) for money, property, services, or an extension . . . of credit, to the extent obtained by
(A) false pretenses, a false representation, or actual fraud. . . .
A single test is applied to the claim of nondischargeability under subparagraph (A). In re Alvi, 191 B.R. 724, 729 (Bankr.N.D.Ill.1996), citing, inter alia, Mayer v. Spanel Internat'l Ltd., 51 F.3d 670, 674 (7th Cir. 1995).
[3] Judge Ginsberg in Alvi concluded that the "use of a credit card to incur debt in a typical credit card transaction involves no representation, express or implied." 191 B.R. at 731.
[4] The second element of proof requires, literally, a false statement. But a statement of intention to do something in the future requires the fact finder to examine the intent of the representer in order to determine whether it was false. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543765/ | 389 Pa. Super. 396 (1989)
567 A.2d 663
Calvin ALSTON and Dorothy Alston, his wife, Appellants,
v.
ST. PAUL INSURANCE COMPANIES, John T. Williams, M.D. and Vocational Rehabilitation Services, Inc. and Janet H. Rohrer.
Supreme Court of Pennsylvania.
Argued June 5, 1989.
Filed December 8, 1989.
Reargument Denied December 27, 1989.
*397 Joseph Lurie, Philadelphia, for appellants.
Andrew J. Gallogly, Philadelphia, for St. Paul, appellee.
Paul A. Barrett, Scranton, for Vocational Rehabilitation, appellee.
Before CIRILLO, President Judge, and BROSKY, ROWLEY, McEWEN[*], OLSZEWSKI, TAMILIA, POPOVICH, JOHNSON and MELINSON, JJ.
CIRILLO, President Judge:
This is an appeal from an order of the Court of Common Pleas of Delaware County granting summary judgment in favor of St. Paul Insurance Companies, Vocational Rehabilitation Services, Inc., and John T. Williams, M.D. We affirm.
On April 24, 1981, while working on a ladder as a carpenter, appellant, Calvin Alston, fell and sustained numerous injuries including avulsion fractures of both wrists, a compression fracture of his spine, and aggravation of degenerative changes in his neck and back. Alston's workmen's compensation carrier, St. Paul Insurance Companies (St. *398 Paul), assigned Alston's file to Robert Dunham, a claims examiner, and began paying benefits.
Shortly thereafter, St. Paul contracted with appellee, Vocational Rehabilitation Services, Inc. (Vocational Services), to obtain Alston's medical records, to monitor his recovery, and to report to St. Paul. In late February, 1982, Vocational Services assigned Alston's file to Janet Rohrer, a "rehabilitation nurse," and employee of Vocational Services.
In February, March, and early April, 1982, J. Brendan Wynne, D.O., met with Alston and evaluated his medical condition. During this time, Dr. Wynne treated Alston for aggravation of his pre-existing degenerative condition and possible traumatic pericarditis. Dr. Wynne indicated to Ms. Rohrer that he was unable to calculate a firm date upon which Alston could return to work. Ms. Rohrer reported Dr. Wynne's findings to St. Paul, after which the company representatives allegedly held an in-house conference and apparently decided to institute a more aggressive approach toward Alston.
On May 14, 1982, Ms. Rohrer met with Mr. and Mrs. Alston to discuss Alston's medical treatment and prognosis. At that time, Ms. Rohrer indicated that she intended to schedule an appointment with appellee, John T. Williams, M.D., whom she allegedly described as a "miracle worker." According to the Alstons, Ms. Rohrer indicated that Dr. Williams would treat and cure Mr. Alston, although the appointment was ostensibly for the purpose of obtaining an independent medical examination.
On August 31, 1982, Alston appeared for Dr. Williams' examination. Alston claims that at no time prior to that examination was he informed that an independent medical examination would occur, or that Dr. Williams had the ability to sign a physician's affidavit of recovery, or that he was entitled to have his own physician accompany him to the examination. Allegedly without the benefit of Alston's prior medical records, x-rays, or contact with his prior treating physicians, Dr. Williams conducted a twenty minute examination, and at the conclusion of that exam, told *399 Alston that he was ready to return to work. Immediately after Alston's departure, Dr. Williams notified Ms. Rohrer that he would sign an affidavit of recovery, which he did in fact execute later that same day.
Having secured the affidavit of recovery, a representative of St. Paul allegedly approached Alston in the hopes of negotiating a lump sum settlement of his workmen's compensation benefits. Alston rejected the offer as insufficient, and shortly thereafter St. Paul filed a petition to terminate Alston's benefits. Alston's benefits were discontinued for nineteen months, until proceedings before a referee denied St. Paul's petition to terminate, and reinstated the benefits. The referee also imposed attorney's fees upon St. Paul. St. Paul appealed the referee's decision to the Workmen's Compensation Appeal Board, who affirmed the underlying decision, but reversed the award of attorney's fees on its own finding of "reasonable contest." No appeal was taken from this decision.
On July 6, 1984, Alston commenced this civil tort action through a complaint seeking both compensatory and punitive damages from St. Paul, Vocational Services, and Dr. Williams. The gravamen of Alston's action is the allegation that the named defendants engaged in a course of tortious conduct through which they conspired to fraudulently deny Alston's benefits due under the Pennsylvania Workmen's Compensation Act. This conspiracy, Alston averred, was advanced by the parties' negligent and intentional misrepresentation of facts to Alston.
A motion for summary judgment was filed on behalf of all three appellees. In that motion, the appellees argued that our decision in Rosipal v. Montgomery Ward, 360 Pa.Super. 570, 521 A.2d 49 (1987), alloc. granted 516 Pa. 635, 533 A.2d 93 (1987), appeal dismissed 517 Pa. 460, 538 A.2d 495 (1988), holding that an employee's tort action against her employer was barred by the exclusivity provision of the Workmen's Compensation Act, precluded Alston's action. On March 3, 1988, the Honorable Frank T. Hazel entered an order granting summary judgment in *400 favor of St. Paul, Vocational Services, and Dr. Williams. This appeal followed.
Alston advances the following two issues for our review: (1) whether the trial court properly concluded that the Workmen's Compensation Act provides statutory immunity from a civil lawsuit to workmen's compensation insurance carriers who inflict injuries outside the scope of employment, by malicious and fraudulent conduct and by abuse of the legal process to terminate workmen's compensation benefits; and (2) whether the trial court properly granted statutory immunity under the Workmen's Compensation Act to appellees Williams and Vocational Services, neither of whom are employers or insurance carriers.
Pennsylvania Rule of Civil Procedure 1035(b) provides, in pertinent part, that on a motion for summary judgment:
The judgment sought shall be rendered 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.
Pa.R.C.P. 1035(b); Dume v. Elkcom Co., 368 Pa.Super. 280, 533 A.2d 1063 (1987). When reviewing a trial court's imposition of summary judgment, we have stated:
Summary judgment is made available by Pa.R.C.P. 1035 when the pleadings, depositions, answers to interrogatories, admissions on file and supporting affidavits considered together reveal no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. To determine the absence of a genuine issue of material fact, we must view the evidence in the light most favorable to the non-moving party and any doubts must be resolved against the entry of judgment. In so doing, we accept as true all well-pleaded facts in appellant's pleadings and give appellant the benefit of all reasonable inferences to be drawn therefrom. Summary judgment is appropriate only in those cases which are clear and free from doubt. *401 Bobb v. Kraybill, 354 Pa.Super. 361, 364, 511 A.2d 1379, 1380 (1986) (citations omitted). Thus, an appellate court is required to determine the existence of any genuine issues of material fact which the trial court may have overlooked. In so doing, we may reverse the trial court only where there has been an error of law, or a clear or manifest abuse of discretion. Lened Homes v. Department of Licenses and Inspections, 386 Pa. 50, 123 A.2d 406 (1956); Dume, supra. Applying these principles, we are faced with the task of determining whether the trial court properly concluded that no genuine issue of material fact existed and that Alston's claim was barred as a matter of law.
Alston initially claims that the trial court erred in granting summary judgment in favor of St. Paul, Vocational Services, and Dr. Williams because their allegedly tortious conduct "did not arise in the scope of [his] employment under the act; did not occur on the employer's premises and did not occur while [he] was acting in furtherance of his employer's interest." Since the incidents which gave rise to the cause of action occurred months after the initial on-the-job injury, Alston maintains that they do not fall within the ambit of the exclusivity provision of the Workmen's Compensation Act. We cannot agree.
Pennsylvania is an industrialized state. In order to promote certainty in the legal affairs of Pennsylvania's industrial base, while protecting employees and their families from economic devastation arising from work-related injuries, our legislature formulated Pennsylvania's Workmen's Compensation Act. The Act was designed to assure quick, fair, and certain compensation for employment-related injuries without requiring the complainants to resort to the courts for recovery. See Blouse v. Superior Mold Builders, Inc., 363 Pa.Super. 516, 518, 526 A.2d 798, 799 (1987).
The Act specifically delineates the coverage which it affords. Section 301(a) provides:
Every employer shall be liable for compensation for personal injury to, or for the death of each employe, by an injury in the course of his employment, and such compensation *402 shall be paid in all cases by the employer, without regard to negligence. . . .
77 P.S. § 431. Although this "no-fault" system of recovery applies equally to all employment-related injuries, the legislature determined that employers should not be accountable for those injuries inflicted by third persons, as a result of nonemployment related matters. This concept is embodied in section 301(c), which states:
The term "injury arising in the course of his employment," as used in this article, shall not include an injury caused by an act of a third person intended to injure the employe because of reasons personal to him, and not directed against him as an employe or because of his employment; but shall include all other injuries sustained while the employe is actually engaged in the furtherance of the business or affairs of the employer. . . .
77 P.S. § 411(1) (emphasis added). Aside from this exception, the Workmen's Compensation Act clearly sought to provide the injured worker with his or her exclusive remedy at law. In essence, the Act was based on a theory of "trade-offs." On the one hand, the employer is forced to surrender the numerous defenses which might be available in an employee's action at common law. However, the injured employee's recourse is strictly confined to those remedies provided by the statute itself, thus providing the employer with some degree of certainty in its legal affairs. Section 303(a) integrates the exclusivity principle into our statutory scheme, and provides:
(a) The liability of an employer under this act shall be exclusive and in place of any and all other liability to such employes, his legal representative, husband or wife, parents, dependents, next of kin or anyone otherwise entitled to damages in any action at law or otherwise on account of any injury or death as defined in section 301(c)(1) and (2) or occupational disease as defined in section 108.
*403 77 P.S. § 481 (emphasis added). Commenting upon this section of the Act, our supreme court has stated:
Section 303(a) of the Workmen's Compensation Act, like its predecessor, is a version of the historical quid pro quo employers received for being subjected to a no-fault system of compensation for worker injuries. That is, while the employer assumes liability without fault for a work-related injury, he is relieved of the possibility of a larger damage verdict in a common law action.
Lewis v. School District of Philadelphia, 517 Pa. 461, 471, 538 A.2d. 862, 867 (1988) (citations omitted); see also 2A A. Larson, Workmen's Compensation Law, § 65.11 (1987 ed.). In short, the exclusivity provision "bars tort actions flowing from any work-related injury." Kline v. Arden H. Verner Co., 503 Pa. 251, 256, 469 A.2d 158, 160 (1983).
We note at the outset that this suit was not brought against Alston's statutory "employer." Rather, Alston instituted this civil action against St. Paul, his employer's workmen's compensation insurance carrier, as well as those individuals retained by St. Paul to shepherd his case through the compensation process. This fact, however, does not alter our analysis of Alston's claim. The same immunity from tort liability enjoyed by an employer has been extended to workers' compensation insurers by section 305 of the Act. Section 305 provides, in pertinent part:
Every employer liable under this act to pay compensation shall insure the payment of compensation in the State Workmen's Insurance Fund, or in any insurance company. . . authorized to insure such liability in this Commonwealth.. . . Such insurer shall assume the employer's liability hereunder and shall be entitled to all of the employer's immunities and protection hereunder. . . .
77 P.S. 501 (emphasis added); see Jadosh v. Goeringer, 442 Pa. 451, 275 A.2d 58 (1971) (employer's workmen's compensation insurer was included within term "employer" as used in immunity provisions of Workmen's Compensation Act and shares employer's immunity from common-law liability); DeJesus v. Liberty Mutual Insurance Company, 439 Pa. *404 180, 268 A.2d 924 (1970) (same); Brown v. Travelers Insurance Company, 434 Pa. 507, 254 A.2d 27 (1969) (same); Leonard v. Harris Corp., 290 Pa.Super. 370, 434 A.2d 798 (1981) (same).
In Brown, supra, our supreme court stated:
[T]he relevant policy considerations reinforce our conclusion that the legislature intended that the insurance carrier would share in the employer's immunity . . . . [I]f the appellant's position were adopted, then a regrettable discrimination would result between employers who are insured by the State Workmen's Insurance Fund or are self-insuring employers and those employers who carry private insurance. . . . Such discrimination would be inequitable and unjust both to the employers who utilize private insurance and to their employees: first, these employers would be placed at a competitive disadvantage since private insurance carriers would necessarily have to raise their rates to offset the increased liability placed upon them by the result urged by the appellant . . . We cannot and do not believe that the legislature ever intended the Workmen's Compensation Act to produce such discrimination.
434 Pa. at 514, 254 A.2d at 29. Similarly, in Jadosh, supra, Justice O'Brien opined:
Although [I] dissented in Brown v. Travelers Ins. Co., 434 Pa. 507, 254 A.2d 27 (1969), and again in DeJesus, supra, where it was held that the insurance carrier is included within the term "employer" as it is used in Section 303 of the Workmen's Compensation Act and, therefore, shares the employer's immunity from common-law liability, the issue has been finally determined . . . . Appellant argues, however, that the statute was only intended to allow the insurer to share the immunities of the employer when the employer itself is concerned, not when the insurer is also involved as an independent contractor. . . . Why, asks the appellant rhetorically, should immunity be granted to a third party merely because it also happens to be the compensation insurer *405 for the employer? We do not think the circumstances were all that coincidental. We believe the language of the statute is clear. PMA . . . was acting as an insurer and is, therefore, entitled to all of the employer's immunity under the act.
442 Pa. at 455-56, 275 A.2d at 61. In short, it is abundantly clear that the express language of section 305, coupled with judicial interpretation of that section in relation to section 303(a), confers all of the employer's immunities and protections under the Act to the workmen's compensation insurer.
The legal immunity which is afforded to employers and their compensation insurers extends not only to acts of negligence, but also to claims based on intentional, wanton and willful misconduct, such as those advanced in the case before us today. In Poyser v. Newman & Company, 514 Pa. 32, 522 A.2d 548 (1987), the appellant, Stephen Poyser, filed suit against his employer, seeking redress for physical injuries he suffered while in the course of his employment. Poyser claimed that Newman disregarded governmental safety regulations and deliberately exposed him to a known hazard. Having committed willful and wanton disregard for his safety, Poyser maintained that Newman's actions rose to the level of an intentional tort, which should pierce the shield of immunity. Newman, on the other hand, asserted that it was immune from Poyser's trespass action because of the exclusivity provision in section 303(a). The trial court agreed with Newman and granted its motion for judgment on the pleadings. We affirmed, and the supreme court did likewise, reasoning:
There is no Pennsylvania judicial authority supportive of the result the appellant seeks. The argument he presents is one based entirely on his view of the relationship between the Act and other laws and regulations which bear upon safety in the workplace. . . . It is true that the appellate courts of some other states have held that wanton and willful misconduct by an employer is tantamount to an intentional tort, and as such, prevents the operation of a statutory exclusive-remedy provision. It *406 must be noted, however, that those cases rested on provisions in the state workmen's compensation statutes which expressly preserved the right of an employee to sue in tort where his injury was caused by the employer's intentional wrongdoing. There is no such provision in The Pennsylvania Workmen's Compensation Act. The appellant's argument is an interesting one; but it is one that must be resolved by the General Assembly, not this Court. What he is asking us to do is to engraft upon section 303(a) of the Act an exception the legislature did not see fit to put there. A reading of the Act will disclose that the legislature was not unmindful of the issue of intentionally caused harm. . . . Since it is clear that the legislature had the issue of intentional harm in mind, and yet did not mention it in connection with section 303(a), we are constrained to conclude that the legislature did not intend the result for which the appellant argues.
514 Pa. at 38, 522 A.2d at 551. Applying Poyser to a case where an employee allegedly sustained injuries as the result of the employer's intentional failure to warn of the known dangers of toxic chemicals, we stated:
As [the Poyser] decision makes clear, where employees sustain injuries during the course of employment as a result of an alleged intentional wrongdoing by their employer, the employees' exclusive remedy is under the Workmen's Compensation Act; a civil action in tort for the same injuries will not lie.
Blouse, 363 Pa. Super at 521, 526 A.2d at 801.
The immunity discussed above has recently been extended to civil tort actions arising from the handling of a worker's compensation claim. In Rosipal v. Montgomery Ward, 360 Pa.Super. 570, 521 A.2d 49 (1987), alloc. granted 516 Pa. 635, 533 A.2d 93 (1987), appeal dismissed 517 Pa. 460, 538 A.2d 495 (1988), Joann Rosipal, an employee at Montgomery Ward, sustained an injury on her employer's premises while performing her duties as a security guard. Montgomery Ward filed a notice of compensation payable, and initiated wage indemnity payments. Almost two *407 months later, Montgomery Ward, along with its workmen's compensation carrier, Aetna Insurance Company, filed a petition for termination of compensation supported by a physician's affidavit of recovery. Rosipal's benefits were curtailed; however, following a hearing before a workmen's compensation referee, compensation benefits were reinstated.
Rosipal then commenced a civil action against Montgomery Ward alleging economic duress, intentional infliction of emotional distress, procuring a "false, fraudulent and perjured affidavit [of recovery]," and breach of compensation agreement. In response, Montgomery Ward filed preliminary objections in the nature of a demurrer, averring that it was immune from Rosipal's action pursuant to section 303(a) of the Act. The trial court overruled Montgomery Ward's demurrer, and concluded that Rosipal's claim "did not arise from an employment related accident such as would be covered by the Workmen's Compensation Act." Following a petition to review to this court, we reversed the order of the trial court, and sustained Montgomery Ward's demurrer thereby dismissing the complaint.
In rejecting the trial court's finding that the injury did not arise from an employment related accident such as would be covered by the Act, we stated:
We disagree with this analysis as the underlying factor in the present action is the alleged injury suffered by the employee while she was acting as a security guard. In the absence of the injury, there would have been no workmen's compensation proceedings out of which the instant civil action arose. . . . The appellee has failed to state a cause of action in her complaint as all of the allegations have as the ultimate basis an injury compensable under the Workmen's Compensation Act and her claims must be considered within the framework of the Act.
360 Pa.Super. at 573-74, 521 A.2d at 50-51 (emphasis added).
*408 It is apparent from our supreme court's pronouncement in Poyser, as well as our holdings in Blouse and Rosipal, that when employees sustain injuries during the course of their employment, because of an intentional wrongdoing by their employer, the employees' exclusive remedy, for the injury itself or the handling of the claim, lies within the framework of the Workmen's Compensation Act, not in a civil action sounding in tort. The express terms of section 305 extend this statutory immunity to workers' compensation insurers, as well as to the employers of the injured worker.
Pennsylvania's Workmen's Compensation statute provides a host of administrative remedies for those claimants who believe their compensation has been wrongfully suspended or terminated by the workmen's compensation insurer. Aggrieved claimants can receive interest on all past due compensation; litigation costs; and counsel fees where the insurer did not have a reasonable basis to contest the claim. In addition, they can receive remuneration for fees paid to witnesses, medical examinations, and lost time to attend the proceedings to contest the termination or suspension. Moreover, they may recover against the insurer in an amount up to twenty percent of the benefits due in cases of unreasonable or excessive delays. Those insurers who repeatedly or unreasonably fail to pay prompt compensation may have their license to transact business revoked or suspended by the Insurance Commissioner. See generally, 77 P.S. §§ 774.1-997. Thus, in addition to assuring quick, fair and certain compensation, our legislators also considered the plight of an injured worker who might be intimidated or disadvantaged by the superior bargaining position of an insurance company, and responded with sanctions and procedures designed to obviate the need for common law actions. This system may not be perfect, but its weaknesses should be cured by further legislation rather than the creation of a parallel scheme for judicial inquiry into an area so carefully legislated by our General Assembly. "Where statutory remedies are provided, the procedure *409 prescribed by the statute must be strictly pursued to the exclusion of other methods of redress." Interstate Traveler Services v. Commonwealth Department of Environmental Resources, 486 Pa. 536, 542, 406 A.2d 1020, 1023 (1979).
We are not unfamiliar with case law emanating from other jurisdictions which allow common law actions against workmen's compensation insurers. See, e.g., R. Schnechter, Bad Faith Handling of Workers' Compensation Claims: Demise of the Exclusivity Provision, 24 Trial 66 (1988); B. Lown, Remedies of Workers Compensation Claimants Against Workers' Compensation Carriers, 30 New Hamp. B.J. 21 (1988). However, as Chief Justice Nix noted in Poyser, our lawmakers considered the issue of intentional acts while drafting our Workmen's Compensation Act, and nonetheless decided to preclude civil tort actions stemming from those acts. Reconsideration of that policy determination is more appropriately left to the wisdom of our General Assembly, and not the courts. Addressing a claim similar to the one before us today, Chief Justice Phillips of the Texas Supreme Court cogently noted:
The Workers' Compensation Act is by no means perfect, as recent criticisms from representatives of workers, employers, and insurers have made clear. Nonetheless, thousands of claims are resolved under its auspices every year. In this, it serves it primary legislative purposes of assuring certain and timely resolution of claims. In my view, this court's [recognition of a cause of action against the workmen's compensation insurer] invites the proliferation of lawsuits and the possibility of double recoveries and inconsistent findings of fact. To permit a tort remedy in addition to the remedies provided by statute betrays the bargain implicit in the Act and necessarily impairs the function of the compensation system.
Aranda v. Insurance Company of North America, ___ Tex. ___, ___, 748 S.W.2d 210, 218 (1988) (Phillips, C.J. dissenting). Having viewed all the evidence proffered in *410 this case in the light most favorable to Alston, and resolving any doubts against entry of judgment, we conclude that Judge Hazel properly determined that appellees were entitled to judgment as a matter of law.
We also dismiss Alston's claim that the trial court erred when it held appellees Williams and Vocational Services immune from suit. The social policies underpinning the grant of immunity to employers and their compensation insurers apply equally to those individuals employed by the insurer to review the case. To hold otherwise would thwart the clear legislative mandate of providing workmen's compensation benefits as the employee's exclusive remedy.
Order affirmed.[1]
ROWLEY, J., files a dissenting statement and joins dissenting statement by JOHNSON, J.
Concurring and dissenting opinion by BROSKY, J.
Dissenting statement by JOHNSON, J.
MELINSON, J. joins dissenting statement by ROWLEY and JOHNSON, JJ.
*411 BROSKY, Judge, concurring and dissenting.
I am in general agreement with the dissenting members of the panel that the term "injury", within the meaning of the Workmen's Compensation Act, does not include fraudulent actions of an insurer as alleged here.
Thus, were an individual able to demonstrate that an insurer fraudulently deprived him or her out of benefits I would find such an action outside the scope of the Act and subject to redress in tort. However, I hesitate to join completely in dissent simply because the Workmen's Compensation Appeal Board found that the insurer had a "reasonable contest." This finding, which was neither appealed nor pursued further, it seems to me, would be preclusive of a fraud action in the present case since it would be res judicata in any subsequent proceedings, including the one contemplated here. I simply cannot see the appellant moving to trial in the face of a conclusive determination that the insurer had a reasonable contest to further workmen's compensation claims. However, in general, I find the majority's analysis quite suspect.
It is true that Pennsylvania is an industrialized state and that workmen's compensation provides a useful purpose with mutual trade-offs by both employer and employee. However, nowhere within the concept of work related injury under the Act can you reasonably fit a fraudulent deprivation of a rightfully acquired benefit under the Act. Nor are the purposes of the Act furthered to any perceivable degree by providing a shield to insurers relating to post accident matters and unconnected to the workplace. Allowing a tort action against an insurer which happens to fraudulently deprive an individual of a benefit should not in any way hinder or impair industrial growth and operation, nor should it work to unfairly impose unlimited liability to a good faith employer for events occurring naturally during the course of operating a business. These are general purposes, on the employer's side, for passage of the Act.
In contrast, preventing an individual from the subject action will in no way aid the injured employee in assuring *412 fair and prompt monetary compensation for injury suffered in the workplace regardless of fault. This is the primary purpose for passage of the Act on the employee's side and certainly it cannot be beneficial to this interest to limit the legal responsibility of an insurer who engages in fraudulent practices to limit its own expenditures to injured employees. Thus, I can concur only in the result reached by the majority.
ROWLEY, Judge, dissenting.
I join the Dissenting Statement by Judge Johnson. I also join in the compelling analysis by Judge Brosky contained in the last two paragraphs of his Concurring and Dissenting Opinion. However, I do not agree with Judge Brosky's conclusion that the findings by the Workmen's Compensation Appeal Board are res judicata as to the claims asserted by appellants in the present case.
MELINSON, J., joins.
JOHNSON, Judge, dissenting.
For the reasons set forth in my Dissenting Opinion in Rosipal v. Montgomery Ward, 360 Pa.Super. 570, 521 A.2d 49 (1987), and because I continue to believe that Kuney v. PMA Insurance Company, 379 Pa.Super. 598, 550 A.2d 1009 (1989) (pet. for alloc. filed at 241 E.D. Allocatur Docket 1989, 3-13-89) is a correct statement of the law, I must dissent.
I cannot believe that our legislature intended the use of the word "injury" in the Workers' Compensation Act to encompass intentional fraudulent acts of insurance companies and their employes designed to deny benefits due Pennsylvania workers. Cf., Reed v. Hartford Accident and Indemnity Co., 367 F. Supp. 134 (E.D.Pa. 1973).
MELINSON, J., joins.
NOTES
[*] Judge McEwen did not participate in the decision of this case.
[1] In dismissing Alston's claims, we expressly overrule our panel decision in Kuney v. PMA Insurance Company, 379 Pa.Super. 598, 550 A.2d 1009 (1988). The majority in Kuney relied upon Reed v. Hartford Indemnity Company, 367 F. Supp. 134 (E.D.Pa. 1973), in finding that the immunity provided to employers under the Workmen's Compensation Act did not extend to an insurer when its conduct was "separate and apart" from claimant's work-related injury. We note, however, that after the injuries occurred which gave rise to the Reed case, the Pennsylvania Workmen's Compensation Act underwent a substantial revision. In 1972, the General Assembly eliminated the phrase "accident in the course of employment," and broadened the language to encompass "an injury to an employee . . . arising in the scope of his employment and related thereto." 77 P.S. § 411(1). Without the "accident" language, the employee could no longer avoid the exclusive remedy provision by showing that the injury did not arise from an "accident." See Note, Intentional Employer Misconduct and Pennsylvania's Exclusive Remedy Rule after Poyser v. Newman & Co.: A Proposal for Legislative Reform, 49 U.Pitt.L.Rev. 1127, 1129 (1988). More importantly, Kuney contravenes the express statutory language contained in section 305, and our supreme court's mandate in Poyser. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1959379/ | 496 A.2d 618 (1985)
UNITED STATES, Appellant,
v.
Michael B. HIGDON, Appellee.
No. 84-1050.
District of Columbia Court of Appeals.
Argued June 18, 1985.
Decided August 12, 1985.
Bradley L. Kelly, Asst. U.S. Atty., Washington, D.C., with whom Joseph E. diGenova, U.S. Atty., and Michael W. Farrell and Judith Hetherton, Asst. U.S. Attys., Washington, D.C., were on brief, for appellant.
Charles F. Stowe for appellee.
Before PRYOR, Chief Judge, MACK, Associate Judge, and PAIR, Associate Judge, Retired.
PER CURIAM:
The government appeals from the trial court's order granting appellee's petition for a writ of error coram nobis and vacating his sentence for second-degree burglary. We reverse.[1]
I
Appellee pleaded guilty to one count of second-degree burglary, and was sentenced by Judge Murphy, on August 15, 1983, to a term of one to three years in prison. This sentence was to run consecutively to an eight-year term of imprisonment imposed by the Arlington, Virginia, County Circuit Court, for certain prior offenses.
On December 8, 1983, 115 days after sentencing, appellee filed a motion for reduction *619 of sentence pursuant to Super.Ct. Crim.R. 35(b). On December 19, Judge Murphy denied appellee's motion on the merits.[2]
Appellee was paroled from the Commonwealth of Virginia Department of Corrections in March 1984, and immediately began serving his District of Columbia sentence at the Lorton Correctional Facility. Thereafter, appellee filed a petition for a writ of error coram nobis to have his sentence vacated. Appellant alleged that his sentence was improper because,
no mitigating evidence [was] presented to the Court at sentencing, [and therefore] the Court was prevented from considering any relevant and crucial information in imposing sentence other than the presentence report.
In support of his petition, appellee included a proposed sentencing plan prepared by the National Center on Institutions and Alternatives (NCIA). This plan contained information about appellee including his school records, his District of Columbia and Virginia presentence reports, the charging documents in this case, a list of mitigating factors to be considered in sentencing, other relevant research on issues pertaining to the case, and a proposed sentence.
Although a copy of appellee's petition was served on the government on May 9, 1984,[3] the government did not file a timely response to the petition.[4] A representative of the United States Attorney's Office was present at the scheduled hearing on the petition, on June 15, 1984, but was not familiar with appellee's case, and did not participate in the hearing in any meaningful way. Following the hearing, Judge Murphy granted appellee's petition for writ of error coram nobis, and set aside the previously imposed sentence. Judge Murphy then resentenced appellee to one to three years imprisonment, but placed appellee on two years probation with a requirement of 200 hours of community service.
Thereafter, the government filed a motion for reconsideration of the June 15 decision. The trial court denied the government's motion on the grounds that the government's inaction with respect to appellee's petition constituted "plain neglect," and that in light of the government's failure to oppose appellee's petition, the court had treated the petition as "conceded." This appeal followed.
II
A writ of error coram nobis is an "extraordinary remedy" which should be granted "only under circumstances compelling such action to achieve justice." United States v. Morgan, 346 U.S. 502, 511, 74 S. Ct. 247, 252, 98 L. Ed. 248 (1954). At common law, the function of such a writ was to "correct errors of fact on the part of the trial court, not attributable to the negligence of the defendant, when the errors alleged [were] `of the most fundamental character; that is, such as rendered the proceeding itself irregular and invalid.'" Moon v. United States, 106 U.S.App.D.C. 301, 303, 272 F.2d 530, 532 (1959) (quoting United States v. Mayer, 235 U.S. 55, 69, 35 S. Ct. 16, 19, 59 L. Ed. 129 (1914)). The writ was intended to correct errors of fact not apparent on the face of the record and unknown to the trial court. Id. at 303, 272 F.2d at 532; see Watwood v. District of Columbia, 162 A.2d 486, 487 (D.C.1960). In reviewing a petition for such a writ, there is a presumption that the proceeding in question was without error, and the petitioner *620 bears the burden of showing otherwise. Id. at 487.
We have reviewed the record in this case and do not believe that appellee carried his burden of showing that an error amounting to a "miscarriage of justice," Moon v. United States, supra, 106 U.S. App.D.C. at 303, 272 F.2d at 532, occurred at his sentencing hearing. Thus, we conclude that the trial court abused its discretion in granting appellee's petition for relief.
In his petition, appellee maintained that his sentencing hearing was fatally flawed because his counsel failed to set forth "mitigating factors" for the trial court's consideration, and failed to have witnesses testify on appellee's behalf at the hearing. Appellee argued that if this information had been available to the court before or at sentencing, the court would not have imposed the sentence that it did. We find appellee's contentions without merit, because first, evidence of the mitigating factors, highlighted in the Memorandum of Points and Authorities accompanying appellee's petition for the writ of error coram nobis, were before the court at the time of the sentencing hearing; and second, in any event, appellee's contentions amounted to a claim of ineffective assistance of counsel, which must properly be pursued under D.C.Code § 23-110 (1981), and not under a writ of error coram nobis.
Upon reviewing both the presentence report and the NCIA study, we are hard pressed to find any significant mitigating evidence which is present in the latter but not the former. The mitigating factors set forth in the presentence report included a stable home environment with close family ties; no history of drug or alcohol abuse; and limited prior criminal involvement. The NCIA study emphasized these very same factors. The study's only additions were references to the positive institutional adjustment appellee made while incarcerated in Virginia, and the non-violent nature of appellee's offenses (a factor that the trial court was obviously aware of at the time of sentencing).
Moreover, Judge Murphy's remarks during the August 15 sentencing hearing make clear that the court took mitigating factors into consideration in sentencing appellee. Judge Murphy stated:
You plead guilty. I'll give you a break because of that but you committed a crime in this town so you owe us some some of your time. The Court sentences you to one to three years. . . . You've got a you're a young man. You went off on a life of crime. You weren't very good at it `cause you ultimately got caught. I could have given you five to fifteen . . . [i]t is only one to three . . . you are a young man and I hope you'll learn from the experience. [Emphasis added.]
Thus, it is evident that appellee's petition for a writ of error coram nobis did not set forth errors of material fact unknown to the trial court at the sentencing hearing. Moreover, even assuming certain factors set forth in the NCIA study were not presented to the trial court at the sentencing hearing, we do not believe such omissions amounted to a fundamental flaw in the proceedings, in light of the list of mitigating factors which was contained in the presentence report, defense counsel's oral presentation at the sentencing hearing, and the trial court's own remarks.
In sum, appellee did not carry his burden of proving that his sentence should be vacated in favor of a lesser sentence. Moreover, insofar as appellee was contending that defense counsel did not put forth an adequate defense presentation at the hearing, his claim is really one of ineffective assistance of counsel and should have been pursued through the proper vehicle.
Accordingly, the judgment of the court is reversed and remanded with instructions to reinstate the original sentence.[5]
So ordered.
NOTES
[1] Appellee alleges that this court is without jurisdiction to hear this appeal because the trial court's order granting appellant's motion to extend the time for filing a notice of appeal is defective. Upon reviewing the record, we conclude that the trial court properly granted appellant's motion, pursuant to D.C.App.R. 4(b)(3).
[2] The government points out that the trial court was without jurisdiction to enter this ruling in light of our holding in United States v. Nunzio, 430 A.2d 1372 (D.C.1981) (120-day requirement in Rule 35(b) is a jurisdictional requirement and not a filing limit).
[3] In addition to receiving a copy of the petition, the government was notified by letter from Judge Murphy's law clerk that it had twenty days in which to file an opposition to the petition.
[4] The government's response was filed on July 11, 1984, nearly one month after Judge Murphy entered the order granting appellee's petition.
[5] Nothing in this opinion is meant to suggest that we condone the government's less than exemplary behavior in their handling of this case. However, in light of the extraordinary nature of a writ of error coram nobis, we do not believe that it is a remedy that should have been granted by "default." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2427080/ | 945 S.W.2d 160 (1997)
VALORES CORPORATIVOS, S.A. de C.V., Casa Chapa, S.A. de C.V., and Chapa Trading Co., Inc., Appellants,
v.
McLANE COMPANY, INC. and Wal-Mart Stores, Inc., Appellees.
No. 04-95-00913-CV.
Court of Appeals of Texas, San Antonio.
February 19, 1997.
Rehearing Overruled April 30, 1997.
*161 Luther H. Soules, III, Soules & Wallace, San Antonio, John M. O'Quinn, Kendall C. Montgomery, O'Quinn, Kerensky, McAninch & Laminack, Houston, Ricardo G. Cedillo, Davis, Adami & Cedillo, Inc., San Antonio, Vincent L. Marable, III, Paul Webb, P.C., Wharton, for appellants.
Seagal V. Wheatley, J. Frank Onion, III, Julia W. Mann, San Antonio, James M. Hill, Robert B. Neblett, III, Harold R. Loftin, Jr., Small, Craig & Werkenthin, P.C., Austin, for appellees.
Before HARDBERGER, C.J., and DUNCAN and BUTTS, JJ[1].
OPINION
DUNCAN, Justice.
Valores Corporativos, S.A. de C.V., Casa Chapa, S.A. de C.V., and Chapa Trading Co., Inc. (collectively, "Valores")[2] appeal the summary judgment against them in their suit against McLane Company, Inc. and Wal-Mart Stores, Inc. We hold the summary judgment proof does not conclusively establish the absence of an enforceable agreement between Valores and McLane Co., and Texas law does not preclude holding Wal-Mart liable for tortiously interfering with the contractual relations of its wholly-owned subsidiary, McLane Co. Accordingly, we reverse the judgment and remand the case to the trial court for further proceedings consistent with this opinion.
PROCEDURAL BACKGROUND
Valores filed suit against Drayton McLane, McLane Co., and Wal-Mart on numerous causes of action. On Valores' motion, however, all of its causes of action against Drayton McLane and many of its causes of action against McLane Co. and Wal-Mart were dismissed with prejudice. As a result of these dismissals, Valores retained claims against McLane Co. for breach of contract, breach of a confidential or fiduciary relationship, and constructive fraud; Valores retained claims against Wal-Mart for tortiously interfering with Valores' and McLane Co.'s agreement or prospective contractual relations and for knowingly participating in what it knew or should have known were breaches of fiduciary duty and constructive fraud by McLane Co. towards Valores.
On September 12, 1995, McLane Co. and Wal-Mart moved for partial summary judgment on Valores' claims for breach of contract and tortious interference with contract or prospective contractual relations. The trial court granted this motion by order signed October 6, expressly noting that it was not granting the motion on the statute of frauds ground.[3]
On October 9, McLane Co. and Wal-Mart moved for partial summary judgment on Valores' claims against McLane Co. for breach of a confidential or fiduciary relationship and constructive fraud and its claims against Wal-Mart for knowing participation. In line with the parties' waivers of the appropriate deadlines, the trial court heard and granted this motion on October 11. This second partial summary judgment, coupled with Valores' voluntary dismissals and the earlier October 6 partial summary judgment, comprised a final judgment. Accordingly, on *162 October 11, 1995, the trial court signed a final judgment incorporating all of the pertinent orders. Valores appealed.
STANDARD OF REVIEW
We review a summary judgment de novo. Accordingly, we will uphold a summary judgment only if the summary judgment record establishes that there is no genuine issue of material fact, and the movant is entitled to judgment as a matter of law on a ground set forth in the motion. Travis v. City of Mesquite, 830 S.W.2d 94, 99-100 (Tex.1992); TEX.R. CIV. P. 166a(c). In deciding whether the summary judgment record establishes the absence of a genuine issue of material fact, we view as true all evidence favorable to the non-movant and indulge every reasonable inference, and resolve all doubts, in its favor. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985).
SCOPE OF REVIEW
Before setting forth the factual background in this case, we must first decide an issue relating to the scope of review. In an objection and supplemental objection, Valores argues that we may not consider the summary judgment proof filed on October 9 as support for the trial court's October 6 partial summary judgment, because it was not before the trial court at that time or for that purpose. McLane Co. and Wal-Mart disagree, arguing that we may consider their October 9 summary judgment proof in support of the October 6 partial summary judgment, because it was filed before the October 11 final judgment was signed. We initially overruled Valores' objection and supplemental objection. However, after further reflection and for the reasons discussed below, we reverse our earlier ruling and now sustain Valores' objection and supplemental objection.
As a general rule, the trial court may consider only that summary judgment proof that was properly on file at the time of the hearing. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992). McLane Co. and Wal-Mart are correct, however, that the rule also permits the trial court to consider proof filed after the hearing but before judgment in some circumstances. TEX.R. CIV. P. 166a(c). But this provision, "before judgment," has been "construed to mean before the summary judgment is signed by the trial court." TIMOTHY PATTON, SUMMARY JUDGMENTS IN TEXAS § 2.01[1][b] at 7 (2nd ed.1996). Moreover, "the record must affirmatively reflect that those late-filed documents were filed with leave of court." Id.
In this case, the October 9 summary judgment proof was filed after the trial court signed the October 6 partial summary judgment, and the record does not reflect the trial court permitted this proof to be filed or considered as late-filed proof with respect to the October 6 partial summary judgment. Accordingly, we presume it was not considered by the trial court as support for the October 6 partial summary judgment. Cf., e.g., Benchmark Bank v. Crowder, 919 S.W.2d 657, 663 (Tex.1996); Goswami v. Metropolitan Sav. & L. Ass'n, 751 S.W.2d 487, 490 n. 1 (Tex.1988) (in the absence of order to the contrary, presume trial court did not consider late-filed proof). We therefore reverse our earlier ruling and sustain Valores' objection and supplemental objection to consideration of the October 9 summary judgment proof as support for the October 6 partial summary judgment.
FACTUAL BACKGROUND
The summary judgment proof is voluminous and contradictory in many material respects.[4] The following statement reflects the standard of review set forth abovethat is, Valores' summary judgment proof is assumed to be true, and all inferences are indulged, and all doubts are resolved, in its favor. To emphasize our pointin light of the standard of review, this statement of the factual background does not reflect McLane *163 Co. and Wal-Mart's substantial controverting proof.
In November 1990, Valores, a Mexican corporation, and McLane Co., a Texas corporation (and, as of December 10, 1990, a wholly-owned subsidiary of Wal-Mart), began exploring a joint venture for the wholesale distribution of groceries in Mexico. During the negotiations that followed, Valores was represented by its chairman, Jose Chapa, and its chief executive officer, Gilberto De Hoyos, while McLane Co. was represented by its chief executive officer, Drayton McLane, and its vice president for international affairs, Robert Hudspeth.
On September 26, 1991, after ten months of meetings, analyses, and projections, a meeting was held in Monterrey. According to De Hoyos, this meeting was for the purpose of reaching, and resulted in, a final agreement on all essential terms, as reflected in Drayton McLane's shaking hands with Chapa and De Hoyos and saying they had a deal, as well as media coverage and various correspondence, including Hudspeth's September 27, 1991 letter to Valores "re Agreements and Understandings"; Hudspeth's September 27 letter to De Hoyos congratulating him "for the leadership and vision of creating Chapa/McLane...."; Drayton McLane's September 30 letter to Chapa stating that McLane Co. was "truly honored to be your partner ...."; and Drayton McLane's October 24 letter to Chapa stating that "[o]ur agreement in principle is all we really need, but as soon as the contract is completed, I look forward to coming to Monterrey to have a formal signing of this important document." De Hoyos further testified that he was authorized to bind Valores, and Drayton McLane was authorized to bind McLane Co., to their agreement.
The essential terms of the parties' agreement, according to De Hoyos and as substantially reflected in Drayton McLane's September 27 letter to De Hoyos, were:
▸ The name of the joint venture would be "Chapa/McLane."
▸ Chapa/McLane's business purpose would be the wholesale distribution of groceries and the continuation of Valores' home delivery service near Monterrey in northeastern Mexico.
▸ Valores would contribute its "know-who," while McLane Co. would contribute its "know-how."
▸ Chapa/McLane would "be owned and capitalized equally by Valores and McLane." "Financing methods [would] be evaluated by Valores and recommendations made as to [the] best methods for [the] benefit of [the] joint venture."
▸ The "[t]otal capital investment requirements [were] estimated at 10-12,000,000.00 U.S.D."
▸ Chapa/McLane's "Board of Directors [would] consist of six membersthree from each company with chairman from Valores. Alfonso Cordero [would] serve as General Manager of Chapa/McLane."
▸ Valores would close its existing distribution centers, and Chapa/McLane would "reimburse [Valores] up to [a] maximum of 2,000,000 U.S.D. over five years for losses incurred as [a] result of facility closings. This 2,000,000.00 U.S.D. would be generated from operating profits and could be paid in a time frame shorter than five years at the discretion of McLane Company or longer if [the] profits generate[d] [were] not adequate to fund reimbursement."
▸ "In depth [d]ata [s]ystems analysis," "transportation analysis," and "[t]raining orientation schedules" were to begin and be completed and finalized "as soon as practical." "Alfonso Cordero [would] spend [a] minimum of four months at McLane divisions. David Chapa [would] receive extensive training in [the] McLane CPL Program."
▸ Preliminary, capital expenditure, operating, and cash flow budgets were "to be completed."
▸ A first draft of a written agreement was to be prepared by Valores and "forwarded to McLane."
▸ The "[t]arget date for operation start-up" was "August 1992."
*164 In recognition of its new partner and the new company they would form, and in accordance with Mexican business custom, the following month Valores presented Drayton McLane with coins commemorating the discovery of America.
On November 1, 1991, Valores and McLane Co. issued joint press releases announcing their "agreement in principle." This press release, unlike that issued earlier to announce Wal-Mart's acquisition of McLane Co., did not state that the agreement was subject to legal documentation. After the November 1 press release, the parties began performing their agreement. For instance, David Chapa moved to Temple for management training; the "in depth systems analysis" and "transportation analysis" were begun; drafts of the written agreement were prepared, edited, and exchanged; and a site was selected for the Chapa/McLane distribution center, plans were drawn, and a groundbreaking date was set for July 1992. By the end of May 1992, McLane Co. knew virtually every aspect of Valores' wholesale grocery distribution business in Mexico from its customer profiles and detailed customer lists to the size and number of particular items it warehoused and distributed.
Meanwhile, however, a conflict was brewing. On July 9, 1991, Wal-Mart had issued a press release announcing that it, in partnership with Direción Corporativa CIFRA, S.A. de C.V., would develop the equivalent of Wal-Mart's Sam's Clubs in Mexico. In light of this partnership, on November 11, Rob Walton, Wal-Mart's vice chairman, sent a copy of the November 1 Chapa/McLane press release to CIFRA. CIFRA wrote back, stating that Chapa/McLane was an "unexpected surprise" and "raised some doubts as to how your new venture in Mexico might affect our present business relationship." McLane Co. assured Wal-Mart, however, that no conflict existed; Wal-Mart and CIFRA were retailers, while Chapa/McLane would be a wholesale grocery distributor. Therefore, although Hudspeth mentioned CIFRA's objection to De Hoyos, Hudspeth also indicated it was Wal-Mart's problem and would be worked out by Wal-Mart and CIFRA. Unknown to Valores, however, McLane Co.'s general counsel had been instructed to "slow play" the documents intended to memorialize the Chapa/McLane agreement. At no point, however, did anyone involved identify any "deal breakers." Nonetheless, according to De Hoyos, Drayton McLane admitted to him following a late May 1992 meeting that the conflict with CIFRA was probably affecting McLane Co.'s ongoing performance of its agreement with Valores. On May 29, 1992, Wal-Mart issued a press release announcing an expanded agreement with CIFRA. Under this expanded agreement, Wal-Mart committed McLane Co. to do business in Mexico exclusively with CIFRA.
On June 3, the top executives of Valores, McLane Co., and Wal-Mart met in Dallas. At that meeting, Drayton McLane apologized for the "embarrassing situation" and explained that when he began negotiations with Valores, he owned and controlled McLane Co. But, although Wal-Mart had approved the November 1 press release announcing their agreement in principle, Wal-Mart had decided there would be no Chapa/McLane. When the Valores representatives demanded that McLane Co. honor its agreement, Wal-Mart's president, David Glass, stated that, although "this is not the way Wal-Mart does business," "this is the way it is going to be." In a subsequent letter, McLane Co.'s general counsel admitted to Valores' attorney that "the Wal-Mart/CIFRA relationship has become the controlling force."
BREACH OF CONTRACT
In their first motion for summary judgment, McLane Co. and Wal-Mart contended their summary judgment proof conclusively established that McLane Co. and Valores never entered a binding contract because (1) a signed, written agreement was a precondition to the formation of an enforceable contract and (2) the purported agreement failed for indefiniteness. For convenience, we assume without deciding that McLane Co.'s and Wal-Mart's motion and proof were legally sufficient to shift the burden to Valores to raise genuine issues of material fact on each ground. We hold, however, that Valores met this burden.
*165 Requirement of a Written Agreement
Whether a signed, written agreement is a precondition to the formation of an enforceable contract depends upon the parties' intent. Foreca, S.A. v. GRD Dev. Co., 758 S.W.2d 744, 745-46 (Tex.1988); Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555 (Tex. 1972). While the absence of an intent to be bound without a signed, written agreement may be established as a matter of law, it is generally a question of fact to be decided by a factfinder. Foreca, 758 S.W.2d at 746; Scott, 489 S.W.2d at 556-57. In Scott, for instance, the court held that whether a contractual provision referencing a non-existent subsidiary contract was enforceable was a triable question of fact. Scott, 489 S.W.2d at 557. Similarly, in Foreca, the court held that whether a signed, written agreement was a precondition to the formation of an enforceable contract was a question of fact properly submitted to the jury even though the memorandum of agreement there at issue expressly stated that it was "subject to legal documentation." Foreca, 758 S.W.2d at 746; see also id. at 746 n. 2 (factors to consider); Scott, 489 S.W.2d at 556 (importance of substantial performance); accord Crest Ridge Constr. Group, Inc. v. Newcourt, Inc., 78 F.3d 146, 150 (5th Cir.1996) (applying Texas law) ("the parties' conduct illustrated that they thought they had a deal").
In this case, the summary judgment proof does not conclusively establish that Valores and McLane Co. intended that an enforceable contract would await a signed, written agreement. To the contrary, Valores' summary judgment proof indicates that a signed, written agreement was intended merely to memorialize the agreement already reached on September 26. Unlike the press release in which Wal-Mart announced its acquisition of McLane Co. and the memorandum of agreement at issue in Foreca, the November 1 press release announcing Chapa/McLane did not state that it was subject to the execution of a definitive written agreement. Instead, it appears both parties intended and operated on the premise that "[their] agreement in principle is all [they] really need[ed]," as stated in Drayton McLane's October 24 letter. For instance, two of Valores' management personnel moved to Temple, Texas for training with McLane Co.; Valores provided McLane Co. with the names and addresses of all of its customers so that McLane Co. could determine the exact latitude and longitude of Valores' customers for entry into McLane Co.'s proprietary TRUCKS routing software; and McLane Co.'s architects and engineers selected a site for, designed, and set a ground breaking date for the Chapa/McLane distribution center.
McLane Co. and Wal-Mart insist, however, that the summary judgment proof in this case conclusively establishes the necessity of a signed, written agreement just as it did in Continental Labs., Inc. v. Scott Paper Co., 759 F. Supp. 538 (S.D.Iowa 1990), aff'd, 938 F.2d 184 (8th Cir.1991). According to McLane Co. and Wal-Mart, "[i]n both instances, the parties claiming no contract believed that any agreement reached between the parties would be in a written form and that there would not be a binding agreement until the contract was executed by both parties." We disagree. In Continental Labs, the summary judgment proof established that, while Continental believed the parties were bound by an oral contract, Scott Paper "never intended to be bound by an oral agreement, but only by a written contract executed by both parties." Continental Labs, 759 F.Supp. at 539. In this case, on the other hand, Drayton McLane's October 24 letter, as well as the parties' performance of many aspects of the Chapa/McLane agreement, suggest that both Valores and McLane Co. believed an enforceable agreement resulted from the meeting on September 26. A signed, written agreement, while "an important document," was not required.
We recognize that in a multi-million dollar, international transaction, such as that involved in this case, the parties may very well choose to condition the creation of an enforceable contract upon the execution of a definitive written agreement. However, the issue before us is not whether the parties in other cases have chosen this path or even whether, as a matter of fact, the parties did so in this case. Rather, the issue we must resolve is simply whether the summary judgment *166 proof conclusively establishes this fact. We hold that it does not. Hudspeth's September 27 letter, as interpreted in De Hoyos' deposition testimony, coupled with the parties' performance of many aspects of their agreement and Drayton McLane's October 24 letter, are more than sufficient to raise a genuine issue of material fact as to whether the parties intended the formal signing of a written agreement as a precondition to the formation of an enforceable contract or merely as a memorial of the agreement reached on September 26. The trial court thus erred in granting summary judgment on this ground.
Indefiniteness
To be enforceable, an agreement must "be sufficiently definite in its terms so that a court can understand what the promisor undertook." T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). When a material or essential term is left unresolved and subject to future negotiations, "there is no binding contract." Id. "Each contract should be considered separately to determine its material terms." Id. When the facts are not disputed, "whether an agreement fails for indefiniteness is a question of law to be determined by the court." See id.; America's Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 622 (Tex.App. San Antonio 1996, n.w.h).
As noted above, the standard of review requires that we view Valores' summary judgment proof as true. Accordingly, we assume, in accordance with De Hoyos' deposition testimony, that Hudspeth's September 27 letter sets forth all of the terms of the parties' agreement. The question thus presented is whether these terms are sufficient for this court to determine the undertakings of Valores and McLane Co. We hold that they are.
Regardless of whether Chapa/McLane was a partnership or a joint venture, the essential elements are the same: (1) a community of pecuniary interest such that each partner or joint adventurer has a financial interest at stake in the alleged joint enterprise; (2) an agreement to share profits; (3) an agreement to share losses; and (4) a mutual right of control or management. E.g., Ben Fitzgerald Realty Co. v. Muller, 846 S.W.2d 110, 120 (Tex.App.Tyler 1993, writ denied). If we assume Valores' summary judgment proof to be true, as we must under the applicable standard of review, each of these essential elements is established in Hudspeth's September 27 letter, as interpreted by De Hoyos in his deposition.
According to De Hoyos, Hudspeth's September 27 letter reflects (1) Valores and McLane agreed that each party would contribute one-half of the required capitalization and, as a result, each would receive one-half of the profits and suffer one-half of the losses of Chapa/McLane; and (2) Valores and McLane agreed that each would enjoy a mutual right to control and manage Chapa/McLane through the persons each designated to sit on Chapa/McLane's board of directors. Assuming these terms encompassed the parties' agreement, as required by the standard of review, we have no difficulty determining Valores' and McLane's undertakings.
McLane Co. and Wal-Mart urge, nonetheless, that essential terms are not encompassed by the September 27th letter. They point, for instance, to the absence of buy-sell, licensing, and noncompetition agreements, as well as the failure to resolve the future of Valores' home delivery enterprise, the components of Valores' and McLane Co.'s capital contributions, the date Chapa/McLane would be formed as a Mexican corporation, the date Chapa/McLane would reimburse Valores for closing its existing distribution centers, and the means for resolving tie votes on the Chapa/McLane board of directors. We agree these items would be important for the parties to consider and resolve and were, in that sense, "material." But "material," when used in this context, means more than important; it means "essential." And De Hoyos unequivocally stated in his deposition that all of the terms essential to either party were encompassed by Hudspeth's September 27 letter, and this assertion is corroborated by the drafts of the agreement that circulated between September 1991 and May 1992, which covered few, if any, of these items, and the fact that none of these terms was identified *167 at any time by any person as an essential term or, in the parties' vernacular, as a "deal breaker."
As noted above, we are required to view Valores' summary judgment proof as true. Doing so necessarily leads to the conclusion that Hudspeth's September 27 letter, as interpreted by De Hoyos, sets forth the terms of the parties' September 26 agreement. We hold that this agreement was sufficiently definite to create a joint venture or partnership. Accordingly, the trial court erred in granting summary judgment on this ground.
In sum, the summary judgment record does not conclusively establish that Valores and McLane Co. did not enter an enforceable contract on September 26, 1991. Rather, the record demonstrates that there is substantial evidence on each side of the issues, and they must therefore be decided by a trier of fact.
TORTIOUS INTERFERENCE
In its first motion for summary judgment, Wal-Mart asserted that it was entitled to summary judgment on Valores' tortious interference claim because Wal-Mart was incapable of tortiously interfering with the contractual relations of its wholly-owned subsidiary, McLane Co. We disagree.
The Texas Supreme Court has not yet confronted the issue of whether a parent corporation is capable of tortiously interfering with the contractual relations of its wholly-owned subsidiary. Two of Texas' fourteen courts of appeals have dealt with the issue, and they agreed with McLane Co. and Wal-Mart. See H.S.M. Acquisitions, Ins. v. West, 917 S.W.2d 872, 882-83 (Tex.App. Corpus Christi 1996, writ denied); American Medical Int'l v. Giurintano, 821 S.W.2d 331, 336-37 (Tex.App.Houston [14th Dist.] 1991, no writ) (impossible for parent to interfere with wholly-owned subsidiary's contracts). The federal courts interpreting Texas law, on the other hand, have treated the issue as one of privilege, not capacity, but they have disagreed as to the extent of the privilege. See Deauville Corp. v. Federated Dept. Stores, Inc., 756 F.2d 1183, 1196 (5th Cir.1985) (applying Texas law) (as a matter of law, parent privileged to interfere with wholly-owned subsidiary's contracts because of superior financial interest arising out of stock ownership), cited in Holloway v. Skinner, 898 S.W.2d 793, 794 (Tex.1995); see also In re ContiCommodity Serv., Inc. Securities Litigation, 733 F. Supp. 1555, 1568 (N.D.Ill.1990) (applying Texas law) (parent that is not alter ego of wholly-owned subsidiary capable of tortiously interfering with subsidiary's contracts but interference may be privileged if in good faith and without malice), rev'd in part on other grounds sub nom. Brown v. United States, 976 F.2d 1104 (7th Cir.1992) and aff'd in part on other grounds sub nom. ContiCommodity Servs. Inc. v. Ragan, 63 F.3d 438 (5th Cir.1995), cert. denied, ___ U.S. ___, 116 S. Ct. 1318, 134 L. Ed. 2d 471 (1996).[5] Other jurisdictions have held that, while a parent corporation is legally capable of tortiously interfering with its subsidiary's contracts, its interference may be privileged; they have disagreed, however, on the extent of the privilege and the placement of the burden of proof. See, e.g., Green v. Interstate United Mgmt. Serv. Corp., 748 F.2d 827, 831 (3rd Cir.1984) (applying Pennsylvania law); Phil Crowley Steel Corp. v. Sharon Steel Corp., 782 F.2d 781, 783 (8th Cir.1986) (applying Missouri law); Oxford Furniture v. Drexel Heritage Furnishings, 984 F.2d 1118, 1126 (11th Cir.1993) (applying Alabama law); Eckholt v. American Business Info., Inc., 873 F. Supp. 526, 532-33 (D.Kan.1994) (applying Kansas law); Shearin v. E.F. Hutton Group, Inc., 652 A.2d 578, 589-91 (Del.Ch. 1994); Sunamerica Financial v. 260 Peachtree Street, 202 Ga.App. 790, 415 S.E.2d 677, 684, cert. denied, 202 Ga.App. 907 (1992); GHK Associates v. Mayer Group, Inc., 224 Cal. App. 3d 856, 883, 274 Cal. Rptr. 168 (Cal. App.1990); T.P. Leasing Corp. v. Baker Leasing Corp., 293 Ark. 166, 732 S.W.2d 480, 483 (1987); Bendix Corp. v. Adams, 610 P.2d 24, 29-31 (Alaska 1980); Felsen v. Sol Cafe Mfg. Corp., 24 N.Y.2d 682, 301 N.Y.S.2d 610, 249 N.E.2d 459, 461 (1969).
*168 We believe our resolution of this issue should be guided by our supreme court's recent decision in Holloway, in which the issue presented was whether Holloway, the corporation's president, director, and largest shareholder, was liable for tortiously interfering with the corporation's contract with Skinner. Holloway, 898 S.W.2d at 794. Ultimately, the court held that he was not liable on "no evidence grounds." Id. at 794. En route to its judgment, however, the court reasoned that, "to preserve the logically necessary rule that a party cannot tortiously interfere with its own contract," "the alleged act of interference must be performed in furtherance of the defendant's personal interests." Id. at 796. Accordingly, the court held that a corporate officer will not be treated as a "stranger to the contract" unless the plaintiff shows, as a part of its prima facie case, "the defendant acted in a fashion so contrary to the corporation's best interests that his actions could only have been motivated by personal interests." Id. In so holding, the court expressly rejected the argument that this burden should be imposed on the defendant, id., as well as the notion that a corporate officer could not be held liable for tortiously interfering with the corporation's contracts if the officer was acting within the scope of his corporate authority. Id. at 797.
The supreme court's holding in Holloway recognizes and gives meaning to two principles that apply equally in the corporation-officer and parent-subsidiary contexts. First, the supreme court's holding is consistent with the legal principle that a corporation is a legal entity separate and distinct from its officers. The same is true for a parent corporation and its subsidiaries. E.g., Gentry v. Credit Plan Corp., 528 S.W.2d 571, 573 (Tex.1975). Second, the supreme court's holding in Holloway acknowledges, as a matter of fact, that, while a corporate officer's personal interests may well be coterminous with those of the corporation, circumstances may arise in which the corporate officer pursues his personal interests to the detriment of those of the corporation. These same principles provide the foundation for the rule adopted in the jurisdictions cited above in the parent-subsidiary contextthat is, a parent corporation is privileged to interfere with its subsidiary's contractual relations "when the contract threatens a present economic interest of its wholly owned subsidiary," and the parent does not "employ[] wrongful means or act[] with an improper purpose." T.P. Leasing Corp., 732 S.W.2d at 483; see also Phil Crowley Steel Corp., 782 F.2d at 783; Sunamerica Financial, 415 S.E.2d at 684; GHK Assoc., 224 Cal.App.3d at 883, 274 Cal. Rptr. 168. These jurisdictions recognize that, while the financial interests of a parent corporation and its subsidiary are identical, so that a parent's interference with its subsidiary's contractual relations is usually justified, circumstances may arise in which the financial interests of neither motivate the interference.
For these reasons, we believe the supreme court's reasoning in Holloway also applies in the parent-subsidiary context and decline to follow our sister courts. Instead, we hold that a parent corporation is legally capable of tortiously interfering with its wholly-owned subsidiary's contractual relations.[6] The trial court thus erred in granting a summary judgment against Valores on its tortious interference claim on this ground. Valores' first point of error is sustained.
*169 BREACH OF FIDUCIARY DUTY AND CONSTRUCTIVE FRAUD
In their second motion for summary judgment, McLane Co. and Wal-Mart contended that the trial court's October 6 partial summary judgment precluded Valores' claim against McLane Co. for breach of fiduciary duty and its claim against Wal-Mart for knowing participation as a matter of law. If there were no binding agreement, they argued, there could be no fiduciary duty and therefore no breach of fiduciary duty by McLane Co. and, if there were no breach of fiduciary duty by McLane Co., Wal-Mart could not have knowingly participated.
On this record, therefore, the trial court's second partial summary judgment rises or falls with its first. Accordingly, since we have held that fact issues regarding the existence of an enforceable agreement require the reversal of the trial court's first partial summary judgment, we also necessarily hold that the trial court erred in granting the second partial summary judgment on Valores' causes of action for breach of fiduciary duty, constructive fraud, and knowing participation. Valores' second point of error is therefore sustained.
CONCLUSION
As the Texas Supreme Court has stated on numerous occasions, the underlying purpose of Texas' summary judgment rule has always been a narrow onethe elimination of "patently unmeritorious claims" and "untenable defenses." E.g., Casso v. Brand, 776 S.W.2d 551, 556 (Tex.1989); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 n. 5 (Tex.1979); Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 931 (1952). This same narrow purpose was noted by Professor McDonald on passage of the rule:
The rule is intended to eliminate the delay and expense which result from paper issues which in truth are not factual issues. It has a dual thrust. It reaches groundless actions instituted by plaintiffs seeking to harass defendants into nuisance value settlements, as well as baseless defenses interposed by defendants to seize advantage of docket delays before they can be subjected to judgments establishing their unquestionable liability. The object of the rule, therefore, is to permit either party to brush aside groundless allegations in the pleadings and to obtain prompt disposition of the action where a trial would be an empty formality.
Roy W. McDonald, Summary Judgment, 30 Tex. L.Rev. 286, 286 (1952).
A trial on the issue of whether Valores and McLane Co. entered an enforceable contract on September 26, 1991 will not be "an empty formality." To the contrary, each party has substantial proof and convincing arguments to support its contention. In the face of this conflicting proof, neither we nor the trial court may decide this issue as matter of law. Nor do we believe it is appropriate to hold that Wal-Mart was legally capable of interfering with McLane Co.'s contractual relations in light of the supreme court's recent opinion in Holloway, the law in other jurisdictions, and the rule adopted by this court in the conspiracy context in Metropolitan Life. Accordingly, we reverse the judgment and remand the case to the trial court for further proceedings consistent with this opinion.
BUTTS, Justice, dissenting.[1]
I respectfully dissent.
Valores Corporativos S.A. de C.V. (Valores), Casa Chapa S.A. de C.V., and Chapa Trading Company, Inc. (Chapa) appeal from the summary judgment in favor of McLane Company, Inc. (McLane) and Wal-Mart Stores, Inc (Wal-Mart).
Valores sued McLane for breach of contract, breach of fiduciary duty,[2] and constructive fraud. Other claims were dismissed. Valores sued Wal-Mart, the parent company of McLane, for tortious interference and knowing participation in McLane's alleged breach of fiduciary duty, and other claims which were later dismissed. The trial court *170 granted interlocutory partial summary judgments in favor of McLane and Wal-Mart. The final summary judgment was entered about a week later. The trial court ruled that no agreement, partnership, or joint venture was formed between Valores and McLane.[3]
Valores assigns two points of error: 1) The trial court erred in granting in part McLane's and Wal-Mart's motion for partial summary judgment. 2) The trial court erred in granting the appellees' motion for partial summary judgment as to the breach of fiduciary duty and constructive fraud causes of action. We should affirm.
McLane and Wal-Mart filed a motion for partial summary judgment alleging that negotiations were never completed and never reduced to writing to create a partnership/joint venture or corporation, all of which were conditions precedent to the formation of a partnership. They alleged the essential elements of a partnership were not agreed upon, including how profits and losses would be shared.[4]
Wal-Mart, as the parent corporation, alleged it could not, as matter of law, interfere with the business relations of McLane, its wholly owned subsidiary. In addition, the claims against it for constructive fraud and participation in breach of fiduciary duty would fail as a matter of law.
Background
In November 1990, coinciding with NAFTA and interest in trade relations between the United States and Mexico, McLane and Valores began negotiations to engage in the wholesale grocery distribution business in Mexico. Robert Hudspeth, international vice-president of McLane, contacted the director-general of Valores, Gilberto De Hoyos, and they met to discuss the possibility of a partnership. Meeting with them were Drayton McLane, who headed McLane, and Jose Chapa, chairman of the board of Valores.
On December 4, 1990, Drayton McLane wrote to Chapa, expressing interest "in considering a grocery distribution joint venture with your company." Valores lacked the technology advancements of McLane and sought to modernize its distribution business in Mexico. It was anticipated that the partnership would utilize the existing Valores customer base and multi-million dollar grocery distribution business while McLane furnished the know-how and technology. Both companies would provide capital. Meetings were held and communications exchanged from December 1990, until September 1992.
The McLane concept was to build a large "McLane Company type distribution center in the Monterrey area which would take advantage of McLane's state-of-the art technology." The officers and personnel of both companies inspected the operations of each other's facilities in Mexico, the United States, and Spain. Detailed studies and extensive research of the Valores business were made. Analyses, investigations and projections were made. The parties agree that the negotiations were of a complex and international magnitude.
Hudspeth held a meeting in Temple, Texas, in March 1991, "to begin discussions and planning for a proposed partnership between Valores and McLane." McLane wrote that the purpose was to evaluate the potential of a future relationship between Valores and McLane in Mexico. Hudspeth described the "initial agreement" to Drayton McLane in April 1991: that McLane would contribute know-how, Valores would contribute business, and all subsequent capitalization would be shared. Drayton McLane acknowledged "it has tremendous potential." Hudspeth anticipated in a letter to De Hoyos that "within a few months our project could be launched."
McLane prepared a "Preliminary Mexican Joint Venture Proposal," providing in addition to the above-noted matters, that ownership of the joint venture would be split 50/50, all start-up expenses and capital expenditures would be split 50/50. Estimated capital *171 expenditures were $11,700,700. Software would remain in Temple with communications by satellite or other means.
McLane and Valores exchanged more letters and memoranda during September 1991, pertaining to matters such as projected capital costs, projected profits, projected warehouse expenses, projected transportation needs, and the proposed agenda of a meeting in Monterrey between leaders of the companies on September 26, 1991. To finalize the joint venture was the stated purpose of the meeting.
The summary judgment deposition testimony of Jose Chapa and De Hoyos states that Valores had an agreement with McLane and Drayton McLane told them they had a deal with Valores. De Hoyos denied that any additional approval or authorization was needed, and said he was not told that the agreement was contingent upon any future happening. They shook hands at the meeting, and "we took this as an agreement."
The nucleus of the Valores and Chapa claim that a partnership existed is the September 27, 1991 unsigned memorandum from Hudspeth to De Hoyos following the meeting.[5] Valores claims that document is the partnership agreement of the parties and contains all essential elements of a partnership contract.
A letter to Valores and Chapa from McLane after that time indicated they were beginning a venture, and they were excited about the formation of the new entity, Chapa/McLane. However, no actual business was ever transacted, no buildings constructed, no truck transportation plans agreed upon, no data system completed, and no financing by Valores, as was necessary, had been sought. The two companies continued to exchange letters and information and to conduct meetings. Additionally, both Jose Chapa and De Hoyos explained that the parties understood at that time it would be necessary for a Mexican corporation "Chapa/McLane" to be formed in the future to replace the partnership, and the partnership would then go out of existence. The summary judgment evidence does not support an agreement on this future contingency, including the matter of the value and ownership of corporation shares.
Significantly, the deposition testimony of De Hoyos confirmed Valores and Chapa and the Board of Directors of Valores believed that a final agreement between the parties must be in writing. The Valores attorney sent a draft of the proposed partnership agreement to McLane on October 14, 1991.
After reviewing a draft of the proposed agreement, the attorney for McLane, Robert McClaren, expressed in writing on October 23, 1991, many concerns about material matters which were not yet determined. During this time there were press releases in Mexico and the United States announcing that the companies would establish a wholesale distribution business in Mexico called "Chapa/McLane."
On November 5, 1991, at the insistence of McLane, Valores sent a revised proposed partnership agreement to the McLane attorney. However, the redraft was never finally acted upon nor approved by the two businesses. Although the companies continued to exchange information and business data, the McLane attorney continued to express concerns in writing about the proposed partnership draft.
*172 In the meantime, an action plan and checklist for the Monterrey distribution center was prepared by a firm recommended by McLane which included designers, engineers and architects. Attorney McClaren continued to insist that more changes and preparation of documents were needed. The Valores Board meeting minutes of December 20, 1991, state that a draft of the partnership agreement and by-laws of the company had been finished and sent to their attorney, who forwarded them to McLane for final approval. The minutes affirmatively reflect the Board recognized that McLane had not approved them. The minutes recorded that the board "awaited review of the McLane suggested corrections."
During this interval, other matters were undertaken, such as selection of a site for the Monterrey distribution center, a memorandum specifying the water and power supply requirements, and other operational planning.
Significantly, the January 27, 1992 Valores Board meeting minutes state: "To date we have not concluded formalizing our agreement; however, it was requested that [Valores attorney] Quintero give us his opinion on the partnership agreement drafted by their attorney."
In addition, the February 27, 1992, Valores Board meeting minutes mention problems with the Chapa/McLane negotiations because of the Wal-Mart and CIFRA (a grocery distribution business in Mexico) relationship. In this regard, there is summary judgment evidence that Valores knew that Wal-Mart had acquired the McLane Company as its subsidiary as early as December 1990.
In May 1992, Chapa and De Hoyos attended a management meeting of McLane. Drayton McLane wrote to them that "the potential for the future is truly unlimited, and we continue to be extremely excited about our partnership and joint venture."
Minutes from the May 26, 1992 meeting between the two businesses covered topics of matters to be effected in the future, such as the building lay-out of offices and loading areas with a named firm to provide lay-out drawings. These would include, among other proposed sites, the dock for "Servi-Despensa," the valuable home delivery service of Valores. It was recommended that a Chicago firm be hired to prepare drawings for bidding purposes. A Mexico firm was to design the offices. A design would be made for the cool and frozen building and the dry grocery building, and was to include all specs. None of these proposed essentials were ever undertaken or executed.
A new figure of over sixteen million dollars was estimated for the capital budget. A tentative ground-breaking date was set for July 1, 1992. A tentative bidding date for the steel frames of buildings would be by August or early September, 1992.
But on May 29, 1992, Wal-Mart announced its second expanded venture with CIFRA. Hudspeth told De Hoyos there were problems because of that venture. On June 3, 1992, representatives of Valores and McLane met in Dallas. McLane's stated position at the meeting was that McLane was "on hold" at that time on continuing to try to develop the joint venture contract due to some conflicts arising from the Wal-Mart/CIFRA business.
Summary judgment evidence shows that at that very time Valores was considering a distribution partnership with another company, Fleming, and also had contacted other U.S. grocery distribution companies. The August 18, 1992, Valores Board meeting minutes state "that we have already wasted much time in this [McLane] partnership and that it is very strained ..." The Board instructed De Hoyos to ask Hudspeth for indemnification for Valores expenses and to tell Hudspeth that "Valores is out of the negotiations."
At the Valores Board meeting of September 3, 1992, members expressed concern that the Board needed to see the fine print of a contract. Some directors opined that a business relationship with the Fleming company was better for Valores's business interests and shareholders. The minutes of the Board meeting of September 26, 1992, reflect that Hudspeth telephoned De Hoyos that day and confirmed "that McLane was not interested *173 in forming a partnership with Valores, putting an end to the negotiations."
Standard of Review
In an appeal from a summary judgment, we take as true evidence favorable to the nonmovant. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985). If the defendant disproves at least one element of the plaintiff's claims as a matter of law, summary judgment is appropriate. Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 476-77 (Tex.1995). To obtain summary judgment based on an affirmative defense, the defendant must conclusively establish all elements of the affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995). These established standards are reaffirmed in Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996). See TEX.R. CIV. 166a.
We must first decide whether there was a contract or whether McLane has successfully negated one or more elements of the cause of action for breach of contract.
"A partnership is an association of two or more persons to carry on as co-owners a business for profit." Tex.Rev.Civ. Stat. Ann. art. 6132b § 6(1) (Vernon 1970 & Supp.1996) (Texas Uniform Partnership Act governing this case). This relationship must be based on an agreement, either express or implied. Coastal Plains Dev. Corp. v. Micrea, Inc., 572 S.W.2d 285, 287 (Tex.1978); Corpus Christi v. Bayfront Associates, 814 S.W.2d 98, 107 (Tex.App.Corpus Christi 1991, writ denied). Since there was never an express agreement to form a partnership, for a partnership to exist, the agreement must be implied from the relationship of the parties. Bayfront, 814 S.W.2d at 107. Before an agreement to be partners can be implied, there must be proven four essential elements:
(1) a community of interest in the venture;
(2) an agreement to share profits, (3) an agreement to share losses, and (4) a mutual right of control or management of the enterprise.
Ayco Dev. Corp. v. G.E.T. Serv. Co., 616 S.W.2d 184, 186 (Tex.1981); Micrea, 572 S.W.2d at 287; Bayfront, 814 S.W.2d at 107-108. The burden of proof of the existence of a partnership is upon the party seeking to establish the relationship. Grimmett v. Higginbotham, 907 S.W.2d 1, 2 (Tex.App. Tyler 1994, writ denied).
The intention of the parties to a contract is a prime element in determining whether or not a partnership or joint venture exists. Micrea, 572 S.W.2d at 287. However, just as the words of an express contract do not necessarily control the substance of the relationship, the terms used by the parties in referring to the arrangement do not control. Id. at 288. Therefore, the terms used by Drayton McLane and Hudspeth, such as "joint venture" and "our partnership" do not control.
Whether or not manifestations of assent are sufficient to show that a written agreement is contemplated, or constitute a contract themselves, or are simply preliminary negotiations to a contract depends on the intent of the parties to prepare and adopt a written memorial. The circumstances may show that the agreements are preliminary negotiations. Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 556 (Tex.1972). In the present case, the Valores Board of Directors minutes clearly referred to the agreements and meetings as negotiations, called for an end to the negotiations, and requested indemnification for their expenditures. McLane, through Hudspeth, also considered these preliminary negotiations.
Thus, the trial court could properly conclude that the parties perceived their manifestations of assent on the matters discussed at various meetings and in the communications as preliminary negotiations.
Moreover, if an alleged agreement is so indefinite as to make it impossible for a court to fix the legal obligations and liabilities of the parties, it cannot constitute an enforceable contract. Lynx Exploration & Prod. Co., Inc. v. 4-Sight Operating Co., Inc., 891 S.W.2d 785, 788 (Tex.App.Texarkana 1995, writ denied). Although Valores offered summary judgment proof by way of depositions that the parties contemplated joint ownership of a wholesale grocery distribution business in the future, the terms of the contemplated *174 agreement were so indefinite as to be impossible for the court to fix the legal obligations and liabilities of the parties. The evidence shows that the parties themselves were still in the process of arranging those matters. If an "agreement is so indefinite as to make it impossible for a court to fix the legal liability of the parties thereto, it cannot constitute an enforceable contract." Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944); Lynx, 891 S.W.2d at 789.
In order to be legally binding, a contract must be sufficiently definite in its terms so that a court can understand what the promisor undertook. Bendalin v. Delgado, 406 S.W.2d 897, 899 (Tex.1966); University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex.App.San Antonio 1989, no writ). The material terms of the contract must be agreed upon before a court can enforce a contract. Where an essential term is open for future negotiation, there is no binding contract.
T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex.1992).
Reliance by Valores on Foreca v. GRD Dev. Co., Inc., 758 S.W.2d 744 (Tex.1988) is misplaced. In Foreca the parties had previously agreed upon the terms of a one transaction sales contract. In that case the words "subject to legal documentation" did not indicate, as a matter of law, an intention not to be bound. Id. at 746. The supreme court limited the holding to that factual setting by stating "in this case" this was not conclusive on the intent of the parties to contract but was a fact question. The court stressed, however, that in some cases a court may conclude, as a matter of law, that there existed no immediate intent to be bound. Id. See RESTATEMENT (SECOND) OF CONTRACTS § 27, cmt. c (1981).
Absent from the present complex business dealings were final agreements on many material matters, including the securing of required licensing, the Mexican government approval and agreed terms for forming the necessary Mexican corporation, the purchase of the building site, an intellectual property agreement, provisions for operation and control of the water and power supply in the Monterrey center, a "buy-sell" partnership agreement; several necessary final budgets, the financing of Valores to enable it to participate in the business, the decision on kinds and sizes of trucks and the necessary cost-efficient transportation plan, and the computer software system. Further, no funds for capitalization had been placed in escrow by either McLane or Valores, the matter of mutual control of the new corporation to be formed had not been finalized (one examplethe votes of three Valores officers against the votes of three McLane officers could not break a stalemate), and there was never a necessary agreement concerning sharing the control and operation of Servi-Despensa, the lucrative home delivery service of Valores. These were all specialized material matters which sophisticated business persons, such as these owners, CEOs, vice-presidents, and chairmen of boards of multimillion dollar companies would normally reduce to writing.
While there may have been an implied agreement for McLane and Valores to share ownership and capital expenditures, the summary judgment evidence fails to show an agreement to share profits and losses. These are essential elements of a partnership agreement, and failure to agree on these elements negates the existence of a partnership. A failure by the parties to agree to share losses precludes implying the existence of a partnership. Bayfront, 814 S.W.2d at 108; Gutierrez v. Yancey, 650 S.W.2d 169, 172 (Tex.App.San Antonio 1983, no writ). See Grimmett, 907 S.W.2d at 2 (agreement to share losses was neither express nor implied). In the present case any agreement to share profits and losses was neither express nor implied. Thus, because McLane conclusively negated these elements of the requisite elements of an implied agreement to be partners, the trial court correctly ruled as a matter of law that no enforceable contract existed. And when no contract exists, there can be no breach of the contract.
Tortious Interference With Contract
As a cause of action against Wal-Mart, Valores alleged that Wal-Mart tortiously interfered with the partnership contract. We agree with Wal-Mart that Valores could not *175 have prevailed in this particular cause of action.
A tortious interference cause of action is established if the plaintiff proves: (1) the existence of a contract subject to interference; (2) a willful and intentional act of interference; (3) the act was a proximate cause of the plaintiff's damages; and (4) actual damage or loss resulted. Friendswood, 926 S.W.2d at 282.
Even if Wal-Mart cannot conclusively negate one of these four elements, it may still prevail if it conclusively establishes the affirmative defense of justification. Id. A party is justified in interfering with another's contract if it exercises (1) its own legal rights or (2) a good faith claim to a colorable legal right, even though that claim ultimately proves to be mistaken. Id. A party to a business relationship cannot interfere with itself. American Medical Int'l, Inc. v. Giurintano, 821 S.W.2d 331, 335 (Tex.App. Houston [14th Dist.] 1991, no writ).
The Fifth Circuit Court of Appeals, in applying Texas law, held that a parent and its subsidiary are so closely aligned in business interests as to render them, for tortious interference purposes, the same entity. Deauville Corp. v. Federated Dept. Stores, Inc., 756 F.2d 1183 (5th Cir.1985); Giurintano, 821 S.W.2d at 336. The financial interests of the parent and subsidiary are identical since the parent controlled the subsidiary and its profits. Giurintano, 821 S.W.2d at 336. The trial court correctly ruled that Wal-Mart sustained its burden of conclusively establishing it had a legal right to interfere with the proposed agreement; therefore, it conclusively established its affirmative defense of legal justification. See Friendswood, 926 S.W.2d at 283.
Breach of Fiduciary Duty and Constructive Fraud
After the trial court granted McLane's and Wal-Mart's first motion for partial summary judgment, ruling there was no enforceable partnership contract, the defendants filed their second motion for partial summary judgment regarding the claims of breach of fiduciary duty and constructive fraud. They maintained that the previous ruling of no contract or partnership precluded these claims. The trial court agreed and granted final summary judgment.
The record throughout demonstrates the continuing independent posture of each company, with both being represented by astute businessmen. Valores had its own board of directors, officers and legal counsel. It is reputedly a successful multimillion dollar business of many years' standing. Likewise, McLane is an equally large and successful business. Neither was the beneficiary in an equitable fiduciary relationship in these transactions. See Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507-08 (Tex.1980). These were arms-length transactions between the knowledgeable business representatives of each company. The various studies, analyses and exchange of information in this case supported both the Valores and McLane postures of businesses conducting certain required in-depth evaluations of a possible potential partnership in the future. These did not give rise to a fiduciary relationship. The evidence is also clear that the parties had not had dealings with each other in the past, so as to possibly give rise to a confidential relationship in this dealing. See Consolidated Gas & Equip. Co. v. Thompson, 405 S.W.2d 333, 337 (Tex.1966) (fiduciary relationship might arise outside formal relationship when, over long period of time, the parties had worked together for the joint acquisition of property previous to the particular agreement sought to be enforced). The summary judgment evidence undisputedly demonstrates that no confidential relationship existed as matter of law. The court correctly concluded as a matter of law that the evidence established conclusively there was no breach of a fiduciary relationship or constructive fraud.
Additionally, Wal-Mart is the parent entity of McLane with a unity of interest and cannot, as a matter of law, be liable for participation in an alleged breach of fiduciary duty. Further, even assuming, arguendo, that McLane breached a fiduciary duty, Wal-Mart would not be liable as a joint tortfeasor because it is not a third party who knowingly participated in the breach of a fiduciary duty. See Kinzbach Tool Co. v. Corbett-Wallace *176 Corp., 138 Tex. 565, 160 S.W.2d 509, 513 (1942).
The majority opinion mistakenly relies on the fact that the trial judge signed the interlocutory order, claiming it became final. That would be true only if that order had been severed and made final, which it was not. The record reflects that the trial court signed the final summary judgment a week after the interlocutory order had been signed. Thus, the interlocutory order was subject to the plenary control of the court until final summary judgment was entered in the case. Further, TEX.R. CIV. P. 166a(d) applies only when the trial court grants the interlocutory order on some matters and reserves other issues for a jury or bench trial. In that instance, the preliminary interlocutory order would grant relief on matters of law, and "[u]pon the trial of the action the facts so specified shall be deemed established, and the trial shall be conducted accordingly." TEX.R. CIV. P. 166a(e). See Texas United Ins. v. Burt Ford Enterprises, 703 S.W.2d 828, 832-33 (Tex.App.Tyler 1986, no writ). That did not happen here.
Respectfully, I would overrule the points of error and affirm the judgment of the trial court.
NOTES
[1] Assigned to this case by the Chief Justice of the Supreme Court of Texas pursuant to TEX. GOV'T CODE ANN. § 74.003(b) (Vernon 1988).
[2] Valores is a holding company. Casa Chapa is a wholly-owned subsidiary of Valores, and Chapa Trading is a wholly-owned subsidiary of Casa Chapa. For convenience, we refer to all three entities as "Valores."
[3] Until recently, this statement would have precluded review on the statute of frauds ground. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996). In Cates, however, the supreme court held that the courts of appeals should consider not only all those grounds the trial court rules on but also those grounds the trial court did not rule on but that are preserved for appellate review. Id. at 625-26. In this case, however, neither McLane nor Wal-Mart has sought to uphold the October 6 summary judgment on the statute of frauds ground. Accordingly, since this ground has not been preserved for appellate review, we will not consider it.
[4] We take this opportunity to express our appreciation to the parties and their attorneys for their excellent presentation of this casefrom the separately-bound volumes of summary judgment proof to the outstanding briefs (including appendices of critical documents) and oral arguments. The attorneys' efforts have substantially lessened the work involved in considering the record and legal issues involved in this appeal.
[5] Neither the Fifth Circuit opinion nor the Seventh Circuit opinion deals with the claims against the parent corporation for tortiously interfering with its wholly-owned subsidiary's contracts.
[6] We note that our holding on this issue, while inconsistent with the Supreme Court's opinion in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S. Ct. 2731, 81 L. Ed. 2d 628 (1984), is consistent with our earlier holding that a parent corporation is capable of conspiring with its wholly-owned subsidiary for purposes of common law torts. See Metropolitan Life Ins. Co. v. La Mansion Hotels, 762 S.W.2d 646, 651-52 (Tex.App.San Antonio 1988, writ dism'd) (recognizing that Copperweld limited to conspiracy claims under section 1 of the Sherman Antitrust Act and holding that corporation and wholly-owned subsidiary are separate legal entities for purposes of common law tort actions); accord Atlantic Richfield Co. v. Long Trusts, 860 S.W.2d 439, 447 (Tex.App.Texarkana 1993, writ denied).
We also recognize our holding leaves the scope of the privilege open, as well as whether Texas law will impose this burden on Valores, as a part of its prima facie case, as it was in Holloway, or on Wal-Mart, as an affirmative defense of privilege or justification. We do not decide these issues in this case because Wal-Mart did not move for summary judgment on either ground. See, e.g., McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex.1993).
[1] Assigned to this case by the Chief Justice of the Supreme Court of Texas pursuant to Tex. Gov't Code Ann. § 74.003 (Vernon 1988).
[2] Valores assigned portions of its claims against appellees to Chapa. Appellees do not dispute the assignment.
[3] Other claims against McLane and Wal-Mart were dismissed, as were claims against Drayton McLane, Jr., who is not a party to this appeal.
[4] The final judgment recites that the summary judgment was not granted on the statute of frauds ground.
[5] I. Potential financial loss of closing/downsizing existing distribution business: Future joint venture to reimburse Valores [for closing losses] to be generated from operating profits.
II. Joint venture will be owned and capitalized equally.
III. Estimated capital investment requirements10-12 million dollars.
IV. Financing methods will be evaluated by Valores and recommendations made as to best methods for benefit of joint venture.
V. In-depth Data Systems analysis will begin as soon as practical with project completion date of December 13, 1991.
VI. Transportation analysis to be completed as soon as practical.
VII. Board of Directors will consist of six membersthree from each company.
VIII. Training orientation schedules for Chapa/McLane executives to be finalized as soon as practical.
IX. Budgets to be completed: Preliminary start-up; preparation; capital expenditure; operating and cash flow.
X. Agreement: First Draft of Agreement by Valores to be forwarded to McLane.
XI. Target date for operation start-up: August 1992. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2579132/ | 659 F. Supp. 2d 225 (2009)
Bob BARR, Wayne A. Root, Libertarian Party of Massachusetts, and Libertarian National Committee, Inc., Plaintiffs,
v.
William F. GALVIN, as he is Secretary of the Commonwealth of Massachusetts, Defendant.
Civil Action No. 08-11340-NMG.
United States District Court, D. Massachusetts.
September 17, 2009.
*226 Matthew C. Baltay, Amrish V. Wadhera, Jennifer S. Behr, Foley Hoag LLP, John Reinstein, American Civil Liberties Union, Boston, MA, for Plaintiffs.
Amy Spector, Julie B. Goldman, Timothy James Casey, Attorney General's Office, Boston, MA, for Defendant.
MEMORANDUM & ORDER
GORTON, District Judge.
In September, 2008, the Court entered a preliminary injunction ordering the defendant in this case, William F. Galvin ("Galvin"), in his capacity as the Secretary of the Commonwealth of Massachusetts, to place the names of Bob Barr ("Barr") and Wayne A. Root ("Root") as the Libertarian candidates for president and vice president, respectively, on the Massachusetts ballot for the 2008 presidential election. The parties have now filed cross-motions for summary judgment.
I. Background
A. Factual Background
Because the Libertarian Party is not one of the recognized "political parties" in the Commonwealth of Massachusetts, its candidates may appear on an election ballot only if it submits a valid nominating petition. Such a petition must designate 12 electors, be signed by at least 10,000 voters, and be submitted within sufficient time to permit Town Clerks to prepare for the election. M.G.L. c. 53, § 6. In 2008, the deadline for filing nominating petitions was July 29.
Beginning in late July, 2007, the plaintiffs, Barr, Root, the Libertarian Party of Massachusetts and the Libertarian National Committee, Inc., began preparing for the 2008 presidential election. The nominating convention for the Libertarian Party was not held until late May, 2008, however, thus forcing the plaintiffs to make a choice between waiting until after the convention and collecting all 10,000 signatures within two months or guessing who their nominees would be and circulating petitions for candidates who might not eventually be their party's nominees. The plaintiffs chose the latter course, gathering signatures in support of Dr. George Phillies ("Phillies"), who is the Chair of the Libertarian Party of Massachusetts, for president, and Chris Bennett ("Bennett") for vice president. They eventually collected over 15,000 signatures on the Phillies-Bennett petitions.
In July, 2007, Phillies inquired of the Elections Division of the Office of the Secretary of the Commonwealth ("the Secretary") as to whether the Libertarian Party would be allowed to substitute the names of the nominees actually chosen at its convention, in the event that they were not Phillies and Bennett. The Secretary responded, via e-mail, through one of his attorneys, Kristen Green ("Attorney Green"), on October 26, 2007, that the Libertarian Party could "prepare a form that allows members of [that] party to request the substitution of the candidate." The plaintiffs understood the response as an assurance that a substitution would be allowed and proceeded accordingly.
Barr and Root ultimately defeated Phillies and Bennett and won the Libertarian Party's nomination. Immediately thereafter, on May 29, 2008, the plaintiffs reestablished *227 contact with the Secretary and sought to substitute the nominees' names on the petitions they had gathered. On June 5, 2008, however, the Secretary informed the plaintiffs that no substitution would be permitted because he viewed Phillies and Bennett as having been mere "stand-ins" who were not actually seeking their party's nomination. By that time, the plaintiffs had collected approximately 7,000 signatures on behalf of Phillies and Bennett. They determined that it would be impossible for them to abandon those signatures and the resources that had been devoted to collecting them to start afresh. The plaintiffs chose, instead, to continue gathering signatures on the original petition and to challenge in court the Secretary's refusal to allow substitution.
B. Procedural History
On August 6, 2008, the plaintiffs filed suit alleging that Galvin was in violation of 1) the First Amendment of the United States Constitution by impairing their rights to free speech, to cast their votes effectively and to develop a new political party and 2) the Equal Protection Clause of the Fourteenth Amendment of the Constitution by discriminating between a) major and minor political parties and b) parties that hold their nominating conventions before the deadline for submitting nomination petitions and those that hold their conventions after the deadline. The plaintiffs sought declaratory judgment as well as injunctive relief to require Galvin to place the names of Barr and Root as the Libertarian candidates on the Massachusetts ballot for the 2008 presidential election.
On September 22, 2008, shortly before the Massachusetts presidential ballots were to be printed, the Court allowed the requested preliminary injunction ("the September, 2008, Order").[1]See Barr v. Galvin, 584 F. Supp. 2d 316, 322 (D.Mass. 2008). Galvin appealed that order but he later voluntarily dismissed the appeal. On March 31, 2009, the parties filed cross-motions for summary judgment which were timely opposed and are currently pending before the Court.
II. Legal Analysis
A. Justiciability
The Court notes at the outset that both parties agree that this case is not moot despite the long-past occurrence of the 2008 presidential election because the controversy is "capable of repetition, yet evading review." See Storer v. Brown, 415 U.S. 724, 737 n. 8, 94 S. Ct. 1274, 39 L. Ed. 2d 714 (1974) (citation omitted).
B. Legal Standard for Summary Judgment
The role of summary judgment is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir.1991), quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990). The burden is upon the moving party to show, based upon the pleadings, discovery and affidavits, "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). When cross-motions are filed, the Court must apply that standard and determine which party, if either, deserves summary judgment. *228 Adria Int'l Group, Inc. v. Ferre Dev., Inc., 241 F.3d 103, 107 (1st Cir.2001).
C. Application
1. Law of the Case Doctrine
As the Court explained in the September, 2008, Order, the constitutionality of state action affecting ballot access is reviewed using a sliding scale such that, to pass muster, voting regulations imposing "severe burdens" must be narrowly tailored to a "compelling state interest" but "reasonable, nondiscriminatory restrictions" must be justified by only "important regulatory interests." McClure v. Galvin, 386 F.3d 36, 41 (1st Cir.2004), citing Timmons v. Twin Cities Area New Party, 520 U.S. 351, 358, 117 S. Ct. 1364, 137 L. Ed. 2d 589 (1997); see Barr, 584 F.Supp.2d at 320. When it entered a preliminary injunction against Galvin, the Court determined that, for reasons described below, M.G.L. c. 53, § 14 was ambiguous with respect to whether it applied to presidential nominees and "[s]urely there can be no state interest that would justify" the burden imposed by such ambiguity. Barr, 584 F.Supp.2d at 320-21.
Barr argues that the Court should enter summary judgment purely on the basis of that ruling pursuant to the law of the case doctrine which provides that, once a court decides a rule of law in a case, its decisions in later stages of the case should comport with that rule. See Naser Jewelers, Inc. v. City of Concord, 538 F.3d 17, 20 (1st Cir.2008). That doctrine is inapplicable here, however, because in its September, 2008, Order, the Court ultimately ruled that § 14 was only "likely [to] fail constitutional scrutiny," Barr, 584 F.Supp.2d at 321 (emphasis added), and, therefore, no absolute rule of law governs this case. As the First Circuit Court of Appeals made clear in Naser Jewelers, an initial ruling that "was designed to be preliminary" constitutes an exception to the law of the case doctrine. 538 F.3d at 20; c.f. id. (applying the law of the case doctrine to decide a motion for summary judgment where the court had previously held that an ordinance was unequivocally constitutional when it denied a motion for a preliminary injunction).
2. Constitutionality of Chapter 53, Section 14
Accordingly, the Court will re-consider the constitutionality of § 14. That statute sets forth the procedure for filling the vacancy created when "a candidate nominated for a state, city or town office dies before the day of election, or withdraws his name from nomination, or is found ineligible." M.G.L. c. 53, § 14 (emphasis added). Thus, on its face, § 14 does not appear to apply to candidates for the offices of President and Vice-President of the United States.
Another statute, M.G.L. c. 50, § 1, however, defines the term "state officer" so as to render the term "state ... office" in § 14 applicable to presidential and vice-presidential nominees. Chapter 50, § 1 mandates that "state officer"
shall apply to, and include, any person to be nominated at a state primary or chosen at a state election and shall include United States senator and representative in Congress.
M.G.L. c. 50, § 1 (emphasis added). The same statute also defines "state election" as applying
to any election at which a national, state, or county officer or a regional district school committee member elected district-wide is to be chosen by the voters.
Id. (emphasis added). As this Court previously concluded, under § 1,
*229 A "state officer" is, ultimately, defined as "a national, state or county officer." Thus, the category of "state officers" is defined to be broader than itself, a nonsensical conclusion.
Barr, 584 F.Supp.2d at 320. Based upon the circular definitions set forth in § 1, the inclusion of the term "state ... office" in M.G.L. c. 53, § 14 leaves the determination of whether that statute is applicable to presidential and vice-presidential nominees positively ambiguous. Id.
Where, as here, the meaning of a statute is unclear, it may be found to be void for vagueness. See Duke v. Connell, 790 F. Supp. 50, 53-54 (D.R.I.1992). A vague statute can be justified by no legitimate state interest. See id. Accordingly, the Court concludes, as it preliminarily determined in the September, 2008, Order, that § 14 fails to pass constitutional muster as it applies to this case.
3. Counter-Arguments
a. "Voters"
The Court is not dissuaded from its earlier reasoning by Galvin's arguments to the contrary. Galvin first contends that § 14 cannot apply to presidential elections because that statute clearly refers to officers selected by Massachusetts voters alone. He notes that 1) § 14 applies to "state officers" who, under the definitions of that term and of "state election," are "chosen by the voters" and 2) the term "voter" is elsewhere defined as "a registered voter." See M.G.L. c. 50, § 1.
Galvin argues that "a registered voter" refers only to a voter registered in Massachusetts and, therefore, "state officers" are those "chosen" by only voters registered in Massachusetts. Because the president and vice-president are chosen by voters nationwide, Galvin suggests that they cannot be deemed "state officers" and, hence, are not subject to § 14. The term "voter" is not, however, and cannot logically be expanded to mean "a registered voter in the Commonwealth," and Galvin provides no explanation as to why it should be so restricted.
b. Omission of "President" in the Definition of "State Officer"
Galvin also points out that the definition of "state officer" as set forth in M.G.L. c. 50, § 1 explicitly includes United States senators and representatives but is silent with respect to the president. He suggests, therefore, that that term cannot refer to the president (and, by extension, § 14 cannot apply to the president).
In effect, he invokes the canon of statutory interpretation "expressio unius est exclusio alterius" pursuant to which the express mention of one thing in a statute implies the exclusion of another. That rule is "only a guide," United States v. Vonn, 535 U.S. 55, 65, 122 S. Ct. 1043, 152 L. Ed. 2d 90 (2002), and only applies when it resonates with legislative intent favoring exclusion, see Chevron U.S.A., Inc. v. Echazabal, 536 U.S. 73, 80, 122 S. Ct. 2045, 153 L. Ed. 2d 82 (2002) (refusing to apply the canon to a statute containing the phrase "may include"). Galvin's argument is, therefore, not altogether conclusive.
In any event, his interpretation of "state officer" (as including United States senators and representatives but not the president) does not remedy the inconsistent definitions of that term and "state election." As suggested above, a "state officer," as defined in § 1, is someone elected at a "state election," in which "national, state or county officers" are chosen. Thus, the president, undeniably a "national... officer[]," could, for these purposes, be considered to fall within the ambit of "state officers." In any event, the statutory term is vague and ambiguous.
*230 c. Presidential Electors
In the alternative, Galvin suggests that, if § 14 applies to presidential elections at all, it must only apply to presidential electors who are the persons actually "chosen at a state election" and, hence, it is the electors who must be considered to be "state officers." In that context, Galvin argues that the statutory prerequisites for filling vacancies, as set forth in § 14, were not met in this case because none of the 12 electors who accepted nomination to support Phillies and Bennett died, withdrew or was found ineligible.
The plaintiffs respond that their complaint is with the Secretary's refusal to allow any substitution, whether for presidential nominees or for presidential electors. Indeed, their ultimate goal was to substitute the names of Barr and Root in place of Phillies and Bennett on the ballot, regardless of how that was accomplished. Moreover, the ambiguity with respect to whether § 14 applies to presidential nominees is equally applicable to presidential electors. Galvin's argument concerning presidential electors is, therefore, unavailing.
d. Chapter 53, Section 6
Finally, Galvin devotes a major portion of the memorandum in support of his motion for summary judgment to defending the constitutionality of M.G.L. c. 53, § 6, even though the plaintiffs do not challenge it. That statute provides that, in order to have their names appear on the ballot, candidates for president and vice president representing a political designation must obtain nomination papers (nominating 12 electors who have pledged to vote for the presidential and vice-presidential candidates) signed by 10,000 voters and submitted to election officials on or before a certain date. Galvin contends that it is irrelevant whether § 14 is constitutional so long as § 6 provides valid access to the ballot.
Section 6 does not, however, provide a means for substituting names on a ballot in the event that a candidate withdraws, dies or is found to be ineligible. Such a right to substitute is guaranteed by the Equal Protection Clause of the Constitution to ensure that the names of the actual candidates appear on the ballot. See Anderson v. Firestone, 499 F. Supp. 1027, 1030-31 (D.C.Fla.1980) (holding that substitution of the name of the proper vice-presidential candidate on the ballot was constitutionally required when the presidential candidate had ultimately selected a running mate different from the one listed on nomination petitions). In this case, § 6 did not provide a remedy for substituting the names of Barr and Root on the ballot when Phillies and Bennett had previously secured a spot but wished to cede it to the legitimate Libertarian nominees.
Thus, that statute did not protect ballot access for the candidates actually selected to represent the Libertarian Party or Massachusetts voters' right to vote for those candidates. The lack of a substitution procedure does not serve the state interest in protecting ballot integrity or, indeed, any other state interest and, accordingly, the presumed constitutionality of § 6 does not mitigate the constitutional infirmity of § 14.
ORDER
In accordance with the foregoing, the plaintiffs' motion for summary judgment (Docket No. 37) is ALLOWED and, conversely, the defendant's motion for summary judgment (Docket No. 32) is DENIED.
So ordered.
NOTES
[1] Barr and Root obtained 13,189 votes (about 0.4% of all votes cast) in Massachusetts in the 2008 election. See Fed. Election Comm'n, 2008 Official Presidential General Election Results 1 (Jan. 22, 2009), available at http:// www.fec.gov/pubrec/fe2008/2008 presgeresults.pdf. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2612409/ | 800 P.2d 1082 (1990)
Gerald T. VanNORT, Appellee,
v.
Kenneth DAVIS, Appellant.
No. 73023.
Court of Appeals of Oklahoma, Division No. 3.
October 30, 1990.
As Corrected December 19, 1990.
Ronald L. Kincannon, Boise City, for appellee.
John Richardson, Elkhart, Kan., for appellant.
Released for Publication by Order of the Court of Appeals of Oklahoma, Division No. 3.
*1083 MEMORANDUM OPINION
HUNTER, Vice Chief Judge:
Appellee filed this small claims action against Appellant on January 20, 1989. Appellee attempted to serve process on Appellant by certified mail, but Appellant refused to accept the mail and the process was returned undelivered. Appellee did not seek to serve Appellant personally or by any other manner. On February 8, *1084 1989, a default judgment was rendered against Appellant for $240.00 plus costs and interest. Appellant was unaware of the lawsuit against him until he received a copy of the journal entry of judgment by first class mail. Appellant thereupon filed a motion to set aside judgment on the ground that service was legally insufficient and the trial court therefore lacked jurisdiction. Upon hearing, the trial court overruled Appellant's motion, finding that notice was sufficient under the Small Claims Procedure Act (SCPA) and Rule 10 of the Rules for District Courts of Oklahoma. This appeal followed.
On appeal, Appellant alleges the trial court erred in finding that notice to him was sufficient under the requirements of the SCPA, 12 Ohio St. 1981 §§ 1751 et seq. The SCPA governs the procedure to be followed in all small claims actions. 12 O.S.Supp. 1985, § 2001.
Section 1755 of the SCPA sets forth specific requirements for service of process upon a defendant, as follows:
Unless service by the sheriff or other authorized person is requested by the plaintiff, the defendant shall be served by mail. The clerk shall enclose a copy of the affidavit and the order in an envelope addressed to the defendant at the address stated in said affidavit, prepay the postage, and mail said envelope to said defendant by certified mail and request a return receipt from addressee only. The clerk shall attach to the original affidavit the receipt for the certified letter and the return card thereon or other evidence of service of said affidavit and order. If the envelope is returned undelivered and sufficient time remains for making service, the clerk shall deliver a copy of the affidavit and order to the sheriff who shall serve the defendant in the time set in Section 1756.
Section 1756 provides that if sufficient time does not remain for personal service, the plaintiff can apply for a new order with a different time for appearance, which the clerk must prepare. Sections 1764 and 1765 also provide for the fees for personal service to be collected by the clerk and taxed as costs to be awarded the prevailing party. Thus, if the plaintiff prevails, he is not prejudiced by the cost of personal service upon the defendant.
Jurisdiction depends upon issuance and service of process and without these, jurisdiction does not obtain. Statutes prescribing the manner of service of summons must be substantially complied with in order to vest the court with jurisdiction. Nikwei v. Babcock, 822 F.2d 939 (10th Cir.1987); Williams v. Egan, 308 P.2d 273 (Okl. 1957). The state cannot invest itself with, and exercise through its courts, jurisdiction over a person in a proceeding which may directly and adversely affect his legally protected interests without employing a method of notification which is reasonably calculated to give a person knowledge at a meaningful time and in a meaningful manner of the attempted exercise of jurisdiction and an opportunity to be heard. Bomford v. Socony Mobil Oil Co., 440 P.2d 713 (Okl. 1968). Thus, the question becomes whether the service of process, or lack thereof, was in substantial compliance with the SCPA to a degree sufficient to confer jurisdiction on the district court.
The trial court relied upon 12 O.S. Supp. 1984, Ch. 2, App. Rule 10, of the Rules of the District Courts of Oklahoma, in approving the service upon Appellant and permitting a default judgment to be entered against him. Rule 10 provides, in pertinent part, that notice of taking default is not required where the defaulting party has not made an appearance and is not required in small claims actions even when the defaulting party has made an appearance. However, in general civil actions, 12 O.S.Supp. 1988, § 2004(C)(2)(c) provides specifically for cases where process has been refused. Upon notice of refusal, a plaintiff has ten (10) days to send a copy of the summons, petition and notification to the defendant that despite such refusal, the case will proceed and default judgment will be rendered against him unless he appears to defend the suit. This notice provision establishes a critical distinction between those required in general civil actions, and *1085 those in small claims actions requiring actual notice under the SCPA, since the SCPA does not include a constructive notice provision in cases of refusal of service of process. A small claims defendant faces denial of due process unless the plaintiff complies with Section 1755 and personally serves him as required by the statute upon return of the undelivered process.
Section 1755 of the SCPA does provide specific notice requirements in cases where process remains "undelivered". "Delivery" in this context necessarily includes an "acceptance" by the addressee in taking physical possession of the process and acknowledging the receipt. Without these acts, the process remains "undelivered". Under those circumstances, a plaintiff must then resort to personal service as required by Section 1755.
Service of process is sufficient if it informs a defendant that he has been sued, of the nature of the proceedings against him, of his interest therein and of the court where the hearing will be held. City Ins. Co. v. Rasor, 700 P.2d 1032 (Okl. App. 1985). A failure to follow procedures prescribed by statute for service of process will make the process on which the suit is predicated fatally defective. Pittman v. Compton, 277 F. Supp. 772 (N.D.D.C.Okl. 1968). The provision in the SCPA that the hearing and disposition of small claims shall be informal with the sole object of dispensing speedy justice between the parties was not intended to dispense with basic due process of law, particularly in regard to fundamental hearing requirements. Graves v. Walters, 534 P.2d 702 (Okl.App. 1975). Due process is violated by the mere act of exercising judicial power upon process not reasonably calculated to appraise a defendant of the pendency of an action. Bomford v. Socony Mobil Oil Co., supra. Default judgments are never favored and it is the policy of the law to afford every party an opportunity to present his side of the case. Crussell v. Osborn, 592 P.2d 984 (Okl.App. 1979).
Appellant's motion to set aside judgment was statutorily grounded in 12 Ohio St. 1981, § 1031 (Third) which gives the trial court the power to vacate its own judgment "for mistake, neglect or omission of the clerk or irregularity in obtaining a judgment or order". Such an "irregularity" relates not to the substance of the order, but to whether a serious jurisdictional defect exists, such as lack of service, notice or jurisdiction of either the parties or subject matter. Smaller v. Smaller, 635 P.2d 1341 (Okl.App. 1981). The test for measuring the legal correctness of the trial court's ruling on a motion to vacate or set aside judgment is whether sound discretion was exercised upon sufficient cause shown to vacate, modify, open or correct its earlier decision, or to refuse the relief sought. Schepp v. Hess, 770 P.2d 34 (Okl. 1989). A default judgment must be set aside if the court had no jurisdiction to enter the judgment. Farmers' Union Co-operative Royalty Co. v. Woodward, 515 P.2d 1381 (Okl. 1973).
Here, Appellant was not given notice or an opportunity to be heard. He was in no way informed that he was being sued, the nature of the proceeding or of the pending hearing. Appellee failed to substantially comply with the specific requirements for service of process and notice provided in 12 Ohio St. 1981, § 1755, and would not have been prejudiced by compliance with the statute. Appellant was denied fundamental due process of law and the trial court did not obtain jurisdiction. The trial court abused its discretion in overruling Appellant's motion to set aside the judgment.
Appellee's motion for appellate attorney fees is DENIED.
The trial court's judgment is REVERSED and the case is REMANDED to the trial court WITH INSTRUCTIONS to vacate the default judgment.
GARRETT, P.J., and HANSEN, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1882115/ | 787 So. 2d 446 (2001)
Louis COLEMAN, Individually and as Father of Louis Frank Coleman
v.
Dr. Richard DENO, Dr. Ivan Sherman and JoEllen Smith Hospital.
No. 99-CA-2998.
Court of Appeal of Louisiana, Fourth Circuit.
April 25, 2001.
*454 Michelle A. Bourque, Jones, Walker, Waechter, Poitevent, Carrere and Denegre, L.L.P., New Orleans, Counsel for Intervenor/Appellant.
Gerald E. Meunier, Darryl M. Phillips, Gainsburgh, Benjamin, David, Meunier & Warshauer, Frank J. D'Amico, Jr., New Orleans, Counsel for Plaintiff-Appellant.
Stewart E. Niles, Jr., Charles L. Rice, Jr., Karen M. Fontana, Jones, Walker, Waechter, Poitevent, Carrere and Denegre, L.L.P., New Orleans, Counsel for Defendant-Appellant.
C. William Bradley, Jr., Richard E. Gruner, Jr., Colleen B. Hand, Lemle & Kelleher, L.L.P., New Orleans, Counsel for Defendant/Appellee.
Court composed of Chief Judge WILLIAM H. BYRNES, III, Judge STEVEN R. PLOTKIN, Judge MIRIAM G. WALTZER, Judge DENNIS R. BAGNERIS, Sr., and Judge MICHAEL E. KIRBY.
BYRNES, Chief Judge.
This medical malpractice and general tort case involves the loss of plaintiff's arm. The plaintiff, Louis Coleman, defendant Dr. Richard Deno, and the intervenor, the Louisiana Patients' Compensation Fund ("Patients' Compensation Fund" or "Fund"), appeal a judgment notwithstanding the verdict ("JNOV"), which dismissed the plaintiff's claims and award against Dr. Ivan Sherman. The trial court also lowered the jury award to the plaintiff, Louis Coleman, on behalf of his son, Louis Frank Coleman, for loss of consortium. We affirm in part, amend in part, and reverse in part.
On June 7, 1988 at 1:44 a.m., plaintiff, Louis Coleman went to the emergency room of JoEllen Smith Hospital where he complained to the nurse that he had pulled something in his chest while lifting, and all movements hurt, including deep breathing. Although his vital signs were normal, he had a fever of 100.3.
Dr. Ivan Sherman, the attending emergency physician, found that the plaintiff's chest was clear but his chest wall was tender. Dr. Sherman diagnosed plaintiff with chest pain and costochondritis. Dr. Sherman prescribed Naprosyn twice a day with meals. Plaintiff was discharged at 3:45 a.m. with instructions to apply heat to his chest and to see his personal physician for a follow up examination. Plaintiff filled his prescription that morning and went home. His left arm began to swell later that morning.
On June 8, 1988 at 8:10 p.m. plaintiff went to the emergency room at JoEllen Smith Hospital, complaining to the nurse that his left arm had begun to swell and ache that morning. The nurse noted that his arm was swollen and warm with bullae in the left atecubital space. Plaintiff's vital signs were normal although he had an elevated heart rate of 120/minute and a fever of 102.8.
When Dr. Richard Deno, the attending emergency room physician, first examined the plaintiff, he noted track marks consistent with intravenous drug use. Dr. Deno drew a diagram of plaintiff's left arm, showing the location of the track marks, the hot swollen area, and the small bullous lesions. Dr. Deno ordered laboratory work that showed a white blood cell count of 27.1. Dr. Deno diagnosed the plaintiff *455 with left arm cellulitis and concluded that the plaintiff needed inpatient intravenous antibiotic therapy. Dr. Deno felt that the patient could receive better treatment at Charity Hospital of New Orleans ("Charity"), which had superior and more immediately available health care services for treatment of plaintiff's left arm while JoEllen Smith Hospital did not have the full laboratory facilities available at Charity. Dr. Deno called the resident in charge of Charity's Accident Room, and the resident accepted plaintiff for immediate admission to the emergency room.
Dr. Deno determined that the plaintiff was stable and could transport himself to Charity. Dr. Deno instructed the plaintiff to go directly to Charity. He was given a copy of his laboratory results and discharged from JoEllen Smith Hospital at about 10:00 p.m.
The plaintiff arrived at Charity over 2½ hours later at 12:21 a.m. on June 9, 1988. He told the nurse that his chief complaint was of left arm edema for one day. Plaintiff related that he had a crushing type injury on Sunday when he fell off of a boat and was wedged between the wharf and the boat.
The attending physician noted a small painful and erythematous region approximately one to two inches below the left elbow on the anterior part of the plaintiff's forearm on the morning prior to admission. By that evening plaintiff had swelling up to his elbow, and later that evening he had extremely painful swelling extending into his arm. Plaintiff related that the only recent trauma to his left arm occurred four days before admission when some people injected something into his arm while holding him down. Plaintiff stated that he worked unloading seafood crates from a truck but did not work directly with fish or oysters. He denied having recent cuts while working. He also reported that he fell from a boat five days earlier and was wedged between the bank and the wharf. Plaintiff denied IV drug use although a questionable history of IV drug use was noted.
Plaintiff's physical examination showed that his left upper extremity was swollen and warm from the mid arm to lower forearm, with no fluctuant areas, no streaking, positive axillary node and positive track marks. Plaintiff's white blood cell count was elevated at 29.9. The left arm x-rays, which were completed by 5:00 a.m., showed significant soft tissue swelling but no gas in the tissues. The x-rays demonstrated deformities of the second, third, fourth and fifth digits.
The attending physician diagnosed cellulitis, probable intravenous drug abuse, and noted likely staph or strep infection, ruling out sepsis. The physician determined that the plaintiff should be admitted for intravenous antibiotics (Nafcillin, 2 grams every four hours), tetanus toxoid administration, elevation of warm compresses to the left arm, and additional blood studies.
Seven hours after the plaintiff arrived at the Charity Emergency Room, intravenous antibiotics were initiated at 8:00 a.m. The June 9, 1988 nurse's notes did not show additional swelling or worsening of the plaintiff's left arm. After receiving intravenous antibiotics throughout the day, the plaintiff was admitted to the Hospital's LSU Medicine Service at 6:00 p.m.
At Charity, the attending physician initially noted on June 10, 1988 that he was waiting for the results of blood tests of the plaintiff's blood culture and white blood count to determine the length of the antibiotic treatment, and he planned to consult surgery.
On June 11, 1988 the hospital notes report that the cellulitis with staph was responding to treatment with Nafcillin. After *456 a surgical consult was ordered to evaluate the plaintiff's left arm cellulitis on June 11, 1988, Dr. Clyde R. Redmond, II, initially saw the plaintiff at about 1:00 p.m. that day. Dr. Redmond found that the plaintiff had crepitus, indicating gas in the tissues of his left arm. Dr. Redmond planned to broaden the antibiotic coverage. When x-rays taken about 2:00 p.m. indicated "air" within the soft tissues of plaintiff's left arm, the plaintiff went to surgery at 4:10 p.m.
Dr. Redmond found that the skin, fat, and bulk of the muscles in the plaintiff's left arm were dead as the plaintiff had developed a compartment syndrome within the past few hours. After consulting with an orthopaedic surgeon, Dr. Redmond performed an open left shoulder disarticulation and amputated the plaintiff's left arm at the shoulder. Cultures showed that the dominant infectious organism in the plaintiff's left arm was a gas-forming organism, peptostreptococcus or peptostrep. The peptostrep organism is found in the human mouth and is a common infection with IV drug abusers. Plaintiffs left arm cultures revealed alpha and beta streptococcus. On June 28, 1988, the plaintiff was discharged from Charity.
On April 17, 1989, Louis Coleman, individually and as the father of Louis Frank Coleman, filed a request for a medical review panel pursuant to La. R.S. § 40:1299.41 et seq. under the private malpractice act. Coleman alleged that Dr. Ivan Sherman, Dr. Richard Deno, and JoEllen Smith Hospital were negligent and caused the loss of his left arm. Plaintiff claimed that the defendants failed to properly diagnose or treat his left arm abrasion on June 7 and 8, 1988 at the JoEllen Smith Emergency Room.
Plaintiff also filed a request for a medical malpractice panel pursuant to La. R.S. 40:1299.39 et seq. under the public malpractice act, naming Charity Hospital of New Orleans as a defendant. Plaintiff alleged that Charity was negligent in connection with the treatment of his left arm from June 9 to June 12, 1988.
On May 1, 1990, the medical malpractice panel concluded that there was no breach of the applicable medical standard of care by Dr. Sherman, Dr. Deno or JoEllen Smith Hospital and that "the conduct complained of was not a factor in the resultant damages."
On July 27, 1990, plaintiff filed a petition in civil district court against Dr. Sherman, Dr. Deno and JoEllen Smith Hospital because they failed to properly diagnose and treat plaintiff's left arm abrasion. The Louisiana Patients' Compensation Fund ("Compensation Fund" or "Fund") was an intervenor in the suit. On March 27, 1991, the plaintiff filed a supplemental petition claiming that the defendants violated CBRA's anti-dumping provision.[1] Plaintiff settled his claim against JoEllen Smith Hospital for $10,000, and the hospital was dismissed from the action on October 10, 1991.
Plaintiff settled his separately filed claim against Charity in March 1993 for $25,000, and Charity was dismissed from the action.
A jury trial was held on March 1-5, March 8-12 and March 15, 1999. On March 2, 1999, Dr. Deno filed peremptory exceptions of no cause of action and/or prescription on plaintiff's COBRA/EMTALA antidumping claim and a motion in limine for an order precluding any reference to *457 COBRA/EMTALA's anti-dumping provision, or race or socioeconomic status. The trial court granted Dr. Deno's exception of no cause of action.
In the March 15, 1999 jury verdict, the jury found that both Dr. Sherman and Dr. Deno were negligent, which contributed to the loss of plaintiff's left arm. The jury apportioned 20 % of fault to Dr. Sherman and 80 % to Dr. Deno. The jury found that Charity and plaintiff were not negligent. The jury awarded $4.4 million in general damages and $500,000 in special damages (lost wages, diminished earning capacity and the cost of replacing personal services). The jury found that the amount for future medical care and related benefits was $500,000. The damages sustained by plaintiff's son, Louis Frank Coleman, for loss of society and services was $1 million.
Original March 18, 1999 Judgment
The March 18, 1999 judgment was rendered in favor of the plaintiffs and against Dr. Ivan Sherman and Dr. Richard Deno, in solido. The judgment awarded $4,900,000 to the plaintiff, Louis Coleman, and $1,000,000 to Louis Coleman, as natural tutor of his minor son, Louis Frank Coleman. The awards were subject to the statutory limitation for each defendant in the sum of $100,000 for both plaintiffs plus interest. The judgment was with legal interest from the date of the claim filed with the Louisiana Patients' Compensation Fund Over-Sight Board. The trial court also provided for expert fees for seven doctors. The judgment noted that the jury found that Louis Coleman was in need of future medical care and related benefits in the amount of $500,000.00 (under La. RS. 40:1299.43).
Annotated March 18, 1999 Judgment
In the trial court's annotated judgment dated March 18, 1999, the award rendered against defendants, Dr. Ivan Sherman and Dr. Richard Deno, in solido, remained:
Louis Coleman, individually $4,900,000.00
Louis Coleman, as natural
tutor of his minor son,
Louis Frank Coleman $1,000,000.00
This annotated judgment award was subject to the statutory limitation for each defendant in the sum of $100,000 for both plaintiffs plus interest. La. R.S. 40:1299.42(B)(2). Further, judgment was rendered against the Patient's Compensation Fund in the sum of $300,000.00 for both plaintiffs.
Accordingly, the trial court found that Louis Coleman would recover judgment against each defendant doctor in the sum of $79,591.84 plus interest. The Patient' Compensation Fund owed the balance of $238,775.51 plus interest.
The trial court held that Louis Coleman on behalf of his minor son, Louis Frank Coleman, would recover from each defendant doctor the sum of $20,408.16 plus interest. The patient's Compensation Fund owed the balance of $61,224.49 plus interest.
The annotated judgment awarded legal interest from the date the claim was filed with the Patient's Compensation Fund Over-sight Board. The award for expert fees remained the same. The annotated judgment noted that Louis Coleman was in need of future medical care and related benefits in the amount of $500,000.00 under La. RS. 40:1299.43.
Final Amended June 1999 Judgment
After hearing post-trial motions the trial court rendered a final amended judgment dated June 24, 1999. The amended judgment provided the following:
The parties stipulated that Louis Coleman settled with Charity for $25,000 and settled with JoEllen Smith Hospital for $10,000. The trial court granted the defendant Dr. Ivan Sherman's motion for *458 judgment notwithstanding the verdict (JNOV). The trial court granted remittitur regarding the claim of Louis Coleman as natural tutor of his minor son, Louis Frank Coleman, to $10,000.00. The trial court noted that the jury found Louis Coleman in need of future medical care and related benefits in the amount of $500,000.00; however, the trial court did not enter a judgment on this sum.
The trial court denied the post-trial motions except as follows: The trial court reiterated that it granted Dr. Ivan Sherman's motion for JNOV, dismissing all claims against Dr. Sherman by Louis Coleman, individually and on behalf of his minor son, Louis Frank Coleman, with prejudice, each party to bear their own costs. Sole fault was assigned to Dr. Richard Deno.
In the amended judgment the trial court held that the award to Louis Coleman on behalf of his minor son, Louis Frank Coleman, is remitted from $1,000,000 to $10,000.
The trial court found that the award to Louis Coleman does not pre-empt the claim of the minor son. Louis Frank Coleman, and the awards should be pro rated.
The trial court ordered that the award to the minor son, Louis Frank Coleman, against Dr. Richard Deno was $1,018.30 and interest from April 1, 1991, with the Patient's Compensation Fund paying all other interest thereon. [$10,000.00 divided by $4,910,000,000 = .0020366%, which means that the minor son, Louis Frank Coleman's award on a total limitation of $500,000.00 is $1,018.30 ($500,000 ×.0020366 % = $1,018.00).]
The trial court decreed that the judgment in favor of plaintiff, Louis Coleman, against Dr. Richard Deno was $98,971.70 with interest from April 1, 1991, with the Patient's Compensation Fund paying all other interest.
The trial court ordered that the Louisiana Patients' Compensation Fund should receive credit of $100,000 for the judgment rendered against Dr. Richard Deno.
The trial court awarded $400,000 plus interest in favor of the plaintiff Louis Coleman against the Louisiana Patients' Compensation Fund.
Appeal
Plaintiff Louis Coleman, the defendant Dr. Richard Deno, and the intervenor, Louisiana Patients' Compensation Fund, appealed the trial court's judgment.
On appeal plaintiff Louis Coleman contends that: (1) the trial court erred in not allowing the plaintiff to disclose to the jury that Dr. Deno directed plaintiff to Charity because plaintiff lacked finances or hospitalization insurance; (2) Dr. Deno's fault in directing plaintiff to Charity because of the lack of finances or insurance is beyond the scope of the Louisiana Medical Malpractice Act, thereby removing the Act's limit on damages entitling the plaintiff to the full amount of the jury award; and (3) the trial court erred in granting a JNOV in favor of Dr. Sherman.
Defendant Dr. Richard Deno claims that: (1) the jury was prejudiced by plaintiff's witnesses' references to race and socio-economic status: (2) the jury charges were erroneous and confusing: (3) the verdict was contrary to the law and evidence; (4) the trial court erred in failing to apportion any fault to Charity; (5) the trial court verdict was manifestly erroneous because there was no credible evidence that the plaintiff was in need of future medical care; (6) the trial court abused its discretion in allowing testimony concerning the cost of a prosthesis device where there was no expert testimony establishing that the device was medically *459 necessary; (7) the jury verdict was manifestly erroneous because there was no evidence to support an award to the son, Louis Frank Coleman, for loss of consortium; and (8) the damage award to the minor son, Louis Frank Coleman, was extinguished by the award to his father, Louis I. Coleman.
Intervenor, The Louisiana Patients' Compensation Fund, argues that: (1) the trial court erred in denying Dr. Deno and the Fund's motions for new trial as well as JNOV, and the jury erred in finding that Dr. Deno was negligent; (2) there was no expert evidence to prove that Dr. Deno was negligent or caused or contributed to plaintiff's loss of his left arm; (3) the jury erred in failing to apportion fault to Charity; (4) the jury award was excessive; (5) the jury erred in awarding $500,000 in special damages for lost wages or diminished earning capacity; (6) the trial court and jury erred in rendering an award to the minor son, Louis Frank Coleman, for loss of consortium; (7) the trial court erred in permitting plaintiff's witnesses to testify regarding the cost of plaintiff's future medical care and including $500,000 for future medical care and related expenses in a lump sum; and (8) the trial court erred in failing to give the Patients' Compensation Fund a credit of $110,000 for plaintiff' pretrial settlements with JoEllen Smith and Charity Hospitals.
Plaintiff's Claims
Dr. Deno's Fault in Directing Plaintiffs Transfer to Charity for Lack of Finances or Insurance Creates a Timely Action Beyond the Scope of La. Medical Malpractice Act, Entitling Plaintiff to Full Amount of Jury Award
Plaintiff maintains that he asserted a cause of action, alleging that Dr. Deno improperly dumped an uninsured patient on another facility by directing Louis Coleman for treatment at Charity because he lacked the ability to pay JoEllen Smith Hospital. Plaintiff noted that the pertinent federal statute is 42 U.S.C. 1395dd, COBRA/EMTALA.
On the second day of trial the trial court granted Dr. Deno's combined exception of no cause of action and motion in limine, dismissing the EMTALA federal allegations and prohibiting the plaintiff from referring to his lack of insurance during the trial. The plaintiff does not object to the trial court's holding that the federal statutory law, EMTALA, afforded no cause of action against a defendant hospital. However, the plaintiff argues that the trial court erred in not allowing disclosure of the fact that plaintiff was transferred to Charity because he did not have sufficient funds or insurance to be treated at JoEllen Hospital.
The plaintiff contends that the trial court erroneously found that in his original petition, plaintiff did not give fair notice to the defendant of this claim. In his amended petition, plaintiff alleged a violation of COBRA, complaining that Dr. Deno negligently failed to treat the plaintiff because of the lack of insurance. Plaintiff contends that whether or not there was a formal cause of action under EMTALA, La. R.S. 40:2113.4 or Louisiana general tort law, fair notice of this being an issue in the case was given.
Plaintiff alleges that there was a CBRA/EMTALA violation in his amended petition on February 21, 1991, which was more than two years after the alleged June 8, 1988 violation of the EMTALA statute. Dr. Deno points out that the federal statute contains a two-year statute of limitations which is not interrupted by the provisions of the Medical Malpractice Act. Spradlin v. Acadia/St. Landry Medical Foundation, 98-1977 (La.2/29/00), 758 So. 2d 116. The Louisiana Supreme Court *460 found that under provisions of the Medical Malpractice Act, including those limiting liability of qualified health care providers by providing a maximum amount of damages, a mandatory pre-suit review by a medical review panel, and special prescriptive and peremptive periods, apply only to "malpractice" as defined in the Act, and any other liability of the health care providers is governed by general tort law. Id., pp. 6-7, 758 So.2d at 120.
The federal anti-dumping statute does not provide a civil remedy against physicians. McDougal v. Blanch, 95-1377 (La.App. 1 Cir. 4/4/96), 672 So. 2d 398, 400, fn. 3, writ denied, 96-1129 (La.6/7/96), 674 So. 2d 973. La. R.S. 40:2113.4 also imposes upon hospitals the obligation to render emergency services to all persons regardless of insurance or economic status, but does not expressly impose or decline to impose the same obligation on physicians.
At issue is whether the plaintiff timely stated a cause of action in his pleadings under La.R.S. 40:2113.4 or Louisiana general tort law for patient dumping.
Pleadings must be construed reasonably so as to afford litigants their day in court, to arrive at the truth and to do substantial justice. Krebs v. Mull, 97-2643 (La.App. 1 Cir. 12/28/98), 727 So. 2d 564, writ denied, 99-0262 (La.3/19/99) 740 So. 2d 119. Under fact pleading, as opposed to theory pleading, the court is bound to construe allegations of fact under any theory of law that entitles the pleader to relief. National Gypsum Co. v. Ace Wholesale, Inc., 98-1196 (La.App. 5 Cir. 6/1/99), 738 So. 2d 128. The function of the peremptory exception of no cause of action is to question whether the law extends a remedy to anyone on any grounds or portion of the demand. Kelly v. CNA Ins. Co., 98-0454 (La.3/12/99), 729 So. 2d 1033; Schnell v. McKenzie's Tree Service, Inc., 98-1269 (La.App. 5 Cir. 3/30/99), 731 So. 2d 922.
In the present case, in his original petition. Coleman alleged in pertinent part:
21.
Although he actually recognized, or should have recognized, the severe nature and seriousness of the plaintiff's arm infection. Dr. Deno nevertheless failed to hospitalize the plaintiff for immediate care and attention at JoEllen Smith Hospital, and instead instructed plaintiff to go to Charity Hospital, while at the same time giving him express permission to go first to his home to pick up certain belongings before going to Charity.
22.
The defendant Dr. Deno also telephoned Charity to assure that a hospital bed would be available for plaintiff, but failed to take steps in following up this telephone call to see to it that the plaintiff actually was admitted at Charity on his arrival there.
The plaintiff alleged that Dr. Deno transferred the plaintiff to Charity; however, the plaintiff did not state that it was because the plaintiff had no funds or insurance.
In his First Supplemental and Amended Petition for Damages, the plaintiff alleged:
22 A.
As a hospital receiving Medicare benefits for patient treatment, and/or as a physician employed by said hospital and/or treating such patients, the defendants JoEllen Smith Hospital and Dr. Richard Deno were obliged by federal law not to transfer Louis Coleman or direct him as a patient to Charity Hospital, without first being certain that his condition was stabilized and that no material *461 deterioration of his condition likely would result from the delay between his leaving JoEllen Smith Hospital and his arriving at Charity Hospital; and, accordingly, said defendants were negligent per se in regard to the above sequence of events, for having violated the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), added as a section to the Social Security Act, including, but not limited to, the provisions set forth in Section 1867 of the latter Act.
The plaintiff, Coleman, also added a new subparagraph to his petition as follows:
24.
e) The failure on the occasion of the second emergency room visit of June 8, 1988, to adhere to the "anti-dumping" provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), including, but not limited to the provisions set forth in § 1867 of the Social Security Act, for which violation the defendant and/or defendants would be liable on the basis of negligence per se.
The above language does not state a cause of action against Dr. Deno for patient dumping under the federal law because EMTALA only applies to hospitals and not physicians.
In Tabor v. Doctors Memorial Hosp., 563 So. 2d 233 (La.1990), the physician who denied the patient admission to the hospital was below the standard of care required. The doctor did not feel that the patient presented an emergency or that the patient was suicidal. The Louisiana Supreme Court characterized the physician's actions in not waiving the $400 admission deposit and not admitting a suicidal patient as below the appropriate standard of care and referred to the Medical Malpractice Act. The Supreme Court concluded that the plaintiffs had met their burden of proving that the physician was liable under the medical malpractice action. The Supreme Court did not address the issue of whether Louisiana tort law provided a separate cause of action based on "patient dumping" because of lack of funds.
In Fleming v. HCA Health Services of Louisiana, Inc., 96-1968 (La.4/8/97), 691 So. 2d 1216, 1219, after the patient was refused admittance to the hospital because he was unable to pay, he committed suicide. The Louisiana Supreme Court held that the evidence did not establish that the individual had need for emergency services at the time his wife requested such services from the hospital. The Supreme Court noted in footnote 3 that:
We also need not address the issues of whether a violation of La. Rev.Stat. 40:2113.6, which contains its own penalty provisions for a fine and suspension from the state medical assistance program, constitutes actionable fault in a tort action.
La. R.S. 40:2113.6(F) provides for monetary fines and/or suspension of employment of an officer, employee or member of the medical staff, but does not declare whether these individuals could also be liable for damages under the State patient dumping statute, or whether their individual responsibility is restricted to the penalty provisions.
In Spradlin v. AcadiaSt. Landry Med. Found., supra. fn 3, p. 3, 758 So.2d at 118, the Louisiana Supreme Court asserted that: "Only the first action solely against the hospital is before us." In footnote 8, p. 8, 758 So.2d at 121, the Supreme Court also stated that:
We do not address whether there is a cause of action for damages under La. Civ.Code art. 2315, the fountainhead of tort liability, based on the violation of a *462 statutory law designed to protect the injured person's interest.
The Supreme Court did not review the issue of whether a physician is liable for patient dumping under Louisiana tort law unrestricted by the Medical Malpractice Act. The Supreme Court noted that: "the Louisiana `anti-dumping' statute contains no express private cause of action." Id. at p. 5, 758 So.2d at 120.
In Bolden v. Dunaway, 97 1425 (La. App. 1 Cir. 12/28/98), 727 So. 2d 597, writ denied 99-0275 (La.3/26/99), 739 So. 2d 801, the appellate court reviewed a case in which the plaintiffs asserted in the amended petition that:
9.
As an additional cause of action. Dr. Dunaway's non-medical related decision to leave the hospital and not operate on his patient prepped for surgery because his fee was not in his pocket, was a non-medical related intentional act not based on rendering professional health care services as defined by LSA-R.S. 40:1299.41(8) and therefore not covered by the medical malpractice act. Id. p. 3, 727 So.2d at 599.
The patient needed surgery to remove a tumor. The patient and her husband brought an action against the surgeon for refusing to perform surgery because the patient had not made appropriate financial arrangements. The trial court granted the exception of prematurity to dismiss the husband and wife's negligence and breach of contract claims. The trial court allowed the plaintiffs' intentional tort claims to be maintained and allowed plaintiffs to proceed on the intentional infliction of emotional distress. The Third Circuit Court of Appeal reversed the trial court's judgment and found that the plaintiffs' claims were not malpractice as defined by La. R.S. 40:1299.41(8). The appellate court held that the alleged wrongdoing was the doctor's failure to assist with the surgery as he agreed to do, and the damages are based on the failure of the health care provider to render health care to a patient.
The appellate court characterized the doctor's alleged failure to render professional services of surgically assisting Mrs. Bolden, as he agreed to do, as a breach of contract, and upheld the cause of action subject to the requirements of the Medical Malpractice Act. The appellate court granted the exception of prematurity as to plaintiffs' malpractice claims. In that case the conduct of the doctor was characterized as a breach of contract. In the present case, Coleman had not consented to an operation, and Dr. Deno had not scheduled surgery, which created the basis for the contract in Bolden, supra.
The Louisiana Medical Malpractice Act must be strictly construed against limiting the tort claimant's rights against the wrongdoer. Johns v. Agrawal, 99-0500, 99-0499 (La.App. 4 Cir. 11/17/99), 748 So. 2d 514, writ denied, XXXX-XXXX (La.2/11/00), 754 So. 2d 944; Clark v. Baird, 97-1025 (La.App. 4 Cir. 5/20/98), 714 So. 2d 840, writ denied 98-1684 (La.10/9/98), 726 So. 2d 31. Were the health care provider to commit an intentional tort against a patient or negligently injure that patient in a manner unrelated to medical treatment, the Act's limitation of liability would not be available. Descant v. Administrators of Tulane Educational Fund, 93-3098 (La.7/5/94), 639 So. 2d 246.
Intentional tort allegations constitute causes of action not governed by the Medical Malpractice Act. La. R.S. 40:1299.41 A(8); Richardson v. Advanced Cardiovascular Systems, Inc., 865 F. Supp. 1210 (E.D.La.1994). Whether the hospital *463 engaged in any intentional acts of conspiracy to cover up was fair grist for the medical review panel that had to consider the claim before a suit could be brought. Id. At the termination of the suspension of prescription during review by the medical review board, prescription commences to run again. Bordelon v. Kaplan, 96-1205 (La.App. 3 Cir. 3/5/97), 692 So. 2d 581.
In the present case, in his amended petition, Coleman referred to a cause of action based on the negligent failure of the defendants to treat the plaintiff, as well as an intentional tort based on the federal anti-dumping provisions related to the transfer of a patient to another hospital for lack of funds. The Medical Malpractice Act only encompasses unintentional acts of negligence and contractual issues. JoEllen Smith Hospital's policy provided that every emergency room patient must receive appropriate treatment before discharge or transfer, regardless of financial status. The "patient dumping" cause of action refers to an intentional tort where Dr. Deno directed plaintiff's transfer to Charity for lack of finances or insurance although it conflicted with JoEllen Smith Hospital's written policy. We find no express state law that excludes recovery under La. C.C. art. 2315, general tort law, or La. R.S. 40:2113.4-40:2113.6 against physicians for the intentional tort of patient dumping. Plaintiffs reference to antidumping states a cause of action against the physician under Louisiana law.
Considering that the Medical Malpractice Act must be strictly construed against limiting the tort claimant's rights against the wrongdoer, Coleman's amended petition states a cause of action against the physician, Dr. Deno, beyond the scope of Louisiana Medical Malpractice Act, thereby entitling the plaintiff to the jury award that is not subject to the Act's $500,000 cap.
Prescription
With respect to review by a medical review panel, La. R.S. 40:1299.47 A(2)(a) provides:
The filing of a request for review shall suspend the running of prescription against all joint and solidary obligors and all joint tortfeasors, including but not limited to health care providers, both qualified and not qualified, to the same extent the prescription is suspended against the party or parties that are subject of the request for review.
See In re Robinson, 601 So. 2d 385 (La. App. 4 Cir.1992).
Under Louisiana law Coleman need not assert his "patient dumping" action within the one-year tort prescription period while the action is pending before the medical review panel where Coleman alleged in the prayer of his original petition that: ... "plaintiff prays for judgment in his favor and against the defendants, jointly, severally and in solido...." Although this may conflict with EMTALA's two-year prescription period as found in Spradlin, supra,[2] in the present *464 case EMTALA does not apply. The liability of the physician Dr. Deno does not fall under the federal statute. State law applies. The suspension of prescription does not conflict with the State law where the medical review panel reviews all causes of action asserted in a case that includes medical malpractice claims, and the plaintiff alleged that the defendants were solidarily liable.
In general, any conduct by a health care provider complained of by a patient is properly within the scope of the Medical Malpractice Act if it can reasonably be said that it comes within the definition therein, even though there are alternative theories of liability. Bolden v. Dunaway, supra. When one or more alternative theories of liability is covered by the Medical Malpractice Act, courts generally apply the procedure set forth in the Act to all of the claims. Dominick v. Rehabilitation Hosp. of New Orleans, 97-2310 (La.App. 4 Cir. 4/15/98), 714 So. 2d 739; DeBlanc v. Touro Infirmary, 96-1965 (La.App. 4 Cir. 12/27/96), 686 So. 2d 1015. The filing of a medical malpractice claim with a medical review panel triggers the suspension of prescription specially provided by the Medical Malpractice Act rather than the interruption of liberative prescription generally provided in the Civil Code. LeBreton v. Rabito, 97-2221 (La.7/8/98), 714 So. 2d 1226, overruling Hernandez v. Lafayette Bone & Joint Clinic, 467 So. 2d 113 (La.App. 3 Cir.1985).
In the present case Coleman's injury occurred in June 1988. On April 17, 1989. Coleman filed a request for a medical review panel. On May 1, 1990 the medical review panel reached its ruling. Coleman filed his original petition in civil district court on July 27, 1990. Coleman alleged that the defendants were solidarily liable in his petition, and Coleman asserted a cause of action against the physician based on medical malpractice. The State patient dumping action has not prescribed as the institution of the dumping claim was suspended along with the medical malpractice claim, pending review of all claims by the medical review panel.
Motion for JNOV
Plaintiff asserts that the trial court erred in granting Dr. Sherman's motion for JNOV and dismissing Dr. Sherman from the action.
In a medical malpractice action against a health care provider, the patient must prove by a preponderance of the evidence that: (1) the doctor's treatment fell below the ordinary standard of care required of physicians in his medical specialty; and (2) that the doctor's substandard care caused the injury sustained. La. R.S. 9:2794; Byrd v. State, Through Depart. of Public Safety and Corrections, 93-2765 (La.5/23/94), 637 So. 2d 114. A physician's duty is to exercise the degree of skill ordinarily employed by his professional peers under similar circumstances. Soteropulos v. Schmidt, 556 So. 2d 276 (La.App. 4 Cir.1990). The law does not require absolute precision in medical diagnoses; acts of professional judgment are evaluated in terms of reasonableness under the circumstances then existing, not in terms of the result or in light of subsequent events. Id. Causation is a question of fact to which the trial court's determinations will not be disturbed absent manifest error. Martin v. East Jefferson General Hosp., 582 So. 2d 1272, 1276 (La.1991). Before a fact-finder's verdict may be reversed, the reviewing court must find from the record that a reasonable factual basis *465 does not exist for the verdict, and the record establishes that the verdict is manifestly wrong. Lewis v. State Through Dept. of Transp. and Development, 94-2370 (La.4/21/95), 654 So. 2d 311, 314.
A motion for JNOV may be granted on the issue of liability or on the issue of damages or both issues. La. C.C.P. art. 1811(F); Ehrman v. Holiday Inns, Inc., 94-0312 (La.App. 4 Cir. 3/29/95), 653 So. 2d 732, writs denied, 95-1051, 95-1058 (La.6/16/95), 655 So. 2d 343. The trial court could only grant relief if, after reviewing the evidence in the light most favorable to the non-moving party, it determines that reasonable persons could not have reached the verdict that the jury reached. Bryant v. Solomon, 97-2008 (La. App. 4 Cir. 3/25/98), 712 So. 2d 145. In ruling on a motion for JNOV, a court may not weigh the evidence or substitute its judgment for that of the jury. Id. If reasonable minds could not differ, then the trial court was correct in granting the motion. Anderson v. New Orleans Public Service, Inc. 583 So. 2d 829, 832 (La.1991).
In reviewing the trial judge's decision to grant Dr. Sherman's motion for JNOV on the issue of Dr. Sherman's liability, we conclude that the motion was properly granted. In the present case the plaintiff did not complain to Dr. Sherman about his arm when Dr. Sherman saw him. The plaintiff's primary complaint was chest pain. The plaintiff's generalized symptoms did not develop into swelling in the area of plaintiff's arm until after the plaintiff's initial visit to the emergency room where Dr. Sherman examined him.
Dr. Paul Blaylock, plaintiff's expert in emergency and legal medicine, testified that plaintiff's arm still could have been saved when the plaintiff saw Dr. Deno during Coleman's second visit to the emergency room on June 8, 1988. Dr. Neil Crane, plaintiff's expert in internal medicine and infectious diseases, testified that Coleman's left arm was still salvageable on the evening of Wednesday, June 8, 1988, when he saw Dr. Deno for his second visit to the emergency room. Dr. Ronald Lee Nichols, the defendants' expert in general surgery with a subspecialty in surgical infectious diseases, also testified that Coleman's left arm was salvageable on June 8, 1988 and as late as June 9, 1988 at 8:00 a.m. when antibiotics were started at Charity Hospital. Dr. Clyde R. Redmond, II, an expert in cardiovascular and general surgery, testified that the 12-hour delay in treatment from 8:00 p.m. on June 8, 1988 to June 9, 1988 probably made no difference in the ultimate outcome. Dr. Joseph S. Litner, defendants' expert in emergency medicine, agreed that nothing occurred on June 7, 1988 that caused or contributed to the loss of Coleman's left arm. Dr. Norman E. McSwain, Jr., defendants' expert in general surgery, emergency medicine, policies and procedures and general trauma surgery, confirmed that nothing occurring on June 8, 1988 was related to the loss of the plaintiff's left arm, thus inferring that nothing occurring on June 7, 1988 was related to the loss of Coleman's arm. Dr. Michael K. Hill. defendants' expert in internal medicine and infectious diseases, testified that nothing done by Dr. Deno on June 8, 1988 caused the loss of the plaintiff's arm, thereby indicating that nothing done on June 7, 1988 caused the loss of the plaintiff's arm.
Dr. Sherman's treatment fell within the ordinary standard of care required of physicians in his medical specialty. Dr. Sherman's care was not substandard and did not cause the injury sustained. In reviewing the record as a whole, and resolving all reasonable inferences or factual questions in favor of the plaintiff, the evidence points so strongly in favor of Dr. Sherman that reasonable men could not find that his *466 actions or inactions on June 7, 1988 proximately caused the ultimate loss of the plaintiff's left arm. The trial court did not err in finding that, as a matter of law, no reasonable trier of fact could have found as the jury did, and the trial court properly granted Dr. Sherman's motion for JNOV.
Dr. Deno's Appeal
Mistrial
Dr. Deno contends that the trial court erred in failing to grant a mistrial. Dr. Deno's claims for mistrial were based on the fact that plaintiff and his counsel continued to make references to the plaintiff's race and social-economic status. Dr. Deno argues that a mistrial should have been granted because the plaintiff continued to violate the trial court's ruling that the plaintiff could not proceed against the physicians on a cause of action for patient dumping or refer to the plaintiff's lack of hospitalization insurance.
In this appellate review, this Court has determined that the plaintiff stated an anti-dumping cause of action against physicians under Louisiana law. Although the trial court ordered that no reference should be made to the plaintiff's lack of insurance, the references to anti-dumping were properly before the jury. Furthermore, the trial court has great discretion to determine motions for mistrial. Searle v. Travelers Ins. Co., 557 So. 2d 321 (La.App. 4 Cir.1990). Mistrials are granted only upon proof that there has been such prejudice to a party during trial that it cannot be cured by admonition or instruction to the jury. Barnes v. Thames, 578 So. 2d 1155 (La.App. 1 Cir.1991). Before declaring a mistrial, the trial court must determine that: (1) it is impossible to reach a proper judgment because of some error or irregularity, and (2) that there is no other remedy to provide relief to the moving party. Searle, supra.
In the present case, during the voir dire. Dr. Deno's counsel acquired a collective affirmation from the jurors that any decision would be free from bias, prejudice, passion and sympathy. References, including those to the plaintiff's life in the housing project and the fact that the police stopped the plaintiff because they thought he had a gun when he couldn't remove his artificial arm from his pocket, were not so prejudicial as to make it impossible to reach a proper judgment or create a situation where nothing could provide relief by any other remedy. Under the totality of circumstances, the trial court cannot be found to have abused its discretion in denying Dr. Deno's motion to grant a mistrial.
Jury Instructions
Dr. Deno complains that the jury charges were erroneous and confusing, and that this court is therefore required to conduct a de novo review of the record.
The trial judge is not required to give the precise instructions submitted by the parties, but rather must give instructions which must properly reflect the law applicable in light of the facts of the particular case. Sparacello v. Andrews, 501 So. 2d 269, 277 (La.App. 1 Cir.1986). Jury charges will be considered adequate on appeal if they fairly and reasonably identify the issues and provide correct principles of law. Johnson v. Terrebonne Parish Sheriff's Office, 95 1180 (La.App. 1 Cir. 2/23/96), 669 So. 2d 577, 582, writ denied 96-0727 (La.4/26/96), 672 So. 2d 907. Instructions which omit an applicable, essential legal principal constitute reversible error. Sons v. Delaune, 634 So. 2d 1212, 1216 (La.App. 1 Cir.1993), writ denied, 94-0729 (La.5/6/94), 637 So. 2d 1050. The question is whether the jury was misled to such an extent that it was not able to do justice. Girvan v. New Orleans Public Service, *467 Inc., 94-0681 (La.App. 4 Cir. 11/30/94), 646 So. 2d 481, writ denied 94-3169 (La.3/10/95), 650 So. 2d 1178. The trial court must instruct the jury as to the law and avoid confusing the jury. Kennedy v. St. Charles General Hospital Auxiliary, 630 So. 2d 888 (La.App. 4 Cir.1993), writ denied, 94-0269 (La.3/18/94), 634 So. 2d 863.
Discovery of an error in a jury instruction, by itself, does not justify a trial de novo by an appellate court without measuring the gravity and degree of the error, and considering the instructions as a whole, as well as the circumstances of the case. Barnett v. New Orleans Public Service, Inc., 489 So. 2d 452 (La.App. 4 Cir. 1986). When a jury was erroneously instructed and the error probably contributed to the verdict, a reviewing court must set aside the jury verdict. Kibble v. B.P.O. Elks Lodge No. 30, 640 So. 2d 267 (La.App. 4 Cir.1993), writ denied, 94-0922 (La.5/20/94), 641 So. 2d 204; Boh Brothers Const. Co., Inc. v. Luber-Finer, Inc., 612 So. 2d 270 (La.App. 4 Cir.1992), writ denied, 614 So. 2d 1256 (La.1993). Only then should a reviewing court make an independent de novo determination of the facts from the record, if possible, without according any weight to the factual findings of the erroneously instructed jury. The manifest error standard is not utilized when a jury's findings are tainted. Picou v. Ferrara, 483 So. 2d 915 (La.1986).
Dr. Deno asserts that references to the plaintiff's socio-economic status resulted in prejudice and sympathy. Dr. Deno avers that the trial court's failure to give a jury charge that the verdict should not be based on sympathy, but solely on the evidence was reversible error that tainted the verdict and mandates a de novo review. The record shows that the trial court gave the instruction: "You must not allow any sympathy you may naturally feel for anyone to influence your judgment."
Dr. Deno also avers that the trial court failed to charge the jury on the issue of proximate cause. Dr. Deno complains that the trial court failed to give the following jury charge: "If in a sequence of events between the original negligence and the injury, an entirely independent cause intervenes, which is of itself sufficient to stand as the cause of the accident, the second cause is the proximate cause of the incident, and the original negligence is not the proximate and intervening cause." See Fabre v. B.F. Goodrich Co., 218 So. 2d 617, 620 (La.App. 4 Cir. 1969). Dr. Deno asserts that the testimony of the plaintiff and defendants' experts was that Charity Hospital was at fault and was the cause of the loss of the plaintiff's arm. Dr. Deno maintains that the jury should have been charged on the issue of proximate cause and intervening cause.
The trial judge instructed the jury that it was the plaintiff's burden to prove that the defendant physicians' fault proximately caused the plaintiff's harm, i.e., that because of their fault Mr. Coleman suffered injuries that would not otherwise have occurred. The trial judge also told the jury that neither defendant, Dr. Sherman or Dr. Deno, can be liable for malpractice occurring at Charity Hospital, if any. The Court instructed the jury that factors may act independently or together to cause harm. The trial court further stated that one of the factors to be weighed in allocating fault among the physicians and Charity was the extent to which their substandard conduct caused or contributed to the plaintiff's injury.
Dr. Deno contends that the trial court failed to charge the jury on the burden of proof for a malpractice case as articulated under La. R.S. 9:2794(A). The record shows that the trial court used the wording *468 of La. R.S. 9:2794(A) regarding the burden of proof.
Dr. Deno asserts that the trial court erred in failing to charge the jury that the verdict should not be based upon speculation, as well as that a physician is not a guarantor of the results and that there is a presumption of reasonable care. The record shows that the trial court instructed the jury to base its decision only on the evidence that the jury heard and saw during the trial. The trial court also informed the jury that the plaintiff's injury does not raise a presumption that either Dr. Deno or Dr. Sherman breached the standard of care and that a physician is not a guarantor of good results.
Dr. Deno argues that the trial court failed to charge the jury that in a medical malpractice case, the jurors must be guided by the views and opinions of experts in the same medical specialty. Where the alleged acts of negligence raise issues peculiar to the particular specialty involved, then only those qualified in that specialty may offer evidence of the applicable standards. La. R.S. 9:2794(A)(1); Steinbach v. Barfield, 428 So. 2d 915 (La. App. 1 Cir.), writ denied, 435 So. 2d 431 (La.1983). However, it is a specialist's knowledge of the requisite subject matter, rather than the specialty within which the specialist practices, which determines whether a specialist may testify as to the degree of care which should be exercised; a particular specialist's knowledge of the subject matter on which he is to offer expert testimony is determined on a case by case basis. McLean v. Hunter, 495 So. 2d 1298 (La.1986). It is well established that where medical disciplines overlap, it is appropriate to allow a specialist in one field to give expert testimony as to the standard of care applicable to areas of the practice of medicine common to both disciplines. The opinions of a specialist as to matters within his field are entitled to greater weight than an opinion on the same subject by a specialist in another field. Faust v. Lombardo, 463 So. 2d 745 (La.App. 4 Cir.), writ denied 464 So. 2d 1380 (La.1985). The weight to be given to a medical expert's testimony ultimately rests with the finder of fact. Herpin v. Witherspoon, 95-370 (La.App. 3 Cir.1995), 664 So. 2d 515.
The jury instructions in the present case were adequate as they fairly and reasonably identified the issues. Considering the jury charges as a whole and the circumstances of the case, the jury instructions reflect the applicable law in light of the pleadings and facts of the case. The jury was not misled to such an extent that it was not able to do justice. The jury charges do not justify a de novo review by this court.
Jury Verdict
Dr. Deno contends that the verdict was contrary to the law and evidence because plaintiff's experts failed to address how his receiving one dose of antibiotics at JoEllen Smith Hospital would have affected his outcome. Dr. Deno asserts that the plaintiff provided no credible evidence that Dr. Deno breached the applicable medical standard of care.
La. R.S. 9:2794(A) mandates that plaintiff in a medical malpractice action prove:
(1) The degree of knowledge and skill possessed or the degree of care ordinarily exercised by physicians.... and where the defendant practices in a particular specialty ... plaintiff has the burden of proving the degree of care ordinarily practiced by physicians ... within the involved medical specialty.
(2) That the defendant either lacked the degree of knowledge or skill or failed to use reasonable care and diligence, *469 along with his best judgment in the application of that skill.
(3) That as a proximate result of this lack of knowledge or skill or failure to exercise this degree of care, the plaintiff suffered injuries that would not otherwise have been incurred.
As noted previously with respect to the lack of liability of Dr. Sherman, a physician's duty is to exercise the degree of skill ordinarily employed by his professional peers under similar circumstances. Soteropulos, supra. The law does not require absolute precision in medical diagnoses. Id. Acts of professional judgment are evaluated in terms of reasonableness under the circumstances then existing, not in terms of the result or in light of subsequent events. Id.
Dr. Deno refers to the testimony of Dr. Ronald Lee Nichols (defendant's expert in general surgery with a subspecialty in surgical infections diseases), Dr. Norman E. McSwain, Jr., (defendant's expert in general surgery, emergency medicine, policies and procedures, as well as general trauma surgery), and Dr. Michael K. Hill (defendant's expert in internal medicine and infectious diseases). These doctors testified that the plaintiff was stable and an appropriate candidate to transport himself to Charity. They confirmed that the plaintiff lost his arm due to the development of a compartment syndrome. The doctors testified that the plaintiff's condition did not rapidly and progressively deteriorate in the 2 ½ hours from the time he left JoEllen Smith Hospital to the time that he arrived at Charity. Plaintiff was not septic when he arrived at Charity, and blood cultures initially done at Charity revealed that the plaintiff had no indication of any ongoing sepsis or bacteria in his blood. The physicians also agreed that if antibiotics were begun at JoEllen Smith Hospital, the drugs would have destroyed or tainted the blood cultures done at Charity.
Dr. Deno asserts that the plaintiff's experts did not review the Charity record regarding the cause of the plaintiff's amputation, i.e., compartment syndrome, and therefore their testimony was not credible. Dr. Deno avers that the plaintiff's arm was destroyed by the development of compartment syndrome, and the failure of Dr. Deno to administer antibiotics was irrelevant. Dr. Deno points out that the plaintiff's expert in internal medicine and infectious diseases, Dr. Neil Crane, provided inconsistent testimony and should be discredited. Dr. Deno states that during his deposition, Dr. Crane did not have an opinion as to when the plaintiff's arm became unsalvageable; however, during trial, Dr. Crane opined that the plaintiff's arm was not salvageable as of June 9, 1988. Dr. Deno contends that Dr. Crane's testimony is inconsistent and therefore cannot be credible on this point.
The plaintiff argues that Dr. Crane testified that the earlier the treatment, the better the chance of achieving a good result. When Dr. Deno saw the plaintiff on June 8, 1988. Dr. Crane characterized the situation as limb threatening and life threatening, requiring immediate emergency treatment in the form of a culture of the fluid at the infection site, i.e., antibiotic treatment, and a surgical consult. Dr. Crane opined the plaintiff could be transferred to Charity by ambulance after a culture was obtained and antibiotic treatment commenced.
Dr. Paul Blaylock, plaintiff's expert in emergency and legal medicine, testified that the plaintiff would not have lost his arm by surgery on June 11, 1988, had he received proper treatment while under the care of Dr. Deno on June 8, 1988. Dr. Blaylock also stated that the plaintiff's arm *470 was still salvageable when the plaintiff saw Dr. Deno on June 8, 1988.
The claimant in a malpractice action need not show that he would have obtained a perfect outcome in the absence of the malpractice; rather, he may recover on a showing that the health care provider's negligence denied him a chance of a good outcome. Ambrose v. New Orleans Police Dept. Ambulance Serv., 93-3099, p. 3 (La.7/5/94), 639 So. 2d 216, 219; Graham v. Willis-Knighton Medical Center, 27,338 (La.App. 2 Cir. 9/29/95), 662 So. 2d 161, 164. The reviewing court must give great weight to factual conclusions of the trier-of-fact; where there is conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed upon review, even though the appellate court may feel that its own evaluations and inferences are reasonable. Virgil v. American Guarantee & Liability Ins. Co., 507 So. 2d 825 (La.1987). Where there are two permissible views of the evidence, the fact finder's choice between them cannot be manifestly erroneous or clearly wrong. Rosell v. ESCO, 549 So. 2d 840 (La.1989). Evidence was presented upon which the jury could conclude that Dr. Deno performed below the standard of care within his medical specialty in failing to provide immediate antibiotic treatment to the plaintiff on September 8, 2000. We cannot find that the jury was clearly wrong in concluding that Dr. Deno breached his standard of care.
Charity's Fault
Dr. Deno contends that the trial court was manifestly erroneous in not apportioning any fault to Charity Hospital for the loss of the plaintiff's arm. Dr. Deno notes that the medical experts testified that the plaintiff should have been seen within 30 minutes after he went to Charity. Dr. Deno states that the medical experts criticized Charity's delay in antibiotic treatment and lack of a surgical consult.
Dr. Clyde Redmond was the surgeon who stated that he performed the amputation of the plaintiff's arm. Drs. Hill and McSwaim supported the diagnosis of Dr. Redmond that the plaintiff lost his arm due to a compartment syndrome and that Charity's failure to consult a general surgeon on June 10, 1988 cost the plaintiff a chance of saving his arm.
The plaintiff argues that Dr. Redmond's video deposition testimony was inconsistent with Dr. Redmond's trial testimony because Dr. Redmond did not mention the compartment syndrome during the video deposition. The plaintiff maintains that Dr. Redmond's testimony should be disregarded.
Dr. Redmond claimed that he had not seen part of the plaintiff's Charity record when he testified in the video deposition. At trial Dr. Redmond told the jury that the plaintiff experienced compartment syndrome secondary to infection. Dr. Redmond stated that nothing Dr. Deno failed to do in this case could possibly have mattered, and the attending doctor at Charity on June 10, 1988 deviated from the standard of care by not consulting with him as a surgeon sooner so that Dr. Redmond could have saved the plaintiff's arm by operating on June 10, 1988. The plaintiff urges that it was not surprising that the jury chose to discredit and disbelieve Dr. Redmond's trial testimony. The plaintiff points out that the Charity records were available since 1988. Plaintiff asserts that the jury could have rejected this testimony and found that if Dr. Deno had treated the plaintiff with antibiotics, his arm could have been salvaged. Therefore, Charity was not at fault.
*471 We cannot find that the jury was clearly wrong in concluding that Charity did not breach its standard of care where the jury could have concluded that the plaintiff's arm could have been saved if Dr. Deno had treated him with antibiotics on June 8, 1988.
Future Medical Care
Dr. Deno submits that the trial court's verdict was manifestly erroneous because the plaintiff provided no credible evidence that the plaintiff is in need of future medical care, and the trial court erred in allowing plaintiff's expert to testify about the cost of future medical costs.
La. R.S. 40:1299.43(A)(1) provides in pertinent part:
In all medical malpractice claims filed with the Board which proceed to trial, the jury shall be given a special interrogatory asking if the patient is in need of future medical care and related benefits and the amount thereof.
In Hollingsworth v. Bowers, 96-257 (La. App. 3 Cir. 12/30/96), 690 So. 2d 825, the child suffered nerve injury, which caused the loss of use of his arm as a result of the negligence of a physician and nurses during delivery. The appellate court found that an award of damages for all future medical benefits as they accrued to, rather than an award of a specific amount for future medical care and expenses, was proper where the child was a patient whose recovery consumed the entire amount recoverable under the damage cap.
The trial court is required to include in the judgment a finding that the patient was in need of future medical care and related benefits, thus triggering the applicability of the statute providing that medical malpractice victims may be awarded future medical care and benefits from the Louisiana Patients Compensation Fund. Bijou v. Alton Ochsner Medical Foundation, 95-3074 (La.9/5/96), 679 So. 2d 893; Accardo v. Cenac, 97 2320 (La. App. 1 Cir. 11/6/98), 722 So. 2d 302. The statutory provisions of the Medical Malpractice Act vest exclusive jurisdiction of decision making and supervision over medical and related care claims with the Patient's Compensation Oversight Board, the agency legislatively assigned to administer the Fund. Bijou, supra.
Dr. Deno declares that the plaintiff did not provide any evidence of any medical expenses incurred by the plaintiff since he lost his arm. The plaintiff was not satisfied with the prosthesis he had the second time he went to see Dr. James Butler, a Board certified orthopedist. Dr. Deno asserts that there was no evidence as to the origin of this prosthesis or any expenses incurred in obtaining it. Dr. Butler testified that there was no medical reason that required the plaintiff to have a prosthesis. Although Dr. Butler wrote plaintiff a prescription for a prosthesis, he never saw the plaintiff with a prosthesis. Dr. Butler did not order a myo-electric prosthesis.
Dr. Deno contends that the trial court abused its discretion in allowing Michael Lambert, the plaintiff's expert, to testify as to the cost of a prosthetic device where there was no medical testimony that the plaintiff needed it. Dr. Deno contests that it is highly speculative as to whether the plaintiff was a candidate for a myo-electric arm as he has never been evaluated for that type of prosthesis.
Dr. Deno objects to the testimony of Michael Lambert, the owner of Lambert's Orthotics and Prosthesis, and certified by the American Board of Certification for Orthotics and Prosthetics, without medical testimony that the prosthesis was necessary. Considering that Mr. Lambert owned the company that supplied prosthetic devices, Mr. Lambert properly testified about the cost of those prosthetic devices. *472 Mr. Lambert prepared a lifetime estimate for the plaintiff's shoulder disarticulation prosthesis, a myo-electric type that would be functional as well as cosmetic. Mr. Lambert's total estimate was over $900,000 for the plaintiff's prosthetic needs.
Dr. Deno also complains that Bob Roberts, an expert in vocational evaluation, was not qualified to testify regarding the plaintiff's medical need of a myo-electric arm or the psychological effect the loss of an arm would have on the plaintiff, considering Roberts' lack of training as a psychologist.
Bob Roberts, an expert in vocational evaluation, properly testified as to the plaintiffs potential for employment. He testified that the plaintiff will require training for the use of a functional prosthetic arm. Mr. Roberts did not think that the plaintiff would progress to the point of being competitive for gainful employment. Dr. Richard Richoux, plaintiff's treating psychiatrist, testified that the plaintiff will require future medical treatment because of a major chronic depression related to the loss of his arm. Future treatment would include monthly psychotherapy and continued medication for depression and anxiety.
The plaintiff asserts that Dr. James Butler testified that a prosthesis was reasonable and appropriate, assuming the plaintiff desired it. Dr. Butler also testified that the plaintiff would need future medical care with doctor visits to monitor the prosthesis and replace it when it wore out or problems arose.
La. R.S. 40:1299.43(B)(1) provides:
"Future medical care and related benefits"... are all reasonable medical, surgical, hospitalization, physical rehabilitation and custodian services and include drugs, prosthetic devices, and other similar materials reasonably necessary in the provision of such services after the date of injury.
La. R.S. 40:1299.43(D) states:
Payments for medical care and related benefits shall be paid by the patient's compensation fund without regard to the five hundred thousand dollar limitation imposed in R.S. 40:1299.42.
Considering that Mr. Lambert projected that treatment with the myo-electric prosthesis would be $900,000, we cannot find that the jury erred in finding that the future medical expenses would be $500,000. The jury must have calculated this amount not on the cost of treatment with a myo-electric prosthesis but with medical treatment based on a less expensive prosthesis. We cannot say that the jury was clearly wrong in determining that the plaintiff's future medical expenses would be $500,000 over a thirty-year period.
Dr. Deno and the Patient's Compensation Fund argue that the future medical care and related benefits should be paid as incurred from the time of trial.
La. R.S. 40:1299.43(A)(1) provides in pertinent part:
(1) in all malpractice claims filed with the board which proceed to trial, the jury shall be given a special interrogatory asking if the patient is in need of future medical care and related benefits and the amount thereof.
La. R.S. 40:1299.433(A)(2) states that in a medical malpractice claim tried by the court, the trial court's finding shall include a recitation that the patient is or is not in need of future medical care and the amount thereof. These sections indicate that the issues of whether a patient is in need of future medical care and related benefits and the amount thereof are fact questions for the jury or judge. Descant *473 v. The Administrators of the Tulane Educational Fund, 95-0751 (La.App. 4 Cir. 4/5/95), 653 So. 2d 819.
The district courts are not vested with original jurisdiction or decision-making responsibility over future medical care claims. Kelty v. Brumfield, 93-1142 (La.2/25/94), 633 So. 2d 1210. La. R.S. 40:1299.43(C) vests exclusive jurisdiction of the initial disposition of the claim in the Patient's Compensation Fund and Oversight Board, a state agency with exclusive authority to pay, reject, settle, and monitor all claims and to administer the fund from which all claims are paid. Id.
In Bijou v. Alton Ochsner Medical Foundation, 95-3074, p. 6 (La.9/5/96); 679 So. 2d 893, 898, the Louisiana Supreme Court stated:
Thus, after obtaining a favorable court judgment on the issue of future medical care and related benefits, the plaintiff may file a claim with the Board. In the case at hand, the trial court found Mr. Bijou to be in need of future medical care and benefits, and rendered a judgment to this effect. Following Kelty v. Brumfield and La. R.S. 40:1299.43(C), Mr. Bijou should make a claim to the Patient's Compensation Fund Oversight Board for further action and recovery of his future medical care and related benefits claim....
In the present case the trial court's judgment shows that the plaintiff, Louis Coleman, is in need of future care and benefits. Coleman should make his claim to the Patient's Compensation Fund Oversight Board for further action and recovery of his future medical care and related benefits claim. The Board has exclusive authority to pay, reject, settle, and monitor all claims and to administer the fund from which all claims are paid.
In its final amended June 1999 judgment the trial court properly found that the jury determined that the plaintiff, Louis Coleman, was in need of future medical care and related benefits in the amount of $500,000 without entering a judgment on this sum.
Loss of Consortium
Dr. Deno contends that the trial court erred in awarding loss of consortium to the son, Louis Frank Coleman. Loss of consortium includes such elements as loss of service, loss of love and affection, loss of society and companionship, loss of sexual relationship, loss of support and loss of felicity or overall contentment and happiness. Vaccaro v. Sports and Imports, Inc., 539 So. 2d 989 (La.App. 4 Cir. 1989), writs denied, 541 So. 2d 1391, 1392 (La.1989). Dr. Deno asserts that there was no credible testimony with regard to an established relationship between the plaintiff and his son. The plaintiff points out that at the time of the plaintiff's amputation, Ms. Bradley, the mother of his child, was nine months pregnant with plaintiff's son. The plaintiff was present at his son's birth. Ms. Bradley affirmed that plaintiff's amputation has damaged the father/son relationship. The plaintiff notes that the plaintiff and his son would not be able to play football or basketball together, and the loss of plaintiffs arm precluded activities ranging from hugs to wrestling. Ms. Bradley stated that the child was afraid of his father because the father only had one arm.
The trial court reduced the jury verdict from $1,000,000 to $10,000 for the son's loss of consortium. There was support in the record for the $10,000 award to the son, Louis Frank Coleman, for loss of consortium.
Dr. Deno claims that the judgment should be amended to reflect that the *474 loss of consortium claim of the son, Louis Frank Coleman, was extinguished by the quantum awarded Louis I. Coleman. The loss of consortium claim on the part of the son, Louis Frank Coleman, is a claim that is derivative of the claim of his father. Dr. Deno refers to Hollingsworth v. Bowers, 96-257 (La.App. 3 Cir. 12/30/96) 690 So. 2d 825, 832, which held that because the damages awarded a child injured during child birth exceeded the medical malpractice cap, the mother's derivative claim for loss of consortium was extinguished and the judgment was amended to reflect its extinguishment. In Armand v. State, Dept. of Health and Human Resources, 97 2958 (La.App. 1 Cir. 2/23/99), 729 So. 2d 1085, 1094-1095, writ denied, 99-0842 (La.5/14/99), 741 So. 2d 661, the appellate court noted that La. R.S. 40:1299.42 provides a $500,000 cap on damages. The cap includes any derivative claims that arise from the same act of malpractice.
In the present case, the intentional tort claim based on patient dumping by the physician is not subject to the cap under the Medical Malpractice Act. The loss of consortium claim of the son, Louis Frank Coleman, was not extinguished by the quantum awarded Louis I. Coleman. The plaintiff did not contest the trial court's reduction of the jury verdict from $1,000,000 to $10,000 for the son's loss of consortium. Accordingly, The trial court's final June 1999 judgment is amended in part to reflect an award of $10,000 to the son, Louis I. Coleman, for loss of consortium against the defendant Dr. Deno. This award is not allocated to the Louisiana Patients' Compensation Fund because as noted above, the Fund would not be responsible for a derivative claim.
Louisiana Patients' Compensation Fund's Appeal
The following claims by the Fund have been reviewed previously: (1) the trial court erred in denying Dr. Deno and the Fund's motion for new trial and JNOV; (2) the trial court erred in finding Dr. Deno negligent; (3) the trial court erred in failing to proportion fault to Charity; (4) the trial court erred in rendering an award to the son, Louis Frank Coleman, for loss of consortium; and (5) the trial court erred in rendering an award of $500,000 for future medical care and related expenses in a lump sum.
The Fund presents the following additional claims: the jury award was excessive; the trial court erred in awarding $500,000 in special damages for loss of wages or diminished earning capacity; and the trial court erred in failing to give the Fund a credit of $110,000 for plaintiff's pretrial settlements with JoEllen Smith and Charity Hospitals.
Excessive Jury Award
The Fund argues that the jury award is grossly excessive and is not supported by the record. The Fund requests that this Court grant a new trial on the issue of damages or reduce plaintiff's general damages. The jury awarded $4,400,000 in general damages to the plaintiff, plus $500,000 for loss of wages, as well as diminished earning capacity. The jury noted the amount of $500,000 for future medical expenses.
Consideration of the jury's determination of damages is limited to a review for abuse of discretion on appeal. The discretion vested in the trier of fact is "great," and even vast, in determining the amount of damages. Youn v. Maritime Overseas Corp., 623 So. 2d 1257 (La.1993), certiorari denied, sub nom. Maritime Overseas Corp. v. Youn, 510 U.S. 1114, 114 S. Ct. 1059, 127 L. Ed. 2d 379 (1994). When damages are insusceptible of precise measurement, much discretion is left to the court for its reasonable assessment. La. *475 C.C. art.1999; Coco v. Winston Industries, Inc., 341 So. 2d 332 (La.1976). The reviewing court must evaluate the particular injuries and their effects on the particular injured persons. Reck v. Stevens, 373 So. 2d 498 (La.1979). Only after a determination of an abuse of discretion is a resort to prior awards appropriate, and then only for the purpose of determining the highest or lowest point that is reasonably within that discretion. Youn, supra.
General Damages
General damages involve physical and mental pain and suffering, inconvenience, loss of intellectual gratification or physical enjoyment, and other factors that affect the victim's life. Delphen v. Department of Transp. and Development, (La.App. 4 Cir. 5/24/95), 657 So. 2d 328, writ denied, 95-2116 (La.11/17/95), 663 So. 2d 716, and writ denied, 95-2124 (La.11/17/95), 663 So. 2d 717. The standard for appellate review of general damage awards is difficult to express and is necessarily non-specific. The standard of review for damage awards requires a showing that the trier of fact abused the great discretion accorded in awarding damages. In effect, the award must be so high or so low in proportion to the injury that it "shocks the conscience." Moore v. Healthcare Elmwood, Inc., 582 So. 2d 871 (La.App. 5 Cir.1991).
In the present case the trial court reviewed the general damage award with respect to the Medical Malpractice Act. The trial court did not review the jury's damage award with respect to the cause of action that is not restricted to the Act's cap. The plaintiff did not willingly give up his arm. His arm will never be reattached because it does not exist. It is very difficult to value what an arm is worth. Some individuals would not give up an arm for any amount of money. Some individuals would give up an arm for less and some for more. But who is to determine that? That is the purpose of the jury.
Based on Youn, this Court does not find that the jury, as trier of fact, abused its vast discretion in its general damage award.
Special Damages for Loss of Wages or Diminished Earning Capacity
The Patient Compensation Fund argues that the special damage award of $500,000 for loss of wages and diminished earning capacity is excessive and not proved by the evidence. The Fund maintains that Coleman did not have a boxing career, and his last "win" as a boxer was in May 1987, more than one year before the alleged malpractice. Plaintiff's counsel hired the defendant as a court runner after Coleman's arm was amputated.
Nancy T. Favaloro, Dr. Deno's vocational rehabilitation expert, testified that the plaintiff had no learning disability, was of average intelligence, and capable of obtaining his GED. The Fund asserts that the plaintiff was not borderline mentally retarded and has no psychiatric work restrictions. Ms. Favaloro found that training programs were available and the plaintiff could find employment positions such as substance abuse counsel or x-ray technician, which paid $9 to $10 hourly. Other jobs, paying up to $6.00 hourly, were available such as parking lot attendant, court runner and light janitorial work.
The plaintiff contends that the plaintiff's boxing days are over, that the plaintiff has limited education and little prospect of earning a decent living in the future. The plaintiff asserts that Mr. Coleman was earning $60 a day for Bundy Seafood at the time of his June 1988 injury. He had worked in heavy labor his entire life. The plaintiffs vocational expert Bob Roberts testified that the plaintiff is not likely to *476 ever be competitive in the job market again. Plaintiff's expert economist, Dr. Melville Wolfson, testified that the plaintiffs total economic loss is between approximately $340,000 and $480,000. Dr. Richard Richoux, a psychiatrist, saw the plaintiff fifteen times in five and one-half years. His diagnosis of plaintiffs condition included major depression and anxiety, directly related to the loss of his arm.
Based on the plaintiff's difficulty in doing tasks that he could previously do, and considering his great mental depression that would interfere with his work, we cannot say that the trial court abused its discretion in awarding $500,000 in special damages for loss of wages and diminished earning capacity.
$110,000 Credit for Pretrial Settlements
The Patient's Compensation Fund contends that: (1) the Fund did not receive written notice of the settlements with Charity and JoEllen Smith Hospital; and (2) the Fund is entitled to credit of $110,000 for the plaintiffs pretrial settlements with JoEllen Smith Hospital and Charity Hospital for $10,000 and $25,000 respectively. The plaintiff argues that the defendants cannot receive credit for these settlements where no liability is established. The plaintiff avers that the present case is not one where the plaintiff settled with all health care providers and therefore the plaintiff was not obliged statutorily to then notify the Fund of these settlements and then continue the trial against the Fund itself. The plaintiff asserts that he proceeded to trial against the remaining two providers, and the Fund was not implicated by the settlements.
Under the provisions of the Louisiana Medical Malpractice Act, La. R.S. 40:1299.41 et seq., the total amount recoverable by a plaintiff alleging damages caused by medical malpractice is limited to $500,000 plus interest and costs. La.R.S. 40:1299.42(B)(1). Giammanchere v. Ernst, 96-2458 (La.App. 4 Cir. 5/19/99), 742 So. 2d 572, 578, writs denied, 99-2924 & 99-2928 (La.12/14/99), 751 So.2d 881-882. Of that amount, a qualified health care provider may be liable for $100,000 plus interest. La. R.S. 40:1299.42(B)(2). Id. Any amount due up to the cap from a judgment or settlement in excess of the total liability of the qualified health care providers must be paid by the Fund. La. R.S. 40:1299.42(B)(3)(a). Id.
Notice
The Fund claims that it did not receive written notice of the settlements with Charity and JoEllen Smith Hospital in the present case. However, the Fund did not file an exception of no cause of action based on the plaintiff's failure to notify the Fund. La. C.C.C. art. 927(B) provides:
B. The court cannot supply the objections of prescription and res judicata, which must be specially pleaded. The nonjoinder of a party, or the failure to disclose a cause of action or a right or interest in the plaintiff to institute the suit, may be noticed by either the trial or appellate court of its own motion.
This Court recognizes, sua sponte, and reviews the Fund's assertion of no written notice as an exception of no cause of action based on the claim that the plaintiff lost the right to proceed against the Fund for recovery when the plaintiff failed to properly notify the Fund of the settlements.
In Horil v. Scheinhorn, 95-0967 (La.11/27/95), 663 So. 2d 697, the plaintiff settled his case against the qualified health care provider for $100,000 and subsequently sought additional damages from the Fund. The Louisiana Supreme Court found that a claimant expecting excess recovery from the Fund must closely follow La. R.S. 40:1299.44(C) when requesting *477 court approval of a settlement. Id., 663 So.2d at 698.
In Castille v. Our Lady of Lourdes Regional Medical Center, 96-1476, p. 3 (La. app. 3 Cir. 4/2/97), 692 So. 2d 1303, 1305, the Third Circuit interpreted Horil v. Scheinhorn, supra. to require compliance with the provisions of La. R.S. 40:1299.44(C) anytime a plaintiff attempts to obtain excess damages from the Fund. In Castille the plaintiff settled his claim with the qualified medical provider for $75,000. The settlement was approved by the court and contained a reservation of rights against the Fund. The plaintiffs also amended their original petition to name the Fund as a defendant; however, the requirements of La. R.S. 40:1299.44(C) were not met.
In Giammanchere v. Ernst, id., the plaintiffs filed suit against Touro, Dr. Mandich and Dr. Ernst. Prior to trial, the plaintiffs settled their suit against Dr. Mandich for $31,500. The plaintiffs proceeded to trial against another medical provider, Dr. Ernst, as well as Touro. After trial, the jury found that Dr. Mandich was 60% at fault, Touro was 10% at fault, and Ms. Giammanchere was 30% at fault. The jury awarded $800,000 in favor of the plaintiffs, which was reduced to the $500,000 liability limit under the Medical Malpractice Act. The Fund then intervened and appealed the judgment. The Fund filed an exception of no cause of action. On rehearing, this Court reviewed the Fund's exception of no cause of action based on the contention that the plaintiffs lost their right to proceed against the Fund for recovery when they failed to follow the requirements of La. R.S. 40:1299.44(C). The Fund claimed that the plaintiff failed to file a petition for court approval of the settlement and to serve the petition on the Fund. This Court distinguished Castille, supra, and Horil, supra, by finding that in those cases, the plaintiffs expected to recover excess damages from the Fund.[3]*478
*479 In Payne v. New Orleans General Hospital, 611 So. 2d 777 (La.App. 4 Cir. 1992), the Louisiana Patient's Compensation Fund and Oversight Board could not intervene in a medical malpractice action prior to rendering judgment, settlement, or an award in arbitration; the medical malpractice act did not give the Fund status as a co-obligor or codefendant, and until settlement or judgment in excess of $100,000 had been rendered, the Fund did not have any standing to intervene.
In the present case the settlements of $25,000 to Charity and $10,000 to JoEllen Smith Hospital were amounts far below *480 the $100,000 limit of liability. (Charity was not specifically named as a defendant in plaintiffs two petitions. Further, although Charity was listed in the determination of fault in the jury interrogatories, Joe Ellen Smith Hospital was not.) Based on Giammanchere, supra, we infer that the plaintiffs believed that the greater amount of liability in the present case lay with Dr. Deno and Dr. Sherman. Because the settlements were below $100,000, the Fund could not intervene prior to the judgment.
Pursuant to Giammanchere, id., it must be determined if the plaintiff in the present case fulfilled the requirements of La. R.S. 40:1299.42(D)(5). At issue is whether the plaintiff met the notice requirement because there is no evidence that the Fund was given notice of the plaintiff's settlements with Charity and JoEllen Smith Hospital. La. R.S. 40:1299.42(D)(5) contains no time limit for giving written notification of a plaintiff's settlement with a qualified health care provider to the Fund. Moreover, the form of the notice is not specified.
In the present case, the fact that the Fund received notice of the settlement with the two hospitals is inferred as in Giammanchere, id. In the present case, with reference to the March 18, 1999 judgment, the Fund filed its petition for intervention on March 26, 1999. On March 29, 1999, the Fund filed its motion for new trial and/or motion for judgment not withstanding the verdict and/or motion for remittitur and/or motion to amend judgment, which references the settlements with Charity and JoEllen Smith Hospital. The Fund's counsel signed the blank for approval as to form only for the trial court's judgment of July 25, 1999. On July 23, 1999 the Fund filed a suspensive appeal. Just as in Giammanchere v. Ernst, the Fund did not intervene until after trial and after a judgment was reached. Under the circumstances, following Giammanchere, id., we find that the requirements of La. R.S. 40:1299.42(D)(5) were met. Accordingly, the exception of no cause of action, reviewed on behalf of the Fund, is denied.
Credit for Two settlements
Because the Fund had notice of the settlements, at issue is what amount of credit will the Fund receive for the two settlements.
Decisions interpreting La. R.S. 40:1299.44(C)(5) have made it clear that once one health care provider has settled for $100,000, liability for malpractice is admitted and the only issue between the victim and the Fund is the amount of damages. In Stuka v. Fleming, 561 So. 2d 1371, 1374 (La.1990), cert. denied, 498 U.S. 982, 111 S. Ct. 513, 112 L. Ed. 2d 525 (1990), the Louisiana Supreme Court stated:
The Medical Malpractice Act therefore contemplates that the issue of liability is generally to be determined between the malpractice victim and the health care provider, either by settlement or by trial, and that the Fund is primarily concerned with the issue of the amount of damages. Payment by one health care provider of the maximum amount of his liability statutorily establishes that the plaintiff is a victim of that health care provider's malpractice. Once payment by one health care provider has triggered the statutory admission of liability, the Fund cannot contest that admission. The only issue between the victim and the Fund thereafter is the amount of damages sustained by the victim as a result of the admitted malpractice.
However, in the present case the two settlements ($25,000 with Charity and $10,000 with JoEllen Smith Hospital) were for less than $100,000 each so that the *481 issue remains as to whether liability must be proved before the Fund can receive credit for the settlements.
The Medical Malpractice Act, La. R.S. 40:1299.42 D(5), provides:
In the event that a partial settlement is executed between the defendant and/or his insurer with a plaintiff for the sum of one hundred thousand dollars or less, written notice of such settlement shall be sent to the board. Such settlement shall not bar the continuation of the action against the patient's compensation fund for excess sums in which event the court shall reduce any judgment to the plaintiff in the of malpractice liability insurance in force as provided for in R.S. 40:1299.42(B)(2).
In the present case, the Fund received $100,000 credit for the medical malpractice liability of Dr. Deno who was the only party found liable at trial. In oral argument, the plaintiff referred to Roy v. Gupta, 606 So. 2d 940 (La.App. 3 Cir.1992), writ denied, 609 So. 2d 232 (La.1992), in which the Third Circuit gave only $100,000 credit because only one health care provider was found at fault. There had been three settlements under $100,000 each with three health care providers but the Third Circuit did not give credit to the funds for these settlements because the health care providers were not found to be liable. The Third Circuit stated:
The question becomes whether or not credit is given for all of the health care providers who are potentially liable and who participate in a settlement, or for only those involved in the settlement whose liability is proven by either an admission of liability by settling for the limits of liability or by obtaining a judgment of negligence and malpractice against them. There are good arguments for both sides. To allow a plaintiff to name several health care providers and settle with all for under the limit, and then amend the petition to allege the negligence of only one, gives the plaintiff a chance to recover from any and still expose the fund to a potential liability of $400,000.00. On the other hand, nothing prevents the fund from asserting as a defense the negligence of those parties not named at trial and having liability reduced by the amount of the settlement.
It is well entrenched in the jurisprudence that where there is a settlement for the limits of liability by the health care provider, the only remaining issue is quantum. The fund is not a party defendant, rather it is a statutory intervenor. See, Williams v. Kushner, 449 So. 2d 455 (La.1984); Felix v. St. Paul Fire and Marine Ins. Co., 477 So. 2d 676 (La.1985).
In this instance, however, liability is an issue. Furthermore, the only liability at issue was Dr. Gupta's. The amended petition alleged only his negligence. The judgment was rendered finding only him at fault. The other two health care providers were not named and not a party to the trial.
The statute mandates credit against the judgment for the amount of malpractice insurance in force for the liable health care provider. In the present case there is only one liable health care provider. The other two were relieved of liability.
Id., 606 So.2d at 946.
In Thomas v. Insurance Corp. of America, 93-1856 (La.2/28/94), 633 So. 2d 136, the Louisiana Supreme Court interpreted La. R.S. 40:1299.42 D(b) to allow $100,000 credit for the one settlement and then a dollar-for-dollar amount for the second settlement. The Supreme Court stated:
Accordingly, in the case of multiple settlements, a single settlement between *482 a defendant and/or his insurer and the plaintiff for a sum of $100,000, or less than $100,000 but more than any other of multiple settlements, shall reduce by $100,000 any judgment in favor of the plaintiff to be paid by the Patient's Compensation Fund. Each other settlement shall reduce the amount due by the Fund by the amount of that settlement.
Id. at 141.
Thomas differs from the present case because in Thomas, one of the settlements was for $100,000, and therefore liability was admitted. In the appellate opinion. Thomas v. Insurance Corp. of America, 621 So. 2d 67 (La.App. 2 Cir.1993), the Second Circuit reviewed Roy v. Gupta, supra, and distinguished it for that reason. The Second Circuit stated:
Roy v. Gupta is easily distinguished on its facts. No settling defendant or insurer, or even all of them combined, paid $100,000, so the Rule of Stuka [v. Fleming, 561 So. 2d 1371 (La.1990) ], did not apply and the liability of all health care providers was an issue at trial. Further, we cannot agree with the opinion that states "The statute mandates credit against the judgment for the amount of malpractice insurance in force for the liable care provider." 606 So. 2d 940, 945. We see no language in § 1299.42(D)(5) that says or implies a credit is due the Fund only for a settlement by a liable health care provider. The credit statute simply says a credit is due the Fund when the provider and/or his insurer pays $100,000 or less in settlement. Moreover, we see nothing in the statute that suggests that multiple credits are not due the Fund when multiple settlements with health care providers and/or their insurers are made.... [Emphasis added] Id., 621 So.2d at 69.
The Louisiana Supreme Court did not refer to Roy v. Gupta in its subsequent opinion in Thomas, supra. The Louisiana Supreme Court amended the Third Circuit's award that credited the Fund for the patient's $100,000 settlement with the hospital but not for the $40,000 settlement with the physician. The Louisiana Supreme Court held that the Fund was entitled to a $100,000 credit for the patient's settlement with the hospital and a $40,000 credit for the settlement with the physician. The Fund received credit for the physician although no assignment of fault was assigned to the physician who settled in Thomas.
We conclude that La. R.S. 40:1299.42(D)(5) does not require that credit can be given only to the defendants who are found liable for the reasons expressed by the Second Circuit as cited above.
In the present case the larger settlement was in the amount of $25,000. This is the amount that is calculated for the $100,000 credit to the Fund for the settlement with Charity. The Fund is entitled to an additional credit of $10,000 for the second settlement with JoEllen Smith Hospital for a total of $110,000 for the medical malpractice settled claims.
Summation of Revisions in Judgment
The trial court's final June 1999 judgment is affirmed in part, amended in part, and reversed in part.
The trial court's judgment notwithstanding the verdict, dismissing all claims against Dr. Ivan Sherman, is affirmed. The finding of sole fault assigned to Dr. Deno is affirmed. The trial court's order that the Louisiana Patients' Compensation Fund should receive credit of $100,000 for the judgment rendered against Dr. Richard Deno, is affirmed with respect to the *483 medical malpractice claims against Dr. Deno.
For the claim of patient dumping, beyond the medical malpractice cap, the plaintiff is awarded $4,400,000 in general damages to be paid by Dr. Deno. The award for special damages for loss of wages or diminished earning capacity in the amount of $500,000 is affirmed. The trial court's finding that the jury determined that the plaintiff is in need of future medical care and related benefits in the amount of $500,000 is noted.[4]
$100,000 credit is given to the Fund for the settlement with Charity. The Fund is given an additional credit of $10,000 for the second settlement with JoEllen Smith for a total of $110,000 for the medical malpractice settled claims. The trial court's decree of judgment against Dr. Deno for $98,971.70 with interest from the date of April 1, 1991 is affirmed, in addition to his liability for interest on damages above the medical cap. The Patients' Compensation Fund is responsible for the other interest on the amount of $400,000 minus $110,000 (for credit for the settled claims) or $290,000. Dr. Deno is assessed interest for the amount of the award for damages above the $500,000 medical malpractice cap. This is equal to $4,900,000 (general damages plus special damages for loss of wages or diminished earning capacity) minus $500,000 (medical cap) or the total amount of $4,400,000. Dr. Deno is liable for the plaintiff's future medical needs, which will be administered by the Oversight Board.
With respect to the plaintiffs son, Louis Frank Coleman, the award of $10,000 for loss of consortium is included in the amount of the judgment above the $500,000 medical malpractice cap against the defendant Dr. Deno. This award for loss of consortium is not allocated against the Louisiana Patients' Compensation Fund.
AFFIRMED IN PART; AMENDED IN PART; AND REVERSED IN PART.
PLOTKIN, J., dissents with written reasons.
KIRBY, J., dissents for reasons assigned by J. PLOTKIN.
PLOTKIN, J. Dissenting with Written Reasons.
This case involves a gross misapplication and misinterpretation of Louisiana tort law. I must dissent because I strongly disagree with two pivotal findings in the majority decision: (1) the finding that Mr. Coleman's claims against Dr. Richard Deno are not subject to the $500,000 cap imposed by the Louisiana Medical Malpractice Act ("MMA"), and (2) the finding that Dr. Deno is 100 percent liable for the loss of Mr. Coleman's arm. Moreover, the majority's finding that Mr. Coleman's claims do not fall under the provisions of the Louisiana MMA creates a conflict between this circuit and the First Circuit Court of Appeal's decision in Bolden v. Dunaway, 97 1425 (La.App. 1 Cir. 12/28/98), 727 So. 2d 597. For the reasons discussed below, I would hold that Mr. Coleman's claims are subject to the limitations of the MMA and that Dr. Deno and Charity Hospital New Orleans ("CHNO") are equally liable for Mr. Coleman's damages. Accordingly, I would limit Mr. Coleman's damages to $500,000, and apportion fault 50 percent to Dr. Deno and 50 percent to CHNO.
*484 Facts
The uncontested facts in this case are as follows:
Mr. Coleman first presented himself at Jo Ellen Smith Hospital ("JESH") at about 1:44 a.m. on June 7, 1988, complaining that he had pulled something in his chest while lifting an item at work and that "all movement hurts," even breathing. He was seen by Dr. Sherman, an emergency room physician. Dr. Sherman found that Mr. Coleman's chest was clear, but that his chest wall was "tender." Although Mr. Coleman's temperature was 100.2 degrees, all his other vital signs were normal. Dr. Sherman ordered an EKG and a chest x-ray, which were normal. Dr. Sherman diagnosed Mr. Coleman with chest pain and costochondritis, and prescribed Naprosyn twice a day with meals. When Mr. Coleman was discharged, Dr. Sherman told him to apply heat to his chest and see his personal physician for follow up. Mr. Coleman did not complain about his left arm on that visit to JESH.
The next day, June 8, 1988, at 8:10 p.m., Mr. Coleman again presented at JESH emergency room. This time he complained that his left arm had started to swell and ache that morning. The triage nurse noted that Mr. Coleman's arm was swollen and that it was warm to the touch with bullae in the left antecubital space. Other than an elevated heart rate of 120 beats per minute and a temperature of 102.8 degrees, Mr. Coleman's vital signs were normal. Mr. Coleman was attended by Dr. Deno, who ordered laboratory work, which revealed an elevated white blood count of 27,100.
Dr. Deno diagnosed Mr. Coleman with left-arm cellulitis, and concluded that Mr. Coleman should receive inpatient intravenous antibiotic therapy. However, rather than admit him to JESH, a Level Two Trauma Center, Dr. Deno elected to contact the charge resident in the accident room at CHNO and arrange a transfer through the emergency room at CHNO, a Level One Trauma Center. After Dr. Deno was certain that the CHNO charge resident had accepted Mr. Coleman for treatment, Dr. Deno released Mr. Coleman to go to CHNO. Because Mr. Coleman was ambulatory and because he was in good condition, Dr. Deno did not order a transfer by ambulance. Mr. Coleman signed the record prepared by Dr. Deno documenting his decision to transfer Mr. Coleman to CHNO. Dr. Deno gave Mr. Coleman a copy of the results of the laboratory tests performed at JESH and discharged him to go to CHNO at 10 p.m.
Dr. Coleman arrived at CHNO on June 9, 1988 at 12:21 a.m., and saw a physician before 1:30 a.m. At that time, blood work, including a complete blood count, blood chemistries, and blood cultures, was performed. The doctor noted that Mr. Coleman's left arm was "swollen and warm from the mid arm to lower forearm, with no fluctuant areas, no streaking, positive axillary node and positive track marks." Mr. Coleman's white blood count was elevated to 29,900. The CHNO records indicate that Mr. Coleman suggested two possible causes of the left arm problem: (1) a "crushing type injury" several days before "when he fell off boat and was wedged between wharf and boat," and (2) an incident also several days prior to his hospital admission when "some people injected something into his arm while holding him down" at a party. However, x-rays performed at 5 p.m. showed no gas in the tissues.
The CHNO emergency room physician diagnosed "cellulitis, probable intravenous drug abuse, likely staph or strep infection, and rule out sepsis." The physician prescribed admission for intravenous antibiotics, tetanus toxoid administration, elevation *485 of and warm compresses to the left arm, and additional blood studies. Mr. Coleman started receiving antibiotics intravenously at 8 a.m. The CHNO records indicate that on June 11, 1988, Mr. Coleman was responding to treatment with Nafcillin.
On June 11, 1988, a surgical consult was ordered. Dr. Redmond saw Mr. Coleman for the first time at approximately 1 p.m. that day, when he noted that Mr. Coleman's arm was draining an extremely foulsmelling pus from the antecubital fossa. Dr. Redmond recommended surgery to explore Mr. Coleman's arm. X-rays taken at 2 p.m. indicated the presence of air in Mr. Coleman's left arm. At 4:10 p.m., surgery began. During surgery, Dr. Redmond discovered that the skin, fat, and the bulk of muscles in Mr. Coleman's left arm were dead. After consulting with an orthopedic surgeon, Dr. Redmond elected to perform an open left shoulder disarticulation in order to save Mr. Coleman's life. Cultures revealed that Mr. Coleman's left arm had become infected with peptostreptococcus, as well as alpha and beta streptococcus. Mr. Coleman was discharged from CHNO on June 28, 1988.
Application of Medical Malpractice Act
Following the lengthy trial in this case, the jury held that Dr. Deno, the JESH emergency room physician who treated Mr. Coleman on June 8, 1988, was 80 percent liable for Mr. Coleman's injuries and awarded Mr. Coleman $4.4 million in general damages and $500,000 in special damages. However, the trial court, in its "Annotated March 18, 1999 Judgment," found that the judgment was subject to the statutory limitations established by the Louisiana MMA, and limited Mr. Coleman's recovery to $500,000. The majority reverses the trial court's finding that the judgment is subject to the MMA, and reinstates the original jury verdict. However, it is important to note that under the circumstances of the instant case, the majority's decision to reinstate the jury verdict is not based on any deference to a factual finding made by the jury. In fact the majority's decision, though not characterized as such, involves the reversal of a trial court decision on an issue of lawi.e., whether Mr. Coleman had a cause of action against Dr. Deno under the provisions of EMTALA. The majority improperly reverses the trial court's decision on that legal issue without finding that the trial court committed manifest error.
During the June 8, 1988, visit, Dr. Deno correctly diagnosed Mr. Coleman as suffering from left-arm cellulitis, and properly concluded that Mr. Coleman needed inpatient intravenous antibiotic therapy. However, according to Dr. Deno's testimony at trial, because he also worked at CHNO, he knew that Mr. Coleman would receive better treatment at CHNO, which had a Level One Trauma Center, than he could receive at JESH, which was a Level Two Trauma Center with limited capabilities. Thus, Dr. Deno contacted the charge resident at CHNO and arranged to have Mr. Coleman admitted immediately through the CHNO emergency room. According to his deposition testimony, Dr. Deno asked Mr. Coleman whether he had insurance prior to the transfer. Mr. Coleman signed the form documenting Dr. Deno's decision to transfer him to CHNO for intravenous antibiotic treatment. Mr. Coleman now claims, and the majority implicitly finds, that Dr. Deno improperly "dumped" Mr. Coleman on CHNO for economic reasons.
In his petition for a medical review panel, filed on July 27, 1990, all of Mr. Coleman's allegations against Dr. Deno are based purely in negligence; there is no mention of his "dumping" Mr. Coleman on another hospital. As the majority notes, *486 Mr. Coleman alleged in his original petition that Dr. Deno and JESH were negligent under the MMA and specifically stated that their negligence was covered by the MMA. Additionally, he claimed that Dr. Deno and JESH failed to properly diagnose or treat his left arm. However, by his First Supplemental and Amended Petition filed on March 27, 1991, Mr. Coleman alleged that JESH and Dr. Deno were liable for violation of the federal Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), and particularly under the "anti-patient dumping" provisions of that Act. There are absolutely no allegations in either of Mr. Coleman's petitions that Dr. Deno violated Louisiana's Anti-Patient Dumping Statute, LSA-R.S. 40:2113.4 through 40:2113.6, or Louisiana general tort law, La. C.C. art. 2315.
Prior to trial, but after Mr. Coleman had settled with both the hospitals named as defendants in his petition, the trial judge court granted an exception of no cause of action on the federal anti-patient dumping issue alleged in Mr. Coleman's First Supplemental and Amending Petition, presumably because EMTALA applies only to hospitals, not to individual physicians. See Spradlin v. Acadia-St. Landry Medical Foundation, 98-1977, p. 4 (La.2/29/00), 758 So. 2d 116, 119. At the same time, the trial court granted a motion in limine prohibiting Mr. Coleman from referring to his lack of insurance at trial. Mr. Coleman did not seek supervisory writs concerning the granting of the exception of no cause of action and motion in limine. The issue therefore was not presented to the jury, and the jury did not make any finding on the anti-patient dumping issue. Accordingly, the proper standard of review in this case is whether the trial court was manifestly erroneous in granting the motion in limine on the EMTALA allegations.
Both federal law and Louisiana state law contain Anti-Patient Dumping provisions. See Emergency Medical Treatment and Active Labor Act (EMTALA), 42 U.S.C. § 1395dd; LSA-R.S. 40:2113.4 through 4-2113.6. In granting the exception of no cause of action and the motion in limine on that issue, the trial court implicitly found that Mr. Coleman had no cause of action under any anti-patient dumping provision, federal or state. Moreover, when he granted the exception and motion on the anti-patient dumping issues, the trial court essentially found that all of Mr. Coleman's claims were subject to the Louisiana MMA. Accordingly, the trial court applied the limitations of the Act to the jury verdict.
The majority never finds that the trial court improperly granted the motion in limine on the EMTALA issues; indeed, the majority concedes that Mr. Coleman had no cause of action against Dr. Deno under EMTALA, the only anti-patient dumping provision referenced in Mr. Coleman's petition, because that provision applies only to hospitals, not to individual physicians. Spradlin, 98-1977 at 4, 758 So.2d at 119. Instead, the majority frames the issue to be decided in order to determine whether Mr. Coleman's claims fall under the limitations of the MMA as follows: "At issue is whether the plaintiff timely stated a cause of action in his pleadings under La. R.S. 40:2113.4 or Louisiana general tort law for patient dumping." However, as noted, Mr. Coleman never mentions either of those provisions in either of his petitions. The majority's reversal of the trial court's finding that all of Mr. Coleman's claims are subject to the limitations of the Louisiana MMA is then explained as follows:
In the present case, in his amended petition, Coleman referred to a cause of action based on the negligent failure of the defendants to treat the plaintiff, as *487 well as an intentional tort based on the federal anti-dumping provisions related to the transfer of a patient to another hospital for lack of funds. The Medical Malpractice Act only encompasses unintentional acts of negligence and contractual issues. JoEllen Smith Hospital's policy provided that every emergency room patient must receive appropriate treatment before discharge or transfer, regardless of financial status. The "patient dumping" cause of action refers to an intentional tort where Dr. Deno directed plaintiff's transfer to Charity for lack of finances or insurance although it conflicted with JoEllen Smith Hospital's written policy. We find no express state law that excludes recovery under La. C.C. art 2315, general tort law, or La. R.S. 40:2113.4-40:2113.6 against physicians for the intentional tort of patient dumping. The plaintiff's reference to anti-dumping statutes states a cause of action against the physician under Louisiana law.
Considering that the Medical Malpractice Act must be strictly construed against limiting the tort claimant's rights against the wrongdoer, Coleman's amended petition states a cause of action against the physician, Dr. Deno, beyond the scope of Louisiana Medical Malpractice Act, thereby entitling the plaintiff to the jury award that is not subject to the Act's $500,000 cap.
For the reasons explained below, I believe that the majority's conclusion is fatally flawed.
The majority's conclusion that Mr. Coleman's claims are not subject to the limitations of the MMA is best analyzed by examining each underlying premise asserted by the majority prior to reaching that conclusion. The majority's premises may be summarized as follows:
1. Mr. Coleman "referred to" a cause of action based on negligent failure to treat, as well as an intentional tort based on EMTALA provisions related to the transfer of a patient to another hospital for lack of funds.
2. The MMA only encompasses unintentional acts of negligence and contractual issues.
3. JESH's written policy provided that every emergency room patient must receive appropriate treatment before discharge or transfer, regardless of financial status.
4. Dr. Deno directed Mr. Coleman's transfer to CHNO for lack of finances or insurance, in violation of JESH's written policy.
5. No express Louisiana law "excludes recovery" under general tort law or Louisiana's Anti-Patient Dumping Statute against physicians for the intentional tort of patient dumping.
I will examine each of the above premises under the applicable law and record evidence presented in this case.
In its first premise, the majority cites to Mr. Coleman's allegations in his First Supplemental and Amending Petition, and finds that Mr. Coleman's allegations were sufficient to refer to two different causes of actionone for negligent failure to treat and one for intentional tort. Concerning the first cause of actioni.e., negligent failure to treatthose allegations unquestionably fall under the limitations of the Louisiana MMA. In fact, "malpractice" is defined for purposes of the MMA in LSA-R.S. 40:1299.41(A)(8), as follows:
Any unintentional tort or any breach of contract based on health care or professional services rendered, or which should have been rendered, by a health care provider, to a patient, including failure to render services timely and the handling of the patient, including loading *488 and unloading of a patient, and also includes all legal responsibility of a health care provider arising from defects in blood, tissue, transplants, drugs and medicines, or from defects in or failures of prosthetic devices, implanted in or used on or in the person of a patient.
(Emphasis added.) Mr. Coleman alleged in his original petition that his claims against the defendants were subject to the MMA: accordingly. I have no quarrel with the majority's conclusion that Mr. Coleman stated a cause of action for negligent failure to treat, subject to the provisions of the MMA.
Concerning the second cause of action i.e., intentional tortthe majority essentially concludes that the following allegations in Mr. Coleman's First Supplemental and Amending Petition are sufficient to state a cause of action in intentional tort under Louisiana general tort law:
22 A.
As a hospital receiving Medicare benefits for patient treatment, and/or as a physician employed by said hospital and/or treating such patients, the defendants JoEllen Smith Hospital and Dr. Richard Deno were obligated by federal law not to transfer Louis Coleman or direct him as a patient to Charity Hospital, without first being certain that his condition was stabilized and that no material deterioration of his condition likely would result from the delay between his leaving JoEllen Smith Hospital and his arriving at Charity Hospital; and, accordingly, said defendants were negligent per se in regard to the above sequence of events, for having violated the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), added as a section to the Social Security Act, including, but not limited to, the provisions set forth in Section 1967 of the latter Act.
* * * * *
e) The failure on the occasion of the second emergency room visit of June 8, 1988, to adhere to the "anti-dumping" provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), including, but not limited to provisions set forth in § 1867 of the Social Security Act, for which violation the defendant and/or defendants would be liable on the basis of negligence per se.
(Emphasis added.) I quote the above allegations in their entirety only to show the fallacy in the majority's conclusion that Mr. Coleman's petition refers to an intentional tort under Louisiana general tort law. Not only does Mr. Coleman fail to expressly refer to an intentional tort of any kind, he specifically asserts that the defendants' alleged violation of EMTALA provisions results in "negligence per se." All allegations of negligence on the part of a physician in providing professional services unquestionably fall under the provisions of the Louisiana MMA. See Spradlin, 98-1977 at 4, 758 So.2d at 119. In fact, this conclusion is inherent in the majority's second premise on which it bases its finding that Mr. Coleman's allegations fall outside the limitations of the MMAi.e., that the MMA only encompasses unintentional acts of negligence and contractual issues. I should state here that I agree with the majority's second premise, which is simply a statement of law, not an interpretation of the allegations or facts in this appeal.
More important to this case, however, is the fact all of Mr. Coleman's allegations in his First Supplemental and Amending Petition are clearly based on the federal EMTALA provisions, not on Louisiana general tort law, or even the Louisiana Anti-Patient Dumping Statute. The majority *489 concedes that the trial court properly found that Mr. Coleman had no cause of action against Dr. Deno based on EMTLA because that provision applies only to hospitals, not to individual physicians. See Spradlin, 98-1977 at 4, 758 So.2d at 119. However, the majority concludes, without any citation to any allegations to that effect in either of Mr. Coleman's petitions, that his allegations refer to an intentional tort based on EMTALA. The majority fails to cite any authority for the conclusion that the EMTALA allegations constitute intentional torts. Accordingly, I disagree with the first premise forming the basis of the majority's conclusion that Mr. Coleman's allegations fall outside the limitations of the Louisiana MMA.
In its third premise, the majority asserts that JESH had a written policy that provided that every emergency room patient must receive appropriate treatment before discharge or transfer, regardless of financial status. The record does indeed reflect such a written policy. Although not quoted by the majority, Dr. Paul Blaylock, an emergency physician in Portland, Oregon, read the following excerpt from JESH's Emergency Department policy manual:
Each and every patient with a new illness or injury requesting attention will be promptly seen and evaluated by a physician and receive appropriate treatment before discharge or transfer, regardless of his condition or financial status.
It is not the accuracy of the majority's premise based on the above policy that concerns me in this case, but the majority's application of this policy to the facts. Applying that policy to the facts in this case, the majority concludesin its fourth premisethat Dr. Deno directed Mr. Coleman's transfer to CHNO for lack of finances or insurance, in violation of JESH's written policy. The majority cites no record evidence to support this finding, but simply makes a conclusory statement to that effect.
However, the record evidence, as I read it, does not support the majority's fourth premise. Given the fact that the trial court granted Dr. Deno' exception of no cause of action and motion in limine on the federal patient-dumping issue, coupled with the fact that Mr. Coleman failed to seek supervisory review of those rulings, the parties were prohibited from presenting evidence on the issue. In order to find that Dr. Deno violated JESH's written policy relative to transfer of a patient, the majority had to make two implicit factual findings: (1) that Dr. Deno's decision to transfer Mr. Coleman's was motivated by his condition or financial status, and (2) that Mr. Coleman was not "promptly seen and evaluated by a physician" or that he did not "receive appropriate treatment before" his transfer.
Concerning Dr. Deno's motivation for transferring Mr. Coleman to CHNO, the only direct record evidence of Dr. Deno's reason for transferring Mr. Coleman to CHNO is Dr. Deno's own statements that he knew CHNO had better laboratory equipment and more experience than JESH dealing with infections of the type experienced by Mr. Coleman. The reason Dr. Deno knew this fact was that he worked in the CHNO emergency room, as well as the JESH emergency room. Moreover, CHNO is universally acknowledged as the preferred treatment center in the Greater New Orleans area for any type of trauma. The fact that Dr. Deno admitted in his deposition that he asked Mr. Coleman if he had insurance prior to transferring him to CHNO is not proof that his lack of insurance was the motivating consideration in Dr. Deno's decision to transfer him, especially in light of the fact that no one can or does contest Dr. Deno's *490 statement that CHNO was the best facility in the area to treat Mr. Coleman's illness.
Further, Mr. Coleman does not allege, and the majority does not find, that he was not "promptly seen and evaluated" by Dr. Deno, as required by JESH policy, prior to his transfer. The majority's conclusion is therefore apparently based on a finding that Mr. Coleman did not "receive appropriate treatment before ... the transfer," as required by the JESH policy. However, Dr. Deno testified extensively to his conviction that Mr. Coleman was stable, alert, and ambulatory at the time of the transfer. Mr. Coleman does not contradict Dr. Deno's characterization of his condition. Moreover, Mr. Coleman clearly understood and consented to Dr. Deno's decision to transfer him to CHNO because he would receive better treatment there, as evidenced by his signature on the form documenting the transfer.
Mr. Coleman and his experts suggested at trial that Dr. Deno should have given Mr. Coleman a dose of antibiotics prior to his release from JESH. On the other hand. Dr. Deno testified that giving him a dose of antibiotics prior to the transfer would have contaminated blood cultures at CHNO. Dr. Deno's decision not to give Mr. Coleman a dose of antibiotics was obviously based on his medical expertise and does not support a finding that Mr. Coleman did not receive appropriate treatment prior to the transfer.
In its fifth premise, the majority finds that no express Louisiana law excludes recovery under general tort law or Louisiana's Anti-Patient Dumping Statute against physicians for the intentional tort of patient dumping. This is the conclusion reached by the majority that most troubles me in this case. The primary reason for that concern is that the majority's conclusion completely begs the question. The only real question in this caseas in any caseis whether the statutory scheme adopted by the Louisiana legislature, taken as a whole, allows recovery under the particular set of facts. A finding that no express state law excludes recovery under particular provisions is disingenuous because it ignores the pertinent question. My secondary concern about the majority's fifth premise is that it ignores important tenets of Louisiana's statutory scheme.
Concerning the Louisiana Anti-Patient Dumping Statute, the majority concedes that LSA-R.S. 40:2113.4 through 40:2113.6 contains no express private right of action. Spradlin, 98-1977 at 8, 758 So.2d at 121. Nevertheless, the majority finds that the Statute does not exclude a private right of action. However, as explained below, that conclusion violates both the wording and the purpose of LSA-R.S. 40:2113.4 through 40:2113.6.
The Louisiana Anti-Patient Dumping Statute was enacted by the 1980 Louisiana Legislature "to establish a statutory duty on the part of certain hospitals to provide emergency services to all persons residing in the territorial area, regardless of whether they are insured or able to pay." Id. at 7, 758 So.2d at 120 (emphasis added). The purpose of the statute "was to override the common law rule that hospitals have no duty to provide treatment." Id. at 7, 758 So.2d at 121 (emphasis added). All of the duties specified in the statutes are duties owed by "general hospitals" meeting certain criteria, and "officers, employees, and members of the medical staffs" of such hospitals. In fact, LSA-R.S. 40:2113.6 specifically prohibits such officers, employees, and members from denying emergency services "to a person diagnosed by a licensed physician as requiring emergency services." The penalty provisions of the statute apply only to those officers, employees, and members of the medical staffs of such hospitals, a group that the statute *491 clearly distinguishes from "licensed physicians." Accordingly, the very wording of Louisiana's Anti-Patient Dumping Statute indicates that it was never intended to be applied to physicians.
Moreover, my research indicates that no Louisiana court has ever applied Louisiana's Anti-Patient Dumping Statute to a physician. See Spradlin, 98-1977, 758 So. 2d 116; Pfiffner v. Correa, 94-0924, 94-0963, 94-0992 (La.10/17/94), 643 So. 2d 1228; Tabor v. Doctors Memorial Hospital, 563 So. 2d 233 (La.1990); Terrebonne v. Floyd, 99 0766 (La.App. 1 Cir. 5/23/00), 767 So. 2d 758; Bolden v. Dunaway, 97 1425 (La.App. 1 Cir. 12/28/98), 727 So. 2d 597, writ denied, 99-0275 (La.3/26/99), 739 So. 2d 801; Spradlin v. Acadia-St. Landry Medical Foundation, 97-845 (La.App. 3 Cir. 1/21/98), 711 So. 2d 699, aff'd, 98-1977, 758 So. 2d 116; Torbert v. Licciardi, 94-2026 (La.App. 4 Cir. 4/24/96), 673 So. 2d 1213, writs denied, 96-1168, 96-1302 (La.6/21//96), 675 So. 2d 1082; Gordon v. Willis Knighton Medical Center, 27,044 (La.App. 2 Cir. 6/21/95), 661 So. 2d 991, writ denied, 95-2776, 95-2783 (La.1/26/96), 666 So. 2d 679.
In fact, none of the cases cited by the majority in which Louisiana courts considered the application of the Louisiana Anti-Patient Dumping Statute can reasonably be interpreted to allow a cause of action under LSA-R.S. 40:2113.4 through 40:2113.6 against an individual physician. In most of the cases the majority cites, including Spradlin, 98-1977, 758 So. 2d 116, Tabor v. Doctors Memorial Hospital, 563 So. 2d 233 (La.1990), and Fleming v. HCA Health Services Of Louisiana, Inc., 96-1968 (La.4/8/97), 691 So. 2d 1216, the only defendants are hospitals. In Bolden, 97 1425, 727 So. 2d 597, the only defendant is a physician, but the only reference to Louisiana's Anti-Patient Dumping Statute in the case is found in a paragraph distinguishing the case from Spradlin. Thus, they do not support the majority's conclusion that no express state law excludes recovery against an individual physician under LSA-R.S. 40:2113.4 through 40:2113.6 under the allegations of Mr. Coleman's petition.
In fact, the only reasonable interpretation of all the cases cited above, when considered together, is that Mr. Coleman's claims are excluded under the statute because the statute is simply not designed to allow Mr. Coleman to seek recovery from an individual physician, like Dr. Deno, under its provisions. The reason for the statute's design is obviousindividual physicians working in a hospital have nothing to lose by providing medical treatment to a patient who lacks the financial resources to pay for treatment. The physician is paid regardless of whether the patient pays for treatment; it is the hospital that has incentive to refuse treatment to patients lacking insurance, not the individual physician.
The majority also finds that no express state law excludes recovery under Louisiana general tort law, La. C.C. art. 2315, "against physicians for the intentional tort of patient dumping." I vehemently disagree with the majority's suggestion that a physician's failure to treat can be considered to constitute an intentional tort falling outside the Louisiana Medical Malpractice Statute. In fact, that exact proposition has previously been correctly rejected by another Louisiana appellate court. In Bolden v. Dunaway, 97 1425 (La.App. 1 Cir. 12/28/98), 727 So. 2d 597, cited by the majority, the court found specifically that allegations that a surgeon refused to perform surgery because the patient failed to make proper financial arrangements, despite the fact the patient had been prepared for surgery, did not state a cause of action in intentional tort, *492 but fell under the provisions of the Medical Malpractice Act. The court stated, in pertinent part, as follows:
In general, any conduct by a health care provider complained of by a patient is properly within the scope of the Medical Malpractice Act if it can reasonably be said that it comes within the definitions therein, even though there are alternative theories of liability. See Rogers v. Synthes, Ltd., 626 So. 2d 775, 777 (La.App. 2d Cir.1993) (suit against hospital came under the Act even though plaintiff characterized her suit as one in strict product liability and redhibition); compare Hidalgo v. Wilson Certified Express, Inc., 94-1322 (La.App. 1st Cir.5/14/96), 676 So. 2d 114 (suit for injuries sustained by patient while she was being transported in ambulance did not come under the Act because it was a suit involving negligent driving, not negligent health care). In enacting the Medical Malpractice Act, the legislature recognized the traditional rule of law allowing recovery for medical malpractice based on a physician-patient relationship that exists as the result of an express or implied contract and where the physician breaches either the contract or his or her professional duty to the patient. Hutchinson, 93-2156 at pp. 6-7, 637 So.2d at 421.
The allegations in the instant case state a cause of action for malpractice as defined by statute. Plaintiffs allege that the defendant doctor failed to render the professional services of assisting with her surgery as he had agreed to do. The alleged failure, if proven, is a breach of contract based on a failure to render professional services which should have been rendered in a timely fashion. Despite the attempt by plaintiffs in their amending petition to avoid the provisions of the Medical Malpractice Act by restructuring their allegations, we find that the clear and unambiguous wording of La. R.S. 40:1299.41 A(8) encompasses all of the acts complained of in plaintiffs' petitions.
Id. at 5, 727 So.2d at 600. As indicated by the above quotation, the basis of the court's finding in Bolden that the plaintiffs' claims against the physician who failed to provide treatment fell under the MMA was the fact that the physician's actions did not constitute an intentional tort. The majority's suggestion that the distinguishing factor between the instant case and Bolden is the existence of a contract is incorrect. The "contract" in Bolden arose only from the physician's'"failure to render professional services which should have been rendered in a timely fashion." Under that definition, Dr. Deno had a contractual relationship with Mr. Coleman. The majority's conclusion to the contrary in this case creates a conflict between the circuits on the issue of whether a physician's failure to treat is covered by the Louisiana MMA.
Moreover, the majority's conclusion that Mr. Coleman's allegations that Dr. Deno denied him treatment at JESH for economic reasons is sufficient to state a cause of action in intentional tort, not subject to the limitations of the Medical Malpractice Act, represents a dramatic departure from previous Louisiana jurisprudence, creating other conflicts between the circuits. The Louisiana statutory scheme clearly distinguishes between the duties of hospitals and the duties of physicians. That distinction was explained by the Louisiana Supreme Court in Spradlin, 98-1977, 758 So. 2d 116, as follows:
The term "malpractice" has its roots (and relevance) in differentiating professionals from nonprofessionals for purposes of applying certain statutory limitations on tort liability. Health care providers are said to "practice" their profession and their negligence in providing *493 such professional services is called malpractice.
On the other hand, hospitals, which are the only health care providers covered by EMTALA, are distinct legal entities that do not, in the traditional sense of the word, "practice" medicine.
Id. at 4, 758 So.2d at 119. The above quotes indicates that claims against individual physicians arising out of their treatment or failure to treat always fall under the limitations of the Louisiana MMA.
In fact, the Bolden court noted that the Louisiana cases cited by the plaintiff in which the court found that a physician had committed an intentional tort outside the Medical Malpractice Act all involved "physical acts against the person of the plaintiff, not the failure to perform an agreement to provide medical care such as we have in the instant case." Id. at 6, 727 So.2d at 601, citing Baham v. Medical Center of Louisiana at New Orleans, 95-2605 (La.App. 4 Cir. 5/8/96), 674 So. 2d 458; Reaux v. Our Lady of Lourdes Hospital, 492 So. 2d 233 (La.App. 3 Cir.), writ denied, 496 So. 2d 333 (La.1986); Leger v. Delahoussaye, 464 So. 2d 1 (La.App. 3 Cir. 1984); Head v. Erath General Hospital, Inc., 458 So. 2d 579 (La.App. 3 Cir.1984), writ denied, 462 So. 2d 650 (La.1985). Neither Mr. Coleman nor the majority has cited any cases in which a failure to treat was found to constitute an intentional act, nor have I been able to find any. In fact, the majority cites Bolden, 97-1425, 727 So. 2d 597, as follows: "In general, any conduct by a health care provider complained of by a patient is properly within the scope of the Medical Malpractice Act if it can reasonably be said that it comes within the definition therein, even though there are alternative theories of liability." Id. at 5, 727 So.2d at 600. Certainly, the conduct by Dr. Deno that Mr. Coleman complains abouti.e., transferring him to CHNOcomes within the definition of malpractice for purposes of the Louisiana Medical Malpractice Act. In fact, the definition of "malpractice" for purposes of the MMA, quoted above, expressly includes "failing to render services timely."
Once it determined that Mr. Coleman had no cause of action under EMTALA because it applies only to hospitals, or under the Louisiana Anti-Patient Dumping Statute, because it contains no express private cause of action, the trial court correctly found that all of Mr. Coleman's claims against Dr. Deno clearly fell under the limitations of the MMA. Accordingly, I would affirm the trial court judgment limiting Mr. Coleman's recovery to $500,000, consistent with the provisions of the Louisiana MMA.
Apportionment of fault
The jury in this case assigned 100 percent of the liability for Mr. Coleman's damages to Dr. Deno and assigned zero liability to CHNO; the majority affirms that apportionment of fault. However, based on the overwhelming evidence of fault on the part of CHNO that is evident from the majority's own recitation of facts in this case, I would modify the apportionment of fault to assign 50 percent liability to Dr. Deno and 50 percent liability to CHNO.
Concerning Dr. Deno's liability for Mr. Coleman's damages, the record contains evidence that Mr. Coleman might not have lost his arm had Dr. Deno started giving him intravenous antibiotics prior to his transfer, then had him transferred by ambulance, rather than allowing Mr. Coleman the opportunity to delay the time at which he reported to CHNO. The record is clear that Mr. Coleman did not report to CHNO emergency room until some two to three hours after being released by Dr. Deno. Dr. Deno attempted to explain his decision to send Mr. Coleman directly to CHNO; *494 however, the record contains ample other evidence to support the jury's finding that Dr. Deno's actions qualified as malpractice that did contribute to the loss of Mr. Coleman's left arm.
However, as noted in the majority opinion, the surgeon, Dr. Redmond, testified that the "compartment syndrome" which resulted in the loss of Mr. Coleman's arm developed the same day that the amputation occurred, three days after Dr. Deno saw Mr. Coleman and transferred him to CHNO, indicating that much of the liability for Mr. Coleman's damages must be assigned to CHNO. The majority notes that x-rays taken at CHNO at 5 a.m. on June 9, 1988, showed "significant soft tissue swelling but no gas in the tissues." The majority also notes that the June 9, 1988, "nurses' notes do not show additional swelling or worsening of the plaintiff's left arm." According to the majority, the June 11, 1988, hospital notes report that Mr. Coleman's "cellulitis with staph was responding to treatment with Nafeillin." Although not reported by the majority, the record evidence indicates that the attending physician planned to consult surgery on June 10, 1988, but that no surgeon saw Mr. Coleman until 1 p.m. on June 11, 1988, just hours before his surgery to amputate his arm. Finally, the majority cites the testimony of the surgeon, Dr. Clyde Redmond, that the compartment syndrome that resulted in the amputation of Mr. Coleman's arm developed within a few hours of the surgery. Accordingly, I would assign 50 percent of the liability for Mr. Coleman's damages to CHNO.
NOTES
[1] COBRA currently is known as the Emergency Medical Treatment and Active Labor Act ("EMTALA").
[2] In Spradlin, the Louisiana Supreme Court stated:
Requiring separate suits based on related claims growing out of the same transaction or occurrence appears to be judicially inefficient and may produce inconsistent results. However, the court in the EMTALA action (which must be filed within two years) may consider whether it is appropriate under the particular facts and circumstances to grant a motion to stay that action, while urging expeditious action in the medical review panel proceeding. In any event, plaintiffs are entitled to recover damages on both claims, whether in one or two trials, if the different requirements of proof are met, despite the fact that the law requires exhaustion of an administrative remedy in one action that is not applicable to the other.
Id., pp. 13-14, 758 So.2d at 124.
[3] In Giammanchere v. Ernst, supra. 742 So.2d at 579-581 this Court stated that:
The LPFC [Fund]'s exception of no cause of action is based on its contention that the plaintiffs lost their right to proceed against the LPFC [Fund] for recovery when they failed to follow the requirements established by LSA-R.S. 40:1299.44(C), which provides, in pertinent part, as follows:
C. If the insurer of a health care provider or a self-insured health care provider has agreed to settle its liability on a claim against its insured and claimant is demanding an amount in excess thereof from the patient's compensation fund for a complete and final release, then the following procedure must be followed:
(1) A petition shall be filed by the claimant with the court in which the action is pending against the health care provider, if none is pending in the parish where plaintiff or defendant is domiciled seeking (a) approval of an agreed settlement, if any, and/or (b) demanding payment of damages from the patient's compensation fund.
(2) A copy of the petition shall be served on the board, the health care provider and his insurer, at least ten days before filing and shall contain sufficient information to inform the other parties about the nature of the claim and the additional amount demanded.
Specifically, the LPCF [Fund] claims that the plaintiff failed both to file a petition for court approval of the settlement and to serve the petition on the LPCF [Fund].
The plaintiffs concede that they failed to meet the requirements of LSA-R.S. 40:1299.44(C), but claim that LSA-R.S. 40:1299.44(C) does not apply under the circumstances of the instant case. Instead, the plaintiffs claim that they were required only to meet the more general requirements established by LSA-R.S. 40:1299.42(D)(5), which provides as follows:
In the event that a partial settlement is executed between the defendant and/or his insurer with a plaintiff for the sum of one hundred thousand dollars or less, written notice of such settlement shall be sent to the board. Such settlement shall not bar the continuation of the action against the patient's compensation fund for excess sums in which event the court shall reduce any judgment to the plaintiff in the amount of malpractice liability insurance in force as provided for in R.S. 40:1299.42(B)(2).
Determination of whether LSA-R.S. 40:1299.44(C) or R.S. 40:1299.42(D)(5) applies to the instant case depends on this court's interpretation of the Louisiana Supreme Court's decision in Horil v. Scheinhorn, 95-0967 (La.11/27/95), 663 So. 2d 697. In that case, the plaintiff had settled his case against the qualified health care provider for the full $100,000, and had subsequently sought additional damages from the LPCF [Fund]. The court held "that a claimant expecting excess recovery from the Fund must closely follow La. R.S. 40:1299.44(C) when requesting court approval of a settlement." Id. at 1, 663 So.2d at 698 (emphasis added). However, the plaintiffs argue that the Horil decision should not be interpreted to require compliance with LSA-R.S. 40:1299.44(C) under the circumstances of this case because they did not expect to recover excess damages from the LPCF [Fund]. In support of this argument, they note that their settlement with Dr. Mandich was for $31,500, an amount far less than the $100,000 limit of liability applicable to Dr. Mandich.
However, the LPCF [Fund] correctly points out that the Louisiana Third Circuit Court of Appeal has interpreted Horil to require compliance with the provisions of LSA-R.S. 40:1299.44(C) anytime a plaintiff attempts "to obtain excess damages from the PCF." Casttlle v Our Lady of Lourdes Regional Medical Center. 96-1476, p. 3 (La.App. 3 Cir. 4/2/97), 692 So. 2d 1303, 1305. In that case, the plaintiff settled his claim with the qualified medical provider for $75,000 in a settlement which was approved by the court and which contained a reservation of rights against the LPCF [Fund]. Id. at 1, 692 So.2d at 1304. The plaintiffs also amended their original petition to name the LPCF [Fund] as a defendant: however, the requirements of LSA-R.S. 40:1299.44(C) were not met. The Third Circuit affirmed a trial court judgment granting a summary judgment in favor of the defendant in Castille, stating as follows:
The [ ] provisions [of LSA-R.S. 40:1299.44(C) ] require that the board be served with a copy of the petition for approval of a settlement including any demand for payment of excess damages from the fund, and that the PCF [Fund] be given an opportunity to introduce evidence at the hearing on that petition. In this case, the PCF [Fund] was not given notice prior to the hearing on the settlement and was not given an opportunity to present evidence with regard to the demand for excess damages. As the supreme court stated in Horil [v Scheinhorn], 95-0967 (La.11/27/95), 663 So. 2d 697, there is no provision for a separate settlement vehicle. The plaintiffs here in did not comply with the provisions of La. R.S. 40:1299.44(C). As a result, under the holding of Horil, 95-0967, 663 So. 2d 697, the trial court correctly dismissed the plaintiffs' claims against the PCF [Fund].
The LPCF [Fund] claims that the facts of the instant case are virtually indistinguishable from the facts of Castille.
However, we believe this case involves an important factual distinction from the Castille case. In Castille, the plaintiff obviously intended and expected to receive excess damages from the LPCF [Fund], as evidenced by the fact that the plaintiff amended his petition to add the LPCF [Fund] immediately after the settlement. However, in the instant case, there is no evidence that the plaintiffs intended and/or expected to receive excess damages from the LPCF [Fund]. In fact, the plaintiffs in this case settled their claim against Dr. Mandich for only $31,500, an amount far below the $100,000 limit of liability. The plaintiffs obviously believed that the greater amount of liability in this case lay with Dr. Ernst; the jury saw the facts differently.
Moreover, we agree with the plaintiffs' argument that nothing in the Horil decision requires that the plaintiffs in the instant case meet the requirements of LSA-R.S. 40:1299.44(D) or suffer dismissal on an exception of no cause of action. The Horil decision clearly refers only to situations where the plaintiff intends and/or expects to recover excess damages from the LPCF [Fund]. For example, the decision states, in pertinent part as follows:
Recently, in Russo v. Vasquez, 94-2407, pp. 5, 6 (La.01/17/95), 648 So. 2d 879, 882, we outlined the purpose and requirements of La. R.S. 40:1299.44(C). We noted there that, where a provider's insurer agrees to settle a claim against its insured but the claimant demands, from the Fund, an amount exceeding the $100,000 paid by the insurer, this statute requires the claimant to utilize a specific procedure. First, the claimant must file a petition seeking approval of the settlement and demanding additional damages from the Fund. La. R.S. 40:1299.44(C)(1). The Fund's oversight board must be served with a copy of that petition at least ten days prior to the filing, La. R.S. 40:1299.44(C)(2), and may within twenty days agree or object to the amount demanded, La. R.S. 40:1299.44(C)(3). Then, if the oversight board, the claimant, and the insurer of the health care provider cannot agree on the amount to be paid by the Fund, the court must conduct a trial to determine the amount of the victim's damages exceeding the sum already paid by the health care provider or his insurer. La. R.S. 40:1299.44(C)(5). Where the insurer has paid its policy limits of $100,000, the court shall consider the liability of the provider as admitted and established for purposes of approving a settlement or determining the amount, if any, to be paid by the Fund. La. R.S. 40:1299.44(C)(5).
In the case sub judice, by viewing Horil's 1985 settlement as not then implicating the Fund and as being narrowly controlled by La. R.S. 40:1299.42(D)(5), the court of appeal disregarded the special requirements of La. R.S. 40:1299.44(C). In instances where the claimant expects to ultimately recover from the Fund despite his settlement of the provider's liability, this latter statutory provision mandates the procedure that the claimant must closely follow: In the present matter, at the time of seeking court approval of his settlement with the named defendants. Horil obviously sought to reserve his right to further recovery from the Fund. In such circumstances. La. R.S. 40:1299.42(D)(5) does not license a separate settlement vehicle. Instead, it is clear that the specifics of La. R.S. 40:1299.44(C) govern.
95-0967, at 5, 663 So.2d at 700 (footnote omitted).
Thus, we find that Horil requires compliance with the procedural requirements established by LSA-R.S. 40:1299.44(C) only when the circumstances indicate that the plaintiff expected and/or intended to recover excess damages from the LPCF [Fund].
In circumstances, such as the instant case, where the plaintiff clearly did not expect or intend to recover excess damages from the LPCF [Fund]and especially where, as here, the settlement with the qualified health care provider is far less than the $100,000 limit the provisions of LSA-R.S. 40:1299.42(D)(5) apply. This conclusion is based on the language of LSA-R.S. 40:1299.44(C) and the Supreme Court's decision in Horil, and on consideration of the well-accepted rule of statutory construction which demands that courts give effect to all language where possible. See In re Succession of Toncrey, 98-2342, p. 2 (La.App. 4 Cir. 12/9/98), 725 So. 2d 59, 60. If we applied LSA-R.S. 40:1299.44(C) to the instant case, LSA-R.S. 40:1299.42(D)(5) would have no effect.
Thus, the final question to be decided is whether the plaintiffs in the instant case fulfilled the requirements of LSA-R.S. 40:1299.42(D)(5). The LPCF [Fund] suggests that the plaintiffs did not meet the requirements of that provision because the record contains no evidence that the LPCF [Fund] was given notice of the plaintiffs' settlement with Dr. Mandich. The LPCF [Fund] also suggests that any notice received was "insufficient." However, as noted by the plaintiffs, LSA-R.S. 40:1299.42(D)(5) contains no time limit for giving written notification of a plaintiff's settlement with a qualified health care provider to the LPCF. Moreover, the form of the notice is not specified.
In the instant case, the fact that the LPCF [Fund] received notice of the settlement with Dr. Mandich is easily inferred. Most importantly, the lawyers who represented Dr. Ernst at trial are members of the same firm as the lawyers that represent the LPCF [Fund] on appeal. Moreover, the petition for intervention filed by the LPCF [Fund] on June 28, 1996 references the May 24, 1995 settlement with Dr. Mandich. Under the circumstances, we find that the requirements of LSA-R.S. 40:1299.42(D)(5) were met. Accordingly, the exception of no cause of action filed by the LPCF [Fund] is DENIED. [Emphasis added.]
[4] Coleman should make his claim to the Patient's Compensation Fund Oversight Board for further action and recovery of his future medical care and related benefits claims. The Board has exclusive authority to pay, reject, settle, and monitor all claims and to administer the fund from which all claims are paid. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1517302/ | 933 S.W.2d 343 (1996)
ISHIN SPEED SPORT, INC., Appellant,
v.
Johnny RUTHERFORD and Johnny Rutherford, Inc., Appellees.
No. 2-95-169-CV.
Court of Appeals of Texas, Fort Worth.
November 7, 1996.
*346 Neil D. Kelly, Stephen B. Schulte, Hughes & Luce, L.L.P., Houston, for appellant.
H. Allen Pennington, Jr., Law, Snakard & Gambill, Fort Worth, for appellees.
Before CAYCE, C.J., and BRIGHAM and HOLMAN, JJ.
OPINION
HOLMAN, Justice.
Johnny Rutherford individually and a corporation known as Johnny Rutherford, Inc. sued Ishin Speed Sport, Inc. for breach of contract and resulting loss of profits. The jury found for the plaintiffs and the trial court entered judgment awarding Rutherford and Rutherford, Inc. $226,388.87, plus $36,954.10 in prejudgment interest and $33,848.71 in attorney's fees. Ishin appeals, and we affirm.
Although Ishin brings fifteen points of error, its appeal presents three principal issues: (1) whether the trial court abused its discretion by erroneously refusing to submit Ishin's requested jury instructions; (2) whether there was legally or factually sufficient evidence to support the jury's answers and the court's judgment that a contract either existed or was agreed to by and between Rutherford individually or Rutherford, Inc., and Ishin; and (3) whether there was legally or factually sufficient evidence to support the jury findings and judgment awarding Rutherford and Rutherford, Inc. damages for lost profits.
The Initial Concept
Richard Respess, M.D., created and was president of Ishin Speed Sport, Inc. for the purpose of developing an automobile racetrack and driving technology center in Tarrant County. Ishin also was involved in refurbishing Texas World Speedway in College Station, Texas. Dr. Respess asked Johnny Rutherford, a Fort Worth native and a professional race car driver who is a three-time winner of the Indianapolis 500, to agree to assist the Ishin endeavors by creating the "Johnny Rutherford Performance Racing and Driving School" at the Texas World Speedway.
Ishin concedes that early in 1991 Dr. Respess and Johnny Rutherford tentatively agreed that in exchange for being allowed to use the Rutherford name in promoting Ishin's enterprises, Ishin periodically would pay Johnny Rutherford a commission on the income generated by the driving school and related merchandise sales. Johnny Rutherford insists that his commission was to be 25% of the school revenues, but in no event less than a guaranteed compensation of $100,000 for one year. By contrast, Ishin contends that the amount of commission payable to Johnny Rutherford was never agreed upon, and the only agreement was that a guaranteed minimum of $100,000 per year would be paid against commissions. Ishin also contends that although Johnny Rutherford individually would be doing the work for Ishin, only Rutherford, Inc. was the intended party to the agreement.
Nevertheless, in February 1991 Ishin began paying Johnny Rutherford installments toward the guaranteed minimum by paying him $4,166.67 every two weeks. Ishin contends that it paid no commissions to Rutherford *347 because he wanted the commissions computed on the driving school's gross profits, while Ishin wanted commissions to be paid only on the net profits. Ishin asserts that by September 1991 Johnny Rutherford had not met his obligation to furnish a business plan and curriculum for the driving school. In August 1991, experiencing cash flow problems, Ishin needed to reduce costs and stopped paying Johnny Rutherford. However, Ishin admits that it did not notify Johnny Rutherford that his services were no longer needed.
In January 1992, Johnny Rutherford did present Ishin with a business plan for the driving school. In the plan, Rutherford estimated that he would be entitled to a 25% commission on projected revenues of $1.8 million from the school's tuition and $200,000 from merchandise sales during the first year of operation. Ishin did not pay, and Rutherford and his corporation filed suit seeking damages.
The Contract
In answer to question number 1 of the court's charge, the jury found that Johnny Rutherford and Ishin had agreed that Ishin would pay Johnny $100,000 and 25% of gross tuition, fees, and merchandise in return for his commitment to set up, develop, promote, and operate an automobile driving school. The question included the following instruction to the jury:
To form a valid agreement, the parties must have the same understanding of the subject matter of the agreement and all its essential terms.
In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances, including any earlier course of dealing. You may not consider the parties' unexpressed thoughts or intentions.
With an identical instruction, the jury answered "yes" to question number 4, finding that Ishin had agreed to pay Rutherford, Inc. the $100,000 and 25% commission.
By its first, third, and fourth points of error Ishin asserts either that there is no evidence to support the existence of a contract between Ishin and Johnny Rutherford individually or that the evidence of it is factually insufficient.
By its fifth, seventh, and eighth points of error Ishin asserts either that there is no evidence to support the existence of a contract between Ishin and Johnny Rutherford, Inc. as found by the jury in question 4, or that the evidence of it is legally or factually insufficient. We will address points of error one, three, four, five, seven, and eight as a group because they present related issues.
First, we note that in determining a "no evidence" point, we are to consider only the evidence and inferences that tend to support the finding and disregard all evidence and inferences to the contrary. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661-62 (1951). If there is more than a scintilla of such evidence to support the finding, the claim is sufficient as a matter of law, and any challenges go merely to the weight to be accorded the evidence. Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex.1993).
A "no evidence" point may only be sustained when the record discloses one of the following: (1) a 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 vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla of evidence; or (4) the evidence establishes conclusively the opposite of a vital fact. Juliette Fowler Homes, Inc. v. Welch Assocs., 793 S.W.2d 660, 666 n. 9 (Tex.1990); Robert W. Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 TEX.L.REV. 361, 362-63 (1960). There is some evidence when the proof supplies a reasonable basis on which reasonable minds may reach different conclusions about the existence of the vital fact. Orozco v. Sander, 824 S.W.2d 555, 556 (Tex.1992).
Next, we note that an assertion that the evidence is "insufficient" to support a fact finding means that the evidence supporting the finding is so weak or the evidence to the contrary is so overwhelming that the *348 answer should be set aside and a new trial ordered. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965). We are required to consider all of the evidence in the case in making this determination and, if reversing, to detail that evidence in the opinion. Jaffe Aircraft Corp. v. Carr, 867 S.W.2d 27, 29 (Tex.1993).
There was no written contract between the parties, and Ishin argues that Rutherford presented no evidence, or at best only a scintilla, that Ishin ever agreed upon the amount of compensation that would be paid Rutherford in their business relationship. Ishin does concede in its brief that Rutherford testified that he believed that he and Dr. Respess had made an agreement, but Dr. Respess testified there was no agreement.
Clearly, an offer and its acceptance in strict compliance with the offer's terms are essential to the creation of a binding contract. American Nat'l Ins. Co. v. Warnock, 131 Tex. 457, 114 S.W.2d 1161, 1164 (1938); Smith v. Renz, 840 S.W.2d 702, 704 (Tex.App.Corpus Christi 1992, writ denied). However, even if an offer and acceptance are not recorded on paper, dealings between parties may result in an implied contract where the facts show that the minds of the parties met on the terms of the contract without any legally expressed agreement. Smith, 840 S.W.2d at 704; City of Houston v. First City, 827 S.W.2d 462, 473 (Tex.App.Houston [1st Dist.] 1992, writ denied). Accordingly, the parties' conduct may convey an objective assent to the terms of an agreement, and whether their conduct evidences their agreement is a question to be resolved by the finder of fact. Estate of Townes v. Townes, 867 S.W.2d 414, 419 (Tex. App.Houston [14th Dist.] 1993, writ denied). If the finder of fact determines that one party reasonably drew the inference of a promise from the other party's conduct, then that promise will be given effect in law. E-Z Mart Stores, Inc. v. Hale, 883 S.W.2d 695, 699 (Tex.App.Texarkana 1994, writ denied).
At the start of their relationship, Johnny Rutherford met with a racing promoter, Buddy Boren, and Dr. Respess to discuss Rutherford's participation in Ishin's proposed operation, which included the driving school. Rutherford testified that he initially asked for annual compensation of $400,000, but at a later meeting, he and Dr. Respess agreed on compensation of $100,000 and a 25% commission on the school revenues. At that meeting, Dr. Respess refused Rutherford's request for a written contract, but plaintiff's exhibit 24 is a typewritten memo dated June 24, 1991 sent from Dr. Respess to Johnny Rutherford. That exhibit states that Ishin is paying Rutherford $100,000 per year against a commission. Rutherford also testified that his work for the racing and driving school was to include using his name and reputation to promote the operations, preparing a business plan, and persuading the manufacturers of automobiles and component parts to supply cars, parts and accessories as consideration for promoting those products in the Ishin/Rutherford business.
He told the jury that in 1991, from February until June 24, he was doing the work he had agreed to do. He made the arrangements with the manufacturers for the use of their products. Rutherford was to be the chief instructor at the driving school. He testified that he contacted drivers about becoming instructors for the school and told the jury there were "four or five different categories of classes that you could take," from beginner to intermediate to the final advanced racing course. He testified that he and Dr. Respess had a definite meeting of the minds about offering the courses. Rutherford also told jurors that he contacted skilled professionals who operated other driving schools evaluated them, and prepared and gave Dr. Respess a business plan.
Rutherford testified that in a meeting on June 24, 1991 he told Dr. Respess that their contract should be reduced to writing, but that Respess refused. Dr. Respess testified that the focus of that meeting was to keep Johnny Rutherford "on board," that he knew that Rutherford was carrying on the work of contacting potential sponsors for their business, that in his own mind Respess did not separate Rutherford individually from Rutherford, Inc., but that he knew that Johnny expected to be paid for the work he was doing. Dr. Respess told jurors that the intention *349 was to pay Rutherford a commission, but that the business failed for lack of sufficient funding expected from Japanese investors, and that until November 1991, he continued to tell Rutherford that he would be paid the money he was owed.
At trial, Rutherford itemized the damages sought in plaintiff's exhibit 26, which includes the unpaid portion of the $100,000 and sums he alleged to be due him on the 25% commission. The exhibit was admitted in evidence without objection by Ishin. Ishin's marketing director, Slick Johnson, testified without objection that Dr. Respess told him that at the June 24, 1991 meeting with Rutherford, an agreement was made to pay Rutherford "a twenty-five percentage of the revenue."
Having reviewed the evidence presented on the issues jurors were asked about in questions 1 and 4 of the charge, we conclude that the jury had sufficient evidence from which to decide whether the course of dealing between Johnny Rutherford individually and on behalf of his corporation with Ishin, represented by Dr. Respess, manifested an objective assent by those parties to the terms of the agreement asked about in questions 1 and 4. See City of Houston, 827 S.W.2d at 473. On the evidence, the jury was reasonably entitled to consider that Johnny Rutherford and his corporation performed the work expected of them after reasonably drawing the inference that Ishin had promised to pay them $100,000 and a 25% commission on gross tuition, fees, and merchandise. The jury resolved those issues by finding that the parties' own conduct evidenced their agreement, and the law requires that the promise be given effect. E-Z Mart Stores, Inc., 883 S.W.2d at 699; Estate of Townes, 867 S.W.2d at 419.
Points of error one, three, four, five, seven, and eight are overruled.
Charging the Jury About a Contract
The second point of error attacks the trial court's refusal to submit question 1 in words proposed by Ishin and to add the following language to the instruction for that question:
To be enforceable, an agreement must be reasonably definite and certain. Failure to agree on or include an essential term renders an agreement unenforceable.
Because the sixth point of error presents an identical challenge to jury question 4 and its instruction, we will consider both points together.
Although the second and sixth points of error assert that the trial court erred by not submitting Ishin's requested wording for the respective questions (1 and 4), Ishin's arguments under the second and sixth points do not address the wording of the questions. Ishin's arguments only discuss the court's refusal to include the requested instruction with each question. An argument must include a discussion of the facts and authorities relied on to maintain the point at issue. TEX.R.APP.P. 74(f). Accordingly, because the arguments made under points two and six do not tell us why Ishin objects to the way the trial court worded questions 1 and 4, we conclude that Ishin has waived any complaints about the wording of those questions. We will only consider Ishin's arguments about the instructions that Ishin wanted for the jury.
Explanatory instructions should be submitted when in the sole discretion of the trial judge they will help the jurors understand the meaning and effect of the law and the presumptions the law creates. Hamblet v. Coveney, 714 S.W.2d 126, 129 (Tex.App.Houston [1st Dist.] 1986, writ ref'd. n.r.e.). A trial court's refusal will not be overturned on appeal unless the court abused its discretion. Magro v. Ragsdale Bros., Inc., 721 S.W.2d 832, 836 (Tex.1986). No abuse of discretion is shown unless the requested instructions were so necessary to enable the jury to render properly a verdict that the court's refusal probably did cause rendition of an improper verdict. Harris County v. Bruyneel, 787 S.W.2d 92, 94 (Tex. App.Houston [14th Dist.] 1990, no writ); Steinberger v. Archer County, 621 S.W.2d 838, 841 (Tex.App.Fort Worth 1981, no writ).
Ishin contends that because it copied the requested instructions from the Texas Pattern Jury Charges, the trial court's refusal to submit them was error and an abuse of discretion. *350 To support that argument, Ishin cites Westchester Fire Ins. Co. v. Lowe, 888 S.W.2d 243, 250 (Tex.App.Beaumont 1994, no writ) (op on reh'g) and Westchester Fire Ins. Co. v. Lowe, 882 S.W.2d 654, 657 (Tex. App.Beaumont 1994, no writ), reh'g overruled, 888 S.W.2d 243 (Tex.App.Beaumont 1994). The Westchester cases do not stand for the principle that solely because an instruction is copied verbatim from the Texas Pattern Jury Charges its inclusion in a jury charge is mandated. Instead, each of the Westchester cases held, upon its facts and applicable law, that the jury questions requested should have been granted because the issues they presented were essential to those worker's compensation trials. Westchester, 888 S.W.2d at 250 & 882 S.W.2d at 657. Because of that and also because the questions were requested in language found in Texas Pattern Jury Charges, the appellate court in each case found that those appellants had properly made their requests and preserved error. Westchester, 888 S.W.2d at 255 & 882 S.W.2d at 657.
For some causes of action, the Texas Supreme Court has expressly approved the use of the forms found in Texas Pattern Jury Charges and has disapproved the addition of any other instructions in those actions, no matter how correctly they may state the law. See Acord v. General Motors Corp., 669 S.W.2d 111, 116 (Tex.1984) (a products liability design defect case). Otherwise, the forms in Texas Pattern Jury Charges are only a guide to assist a trial court in drafting its charges, and those forms do not bind the court. Keetch v. Kroger Co., 845 S.W.2d 276, 281 (Tex.App.Dallas 1990), aff'd, 845 S.W.2d 262 (Tex.1992).
Upon the general principle that a proper jury instruction is one that assists the jury and is legally correct, a trial court may personalize or individualize a charge to the facts of the case so the jury can more easily understand the law. U.S. Sporting Products, Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 220 (Tex.App.Waco 1993, writ denied). Trial courts also are given considerably more discretion in submitting instructions and definitions than in submitting questions. Harris v. Harris, 765 S.W.2d 798, 801 (Tex.App.Houston [14th Dist.] 1989, writ denied); Houston Nat'l Bank v. Biber, 613 S.W.2d 771, 776 (Tex.Civ. App.Houston [14th Dist.] 1981, writ ref'd n.r.e.).
Ishin argues that the instructions it requested for questions 1 and 4 were necessary to inform the jury that Rutherford was required to prove that Ishin and Rutherford each agreed and communicated their agreement to all essential terms of the contract and that the terms must be reasonably definite and certain. We conclude, however, that even if the requested instructions had that effect on the jury, the requests do not materially differ from the language submitted by the court's own instruction, because the trial court's versions of questions 1 and 4 already contain all of the essential terms of the disputed contract in a reasonably definite and certain manner. Because the wording requested by Ishin would not have been a material addition or improvement to the instructions that were given, we are not persuaded that the trial court's refusal to give Ishin's requested instructions was an abuse of discretion or that it was calculated to and probably did cause the jury to err in its verdict. We overrule the second and sixth points of error.
Lost Profits
Through points of error nine, eleven, and twelve, Ishin attacks jury question 8 of the charge concerning Rutherford's claim of lost profits. Ishin asserts that there is no evidence or no factually or legally sufficient evidence to support the jury's finding of damages for the claimed lost profits and that the trial court erred by submitting the wrong measure of lost profits damages instead of submitting the measure requested by Ishin.
Ishin and Rutherford agree that a party seeking lost profits must prove those profits by competent evidence with reasonable certainty. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992). This means that, at a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained. *351 Id. However, a party claiming injury from lost profits need not produce in court the documents that support his opinions or estimates. Id. The question before us is whether Rutherford's testimony about lost profits was competent and reasonably certain.
Besides telling the jury about his substantial experience as a champion race driver, Johnny Rutherford testified that in reliance on the plans he made with Dr. Respess, he had analyzed the attendance figures, types of courses, and tuition charges of driving schools operated by professionals Bob Bondurant, Bill Buff and Skip Barber, that he had done promotional work and arranged for sponsorship by accessory firms, and that he had contacted instructors who would work under his direction at the school. After giving that background to the jury, Rutherford was offered as an expert witness on racing and driving schools. Over Ishin's objection, Rutherford was accepted by the court as an expert qualified to testify to a reasonable degree of professional certainty about the expected tuition fees, enrollment, and merchandise sales for the driving school.
The Texas Supreme Court has emphasized that the requirement that lost profits be proved with "reasonable certainty" is intended to be flexible enough to accommodate the myriad circumstances in which claims for lost profits arise. Texas Instruments, Inc. v. Teletron Energy Management, Inc., 877 S.W.2d 276, 279 (Tex.1994). That was a case in which the product that the parties had planned to sell had never existed and Texas Instruments had failed in its efforts to produce a working model of the product. There the court explained that "reasonable certainty" is not demonstrated when the profits claimed to be lost are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on promotion of untested products or entry into unknown or unviable markets, or on the success of a new and unproven enterprise. Id. Despite these parameters, when there are firmer reasons to expect a business to yield a profit, recovery for profits allegedly lost will not be denied simply because the business is new. Id. at 280. Clearly, the focus is on the experience of the persons involved in the enterprise and the nature of the business activity and the relevant market. Id.
In that light, Rutherford's many years of successful experience as a professional in auto racing, closely observing the operations of the tracks and driving schools is significant. His evidence includes exhibit 25, admitted with no objection by Ishin. The exhibit is a business plan for the driving school prepared by Rutherford and containing revenue projections based upon his expertise, experience, and discussions with the operators of other professional driving schools. They were the very projections that Dr. Respess had recruited Rutherford to make. With the foundation of Rutherford's expertise, exhibit 25 projects the profits expected from the school and its merchandise. Exhibit 26, admitted without objection, lists Rutherford's damages. Rutherford testified that the revenues anticipated in the exhibit were reasonable expectations based on his research of comparable facilities. We conclude that Johnny Rutherford was competent to testify to those matters.
Dr. Respess testified that because of Rutherford's work, Chevrolet had already furnished Ishin with the cars for the Texas World Speedway and was ready to provide the equipment for the racing school. These were tasks for which Dr. Respess had recruited Rutherford. Dr. Respess told the jury that Ishin had built a garage building with space for classrooms, that three revenue-producing racing events were held at the Texas World Speedway in 1991, and Respess admitted that if Ishin had put the school in operation, Rutherford would have made profits from it. Dr. Respess conceded that he never did tell Johnny Rutherford that the money owed him would not be paid.
The evidence shows that among the firm reasons to expect the Rutherford/Ishin driving school and merchandise sales to yield a profit were that the market for their "product" was not unknown or unviable, their school was patterned upon schools operated by renowned and successful professionals Bondurant, Buff and Barber, and was to operate at Ishin's established motor speedway which was not a new and unproven *352 enterprise. Furthermore, Rutherford's name and celebrity reputation in the relevant market were well established, and Chevrolet had expressed confidence in the Rutherford/Ishin school by agreeing to donate Chevrolet products for the school's use. The operation of professional driving schools and the sales of related merchandise is not an uncertain or speculative business, and the evidence does not suggest that the operation of the Rutherford/Ishin school would be a gamble.
To support its contention that Rutherford may not recover lost profits without either showing a history of profitability or the actual existence of future contracts from which lost profits can be calculated with reasonable certainty, Ishin relies on D/FW Commercial Roofing Co., Inc. v. Mehra, 854 S.W.2d 182, 187 (Tex.App.Dallas 1993, no writ). That case, however, did not involve a new business nor did it address the standards for reviewing claims for lost profits of a new business, set out in Texas Instruments, Inc., 877 S.W.2d at 279-81. Ishin also cites a summary judgment case, Orchid Software, Inc. v. Prentice-Hall, Inc., 804 S.W.2d 208, 210 (Tex.App.Austin 1991, writ denied). Orchid, however, explains that whether data exists to show the anticipated profits of a new business to a reasonable certainty will depend on the facts and circumstances of each case, and the absence of a history of profits does not, by itself, preclude a new business from recovering lost future profits. Id. at 211. Bell Helicopter Co. v. Bradshaw, 594 S.W.2d 519, 536 (Tex. Civ.App.Corpus Christi 1979, writ ref'd n.r.e.) was a personal injury suit by two real estate agents injured in a 1975 helicopter crash. That same year, the two had opened an office devoted solely to farm and ranch sales after past experience in residential sales but being "interested" in the sale of farms and ranches. Testimony about their past real estate experience and knowledge of the farm and ranch sales market was held to support their opinion testimony of what they could reasonably expect to earn from future farm and ranch sales. A new business owner's opinion of its lost profits may have probative value even though the estimate is based on knowledge of a previous similar business and the underlying business records are not introduced. Pena v. Ludwig, 766 S.W.2d 298, 304 (Tex.App.Waco 1989, writ requested).
Lost profits can be recovered if they are the natural and probable consequences of wrongful conduct. Pena, 766 S.W.2d at 304. It is clear from the testimony of Dr. Respess that although Ishin had agreed to start the school, it did not do so and the business failed. He did not testify nor is there any evidence that the business failed because Rutherford's profit projections, admitted without objection in exhibit 25, were speculative or inaccurate. Instead, Dr. Respess admitted that Ishin did not perform its part of the agreement after becoming dissatisfied with its investors for not supplying Ishin the capital it had expected. He testified that over a million dollars came in on two different occasions but about two million dollars more had been expected, yet was not received, by Ishin.
Unless a jury verdict that is challenged for factually insufficient evidence is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust, we must not set it aside. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). The jury's function is to weigh the evidence and the credibility of the witnesses. McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex.1986). Even where a different finding might be reached on the evidence, we are not to substitute our judgment for that of the jury, because this court is not the fact finder. Clancy v. Zale Corp., 705 S.W.2d 820, 826 (Tex.App.Dallas 1986, writ ref'd n.r.e.).
The totality of the evidence was sufficient for the jury to reasonably conclude that if Ishin had allowed the driving school to open rather than violating its contractual obligations to Rutherford, their enterprise would have been able, in all likelihood, to produce the profits claimed by Rutherford. We find that the evidence was reasonably certain and both legally and factually sufficient to support the jury's answer to question 8 of the charge: that $226,388.87 in lost profits were a natural, probable, and foreseeable consequence of Ishin's failure to comply with its *353 contract with Rutherford and his corporation. Points of error nine, eleven, and twelve, challenging the evidence on lost profits, are overruled.
Under point of error ten, Ishin complains that the trial court's instruction on the elements of damages in question 8 on lost profits told the jury that the only element it could consider was:
Lost profits that were a natural, probable and foreseeable consequence of [Ishin's] failure to comply.
Ishin argues that the court erred by not granting its request for the following instruction to the jury:
Johnny Rutherford or Johnny Rutherford, Inc. must establish their damages to a reasonable certainty. You must consider only Johnny Rutherford's or Johnny Rutherford, Inc.'s loss of contractual profit, if any, that was a natural, probable, and foreseeable consequence of [Ishin's] failure to comply with the agreement. Loss of contractual profit is the difference between the agreed price and the cost Johnny Rutherford or Johnny Rutherford, Inc. would have incurred in performing under the agreement. You may not consider any other element of damage.
A party must produce sufficient evidence to enable you to determine the net amount of the loss with reasonable certainty, and the evidence relative to the profits must not be uncertain or speculative. Johnny Rutherford or Johnny Rutherford, Inc. must show either a history of profitability or the actual existence of future contracts from which lost profits can be calculated with reasonable certainty.
The instruction requested by Ishin is both a comment on the weight of the evidence and significantly undermines the flexibility allowed by the Texas Supreme Court's standard for proving lost profits of new businesses. See Texas Instruments, Inc., 877 S.W.2d at 279-80. Because Ishin did not submit a substantially correct instruction in writing to the trial court, point of error ten does not present a ground for reversal of the judgment. TEX.R.CIV.PROC. 278. The tenth point of error is overruled.
Motions Denied by Trial Court
Point of error thirteen complains of the trial court's denial of Ishin's motion for directed verdict on grounds of legally insufficient evidence on the question of lost profits. Point of error fourteen attacks the trial court's denial of Ishin's motion to disregard the jury's answers to questions 1, 4, and 8 of the charge on grounds of legally insufficient evidence. Point of error fifteen challenges the trial court's denial of Ishin's motion for new trial on the grounds that there was no legally or factually sufficient evidence to support the jury's answers to questions 1, 4, and 8 and that the court erred in refusing Ishin's proposed instructions for those questions. For the reasons we have already discussed, points of error thirteen, fourteen, and fifteen are overruled.
The judgment of the trial court is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3107036/ | Order entered June 19, 2013
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-00820-CR
EX PARTE ROBERT ALLAN MILLER
On Appeal from the 422nd Judicial District Court
Kaufman County, Texas
Trial Court Cause No. 88341-422
ORDER
The Court has received appellant’s notice of appeal from the trial court’s May 30, 2013
order on his application for writ of habeas corpus. The appeal is accelerated pursuant to Texas
Rule of Appellate Procedure 31.
We ORDER the Kaufman County District Clerk to file the clerk’s record containing the
documents related to the habeas corpus proceeding by JULY 8, 2013.
We ORDER the court reporter of the 422nd Judicial District Court to file, by JULY 8,
2013, the reporter’s record of all hearings related to the habeas corpus proceedings.
Appellant’s brief is due by JULY 29, 2013. The State’s brief is due by AUGUST 19,
2013.
The appeal will be submitted without argument on September 6, 2013 to a panel
consisting of Chief Justice Wright and Justices Myers and Evans.
We DIRECT the Clerk to send copies of this order, by electronic transmission, to the
Kaufman County District Clerk’s Office; Donna Gehl, Official Court Reporter, 422nd Judicial
District Court; and to counsel for all parties.
/s/ CAROLYN WRIGHT
CHIEF JUSTICE | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1821520/ | 468 So. 2d 451 (1985)
Randolph S. URLING and Deborah E. Urling, Appellants,
v.
HELMS EXTERMINATORS, INC., Appellee.
No. AX-117.
District Court of Appeal of Florida, First District.
May 7, 1985.
*452 Terry P. Lewis of Oven, Gwynn & Lewis, Tallahassee, for appellants.
Paula L. Walborsky of Booth & Walborsky, P.A., Tallahassee, for appellee.
ON MOTION FOR REHEARING
PER CURIAM.
Appellee has filed a lengthy motion for rehearing and motion for rehearing en banc, including a suggestion for certification to the Florida Supreme Court. Appellants have filed a lengthy response contending the motions should be denied but urging clarification of the court's original opinion. Upon consideration of their respective contentions, we have determined to withdraw our original opinion and substitute the following corrected opinion. To the extent that matters raised in the motions for rehearing are not disposed of in the corrected opinion, those motions are denied.
CORRECTED OPINION
Appellants, Randolph and Deborah Urling, obtained a judgment awarding them money damages based on a jury verdict finding appellee, Helms Exterminators, Inc., guilty of negligence in issuing a termite inspection report certifying no termite damage to a house purchased by them when no inspection was made. Being unsatisfied with the amount of damages obtained, they contend on appeal that the trial court erred in directing a verdict for Helms on their claim that Helms violated the Florida Deceptive and Unfair Trade Practices Act, chapter 501, part II, Florida Statutes (1981), erred in directing a verdict for Helms on their claim for punitive damages, and erred in making several rulings on evidentiary matters. We affirm in part and reverse in part.
Helms, the corporate defendant, certified that its inspector had inspected the house to be purchased by the Urlings and found no existing termite damage. Later, however, the Urlings found extensive termite damage. Baker, the Helms inspector whose name appeared on the inspection report, denied that he made the inspection and denied that he authorized anyone to sign his name to the report. A secretary employed by Helms established that it was a customary practice for Baker to call in his inspection reports to her and that she *453 would type them and often sign Baker's name on them, but only after he had reviewed them. She did not recall ever signing his name to a report he had not reviewed.
Sections 501.201 through 501.213, Florida Statutes (1981), constitute the Florida Deceptive and Unfair Trade Practices Act. Section 501.204 provides that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." An exact definition of the "unfair or deceptive acts or practices" is provided nowhere in the statute. Section 501.204(2), however, states that "[i]t is the intent of the Legislature that in construing subsection (1) of this section, due consideration and great weight shall be given to the interpretations of the ... federal courts relating to s. 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. § 45(a)(1))." That provision reads: "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful."
There are only two Florida cases construing "unfair or deceptive acts or practices," but the factual contexts of those cases are so limited that they are not helpful in arriving at a general definition. See Deltona Corp. v. Jannotti, 392 So. 2d 976 (Fla. 1st DCA 1981), and Bert Smith Oldsmobile v. Franklin, 400 So. 2d 1235 (Fla. 2d DCA 1981). The Urlings cite a number of federal cases that also give specific instances of such practices, but neither are these cases helpful.
Although the cases, both state and federal, seem to have most often classified exaggerated advertising claims as "unfair and deceptive" in violation of the act, the language of the statute does not limit its application to these types of cases, but makes it applicable to all "unfair or deceptive acts or practices in the conduct of any trade." § 501.204(1), Fla. Stat. (1981) (emphasis supplied). In Spiegel, Inc. v. Federal Trade Comm., 540 F.2d 287, 293 (7th Cir.1976) (footnote omitted), the court found that a practice was "unfair" under the federal statute when it "offends established public policy and when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers."
In this case the trial court evidently based its directed verdict on the absence of fraud and deceit in Helms' conduct. A finding of fraud, however, is not necessary to sustain a violation under the act. Rollins, Inc. v. Heller, 454 So. 2d 580 (Fla. 3d DCA 1984). As the Rollins court pointed out, the legislature has specifically provided that great weight is to be given the federal courts' interpretations of the Federal Trade Commission Act. § 501.204(2), Fla. Stat. (1981). In D.D.D. Corp. v. Federal Trade Comm., 125 F.2d 679, 682 (7th Cir.1942), the court held that the "false, unfair or deceptive acts defined in the Federal Trade Commission Act need not be such as would constitute fraud." Bearing these legal concepts in mind, we next consider whether the evidence was sufficient to survive a motion for directed verdict.
The standard for directing a verdict is stated in Townsend v. Ward, 429 So. 2d 404, 407 (Fla. 1st DCA 1983): (1) "[T]he court ... must view the evidence in the light most favorable to the non-moving party," and (2) "If there is any evidence to support a possible verdict for the non-moving party, a directed verdict is improper." Viewing the evidence in the light most favorable to the Urlings shows that it was a standard practice for termite inspection reports to be phoned in and typed by the secretary and for the secretary to place the inspector's signature on the report. The secretary would not have performed either act without instructions from the inspector. The inspector acknowledged that the inspection certified by the report never took place. This evidence is sufficient to support an inference that the inspector, to avoid making an inspection, phoned in a false report and instructed the secretary to sign his name thereto and that this report was subsequently delivered to and relied on by the Urlings to their detriment. While *454 the inspector denies any knowledge of the report, as does Helms, the accumulation of the other evidence creates a jury question as to the nature of the act under chapter 501. Applying the cited standards for directing a verdict, we reverse the directed verdict for Helms on this issue and, as a result, must also reverse the attorney's fees and costs awarded Helms under the act.
Although the damages sought by the Urlings under the act were not challenged by Helms at the pleading, trial, or appellate level, we would be remiss if we did not discuss this issue because of the necessity to remand this case. The act is intended to protect a consumer from unfair or deceptive acts or practices which diminish the value or worth of the goods or services purchased by the consumer. Section 501.211, Florida Statutes (1981), authorizes a consumer to recover actual damages, attorney's fees, and court costs for a violation of the statute. The measure of "actual damages" recoverable under the statute is defined in Rollins, Inc. v. Heller, 454 So.2d at 585, quoting from Raye v. Fred Oakley Motors, Inc., 646 S.W.2d 288, 290 (Tex. App. 1983), as follows:
`Generally, the measure of actual damages is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties. [citations omitted] A notable exception to the rule may exist when the product is rendered valueless as a result of the defect then the purchase price is the appropriate measure of actual damages. [citations omitted]'
In the Rollins case, the plaintiffs sought to recover the value of items stolen during a burglary because the security system and services provided by Rollins were deficient and did not properly perform as represented. The court concluded that "[t]he actual damages in the present case should be computed based upon the alarm system and the services Rollins agreed to provide, and not with regard to the value of the items stolen during the burglary." Id. at 586. It seems, therefore, that the statute entitles a consumer to recover damages attributable to the diminished value of the goods or services received, but does not authorize recovery of consequential damages to other property attributable to the consumer's use of such goods or services.
The Urlings seek to recover as damages the cost of repairing extensive termite damage to the structure of the house they purchased after receiving and relying on the false termite inspection certificate issued by Helms. The cost of these repairs constitutes special or consequential damages which fall outside the statutory concept of actual damages as defined in section 501.211, Florida Statutes (1981), and Rollins. Since the Urlings are not seeking recovery of the cost of the erroneous termite certificate but, rather, seek consequential damages, they have no recoverable damages under the act. We assume this issue will be resolved upon remand.
The standard for imposition of punitive damages in negligence cases is characterized in White Construction Co., Inc. v. Dupont, 455 So. 2d 1026, 1029 (Fla. 1984), quoting from Carraway v. Revell, 116 So. 2d 16, 20, n. 12 (Fla. 1959), as follows:
`The character of negligence necessary to sustain an award of punitive damages must be of a `gross and flagrant character, evincing reckless disregard of human life, or of the safety of persons exposed to its dangerous effects, or there is that entire want of care which would raise the presumption of a conscious indifference to consequences, or which shows wantonness or recklessness, or a grossly careless disregard of the safety and welfare of the public, or that reckless indifference to the rights of others which is equivalent to an intentional violation of them.'
In Doral Country Club, Inc. v. Lindgren Plumbing Co., 175 So. 2d 570, 571 (Fla. 3d DCA 1965), the court stated: "If there is any evidence tending to show that punitive damages could be properly inflicted, even if *455 the court be of the opinion that the preponderance of the evidence is the other way, the court should leave the question to the jury." The Florida Supreme Court, in Wackenhut Corp. v. Canty, 359 So. 2d 430, 435 (Fla. 1978), saw the trial court's task as the determination of "whether there is a legal basis for recovery of punitive damages shown by any interpretation of the evidence favorable to the plaintiff."
We conclude that the trial court did not err in withdrawing the issue of punitive damages from the jury. The evidence, taken most favorably to plaintiffs, did not establish a proper foundation for awarding punitive damages against the corporate defendant, Helms, regarding its release of the false inspection report. The testimony and other evidence in the record did not reveal any other instance of false certification, nor did it establish any pattern or course of conduct by Helms Exterminators, Inc., and its employees indicating falsification of certificates for inspections not actually performed. The evidence established only that, in this single instance, a Helms report falsely certified that a termite inspection had been recently made when in fact the house had not been inspected for termites in approximately a year.
We would agree with reversal of the directed verdict if the claim for punitive damages were predicated against the employee, Baker (Baker was sued but dismissed as a party before trial). The law is clear that "[w]hether a fraudulent act is `sufficiently outrageous so as to justify an award of punitive damages is a question for the jury.'" Walsh v. Alfidi, 448 So. 2d 1084, 1087 (Fla. 1st DCA 1984) (quoting from Schief v. Live Supply, Inc., 431 So. 2d 602, 603 (Fla. 4th DCA 1983)). The present action, however, is not against the employee, but against the corporate employer. Before an employer may be held vicariously liable for punitive damages under the doctrine of respondent superior, it is essential for a plaintiff to establish that there was some fault on the employer's part "which foreseeably contributed to the plaintiff's injury to make him [the employer] vicariously liable for punitive damages." Mercury Motors Express, Inc. v. Smith, 393 So. 2d 545, 549 (Fla. 1981) (emphasis supplied). Thus, under Mercury Motors, it is not enough for there to be fault on behalf of the employer, independent from that of the employee; the employer's fault must somehow have foreseeably contributed to the plaintiff's injury. The only theory of fault advanced by appellants against Helms was that Helms was negligent because the secretary was not properly instructed regarding the filling out of termite inspection reports, there was no orientation program for her, and nobody had explained the purpose of the forms to her.
Accepting the evidence in the light most favorable to the Urlings, the nonmoving parties against whom the directed verdict was entered, it is obvious that any purported negligence of Helms in failing to supervise his secretary could not have foreseeably contributed to the Urlings' injury absent some evidence of knowledge by Helms of the inspector's fraudulent conduct. On the present record, the deliberate false representations of Baker, the inspector, if they existed, would have appeared on the inspection report regardless of Helms' endeavor to supervise his secretary in the proper preparation of reports submitted by his inspectors. There is no showing by this isolated incident of misrepresentation that the employer had either actual or constructive knowledge of Baker's fraud. There is nothing in the record revealing a pattern or course of conduct by Helms' employees that should have placed the employer on notice that they were intentionally falsifying certificates of inspections which they had not actually performed. For purposes of proving entitlement to punitive damages, there is insufficient evidence that the employer knew or should have known that its agents were engaging in a course of fraudulent conduct likely to harm the plaintiffs. Life Insurance Co. of North America v. Del Aguila, 417 So. 2d 651 (Fla. 1982). Accordingly, *456 the directed verdict on punitive damages is affirmed.
We agree with the Urlings' contention that admission of the testimony of the chief real estate appraisal analyst of the tax appraiser's office was error and prejudicially affected the outcome of their negligence case. The information relied on by the analyst regarding the size, shape, and construction of the house varied so materially from the actual facts that it was, in our opinion, an incompetent predicate for the analyst's opinion as to the value of the house. We therefore reverse on this issue and remand the negligence action for a new trial on the issues of liability and compensatory damages. Although the pretrial order recognized that plaintiffs would proceed against Helms on a theory of simple negligence, the record reflects that neither a complaint nor an answer addressing this cause of action was filed by the parties. We suggest that this be done before the new trial.
While we remand the unfair and deceptive trade practices action and vacate the attorney's fee and costs awarded to Helms' attorney as previously discussed, recoverable damages have not been claimed by appellants and we suggest that this issue be resolved before trial.
AFFIRMED in part, REVERSED in part, and REMANDED.
ERVIN, C.J., and MILLS and ZEHMER, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2604408/ | 325 P.2d 958 (1958)
Donald C. PARKER, Petitioner,
v.
BLACKWELL ZINC COMPANY and the State Industrial Commission, Respondents.
No. 37900.
Supreme Court of Oklahoma.
May 13, 1958.
Farmer & Kerr, Oklahoma City, for petitioner.
Felix Duvall, Ponca City, Mac Q. Williamson, Atty. Gen., for respondents.
*959 JACKSON, Justice.
Claimant, Donald C. Parker, filed a claim against employer, Blackwell Zinc Company, seeking recovery for disability due to an alleged occupational disease. The trial judge held that the claim was barred by limitations, and entered an order denying compensation which was sustained on appeal to the Commission en banc. Claimant brings the case here for review.
The primary question is as follows: What is the limitation of time within which a claim for disability due to an occupational disease must be filed?
In 1953 the Legislature by amending various sections of the Workmen's Compensation Act made provision for recovery of compensation for specified occupational diseases. In this same Act the Legislature revised and amended 85 Ohio St. 1951 § 43 so as to read in part as follows:
"The right to claim compensation under this Act shall be forever barred unless within one (1) year after the injury a claim for compensation thereunder be filed with the Commission unless such claim shall arise from an occupational disease in which case the claimant shall file said claim within (3) years after his last exposure to the hazard to which the claimant attributes as the cause of the occupational disease. * * *"
Two days after the approval and effective date of the above amendment to Sec. 43, supra, a second Act or amendment to Sec. 43 was approved and became effective. The title to this second amendatory Act provides in pertinent part as follows:
"An Act * * * amending Section 43, Title 85, Oklahoma Statutes 1951, as amended; and declaring an emergency." (Emphasis supplied.)
In the body of the Act we find the following:
"Section 2. Claim for Compensation Barred After One Year * * *. That Title 85, Oklahoma Statutes 1951, Section 43, is hereby amended to read as follows:
"Section 43. The right to claim compensation under this Act shall be forever barred unless within one (1) year after the injury or death a claim for compensation thereunder shall be filed with the Commission. Provided, however, claims may be filed at any time within one (1) year from the date of last payment of any compensation or remuneration paid in lieu of compensation. * * *"
It is observed that under the second amendatory Act the one-year limitation period is applicable to all claims, and no reference to occupational diseases is made. The provision for a three-year period of limitations for occupational diseases is eliminated. This second Act, or amendment, now appears in the 1957 Supp. as an additional Sec. 43.
It is obvious that there can be but one Sec. 43. Both Acts purport to be complete and the second Act expressly provides that Sec. 43, "is hereby amended to read as follows."
In Ratliff v. Cornelius, County Clerk, 49 Okl. 91, 151 P. 675, it is held in *960 the first paragraph of the syllabus as follows:
"Where a section, expressly amendatory of another section of a statute, purports to set out in full all that it is intended to contain, any matter which was in the original section, but not in the amendatory section, is repealed by the omission."
In our opinion the second Act completely obliterated the prior amendatory section as such. Therefore, we do not have two related statutes to construe for the purpose of arriving at the legislative intent as was the case in State v. Prairie Oil & Gas Co., 64 Okl. 267, 167 P. 756. Here we have only one statute on the subject which is the one last enacted and which does not contain the three-year provision. It is possible that the omission of the three-year provision in the second Act was unintentional since the Legislature left unchanged a provision in Sec. 24, which extends the time for giving notice of an injury caused by an occupational disease to eighteen months after the last hazardous exposure. But we cannot speculate as to the Legislature's unexpressed intention in the face of an unequivocal legislative enactment.
In People v. Lowell, 250 Mich. 349, 230 N.W. 202, 204, the court said:
"It is plain from the authorities in this state and elsewhere that the effect of an act amending a specific section of a former act, in the absence of a saving clause, is to strike the former section from the law, obliterate it entirely, and substitute the new section in its place. This effect is not an arbitrary rule adopted by the courts. It is the natural and logical effect of an amendment `to read as follows.' It accomplishes precisely what the words import. Any other construction would do violence to the plain language of the Legislature." (Emphasis supplied.)
See also State v. Horner, 48 Okla. Crim. 141, 290 P. 197; Martinka v. Hoffmann, 214 Minn. 346, 9 N.W.2d 13; Skinner v. Davis, 156 Or. 174, 67 P.2d 176.
Furthermore, even if it were proper in this case to consider the legislative intent and assume that the Legislature intended to leave the three-year provision in force, we would have to ignore such intent for another reason. In Board of County Com'rs of Tulsa County v. Oklahoma Tax Commission, 202 Okl. 269, 212 P.2d 462, it was held that art. 5, § 57, of the Oklahoma Constitution, requires that when a section of an Act is amended, it must be complete within itself, so that when published as amended it will contain all the law on the subject embraced within the section. Therefore, it is clear that regardless of what was intended the three-year provision is not now a part of Sec. 43, since it was not included in the last Act, which Act is complete within itself, as required by the Constitution.
In State ex rel. Gebhardt v. Superior Court for King County, 15 Wash.2d 673, 131 P.2d 943, 951, the court was confronted with a problem very similar to that in the instant case. In that case the court said:
"A legislative intention, not expressed in some appropriate manner, has no legal existence. Lewis' Sutherland Statutory Construction, p. 745. The legislature is presumed to know the principles of statutory construction."
The facts in the Washington case furnish a close parallel for our consideration in the case at bar. In that case the Legislature had passed two Acts upon the same subject matter during the same session of the Legislature, both providing that a certain section of the law should be amended "to read as follows." A new provision contained in the first Act was omitted from the second Act. The two Acts were not inconsistent.
The Constitution of the State of Washington contained a provision (similar to Art. 5, § 57, of the Oklahoma Constitution) which provides, in substance, that no law can be amended by reference to its title but that such section amended must be set forth at full length. The Supreme Court of the *961 State of Washington held that the second Act effectively destroyed the first Act notwithstanding the fact that the two Acts were not inconsistent. The court said:
"So in the instant case, under our constitution there can be but one § 1, chapter 131, Laws of 1939, as amended.
"* * * it seems to us counsel has failed to distinguish between a case such as the instant one, where there was an attempt at the same session to twice amend a former act, both the amendments stating that the section amended is `to read as follows,' and a case such as the one cited, where it is claimed that subsequent, independent acts impliedly repealed a prior independent act. The rules governing the two situations, at least where a constitutional provision is present, such as in this state, are different, for, as we have said, whether there is in the added part contained in the amendment any inconsistency is not material, but the controlling element must be, what is the effect of the statute as last amended. If we could amend a section or act by merely adding a word, phrase or clause, then it seems to us counsel's argument would be sound, but under our constitution and the authorities cited, the act as amended is complete, and must contain all that is intended to be in the section as amended." (Emphasis supplied.)
Since the three-year provision was repealed by its omission from the second Act it follows that claims for occupational diseases must be filed within one year after the injury.
The Legislature specifically broadened the definition of the word "injury" so as to include occupational diseases. 85 O.S. Supp. 1957 § 3(7). However, we must determine when the injury shall be deemed to have been sustained for the purpose of ascertaining when the statute commences to run.
The Legislature has given significance to the expression "last hazardous exposure." In 85 Ohio St. 1951 § 24, as amended in 1953, it is provided that notice of injury shall be given within eighteen months from date of last hazardous exposure. In Sec. 10 of the 1953 amendment (85 O.S.Supp. 1957 § 1.1) it is provided that the provision for occupational disease coverage shall not apply to cases in which the last injurious exposure to the hazards occurred before the effective date of the Act. While the second amendment of Sec. 43, of Title 85, does not specify when the injury shall be deemed to have been sustained we think it is clear that the Legislature intended that limitations would begin to run from the date of the last hazardous exposure. Though not material to the facts in this case the rule might be different where hazardous exposures occur under two employers. 85 Ohio St. 1951 § 11, as amended and supplemented in 1953 (85 O.S.Supp. 1957 § 11(3).)
In the case at bar the claim was filed December 4, 1956. Claimant alleged that the last injurious exposure to the hazard was in June of 1956, and there was some evidence to support this allegation. On the other hand it was also alleged that the last "disabling" exposure was in May of 1955, more than one year prior to the time the claim was filed. In this connection we observe that with reference to limitations the time commences to run from the date of the last hazardous exposure, and not the date of the last "disabling" exposure. The date of disablement is only material as to the question of when notice must be given. See 85 O.S.Supp. 1957 § 24.
The Commission failed to make a finding as to the date of last exposure to the hazard; therefore, we cannot determine whether the claim is barred by the one-year limitation provision.
The employer also pleaded that claimant failed to give the requisite notice. The Commission made no finding on this issue. Of course, if the Commission properly finds that the last exposure occurred more than one year prior to the filing of *962 the claim, it will not be absolutely necessary to pass on the question of notice. Otherwise, the Commission must make a finding on the issue of notice. Pine Valley Lumber Co. v. Robinson, 182 Okl. 234, 76 P.2d 1048. We suggest that the Commission make a finding on the issue of limitations and also on the issue of notice.
The order is vacated and the case is remanded to the State Industrial Commission for the purpose of making the necessary and proper findings, as hereinabove indicated, together with any other findings which it deems appropriate.
WELCH, C.J., CORN, V.C.J., and HALLEY, JOHNSON and WILLIAMS, JJ., concur.
BLACKBIRD, J., concurs in result. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1193580/ | 119 Ariz. 253 (1978)
580 P.2d 714
STATE of Arizona ex rel. Ed SAWYER, A.V. Hardt, and Alfredo Gutierrez, Petitioners,
v.
John A. LaSOTA, Jr., Respondent.
No. 13778.
Supreme Court of Arizona, In Banc.
June 6, 1978.
*254 Mangum, Wall, Stoops & Warden by Daniel J. Stoops, Flagstaff, for petitioners.
John A. LaSota, Jr., Atty. Gen., Phoenix by Donald N. Zillman, Special Asst. Atty. Gen., for respondent.
STRUCKMEYER, Vice Chief Justice.
This petition for writ of quo warranto was commenced as an original action in this Court by Ed Sawyer, a Member and President of the Arizona State Senate, Alfredo Gutierrez, Member and Majority Leader of the Arizona State Senate, and A.V. Hardt, Member and Chairman of the Appropriations Committee of the Arizona State Senate, against John A. LaSota, Jr. as Attorney General. Prayer for relief denied and Petition ordered dismissed.
Petitioners allege that they are citizens and taxpayers of the State and have the responsibility to ensure that appropriate laws are enacted and enforced and that expenditures are effectively and properly made without waste in all matters relating to the government of the State of Arizona. They further allege that the respondent, John A. LaSota, Jr., was named by appointment as Attorney General and presently holds the office; that he is not qualified to hold the office in that by statute A.R.S. § 41-191, "[t]he attorney general shall have been for not less than five years immediately preceding the date of taking office a practicing attorney before the supreme court of the state." They allege that respondent LaSota had not been before taking office a practicing attorney for five years before the Supreme Court of the State, in that during the years 1973 and 1974 respondent was employed at the Arizona State University School of Law and during those years he continued his membership in the Arizona State Bar Association on a retired status and, as a retired lawyer, could not practice law or hold himself out as eligible to do so.
Petitioners requested respondent to bring a quo warranto proceeding pursuant to A.R.S. § 12-2041, but respondent declined to bring such quo warranto action as requested. We accepted jurisdiction for the reasons stated in State ex. rel. De Concini v. Sullivan:
"The public business demands a prompt judicial inquiry and a final determination of the actions of the respondent in allegedly unlawfully usurping, holding, and exercising so vital an office as that of Attorney General." 66 Ariz. 348, 353, 188 P.2d 592, 595 (1948).
By Art. 6, § 5, ¶ 1, of the Constitution of Arizona, the Supreme Court has "original jurisdiction of habeas corpus, and quo warranto, mandamus, injunction and other extraordinary writs to state officers." While the quoted language of Art. 6, § 5 is derived from the constitutional amendment adopted at the general election held November 8, 1960, from statehood this Court has had original jurisdiction in quo warranto and mandamus "as to all state officers." Art. 6, § 4, Constitution of Arizona, approved February 9, 1911. Accordingly, we construe the grant in Art. 6, § 5, ¶ 1, as meaning the power to issue extraordinary writs as under the common law of England.
In People v. Wood, 411 Ill. 514, 104 N.E.2d 800 (1952), the Supreme Court of Illinois considered extensively the ancient common law right of quo warranto. It was pointed out that this was purely a civil writ, issued against one who claimed or usurped any office or franchise, to inquire by what authority he asserted such right. The writ *255 became obsolete at an early date and was supplanted by what became known as an information in the nature of quo warranto. This was a criminal prosecution instituted by the attorney general to oust a usurper of an office or franchise. The court said:
"The information, as any other criminal action, was under the exclusive and arbitrary control of the Attorney General. His discretion could not be coerced and leave of court to file the information was not required. A private citizen could no more prosecute such a proceeding than he could prosecute in his own name for any other crime." 104 N.E.2d at 803.
Arizona follows closely the common law. By A.R.S. § 12-2041:
"A. An action may be brought in the supreme court by the attorney general in the name of the state upon his relation, upon his own information or upon the verified complaint of any person, in cases where the supreme court has jurisdiction, or otherwise in the superior court of the county which has jurisdiction, against any person who usurps, intrudes into or unlawfully holds or exercises any public office or any franchise within this state.
B. The attorney general shall bring the action when he has reason to believe that any such office or franchise is being usurped, intruded into or unlawfully held or exercised."
By A.R.S. § 12-2043, however, any person claiming an office may bring an action:
"A. If the attorney general * * * refuses to bring an action as provided for in §§ 12-2041 and 12-2042, upon information or at the request of any person claiming such office or franchise, the person may apply to the court for leave to bring the action in his own name and may so bring it if leave therefor is granted."
The foregoing statutes do not restrict the common law right of quo warrant. They are simply cumulative thereto in that a private person, claimant of an office, may bring the action, thereby ameliorating the strictness of the common law rule.
"By the express provisions of the statute a private party can only bring quo warranto when he, himself, claims the office or franchise in question. This plaintiff does not do." Skinner v. City of Phoenix, 54 Ariz. 316, 323, 95 P.2d 424, 427 (1939).
And see Tracy v. Dixon et al., 119 Ariz. 165, 579 P.2d 1388 (filed May 23, 1978). Petitioners in the present case are not, of course, claimants to the Office of Attorney General.
It is urged, however, that we have expressly held that a nonclaimant could bring an action challenging the legality of the holding of the Office of Attorney General, citing State ex rel. De Concini v. Sullivan, supra. We do not so read that case. There, the elected Attorney General of the State was John L. Sullivan. He was convicted of the crime of conspiring to violate the gambling laws of the State. Under a statute which provided that an office was deemed vacant when the incumbent was convicted of a felony or of any offense involving a violation of his official duties, the Governor appointed Evo De Concini to the office and he qualified by filing the oath and bond required by law. Palpably, when Sullivan refused to surrender the office, De Concini was a claimant within the meaning of A.R.S. § 12-2043, supra.
While we hold that petitioners may not maintain this action as one in quo warranto, the Attorney General, like any other public officer, may not arbitrarily refuse to discharge the duties of his office. An original petition addressed to this Court will be given effect irrespective of its name. Buell v. Superior Court of Maricopa County, 96 Ariz. 62, 391 P.2d 919 (1964). And see Eggerth v. Forselius, 82 Ariz. 256, 311 P.2d 964 (1957). Consequently, we examine the petition to determine if, as an application for a writ of mandamus, the Attorney General could be compelled to bring an action in which the dispute can be resolved. While mandamus is not available as a remedy to try to title to an office, the holder may be compelled by mandamus to perform the duties of his office.
*256 In 1904, in Buggeln v. Doe, 8 Ariz. 341, 76 P. 458, under a Territorial statute similar in effect to A.R.S. § 12-2041, it was held:
"We think the statute authorizing an action in the nature of quo warranto does not make it mandatory upon the district attorney to institute such action, unless he has reason to believe that an office or franchise is being usurped, intruded into, or unlawfully held or exercised. It is, however, his duty to bring such proceedings when facts are laid before him from which he can reasonably conclude that such franchise is being usurped. If, on such showing, he fails to institute such proceedings, his action can be reviewed upon an application for mandamus; * * *."
This was followed by Duffield v. Ashurst, 12 Ariz. 360, 364, 100 P. 820, 822 (1909), in which the Court said:
"We have already had occasion to hold, in applying this statute, that, where the facts presented to the district attorney show as a matter of law that a franchise is unlawfully being exercised and are not in dispute, the refusal by the district attorney to institute the quo warranto proceedings is a violation of his duty, and that we may compel him to perform that duty by our writ of mandate."
We therefore examine the facts of this case to determine whether as a matter of law respondent has usurped the Office of Attorney General. We have concluded that he has not.
By the Constitution of Arizona, Art. 5, § 1, the Executive Department shall consist of the Governor, the Secretary of State, State Treasurer, Attorney General and Superintendent of Public Instruction. Section 2 of Art. 5 sets forth the eligibility to State offices in this language:
"No person shall be eligible to any of the offices mentioned in Section 1 of this article except a * * * person of the age of not less than twenty-five years, who shall have been for ten years next preceding his election a citizen of the United States, and for five years next preceding his election a citizen of Arizona."
No other conditions to holding of the Executive Department offices can be found, and no others may be imposed by the Legislature.
In a continuous line of cases commencing over 60 years ago, it has been held that the Legislature has no power to add new or different qualifications for a public office other than those specified in the Constitution. In Campbell v. Hunt, 18 Ariz. 442, 453, 162 P. 882, 886 (1917), we held:
"The qualifications for Governor are specifically detailed in the Constitution, and the Legislature is therefore powerless to add to or detract from the qualifications prescribed. No citation of authority is necessary here."
And in Whitney v. Bolin, 85 Ariz. 44, 47, 330 P.2d 1003, 1005 (1958), we said:
"It is our opinion that the constitutional specifications are exclusive and the legislature has no power to add new or different ones. The qualifications fixed in the Constitution are not exclusive for the reason that if it were not intended by the framers thereof to fix all the qualifications, then it must have been intended to fix only a part and leave it to the legislature to fix others. Such a view is inconsistent with accepted constitutional construction that the enumeration of certain specified things in a constitution will usually be construed to exclude all other things not so enumerated. Positive directions in a constitution contain an implication against anything contrary to them. Indeed, were the framers to intend otherwise, they would have created the office with directions that the legislature could or should fix other qualifications."
We conclude that A.R.S. § 41-191, providing that the Attorney General shall be a practicing attorney before the Supreme Court of Arizona for five years immediately preceding the date of taking office is an additional qualification not required by the Constitution and is of no force or effect. As a matter of law, petitioners do not state sufficient facts upon which the Court can grant any relief.
*257 It is ordered that petitioners' prayer for relief is denied and the petition is ordered dismissed.
CAMERON, C.J., and HAYS, HOLOHAN and GORDON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1542355/ | 947 A.2d 1116 (2008)
Stephen M. CAMPBELL and Stacy A. Campbell, husband and wife, jointly and individually and as guardians ad litem of Jonathan S. Campbell and Lauren E. Campbell, minor children, Plaintiffs Below, Appellants,
v.
Marie DiSABATINO and Patterson Schwartz Associates, Inc., a Delaware Corporation, Defendants Below, Appellees.
No. 256,2007.
Supreme Court of Delaware.
Submitted: January 30, 2008.
Decided: April 23, 2008.
Robert C. McDonald, Esquire of Silverman, McDonald & Friedman, Wilmington, Delaware, for Appellants.
Stephen P. Casarino, Esquire of Casarino, Christman & Shalk, Wilmington, Delaware, for Appellee Marie DiSabatino.
R. Karl Hill, Esquire of Seitz Van Ogtrop & Green, P.A., Wilmington, Delaware, for Appellee Patterson Schwartz Associates, Inc.
*1117 Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices, constituting the Court en banc.
BERGER, Justice.
In this appeal we are asked to decide whether tenants, who allegedly suffered damages from mold in a rental home, must have a "standard of care" expert to establish landlord's breach of duty. The trial court granted landlord's motion for summary judgment based on that premise. We agree that landlord was entitled to summary judgment, but for a different reason the tenants failed to provide expert evidence as to the cause of the mold. A landlord has no duty to remediate mold created by the tenants' conduct or possessions. Here, tenants failed to provide competent evidence that mold in the rental unit was caused by any of the rental unit's systems, alleged design defects, or other structural problems relating to the dwelling. Accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On October 20, 2000, Stephen M. Campbell, his wife, and children, moved out of their furnished apartment and into a single family home owned by Marie DiSabatino and managed by Patterson Schwartz Associates, Inc. (collectively, "PSA"). Shortly after taking their personal furniture out of storage and moving in, the Campbells noticed a musty smell in the house. Campbell discovered stagnant water in the basin of a whole house humidifier that was not functioning. After removing the humidifier and discarding it, Campbell complained to PSA about the musty smell. On November 29, 2000, PSA hired ServPro to clean the air ducts in the house. On December 18, 2000, Campbell notified PSA in writing that the musty smell persisted. In addition, Campbell advised PSA that his doctors considered the situation unhealthy. Campbell wrote again a few days later, but received no response. On December 28, 2000, the Campbells moved out, leaving all of their possessions in the house.
In February 2001, PSA brought an action in Justice of the Peace Court seeking summary possession and back rent. PSA prevailed. The Campbells filed an appeal, but later dismissed their appeal with prejudice. In October 2002, the Campbells filed this action, pro se. After retaining counsel in January 2003, they amended their complaint to allege negligence, negligence per se, and other claims all arising from the physical harm that they suffered as a result of the mold in the rental unit. The Campbells identified a standard of care expert, but the expert failed to provide a report by the date set in the trial court's scheduling order. As a result, the trial court granted PSA's motion to exclude the Campbells' expert. Thereafter, the trial court granted PSA's motion for summary judgment on the ground that a standard of care expert is required in "mold" cases. This appeal followed.
DISCUSSION
The Campbells allege that PSA was negligent in its maintenance of the home they rented. To prevail in a claim for negligence, a plaintiff must establish that: 1) the defendant owed the plaintiff a duty of care; 2) the defendant breached that duty; 3) the plaintiff was injured; and 4) the defendant's breach was the proximate cause of the plaintiff's injury.[1] No one disputes PSA's duty to maintain the leased premises in a safe and sanitary condition. The parties and the trial court focused on the question of whether PSA breached that duty. Specifically, the parties *1118 disputed whether an expert is required to explain the corrective action a landlord must undertake when a tenant complains of mold in the leased premises.
No one addressed the more fundamental question of whether PSA's conduct proximately caused the Campbells' injuries. In other words, was there any evidence that the allegedly non-functional humidifier, which was discarded, was the source of the mold? When the trial court touched on this issue, the Campbells' attorney replied, with appropriate candor:
THE COURT: What's the legal effect of the point made by Mr. Hill that, I guess both parties made, that the humidifier was removed? What Mr. Campbell claimed was the source of the mold was removed by him and not preserved?
* * *
MR. MCDONALD: Your Honor, I think I called this the fly in the ointment. It's a huge problem frankly for the plaintiff. . . .
I understand that my client has done some remedial work in the house to try to remove the musty odor, I understand that the humidifier is not in the home, I don't know where the humidifier is. . . . I don't know how to get past that to be candid with the Court. . . .
Because that "huge problem" was not argued to the trial court, however, the trial court undertook an analysis of the need for a standard of care expert in a mold case.
We think the more appropriate starting point, given the undisputed facts of this case, should have been the absence of any competent evidence that PSA was responsible for (in the sense that its conduct proximately caused) the mold. The Campbells maintain that the humidifier was the source of the mold. They make that assertion because, according to Campbell, the humidifier was not functioning and there was standing water in it.[2] Campbell concedes that he is not an expert on the causes of mold, and that he has no expert who would opine that the humidifier was the source of the mold.[3]
It is settled Delaware law that, if a claim requires proof of facts that are "not within the common knowledge of laymen," those facts must be presented through competent expert testimony.[4] There may be cases where the source of mold arguably is within the common knowledge of laymen. For example, where black mold is growing on the ceiling of an apartment at a place where water is leaking, an expert might not be needed to opine that the wet ceiling tiles are the source of the mold. Here, however, the Campbells allege that they were injured by invisible, airborne mold. Because an opinion as to the source of invisible, airborne mold necessarily requires scientific or technical knowledge, the Campbells were required to present expert testimony in support of this element of their claim. They did not. Accordingly, PSA was entitled to the entry of summary judgment because the Campbells failed to adduce competent evidence that PSA's conduct proximately caused the injuries resulting from the mold.
*1119 CONCLUSION
Based on the foregoing, the judgment of the Superior Court is affirmed, on different grounds.[5]
NOTES
[1] New Haverford Partnership v. Stroot, 772 A.2d 792, 798 (Del.2001).
[2] Because causation had not been discussed by the parties, we asked for supplemental briefing to determine the parties' positions on the need for expert testimony and the record evidence, if any, as to the source of the mold.
[3] Indeed, the evidence strongly suggests otherwise. The prior tenants did not notice any musty smells; the musty smell did not abate after the humidifier was removed (or after the air ducts were cleaned); but the musty smell did abate after the Campbells' furniture was removed.
[4] Davis v. Maute, 770 A.2d 36, 40 fn. 3 (Del. 2001) (Citing Mazda Motor Corp. v. Lindahl, 706 A.2d 526, 533 (Del. 1998)).
[5] Unitrin v. American General Corp., 651 A.2d 1361 (Del.1995). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1659203/ | 671 So. 2d 1305 (1996)
GULF GUARANTY LIFE INSURANCE COMPANY
v.
Tammy DUETT, Administratrix of Billy Dewayne Duett, Deceased.
No. 93-CA-00133-SCT.
Supreme Court of Mississippi.
March 7, 1996.
*1306 Stephanie M. Rippee, Butler Snow O'Mara Stevens & Cannada, Jackson, W. Scott Welch, III, Butler Snow Firm, Jackson, for appellant.
Roy O. Parker, Jr., Tupelo, for appellee.
Before PRATHER, P.J., and PITTMAN and McRAE, JJ.
PRATHER, Presiding Justice, for the Court:
I. STATEMENT OF THE CASE
This case involves the interpretation of a contract for credit life insurance between Billy Duett (Billy) and Gulf Guaranty Life Insurance Company (Gulf Guaranty). In October 1989, Billy Duett bought a new pick-up truck, which he financed through the Guaranty Bank and Trust Company of Belzoni, Mississippi. The loan was for $26,100.90, and was to be paid in three annual installments of $8,700.30. The installments were to become due beginning May 15, 1990, and the final payment was to be due May 15, 1992.
Billy purchased credit life insurance on the loan from Gulf Guaranty. He was issued a certificate of insurance and a schedule. The certificate clearly stated that its provisions were subject to the Group Credit Insurance Policy (the master policy), which was held by the bank.
The schedule issued to Duett indicated the following: (a) "amount of insurance" "$26,100.90", (b) "type of loan" "level", (c) "life premium" "673.90", and (d) "Term of Ins. Months" "3 ANN PAY OF $8,700.30 EA BEG. 5-15-90".
The certificate of insurance that accompanied the schedule reads as follows:
BENEFIT: If this Certificate provides Level Life Insurance, the death benefit is level for the term of coverage and is equal to the Amount of Insurance shown in the Schedule. If this Certificate provides Reducing Life Insurance, the death benefit reduces throughout the term of coverage, beginning with the Amount of Insurance on the Date of Loan, decreasing uniformly each month by an amount equal to the "Amount of Insurance" divided by the number of months in "Term of Insurance Months" both shown in the Schedule on the reverse side.
Billy Duett died July 24, 1991; at that time, he owed $8,700.30 on his truck loan. Gulf Guaranty paid $8,700.30 in death benefits. Billy's wife, Tammy Duett (Tammy), was named administratrix of Billy's estate. After unsuccessfully making demands on *1307 Gulf Guaranty, she brought suit in the Circuit Court of Humphreys County for $17,400.60 the difference between the $26,100.90 "amount of insurance" and the $8,700.30 amount of benefits already paid. She also sued for punitive damages. Both parties moved for summary judgment. The trial judge granted summary judgment in Tammy's favor and ordered Gulf Guaranty to pay $17,400.60 in additional death benefits and $15,000 in punitive damages, plus interest. On appeal, Gulf Guaranty raises the following issues:
A. WHETHER TAMMY DUETT IS ENTITLED TO ANY ADDITIONAL DEATH BENEFITS UNDER THE TERMS OF THE GROUP POLICY AND THE INDIVIDUAL CERTIFICATE OF INSURANCE ISSUED TO BILLY DEWAYNE DUETT?
B. WHETHER THE "INCORRECT PREMIUM" PROVISION GOVERNS?
C. WHETHER GULF GUARANTY'S ACTIONS JUSTIFY AN AWARD OF PUNITIVE DAMAGES.
II. LEGAL ANALYSIS
The standard of review when a trial court issues a summary judgment is as follows:
We review de novo the record on appeal from a grant of a motion for summary judgment. In Brown v. Credit Center, Inc., 444 So. 2d 358, 362 (Miss. 1983), we interpreted Rule 56 and the standards that the trial courts should use in considering a motion for summary judgment. We explained that
The trial court must review carefully all of the evidentiary matters before it admissions in pleadings, answers to interrogatories, depositions, affidavits, etc. The evidence must be viewed in the light most favorable to the party against whom the motion has been made. If in this view the moving party is entitled to judgment as a matter of law, summary judgment should forthwith be entered in his favor. Otherwise the motion should be denied.
Northern Elec. Co. v. Phillips, 660 So. 2d 1278, 1281 (Miss. 1995) (citations omitted). Gulf Guaranty's arguments are analyzed according to these principles.
A. WHETHER TAMMY DUETT IS ENTITLED TO ANY ADDITIONAL DEATH BENEFITS UNDER THE TERMS OF THE GROUP POLICY AND THE INDIVIDUAL CERTIFICATE OF INSURANCE ISSUED TO BILLY DEWAYNE DUETT?
Gulf Guaranty argues that Billy:
purchased level credit life insurance coverage at three different levels, one for each of the three terms of coverage specified in his certificate. Billy Dewayne Duett died during the third level term of coverage, and during that term his coverage was for the level amount of $8,700.30. As a consequence, Gulf Guaranty's payment of $8,700.30 to the Bank fulfilled Gulf Guaranty's obligations under the policy and the certificate. No additional policy benefits or interest is due.
In support of this argument, Gulf Guaranty points out that the term of insurance is listed on the schedule as three annual payments of $8,700.30 each, beginning May 15, 1990. According to Gulf Guaranty, the "clear and unambiguous" language of the contract indicates that Billy purchased level insurance at three different levels, which entitled him to coverage in the following amounts: (a) $26,100.90 prior to May 15, 1990, (b) $17,400.60 from May 16, 1990 until May 15, 1991, and (c) $8,700.30 from May 16, 1991 until May 15, 1992.[1]
Guaranty also cites the master policy, which outlines the procedure for calculating the premiums for credit life insurance:
Premiums Life: The required premiums for Life Insurance for each one hundred dollars ($100.00) of "Amount of Insurance" and for each month of the "Term of Insurance Months" are shown in the table below.
*1308
Type Premium
Reducing 6 2/3 cents
Level 13 1/3 cents
Joint Reducing 11 7/12 cents
Joint Level 23 1/3 cents
The premiums for other amounts of insurance
and terms of insurance are in direct
proportion to the premium rates quoted
above.
According to Gulf Guaranty, when this provision is applied, Billy's premium under its interpretation of the policy would have been $673.90 which is exactly what Billy was charged. On the other hand, Gulf Guaranty argues that "if Duett's coverage was at one level amount for 31 months as the plaintiff argues, his total premium would have been approximately $1,095.04, almost twice what he actually paid."
To the contrary, Tammy argues that her husband purchased level insurance and that she is entitled to the entire amount of coverage $26,100.90. To support her argument, she cites the definition of level life insurance given in the certificate of insurance, which states that level life insurance is "level for the term of coverage and is equal to the amount of insurance."
Our familiar rule of contract interpretation is that a clear and unambiguous contract will be enforced as written. Century 21 Deep South Properties, Ltd. v. Keys, 652 So. 2d 707, 717 (Miss. 1995). Furthermore, "[i]n contract construction cases our focus is upon the objective fact the language of the contract. We are concerned with what the contracting parties have said to each other, not some secret thought of one not communicated to the other." Heritage Cablevision v. New Albany Elec. Power System of City of New Albany, 646 So. 2d 1305, 1313 (Miss. 1994) (quoting Osborne v. Bullins, 549 So. 2d 1337, 1339 (Miss. 1989)). Moreover, "[t]he familiar public policy" in this State is that "courts must interpret the terms of an insurance policy (and the statutes from which they derive) liberally in favor of providing coverage for the insured." Aetna Cas. and Sur. Co. v. Williams, 623 So. 2d 1005, 1008 (Miss. 1993).
Undisputedly, the schedule shows that Billy bought "level" insurance and that his "amount of insurance" was $26,100.90. Under the definition of level insurance in the certificate of insurance, neither the premium amount nor the "Term of Ins. Months" entry is relevant to the calculation of death benefits. Therefore, Gulf Guaranty's arguments on this point are specious. The contract indicates that Billy's coverage was to be "level" for the "amount of insurance" of $26,100.90, which would entitle Tammy to the remaining death benefits she seeks to recover.
B. WHETHER THE "INCORRECT PREMIUM" PROVISION GOVERNS?
In the alternative, Gulf Guaranty argues that, if its interpretation of the policy is incorrect, then this situation is governed by the "Incorrect Premium" provision of the policy. That provision states:
Incorrect Premium: If the premium charge for either life or disability insurance in connection with any loan is less than the premium which should have been charged according to the rates specified above, then the maximum amount of insurance for which the company will be liable will be reduced to the amount which the premium that was actually charged would have purchased under the premium rate specified according to the term of insurance. If any excess premium is inadvertently charged, the amount of the excess shall be refunded promptly as soon as the excess is discovered.
To refute this argument, Tammy cites Standard Life Ins. Co. of Indiana v. Veal, 354 So. 2d 239 (Miss. 1977), in which the insurance company argued that a spouse was not covered on a joint policy because the premium charged was that charged for a single coverage policy. The Veal court held that:
the error in the premium was an error of the agent of defendant and an insured may not be prejudiced by the mistake of an insurance agent if the agent made a mistake in computing the premium. In case of a mistake in the premium being charged, defendant would be entitled to *1309 have the contract reformed to reflect the proper premium.
Veal, 354 So.2d at 246 (emphasis added).
Gulf Guaranty argues that this case can be distinguished from Veal because there was no "incorrect premium" provision in Veal and because Billy Duett agreed to the contract, which included this provision in the master policy. Indeed, this Court respects the right of insurer and insured to contract freely one with the other (except as limited by the public law). In re Koestler, 608 So. 2d 1258, 1263 (Miss. 1992) (overruled on other grounds) in Nationwide Mut. Ins. Co. v. Garriga, 636 So. 2d 658 (Miss. 1994)).
However, Tammy argues that Gulf Guaranty should be equitably estopped from asserting that the premium charged was the incorrect premium. Equitable estoppel "precludes a party from denying a material fact which he has previously induced another to rely upon, whereby the second party changed his position in such a way that he would suffer injury if denial was allowed." Christian Methodist Episcopal Church v. S & S Const. Co., Inc., 615 So. 2d 568, 571-72 (Miss. 1993). Tammy argues that Gulf Guaranty represented to Billy that the proper premium had been paid, and that Billy relied on that representation to his detriment. In the light of the language of the contract as analyzed above, Tammy's equitable estoppel argument has merit. An insurance company which represents that certain coverage is being purchased and that the premium charged is the appropriate premium can not later deny that the premium was sufficient. See Veal, 354 So.2d at 246.
C. WHETHER GULF GUARANTY'S ACTIONS JUSTIFY AN AWARD OF PUNITIVE DAMAGES?
Finally, Gulf Guaranty argues that the award of punitive damages in this case was inappropriate. In support of this argument, Gulf Guaranty states that it had a "legitimate, or at least an arguable, reason for denying the claim. There is no evidence that the conduct of any officer, agent or employee of Gulf Guaranty was in reckless disregard of the insured's rights."
Indeed, the award of punitive damages is appropriate in breach of contract cases where there is a showing of willful or malicious wrong or gross negligence or reckless disregard for the rights of others. Peoples Bank and Trust Co. v. Cermack, 658 So. 2d 1352, 1361 (Miss. 1995). However, "[t]he award of punitive damages, along with the amount of such are within the discretion of the trier of fact." Id. Therefore, this issue was inappropriate for summary judgment, and the award of punitive damages should have been submitted to a jury.
"Nonetheless, the trial court, in determining if the issue should be submitted to the jury, must `decide whether, under the totality of the circumstances and viewing the defendant's conduct in the aggregate, a reasonable hypothetical trier of fact could have found either malice or gross neglect or reckless disregard.'" Id. (quoting Colonial Mortg. Co., Inc., v. Lee, 525 So. 2d 804, 808 (Miss. 1988)). Therefore, the issue of punitive damages is remanded to the trial court for trial on the merits in the light of these legal principles.
III. CONCLUSION
Under the language of the contract, Tammy is entitled to "level" coverage in the amount of "$26,100.90." However, after the legal determination that the issue of punitive damages is properly before the trier of fact, the award of punitive damages is a matter to be determined by a jury. Therefore, this case is affirmed with regard to the actual damages and reversed and remanded for retrial with regard to issue of punitive damages only.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
DAN M. LEE, C.J., SULLIVAN, P.J., and PITTMAN, JAMES L. ROBERTS, Jr., SMITH and MILLS, JJ., concur.
BANKS, J., concurs in result only.
McRAE, J., specially concurs with separate written opinion.
*1310 McRAE, Justice, specially concurring:
I agree with the majority that Gulf Guaranty Life Insurance company was obligated under the terms of its policy to pay the total face amount of $26,190.00. Summary judgment on the issue of liability, therefore, was appropriate since there were no disputed facts. Furthermore, the arguments presented by Gulf Guaranty were, as the majority states, "specious." The contract clearly stated that this was a level policy. The terms and conditions of its benefits provision stated, "Benefit if this certificate provides level life insurance, the benefit is level for the term of coverage and is equal to the amount of insurance showing in the schedule."
For Gulf Guaranty now to say that this was coverage for three different levels, one for each of the three terms of coverage specified in the certificate, is truly specious. Just as we allow for the granting of partial summary judgment on the issue of liability when compensatory damages are at issue, so partial summary judgment also may be granted on the issue of liability for punitive damages. In this case, where the facts are not disputed and the Duetts are entitled to judgment as a matter of law, summary judgment on the issue of liability for punitive damages, likewise, was appropriate. It remains for the jury, however, to determine only the amount of the award necessary to punish the insurer and deter it from further unfair practices, to serve as an example to others and to compensate the Duetts for their public service in bringing the action. Valley Forge Insurance Co. v. Strickland, 620 So. 2d 535, 541 (Miss. 1993), cert. denied, ___ U.S. ___, 114 S. Ct. 635, 126 L. Ed. 2d 593 (1993).
The insured contracted for a level policy, by definition, one which would cover the full amount of the loan for its duration. If the insured died, the total amount initially loaned to him would be paid. Gulf Guaranty had no arguable reason to deny that. It wrote this policy, which is a contract of adhesion. The insurer's refusal to pay the full policy benefits amounts to post claims underwriting, an act of bad faith which warrants imposition of punitive damages, the amount of which is within the province of the jury to determine.
NOTES
[1] However, the "amount of insurance" entry does not reflect three different terms of coverage at three different amounts. That entry states that the amount of insurance is $26,100.90. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1734775/ | 757 So. 2d 236 (2000)
Louis CLAY a/k/a Louis Clay, Jr. a/k/a `Spoola Boo'
v.
STATE of Mississippi.
No. 97-KA-01452-SCT.
Supreme Court of Mississippi.
March 23, 2000.
*237 Robert J. Hildum, Baton Rouge, Attorney for Appellant.
Office of the Attorney General by Pat S. Flynn, Attorney for Appellee.
BEFORE PITTMAN AND BANKS, P.JJ., AND MILLS, J.
PITTMAN, Presiding Justice, for the Court:
STATEMENT OF THE CASE
¶ 1. This is a criminal appeal taken from the Circuit Court of Wilkinson County, Mississippi, Circuit Judge Lillie Blackmon Sanders, presiding, wherein Louis Clay, Jr. was convicted of aggravated assault and sentenced as an habitual offender to twenty years in the custody of the Mississippi Department of Corrections without benefit of probation or parole. Final judgment was entered on October 17, 1997, and this appeal was timely filed.
STATEMENT OF THE FACTS
¶ 2. On November 8, 1996, Louis Clay, Jr., was indicted on the charges of assault with a deadly weapon and a convicted felon in possession of a firearm. The indictment also noted that Clay was an habitual offender.
¶ 3. On December 2, 1996, Clay appeared before Circuit Judge Lillie Blackmon Sanders in the Circuit Court of Wilkinson County for arraignment. Clay pled not guilty. Judge Sanders found Clay to be indigent and appointed Thomas Rosenblatt to represent Clay. Citing an unwillingness by Clay to defer and cooperate with counsel, Rosenblatt filed a motion to withdraw as Clay's attorney, which was granted. L.H. Rosenthal was then appointed as Clay's counsel, and trial was set for February 27, 1997. Rosenthal sought and was granted a continuance, giving him more time to prepare for trial due to his recent appointment to the case.
¶ 4. Trial was set for June 17, 1997. On June 16, Rosenthal sought and was granted a continuance based upon Clay's impending surgery with a new trial date set for June 26, 1997. Although not reflected *238 in the record, the trial was apparently continued again on June 26, 1997. On September 19 trial was reset for October 8, 1997.
¶ 5. Jury selection began on October 8, 1997, but a mistrial was declared prior to the jury being selected. Trial was reset for October 16, 1997. On the date of trial an extensive conference was held in chambers. During the conference, Clay requested that he be allowed to present pro se motions. During the course of discussion, the court discovered that Clay and Rosenthal disagreed on how Clay was to be represented. Rosenthal then made an oral motion to withdraw as Clay's counsel citing a differing opinion on how to proceed with the case and questioning Clay's indigent status.
¶ 6. Clay responded to Rosenthal's allegation concerning certain assets and pointed out that Clay received food stamps and disability benefits, citing a monthly income of $484. Subsequently, the court granted Rosenthal's motion to withdraw and revoked Clay's indigent status based upon his statement that he made $484 per month from disability. A discussion then ensued concerning the prior delays in going to trial. The State blamed the delays on Clay and accused him of intentionally delaying the proceedings. The State also petitioned the court to raise Clay's bond. Rosenthal stated that delay alone was not his purpose for seeking another continuance. Before Rosenthal could explain his reason for the continuance, Judge Sanders cut him off, reminding him that he had been excused from representing Clay. The discussion of prior delays continued with the State seeking once again to have Clay's bond raised, theorizing that Clay was manipulating the system through undue delays.
¶ 7. Conversation then turned to the issue of Judge Sanders's ability to be fair and unbiased. The discussion ended when Judge Sanders once again found Clay not indigent, granted a recess in which time Clay could hire a new attorney, and raised his bond from $20,000 to $100,000 so the case would not "drag on and on and on."
¶ 8. Clay stated that he could not make the bail and requested that he be given "a couple of days" to find an attorney since he had already talked to one about taking his case. Judge Sanders reiterated that Clay's bail was set at $100,000 and explained that his new attorney could talk to him in jail. Faced with the prospect of going to jail during the interim before trial and after talking with Rosenthal, Clay decided to proceed pro se that day.
¶ 9. Judge Sanders then conducted an examination of Clay under URCCC 8.05 to determine whether he knowingly and voluntarily desired to proceed as his own attorney. After the examination and further discussion with Rosenthal, Clay decided to represent himself at trial that day. For the record, Judge Sanders found that Clay knowingly and voluntarily decided to proceed as his own attorney. Judge Sanders, in her discretion, further decided not to appoint, at that time, an attorney to assist Clay in matters of procedure and protocol. Clay suggested that he might need an attorney later, at which point the State argued that such an appointment at a later time would once again delay the trial. Judge Sanders responded that Clay could acquire an attorney to advice him at the beginning of trial. Clay said he intended to get an attorney but wanted to get started.
¶ 10. Jury selection then began. At some point during voir dire, one of Clay's witnesses (also his common-law wife) entered the courtroom with her baby. Clay wanted to speak with her, but the court sustained the State's objection to communication between Clay and the witness during voir dire. Judge Sanders informed Clay that he could talk to his witness but not about the case.
¶ 11. After a two-day trial, the jury returned a guilty verdict. After excusing the jury, the Court, at the request of the State, conducted an habitual offender *239 hearing. The State introduced documentation from the Circuit Clerk's Office evidencing prior convictions. Clay was then sentenced to twenty years in prison as an habitual offender.
STATEMENT OF THE ISSUES
I. WHETHER CLAY WAS DENIED HIS DUE PROCESS RIGHTS WHEN ON THE DAY OF TRIAL THE COURT STRIPPED CLAY OF HIS INDIGENT STATUS AND ALLOWED HIS ATTORNEY TO WITHDRAW.
II. WHETHER CLAY'S DECISION TO PROCEED PRO SE WAS FREE AND VOLUNTARY WHERE AS A RESULT OF THE TRIAL COURT'S RULINGS CLAY WAS FACED WITH THE CHOICE OF GOING TO TRIAL WITHOUT COUNSEL OR GOING TO JAIL.
DISCUSSION
I. WHETHER CLAY WAS DENIED HIS DUE PROCESS RIGHTS WHEN ON THE DAY OF TRIAL THE COURT STRIPPED CLAY OF HIS INDIGENT STATUS AND ALLOWED HIS ATTORNEY TO WITHDRAW.
II. WHETHER CLAY'S DECISION TO PROCEED PRO SE WAS FREE AND VOLUNTARY WHERE AS A RESULT OF THE TRIAL COURT'S RULINGS CLAY WAS FACED WITH THE CHOICE OF GOING TO TRIAL WITHOUT COUNSEL OR GOING TO JAIL.
¶ 12. Issues I and II shall be considered together for the purpose of determining whether stripping Clay of his indigent status and raising his bail served to make his choice to proceed pro se nonvoluntary and to infringe his right to effective assistance of counsel. Both the determination of indigent status and the setting of bail are left to the sound discretion of the trial judge. Gerrard v. State, 619 So. 2d 212, 218 (Miss.1993); Lee v. Lawson, 375 So. 2d 1019, 1021 (Miss.1979). Such judgment shall not be overturned unless there is a showing of manifest error or abuse of discretion. Id. at 1021.
¶ 13. The record reflects that Clay was examined and declared indigent on December 3, 1996, by Judge Sanders and an attorney was appointed for his defense. The record does not show upon what basis this decision was made, nor are there any affidavits or statements attesting to Clay's status as an indigent.
¶ 14. On October 16, 1997, the day of trial, Clay sought a continuance and the dismissal of his attorney, Rosenthal. After such motion had been read into the record, Rosenthal claimed that Clay was not indigent. He based this opinion upon certain property he had seen at Clay's home over the course of his representation of Clay. These assets as described by Rosenthal were cars, office equipment and interest in a club. Rosenthal, however, did not provide any evidence that such property belonged to Clay nor did he provide an affidavit for the record as directed by Judge Sanders.
¶ 15. When questioned about these alleged assets Clay explained that the cars were not his and were not located at his address but were located at the address of his common-law wife, Yolanda Davis. He explained that his common-law wife owned four, that his son owned one, and that another belonged to a friend, Joseph Pyle, for whom Clay "had some guys working on it." Clay further explained that the office equipment belonged to his sister who owned a beauty shop in Baton Rouge which had burned, and she was storing the equipment with him. Clay did not address his alleged interest in a social club, but Rosenthal admitted that the club was titled in the name of Clay's son. Clay admitted to receiving $480 in disability and food stamps. He had admitted to this income at his first examination concerning whether he was indigent.
*240 ¶ 16. Based upon Rosenthal's opinion regarding Clay's assets and Clay's income of $480 per month from disability and food stamps, Judge Sanders stripped Clay of his indigent status. Judge Sanders also granted Rosenthal's motion to withdraw as Clay's counsel.
¶ 17. While the determination of indigent status is left to the sound discretion of the judge and no law requires that an evidentiary hearing be held to determine such, the decision must not be an abuse of that discretion. See generally Bilbo v. Thigpen, 647 So. 2d 678 (Miss.1994). This Court finds that Judge Sanders abused her discretion in stripping Clay of his indigent status under the facts of this case.
¶ 18. Supporting this decision are several factors: First, Clay had previously been examined and declared indigent by Judge Sanders with the knowledge that Clay received a monthly income of $480. Second, the opinion of Rosenthal, without more, is nothing more than opinion. He did not make a sworn affidavit, and one is not in this record. Furthermore, Rosenthal's opinions as to Clay's assets were speculative and not well developed. Clay adequately responded to the accusations. Third, Judge Sanders should not have relied upon the mere opinion of a single person in revoking Clay's indigent status after she had previously examined him and found him to be indigent. Lastly, Judge Sanders evinced a bias toward Clay because of the delays in going to trial. Such bias is represented by the following statements made immediately after Clay provided an explanation to Rosenthal's opinions: "The Court is of the opinion that you are doing everything in your power to prevent having a trial. That you are delaying this matter. And all of these are tactics." Subsequently, Judge Sanders allowed Rosenthal to withdraw and stripped Clay of his indigent status. Judge Sanders abused her discretion in revoking Clay's indigent status.
¶ 19. It should be noted that the State mentions in its brief the fact that Clay had been in touch with another attorney, John Horne, just prior to the withdrawal of Rosenthal. The State asks the question how Clay could retain another lawyer if he was indigent. There is no evidence to suggest that Clay could afford' to pay Horne. In fact, Clay proceeded with the trial pro se, without the assistance of an attorney. Neither does the fact that Clay is now represented by counsel evidence that he was not indigent on the day of trial.
¶ 20. The revocation of Clay's indigent status should not be examined alone. The raising of Clay's bond from $20,000 to $100,000 should also be considered in the context of Clay proceeding to trial pro se and his right to effective counsel. While this Court has maintained that the setting of bail is within the trial court's discretion, this Court has espoused factors which should be considered as guidelines when determining the amount of bail. They are here set forth:
1) Defendant's length of residence in the community;
2) His employment status and history and his financial condition;
3) His family ties and relationships;
4) His reputation, character and mental condition;
5) His prior criminal record, including any record of prior release on recognizance or on bail;
6) The identity of responsible members of the community who would vouch for defendant's reliability;
7) The nature of the offense charge and the apparent probability of conviction and the likely sentence, insofar as these factors are relevant to the risk of nonappearance; and
8) Any other factors indicating the defendant's ties to the community or bearing on the risk of willful failure to appear.
Shook v. State, 511 So. 2d 1386, 1387 (Miss. 1987). The record clearly reveals that *241 Judge Sanders considered none of these guidelines when she determined to raise Clay's bail. The only reason stated for raising the bail was that Judge Sanders did not want the case to "drag on and on and on." Judge Sanders got her wish. Clay proceeded to trial that day as a pro se defendant and was convicted after a two-day trial.
¶ 21. The purpose of bail is to secure the presence of the accused at trial, not necessarily to expedite the judicial process. Lee, 375 So.2d at 1021. Judging from the record, Judge Sanders had nothing more on her mind than seeing that the case experienced no more continuances, whether or not Clay was responsible for such delays. "The constitutional right to bail before conviction ... has become so fundamental that it is favored by the public policy of this state." Id. Where excessive bail is required it is tantamount to a denial of bail which is in direct contradiction to Article 3, Section 29 of the Mississippi Constitution. Brown v. State, 217 So. 2d 521, 523 (Miss.1969). Clay repeatedly informed Judge Sanders that he could not afford $100,000 bail. His decision to proceed pro se is evidence of his sincerity. Where Judge Sanders abused her discretion in revoking Clay's indigent status without proper reasons and in setting excessive bail beyond the means of an indigent Clay without the appropriate rationale, Judge Sanders committed reversible error, essentially forcing Clay to go to trial pro se without the effective assistance of counsel.
¶ 22. The examination conducted by Judge Sanders under URCCC 8.05 to determine whether Clay knowingly and voluntarily proceeded to trial pro se does not cure her prior abuses of discretion because it was precisely those abuses of judicial discretion which led to Clay's decision to proceed to trial that day as a pro se defendant. Faced with the prospect of going to trial pro se or going to jail until he could raise the money to hire an attorney, Clay "chose" to go to trial. It is not this Court's ruling that any time a defendant chooses to proceed pro se in the face of a denial of bail that they do so involuntarily. Under these facts, however, Clay should not have had to confront his fears about going to jail. For Clay, there was no choice.
¶ 23. One might wonder why Judge Sanders was so abrupt with Clay. The record reflects that the delays in the case weighed heavily upon her. The record, however, indicates further bias by Judge Sanders toward Clay. The record indicates that Clay made a pro se motion which claimed that Judge Sanders was biased against Clay, and he sought her recusal. In the record, Judge Sanders and Clay discuss a letter from Clay to Rosenblatt, Clay's first attorney, in which Clay asks Rosenblatt to seek the recusal of Judge Sanders for past statements she made evidencing bias against Clay. Apparently, Rosenblatt withdrew from representation over the matter and never discussed the issue with Judge Sanders. During a discourse on the record, however, the gist of the letter was discussed:
THE COURT: Would you make the statement what this Court, what Lillie Blackmon Sanders has done that you feel would be prejudicial to you as a defendant in this case, things that I have done.
MR. CLAY: The thing that I wanted to file beforeMr. Rosenblatt, when you appointed him, I was at arraignments here in Wilkinson County. And, anyway, you had stated could I afford an attorney, so I told you I couldn't afford an attorney. And you said, "how much money do you make," and I told you $484.00. So you said, "well you can pay an attorney out of that money". I said, "well where am I going to stay at. I have kids and I have a house," you know, "I have to pay rent and stuff". So then you made the statement that Mississippi offered free housing. And I said, "well I didn't know nothing about that". I said, "where that's at". So you *242 told me Parchman Prison. So that intimidated me. I felt that you was telling me, you know, you would lock me up in the pen or something, you know. You would send me to the pen. That was my impression.
THE COURT: I believe that statement was made at your arraignment.
MR. CLAY: Yes, ma'am.
THE COURT: So how did that prejudice your case in terms of
MR. CLAY: Well I figured, you know like I say, I'm just thinkingI just figured you would go against me, you know. Wouldn't give me a fair trial.
After this discourse, Judge Sanders informed Clay at length that she was not biased or unfair and that she would not be manipulated by Clay or any defendant. As proof of her fair mindedness she offered this insight:
THE COURT: This Court does not go against anybody. Let me just say this on the record: if I had wanted to be unfair to you, or if I had wanted toand the Court had every prerogative to do that. Last week, the top of the jury had mostly white jurors on it. And it was totally my call as to whether or not I would start at the top of the list, or whether I would start at the bottom of the list so that you could have a majority African-American jury. The Court started at the bottom of the list, because my rule, and I do not change them regardless of who the defendant is or what the situation is, is that the first day I empanel the jury, I start at the top, and the second day, I start at the bottom.
We do not know which day this occurred or why she started where she did in selecting a jury. Immediately following her lengthy discussion concerning her ability to be fair, Judge Sanders repeated that she was revoking Clay's indigent status and promptly ruled that she was increasing Clay's bond.
¶ 24. The record reflects that Clay actually perceived a hostile attitude by Judge Sanders toward him:
MR. CLAY: Judge Sanders, I also
THE COURT: And would you state on the record what statements this Court has made that are prejudicial to you, or that leads you to believe that I cannot be a fair judge on your case.
MR. CLAY: Judge Sanders, I don't mind talking, but it seems like I'm just making people mad up in here.
THE COURT: No, if you have a legitimate reason. We have another judge in this district, so I don't have to be the judge on your case.
The previous discussions clearly reveal that Judge Sanders has a propensity for bias and exhibited such toward Clay as revealed by her words and her actions in abusing her judicial discretion with regard to Clay's indigent status and the setting of bail.
¶ 25. This bias extended to the trial as well. Although not addressed by Clay, warnings given by Judge Sanders to Yolanda Davis (Clay's only defense witness) on cross-examination concerning per-jury show further judicial bias and indiscretion. The following exchange took place between Judge Sanders and Davis:
Q. On the second trip. It's your testimony, under oath, that on the afternoon of October 15th, 1996, after 2 p.m., did you see Reginald Todd McGhee on the property out there at Jackson-Louisiana
THE COURT: Before you answer that question, the Court feels compelled to
A. I seen
THE COURT: Before you answer that question, the Court feels compelled to remind you that you're under oath. And that the penalty for lying under oath, the crime is called perjury.
MS. DAVIS: Excuse me?
THE COURT: No, don't excuse me. You excuse me.
MS. DAVIS: I mean, I can understand what he's saying. But
*243 THE COURT: When the Court's speaking to you, you listen.
MR. CLAY: Just be quiet, Yolanda.
MS. DAVIS: I'm sorry.
THE COURT: Thank you. And I feel compelled. Because as the Court, I'm here duty bound to explain to you that the penalty for lying under oath is ten years. That's the maximum sentence for perjury, before you answer his question. I'm going to go even further and tell you that I believe thatexcuse me the answer to your question, that it can be proven.
It appears from this exchange that Judge Sanders told the witness that she believed Davis's answer would constitute perjury. This exchange took place in front of the jury. Such commentary on Davis's testimony was undeniably prejudicial to both Davis's testimony and Clay's defense. Such judicial conduct is wholly inappropriate.
¶ 26. Ignoring the issues of bias and procedure, the State focuses on the ends rather than the means. The State claims that increasing Clay's bail was not error because Judge Sanders had ample evidence suggesting that Clay posed a flight risk and a danger to the community. The State's argument is based upon Clay's arrest and indictment on two counts of possession of a weapon by a convicted felon and eleven counts of the misdemeanor offense of contributing to the delinquency of a minor while out on the $20,000 bond pending his trial for aggravated assault. A motion was filed after Clay's arrest and indictment asking Judge Sanders to increase Clay's bond.
¶ 27. Apparently this motion was never heard by Judge Sanders. Neither did she consider such evidence at the time she actually increased Clay's bond. The record clearly reveals that Judge Sanders raised Clay's bond for no other reason that to expedite the case. Had Judge Sanders considered the new arrest and indictment then she could have properly determined that Clay was a flight risk or a danger to the community. She did not consider such evidence, and this Court should not assume that she did.
¶ 28. The State also comments on the fact that this Court has three times previously denied bond pending appeal in Clay's case, finding that the trial court determined Clay to be a flight risk after his conviction. These denials occurred under different circumstances which are not a part of this record and occurred after Clay's conviction for aggravated assault.
CONCLUSION
¶ 29. While Clay's status as an indigent or the need to raise his bail may not be certain, Judge Sanders's course of conduct was clearly an abuse of judicial discretion which constitutes reversible error. Such errors combined to make Clay's decision to proceed to trial pro se involuntary and violated his right to effective counsel. The judgment of the Wilkinson County Circuit Court is reversed, and this case is remanded to that court for a new trial.
¶ 30. REVERSED AND REMANDED.
PRATHER, C.J., BANKS, P.J., McRAE, MILLS, WALLER AND COBB, JJ., CONCUR. SMITH AND DIAZ, JJ., NOT PARTICIPATING. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1776645/ | 353 S.W.2d 22 (1962)
OLAN MILLS, INC. OF TEXAS, Appellant,
v.
Mrs. Mary DODD, Appellee.
No. 5-2568.
Supreme Court of Arkansas.
January 22, 1962.
Robert C. Hunt, Chattanooga, Tenn., Yingling, Henry & Boyett, Searcy, for appellant.
Lightle & Tedder, Searcy, for appellee.
McFADDIN, Justice.
This is an action brought by the appellee against the appellant for damages allegedly caused when appellant published and distributed appellee's photograph without her knowledge or consent. Trial to a jury resulted in a verdict and judgment for the appellee in the amount of $2500.00, and this appeal ensued.
The appellee, Mrs. Mary Dodd, is a housewife in Searcy, Arkansas. At one time she worked in a store with her husband, and later was associated with him in a local radio station. At all times here involved, the appellant, Olan Mills, Incorporated of Texas, was engaged in the business of photography. In 1957, Olan Mills had representatives in Searcy, and Mrs. Dodd had *23 her picture taken for a stipulated price. She wanted the picture for her daughter; and when she received the picture the transaction was closed.
Some time in 1960, Olan Mills, without the knowledge or consent of Mrs. Dodd, caused 150,000 advertising post cards to be mailed over Arkansas and surrounding states; more than 5000 of these cards were mailed to rural boxholders in White County, Arkansas; and each of these cards contained the picture of Mrs. Dodd. This use of her picture was a part of an advertising campaign put on by Olan Mills in order to obtain business; and, in addition to mailing the post cards, Olan Mills had enlargements of Mrs. Dodd's picture carried by its door-to-door salesmen who were soliciting orders. The cards did not mention Mrs. Dodd's name but merely carried her picture, implying an offer to make a picture of like kind and quality for anyone at an agreed price.
Mrs. Dodd first learned that her picture had been so distributed when a friend advised her. Later, she saw the card, and sued Olan Mills for damages. She testified: "I hadn't given anybody permission to use my picture. It caused me a lot of humiliation and embarrassment. I have heard remarks on the street when I was passing, people saying, `I never thought Mrs. Dodd would permit her picture to be used for advertising,' and things like that. I can't go out on the streetI am embarrassed. I have lost weight. I can't sleep." Later, one of the door-to-door salesmen for Olan Mills came to Mrs. Dodd's house and exhibited her picture to her in his solicitation campaign.
The original answer of Olan Mills stated that (a) Mrs. Dodd had given her consent to the publication of the picture; and (b) in truth and in fact, it was not a picture of Mrs. Dodd but of someone else. Later, by amended and substituted answer, it was admitted that Mrs. Dodd's picture had been used without her knowledge and consent and as the result of a mistake. Trial of the case to the jury resulted in a unanimous verdict for $2500.00 to Mrs. Dodd. The appellant urges two points on appeal: (a) only nominal damages can be recovered; and (b) the damages awarded are excessive. We will consider these points together.
So far as we can determine, this Court has never directly passed on a case like this, although in the two cases of Mabry v. Kettering, 89 Ark. 551, 117 S.W. 746; 92 Ark. 81, 122 S.W. 115, there is dicta as to what is known in law as the "right of privacy." While there is a dearth of case law in Arkansas on the point, there are cases, textbook writings, and law review articles elsewhere.[1] In some jurisdictions, statutes have been passed guaranteeing the right of privacy, but in most of the jurisdictions the courts have recognized the right of relief in a case like the one at bar, independent of statute. In Restatement of the Law of Torts, Section 867, this matter is discussed under the topic, "Interference with Privacy," and in stating that in some instances there may be recovery for the unauthorized publication of the photograph of a person who is not in public life, the Restatement uses this language:
"The rule stated in this Section gives protection to the interest which a person has in living with some privacy, but this protection is relative to the customs of the time and place and to the habits and occupation of the plaintiff. One who is not a recluse must *24 expect the ordinary incidents of community life of which he is a part. These include comment upon his conduct, the more or less casual observation of his neighbors as to what he does upon his own land and the possibility that he may be photographed as a part of a street scene or a group of persons. Likewise if he submits himself or his work for public approval, as does a candidate for public office, a public official, an actor, an author or a stunt aviator, he must necessarily pay the price of even unwelcome publicity through reports upon his private life and photographic reproductions of himself and his family, unless these are defamatory or exceed the bounds of fair comment. One who unwillingly comes into the public eye because of his own fault, as in the case of a criminal, is subject to the same limitations upon his right to be let alone. Community custom achieves the same result with reference to one unjustly charged with crime or the subject of a striking catastrophe. Both groups of persons are the objects of legitimate public interest during a period of time after their conduct or misfortune has brought them to the public attention; until they have reverted to the lawful and unexciting life led by the great bulk of the community, they are subject to the privileges which publishers have to satisfy the curiosity of the public as to their leaders, heroes, villains and victims."
It is unnecessary to develop in greater detail the nature of the cause of action; because our opinion herein is limited to the particular facts of this case and the extent of the damages here awarded. The appellant concedes that Mrs. Dodd is entitled to recover nominal damages but claims that the verdict for $2500.00 is excessive; and cites us to some of the Arkansas cases which hold that there can be no recovery for mental anguish in the absence of accompanying physical injury. One such case so cited is Chicago, R. I. & P. Ry. Co. v. Caple, 207 Ark. 52, 179 S.W.2d 151. But in that case we said:
"Where the action is wanton or wilful there may be a recovery for humiliation and mental suffering without any physical injury. Such cases are Erwin v. Milligan, 188 Ark. 658, 67 S.W.2d 592; Rogers v. Williard, 144 Ark. 587, 223 S.W. 15, 11 A.L.R. 1115; Lyons v. Smith, 176 Ark. 728, 3 S.W.2d 982."
So we have recognized that in some instances there may be recovery for humiliation and mental suffering in the absence of any physical injury; and we hold that in an action like this onefor violation of the right of privacythere may be such recovery, just as in cases of willful and wanton wrong. Other courts recognize there may be awarded substantial damages for violation of the right of privacy. Hinish v. Meier & Frank Co., 166 Or. 482, 113 P.2d 438, 138 A.L.R. 1; Fairfield v. American, etc., Co., 138 Cal. App. 2d 82, 291 P.2d 194; and cases there cited.
Olan Mills admitted that it was its custom to obtain the written consent of persons whose pictures were distributed, as was Mrs. Dodd's in this case; but Olan Mills conceded that it neglected and failed to get such consent from Mrs. Dodd. Since Mrs. Dodd's picture was published and circulated without her knowledge or consent, the jury was justified in finding from the evidence that the action of Olan Mills resulted in damage to Mrs. Dodd. She testified as to her humiliation, her embarrassment, mental anguish, loss of weight from worry, and lack of sleep; and we cannot say that the verdict, while liberal, is so grossly excessive as to shock the conscience; so the judgment is affirmed under the facts of this case.
Affirmed.
NOTES
[1] There is a case note in 3 Ark.L.Rev. 105, entitled, "TortsInvasion of Privacy by Publication of a Photograph"; and also there is a comment in 6 Ark.L.Rev. 459, entitled, "The Right of Privacy." See also annotations entitled "Right of Privacy," in 138 A.L.R. 22, 168 A.L.R. 446, 14 A.L.R. 2d 750. The earliest law review article seems to be in 4 Harvard Law Review 193, "The Right to Privacy," of which the late Justice Louis D. Brandeis was one of the authors. There is a later law review note in 43 Harvard Law Review 297. See also "Privacy", in 41 Am.Jur. 923; and "Right of Privacy," in 77 C.J.S. § 1, p. 396. See also the article, "Privacy," by Dean William L. Prosser in 48 California Law Review 383. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1800979/ | 428 So. 2d 1343 (1983)
Warren CAMPAGNA, Joseph Campagna, Mary Robin, d/b/a Madeline Enterprises and Campagna Fiberglass Skiff Corporation
v.
William E. SMALLWOOD, d/b/a W.E. Smallwood, Builder, and Home Indemnity Insurance Company.
No. CA-0274.
Court of Appeal of Louisiana, Fourth Circuit.
March 9, 1983.
*1344 Manuel A. Fernandez, Chalmette, for plaintiffs-appellees.
Owen A. Neff, Peter S. Title, Sessions, Fishman, Rosenson, Boisfontaine & Nathan, New Orleans, for defendants-appellants.
Before SCHOTT, GARRISON and BARRY, JJ.
BARRY, Judge.
This dispute arose out of a contract for the construction of a pre-engineered metal building to be used in plaintiff Warren Campagna's skiff manufacturing business. The contract between plaintiff and defendant-contractor, William Smallwood, was executed on 10/22/75 and provided the work was to commence within 90 days and be completed within 110 days. The contract price was $38,500 payable in five "progress payments" at various stages of the construction with the final payment due upon occupancy or acceptance, whichever was sooner. The contract contained the usual contractor's warranty of good workmanship, "free from defects," and provided payments could be withheld on account of "defective work not remedied" or "unsatisfactory *1345 prosecution of the work by the contractor." The contract provided that "all claims or disputes arising out of this contract or the breach thereof shall be decided in accordance with the Construction Industry Rules of the American Arbitration Association."
The construction was to be completed in two stages so that the owner could occupy the north half of the building when completed while the contractor worked on the south half. Toward the end of construction plaintiff became dissatisfied with defendant's work and presented defendant's project manager with two "punch lists" of items for correction or additional work. The items were not completed to plaintiffs' satisfaction and on February 16, 1976, plaintiff presented defendant with a consolidated punch list of 19 items. Two days later Smallwood submitted a list of proposed solutions to the problems. While defendant's men were working on those items, plaintiff moved into the second half of the building and began using the entire building.
Although many of the problems were corrected, several major defects, including misalignment of roof panels, two misdrilled roof panels, misalignment of an end wall, inadequate support for a one ton capacity monorail, and torn ceiling insulation, were not corrected to plaintiff's satisfaction. Plaintiff and defendant met on May 26, 1976 to resolve the remaining problems, and the next day plaintiff's attorney sent defendant a letter asserting the building was incomplete and did not meet the standards of good workmanship. The letter referred to the 19 punch list items and other deficiencies, and stated, "Please accept this letter as notice that if those conditions are not corrected within the next five days, you will be placed in default on this contract ...." That letter apparently crossed in the mail with a letter from defendant's attorney expressing defendant's willingness to supervise additional corrections or to employ a metal building erection specialist to effect necessary repairs. Defendant received plaintiff's letter on 5/31/76 and went to the job site the next day with a crew, but plaintiff refused to allow defendant to perform any work. Defendant's attorney wrote plaintiff's attorney on July 21 and again on August 31 attempting to resolve the matter amicably, but plaintiff refused to allow defendant to attempt further repairs.
On January 24, 1977 plaintiff sued for $35,000.00 to correct the roof and other deficiencies, and for $10,000.00 in consequential damages. On February 9, 1977, defendant advised plaintiff of his desire to settle the dispute by arbitration in accordance with the contract's arbitration clause. Defendant filed an exception of prematurity or, alternatively, moved to stay the proceedings pending arbitration. The trial court overruled defendant's exception and denied the stay.
Defendant then filed an answer and reconventional demand seeking $8,700.00 for the unpaid balance on the contract, plus $2,016.76 for extra work and alleged losses. Judgment was rendered for plaintiff for $28,600.00, consisting of $18,600.00 for a new roof, $6,500.00 for corrections to the monorail, and $3,500.00 for reworking walls and installing new louvers. The trial court did not render a judgment on defendant's reconventional demand.
On appeal defendant assigns as error the lower court's failure to dismiss this suit and require arbitration, the implied rejection of his reconventional demand, the excessive amount of damages, and the failure to find plaintiff refused to mitigate his damages.
ARBITRATION
Louisiana has a strong public policy in favor of arbitration[1] which our courts have recognized in numerous cases dealing *1346 with the timeliness of a party's demand for arbitration. In Matthews-McCracken Rutland Corp. v. The City of Plaquemine, 414 So. 2d 756, 757 (La.1982), the Louisiana Supreme Court reaffirmed the legislative mandate to the courts to order arbitration when suit has been filed despite an arbitration agreement. The Court further declared,
... Because of the strong policy favoring the right to demand arbitration, a party's otherwise explainable conduct should be construed against waiver of the right.
and noted that only in extreme cases have courts found waiver of the right to demand arbitration.
However, during oral argument defendant's counsel acknowledged that the record is complete and stated that a remand would only cause additional delays. The purpose of arbitration is to avoid costly and lengthy litigation and for speedy resolution of contractual disputes. Spencer v. Hoffman, 392 So. 2d 190, 191 (La.App. 4th Cir. 1980). That purpose has long since been rendered moot in this case. We agree that no purpose would be served by setting aside the judgment and remanding for arbitration.
PROOF OF DEFECTS AND COST OF REPAIRS
In his Reasons the Trial Judge found the building was:
"1. Out of square.
2. That this resulted in roof misalignment or that the misalignment in the roof resulted in this unsquareness of the structure.
3. That multiple leaks resulted therefrom.
4. That there is a sag or deflection in the mono-rail [sic] system which does somewhat hinder production."
The trial court stated it "was impressed with the testimony ... of Mr. John F. McCaskell ... and bases its awards upon his testimony" and cited his testimony that two-thirds of the roof was misaligned and "the only correct remedy was a new roof." The court also awarded sums for "necessary corrections to the monorail" and for reworking the walls and installing new louvers.
We find the evidence conflicting as to the extent of the defects and the necessary corrections. Defendant's witnesses agreed that a substantial number (one-half to two-thirds) of the metal roof panels were misaligned, that there was at least a 1½ inch deflection in the roof area supporting each of two exhaust fans, that 18 roof sheets were originally misdrilled and two have still not been replaced, and that there were numerous water leaks into the building. Defendant-contractor and his expert, Mr. Puckett (a local contractor) testified that despite misalignment the roof could be made watertight at a cost of $1300-$1500. Defendant's expert stated the deflection around the fans could be corrected by bracing, and the other leaks could be eliminated by replacing faulty fasteners. Defendant and his expert vehemently maintained a new roof is unnecessary.
According to plaintiffs' expert, Mr. McCaskell (a local contractor) the best way to correct a leak problem of this magnitude is by replacement of the entire roof. While Mr. McCaskell admitted the roof could "probably" be made watertight without replacement of every panel, he testified he could not guarantee the roof would be watertight.
Mr. McCaskell also testified there was a 2½ inch deflection in a monorail beam which was used to transport plaintiffs' skiffs out of the building. Although the monorail was to have a one ton capacity, plaintiff testified the roof and entire building shook when the monorail was operated. Campagna stated he was told by the manufacturer's representative the beam was unsafe, but the monorail was essential to plaintiffs' business so they continued to use the beam but had to support it by placing a post underneath.
Both parties conceded the rear end wall was misaligned and "leaned in." Mr. McCaskell thought this was caused by a strut supporting the monorail beam which *1347 pushed out the end wall. McCaskell also testified the louvers were of interior rather than exterior quality, there were problems with the flashings and leaks around many of the windows, there was insulation hanging out from the bottom of the wall panels, the roof overhang panels were mis-lapped, and there were other miscellaneous items requiring repair work.
The contract was for new construction, rather than repairs, and the trial court obviously felt plaintiffs were entitled to a properly aligned, watertight roof rather than a patch job that would "probably" make a misaligned roof watertight. We note a similar result in Hemphill v. Kaltenbach, 276 So. 2d 733 (La.App. 3d Cir.1973), in which replacement of an entire roof was the only remedy for a defective roof. The trial court's fact-findings are entitled to great weight and should not be disturbed on appeal in the absence of manifest error. Canter v. Koehring, 283 So. 2d 716 (La.1973). We find no such error in the lower court's conclusions as to the nature of the defects and the necessary remedies.
We do, however, find manifest error in the estimates for making the necessary repairs. The trial court found that "the plaintiffs who had utilized the building since 1976 could have remedied these conditions by [1978] and accordingly the court will use the 1978 figures in rendering the judgment." The uncontradicted evidence shows plaintiffs considered defendant in default as of May 27, 1976 and refused defendant any opportunity to make repairs after that date. Having decided defendant's work was unsatisfactory, plaintiffs were under a duty to mitigate their losses by having the work completed after dismissing defendant. Plaintiff consulted McCaskell about completing the work in July or August of 1976. He inspected the building, made an estimate, and offered to do the work at that time.
In Calais v. Dura-White Roofs Co., 208 So. 2d 397 (La.App. 4th Cir.1968), this Court held a homeowner was obligated to minimize his damages resulting from a repairman's defective performance by having the roof fixed soon after discovery of the faulty workmanship, and the owner could not recover increased costs of the work due to his delay. Unlike the defendants in Heap v. Weber Constn. Co. of La., 407 So. 2d 799 (La.App. 4th Cir.1981) and Unverzagt v. Young Builders, 252 La. 1091, 215 So. 2d 823 (La.1968), defendant herein was not afforded equal opportunity with plaintiff to effect repairs or completion of the building and he should not be penalized for plaintiffs' delay. Therefore, the awards for the monorail and walls and louvers, based on 1978 estimates, should be reduced from $6,500.00 and $3,500.00, respectively, based on the 1978 estimates, to the 1976 estimates of $4,500.00 and $1,900.00, and the award for the roof decreased from $18,600.00 to $12,000.00. The total judgment reduction is $10,200.00.
DEFENDANT'S RECONVENTIONAL DEMAND
The trial court's Judgment and Reasons make no mention of defendant's reconventional demand for the contract balance due and other incidental losses. We presume defendant's claim was denied. Stringer v. Todd, 305 So. 2d 696 (La.App. 4th Cir.1974). Plaintiffs contend the lower court "took into consideration what he believed to be the relative merits of defendant's reconventional demand and plaintiff-appellees' damage claim and offset the value of the latter's claim accordingly." We disagree. The Trial Judge's Reasons make it clear the total amount awarded to plaintiffs, $28,600.00, is the sum of the estimates given by plaintiffs' expert for repairs.
Defendant's right to recover the balance due on the contract depends on whether he substantially performed his obligations. If so, defendant is entitled to the contract price less the amount necessary for completion of the work. LSA-C.C. Art. 2769; Airco Refrigeration Service, Inc. v. Fink, 242 La. 73,134 So.2d 880 (1961). Substantial performance is found when the building may be used for the purpose intended, even though there are defects or incomplete items in the structure. As the *1348 court stated in Neel v. O'Quinn, 313 So. 2d 286, 291 (La.App. 3d Cir.) cert. denied 319 So. 2d 440 (1975): "Substantial performance by a contractor is readily found, despite the existence of a large number of defects in both material and workmanship, unless the structure is totally unfit for the purpose for which it was originally intended." (Emphasis in original.)
It is undisputed that plaintiff continuously utilized the building for his skiff manufacturing business since at least April, 1976. Defendant's witnesses testified plaintiff has occupied the entire building since February of 1976. Plaintiff stated his company used the front portion of the building as a showroom for their skiffs. The Trial Judge noted in his Reasons that "plaintiffs have utilized the building since 1976." Thus, we conclude defendant substantially performed under the contract and is entitled to recover the remainder of the contract price, less the amounts necessary to perfect the faulty work.
The total contract price was $38,500.00 and defendant was paid $29,800.00. The testimony revealed subsequent to the written contract, plaintiffs and defendant verbally agreed to add a monorail for $1,100.00. Plaintiffs do not dispute the price or the verbal agreement, but contend it is not enforceable because the contract provides that work changes must be "authorized by written change order." A written construction contract may be modified by subsequent oral agreement since a construction contract is not required to be in writing. Style Craft, Inc. v. Grassin, 347 So. 2d 950 (La.App. 4th Cir.1977). See also 13 Am.Jur.2d Building and Construction Contracts, § 24, at 26. We also note that, as the monorail was one of plaintiffs' chief complaints and plaintiffs were awarded more than $1,100.00 for replacement of the original monorail, plaintiffs are estopped from denying their obligation was modified to include and pay for a monorail. Defendant is therefore entitled to an offset of $9,800.00, representing $8,700.00 due on the contract, and $1,100.00 for the monorail.
Defendant also seeks $757.67 for roof sheets with misdrilled holes which were left at the job site. The value of the sheets was not established nor is there sufficient evidence on defendant's claim for $159.00 in wages to employees who allegedly waited at the job site and were refused entry. The trial court ignored these items and there is no error in the implied rejection.
ACCORDINGLY, the judgment of the district court is amended as follows: The award in favor of plaintiff for repairs is reduced from $28,600.00 to $18,400.00; judgment is hereby entered in favor of plaintiff in reconvention for $9,800.00. Judgment in favor of plaintiff is therefore granted in the net amount of $8,600.00. Costs to be paid by each party.
AMENDED IN PART; REVERSED IN PART; RENDERED.
NOTES
[1] See Matthews-McCracken Rutland Corp. v. The City of Plaquemine, 414 So. 2d 756, 757 (La.1982); State of Louisiana, Through the Division of Administration v. Algernon Blair, Inc., et al, 415 So. 2d 612, 613 (La.App. 3d Cir.1982); Willis-Knighton Medical Center v. Southern Builders, Inc., 392 So. 2d 505 (La.App. 2d Cir. 1980); In Re Schumacher, 389 So. 2d 881 (La. App. 4th Cir.1980). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/250562/ | 276 F.2d 798
UNITED STATES of America, Appellant,v.Mrs. Josephine SPRINGFIELD et al., Appellees.UNITED TRANSPORT, INC., Appellant,v.UNITED STATES of America, Appellees.
No. 17873.
United States Court of Appeals Fifth Circuit.
March 31, 1960.
John L. Burke, Jr., Sp. Asst. to U. S. Atty., Dallas, Tex., Paul N. Brown, U. S. Atty., Tyler, Tex., for appellants.
Royal H. Brin, Jr., Dallas, Tex., Robert S. Vance, Bun L. Hutchison, Texarkana, Tex., Hobart Price, Dallas, Tex., Strasburger, Price, Kelton, Miller & Martin, Dallas, Tex., of counsel, for appellees.
Before RIVES Chief Judge, and HUTCHESON and TUTTLE, Circuit Judges.
RIVES, Chief Judge.
1
This case arises out of a highway accident that occurred on U. S. Highway No. 82 in Bowie County, Texas, on December 27, 1956. The accident involved three vehicles: a five-ton dump truck, a grain truck, and a Ford passenger automobile. The dump truck was owned by the United States and was being driven by one Rufus Springfield, an employee of United Transport, Inc., under a contract between the United States and United Transport whereby United Transport had agreed to transport the truck from Red River Arsenal, Texarkana, Texas, to State Arsenal, Topeka, Kansas. The grain truck was owned by R. L. Willard and was being driven by Hugh Stone. The Ford automobile was owned by Dwight Wood and was being driven by his wife, Marie Wood.
2
Immediately prior to the accident, the dump truck was proceeding in an easterly direction on Highway No. 82, the grain truck was proceeding in a westerly direction, on the same highway, and the Ford was also proceeding in a westerly direction, following along immediately behind the grain truck. The speed of the dump truck was estimated at 40 to 50 miles per hour, while the speed of the grain truck and that of the Ford were somewhat less.
3
As the two trucks approached each other the dump truck moved over into the westbound lane and struck the trailer of the grain truck a glancing blow. A collision then followed between the dump truck and the Ford. The driver of the dump truck and the driver and two other occupants of the Ford were killed instantly. A fourth occupant of the Ford sustained permanently incapacitating injuries.
4
Actions were commenced under the Federal Tort Claims Act1 to recover damages from the United States on the theory that the accident was caused by its negligence in either creating or failing to discover and correct a defect in the dump truck. The United States filed an answer denying negligence on its part and a third-party complaint against United Transport, Inc., alleging that the accident was caused by the negligence of the driver rather than by a defect in the truck. The third-party complaint sought recovery from United Transport for damages to the dump truck as well as indemnity with respect to any judgment rendered in favor of the original plaintiffs. United Transport answered, denying negligence on the part of its driver, and counterclaimed for $5,434.83, the amount owed by the United States for services rendered under the contract between the parties but which had been withheld pending the outcome of this litigation. The cases were tried to the court and resulted in determinations adverse to the contentions of the United States in every instance except as to United Transport's counterclaim, which was dismissed on the ground that the United States had not consented to suit. The United States appealed from the adverse portions of the judgment; United Transport appealed from the dismissal of its counterclaim.
5
The principal controversy at the trial related to the right front wheel of the dump truck. It is undisputed that that wheel came off the truck either before the collision or at the moment thereof. The Government's theory was that the wheel came off at the time of the collision as a result of the impact and that, consequently, the losing of the wheel could not have caused the accident. The appellees' theory, on the other hand, was that the wheel came off prior to the collision; that, after the wheel became disengaged, it passed back under the rear of the right fender and the running board of the truck, thus lifting up the right side of the truck; and that this caused the truck to lurch over into the westbound lane and collide with the oncoming vehicles. Both sides to the dispute placed their reliance primarily upon the testimony of expert witnesses, the basic facts being largely undisputed. The trial judge chose to accept the version of the occurrence presented by the appellees' expert. The principal question presented on this appeal is whether that version is so inherently incredible that the findings of fact predicated thereupon must be rejected as clearly erroneous. Rule 52(a), Federal Rules of Civil Procedure, 28 U.S.C.A.
6
The Government's attack upon the appellees' theory of the accident is two-pronged: first, it contends that the accident could not possibly have occurred as opined by appellees' expert because it would be physically impossible for a truck constructed as was the truck involved in this case to run over its own loose front wheel and be thrown in the direction away from that loose wheel; and, secondly, it contends that, even were it to be assumed that such an occurrence is theoretically possible, the conclusion that it did in fact occur in this particular case is untenable because such a conclusion is entirely inconsistent with the undisputed facts. These two contentions will be treated separately.
7
The contention that the appellees' theory of the accident is an impossible one rests upon three sub-contentions. The first of these is that, since the front fender is located further from the truck's right wheel than the truck's axle is from the highway, if the right wheel did become disengaged while the truck was in motion, the axle would fall to the highway and pull the truck to the right before the wheel reached the fender. We do not think that such a conclusion is necessarily correct. It is undisputed that when the right wheel came off it did so suddenly and with considerable force. That is evidenced by the fact that a part of the velocity housing to which the wheel was attached was broken off and remained with the wheel. This force doubtless reacted on the wheel in some manner and it is possible that it threw the right wheel backward against the rear of the right front fender. That this could happen before the axle fell to the highway, even though the distance between the axle and the highway was less than that between the wheel and the fender, seems clear. The force of inertia acting upon the axle would prevent its falling directly to the highway and increase considerably the distance it would have to travel.
8
The Government's second argument on impossibility is that the right, front fender and running board would have collapsed rather than have supported the truck as appellees theorize. An examination of the record, however, does not support this argument. The appellees' expert witness testified that the fender was made of metal sufficiently heavy to support the truck momentarily and that the running board, enforced as it was with brackets, could do likewise. The only contrary testimony was that neither of these parts was designed to support the truck. On that state of the record, this Court certainly cannot hold that the implied finding that the fender and running board could momentarily support the truck is clearly erroneous.
9
Thirdly, the Government contends that appellees' theory of the accident is impossible because, even if the right wheel did get under the right fender and lift the truck, it would certainly pull the truck to the right rather than throw it to the left. Clearly, if all other factors remain equal, the lifting of the right side of the truck would cause it to veer to the left. The Government's argument is that the right wheel would have slowed down to such an extent that it would tend to brake the right side of the truck enough to more than compensate for this tendency to the left. The extent of this braking action would be roughly proportionate to the reduction in the speed of the right wheel. There is nothing in the record to indicate how much the speed of the right wheel would have been reduced. The rear of the right front fender, where under the appellees' theory contact with the wheel was made, sloped gently down and back. While it may be assumed that some friction would have accompanied this contact which would tend to decrease the speed of the wheel, the amount of such decrease is incalculable. When the fact is kept in mind that the fender and the wheel were traveling at almost exactly the same speed, it certainly does not seem impossible that the increased friction would not be adequate to compensate for the tendency to the left caused by the lifting of the right front of the truck.
10
We conclude, therefore, that there is nothing in the construction of the truck which would render appellees' theory of the accident inherently impossible. Before coming to the Government's second contention, i. e., that appellees' theory is completely inconsistent with the undisputed facts, a fuller description of the two competing theories here would seem helpful.
11
The Government's theory is that the driver of the dump truck fell asleep at the wheel. In order to put this theory in perspective, it seems necessary to point out that the accident occurred in mid-afternoon, on a straight stretch of highway, approximately eight miles from the Red River Arsenal where the trip began. A great deal of testimony, impliedly credited by the trial judge, was to the effect that the driver was rested and alert when he departed on his journey. Moreover, the driver of the grain truck testified that just before the collision it appeared to him that the driver of the dump truck was wrestling with the wheel of his vehicle. Finally, the Government's own expert testified that his examination of the wreck convinced him that the driver of the dump truck was properly positioned at its wheel at the moment of impact.
12
The appellees' theory is that the right front wheel came off because the studs which attach the wheel to the velocity housing of the truck stripped out. There are ten studs which serve this purpose, the attachment being effected by inserting the studs into coarsely threaded holes bored in the velocity housing. The studs are secured to the wheel by means of nuts which fit fine threads on the other end of the studs.
13
It is undisputed that at least six of these studs came out of the velocity housing by stripping the coarse threads out of the holes. Two of the studs did not strip out but, rather, were freed when the portion of the velocity housing into which they were set broke off. The remaining two studs together with the corresponding piece of the velocity housing were never recovered.
14
The appellees' theory is that these studs stripped out either because they were tightened too tight or were left too loose, and it is admitted by the Government's witnesses that either could cause stripping. At the same time, it is admitted by appellees' witness that stripping can be caused by impact. The question then is: What in fact did cause this particular stripping?
15
The Government's first argument on this point is that, because the coarse threads were stripped out of the velocity housing rather than the fine threads out of the nuts, the stripping must have occurred as a result of impact. In support of this argument the Government points that the coarse threads could not have been stripped out as a result of overtightening of the nuts because the fine threads of the nuts would have stripped first. Next, the Government contends that the coarse threads could not have been stripped out as a result of overtightening the studs themselves, because to do so would require such a tremendous amount of pressure that it could only be accomplished by a deliberate effort to do so and with the aid of an unusually heavy tool. Finally, the Government contends that the stripping of the coarse threads could not have resulted from looseness, because such looseness would necessarily have been accompanied by evidence of wear on surrounding parts and it was clear that no such wear occurred, and, also, because any looseness would have been discovered by the inspectors at Red River Arsenal before the truck was released. Since the three contentions considered collectively cover all possibilities under the appellees' theories, if these contentions are correct the Government must prevail. On the other hand, since the appellees' theories are alternative, if any one of the three contentions fails, the Government's entire argument on this point must fail.
16
We consider it unnecessary to pass upon the first two of these contentions for we are satisfied that the Government cannot prevail on the third. Clearly, the Government's contention that the looseness theory must be rejected because looseness would have been discovered is no argument at all; for it assumes the whole ground of the argument to which it is directed by assuming that there was no negligence on the part of the Government employees at Red River Arsenal who were charged with the responsibility of seeing that the truck was roadworthy. The contention that looseness would have produced wear, though stronger by reason of the fact that it is not inherently fallacious, is equally unavailing. Even the Government's own witness did not testify unequivocally that looseness would necessarily be accompanied by evidence of wear not here present. His testimony is merely that such things as alleged by the appellees "generally" occur over a period of time and, when they do, are accompanied by evidence of wear. We cannot hold that the mere absence of such wear precludes a reasonable finding that the studs were loose.2
17
A second argument offered by the Government is rested primarily upon the fact that two studs did not strip. The Government showed that the tensile strength of each of these studs was more than sufficient to bear the weight of the entire truck and argues that, since that is so, the stripping of the six studs could not possibly have been the cause of the accident because the remaining two were easily strong enough to carry the truck. The fallacy in this argument is obvious. The issue is not whether the two studs were strong enough to carry the truck but whether the velocity housing was strong enough when all of the weight was shifted to two studs rather than distributed evenly among ten. For it is clear that the studs did not give way. The velocity housing fractured. Appellees contend that this fracture was caused by the concentration of all of the weight normally carried by the ten studs on only two of them. There is no evidence in the record to indicate that such a theory is impossible.
18
Moreover, an examination of the record reveals that there is considerable support for the appellees' theory. The rear of the right front fender and the running board showed evidence of damage of the precise nature to be expected under the theory that the truck had overrun a loose wheel. The rear of the fender was raised and straightened; the running board was pushed back and raised several inches. This damage becomes more significant when considered in connection with the fact that the front of that fender showed no evidence of damage. In addition, a battery which was mounted on the running board was dislodged and found lying on the right-hand side of the road and behind the point of impact, a position consistent with the appellees' theory and inconsistent with that of the Government. Finally, the wheel itself was found beside the truck rather than in front of it, as would normally be expected if it came off as a result of the impact.
19
The Government has, of course, attempted to explain away each of these facts. To some extent, it has succeeded. If we were sitting as the trier of facts in this case, a difficult problem would be presented. But our function is more limited. The trial court found, as a fact, that the accident was caused by the truck's overrunning of its own right front wheel. We have only to decide whether that finding is clearly erroneous. Rule 52(a), Federal Rules of Civil Procedure. We conclude that it is not.
20
The Government also contends that, even if the accident was due to a defect in the truck, there is no evidence to sustain a finding that the United States either created such defect or failed to exercise reasonable care to discover it. This contention too must fail. The Government's own witnesses testified that, if the claimed defect had been present, it would have manifested itself to proper inspection. This testimony, designed to negative the existence of a defect, is relevant to the question of due care once the defect is established. Again, we are unable to say that the finding of the trial court is clearly erroneous. The judgment must, therefore, be affirmed insofar as it holds the United States liable for damages suffered as a result of the accident.
21
There remains only the question of the appeal by United Transport. The trial court dismissed United Transport's counterclaim against the United States on the sole ground that the United States had not consented to suit. Since it is clear that the claim sought to be asserted is within the Tucker Act3 and could therefore be asserted in an original action, this Court is presented with the question of whether the jurisdiction conferred by that Act may be invoked by way of a counterclaim.
22
Though this is a question of first impression in this Court, other Courts of Appeals have found occasion to consider it. In United States v. Silverton,4 the First Circuit, speaking through Chief Judge Magruder, said:
23
"It is conceded by the government that the defendant in this case could have brought an original action in the court below against the United States for breach of contract, under the Tucker Act. If he had done so, of course the court below, under Rule 42, F.R.C.P., 28 U.S.C. could have consolidated such action with the pending action brought by the United States. It would be the emptiest technicality to hold that the same jurisdiction could not be invoked by way of counterclaim in the action already brought by the United States."
24
Subsequently, in Thompson v. United States,5 the Fourth Circuit said:
25
"Although the appeal must be dismissed for lack of jurisdiction, we think that, in the interest of a prompt disposition of the litigation involved, we should say, in line with our action in Carolina Mills, Inc., v. Corry, 4 Cir., 206 F.2d 76, 77, and Ford Motor Co. v. Milby, 4 Cir., 210 F.2d 137 that all of the judges of this court are of opinion that the counterclaims here involved may be asserted in the action instituted by the United States. They arise out of contract and involve less than the sum of $10,000. Congress has given its consent in the Tucker Act, 28 U.S.C. § 1346(a) (2), that the United States be sued on such claims in the District Courts; and we can think of no sound reason why the suit should not take the form of counterclaim filed to a suit instituted by the United States in a District Court, where the amount of the counterclaim does not exceed $10,000."
26
On the other hand, in United States v. Nipissing Mines Co.,6 the Second Circuit took the opposite position:
27
"Moreover, in our opinion, the Tucker Act of 1887 which gives the District Courts jurisdiction over certain suits against the United States, is not broad enough to permit the recovery of demands upon counter claims. We think that that statute refers to original suits and prescribes procedure inconsistent with its use as the basis of a counter claim."
28
Upon close consideration of the question, we think the view expressed by the First and Fourth Circuits is the correct one. We think the statute should be interpreted from a practical rather than a technical standpoint. Nothing in the statute itself precludes such an interpretation. And in a situation where no substantive rights are at stake, the only question being whether litigation is going to be disposed of in an expeditious or inexpeditious manner, we think that an interpretation which lends itself to sound judicial administration is justified.
29
It follows that the judgment of the trial court must be reversed insofar as it dismisses United Transport's counterclaim. On the appeal of the United States the judgments are affirmed. On the appeal of United Transport, Inc., the judgment is reversed and the cause remanded with directions to enter judgment against the United States in the amount of $5,434.83. See 28 U.S.C.A. § 2106.
30
Judgment against United States affirmed; judgment against United Transport, Inc. reversed with directions.
Notes:
1
28 U.S.C.A. §§ 1346(b), 2671 et seq
2
Parenthetically, we could not hold the trial court clearly erroneous in rejecting any explanation of the apparent inconsistency between the Government's first contention, i. e., that the fine threads would strip before the coarse threads, and its theory that the stripping occurred as a result of the impact. It is undisputed that the coarse threads did, in fact, strip out and the fine threads did not. One might tend to think that the pressure on both sets of threads which would result from impact would be roughly equal and that the fine threads, rather than the coarse threads, would strip out unless the coarse threads were in a weakened condition
3
28 U.S.C.A. § 1346(a) (2)
4
1952, 200 F.2d 824, 827
5
1957, 250 F.2d 43, 44
6
1913, 206 F. 431, 434
31
TUTTLE, Circuit Judge (dissenting).
32
With the greatest deference to the views of the majority, I must dissent.
33
The recovery allowed by the trial court was, in my opinion based on nothing more than the possibility (on an extremely remote possibility) that the government truck ran across the road to its left and into the oncoming truck because its right-hand front wheel came off due to the government's negligence.
34
There were several eye witnesses to everything that happened. Several of them testified at the trial. Unfortunately several of them, including the driver of the government truck, died in the crash. All of the eye witnesses testified that the Army truck angled to the left of the center line and that they did not see any wheel come off of the truck or any untoward event before the crash that brought a pile-up and fire involving two other vehicles.
35
In this state of facts there was no burden on the government to prove any theory as to what caused the accident. Unexplained, this state of facts would require a judgment that the injury was caused by the negligence of the driver. The opinion, it seems to me, is too much preoccupied with knocking down the government's theory of the case. It needs no theory. In McNamara v. American Motors Corp., 5 Cir., 247 F.2d 445, 447, we said:
36
"* * * we think the plaintiff's claim is untenable in law and in fact. It is untenable in law because it unwarrantedly assumes, contrary to settled law, that theory and speculation, as to how decedent's death occurred, can serve as evidence, satisfying plaintiff's burden to make out her case, and shifting to defendant the burden of showing by evidence that plaintiff's theory was wrong, or of coming forward with a theory of its own, as to decedent's death, and evidence showing it to be a better, that is a more plausible, theory than the one plaintiff advances."
37
In all reason, it is the plaintiffs' theory that must be examined, because it is only by establishing by competent proof that this theory of the occurrence is what happened that the plaintiffs could recover.
38
Examining the plaintiffs' theory, we find it to be that, due to some negligence at the government repair installation, some of the studs which held the right-hand front wheel were improperly attached to the velocity housing; that this improper attachment caused or permitted six of the ten studs to pull loose by stripping their threads; that this caused or permitted the wheel to come off; it then dropped back and wedged under the right fender; this raised the right side and threw the truck to the left and into the other vehicle. This theory is expounded in spite of the fact that no one saw any of these things happen, but because an automobile repair expert gave the opinion that the wheel became dismounted in such a manner. The only observable physical facts upon which this opinion was based were that after this crash, which occurred between three automobiles whose combined speed at time of impact was between 60 and 90 miles per hour, the right-hand front wheel was in fact off, and the threads of six of the studs had been stripped and two remaining studs that had not been stripped were still firmly screwed into a part of the velocity housing which had itself been torn apart, with a part of it still attached to the two studs and wheel.
39
I think it is self evident that the chain of causation which the plaintiffs' expert built up, embodying, as it does, inferences from the one circumstance of the loss of the wheel as a result of or before the crash, that the improper insertion of the studs rather than the tremendous impact of the crash tore this wheel from the truck with such force as to break the casting of the velocity housing and strip the heavy threads of six studs; that this wheel, when lost, rolled back and under a lower running board before the axle assembly could drop to the ground; that such action caused the front end to turn to the left instead of to the right; that such loss of the wheel was the result of some negligent act of the government at its repair shop, although it was not shown that the studs were removed or needed to be removed in the overhaul job, would be too tenuous to be the basis of a fact finding even though the known physical facts made it appear equally reasonable with any other theory. See Smith v. General Motors, 5 Cir., 227 F.2d 210; McNamara v. American Motors Corporation, supra.
40
Where, as here, such chain of causation is not only too tenuous to be considered, but when the only theory on which the plaintiff could support a claim of negligence is itself, as I firmly believe, inherently incredible, I am convinced that the judgment of the trial court based on such theory is clearly erroneous.
41
It simply seems to me so contrary to common knowledge of physical facts that the accident could have occurred as contended for by the appellees that I think a more detailed statement of the facts should be made than is contained in the opinion of the court.
42
Stone, the driver of the grain truck which was first struck by the government vehicle, testified that when he was about 50 to 100 feet from the Army truck he saw it angling towards him, across the center line of the road; he himself was doing 20 to 30 miles per hour; the Army truck was driving 40 to 45 miles per hour; he immediately veered to the right shoulder and in the time it would take to snap his fingers twice the truck had struck the left rear of his vehicle; at the time of the impact he was completely off the road on the right shoulder; he did not see the wheel come off and he saw no sudden jerk or any sudden elevation of the front end of the Army truck.
43
Mrs. Phelps, who was in a car following the truck, saw it suddenly swerve to the left across the road; she saw no wheel come off and saw nothing "mechanically defective about the Army truck as it crossed the road."
44
Mrs. Story, who was in an automobile following the Wood car, which was demolished, testified she just "noticed the Army truck coming over in our side of the lane," and "it just left its lane off the road it was going east and we were going west. And it just came angling over and the grain truck (Stone) swerved his cab to * * *." She testified she did not see a wheel come off of the Army truck, and, when asked whether the Army truck looked level or tilted, she said: "Well, the best I remember it looked level."
45
These are the only eye witnesses to the accident who testified at the trial.
46
An examination of the wheel showed that six of the ten steel studs, which were threaded with heavy or coarse threads into the velocity housing, had been pulled out of their threaded seating and two others were still firmly embedded in a part of the housing that had been literally torn away from the main part of the housing; two other studs were missing and not accounted for; the end of the axle assembly was not disfigured and no marks on the road indicated that it had dropped to the road while the truck was still in forward motion.
47
There was a slightly bent portion of the right-hand fender and running board which, according to appellees' theory, was caused by the wheel passing back and raising these elements sufficiently to cause the truck to lurch to the left. The diameter of the wheel and tire was much greater than the height of the running board from the ground, so that some unexplained force would have had to raise it sufficiently for the wheel to wedge under it enough to raise the right side of the truck. The running board was 22 inches from the pavement, and the wheel was 42½ inches tall, so that this 42½-inch wheel would have to pass under a 22-inch high running board to achieve this effect. This would, of course, have canted the cab of the truck sharply to the left, but no eye witness saw any such tilt.
48
Then, if we assume that all of this happened, we must next believe that instead of this jammed wheel pulling the truck around to the right because of the tremendous drag thus created, the wedging of the 42½-inch tire under the 22-inch high running board in some way heaved the truck over towards the left, and all in such a way that it would not be noticed by the three eye witnesses who saw only that the truck angled over to the left in an apparently normal fashion.
49
I think that no careful analysis of the physical facts, most of which were without dispute, could possibly permit the conclusion that the accident occurred as opined by the plaintiffs' single expert witness.
50
It is, of course, unusual for an appellate court to reverse the judgment of a trial court, even when sitting without a jury, on the weakness of the factual proof. We are, however, enjoined to do so when a finding of the trial court is clearly erroneous. I am firmly convinced that for the reasons stated this judgment was clearly erroneous, both because there was no adequate proof that would permit the making of an inference that the wheel came off before the accident and because even if there were such affirmative proof, it would be so contrary to known physical facts and physical laws as to be inherently unbelievable.
51
I would reverse the judgment on the main appeal and affirm on the cross-appeal. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1756900/ | 746 F.Supp. 213 (1990)
WE THE PEOPLE, INC., OF THE UNITED STATES, et al., Plaintiffs,
v.
NUCLEAR REGULATORY COMMISSION, et al., Defendants.
Civ. A. No. 89-873.
United States District Court, District of Columbia.
September 19, 1990.
*214 Ernest C. Hadley, Wareham, Mass., for plaintiffs.
Bradley Kelly, Asst. U.S. Atty., Washington, D.C., for defendants.
MEMORANDUM OPINION
JOHN H. PRATT, District Judge.
I. Introduction
In this action, plaintiffs, We the People, Inc., of the United States ("We the People") and Stephen B. Comley, allege that defendants, the Nuclear Regulatory Commission ("NRC") and its chairman, have violated their first amendment right to free expression by banning their display of political posters and bumper stickers at public NRC meetings. Before the Court are the parties' cross-motions for summary judgment.
II. Background
We the People, a non-profit corporation organized under the laws of Massachusetts, monitors and investigates the operation of domestic nuclear power plants and the activities of the NRC. It provides the public with information concerning "the construction and operation of nuclear power plants," and apprises the NRC and other federal and state agencies of "possible safety violations in the nuclear power industry." Articles of Organization, Ex. 1, Pls. Mot. Comley, We the People's executive director, is and has been a critic of the NRC.
The essential facts are not in dispute. On September 8, 1988, the NRC held a public meeting at its Rockville, Maryland, offices. At this meeting, the NRC considered and voted on a proposed change to its emergency planning regulations. Comley attended the meeting, and sat in full view of the NRC's five Commissioners. At the direction of Victor Stello, former executive director for NRC operations, two security guards kept Comley under surveillance.[1]
Once the meeting began, Comley displayed a poster bearing the words "Stop Chernobyl Here" and urging observers to join We the People "in order to form a more perfect Union."[2] The poster measured 18 inches wide and 25 inches long. In displaying it, Comley did not speak.
One of the security guards promptly banned the display. In so doing, he informed Comley that display of posters at public meetings violated a 1940s regulation. Comley was permitted to return to the meeting without displaying the poster. After resuming his seat, he displayed a large reproduction of the Constitution. The reproduction measured 13.5 inches wide and 15.5 inches long. NRC officials allowed Comley to display this reproduction for the rest of the meeting.
On October 14, 1988, Comley attended another public meeting at the NRC's Rockville offices. The subject of the meeting was the proposed restart of Pilgrim Station at Plymouth, Massachusetts. Once the meeting convened, Comley displayed the "Stop Chernobyl Here" poster, as well as "Stop Chernobyl Here" bumper stickers. In displaying these items, Comley did not speak. Security guards promptly ejected Comley from the meeting and did not permit him to return.
Comley, through counsel, protested this ejection in a letter dated November 7, 1988 to the NRC's chairman. Comley requested that the NRC identify the legal authority *215 on which it relied to eject individuals displaying posters from its public meetings. In a letter dated November 28, 1988, NRC General Counsel William Parler, on behalf of the chairman, responded: "[I]t is the Commission's responsibility to conduct its meetings in an orderly fashion. The displaying of signs and posters in the meeting room is disruptive not only to the Commissioners but to the other meeting participants." Letter from William C. Parler to Ernest C. Hadley (Nov. 28, 1988) at 1 [hereinafter Parler Letter], Ex. 5, Pls. Mot. Parler explained that the General Services Administration ("GSA") had promulgated regulations governing the use of public buildings and grounds. The following regulation, he alleged, prohibited Comley from "holding up signs:"
Any loitering, disorderly conduct, or other conduct on property which creates loud or unusual noise or a nuisance; which unreasonably obstructs the usual use of entrances, foyers, lobbies, corridors, offices, elevators, stairways, or parking lots; which otherwise impedes or disrupts the performance of official duties by Government employees; or which prevents the general public from obtaining the administrative services provided on the property in a timely manner, is prohibited.
41 C.F.R. § 101-20.305 (1989); see Parler Letter at 1, Ex. 5, Pls. Mot.[3]
Several weeks after receiving this letter, on or about December 21, 1988, Comley attended a third public NRC meeting in Rockville. The meeting concerned evacuation planning for Pilgrim Station. This time, security guards required Comley to relinquish his "Stop Chernobyl Here" posters and bumper stickers before allowing him to enter the meeting room. After the meeting began, Comley, having taken a seat at the front of the room, removed his sport jacket, shirt, and tie. Underneath he wore a "Stop Chernobyl Here" tee-shirt. The tee-shirt also exhorted others to "Join We the People" and contained a reproduction of the Constitution. The NRC allowed Comley to remain in the meeting room while wearing this tee-shirt.
On or about March 29, 1989, Comley attended a public meeting of the Atomic Safety and Licensing Board ("ASLB"), a division of the NRC, in Boston, Massachusetts. The meeting concerned emergency evacuation planning for Seabrook Station in Seebrook, New Hampshire. Comley carried a small bag with him when he entered the meeting room. During a recess, a security officer named McGee approached him. McGee stated that he knew who Comley was and that he was acting on the direction of ASLB Judge Ivan Smith. McGee told Comley that he could not re-enter the meeting room with the small bag. Comley objected to the prohibition, since other members of the public had been allowed to enter the meeting room with briefcases, purses, and other such items. He also invited McGee to inspect the contents of the bag. McGee declined to inspect the contents of the bag, and Comley ultimately re-entered the meeting room without his bag.
The NRC's "A Guide to Open Meetings" ("Guide") states that, pursuant to the Government in the Sunshine Act, 5 U.S.C. § 552b(b) (1988), Commission meetings are generally open to the public. See NRC Guide, Ex. 7, Pls. Mot. The Guide also sets out the following standard "for behavior in the Commission meeting room":
Commission meetings are open for the public to observe. Members of the public are not allowed to participate in Commission deliberations unless specifically requested to participate by the Commission.... [D]isorderly conduct or other conduct, including the display of signs and posters, which creates loud or unusual *216 noise or a nuisance, impedes or disrupts the performance of official duties by the Commission or its staff or interferes with the orderly conduct of the scheduled presentations may result in expulsion from the meeting room.
Id. (citing 41 C.F.R. § 101-20.305). On several occasions, Comley, in his capacity as executive director of We the People, has requested permission to participate in NRC meetings. The NRC has denied all of his requests.
III. The Cross-Motions for Summary Judgment
This is a close case, the facts of which are not in dispute. Plaintiffs contend that the NRC's ban on the peaceful display of posters bearing political messages constitutes an unlawful restraint on freedom of speech. Plaintiffs do not mount a facial attack on 41 C.F.R. § 101-20.305, the GSA regulation on which defendants rely. Instead, they argue that the regulation is unconstitutional as applied by defendants. Defendants have cross-moved for a ruling that their conduct comports with the first amendment.
A. Standards Applicable to Summary Judgment
We begin our discussion with a review of the standards governing entry of summary judgment. Rule 56(c), Fed.R.Civ.P., "mandates the entry of summary judgment, after adequate time for discovery ..., against a party who fails to make a showing sufficient to establish the existence of an element essential to [his] case, and on which [he] will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). To survive a motion for summary judgment, the opposing party must demonstrate that a "genuine issue" exists as to each such element. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986).
An issue is not "genuine" unless a rational trier of fact, taking the record as a whole, could resolve it in favor of either side. See id. at 250, 106 S.Ct. at 2511; Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (citation omitted). If evidence favoring the opposing party "is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted). An opposing party may not rely on "mere allegations or denials ..., but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510 (citation omitted).
B. First Amendment Analysis
Turning now to the underlying controversy, we first must decide whether Comley's display of "Stop Chernobyl Here" posters and bumper stickers at public NRC meetings is speech normally protected by the first amendment. Cornelius v. NAACP Legal Defense & Educational Fund, 473 U.S. 788, 797, 105 S.Ct. 3439, 3446, 87 L.Ed.2d 567 (1985). Plaintiffs bear the burden of proof on this issue, Clark v. Community for Creative Non-Violence, 468 U.S. 288, 293 n. 5, 104 S.Ct. 3065, 3069 n. 5, 82 L.Ed.2d 221 (1984), and they clearly have met it. "[S]igns or displays critical of" government action fall squarely within the realm of "classically political speech." See Boos v. Barry, 485 U.S. 312, 318, 319, 108 S.Ct. 1157, 1162, 1162-63, 99 L.Ed.2d 333 (1988). In displaying, or attempting to display, "Stop Chernobyl Here" posters at open NRC meetings concerning emergency planning regulations (September 8, 1988), the restart of Pilgrim Station nuclear power plant (October 14, 1988), and evacuation planning for Pilgrim Station (December 21, 1988), Comley obviously was communicating, or attempting to communicate, a message on an issue of public concern.[4] Defendants, in fact, concede *217 that Comley's activity constitutes protected speech. See Local Rule 108(h).
Having decided this threshold issue does not answer the problem. We next "must identify the nature of the forum, because the extent to which the Government may limit access depends on whether the forum is public or nonpublic." Cornelius, 473 U.S. at 797, 105 S.Ct. at 3446. The government may exclude speakers from a public forum only when the exclusion is both "necessary to serve a compelling state interest" and "narrowly drawn to achieve that interest." Id. at 800, 105 S.Ct. at 3448 (citing Perry Education Association v. Perry Local Educators' Association, 460 U.S. 37, 45, 103 S.Ct. 948, 954-55, 74 L.Ed.2d 794 (1983)). The government may restrict access to a nonpublic forum, however, provided "the restrictions are `reasonable and [are] not an effort to suppress expression merely because public officials oppose the speaker's view.'" Id. 473 U.S. at 800, 105 S.Ct. at 3448 (quoting Perry, 460 U.S. at 46, 103 S.Ct. at 955-56).
We have no difficulty in concluding that Comley sought access to a nonpublic forum. Obviously, the NRC meeting room is not a "traditional public forum," a place "`by long tradition or by government fiat ... devoted to [public] assembly and debate.'" Cornelius, 473 U.S. at 802, 105 S.Ct. at 3449 (quoting Perry, 460 U.S. at 45, 103 S.Ct. at 954). Although plaintiffs concede as much, they argue that the meeting room is a "public forum created by government designation." Id. This argument cannot withstand scrutiny.
"The government does not create a public forum by inaction or by permitting limited discourse, but only by intentionally opening a nontraditional forum for public discourse." Id. (citing Perry, 460 U.S. at 46, 103 S.Ct. at 955-56). Congress, when it passed the Sunshine Act, 5 U.S.C. § 552b, manifested no such intention. To the contrary, it required only that federal agency meetings "be open to public observation." 5 U.S.C. § 552b(b) (emphasis added). The Act was designed to make available to the public, to the fullest extent practicable, "information regarding the decisionmaking processes of the Federal Government." H.R.Rep. No. 880, 94th Cong., 2d Sess., pt. 1, at 7 (1976), reprinted in 1976 U.S.Code Cong. & Admin.News (94 Stat.) 2183, 2188. Simply put, public discourse was not a goal. The NRC has construed the Act accordingly, and has not opened its meeting room to public debate. See 10 C.F.R. § 9.103 (1989) (Although meetings shall be open "for public observation," "[n]o additional right to participate ... is granted...."); see also NRC Guide, Ex. 7, Pls. Mot.
In the face of this evidence, we will not infer that either Congress or the NRC has designated the NRC meeting room as a public forum. See Cornelius, 473 U.S. at 803, 105 S.Ct. at 3449-50 (citations omitted). An examination of the nature of the NRC meeting room fortifies this conclusion. The meeting room "exists to accomplish the business of the" NRC. Id. at 805, 105 S.Ct. at 3451 (citation omitted); see NRC Guide, Ex. 7, Pls. Mot. It follows that the NRC may "exercise control over access to" its meeting room "in order to avoid interruptions to the performance of [its] duties...." Cornelius, 473 U.S. at 806, 105 S.Ct. at 3451 (citation omitted). Accordingly, we hold that the NRC meeting room is a nonpublic forum.
Having reached this conclusion, we now turn to the third and final inquiry in our analysis: Are the NRC's restrictions on plaintiffs' expressive activity both reasonable and viewpoint-neutral? See id. at 800, 105 S.Ct. at 3447-48 (citing Perry, 460 U.S. at 46, 103 S.Ct. at 955-56). On these issues, defendants bear the burden or proof. See, e.g., Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 777, 106 S.Ct. 1558, 1564, 89 L.Ed.2d 783 (citations omitted), appeal dismissed, cert. denied, 475 U.S. 1134, 106 S.Ct. 1784, 90 L.Ed.2d 330 (1986).
"The reasonableness of the [NRC's] restriction ... must be assessed in the light of the purpose of the forum and all the surrounding circumstances." Cornelius, 473 U.S. at 809, 105 S.Ct. at 3453. In their briefs, defendants contend that they prohibited Comley from displaying the "Stop Chernobyl Here" poster because the poster was "visually disruptive." Dfs. *218 Mem. at 10-11. In light of the purpose of public NRC meetings, we find this posited justification, if true, to be reasonable. The meetings are designed to allow the public to observe the decision-making processes of the NRC. If the display of a poster either impedes the public's observation, or disrupts the decision-making process of the Commission, the NRC may exclude that activity, with this important condition: the exclusion must be viewpoint-neutral. Cornelius, 473 U.S. at 811, 105 S.Ct. at 3453-54; see 41 C.F.R. § 101-20.305 (prohibiting conduct that "impedes or disrupts the performance of official duties ... or prevents the general public from obtaining the administrative services provided on the property in a timely manner"); NRC Guide, Ex. 7, Pls. Mot. (prohibiting "conduct, including the display of signs and posters, which ... impedes or disrupts the performance of official duties by the Commission or its staff or interferes with the orderly conduct of the scheduled presentations").
However, a reasonable justification for excluding a particular type of activity "cannot save an exclusion that is in fact based on the desire to suppress a particular point of view." Cornelius, 473 U.S. at 812, 105 S.Ct. at 3454 (citation omitted). We underscore that defendants bear the burden of proving that their ban on plaintiffs' display was viewpoint-neutral. See, e.g., Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. at 777, 106 S.Ct. at 1564 (citations omitted). Upon examination of the entire record, we hold that defendants have failed to demonstrate that a genuine issue exists as to this fact. We find that defendants' acts in banning plaintiffs' display were not viewpoint-neutral. See Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. at 2552; Liberty Lobby, 477 U.S. at 250, 106 S.Ct. at 2511; Matsushita Electric, 475 U.S. at 587, 106 S.Ct. at 1356 (citation omitted). Accordingly, plaintiffs' motion for summary judgment must be granted, and defendants' cross-motion must be denied.
It is undisputed that at the September 8, 1988, meeting, NRC security guards prevented Comley from displaying an 18 by 25 inch "Stop Chernobyl Here" poster, yet allowed him to display a 13.5 by 15.5 inch reproduction of the Constitution. This difference in size forms the crux of defendants' argument. It is evidence, defendants maintain, that the "Stop Chernobyl Here" poster was banned not because of its message, but because of its size.
The discrepancy in size between the two posters is virtually the only evidence on which defendants rely.[5] Although somewhat helpful to defendants, it is a thin reed on which to rely and is insufficient, in light of the record as a whole, to allow a trier of fact to return a verdict in their favor. Liberty Lobby, 477 U.S. at 249, 106 S.Ct. at 2510 (citation omitted); Matsushita Electric, 475 U.S. at 587, 106 S.Ct. at 1356 (citation omitted). As an initial matter, we note the complete absence of any additional evidence demonstrating that the "Stop Chernobyl Here" poster did, or would have, "visually disrupt[ed]" NRC meetings. No Commissioner, member of the NRC staff, or attendee has testified that the poster obstructed his view or distracted him from the business of the September 8, 1988, meeting. Nor has any witness testified that the reproduction of the Constitution was not "visually disruptive." Defendants may not avoid summary judgment simply by relying on "mere allegations or denials;" instead, they "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e) (emphasis added); see Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510 (citation omitted).
Moreover, too much evidence weighs against defendants for a rational trier of fact to return a verdict in their favor. Prior *219 to filing their cross-motion, defendants never proclaimed a policy of banning posters based on size. To the contrary, when the security guard forbade Comley from displaying the "Stop Chernobyl Here" poster at the September 8, 1988, meeting, he told him, simply, "that display of posters at public meetings violated a [federal] regulation. ..." Jt.Stip. of Facts ¶ 15. Furthermore, NRC General Counsel Parler, in explaining the NRC's purported basis for ejecting Comley from the October 14, 1988, meeting, issued the following blanket statement: "The display of signs and posters ... is disruptive not only to the Commissioners but to the other meeting participants." Parler Letter at 1, Ex. 5, Pls. Mot.
In addition, it is undisputed that at the December 21, 1988, meeting, NRC security guards prohibited Comley from entering the meeting room with either "Stop Chernobyl Here" posters or bumper stickers. A bumper sticker is significantly smaller than the reproduction of the Constitution that Comley had been permitted to display at the September 8, 1988, meeting. If display of this reproduction was not "visually disruptive," then a fortiori display of a bumper sticker would not be either. Defendants have offered no explanation for the December 21 incident. We emphasize once again that it is their burden to demonstrate viewpoint-neutrality. See, e.g., Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. at 777, 106 S.Ct. at 1564 (citations omitted). Their silence on this point hardly fits the bill.
Finally, it appears that NRC officials treated Comley differently from other meeting attendees, and that this difference in treatment was based on Comley's views, which no doubt were irritating and annoying. At the March 29, 1989, ASLB meeting, security officer McGee, acting on the direction of ASLB Judge Ivan Smith, prevented Comley from taking a small bag with him into the meeting room. Both McGee and Smith were aware of who Comley was. It is undisputed that Comley was singled out; other attendees were permitted to carry briefcases, purses, and similar items into the meeting room. Despite the obvious implications of this incident, defendants once again have made no effort to explain it. The incident is further evidence that defendants prevented Comley from engaging in protected speech because they did not like his message.
In summary, the record as a whole supports only one conclusion that defendants' conduct with respect to Comley was viewpoint-based, and thus unconstitutional under the first amendment. No rational trier of fact could find that defendants have proved otherwise. See Shields v. Eli Lilly & Co., 895 F.2d 1463, 1465 (D.C.Cir.1990). Defendants' argument based on the claim that plaintiffs' signs because of size were unusually disruptive is pure make weight. Accordingly, "there is no `genuine issue for trial,'" and plaintiffs are entitled to summary judgment. Matsushita Electric, 475 U.S. at 587, 106 S.Ct. at 1356 (citation omitted); see Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. at 2552; Liberty Lobby, 477 U.S. at 250, 106 S.Ct. at 2511.
IV. Conclusion
Based on the foregoing, we hold that: plaintiffs' display of "Stop Chernobyl Here" posters and bumper stickers is protected speech under the first amendment; the NRC public meeting room in Rockville, Maryland, is a nonpublic forum; a prohibition on the display of visually disruptive posters or signs at public NRC meetings is a reasonable restriction on protected speech; and defendants, "after adequate time for discovery," have failed "to make a showing sufficient to establish" that their particular ban on the display of plaintiffs' "Stop Chernobyl Here" posters and bumper stickers was "viewpoint-neutral." Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. at 2552; Cornelius, 473 U.S. at 811, 105 S.Ct. at 3453-54. Since defendants bear the burden of proof on this issue, see, e.g., Philadelphia Newspapers, 475 U.S. at 777, 106 S.Ct. at 1564 (citations omitted), Rule 56(c), Fed.R.Civ.P., "mandates the entry of summary judgment" against defendants and in favor of plaintiffs. Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. at 2552.
*220 An Order consistent with the foregoing has been entered this day.
ORDER
Upon consideration of the parties' cross-motions for summary judgment, the oppositions thereto, and the entire record herein, and for the reasons stated in an accompanying Memorandum Opinion entered this day, it is by the Court this 18th day of September, 1990,
ORDERED that plaintiffs' motion for summary judgment is granted; it is
ORDERED that defendants' cross-motion for summary judgment is denied; and it is
FURTHER ORDERED that this case is dismissed with prejudice.
NOTES
[1] Comley had previously called for Stello's resignation. In addition, following an encounter with Stello at a February 1987 NRC meeting, Comley had lodged a written complaint against him with the NRC's chairman. At the September 8, 1988, meeting, Stello brought Comley's presence to the attention of the NRC's director of security, who in turn directed the guards to keep Comley under surveillance.
[2] The poster provided the addresses and telephone numbers of three We the People offices, and identified the corporation as a tax deductible, non-profit organization.
[3] Parler also relied on 41 C.F.R. § 101-20.304, which requires "[p]ersons in and on [federal] property" to "comply with official signs of a prohibitory, regulatory, or directory nature and with the lawful direction of Federal Protective Officers and other authorized individuals." Parler noted that the disorderly conduct regulation set out in the text above was posted at the entrance to the NRC's Rockville headquarters, and that Comley had been informed by security officers on several occasions that he could not display signs or distribute literature during public NRC meetings. See Parler Letter at 1-2, Ex. 5, Pls. Mot.
[4] The Court takes judicial notice of the recent nuclear reactor disaster at the U.S.S.R.'s Chernobyl plant.
[5] They also point to the fact that Comley was permitted to wear a "Stop Chernobyl Here" tee-shirt throughout the December 21, 1988, meeting. This evidence is "[in]significantly probative" of whether the NRC applies its ban on the display of posters in a viewpoint-neutral manner. Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. at 2510-11; see infra; see also NRC Guide, Ex. 7, Pls. Mot. (devoid of any restrictions on mode of dress). The Supreme Court has held as a matter of law that the wearing of symbolic clothing is "nondisruptive speech." Board of Airport Comm'rs v. Jews for Jesus, Inc., 482 U.S. 569, 575, 576, 107 S.Ct. 2568, 2572, 2572-73, 96 L.Ed.2d 500 (1987). Thus, it cannot be banned, even in a nonpublic forum. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1883189/ | 980 F.Supp. 848 (1997)
Mark E. NETTLES and Mary Nettles,
v.
ENSCO MARINE COMPANY.
Civil Action No. 96-2479.
United States District Court, E.D. Louisiana.
September 12, 1997.
*849 Fransen & Harden by A. Remy Fransen, Jr., New Orleans, LA, Jacobs, Manuel & Kain by Stanley Joseph Jacobs, David J. Kain, New Orleans, LA, for Mark E. Nettles, Mary Nettles.
Burke & Mayer by William Bryon Schwartz, William Daniel Wellons, New Orleans, LA, for Ensco Marine Co.
Peter B. Tompkins, Gelpi, Sullivan, Carroll & Gibbens, New Orleans, LA, for Amoco Production Co.
FALLON, District Judge.
I heard evidence in the case and I have had an opportunity to review the material and I make the following findings of fact and conclusions of law:
FINDINGS OF FACT AND CONCLUSIONS OF LAW
(Orally delivered on 9/12/97)
I.
PROCEDURAL HISTORY
Mark E. Nettles was employed as an operation specialist by Amoco. On July 2, 1996, he was assigned to work on an offshore platform located on the Outer Continental Shelf off the Coast of Louisiana. After completing his duties for the day he and a fellow employee went to the living quarters on the platform. Mark E. Nettles proceeded to take a shower. While so engaged the M/V ENSCO ENDEAVOR, it is alleged that an offshore supply vessel owned and operated by Ensco Marine Company, came in contact *850 with the boat deck of the platform. Mark E. Nettles fell and sustained injuries. Mark E. Nettles and his wife have filed suit alleging that the incident and resulting damages were caused by the negligence of Ensco Marine. Ensco Marine denies that it was negligent and claims that if its vessel did in fact come in contact with the boat deck that it was a normal bump to be expected and that they were in no way the cause of the plaintiffs injuries. This cause came on for a non jury trial which commenced on September 8th, 1997, and concluded on September 11th, 1997.
The Court having carefully considered the testimony of all of the witnesses, the exhibits entered at trial, the record, and pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, hereby orally enters the following findings of fact and conclusions of law.
To the extent that any findings of fact constitute a conclusion of law, the Court hereby adopts it as such, and to the extent that any conclusions of law constitute a finding of fact, the Court hereby adopts it as such.
II.
FINDINGS OF FACT
(1)
At approximately 2:00 o'clock P.M. on July 2nd of 1996, Mark Nettles along with Tony McElroy, an employee of Danos & Curole, were sent to Amoco stationary offshore platform West Delta 75F, which was located on the Outer Continental Shelf approximately thirty miles off the coast of Grand Isle, Louisiana, for the purpose of insuring that a piece of equipment, namely, a separator worked properly when a well was brought in.
(2)
This offshore structure rests on four legs which are seated on the sea bed of the Gulf of Mexico. At the waterline there is a boat deck which is an L-shaped platform approximately 45 feet by 45 feet. Above the boat landing is a subdeck about the same size. And some 65 to 70 feet above the waterline is the main deck, which is larger. On the main deck there is a dog house or living quarters.
(3)
Nettles and McElroy were the only individuals on the platform at this time.
(4)
When the day's work was completed Nettles and McElroy returned to the living quarters on the platform where they intended to spend the night.
(5)
At approximately 6:10 P.M. Nettles was taking a shower when the offshore utility vessel ENSCO ENDEAVOR came in the vicinity of the platform.
(6)
The M/V ENSCO ENDEAVOR is a vessel owned and operated by Ensco Marine Company, which is a Delaware corporation with its operations office maintained in Broussard, Louisiana.
The ENSCO ENDEAVOR is a documented and inspected vessel, documented and inspected by the United States Coast Guard, with a measured length of a 137.3 feet, overall length of 146 feet a breath of 26 feet and depth of 10.5 feet. The vessel is an offshore supply vessel providing transportation services for men, equipment and supplies to various oil company platforms in the Gulf of Mexico.
(7)
The captain of the vessel Tony Donaldson planned to stop at the platform to let one of the passengers, an Amoco employee named Johnny Green, board the platform to retrieve some electrical cord and wiring so it could be used on another Amoco platform in the same offshore field.
(8)
While maneuvering toward the platform a portion of the stern of the ENSCO ENDEAVOR came in contact with the boat landing of the platform causing the platform to shake.
(9)
The unexpected movement of the platform caused Nettles to fall in the shower stall. He struck his lower back and knocked a cap off one of his teeth.
*851 (10)
Nettles shouted from the bathroom that he had been knocked down and was hurt and asked McElroy to go see what had happened.
(11)
Following that request McElroy left the living quarters and looked over the side of the platform and saw the ENSCO ENDEAVOR pulling away from the boat dock.
(12)
At the time of the incident McElroy was in the bunk room leaning on the top of the a bunk, apparently doing some paperwork. He said the blow caused him to "rock back and forth." In describing the nature of the impact he testified that he had never been on a platform that had been hit that hard before the incident.
Bryan Broussard, an employee of Fowley Crane Construction Company, a subcontractor of Amoco, was on the ENSCO ENDEAVOR at the time of the impact. He described the force of the impact as "major" compared to the other bumps he experienced during his seventeen years working offshore.
Johnny Green, the Amoco employee, who was planning to board the platform was standing on the stern of the vessel as the vessel approached the platform. He saw the port stern of the vessel collide with the boat landing. Based on his sixteen years experience offshore he testified that the vessel came in too fast and struck the platform a lot harder than usual.
James Weber, a drilling superintendent for Amoco, was a passenger on the back deck of the vessel. He was watching as the port stern began to approach the platform and eventually came in contact with the boat landing. Although he described the blow as a normal bump, the Court takes note of the fact that he had fore knowledge of the impact and readied himself for it. Not withstanding his preparation, however, the impact caused even him to lurch forward.
There were several witnesses who denied ever seeing or feeling any impact. The Court finds these witnesses were not credible, either because they were completely impeached, as for example, Sean Hester, or because they had a personal interest in the docking operation as in the case of the captain Tony Donaldson, or because they were located off the deck in the galley or lounge of the vessel.
(13)
The credible evidence supports the conclusion that the ENSCO ENDEAVOR forcefully came in contact with the platform and that the impact caused the platform to shake
(14)
Shortly after the incident Nettles radioed Robert Anthony Griffin, an Amoco employee who was serving as a field relief foreman and told him that he, Nettles, was injured when the ENSCO ENDEAVOR hit the platform causing him to fall in the shower. The next morning, because of severe pain in his back and after a hard night twisting and turning, Nettles reported that he needed to come in and was flown to shore for medical treatment. He was seen by a doctor in Houma, Louisiana and then returned to his home in Brookhaven, Mississippi where he resides with his wife, Mary Nettles.
(15)
Nettles saw his family physician, Dr. Baxter Irby in Brookhaven on July 5th, 1996. Dr. Irby's examination revealed that Nettles had pain in the buttocks and his foot was numb and he had pain in his leg. He was referred to Dr. Lynn Stringer, a neurosurgeon, in Jackson, Mississippi
(16)
Nettles had a prior herniated disc at L5-S1 which was removed by Dr. Stringer in June of 1995.
(17)
After the June 1995, surgery Nettles was cleared to return to work offshore, and on September the 1st of 1995 he did in fact return and was able to perform his job without any pain or physical problems until the incident of July 2nd, 1996.
(18)
When Nettles saw Dr. Stringer following the July 2nd, 1996 incident, he had pain in his back and radiating pain in the leg. Based on the examination and diagnostic *852 tests Dr. Stringer concluded that Nettles had a recurrent herniation at the L5-S1 level of his spine.
(19)
The medical evidence, namely, the testimony of Dr. Stringer and Dr. George Carey, Nettles' current treating physician, supports the conclusion that the incident in the shower on July 2nd, 1996 was the cause of the recurrent herniated disc.
(20)
Dr. Stringer performed a micro lumbar discectomy at L5-S1 level of Nettles' spine on July 25th of 1996.
(21)
At the time of the trial Nettles is still having considerable pain and has limitations on standing for long periods of time, climbing, stooping, bending, lifting and sitting. He is a candidate for a rehabilitation regime, and in time a work hardening program.
(22)
The credible medical evidence indicates that his prognosis is good for his return to some type of work, but it is not good for his return to offshore work. He will not be able to return to offshore work. He will have permanent restrictions on bending, stooping, climbing and lifting weights in access of twenty-five pounds and sitting for long periods.
(23)
The good news, if there is any good news in this unfortunate situation, is that Nettles has a good education and is proficient with electronic equipment. He is a hard worker and has demonstrated that throughout his life. He completed high school in 1971, and then attended a two year program in electronics at Copiah Lincoln Junior College graduating with an Associates of Arts Degree with honors in electronics in 1973.
From 1973 through 1979 Nettles was a service technician with Lanier Business Machines providing repair and maintenance services on office equipment. Thereafter, for about one year, Nettles and another individual operated a business of servicing office equipment and utilized his learned skills in the electronics field. He also repaired and serviced T.V.'s and audio equipment. In short he has the education and experience and the work ethic which will allow him to compete for jobs which do not stress strength or agility.
(24)
In addition to his back injury, Nettles suffers from chronic depression and personality adjustment disorders. These conditions predated his injury of July 2nd. They were not caused by his back injury. Nevertheless, his back injury did have some aggravating effect on his chronic depression. But any effect of his injury on his chronic depression is likely to abate when he returns to some gainful activity.
III.
CONCLUSIONS OF LAW
(1)
The Court has jurisdiction over this matter pursuant to:
1. 28 U.S.C. 1333, which provides original jurisdiction over admiralty and maritime claims;
2. 33 U.S.C. Section 905(b), which authorizes a covered employee to bring a claim against a vessel;
3. 46 U.S.C. App. Section 740 entitled the extension of Admiralty Act, which extends General Maritime Law to land or extensions of land, such as this platform, when an incident occurs over navigable waters but is consummated on land or the extension of land, and
4. 43 U.S.C. 1333 known as the Outer Continental Shelf Lands Act.
The General Maritime Law is the substantiative law applicable to this case. See 46 U.S.C. App. Section 740, and Continental Oil Co. v. London Steam-Ship Owners' Mutual Insurance Association, 417 F.2d 1030 (5th Cir.1969).
(2)
As mentioned the incident giving rise to the present lawsuit occurred when a vessel collided or allided with a fixed platform located on the Outer Continental Shelf
*853 (3)
Liability for collisions or allisions is based upon a finding of fault that the collision caused or contributed to the damage. From the earliest times this rule has been consistently applied. See Owen. The Origins and Development of Maritime Law 51 Tulane Law Review 759, 1997.
(4)
The test and standards for a finding of fault or negligence is reasonable care under the circumstances. Schoenbaum Admiralty and Maritime Law, Volume 2 page 255 Second Edition 1994.
(5)
In the present case it is the conclusion of the Court after hearing the testimony and observing the demeanor of the witnesses, that the cause of Mark E. Mark Nettles injuries was the negligence of the defendants employee the captain of the ENSCO ENDEAVOR in causing or allowing his vessel to forcefully strike the Offshore Platform West Delta 75F.
(6)
Mark E. Nettles was born on July 25th, 1953. He was forty-two years old at the time of his injury. He had a worklife expectancy of seventeen years and a life expectancy of thirty-three years. He had been employed by Amoco for sixteen years, and at the time of his injury his wage after taxes, of all kinds, was approximately $45,000.00 per year plus $9,000.00 in fringe benefits. As a result of the above-described incident and resulting injuries he sustained the following loss of wage earning capacity:
a. Past loss.
The Court finds that the evidence justifies the conclusion that Nettles has been and will be temporarily totally disabled from 7/2/96 to 7/2/98. A period of two years. During this time he either has loss or will lose wages and fringe benefits in the amount of $108,000.00.
b. Future loss.
(1)
The Court finds the evidence and law supports the conclusions that Nettles will be able to return to some gainful activity, and from 7/2//98 to 7/2/01, a period of some three years, he will be able to earn approximately $10,700.00 per year so that he will sustain a loss of $34,300.00 annually.
The Court concludes he will not have any loss of fringe benefits because he will be able to receive some fringe benefits and eventually the same fringe benefits in his future employment as he had in the past. Reducing this amount to present value using an appropriate below market discount rate would result in a loss of $99,000.00.
(2)
The Court further finds that the evidence and law supports the conclusion that from 7/2/01 to 7/2/06 he will be able to average approximately $23,000.00 per year, so that he will have an annual loss of 22,000 per annum. Again reducing this figure to present value using an appropriate below market discount rate would produce a loss of $103,697.00
(3)
The Court further finds that the evidence and law supports the conclusion that Nettles, through his industry and his efforts and his work ethic, will continue to improve his efficiency and enhance his wage earning capacity. He has demonstrated that in the past. He has demonstrated proficiency. He has demonstrated a capacity for hard work, and he has demonstrated a willingness to work. From 7/2/06 to 7/2/13, the end of his worklife expectancy he will average $30,000.00 per year and will thus have a loss of wage earning capacity of 15,000 per year. Reducing this figure by the appropriate below market discount rate, the result will be a loss of $97,000.00.
In summary, the past and future wage earning lost of Mark E. Nettles is $407,697.00. See Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980); Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983) processed 1983. Culver *854 v. Slater Boat Co., 722 Fd.2d 114 (5th Cir. 1983).
(7)
In addition to the loss of wage earning capacity Nettles incurred medical expenses made necessary by his injuries. He is entitled to recover the amount of these losses which total $11,266.19
(8)
Mark E. Nettles also sustained and will sustain for an indefinite time in the future, in all likelihood the rest of his life, mental and physical pain and suffering. Hopefully this will reduce itself in time. But from the evidence presented the Court concludes that an appropriate amount for this element of damage is $150,000.00. 80,000 of which is attributable to the time prior to the trial and 70,000 is allotted for the future.
(9)
Mary Nettles, Mark E. Nettles' wife, has filed a claim for loss of consortium. As mentioned, the General Maritime Law is applicable to the present case. See 46 U.S.C. App. 740. Also see Continental Oil Co. v. London Steam-Ship Owners' Mut. Ins. Ass'n, 417 F.2d 1030 (5th Cir.1969).
Under the General Maritime Law there is no claim for loss of consortium on the Outer Continental Shelf. See Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 98 S.Ct. 2010, 56 L.Ed.2d 581 (1978). Nichols v. Petroleum Helicopters, 995 F.2d 82 (5th Cir.1993), and Miles v. Apex Marine Corp., 498 U.S. 19, 111 S.Ct. 317, 112 L.Ed.2d 275 (1990).
(10)
This is an admiralty case tried without a jury pursuant to the Court's admiralty jurisdiction invoked by Federal Rule of Civil Procedure 9(h). Accordingly, an award of prejudgment interest on past damages is proper. And the starting date and rate is left to the sound discretion of the Court. See Doucet v. Wheless Drilling Co., 467 F.2d 336 (5th Cir.1972). Marathon Pipe Line Co. v. M/V Sea Level II, 806 F.2d 585 (5th Cir. 1986).
The Court finds that an award of prejudgment interest from the date of judicial demand is appropriate in this case at the rate of 5.67% per annum on plaintiff's past damages as described above. Martin v. Walk, Haydel & Associates, Inc. 794 F. 2d 209, 212 (5th Cir.1986).
(11)
Since his injuries Nettles has received compensation benefits paid by his employer Amoco. The total compensation paid to Nettles to date is $50,076.16. This amount has been stipulated by the parties.
The total medical payments paid on behalf of Nettles, which is included in that figure, is $10,043.19. I'm sorry, it's not included in that figure. The total comp is 50,076.16 and total medical is 10,043.19.
His employer is entitled to reimbursement of these sums from any amounts recovered. See Bloomer v. Liberty Mutual Ins. Co., 445 U.S. 74, 100 S.Ct. 925, 63 L.Ed.2d 215 (1980).
IV.
SUMMARY
On the basis of the foregoing findings of fact and conclusions of law, the Court finds that the plaintiff Mark E. Nettles has sustained damages due to the defendant's negligence. Accordingly the plaintiff is entitled to recover from the defendant Ensco Marine Company the following damages: $108,000.00 for past earnings lost; $299,697.00 for future earnings lost; $11,266.19 for past medical expenses; and $150,000.00 for past, present and future pain and suffering.
Additionally, the plaintiff is entitled to prejudgment interest on the above past losses totalling $199,266.19 at the rate of 5.67% per annum from the date of judicial demand until the judgment is satisfied. Further, the plaintiff is entitled to post judgment interest at the legal rate on the above itemized future losses totaling $369,697.00 from the date of judgment until satisfied.
Finally, the compensation and medical lien asserted and stipulated by and between the parties is recognized. Bloomer v. Liberty Mut. Ins. Co., 445 U.S. 74, 100 S.Ct. 925, 63 L.Ed.2d 215. That is the judgment of the Court.
*855 Thank you, gentlemen, for the professional manner in which all of you have tried this case.
Court will stand in recess.
MR. FRANSEN: Judge, may I make a observation?
THE COURT: Yes.
MR. FRANSEN: Your Honor, there's something I but this there is something I noted and I may have not heard right.
THE COURT: Okay.
MR. FRANSEN: When you were talking about the numbers I know that the final number of 369,000 included all of the future items, but I think that, unless I misheard, you may have not mentioned that entire amount when you were going from 7/2/98 to 7/2/01, 7/2/01 to 7/2/06, 7/2/06 to 7/2/13. think you may have overlooked the period 7/2/06 to 7/2/13. That was my impression. I don't know if anybody heard it but I was writing. I just to want to be sure that if it's deleted accidently the judgment will be as you said earlier.
THE COURT: I think I covered it.
MR. FRANSEN: Okay.
THE COURT: Fine.
MR. FRANSEN: And on behalf of my clients thank you very much for your time.
THE COURT: I ask the parties to get together and confect a judgment and submit it to the Court for my review within ten days of receipt of the transcript of my findings.
Thank you, gentlemen.
Court will stand in recess.
MR. FRANSEN: Thank you.
THE CLERK: Everyone rise.
Court stands in recess. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1996572/ | 104 Ill. App.2d 192 (1968)
244 N.E.2d 384
People of the State of Illinois, Plaintiff-Appellee,
v.
Richard L. Wendt, Defendant-Appellant.
Gen. No. 51,748.
Illinois Appellate Court First District, Second Division.
December 30, 1968.
Rehearing denied January 29, 1969.
*193 *194 Bellows, Bellows & Magidson, of Chicago, for appellant.
John J. Stamos, State's Attorney of Cook County, of Chicago (Elmer C. Kissane and Sheldon Schapiro, Assistant State's Attorneys, of counsel), for appellee.
MR. JUSTICE McNAMARA delivered the opinion of the court.
The defendant, Richard L. Wendt, was indicted for the crime of indecent liberties with a child in violation of Ill Rev Stats 1965, c 38, § 11-4. After a trial without a jury, he was found guilty of that crime and sentenced *195 to a term of 1 to 3 years in the penitentiary. He appeals, contending that he was not proved guilty beyond a reasonable doubt; that the trial court erred in excluding evidence of the reputation of the complaining witness; that the trial court erred in allowing evidence of other offenses; and that the sentence imposed was harsh and should be reduced.
Evidence for the State:
The complaining witness testified that he was 10 years old, in fifth grade, and lived with his parents. He met the defendant about two years before trial. On August 5, 1965, he went to the defendant's apartment after school about 3:45 p.m. and entered by means of a key which had been given to him by defendant. He played records and cleaned the apartment until the defendant arrived about 4:15 p.m. Complainant then watched T.V. and ate a supper which he had prepared. After supper he did some homework, worked on a shortwave set for about an hour, and went to bed at 9:00 p.m. He and defendant slept in the same bed, and they both wore pajamas. The air conditioner was on, but shortly after they went to bed defendant stated that he was hot; he took off his pajamas and told the complainant to do the same. At that point, defendant played with the complainant's penis for approximately one-half hour. Another boy about the same age was in the apartment that night. The other boy slept on the couch in the living room, and the door between the living room and the bedroom was closed. At about 6:00 a.m. the following morning, defendant drove the complainant home and the other boy to Hanover Islands. A few days afterwards, complainant's father directed him to tell what had happened, stating that he already knew about it. Complainant did not know how his father had found out about the incident. Complainant had slept with the defendant on numerous prior occasions, and defendant had touched his *196 penis many times before. Defendant had bought him presents at times and gave him an allowance of fifty cents a week. The defendant, at times, had struck the complainant around his thighs with a belt, a paddle, or his open hand, usually before defendant touched him in his private parts. Defendant warned him not to tell anyone about what was going on in the apartment or he would punish him.
On cross-examination, complainant stated that at the preliminary hearing he had testified that just he and defendant were present on the night in question, and that defendant had touched his penis for "five or more minutes." He could not remember whether they went to the Allied Radio store on that particular evening. He was not attending school on the day in question, and the homework he was doing on that evening was part of a long-range summer assignment.
Complainant's mother testified that four days after the above incident, she and her husband went to defendant's apartment. They were there from about 10:00 p.m. until 11:00 p.m. When accused, defendant at first denied doing anything, but then admitted fondling their child, stating that there was nothing wrong with what he did. On cross-examination, she testified that defendant was a Sunday School teacher and otherwise active in their Church; that they had known him for some time; that she knew that he had struck her son with a paddle, but that she did not know about a belt. She denied being intoxicated on the evening they went to defendant's apartment, but stated that she could have had something to drink.
The father of the complainant also testified that he and his wife went to defendant's apartment four days after the incident. After being accused by the father, the defendant at first denied, then admitted fondling the complainant. Defendant explained the term "fondling" as playing with their son's penis. Defendant said *197 that what he had done "wasn't so terrible." The father told the defendant that if he would not turn himself in to the police or to a mental institution within 24 hours, he would notify the police. On cross-examination, the father stated that he did not remember whether he and his wife had anything to drink, and that he had no knowledge that defendant had on occasion struck his son. Although stating that defendant had their permission to discipline the children, he would never have given permission to defendant to strike them with any instrument. His children also had permission to stay at defendant's apartment, and defendant had on one occasion lent him money.
Leonard J. Keating, youth officer of the Cook County Sheriff's Police Department testified that he talked to defendant for about an hour after his arrest. Defendant admitted that he had slept in the nude with the complainant on the night in question, and with other children on different occasions. He denied ever fondling the complainant, but stated that he probably rolled over in bed at times and touched the children on their private parts, but "they never objected so he just let it go."
It was stipulated that defendant was 26 years of age.
Evidence for the Defense:
Reverend Mr. William Bartley, pastor of the Church where defendant taught, testified that the defendant's general reputation for good morals, chastity, truth and veracity was good. Complainant and his family were members of his congregation. John Frederickson, a school teacher and head of the Sunday School, also testified that defendant's general reputation for good morals, chastity, truth and veracity, was good.
David Hewing, a boy of the approximate age of complainant, testified that he had met the complainant through the defendant, and had also slept at the defendant's apartment on several occasions. On the *198 night in question the three of them went to Allied Radio store to buy a birthday present for the complainant and his brother, and then returned to the apartment, where he and the defendant worked on a coil in the bedroom. The complainant fell asleep in the living room, and David and the defendant later went to sleep in the bedroom.
Steven Mendak, the principal of the school attended by the complainant, testified that he did not have any knowledge of school work assigned to the complainant during the summer. His testimony concerning the complainant's reputation for truth and veracity was stricken by the trial judge.
Thomas Maher, a fellow employee of the defendant, testified that defendant's reputation for truth, veracity, morals and chastity was good. He also testified that he had heard Officer Keating say at the police station that the complainant's father was intoxicated when he signed the complaint.
Emily Peyer testified that her 13-year-old son had been in the fun program at the Church under the supervision of the defendant, and that defendant's general reputation for good morals and chastity was good.
Defendant's mother, Lucille Wendt, testified that during a recess in the courtroom at the time of the preliminary hearing, she overheard a conversation between the complainant and his parents. She heard the complainant say that the defendant did not do anything to him, and his father agreed, but asserted that they had to go through with it. The complainant also told his mother that defendant did not do anything, but his mother told him to be quiet.
Defendant testified that he was a production engineer at Motorola; that he had been a member of the Apostles Lutheran Church for the past three years; that he was a Sunday School teacher and the director of the fun program there. He had known the complainant and his *199 family for about two and a half years, and that he had seen the father strike the complainant and his brother on several occasions. He had given the father a key to the apartment some time previously. On the night in question, he, the complainant and David Hewing went to his apartment together. After supper, they went to Allied Radio to buy some gifts. When they returned, the complainant said that he was tired and went to sleep on the living room couch, while defendant and David were in the bedroom working with the gifts. The complainant called the defendant because he had a heat rash on his abdomen, and defendant rubbed some talcum powder on the rash. Later, the defendant and David went to sleep in the bedroom. In the morning, defendant drove the two boys to the complainant's home. A few days later, the parents of complainant came to his home and accused him of the act in question, which act he denied. They both threatened him if he would not commit himself to an institution. Three days later he was arrested. He never touched the boy's private parts.
On cross-examination, the defendant stated that he had slept in the same bed with complainant but not on the night in question. On the nights that they slept in the same bed, complainant sometimes was in the nude, but not the defendant. He struck the complainant sometimes with his hands, and sometimes with a paddle, a "seater-heater." He did not remember, but it was possible that he had also struck complainant with a belt.
On rebuttal, Officer Keating testified that he never said that complainant's father was drunk at the time he signed the complaint. The complainant and his parents testified on rebuttal that they did not have such a conversation in the courtroom at the preliminary hearing as testified by defendant's mother. Complainant also denied that he had a rash or that defendant applied talcum powder to a rash on the night in question.
*200 Defendant's first contention on this appeal is that he was not proved guilty of the crime charged beyond a reasonable doubt. We do not agree.
[1] Where a conviction for the crime of indecent liberties is based on the testimony of the complaining witness, and the defendant denies the charge, the testimony of that witness must be clear and convincing or must be corroborated by other substantial evidence. People v. Kolden, 25 Ill.2d 327, 185 NE2d 170 (1962).
[2] The defendant maintains that the testimony of the complainant was not clear and convincing, citing several inconsistencies in his testimony. At trial, the boy testified that he went to defendant's apartment after school; on cross-examination he stated that school was not then in session and that he was not attending summer school. At the preliminary hearing he testified that he and the defendant were alone on the evening in question; at trial he stated that David Hewing was also present. At the preliminary hearing, the complainant testified that he and the defendant went to Allied Radio store that evening, while at trial he could not remember whether they went to the store; at the preliminary hearing he testified that defendant was wearing pajamas during the indecent act, while at trial he stated that defendant removed them before the occurrence. The complainant tried to explain some of the inconsistencies at trial; for example, when he testified that he and defendant were alone he thought that the question referred to who was present in the bedroom rather than in the apartment. However, when viewed in the light of all the surrounding circumstances, we cannot attach the importance to these inconsistencies that the defendant does. The testimony from which the inconsistencies arise deals only with collateral events. Moreover the relationship between the boy and defendant, the frequency with which he stayed at defendant's apartment and the interval between the occurrence, the preliminary *201 hearing, and the trial would explain the minor inaccuracies of the boy's testimony.
[3] However, defendant points out an inconsistency in the complaining witness's testimony which is more relevant to the indecent act for which he has been convicted. At the preliminary hearing, the complainant testified that the act took "five or more minutes," while at trial he stated that it took about a half hour. While the testimony concerns the act, we do not believe that a boy of 10 years would pay much attention to the passage of time during the occurrence. In fact we would expect the complainant's recollection of the time element to be somewhat hazy. The trial judge made an express finding that he recognized the difficulty of cases such as these, but that the testimony of the complaining witness was clear, and convincing and mature. We believe that the record supports that finding.
Defendant cites People v. Martin, 380 Ill. 328, 44 NE 2d 49 (1942); People v. Pazell, 399 Ill. 462, 78 NE2d 212 (1948); and People v. Williams, 414 Ill. 414, 111 NE 2d 343 (1953), in support of his contention that the testimony of the complaining witness was not clear and convincing. But these cases are all distinguishable from the case at bar. In the Martin case, the conviction was reversed on the basis of an insufficient identification of the defendant by a six-year-old girl who did not recognize defendant until prompted by her mother. In the Pazell case, the Supreme Court found that the testimony of a seven-year-old girl was unsatisfactory. In the Williams case, the court found that the testimony of a 13-year-old complainant was unsatisfactory in that she was uncertain as to whether the attempted intercourse caused any pain; further there was testimony by her mother as to bias upon the part of the complainant against the defendant. Neither of these factors are applicable to the present case.
*202 [4, 5] The credibility of the witnesses and the resolution of the conflicting testimony was a matter for the trial court, and this court will not substitute its judgment for that of the trial court. People v. Woodruff, 9 Ill.2d 429, 137 NE2d 809 (1956); People v. Kirilenko, 1 Ill.2d 90, 115 NE2d 297 (1953).
[6] Although our determination that the complainant's testimony was clear and convincing makes any discussion of whether there was corroboration of his testimony unnecessary, we wish to note that the testimony of the parents as to admissions made by defendant constituted corroboration. We are not persuaded that the difference in their testimony negates its corroborative value. The mother testified that they both accused defendant of molesting their child. She testified that, after first denying it, the defendant finally admitted fondling the child, but that he did not explain what he meant by fondling. The father testified that under his questioning, defendant did explain what he meant by fondling that he handled the boy's penis. We believe that the testimony of the parents corroborated the boy's testimony. Moreover, the complainant's testimony is further corroborated by the testimony of the police officer as to admissions made by defendant. The officer testified that, while denying the act of indecent liberties, defendant admitted sleeping with the complainant in the nude on the night in question, and also stated that on occasions he may have rolled over in bed and touched boys with whom he was sleeping on their private parts, but that they never objected.
The defendant next contends that the trial court erred in excluding evidence of the reputation of the complaining witness. The principal of the school attended by the complainant was called by the defense to testify about the complainant's reputation for truth and veracity in the community.
*203 After the witness testified that he had an idea as to the complainant's reputation in the community, the following colloquy took place during the examination of the witness:
THE COURT: "He has answered that he knows the general reputation for truth and veracity in and about the school. Is that correct, sir?"
THE WITNESS: "That is right, sir."
THE COURT: "He may answer as to what it is."
ATTORNEY FOR DEFENSE: "Would you state what that reputation is?"
THE WITNESS: "It's questionable because times where I have had contacts"
STATE'S ATTORNEY: "Objection to questionable and any relation of any individual instances. It is just a yes or no."
THE COURT: "Individual instances are not admissible."
ATTORNEY FOR DEFENSE: "Just state the general reputation."
THE WITNESS: "It's not the best."
THE COURT: "Objection sustained. Is it good or bad, sir?"
THE WITNESS: "Your honor, it is somewhere in between. There are times when to my knowledge he has told the truth and there have been other times when he hasn't and"
THE COURT: "But as to does he really have a general reputation, Mr. Principal? Does the youngster have a general reputation?"
*204 THE WITNESS: "I will go back to the records, as a teacher that has had him I will say that he has not a good"
STATE'S ATTORNEY: "Object."
THE WITNESS: "He doesn't have a good reputation."
On cross-examination, the following took place:
STATES ATTORNEY: "So when you say that he does not have a good reputation for truth and veracity you are expressing your personal opinion, is that correct?"
WITNESS: "I am expressing the opinion that I have in my working with Terry in situations in the school."
At this point, the trial court, at the request of the assistant State's Attorney, struck the witness's testimony as to the complainant's reputation for truth and honesty. Thereafter, counsel for the defense examined the witness further and the following occurred:
DEFENSE: "Are you aware of his general reputation in and about the school?"
STATE'S ATTORNEY: "The question has been asked and answered already."
WITNESS: "Yes, sir."
DEFENSE: "He says he is, Your Honor."
STATE'S ATTORNEY: "The question has been asked and answered."
THE COURT: "Yes, he answered that he did but at the same time he testifies and I think I understand his attitude. It is based upon personal opinion *205 based upon specific instances, is that right, sir?"
WITNESS: "Yes, sir, that is right."
[7] A witness may testify concerning his knowledge of another witness's general reputation in a particular community for truth and veracity. However, the testimony may not be based upon the personal opinion of the witness, and must not be concerned with specific instances as opposed to general reputation. People v. Lehner, 326 Ill. 216, 157 NE 211 (1927).
[8] An examination of the above testimony clearly indicates that the principal's knowledge of the complainant's reputation was based upon personal opinion arising out of specific encounters with the boy. Defendant argues that the witness was asked a series of confusing questions, and consequently, gave confusing answers, but that his opinion as to defendant's reputation should have been allowed to stand. We find that neither the questions nor the answers were confusing; rather they reveal that the witness was not able to testify as to the complainant's general reputation even in the academic community. The trial court did not err in excluding the principal's testimony concerning the complainant's reputation for truth and veracity.
The defendant next argues that the trial court erred in admitting evidence concerning other acts of indecent liberties between the complainant and the defendant, and evidence that defendant had administered beatings to the complainant.
[9, 10] Over defendant's objection, the complainant testified that the defendant had touched him "around his penis or private parts" for a period of 2 years prior to August 5, 1965. Defendant concedes that evidence of similar acts of indecent liberties with the same complainant is proper for the purpose of showing the relationship *206 and familiarity between the parties. People v. Pazell, 399 Ill. 462, 78 NE2d 212 (1948); People v. Sampson, 1 Ill.2d 399, 115 NE2d 627 (1953). But he argues that these other acts were not sufficiently described, either as to time and place, or as to the details of each act, citing People v. Rongetti, 338 Ill. 56, 170 NE 14 (1929).
However, in People v. Kraus, 395 Ill. 233, 69 NE2d 885 (1946), the Supreme Court held that the testimony of a 13-year-old complainant that acts similar to the one charged had occurred several times over a period of one year was admissible, not for the purpose of showing an offense other than the one charged, but to show the relationship that existed between the parties. Likewise in the instant case, the complainant's testimony as to the prior indecent acts was properly admitted.
[11, 12] The complainant also testified that defendant struck him about the legs and rear end with a belt and board (the latter was characterized as a "seater-heater" by both parties) a couple of times a week for about two years. Although we do not accept the State's argument that this evidence constituted proof of defendant's warped sexual desires, we believe that it was admissible to show the relationship and familiarity between the two parties.
[13, 14] Defendant finally contends that the sentence imposed by the trial court was unnecessarily severe, arguing in effect that it was error to deny probation to defendant. The Supreme Court has stated that the power of reviewing courts to reduce sentences (Supreme Court Rule 615(b)(4)), (Ill Rev Stats 1967, c 110A, § 615) should be exercised with considerable caution. People v. Taylor, 33 Ill.2d 417, 211 NE2d 673 (1965). Although defendant had an excellent background, he was convicted of a serious crime. We believe that the trial court acted within its sound discretion in denying the application for probation and in imposing a sentence.
*207 For the foregoing reasons the judgment of the Circuit Court is affirmed.
Judgment affirmed.
BURKE, P.J. and LYONS, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2016330/ | 128 B.R. 622 (1991)
In re GUILFORD TELECASTERS, INC., trading and doing business as WGGT-TV, Debtor.
Bankruptcy No. B-86-02633C-11.
United States Bankruptcy Court, M.D. North Carolina.
May 28, 1991.
*623 Rayford K. Adams, III, Greensboro, N.C., for debtor.
Richard M. Hutson, Durham, N.C., for shareholders.
Walter Rand, Greensboro, N.C., for Continental Bank, N.A.
MEMORANDUM OPINION
JAMES B. WOLFE, Jr., Chief Judge.
On December 31, 1986, Guilford Telecasters, Inc., trading and doing business as WGGT-TV ("Debtor"), filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On August 7, 1989, Kathrine R. Everett, Robinson O. Everett, James Thrash, Roy O. Rodwell and such other shareholders of the Debtor who elect to participate, filed a plan of reorganization. The plan of reorganization was subsequently modified and amended. On March 20, 1991, a hearing was held on the confirmation of the amended plan and on the proponents' "cram-down" motion to confirm the plan over dissenting classes pursuant to 11 U.S.C. § 1129(b)(1).
Objections to confirmation of the plan were filed by Continental Bank N.A., formerly Continental Illinois National Bank and Trust Company of Chicago ("Continental"), and the Official Committee of Unsecured Creditors ("Committee"). At the hearing on March 20, 1991, the Committee withdrew its objection to the plan and Continental's objection remained for disposition. In open court, Thomas Cookerly and George W. Lyles, Jr., shareholders of the Debtor, joined Continental in objecting to the plan.
At the confirmation hearing, extensive evidence was heard on behalf of the proponents and Continental. The objecting shareholders did not participate in the hearing other than noting their objection for the purposes of the record. This opinion shall constitute the Court's findings of fact and conclusions of law. A separate order will be issued consistent with these findings and conclusions.
This Court has jurisdiction over the parties and subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334 and the Standing Order of Reference entered by the United States District Court for the Middle District of North Carolina. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L) in which this Court may exercise its full authority to hear and determine the matter and issue a final order.
The Debtor, a North Carolina corporation, is engaged in the business of operating an independent UHF television station in the Greensboro/Winston-Salem/High Point market area. The Debtor was licensed during 1981 and aired its first full telecast on May 9, 1981. The Debtor enjoyed continual growth until 1985. Beginning in late 1985, the Debtor suffered severe financial setbacks for a variety of reasons and, ultimately, on December 31, *624 1986, the Debtor filed a Chapter 11 petition in this Court.
Until August 1989, the Debtor was unable to foster a plan of reorganization. Prior to the filing of the plan, efforts were made by the Debtor and Committee to sell the station; however, negotiations with prospective purchasers never resulted in a purchase agreement.
Two years prior to the petition date, Continental and the Debtor entered into a loan agreement wherein Continental agreed to loan the Debtor $4.2 million. The agreement between the parties provided for interest only for one year and thereafter principal, with interest at Continental's prime rate, plus one and one-half (1-½%) percent, would be paid over a period of six years. Continental held as collateral a security interest in the Debtor's equipment, furniture, fixtures, contracts, accounts receivable, and general intangibles.
The Continental loan was additionally secured by a pledge of the common stock of the Debtor and was further guaranteed by the shareholders of the Debtor. Each shareholder's personal guaranty was equal to approximately 135% of his ownership percentage in common stock of the Debtor.
On December 31, 1986, the petition date, Continental was owed approximately $4.1 million. After the filing of the petition, the Debtor made payments to Continental through May 1987 and thereafter the Debtor defaulted and the shareholder guarantors paid $2,688,415.84 in principal and interest.
On August 3, 1987, an Order Recognizing Subrogation Rights ("Subrogation Order"), with consent of all parties, was entered by this Court, which provided that upon payment of the "Guaranteed Indebtedness" (as defined in the Subrogation Order) to Continental, including principal, interest, attorney fees and legal expenses, the shareholder guarantors would be subrogated to the rights of Continental against the Debtor. At the time of the confirmation hearing, Continental was owed $2,808,005.95 in principal and accrued interest of $182,258.37 and $2,688,416.00 was owed to the shareholder guarantors by way of subrogation. Continental has not made application to this Court for attorney fees and legal expenses from the Debtor. Any fees and expenses to be paid by the Debtor may only be allowed upon application to this Court and in accordance with 11 U.S.C. § 506(b).
THE PLAN
The plan as amended classifies and treats claims as follows:
Class I: Administrative Claims. These claims shall be paid in full on the "closing date" of the plan (the first day of the next calendar month following the time that the order confirming the plan becomes a final order) unless otherwise agreed between the Debtor and the claimant.
Class II(A): Priority Wage Claims. These claims shall be paid in full on the closing date.
Class II(B): Priority Tax Claims. These claims shall be paid in full on the closing date.
Class III: Continental. The indebtedness due Continental will be modified as follows:
(i) Any delinquent interest due prior to the closing date shall be added to and become part of principal.
(ii) On the closing date, the interest rate due on the claim of Continental Bank shall be prime plus one and one-half percent (1-½%).
(iii) The maturity date shall be extended, and the Debtor shall pay interest only in quarterly installments commencing on the first day of the next calendar quarter following the closing date and for seven calendar quarters thereafter, and commencing on the first day of the ninth calendar quarter the Debtor shall pay interest plus quarterly installments to equal annual principal payments as follows:
Total Annual
Principal Payments
Year 3 $ 250,000.00
Year 4 300,000.00
Year 5 600,000.00
Year 6 825,000.00
Year 7 1,000,000.00
(remaining balance to balloon with last payment)
*625 (iv) The modification of the debt due Continental shall not affect the liability of any guarantor, endorser or surety for such debt.
(v) Guarantors who have made payments to Continental on the indebtedness shall be subrogated to the rights of Continental as provided for under the Subrogation Order of the Court dated August 3, 1987.
(vi) The capital stock of the Debtor issued to the plan proponents shall not be pledged or subject to a security interest in favor of Continental.
(vii) Except as modified herein, the present terms of the promissory note, security agreement and other loan documents shall remain effective and the reorganized Debtor shall execute such modifications and agreements to effectuate the terms of this plan as Continental may reasonably request.
Class IV: Unsecured Claims of $500.00 or Less. These claims shall be paid in full on the closing date.
Class V(A): Trade Creditors with Claims over $500.00. These claims shall be paid 10% on the closing date. The approximate amount of claims in this Class is $142,670.00.
Class V(B): Film Creditors. These claims will be paid 7.87% on the closing date together with the right to participate in 10% of gross revenue collected by the Debtor in excess of $2.2 million during the years 1991-1995, inclusive; provided, however, if total distribution does not equal 10% on each allowed claim in this Class, then the Debtor will be required to pay the difference on March 15, 1996. The approximate amount of claims in this Class is $9,679,634.00.
Class VI: Unsecured Loans Due Shareholders. These claims shall be deemed to have been capital contributions and received no distribution.
Class VII: Shareholders' Interests. All outstanding stock shall be cancelled on the closing date.
The plan further provides that the proponents will contribute $600,000.00 cash on the closing date in order to fund the plan which allows the Debtor the means to comply with the plan. In return for the $600,000.00, the proponents will receive common stock in the Debtor pro-rata to their respective contributions. All present shareholders of the Debtor will be entitled to participate in an amount equal to their respective present ownership interest. After consummation of the plan, the proponents will be the sole shareholders of the reorganized Debtor.
According to the plan, Classes I, II(A), II(B) and IV are unimpaired. All other classes have accepted the plan with the exception of Class III (Continental) and Class VII (shareholders). The shareholders are eliminated and deemed not to accept the plan under § 1126(g). Continental objected to the plan upon the grounds that:
1. The plan is not feasible under the provisions of § 1129(a)(11);
2. The plan is not fair and equitable to Continental within the meaning of § 1129(b)(2) in that Continental does not receive under the plan deferred cash payments of at the least the value of its secured claim;
3. The plan is not otherwise fair and equitable to Continental; and
4. All the present issued and outstanding capital stock of the Debtor is pledged to Continental to secure its claim, but the plan provides for the capital stock to be issued in the future to the plan proponents free of any pledge to Continental.
In order to confirm a reorganization plan, the Bankruptcy Court must be satisfied that the plan complies with all requirements of 11 U.S.C. § 1129(a). The burden of establishing these requirements lies with the proponents of the plan. In re Trail's End Lodge, Inc., 54 B.R. 898 (Bankr.D.Vt. 1985); and In re Prudential Energy Co., 58 B.R. 857 (Bankr.S.D.N.Y.1986). The Court is satisfied that the plan meets all applicable requirements of § 1129 other than § 1129(a)(8) since Class III (Continental) has not accepted the plan and Class VII (shareholders) is eliminated and deemed not to have accepted the plan.
*626 The plan has been accepted by Classes V(A) and V(B) who are not insiders and, therefore, the plan is confirmable if all other conditions are met. In re Ruti-Sweetwater, Inc., 836 F.2d 1263 (10th Cir. 1988).
The plan may be confirmed over the objections of Continental and the shareholders through the use of "cram-down" as provided in § 1129(b)(1). This section permits the Court on request of the proponents to confirm the plan if the plan does not discriminate unfairly and if it is "fair and equitable" to Continental and the shareholders.
FAIR AND EQUITABLE
The term "fair and equitable" with respect to secured claims is defined by § 1129(b)(2)(A) to mean:
(i) (I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the Debtor or transferred to another entity, to the extent of the allowed amount of such claims; and
(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder's interest in the estate's interest in such property;
(ii) for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or
(iii) for the realization by such holders of the indubitable equivalent of such claims.
The treatment of Continental's debt does not discriminate unfairly against Continental and meets the statutory criteria of fair and equitable. Continental will retain its lien on its collateral that has value and receive deferred cash payments totaling at least the allowed amount of its claim, of at least the value of Continental's interest in the estate's interest in the collateral. 11 U.S.C. § 1129(b)(2)(A)(i). Upon payment to Continental of the "Guaranteed Indebtedness" as provided for in the Subrogation Order, the shareholder guarantors will be entitled to be subrogated to Continental's position and receive payment in accordance with the Subrogation Order.
If a plan proposes to pay a secured claim in installments, the present value of the future payments must equal the amount of the creditor's secured claim. To accomplish payment of present value, interest at an appropriate discount rate must be added to the installment payments. In re Bryson Properties XVIII, 129 B.R. 440 (M.D.N.C.1991). The appropriate discount rate should reflect the prevailing market rate of interest. In re E.I. Parks No. 1 Ltd. Partnership, 122 B.R. 549 (Bankr. W.D.Ark.1990).
The interest rate to be paid Continental is its prime rate plus 1-½%, which is a floating rate and Continental's contract rate under the original loan. The Court finds that this is a market rate of interest for a loan of a term equal to the payout period, with due consideration of the quality of the collateral and the risk of subsequent default. Matter of Southern States Motor Lines, Inc., 709 F.2d 647 (11th Cir. 1983). Additionally, the rate proposed in the plan is the contract rate originally negotiated between the parties and is relevant to the determination of an appropriate interest rate. In re Club Associates, 107 B.R. 385 (Bankr.N.D.Ga.1989); In re Monnier Bros., 755 F.2d 1336 (8th Cir.1985). The interest rate as provided assures that Continental will receive an amount equal to the present value of its secured claim.
Continental argued that the plan is not otherwise "fair and equitable" in the literal sense in providing for repayment of its claim. The Court finds that the treatment of Continental's claim under the plan meets the literal meaning of being "fair and equitable". In re Cheatham, 78 B.R. 104 (Bankr.E.D.N.C.1987).
The plan proposes to pay Continental's claim with interest at prime plus 1-½% *627 over a period of seven years. For the purpose of confirmation only, under § 1129(b), the going concern value of the Debtor has been calculated to be $2.5 million and the liquidated value of Continental's collateral has been estimated at $725,000.00. The treatment of Continental's claim under the plan, if anything, is overly generous and surpasses being "fair and equitable." The amount paid by the shareholder guarantors will be repaid in accordance with the Subrogation Order, after Continental receives payment of the "Guaranteed Indebtedness", and in all events at the end of seven years by a balloon payment.
The Court finds that not only can the plan be confirmed under § 1129(b)(2)(A)(i), but also that the plan may be confirmed in that Continental realizes the indubitable equivalent of its claim under § 1129(b)(2)(A)(iii). Continental, will be paid in full under the plan with an appropriate interest rate, which treatment serves at the very least, as the indubitable equivalent of Continental's claim. The requirement of § 1129(b)(2)(A)(iii) is met where an objecting secured creditor will, under a proposed plan, receive payment in full over a reasonable period of time, with an appropriate interest rate, or if not paid in full, will have the option to foreclose on its collateral. In re Pike's Peak Water Company, 779 F.2d 1456 (10th Cir.1985).
The equity interests of the present shareholders are eliminated pursuant to the plan; therefore, this class is deemed not to accept the plan under § 1126(g). To confirm the plan the shareholders must receive property of a present value equal to the value of their ownership interests. 11 U.S.C. § 1129(b)(2)(C)(i).
The going concern value of the Debtor is far less than aggregate allowed unsecured claims against the Debtor which exceed $9.6 million, and the Debtor, under a reorganization value, is clearly insolvent. The value of the shareholders' interests is zero and, therefore, the plan need not provide for this class. In view of the Debtor's insolvency and the fact that no class of interests junior to shareholders is receiving property of the estate, the plan does not discriminate unfairly and the treatment of shareholders is fair and equitable. Klee, All You Ever Wanted to Know About Cram Down Under the New Bankruptcy Code, 53 Am.Bankr.L.J. 130, 145 (1979); Matter of Johns-Manville Corp., 68 B.R. 618 (Bankr.S.D.N.Y.1986).
PLAN FEASIBILITY
To be feasible, a Chapter 11 plan must offer a reasonable prospect of success and be workable; however, success need not be guaranteed. In re Monnier Bros., supra. Section 1129(a)(11) charges the Court to find at confirmation that the proposed plan, if confirmed, is not likely to be followed by liquidation. In re Neff, 60 B.R. 448 (Bankr.N.D.Tex.1985).
In determining feasibility, courts have suggested a review of the adequacy of the capital structure; the earning power of the business; economic conditions; the ability of management; the probability of the continuation of the same of management; and any other related matter which determines the prospects of a sufficiently successful operation to enable performance of the provisions of the plan. In re Lakeside Global II Ltd., 116 B.R. 499 (Bankr.S. D.Tex.1989); In re U.S. Truck Co., 800 F.2d 581 (6th Cir.1986); and In re Clarkson, 767 F.2d 417 (8th Cir.1985).
Based upon the evidence in this case, the Court finds and concludes that the plan is feasible. The present management of the Debtor is under the supervision of Mr. James Thrash, who assumed this responsibility on November 1, 1989. Mr. Thrash is an original founder of the Debtor and served as manager during the successful formative years of the Debtor. The past performance and future projections prepared and submitted to the Court clearly demonstrate that the Debtor can realistically carry out the financial commitments under the plan and that the plan offers a reasonable prospect of success. In re Monnier Bros., supra.
Continental argued that the plan is not feasible in that the Debtor owes Continental *628 more than $5.6 million in principal and accrued interest. That amount has been reduced by payment to Continental by the guarantors, so that after giving effect to the guarantor payments, Continental is owed $2,808,005.95 in principal, plus accrued interest on that amount through the Closing Date, which will bring principal and interest due to Continental to approximately $3.1 million. It is this reduced amount on which the Debtor will pay interest under the plan. This is within the spirit of the Subrogation Order. At the end of seven years, the balance due and owing will be paid by a balloon payment. Plans which provide for balloon payments have been approved. In re Bryson Properties, supra.
The creditors holding unsecured claims have accepted the plan. The plan meets the "best interest" of creditors' test under § 1129(a)(7)(A)(ii) in that unsecured claims will receive more under the plan than in liquidation. The liquidation analysis demonstrates that there would be no funds available for distribution to unsecured claims in the event of liquidation.
Since all classes of unsecured claims have accepted the plan, "cram-down" as to these classes is not required, thereby foregoing any discussion of the "absolute priority rule" and the "new value exception". The absolute priority rule is not applicable with respect to an impaired class of unsecured claims that has accepted the plan. In re Club Associates, supra.
CONCLUSION
The plan meets all applicable requirements of § 1129(a), does not discriminate unfairly, and is fair and equitable as to dissenting classes. Accordingly, a separate order confirming the plan will be entered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2016334/ | 12 Ill.2d 532 (1957)
147 N.E.2d 376
MERVIN TUCKER, Appellant,
v.
NEW YORK, CHICAGO AND ST. LOUIS RAILROAD COMPANY, Appellee.
No. 34438.
Supreme Court of Illinois.
Opinion filed November 20, 1957.
Rehearing denied January 20, 1958.
*533 WILLIAM L. TURNER, of Shelbyville, and EARL S. HODGES, of Springfield, (DUANE L. TRAYNOR, of counsel,) for appellant.
BAKER and BAKER, of Shelbyville, and POPE and DRIEMEYER, of East St. Louis, (JOHN J. BAKER, and FRANK M. RAIN, of counsel,) for appellee.
Judgment affirmed.
Mr. CHIEF JUSTICE DAVIS delivered the opinion of the court:
This is an action for personal injuries sustained by plaintiff when the truck he was driving collided with defendant's freight train at a grade crossing. The jury returned a verdict for plaintiff in the sum of $12,250 and the trial court entered judgment thereon. The Appellate Court reversed this judgment on the ground that the trial court should have allowed defendant's motion for a directed verdict because plaintiff was guilty of contributory negligence as a matter of law. We granted leave to appeal from the judgment of the Appellate Court.
*534 The determinative question presented to us is whether the evidence, taken most favorably to the plaintiff, shows that he was guilty of contributory negligence as a matter of law. While this court is precluded from weighing the evidence, except as to equitable issues, to determine where the preponderance lies, (Ill. Rev. Stat. 1955, chap. 110, par. 92(3)(b),) where a motion is made in the trial court to direct a verdict, we may examine the evidence to determine whether, as a matter of law, there is any evidence in the record to prove the essential elements of the case. Robinson v. Workman, 9 Ill.2d 420; Illinois Central Railroad Co. v. Oswald, 338 Ill. 270.
Plaintiff contends that his testimony, a plat, and a profile map of the crossing, raise a question of fact for the jury as to his exercise of due care. In considering this contention we have examined the entire record.
The rule of law, to be applied in determining whether the trial court should have directed a verdict for the defendant, is clear. A motion for a directed verdict should be allowed if, when all the evidence is considered, with all reasonable inferences to be drawn therefrom in its aspects most favorable to the party against whom the motion is directed, there is a total failure to prove one or more essential elements of the case in the case at bar, the element of due care. Carrell v. New York Central Railroad Co. 384 Ill. 599; Greenwald v. Baltimore and Ohio Railroad Co. 332 Ill. 627; Illinois Central Railroad Co. v. Oswald, 338 Ill. 270.
The plaintiff testified that on September 4, 1953, he was driving a truck, picking up milk; that about 8:00 A.M., while driving 20 to 25 miles per hour, he approached the grade crossing in question in open country; that he had crossed at this particular point every day for about nine months; that the day was cloudy, with a little mist and fog, but the visibility was about two miles; that he looked north-easterly, to the right, and saw telephone poles and timber *535 about a quarter of a mile down the track; that he drove his truck up to 9 or 10 feet from the south rail of the track, stopped, scooted over to the right door, rolled the window down and looked to the right; that he saw the telephone lines, railroad tracks, the top of the telephone shack and sprouts and weeds, as he looked down the track, but did not see or hear any train; and that he then rolled up his window, scooted back in his seat and started across the tracks when the train, approaching from the northeast, hit the rear end of his truck. On cross-examination he testified that the telephone shack was located near the track about 275 feet northeasterly from the crossing; and that when he looked to the right from the truck window, while stopped, he could see at least 200 feet beyond the telephone shack.
We find no other testimony in the record to either corroborate or add to the foregoing testimony as to plaintiff's due care. While it is true that plaintiff's witness Earl Endsley and defendant's witnesses Berl Waters and Carlos Lloyd were eyewitnesses of the collision, yet their testimony fails to substantiate due care on the part of the plaintiff. The physical conditions at the crossing are shown by a plat and profile map offered by plaintiff, and by eight photographs submitted by defendant. All exhibits were admitted in evidence by stipulation.
There is no substantial dispute as to the governing rules of law in the case before us. It is well settled that railroad crossings are dangerous places, and that in crossing them a person must approach the track with a degree of care proportionate to the known danger. The law requires that the traveler make diligent use of his senses of sight and hearing and exercise care commensurate with the danger to be anticipated. (Moudy v. New York, Chicago and St. Louis Railroad Co. 385 Ill. 446; Provenzano v. Illinois Central Railroad Co. 357 Ill. 192; Greenwald v. Baltimore and Ohio Railroad Co. 332 Ill. 627.) Nor does the law tolerate the absurdity of permitting a plaintiff to say he *536 looked and did not see the approaching train, when had he looked he would have seen it. (Dee v. City of Peru, 343 Ill. 36; Greenwald v. Baltimore and Ohio Railroad Co. 332 Ill. 627; Holt v. Illinois Central Railroad Co. 318 Ill. App. 436.) It is also true, as plaintiff contends, that there may be facts such as obstructions to view or distractions that might mislead plaintiff, without his fault, or excuse a failure to look and listen. Gills v. New York, Chicago and St. Louis Railroad Co. 342 Ill. 455; Chicago and Alton Railroad Co. v. Pearson, 184 Ill. 386.
There is no fact shown in the evidence that would tend to distract or confuse the plaintiff, or lull him into a false sense of safety. According to his testimony, he was thoroughly familiar with the crossing, approached it cautiously, and gave his full and undisturbed attention to ascertaining the possible approach of a train. The only question is whether there was any obstruction to view which would either excuse his failure to look, or at least render plausible his assertion that he looked but did not see the train.
The testimony in the record fails to show such obstruction. But plaintiff earnestly contends that the profile map and plat show a cut or hollow that would obstruct the approaching 48-car freight train from view when he looked to his right 9 or 10 feet from the track.
Because of this contention we have meticulously examined all the exhibits, both in the record and as reproduced in the abstract. The photographs clearly show that the plaintiff, while sitting in his truck at points 10 and 17 feet from the south rail of the track, had a clear and unobstructed view of any approaching train for one fourth of a mile northeast of the crossing. Neither the plat nor the profile map are in conflict with this obvious physical fact.
From a review of the entire record, we find neither evidence nor any legitimate inference which may legally be drawn therefrom, which would either excuse plaintiff's failure *537 to look, or convince a reasonable mind that he looked but did not see the train. The record is without evidence of due care, and consequently the plaintiff was guilty of contributory negligence as a matter of law. "Contributory negligence becomes * * * a question of law when it can be said that all reasonable minds would reach the conclusion, under a particular factual situation, that the facts did not establish due care and caution on the part of the person charged therewith. [Citations] In such cases, the court should instruct the jury to render a verdict for the defendants." (Briske v. Village of Burnham, 379 Ill. 193, 201.) Accordingly, the judgment of the Appellate Court must be affirmed.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2280043/ | 75 Cal.Rptr.2d 141 (1998)
64 Cal.App.4th 176
The PEOPLE, Plaintiff and Respondent,
v.
Kevin THIERRY, Defendant and Appellant.
No. B109477.
Court of Appeal, Second District, Division Seven.
May 26, 1998.
Review Denied August 26, 1998.
*142 Dain & Li, and Anthony J. Dain, under appointment by the Court of Appeal, San Diego, for Defendant and Appellant.
Daniel E. Lungren, Attorney General, George Williamson, Chief Assistant Attorney General, Carol Wendelin Pollack, Senior Assistant Attorney General, Pamela C. Hamanaka, Supervising Deputy Attorney General, and Arthur H. Auerbach, Deputy Attorney General, for Plaintiff and Respondent.
JOHNSON, Associate Justice.
Upon denial of his motion to suppress, appellant pleaded nolo contendere to one count of robbery in violation of Penal Code section 211 and on a special allegation pursuant to Penal Code section 12022.5(a). The sole issue on appeal is whether the trial court erred in denying appellant's motion to suppress any photographs taken of appellant and any identifications made with those photographs following a purported illegal arrest. We conclude the taking of appellant's photograph was reasonable involving no exploitation of the alleged illegal arrest. We therefore affirm the judgment.
FACTS AND PROCEEDINGS BELOW
On November 29, 1995, Officer Jennifer Hickman of the Los Angeles Police Department was patrolling the area of Cadillac and Chariton in the City of Los Angeles. Detective Stanley Evans had informed Officer Hickman that appellant was wanted for robbery and he frequented the area of Garth and Cadillac. Officer Hickman observed appellant on the west side of Garth Street, just north of Cadillac, and, took him into custody.
Detective Evans was assigned to the investigation of multiple robberies in a five-block radius, including the robbery of Rashawn Tony ( Mr. Tony). As part of the investigation of the robberies, Detective Evans spoke with Mr. Tony. Mr. Tony told Detective Evans that Dominique Gist (Gist) was the person who robbed him. Gist was arrested and later interviewed by Detective Evans. Gist gave Detective Evans appellant's nickname and address and told Detective Evans appellant robbed Mr. Tony and also was involved in robberies at the gas station at La Cienega and Cadillac.[1] Detective Evans ran the description of the suspect to the robberies through the computer. This very general description was consistent with appellant's general description. The officers arrested appellant for the robbery of Mr. Tony based on the information Gist gave to Detective Evans.
The day after appellant's arrest Detective Evans took appellant's picture. Detective *143 Evans used this photo in a photographic lineup shown to Mr. Tony. Mr. Tony stated he knew appellant and appellant was not the person who robbed him. Detective Evans then showed the same photographic lineup to victims of other robberies. Charles Negethe and Manuel Ceja identified appellant as the perpetrator in their robberies.
Appellant was charged with six counts of robbery and two counts of attempted robbery, none of them involving the Tony robbery for which he was initially arrested. After the trial court denied appellant's section 1538.5 motion to suppress any photographs taken of appellant after his arrest and any identifications made with those photographs, appellant pled nolo contendre to a violation of Penal Code section 211 and on a special allegation pursuant to Penal Code section 12022.5(a). The trial court sentenced appellant to the low term of two years for the Penal Code section 211 violation and the high term of ten years on the special allegation for a total sentence of 12 years.
DISCUSSION
Appellant contends the trial court erred in denying his motion to suppress any photographs taken of him after his arrest in the Tony case and also any identifications made with those photographs. He contends Gist's statements and Detective Evans's corroboration were insufficient to establish probable cause to arrest him for the Tony robbery. We find it unnecessary to address appellant's probable cause argument, which indeed presents a close question. Even if that initial arrest violated appellant's Fourth Amendment rights, we conclude the identification evidence remains admissible against appellant in prosecutions for other crimes, such as the one to which he pled nolo contendere in this proceeding.
I. THE "FRUIT OF THE POISOOUS TREE" DOCTRINE DOES NOT REQUIRE SUPPRESSION OF PHOTO IDENTIFICATIONS BASED ON PHOTOGRAPHS WHICH HAPPEN TO HAVE BEEN TAKEN WHILE A DEFENDANT WAS IN CUSTODY UNDER AN ILLEGAL ARREST.
Appellant argues the identification evidence linking him to these other robberies must be excluded because they were the "fruit of the poisonous tree." According to this theory, the officers took photographs of him as a result of the arrest for the Tony robbery and then used those photographs to obtain identifications linking him to the other robberies. The Tony arrest was the "poisonous tree" and the photographs the first fruits and the victim's photo identifications the second crop of fruit from that infected tree.
In determining whether evidence is the "fruit of the poisonous tree" and therefore inadmissible the correct inquiry is "whether, granting establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint." (Krauss v. Superior Court (1971) 5 Cal.3d 418, 422, 96 cal.Rptr. 455, 487 P.2d 1023; Wong Sun v. United States (1963) 371 U.S. 471, 488, 83 S.Ct. 407, 417, 9 L.Ed.2d 441, quoting Maguire, Evidence of Guilt (1959) p. 221.)
There are three recognized avenues for admitting the "fruit of a poisonous tree" despite its illegal origins:
(1) The same evidence was discovered through an independent source not tainted by the poisonous tree.
(2) The evidence was not found through a second untainted source but it should not be suppressed despite law enforcement's illegal acts because the same evidence would have been inevitably discovered through legal means. (The inevitable discovery rule is "a variation upon the `independent source' theory, `but it differs in that the question is not whether the police did in fact acquire certain evidence by reliance upon an untainted source but instead whether evidence found because of a Fourth Amendment violation would inevitably have been discovered lawfully.' (Citations.)" (People v. Saam (1980) 106 Cal. App.3d 789, 797, 165 Cal.Rptr. 256).)
(3) The connection between the illegal source and the evidence is so attenuated it *144 would serve no legitimate purpose to suppress the evidence.
(See 5 LaFave, Search and Seizure (1996) § 11.4, pp. 234-253.)
In People v. McInnis (1972) 6 Cal.3d 821, 100 cal.Rptr. 618, 494 P.2d 690, the California Supreme Court applied the "fruit of the poisonous tree" doctrine to the admissibility of photographs taken while a defendant is under an illegal arrest. In McInnis, a store clerk and a pedestrian witnessed the defendant committing a liquor store robbery. Police officers later arrested and photographed defendant for an unrelated crime. The officers showed this photograph to the witnesses from the liquor store robbery. From the photograph, they identified the defendant as the perpetrator of the robbery. The trial court refused to suppress the photograph despite the possible illegality of the arrest which resulted in the taking of that photograph.
In affirming the judgment the Supreme Court majority reasoned the taking of a booking photograph was "standard police procedure [citation], bearing no relationship to the purpose or validity of the arrest or detention...._ [T]he photos are kept in permanent files regardless of the eventual disposition of the case; indeed, thousands of persons ultimately found to be entirely innocent undoubtedly have their photographs ... on record with law enforcement agencies." (6 Cal.3d at pp. 825-826, 100 Cal.Rptr. 618, 494 P.2d 690.)
The McInnis majority opinion analogizes to the high court's earlier opinion in Lockridge v. Superior Court (1970) 3 Cal.3d 166, 170, 89 cal.Rptr. 731, 474 P.2d 683, where the court found the connection between an illegal arrest and the present crime was `pure happenstance.' In Lockridge, the Pesce robbery remained unsolved until officers served an unlawful search warrant during the course of investigating crimes totally unrelated to the robbery. During that search, they discovered the Pesces' gun in the defendants' possession. In a later trial of the Pesce robbery case, the trial court suppressed the gun but allowed the Pesces to testify. This was not a case fitting easily the "independent source" or "inevitable discovery" rationales. Without the lead supplied by the gun found during the illegal search it seems improbable the police investigation would have connected the defendants with the Pesce robbery. So in that sense the prosecution of defendants for that crime and some of the evidence introduced against them was the "fruit of the poisonous tree."
"Nevertheless," the Supreme Court held, "we do not believe that the police connection of petitioners to the Pesce robbery through the illegal discovery of the gun is sufficient to characterize the Pesces' testimony as `come at by exploitation of that illegality'" (Lockridge v. Superior Court, supra, 3 Cal.3d at p. 170, 89 cal.Rptr. 731, 474 P.2d 683, citing Wong Sun v. United States, supra, 371 U.S. 471, 488, 83 S.Ct. 407, 417, 9 L.Ed.2d 441.) The Court reasoned "it was pure happenstance that during the investigation of other crimes, the police came across the gun taken in the Pesce robbery." (Lockridge, at p. 171, 89 cal.Rptr. 731,474 P.2d 683.)
"`[P]ure happenstance' as used in McInnis and Lockridge, [has been defined as] a chance disclosure absent the `the exploitation of illegal police conduct ....'" (People v. Griffin (1976) 59 Cal.App.3d 532, 537, 130 cal.Rptr. 648.)
The present case resembles McInnis. A photograph of appellant originally taken as a result of (or at least while he was in custody for) a purported illegal arrest led to his connection with the crimes currently charged. As in McInnis, the illegal arrest here was in no way related to the crimes with which appellant was ultimately charged.[2]
Other jurisdictions have found an illegal arrest does not render an identificationor even a photograph taken during the illegal arrestinadmissible. Generally these opinions adopt the McInnis analysis or a variation thereof. (See, e.g., United States ex rel. Moore v. Lane (7th Cir.1980) 612 F.2d 1046; State v. Tyrrell (1990) 234 Neb. 901, 453 N.W.2d 104; People v. Pettis (1973) 12 Ill. *145 App.3d 123, 298 N.E.2d 372; Kinsey v. State, 639 S.W.2d 486; State v. Price (1976) 27 Ariz.App. 673,558 P.2d 701.)
Robinson v. State (1982) 53 Md.App. 297, 452 A.2d 1291 follows McInnis and cites numerous cases from other jurisdictions, but also adds to the analysis. "We think that the approach taken in these cases is the correct one, whether expressed as `attenuation' or simply as a rational and commonsense application of the `fruit of the poisonous tree' doctrine. In the absence of evidence (or a reasonably firm and detailed proffer of evidence) tending to show that appellant's...arrest was not only illegal but was merely a pretext for a general exploratory search (as in Davis v. Mississippi (1969) 394 U.S. 721, 89 S.Ct. 1394, 22 L.Ed.2d 676) or for gathering evidence in this case (as in United States v. Crews, (1980) 445 U.S. 463, 100 S.Ct. 1244, 63 L.Ed.2d 537) a routine `booking' photograph taken as a consequence of that arrest would not be suppressible as tainted fruit in this proceeding." (Robinson v. State, supra, 452 A.2d at p. 1299.)
In stressing the motive fornot just the illegality ofthe arrest which produced the defendant's photo, the Maryland appellate court appears to focus on the policies behind the exclusionary rule. The underlying purpose of that rule - to discourage government from violating citizens' rights to be free from unconstitutional searches and seizures - can be accomplished without barring identifications obtained through photos taken during illegal arrests. That is so even though it might be said the photos would not exist "but for" the arrest.
Generally, law enforcement officers do not make arrests, legal or illegal, in order to obtain photographs they can use to seek identifications from the victims of crimes. They have other much more important motives for those arrests to get suspects off the street, to search them for physical evidence, and to interrogate them. The taking of photographs and fingerprints is merely an incidental event accompanying the arrest. And, indeed there is no need to arrest a suspect in order to take a photograph of him or her. Officers can surreptitiously photograph people on the street without arresting or detaining them in any way. So, it could be said the arrest is only incidental to the photograph just as the photograph is only an incident of the arrest. In that sense, the rationale for admitting photographs taken during illegal arrests partakes of the "inevitable discovery" as well as the "attenuation" limitations on the fruit of the poisonous tree doctrine.
This is not to say every photograph taken while a defendant is held under an illegal arrest can be used in seeking identifications in other cases. Professor LaFave cautions "[e]ven if it is thought that the fears expressed by the McInnis dissenters are overstated, and that consequently it is not necessary to bar all use of photographs taken incident to illegal arrests, courts should nonetheless be vigilant in determining in particular cases whether the photograph was come by as a consequence of an arrest made for the purpose of adding defendant's picture to the police mug books." (5 LaFave, Search and Seizure (1996) § 11.4(g), p. 322, italics added.) LaFave's admonition makes sense. If the courts were to sanction the practice of making illegal arrests for the specific purpose of collecting photographs to be used in future or ongoing investigations we would encourage an increase, perhaps dramatic, in the frequency of unconstitutional conduct on the part of law enforcement. In those instances, the taking of the photographs supplies an important motive, perhaps the prime motive, for the illegal arrests. Accordingly, to protect constitutional rights, the underlying purpose of the exclusionary rule would dictate the courts bar the photographs and resulting identifications.[3]
*146 The instant case does not raise this concern, however. Here the taking of appellant's photograph was a reasonable police procedure for which we can find no evidence whatsoever of exploitation. The officers did not arrest appellant "for the purpose of adding defendant's picture to the police mug books." Rather they arrested Mm because they believed, albeit on questionable evidence, that he might have robbed Tony. They merely used the occasion of appellant's arrest for that crime to take a photograph they would have been entitled to take on the street or elsewhere without an arrest. And furthermore they used the photograph initially to seek an identification from Tony, the victim in the crime for which they had arrested appellant, not merely to add it to a "mug book." Only after Tony told them appellant was not the one who robbed him did the officers use the same photograph to seek and obtain identifications in other crimes.
It would be unnecessary and indeed absurd to rule inadmissible all identifications victims might make in criminal investigations merely because the officers chose to use a defendant's photograph which happened to have been taken while appellant was held illegally for a different crime. Only when law enforcement makes illegal arrests for the sole or primary purpose of obtaining photographs they can use in ongoing or future investigations is there a constitutional justification to bar use of those photographs in identifying the perpetrators of crimes. As explained above, the photographs here were an event occurring during the arrest not the motive for the arrest. Thus, the officers properly used them in photo arrays shown to the victims of appellant's crimes.
II. ASSUMING THE PHOTOGRAPHS AND PHOTO IDENTIFICATIONS WERE FRUIT OF THE POISONOUS TREE, THE VICTIMS' INCOURT IDENTIFICATIONS WERE NOT TAINTED BY THAT ILLEGALITY.
We also observe an alternate rationale exists for upholding the judgment in this case. Even where courts have found it unlawful to use a particular photo to identify the defendant they do not always conclude the photo identification tainted the victim's in-court identification of the defendant. For instance, in United States v. Slater (10th Cir.1982) 692 F.2d 107 officers assembled an array of photos and showed it to witnesses. The array included a photograph of defendant taken after he had been arrested illegally. The witnesses identified his photo as the perpetrator and he was prosecuted. At trial and on appeal he argued the photograph of him used in an array was inadmissible because it was taken after an illegal arrest.
The 10th Circuit held any error in admitting the photograph and ensuing photo identifications was harmless because the witnesses also identified the defendant in person during the trial. The court reasoned the witnesses "had each actually seen the crime committed at close hand,...there was no identification of another person or failure to identify the defendant, and the person who committed the crime made no attempt to conceal his face ... [therefore] the in-court identifications of [the defendant] were independently valid and that if there was any error in the failure to suppress the photographic array it was harmless." (Id. at p. 108)
At the preliminary hearing in the present case four victims testified and positively identified appellant as the perpetrator. Each victim actually saw the crime committed at close hand, they did not fail to identify the defendant, and the perpetrator made no attempt to conceal his identity. Consequently, the victims' in-court identifications of appellant as the perpetrator would render harmless any error in refusing to suppress the photographic identifications. Futhermore, since appellant pled nolo contendere he is foreclosed from speculating what might have happened had the case gone to trial. He has surrendered any opportunity to argue the victims somehow would have been unable to identify him independent of the photographic *147 evidence had there been such a trial even though they demonstrated an ability to do so during the preliminary hearing.
For both reasons expressed in this opinion, we find the trial court did not err in denying appellant's motion to suppress under Penal Code section 1538.5.
DISPOSITION
The judgment is affirmed.
LILLIE, P.J., and NEAL, J., concur.
NOTES
[1] The record is not clear as to when Gist gave Detective Evans the information implicating appellant in the gas station robberies. However, this uncertainty does not affect our decision.
[2] Appellant was never charged with the robbery of Mr. Tony. He was charged with totally unrelated robberies.
[3] For a case in which the court found a photograph to have been discovered by the exploitation of illegal police conduct, see People v. Rodriguez (1993) 21 Cal.App.4th 232, 241, 26 Cal. Rptr.2d 660. In that case the court concluded the police illegally arrested a defendant for the primary or sole purpose of taking a "gang book photograph" which was "obtained deliberately for use in future criminal investigations." This case is readily distinguishable from Rodriguez-There is no evidence in the instant case suggesting the officers' primary motive for appellant's arrest in the Tony investigation was to take photographs they could add to a "mug book" or a "gang book." Instead as discussed above, the evidence supports the conclusion they arrested appellant because they thought he committed a specific crime, the Tony robbery. After the arrest they took the photo and sought an identification from the victim of that crime. Only then did the officers use it for the crimes involved in this appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2280045/ | 433 A.2d 258 (1981)
Peter R. JENSEN
v.
Deborah L. JENSEN.
No. 305-80.
Supreme Court of Vermont.
June 2, 1981.
*259 Kelley & Meub, Ltd., Middlebury, for plaintiff.
Lynch & Foley, Middlebury, for defendant.
Before BARNEY, C. J., and LARROW, BILLINGS, HILL and UNDERWOOD, JJ.
HILL, Justice.
The parties were divorced by a judgment order that provided joint custody of their two children. No terms governing the joint custody arrangement were set forth in the decree. The court subsequently ordered the children to remain with the mother during the week and to reside with the father weekends, and modified the support payments. The father, seven months later, moved to clarify the joint custody rights of the parties. The mother then moved for permanent custody of the children. Based on its findings, the court granted custody of the children to the plaintiff father. It is from this order that defendant appeals.
I.
The court made findings of fact on its own initiative without a request from either party, as permitted under V.R.C.P. 52(a). Where there are no findings and none have been requested, a party is barred from complaining. Schwartz v. Town of Norwich, 137 Vt. 130, 131, 400 A.2d 991 (1979). Defendant claims, however, that where the court does make findings, albeit on its own initiative, they must meet the test of adequacy.
We noted in Chittenden Trust Co. v. Maryanski, 138 Vt. 240, 243, 415 A.2d 206 (1980), that findings are desirable because they are helpful for appellate review. Even without findings, however, "we examine the record to see whether a given result is supportable, upon the assumption that the trial court had the evidence in mind." Quazzo v. Quazzo, 136 Vt. 107, 113, 386 A.2d *260 638 (1978). Under such review standards the conclusion is inescapable that where the court has helped our appellate process by making findings, they must be supportable.
The trial court here made fifteen numbered findings. Findings 1 though 12 enumerate reasons why the joint custody order was unsuccessful. Finding 13 concludes that joint custody should not continue. Finding 14 concludes that frequent changes in physical custody are inherently disruptive and that a roughly equal division of physical custody is more confusing to the children than a less balanced proposition.
The court concluded in Finding 15 as follows:
The parties have given the Court little evidence and few guidelines to assist the Court in determining which parent should more appropriately assume the full burden of legal custody. The Court therefore has been required to search the record to find seemingly minor facts to guide it to its decision.
Based upon all of the evidence and the Court's impression of the parties gained from observing them in the courtroom and on the witness stand, the Court finds that it is in the best interests of the children that the plaintiff have legal custody.
Nowhere does the trial court point out what minor facts it found to dictate its decision. This failure to find denies us the help necessary to our appellate review. We are left to speculate as to the basis upon which the trial court made its findings and reached its decision. This we will not do. See New England Power Co. v. Town of Barnet, 134 Vt. 498, 502, 367 A.2d 1363 (1976).
II.
Defendant also objects to the testimony of plaintiff's fiancee, contending that she is not qualified to express an opinion regarding the children's relationship with plaintiff. Whether a person is competent to testify is a decision left to the discretion of the trial court, and we will not infringe upon that province unless the decision is clearly erroneous and prejudicial. Dunn v. State Highway Board, 135 Vt. 26, 28, 370 A.2d 626 (1977). The burden of showing reversible error is on the excepting party, Crawford v. State Highway Board, 130 Vt. 18, 25, 285 A.2d 760 (1971), and defendant failed to show that allowing the witness to testify was clearly erroneous.
III.
When the trial court filed its findings, defendant, pursuant to V.R.C.P. 59, moved to amend the Findings of Fact and Order, or, in the alternative, for a rehearing on her Motion for Temporary and Permanent Custody. Defendant filed affidavits in support of the requests. The motion was denied by the trial court without hearing. In West v. West, 139 Vt. 334, 428 A.2d 1116 (1981), this Court noted that a hearing should be granted on a V.R.C.P. 59 motion when the grounds relied upon are stated with particularity and the motion is neither frivolous nor totally lacking in merit. See also Kalakowski v. Town of Clarendon, 139 Vt. ___, 431 A.2d 478 (1981). Since we reverse on other grounds, it is not necessary to determine whether the trial court applied the proper standard to defendant's motion.
The judgment is reversed and the cause is remanded for a new trial. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1862295/ | 237 B.R. 577 (1999)
In re Patrick W. REID and Roselyn J. Reid, Debtors.
F.C.C. National Bank, Plaintiff,
v.
Roselyn J. Reid, Defendant.
Bankruptcy No. 98-12103 K. Adversary No. 98-1194 K.
United States Bankruptcy Court, W.D. New York.
August 5, 1999.
*578 Robert S. Cooper, Rochester, NY, for plaintiff.
*579 Brendan C. Hand, Buffalo, NY, for defendant.
DECISION AFTER TRIAL
MICHAEL J. KAPLAN, Chief Judge.
This 11 U.S.C. § 523(a)(2)(A) action was tried to the Bench on June 29, 1999. The following decision includes the Court's Findings and Conclusions under Rule 52, F.R.Civ.P.
INTRODUCTION
The Court today finds that unless a "pre-approved" credit card commands a different result (as described in footnote 1), turning one's credit card and line of credit and PIN over to another (even to one's own spouse) to be freely used at the other's discretion and judgment without limitation, and handing over to the other person "convenience checks" endorsed in blank, all in utter disregard of the amount of debt incurred, constitutes a "false pretense" for purposes of 11 U.S.C. § 523(a)(2)(A). That false pretense lies in creating the false understanding that it is the judgment and discretion of the account holder that is being exercised, when in fact it is the judgment and discretion of one is not suable by the credit issuer, that is being exercised.
Necessarily included in this holding is a reiteration of this writer's holdings that § 523(a)(2)(A) does not require that the five-prong common law test of fraud and deceit be satisfied. This decision more fully explains why, in this writer's view, holdings to the contrary are without statutory foundation.
Not all scams, stings, or shell games involve the actual malice that would be actionable under 11 U.S.C. § 523(a)(6), or the false representations that some courts believe to be a sine qua non of a § 523(a)(2)(A) action. The present case illustrates well this fact.
Additionally, the Court reaffirms and expands upon its holding in Irr Supply Centers, Inc. v. Phipps (In re Phipps), 217 B.R. 427, 429-32 (Bankr.W.D.N.Y.1998), aff'd. on other grounds No. 98-CV-0294 C (W.D.N.Y. July 16, 1999), and rules itself bound by the decision of one District Judge, in an earlier case, commanding an award of attorneys fees to the prevailing creditor.
FINDINGS OF FACT
1. In this joint Chapter 7 case, it is only the wife who is obligated on the debt that is the subject of this Adversary Proceeding.
2. This credit card/line of credit account had been open for a number of years prior to the bankruptcy, had been used several times before and paid off several times before the dates at issue here.
3. There is no evidence that this account was issued while the defendant was insolvent for purposes of the application of In re Sigrist.[1]
4. The defendant is a high school graduate and has worked either part-time or *580 full time as a teacher's aid for fourteen years.
5. She and her husband have been married for 21 years.
6. Her husband has been employed by the same employer for 22 years.
7. The defendant testified that she was raised in a household in which her father took care of all the bills and that her own household has been one in which her husband takes care of all the bills. Her mother never worried about them, and in her own marriage she has never worried about them.
8. She testified that though she used the account in question and other credit accounts, she believed that any single expenditure in excess of $300 would be "going overboard," at least as to the account with this plaintiff. (Cf. finding # 21 et seq.)
9. She claims never to have used an ATM machine (or even know her PIN number).
10. She and her husband had a number of credit card accounts. Some were hers, some his, and some joint. They kept the cards in the bedroom, and the two persons used them interchangeably.
11. She provided her husband with her PIN number so that he could freely use her card for cash advances.[2]
12. For several months commencing in December, 1996, the husband (a truck driver) had a temporary disability occasioned by a newly-emerged phobia regarding winter driving.
13. He returned to work with the same employer, but at a different job, at approximately the same rate of base pay, but with less overtime opportunity.
14. Overlapping the period of the husband's temporary disability, the defendant was laid off for a number of months. The record is not clear as to the dates of the lay-off. They were both back to work before the events described below. Neither the period of disability nor the lay-off were argued as a defense for the subsequent events described below.
15. Prior to 1997, the defendant and her husband did not generally maintain large balances on their credit cards, but the husband testified that apart from mortgage debts and car loans, they might have owed as much as $20,000 to $25,000 at some point prior to August, 1997.
16. Between September 30, 1997 and January 29, 1998, the account issued by the plaintiff in this case was the subject of nine cash advances totaling $8,442.08 and credit card purchases of $381.84. Prior to September 30, 1997, the account balance was de minimus.
17. Many of the debtors' other eight credit accounts were subject to similar "run-up" during the same period of time.
18. The defendant's husband testified that the couple's late-1997 purchases "were significantly different" than at any other time in their marriage. However, there is nothing in the record to suggest why this extraordinary usage began in late 1997, rather than earlier in 1997 or in late 1996 when, the husband claims, he developed a gambling addiction.[3]
19. Although some of the cash advances taken on the subject account were taken by the husband at ATMs, the vast bulk of the debt owed to the plaintiff and to other credit issuers in this case were in large cash advance "convenience checks." *581 As to this plaintiff, the major advance was a cash advance check of $6,500 on November 19, 1997.
20. Debtor testified that she signed this and other cash advance checks whenever her husband requested it, and that he would make these requests when he indicated that he was "short" of funds to pay bills. She claims that none of the numerous "convenience checks" she signed ever had a face amount on it, whether pre-printed by the lender or inscribed by the husband; she always signed them "in blank."
21. Despite finding # 8 (that any single purchase over $300 would be "going overboard," in the defendant's view), there were many substantial purchases on other cards during late 1997. For example, on a Sunoco MasterCard maintained in the defendant's own name, she remembers making a purchase of nearly $4,000 for furniture, and also several thousand dollars in purchases related to a daughter's wedding. (Some very small portions of the latter ($100 here or there) she claimed were to have been reimbursed by her daughter, but not all were so reimbursed.)
22. In August of 1997, $5,000 in convenience checks were drawn on another account and a $1,457 charge was incurred on that account for a new television set. In October of 1997, nearly $3,000 in unexplained charges were incurred and in August, 1997 a $4,500 convenience check was cashed on an account held only by the defendant's husband. On another account in the name of the defendant alone, the defendant signed two convenience checks in July of 1997, totaling $5,450, and in September of 1997 she signed another convenience check in the amount of $1,550. From August 26, 1997 to the end of October, 1997, over $6,200 in charges were incurred on a different account that was maintained in the husband's name only, many of which charges appear to be ATM withdrawals in Niagara Falls, Ontario, Canada. (Although the husband testified that some convenience check withdrawals may have involved consolidation or other payments on other obligations, there were no affirmative defenses raised, or documentary evidence introduced, to that effect.)
23. The defendant testified that she was aware that her husband had a drinking problem; that he would sometimes be away for one or two days at a time, supposedly drinking; that he would occasionally call her when he was "out drinking" to ask her to call his employer and tell his employer that he was ill and unable to report for work; and that on more than one occasion her husband would arise at three in the morning, get dressed and supposedly go "out drinking" with friends.
24. Nonetheless, the defendant states that she never looked at any bills, never asked her husband what their financial circumstances were, and never worried about whether they might be in over their heads. Never. Absolutely never. Not a single time.
25. The defendant's husband's testimony is that he developed addictive gambling in late 1996; that he hid this from his wife throughout all of 1997; that as to all of his disappearances during 1997 when he told his wife he was "out drinking," he was really at a casino in Niagara Falls, Ontario, Canada (less than 20 miles from Buffalo); and that the vast bulk of the cash obtained through the use of convenience checks during late 1997 were used for gambling. For example, if $4,500 were taken in cash, $3,000 would likely go to gambling and only $1,500 to bills, by his testimony.
26. There is no testimony that the husband received any counseling for his supposed gambling addiction, nor any testimony that he has ceased gambling. Rather, there was testimony that he obtained counseling for his phobia and drinking problem and that the defendant attended some counseling sessions with him. There is no evidence whatsoever of any gambling "problem" other than the husband's selfserving *582 testimony. (See, however, finding # 22 which involved the only documentary evidence demonstrating a Canadian connection, and a consequent proximity to the casino in Niagara Falls, Ontario.)[4]
27. The defendant claims that she never knew about her husband's gambling addiction until he told her, in early 1998, that he had been to see an attorney and was counseled that they should file for bankruptcy.
28. Though she had accompanied her husband to the casino on at least two occasions, she claims to have been completely unaware that he was an addicted gambler because, by her testimony, they went their own way and met up later. She had no idea what he lost or won.
29. Throughout this litigation, the defendant and her husband have attested that his gambling losses were as much as $25,000.
30. By the time the couple filed their Chapter 7 petition, there was over $38,000 in debt on her accounts or her and her husband's joint accounts alone (which is to say, not counting accounts in her husband's name only). The nine cards (hers, his, and theirs) totaled $71,000.
31. At the time of the filing, the husband's gross income was $30,000 a year and the defendant's was about $12,000 gross, and if this was unusually low for them, it was not substantially so. They have five grown children and thirteen grandchildren. They live in a two-family home owned by the mother of one of the debtors, and supposedly make monthly rent payments to her. They also own a piece of rental property in which one of their own children resides, who paid them rent of $500 per month. That property has a value of only $28,000, but is mortgaged for $32,000. Some of the charges that were incurred on the several credit cards were for repairs and improvements to the rental property.
32. The defendant insists that she was never aware of a gambling problem prior to her husband's having seen an attorney; that the two had never spoken about their finances before he went to an attorney; that she never looked at their checkbook which she knew that her husband had diligently maintained and that was always readily available for her to see; that she never opened a piece of mail from a credit card company that was addressed to her or to anyone else at their address; that she never thought about how they could pay their bills; that she always thought they were "current" or "nearly current" on all their accounts even right up to the date of filing of the Chapter 7 petition.
33. Defendant and her husband signed their Chapter 7 petition on March 24, 1998, having met with bankruptcy counsel in early February of 1998.
34. Of $71,000 in credit card debt scheduled by the debtors in their filing, approximately $50,000 of it had been incurred in the last six months before the defendant's husband alone consulted with bankruptcy counsel.
*583 INSISTENCE UPON THE FIVE-PRONG TEST IS WITHOUT STATUTORY BASIS[5]
With one exception, I can contribute nothing to Bankruptcy Judge David Snow's excellent rationale for concluding that (1) actual fraud is not limited to the classic misrepresentation/reliance test, and that (2) "false pretenses," "false representations," and "actual fraud" are "separate categories rather than different descriptions of the same category." See Hon. David F. Snow, The Dischargeability of Credit Card Debt: New Developments and the Need for a New Direction, 72 Am.Bankr.L.J. 63, 95 (1998). The exception is that whereas Judge Snow expressly puzzled over the question of why the word "fraud" was reinserted in § 523(a)(2)(A) "nearly eighty years after its 1903 deletion from § 17a(2)," I believe I can provide the answer. Id. at 96.[6]
It is respectfully submitted that the answer lies in the Report of the 1970 Commission on the Bankruptcy Laws of the United States (the "Commission Report"). See H.R.Doc. No. 93-137, 93rd Cong., 1st Sess., Pts. I and II, 1973, in Collier on Bankruptcy, App. Vol. B, Pt. X-XXX-XXX (15th Ed.1998). The Commission proposed a new § 4-506(a) as follows:
(a) Exceptions from Discharge. A discharge extinguishes all debts of an individual, whether or not allowable, except the following:
(1) any liability for taxes with respect to which (A) a priority is granted under section 4-405(a)(5), (B) a return, if required to be filed, was not filed more than one year prior to the date of the petition, or (C) the debtor made a false or fraudulent return or willfully attempted in any manner to evade or defeat;
(2) any debt, other than a consumer debt, for obtaining money, property, or services, or an extension or renewal of credit by (A) fraud or false pretenses or false representations or (B) use of a materially false statement in writing respecting his financial condition relied on by the creditor and made or published in any manner whatsoever with intend to deceive;
(3) any debt for obtaining money, property, or services within 90 days before the date of the petition without the intention, at the time it was incurred, to pay the debt and in contemplation of the filing of a petition under this Act by or against him;
(4) any debt not scheduled in time for allowance, with the name of the creditor, if known to the debtor, unless the creditor had notice or actual knowledge of the case under the Act permitting timely filing for allowance;
(5) any liability of embezzlement or larceny;
(6) any liability to a spouse or child for maintenance or support, for alimony due or to become due, or under a property settlement in connection with a separation agreement or divorce decree;
(7) any liability for willful and malicious injury to the person or property of another;
(8) any educational debt if the first payment of any installment thereof was due on a date less than five years prior to the date of the petition and if its payment from future income or other wealth will not impose an undue hardship on the debtor and his dependents;
(9) any liability to the extent it is for a fine for the benefit of a federal, state, or local government; and
(10) any debt which was scheduled, or could have been scheduled, in a prior case in which the debtor waived discharge *584 or was denied discharge under any clause of section 4-505(a) of this Act except clause (7) or under section 14c of the former Act except clause (5) or (8). A debt not dischargeable under clause (4) or (8) of this subdivision may nevertheless be discharged in a subsequent case.
Collier on Bankruptcy, App. Vol. B, Pt. 4-706-07.
This proposal was in replacement of former § 17a which provided, in pertinent part:
And provided further, That a discharge in bankruptcy shall not release or affect any tax lien; (2) are liabilities for obtaining money or property by false pretenses or false representations, or for obtaining money or property on credit or obtaining an extension or renewal of credit in reliance upon a materially false statement in writing respecting his financial condition made or published or caused to be made or published in any manner whatsoever with intent to deceive, or for willful and malicious conversion of the property of another; (3) have not been duly scheduled in time for proof and allowance, with the name of the creditor, if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; (4) were created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity; (5) are for wages and commissions to the extent they are entitled to priority under subdivision a of section 64 of this Act; (6) are due for moneys of an employee received or retained by his employer to secure the faithful performance by such employee of the terms of a contract of employment; (7) are for alimony due or to become due, or for maintenance or support of wife or child, or for seduction of an unmarried female or for breach of promise of marriage accompanied by seduction, or for criminal conversation; or (8) are liabilities for willful and malicious injuries to the person or property of another other than conversion as excepted under clause (2) of this subdivision. 17a of the Bankruptcy Act of 1898 as codified in former 11 U.S.C. § 35(a), as amended by Publ.L. 91-467, § 6 (1970).
A close comparison of the actual and proposed provisions, coupled with the Commission Report's text makes it clear that the Commission was proposing a major change in the law of exception to discharge, and the reinsertion of the word "fraud" was essential to that change. However, Congress rejected the change, and then chose not to restore the § 17a(2) language.
Specifically, the Commission proposed abolishing § 17a(2) as it applied to consumer debts, and replacing it instead with a "spending spree" provision that it proposed at § 4-506(a)(3) (the forerunner of current § 523(a)(2)(C)).
Clause (2) . . . of subdivision (a) replaces § 17a(2) of the [1898 Bankruptcy] Act. Nondischargeability under this clause does not attach to consumer debts, in recognition of the spurious use of § 17a(2) by creditors to avoid the discharge of consumer debts owed them. Clause (A) is identical to the corresponding portion of § 17a(2), except for the addition of the word "fraud," removed from § 17a(4) of the . . . Act, as explained below in the discussion of clause (5) of this subdivision. Clause (B) also makes no substantive change. The phrase of § 17a(2), concerning willful and malicious conversion of property has been removed to clause (7).
Collier on Bankruptcy App. Vol. B, pt. 4-709. (Emphasis added.)
And as the Commission proposed the retaining of § 17a(2) only as to non-consumer debts only, it offered the following further analysis of fiduciary frauds:
Clause (5) of subdivision (a) replaces § 17a(4) of the . . . Act. The limiting words, "while acting as an officer or in any fiduciary capacity," the scope of *585 which is controverted under the . . . Act, are eliminated. Thus, for example, the uncertainty whether this ground for nondischargeability applies only to a corporate or public officer or extends also to a corporate employee, partner, or other agent, compare 1A Collier ¶ 17.24, at 1707-1714.1 (1971), with Countryman, The New Dischargeability Law, 45 Am. Bankr.L.J. 1, 17 nn. 70-76 (1971), is abolished.
11. The terms "misappropriation" and "defalcation" are discarded as overbroad and uncertain in meaning. See Central Hanover Bank & Trust Co. v. Herbst, 93 F.2d 510 (2d Cir.1937). The standard of "fraud" is moved to a more appropriate location in clause (2), and the precisely definable term "larceny" is added to the remaining term "embezzlement" to cover conduct clearly within the intended scope of this ground for dischargeability.
Id.
Thus, another non-consumer debt fiduciary fraud was moved from § 17a(4) into § 17a(2) (in their § 4-506(a)(2) proposal), and the word "fiduciary" was dropped so that all frauds related only to a non-consumer debt were covered by (a)(2). In sum, non-consumer debts arising from false pretenses or false representations as well as non-consumer "fraud" would be covered in their proposed replacement for § 17a(2).
But limiting a(2) to non-consumer debts required that § 17a(2)'s provision for wilful and malicious conversion be moved into a broadened (a)(6) (which in proposed § 4-506 was (a)(7) because of the insertion of the "spending spree" exception as (a)(3)). Thus, both consumer debtors and non-consumer debtors alike would remain liable for any sort of wilful and malicious injury.
As the Report thus stated:
Clause (7) of subdivision (a) continues without substantive change § 17a(8) of the Act. The phrase "willful and malicious conversion of the property of another," now appearing at the last phrase of § 17a(2) of the Act, is reincorporated into this clause, undoing a technical change made by the 1970 Amendments to § 17a.
Id. at 4-710.
Congress eventually rejected the Commission's effort to abolish the § 17a(2) exception as it applied to consumer debts. Congress retained the exception as § 523(a)(2), but added § 523(d) to permit a consumer debtor who prevails in (a)(2) dischargeability litigation to recover attorney's fees and costs in some instances.[7]
When Congress thus deleted the proposed clause that took consumer debt outside the scope of the proposal (the critical clause that read "other than a consumer debt"), it did not also delete from the Commission's proposal the word "fraud" which had been added only to make (a)(2) a comprehensive provision addressing nonconsumer debts, such as the fiduciary frauds that had previously been addressed in § 17a(4).
Congress did re-insert the "fiduciary fraud" provision in § 523(a)(4), and it approved the Commission's relocating of the "wilful and malicious conversion" provision from a(2) to a broadened (a)(6).
Had Congress removed the word "fraud" from § 523(a)(2) that would have fully "rescued" (a)(2) from the Commission's proposed, dramatic change that would have permitted discharge of consumer-type debts incurred through fraud. But Congress instead simply announced that "`actual fraud' is added as a ground for exception from discharge." S.Rep. No. 95-989 to accompany S. 2266, 95th Cong.2d Sess. (1978) pp. 77-80. And at 124 Cong.Rec. H 11095, H 11096, H 11113 *586 (Sept. 28, 1978), Congress stated "Subparagraph (A) is intended to codify current case law, e.g. Neal v. Clark, 95 U.S. 704, 24 L. Ed. 586 (1877) which interprets `fraud' to mean actual or positive fraud rather than fraud implied in law." As Judge Snow concluded, this statement by Congress was not a limitation of "false pretenses" or "false representation," but rather a limitation on the newly added term "fraud."
Given this history, there can be no statutory basis upon which to argue that Congress intended to limit prior interpretation of "false pretenses" or "false representations" to those that included the five elements of common law deceit.
Rather, I concur in Judge Snow's conclusion that the most plausible explanation for leaving "fraud" where the Commission had put it was to overrule the result of Davison-Paxon Co. v. Caldwell, See 115 F.2d 189 (5th Cir.1940), cert. denied, 313 U.S. 564, 61 S. Ct. 841, 85 L. Ed. 1523, where a debt incurred through fraud was found dischargeable nonetheless, because there were no false pretenses or representations.[8]
Lastly (in these regards) I would note that in In re Gilmore, Bankruptcy Judge Benjamin Cohen took a somewhat different road to the same result. Rather than treating false pretenses and false representations as terms connoting something different from each other and from "actual fraud," Judge Cohen adopted such a broad view of "actual fraud" that he concluded that "it is essentially impossible to conceive of a set of circumstances that would constitute `actual fraud' . . . but which would not also constitute `false pretenses,' as that term has historically been defined." 221 B.R. 864, 872 (Bankr.N.D.Ala.1998). He based this statement on his well-founded premise that "`false pretenses' can be made in any of the ways in which ideas can be communicated." Id.[9]
Though these two approaches are very different, I find them both correct. Indeed, they reinforce each other. Whether one holds, as do Judge Cohen and I, that the term "actual fraud" encompasses not only five-pronged common law deceit, but also any device, trick, artifice or scheme to defraud,[10] or whether one instead resorts to the disjunctive structure of § 523(a)(2)(A) to determine that "false pretenses" or "false representations" alone are a sufficient basis to declare nondischargeability, totally apart from any notion as to what "fraud" requires, the result is the same the cases that hold that the five prongs of common law deceit are always indispensable to a § 523(a)(2)(A) judgment for the plaintiff are, I submit, mistaken.
The Seventh Circuit is more adamant in its dismay at such holdings. In the case of Mayer v. Spanel Int'l Ltd., the court stated that:
Section 17a(2) of [the 1898 Act] . . . forbade discharge of "liabilities for obtaining money or property by false pretenses or false representations," language that to modern ears differs from "fraud" in lacking an intent component. It turns out that cases interpreting the 1898 Act got the intent ingredient from the Bankruptcy Act of 1867, which disallowed the discharge of debts "created by fraud." . . . All reference to "fraud" disappeared from the Act in 1903, but courts of appeals paid no heed. . . . Then the 1978 Code included both *587 fraud and the more capacious "false pretenses [or] false representation" language, and again courts have acted as if nothing has changed. Are we to treat the evolution of statutory language as meaningless? (Emphasis added. Citation omitted.)
51 F.3d 670, 674 (7th Cir.1995).
This writer's own modest sentiment is that whatever the law of credit card fraud "ought" to be, the law as written forbids discharge of some kinds of credit card schemes, and to command that the plaintiff prove-up the five-pronged test in every § 523(a)(2)(A) case is without any basis in the statute. Though it is odious to have to uphold some of the discovery practices of some plaintiffs like these who seemingly seek to beat-down 100 honest debtors for each one who turns out to have been a cheat,[11] appropriate management of discovery under Rule 26(b) is our job in light of cases of credit card fraud such as that present here. There is no judicially-created quick-fix that is true to the statute, in my view. Our duty is diligent, pro-active pre-trial management under Rule 26(b)(2)(iii).
DISCUSSION OF THIS CASE
All bankruptcy courts would likely agree as to the result if a cardholder were to hand her card over to her husband and say "Go run this up. I'll help you. Here is my PIN number. Take all the cash advances you can. I'll sign the pre-printed checks in blank. Then we'll file bankruptcy and I'll claim that I thought we could afford it because you handled the family finances not me. They can't sue you, because you are not liable on the account."
Whatever else that might be, it would be a wilful and malicious injury under 11 U.S.C. § 523(a)(6).
The only difference between that hypothetical and the facts before the court are (1) the defendant claims that by virtue of her upbringing and by choice, she was oblivious to the fact that this and other accounts were being run up over $70,000 in a span of less than a year, and (2) she and her husband deny having contemplated bankruptcy until after the run-up. And those differences preclude a finding of "willful and malicious" injury.
In this writer's view, there is something short of a "wilful and malicious" injury that constitutes a "false pretense" or "actual fraud" and it is present in this case. Taking all of the defense testimony as true (and as noted above, some of these debtors' testimony strains credulity), this writer holds that a credit card issuer does not "assume the risk" that a cardholder will empower and assist someone else to run up the cards and then, after filing bankruptcy, be able to sustain a claim that having chosen to act deaf, dumb, and blind is a complete defense to a § 523(a)(2)(A) action.
There is a "false pretense" when the account holder who is under no duress whatsoever, aided and facilitated her husband's use of the card with complete and utter disregard (on her part) for how it was being used and for the ability to repay it.
Although genuine mental impairment might defeat a claim of fraud,[12] this Court holds that a premeditated, calculated ignorance, coupled with active participation and assistance in the use of credit line by someone else, while the account holder is *588 insolvent in fact, belies any defense of "intent to repay." This defendant's self-serving protestations of actual intent to repay are of no weight against the backdrop of complete indifference to what was being charged to her name.
Indifference is not the same as misplaced confidence. Misplaced confidence might be among the mistakes or lapses of judgment that bankruptcy forgives.[13] Misplaced confidence might be found where a debtor knows how high the debt has become, but accepts a spouse's promise, backed-up with voluntary counseling, to clean up his act or his vow and demonstrated effort to work extra hours to repay their debt.
Indifference is not the same as desperation or submissiveness, either. An abused spouse, or one who fears that the family unit will fall apart if she cuts up the card, might have a defense, at least up until what the spouse is doing approaches outright thievery. (Even if Bonnie were to have assisted Clyde only to keep peace in the relationship, her actions would not have been without culpability.)
To be sure, a lender to one spouse must assume the risk that the other spouse's failings or addictions or injuries, etc. might cause its borrower to use the card to excess. But ultimately the judgment at issue under § 523 is the debtor's judgment. Had this defendant taken some modicum of responsibility for knowing what "she" owed, she may or may not have aided or abetted the run-up. And she may or may not have prevailed in dischargeability litigation grounded in that exercise of judgment. But she may not pre-empt such inquiry, and defeat liability, by claiming that she delegated that judgment to her husband.[14]
In sum, the defendant's conduct here constitutes a "false pretense." The language used by Bankruptcy Judge Cohen, quoted earlier in this decision, is appropriate. The defendant engaged in "a series of . . . activities . . . which, when considered collectively, [served to] create a false and misleading set of circumstances, or a false and misleading understanding of a transaction." Specifically, the plaintiff clearly approved each of the pertinent transactions on an inescapable belief that it was the judgment and discretion of the defendant that was being exercised regarding the use of the account, when, in fact, the judgment and discretion that was being exercised was that of someone against whom the plaintiff has no rights.[15]
STARE DECISIS REVISITED: THE DECISION OF A SOLE DISTRICT JUDGE IN In re Lutgen
Since this writer ruled in Phipps that within the Second Circuit, a decision of just one U.S. District Judge binds all U.S. Bankruptcy Judges of that District until a different District Judge or a higher court reaches a different conclusion, at least two courts have declined to adopt that view. See, e.g. In re Raphael, 230 B.R. 657, 665 (Bankr.D.N.J.1999); Barnett v. Jamesway Corp. (In re Jamesway), 235 B.R. 329, 336, n. 1 (Bankr.S.D.N.Y.1999).
*589 The present case may or may not expose a flaw in those courts' reasoning.
This writer ruled in Lutgen that a creditor who prevails in 11 U.S.C. § 523(a)(2)(A) litigation is not entitled to attorneys' fees incident to that litigation, in the absence of a statute, or other basis, abrogating the American Rule. See 225 B.R. 37, 39-41. (That there was such a statute in Cohen v. De La Cruz, 523 U.S. 213, 118 S. Ct. 1212, 1214, 140 L. Ed. 2d 341, was fully discussed in this Court's Lutgen decision.)
U.S. District Court Judge John T. Elfvin, of this U.S. District Court, squarely reversed that decision on the merits, ordering the opposite result. See In re Lutgen, 1999 WL 222605 (W.D.N.Y. April 5, 1999). As proper format would say, "the U.S. District Court (Elfvin, J.) reversed," and the basis of the reversal was the District Court's finding that I erred in concluding that the contractual obligation to pay attorney's fees was discharged and no longer at issue when the § 523(a)(2)(A) fraud was tried and proven.
If the courts that believe that the In re Phipps holding is wrong are correct, then I am free to disregard a sole District Judge's explanation as to why I wrongly decided In re Lutgen; I may re-issue my now-reversed Lutgen holding in the context of the present case; and I may hope that any appeal goes to a different District Judge one who might agree with me.
I presume that that is precisely what the courts that disagree with In re Phipps would do in my situation (if they do not find the reviewing court's teaching to be persuasive). Certainly they could not say that the bankruptcy judge who was reversed is bound, but the other bankruptcy judges are not; their key argument is that there is no "law of the district," or that "law of the district" cannot be made on the basis of the random selection of a district judge on appeal. That argument collapses if they were to concede that the random assignment of a case to a particular bankruptcy judge who happens to be the one whose decision was reversed, does require obedience to the earlier decision of the district judge who issued the reversal.
I have made no effort to ascertain whether those courts feel that a bankruptcy judge is free to reaffirm, in a different case, a ruling that was specifically reversed in an earlier case decided by that same bankruptcy judge. Perhaps they do so feel free. If not, then their arguments in contradiction to Phipps are flawed.
I, on the other hand, am comfortable with holding that the result of In re Phipps, is particularly compelling when the single district judge's holding was rendered in the form of a reversal of the same bankruptcy judge who is now deciding, in a different case, whether he or she must give stare decisis effect to the district judge's decision.
As explained in Phipps, this writer is of the view that (1) any one district judge speaks for the district court, (2) however many judges thereof have ruled, the district court has ruled, (3) the district court is "superior" to the bankruptcy court, that (4) every judge of an "inferior" court must adhere to the decision of the "superior" court, and that (5) within the Second Circuit, this interpretation of hierarchical stare decisis is commanded by the Circuit's decision in United States v. Whiting Pools, Inc., 674 F.2d 144 (2d Cir.1982), affd. on other grounds, 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983).[16]
*590 CONCLUSION
Judgment will enter for the plaintiff for the amount demanded in the Complaint. However, the Clerk shall not enter judgment until the matter of plaintiff's attorneys fees has been addressed pursuant to the District Court's Lutgen decision. If plaintiff intends to seek fees thereunder, it shall do so by Motion and Notice of Motion filed and served within 15 days from the date of this Order. Any such Motion shall include proof of whatever contractual basis plaintiff asserts gives rise to the right to attorney's fees.
SO ORDERED.
NOTES
[1] In In re Sigrist, 163 B.R. 940 (Bankr. W.D.N.Y.1994), and In re Burns, 196 B.R. 11 (Bankr.W.D.N.Y.1996), this Court ruled that in carrying its burden of proof, a consumer credit issuer is not entitled to be assisted by an evidentiary inference of fraud from the use of the card in the debtor's usual ways while insolvent, if the credit was "pre-approved" while the debtor was already insolvent. In other words, if an issuer grants credit to an insolvent without asking the debtor about ability to repay, then the issuer may not claim the evidentiary benefit of an inference of fraud if the debtor continues her normal pattern of use. Such an issuer clearly did not care about the debtor's own stated basis for an ability to repay at the time the card was issued and therefore cannot later claim an inference to the contrary. The issuer must bring forth extrinsic evidence of fraud, such as acts in contemplation of bankruptcy. Although the credit issued in the case at Bar may or may not have been pre-approved, the defendant has offered no evidence that she was already insolvent when the account was opened or when the limits were increased (if they were).
[2] The Debtor claims that she did not give her husband the PIN number to her account but permitted her husband unfettered access to all mail sent from the plaintiff, and that that is how he got the PIN. In this Court's view, that is the same as giving away her PIN number.
[3] The husband testified that the couple had "a couple thousand" dollars in the bank when he began his alleged gambling stint. However, there was no suggestion that the "run up" began only when the cash ran out. The cash would have run out early in 1997, at the latest.
[4] It is axiomatic that judicial "factfinders" do not find facts. Rather, they conclude what it is more probable than not, in light of the evidence, including the demeanor of the witnesses. This writer makes no finding as to whether the husband's testimony is credible. If, in fact, tens of thousands of dollars are sitting in a hidden account or hidden assets somewhere else, then he (and perhaps the defendant as well) will have made out like the proverbial bandits if this account is held nondischargeable and if the perjury goes unproven until the expiration of the statute of limitations. Such is the current state of fact-finding when faced with an undocumented gambling defense. Gambling losses do not leave an audit trail if the gambler does not want them to. Thus, a false gambling defense can be a haven for the criminal mind who seeks a "cover" for hidden assets. For purposes of this decision, I accept the testimony of the defendant and her husband at face value, though much of it does not pass the "smell test."
[5] Some courts perceive a basis in Field v. Mans, 516 U.S. 59, 116 S. Ct. 437, 133 L. Ed. 2d 351 (1995). That case (1) did not involve a credit card, but rather a letter, and thus "fit" the five-prong analysis, and (2) did not present any argument to the effect that the five-prong test is or is not the only test applicable under 11 U.S.C. § 523(a)(2)(A).
[6] Note also that the Seventh Circuit puzzled over the same question. See Mayer v. Spanel Int'l Ltd., 51 F.3d 670, 674 (7th Cir.1995).
[7] See American Express Travel Related Svcs. Co., Inc. v. King (In re King), 135 B.R. 734 (Bankr.W.D.N.Y.1992); Wegmans Food Markets, Inc. v. Lutgen (In re Lutgen), 225 B.R. 37 (Bankr.W.D.N.Y.1998), rev'd at 1999 WL 222605 (W.D.N.Y.1995).
[8] State law recognized a purchase of goods on credit while knowing oneself to be insolvent as "deceit." But the Court held it to be a species of fraud or deceit that did not involve any overt pretense or representation.
[9] Judge Cohen's analysis in Gilmore is as follows: a false pretense is "a series of events, activities or communications which, when considered collectively, create a false and misleading set of circumstances, . . . or understanding of a transaction, by which a creditor is wrongfully induced by a debtor to transfer property or extend credit. . . ." 221 B.R. 864, 872, (citing inter alia, Black's Law Dictionary) (emphasis added).
[10] See Shanahan, 151 B.R. 44 (Bankr. W.D.N.Y.1993).
[11] See First Deposit Nat'l Bank v. Stahl (In re Stahl), 222 B.R. 497 (Bankr.W.D.N.C.1998) for a description of the type of discovery disputes an honest debtor who does not capitulate may be in for.
[12] It is a matter of record, reported in the daily news of this city, that a number of functionally-disabled, mentally-impaired persons living in a group home received pre-approved credit cards and had run up significant debts ($4,000 or $5,000) before care givers discovered the cards and explained to the recipients that this was not a public assistance program that was free.
[13] "The issuer or a credit card or credit line perhaps assumes the risk of the user's ignorance, mistake, naivete, gullibility, misfortune, or other innocent failing or adversity. . . ." In re Shanahan, 151 B.R. 44 (Bankr. W.D.N.Y.1993).
[14] Falling for "role-playing" is a danger here. How many who might be inclined to disagree with today's decision would do so if the defendant were a husband who had relegated judgment over his accounts to his profligate wife? Indeed, the defense that "I was raised that way" might appropriately be viewed as an insult to millions of married women who accept responsibility for their husbands' gross abuses of their wives' credit. Though arguments are not to be rejected merely because they might insult millions, there can be a nexus between a socially indefensible premise and a "false pretense."
[15] I find the "inescapable belief" to flow from the fact that the plaintiff clearly would have canceled the card if the defendant had reported it "stolen" by her husband or had at least reported it or the convenience checks "lost."
[16] As noted in Arway v. Mt. St. Mary's Hospital (In re Arway), some have described the failure of an inferior court to apply hierarchical stare decisis as "anarchy." See Arway, 227 B.R. 216, 219, n. 3 (Bankr.W.D.N.Y. 1998). More prosaically, the orderly development of law is best served by the rule reaffirmed here, in my view. That is because under In re Phipps, the rule to be applied in any case does not depend upon which bankruptcy judge is assigned. A party need fear (or anticipate) a different rule only at the time a district judge is assigned the appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1887433/ | 740 So. 2d 268 (1999)
Frank E. THURSTON, Plaintiff-Appellee,
v.
Betty Jo Spruell THURSTON, Defendant-Appellant.
No. 31,895-CA.
Court of Appeal of Louisiana, Second Circuit.
August 20, 1999.
Cook, Yancey, King & Galloway by Curtis R. Shelton, Shreveport, Counsel for Appellant.
William H. Ledbetter, Jr., Borrier City, Counsel for Appellee.
Before NORRIS, C.J., and WILLIAMS, GASKINS, CARAWAY and KOSTELKA, JJ.
GASKINS, Judge.
In this action for partition of community property, the defendant, Betty Jo Spruell Thurston, appeals a judgment in favor of the plaintiff, Frank Thurston, sustaining his exception of res judicata. The district court found that the thing demanded in the prior and current lawsuits was the same, and dismissed the defendant's claim for partition of the plaintiff's retirement benefits. We affirm.
FACTS
In September 1980, Mr. Thurston filed a petition for separation from his wife, Mrs. Thurston. Subsequently, a judgment of separation was rendered recognizing their ownership of one-half interest in the community of acquets and gains previously existing between the parties. They agreed to a community property settlement in which Mrs. Thurston received an interest in two parcels of real estate, a vehicle, and *269 her personal belongings; she also assumed a debt secured by a mortgage on the real property. Mr. Thurston received a vehicle and his personal belongings; he likewise assumed a debt.
The partition of community property included a provision by which the parties stipulated that both would own an undivided interest in any property not specifically mentioned therein. With respect to such property, each party reserved the right to sue for partition. In November 1980, the parties obtained a judgment of divorce.
Approximately one month later, Mrs. Thurston filed a petition alleging that during the marriage Mr. Thurston had contributed community earnings to a retirement plan, and that the amount of such funds was not included in the property settlement. Mrs. Thurston sought to partition her interest in Mr. Thurston's retirement by requesting the sum of one-half of all funds contributed and accumulated in the retirement system as of September 1980, the filing date of the petition for separation. Mr. Thurston filed an answer and reconventional demand, alleging that the contributions to his retirement fund were omitted from the partition agreement by mutual mistake, and that the agreement should be rescinded on the grounds of lesion beyond moiety, due to a difference of more than one-fourth in the value of the portions received by each party. On January 16, 1981, the parties filed a motion to dismiss, with prejudice, Mrs. Thurston's petition and Mr. Thurston's reconventional demand. The district court granted the motion, dismissing "with prejudice" the respective demands of the parties.
Sixteen years later, in February 1997, Mrs. Thurston filed a "Supplemental Petition" alleging that Mr. Thurston had retired and was receiving monthly retirement payments. She styled her request for an interest in Mr. Thurston's retirement as a claim for one-half of the retirement benefits which he has received since the termination of the former community of acquets and gains.
Subsequently, Mr. Thurston filed a peremptory exception of res judicata. After a hearing on June 30, 1998, the district court sustained the peremptory exception, finding a sufficient identity of the thing demanded in the two lawsuits. Mrs. Thurston appeals the judgment dismissing her claims.
LAW
The exception of res judicata is currently governed by La. R.S. 13:4231. This statute became effective on January 1, 1991, and applies to all civil actions filed on or after that date. The preclusive authority of a judgment rendered in an action filed before January 1, 1991, shall be determined by the law in effect prior to that date. Acts 1990, No. 521, § 5. Thus, the law of res judicata applicable to the present case is set forth in former La. C.C. art. 2286:
The authority of the thing adjudged takes place only with respect to what was the object of the judgment. The thing demanded must be the same; the demand must be founded on the same cause of action; the demand must be between the same parties, and ... in the same quality.
For res judicata to apply, there must be 1) an identity of the parties; 2) an identity of "cause;" and 3) an identity of the thing demanded. Emory v. Gardner, 415 So. 2d 339 (La.App. 2d Cir.1982); Greer v. State, 616 So. 2d 811 (La.App. 2d Cir.1993). The words "cause of action" as used in the statute are to be interpreted to mean "cause." The civilian concept of cause is the juridical or material fact which is the basis of the right claimed, or the defense pleaded. Mitchell v. Bertolla, 340 So. 2d 287 (La.1976). The "thing demanded" has been defined as the "kind of relief sought." Greer v. State, supra.
The doctrine of res judicata is strictly construed. Any doubt regarding compliance with its requirements is to be resolved in favor of maintaining the plaintiff's *270 action. Greer v. State, supra; Emory v. Gardner, supra. The party urging the exception of res judicata has the burden of proving each essential element by a preponderance of the evidence. Greer, supra; Terrebonne v. Theriot, 94-1632 (La. App. 1st Cir. 6/23/95), 657 So. 2d 1358. The absence of any of these requisite elements is fatal to a plea of res judicata. Welch v. Crown Zellerbach Corp., 359 So. 2d 154 (La.1978).
A judgment of dismissal with prejudice shall have the effect of a final judgment of absolute dismissal after trial. La. C.C.P. 1673.
DISCUSSION
Mrs. Thurston contends the district court erred in sustaining Mr. Thurston's peremptory exception of res judicata. She argues that the relief sought in her prior suit is not identical to her present petition seeking a percentage of the retirement benefits being paid to Mr. Thurston.
In both of the suits, the thing demanded was the same, the demand was founded on the same cause of action, and the demand was between the same parties. The thing demanded in both partition suits was Mrs. Thurston's interest in Mr. Thurston's retirement, the demand was founded on the retirement being declared a community asset, and the Thurstons were the parties in both suits. The only contentious issue in this res judicata analysis is whether the thing demanded is the same. The fact that Mrs. Thurston styled her interest in the retirement as being composed of "contributions and accumulations" in the first suit, and requested her interest in the form of one-half of all funds that Mr. Thurston has received in the second suit is of no moment. In paragraph 7 of her Supplemental Petition filed in 1997, Mrs. Thurston asks for partition and disbursal of payment to her according to her interest therein. The thing demanded in both suits is Mrs. Thurston's interest in Mr. Thurston's retirement.
When a case is dismissed with prejudice, as was the one sub judice, La. C.C.P. art. 1673 mandates that it shall have the effect of a final judgment of absolute dismissal after trial. Had the first case been litigated under Mrs. Thurston's request for her interest in the retirement in the form of contributions and accumulations, an absolute dismissal of this request would prohibit the case from being litigated again. Her claims could have been dismissed by the trial judge's finding that the retirement was not a community asset and, consequently, Mrs. Thurston had no interest in it. Or the trial judge could have determined that her interest in all assets comprising the community, including the retirement, was realized with the property she had already received. Had the judge made such a finding after the case was litigated and absolutely dismissed the claims of Mrs. Thurston, it would be clear that Mrs. Thurston would have no right to come back into court and ask that the court litigate her interest in the retirement in the form of retirement benefits.
Mrs. Thurston relies upon Hare v. Hodgins, 586 So. 2d 118 (La.1991), for the premise that in a partition proceeding, a former spouse might pursue an interest in a community-owned retirement on a basis other than that calculated by the Sims formula.[1] The method of calculation of the spouse's interest in a retirement has no application in the case at bar. Nothing in the Hare case insinuates that a former spouse may receive a judgment under one method of calculating the spouse's interest, then file suit for the spouse's interest under another method of calculating the interest. In the case sub judice, Mrs. Thurston's interest in the retirement was "adjudicated" when she consented to the case being dismissed with prejudice.
Further, the ruling on the res judicata issue by the Fifth Circuit in Hare, which was adopted by the Louisiana Supreme Court, gives us no guidance. See Hare v. *271 Hodgins, 567 So. 2d 670 (La.App. 5th Cir. 1990). There, the issue was whether the partition agreement waived any further claims on the community assets; the appellate court found that it did not. In this case, the partition agreement specifically reserved the right to further adjudicate any claims not addressed. Thereafter, Mrs. Thurston's claim regarding the retirement was addressedand "litigated" in her first petition.
Inasmuch as the suits filed in 1980 and 1997 by Mrs. Thurston demanded the same thing (her interest in the retirement), the demand was founded on the same cause of action (a partition declaring her status as co-owner of the retirement), and the demand was between the same parties (Mr. and Mrs. Thurston), the trial judge correctly sustained the exception of res judicata.
CONCLUSION
For the foregoing reasons, the district court's judgment sustaining the exception of res judicata is affirmed. Costs of this appeal are assessed to the appellant, Betty Jo Spruell Thurston.
AFFIRMED.
NORRIS, C.J., dissents for the reasons assigned by WILLIAMS, J.
WILLIAMS, J., dissents and assigns written reasons.
WILLIAMS, Judge, dissenting.
I respectfully dissent.
In the previous petition filed in 1980, Betty Thurston alleged that she was entitled to receive one-half of all sums contributed by Frank Thurston and accumulated in the retirement system from the date of their marriage to September 8, 1980, when the petition for separation was filed. The parties' joint motion to dismiss stated that Betty Thurston's petition sought "one-half of all of the sums that Frank E. Thurston had contributed to his retirement plan...." The district court judgment merely provided that the "respective demands of movants ... are hereby dismissed with prejudice."
In the present action, Betty Thurston alleges that Frank Thurston is currently receiving monthly retirement benefits, and she seeks one-half of all of the payments which he "has received from the aforesaid retirement" since the date of the termination of the parties' community of acquets and gains.
The majority attempts to support its position by adopting a contradictory argument. First, the majority speculates about what might have happened if the original petition had been litigated. Despite this acknowledgment that there was no such litigation, the majority subsequently asserts the opposite view that Betty Thurston's claims were "addressed- and `litigated-'" by the previous dismissal.
During the hearing on the exception, the district judge similarly speculated that if the wife's 1980 petition had been fully litigated, she would not have been awarded one-half of the husband's contributions to the retirement system. The judge asserted that instead, the wife's interest would have been calculated by use of the formula established by the supreme court in Sims v. Sims, 358 So. 2d 919 (La.1978). In Sims, the court stated that a spouse's interest in the employee spouse's pension plan was not limited to one-half of the cash value upon dissolution of the community. The supreme court held that the non-employed spouse was entitled to a judgment recognizing the spouse's interest as one-half of the retirement proceeds if and when they become payable. The district court apparently reasoned that in light of Sims, Betty Thurston's suit would have resulted in a judgment recognizing her right to future retirement payments, so that the type of relief previously sought was in effect the same as that requested in the present case.
However, if the previous lawsuit had proceeded, the parties may have agreed on *272 a valuation of the pension for the purpose of a conventional partition, a possible alternative which was recognized by the supreme court in Sims. In any event, pursuant to Article 2286, the question is not what might have happened if the previous suit had proceeded. Rather, the relevant inquiry is whether the "thing demanded" is identical in both lawsuits.
Although the majority attempts to dismiss the distinct interests raised in each petition as simply two "methods of calculation," a spouse's interest in the value of accumulated contributions is not the same as an interest in future payments from a vested pension plan. In the petition filed in 1980, Betty Thurston specifically sought to collect the sum of one-half of the funds that Frank Thurston had contributed at the time of separation to the retirement plan, which had not yet matured. In contrast, the present petition seeks a percentage of the retirement payments which Frank Thurston is currently receiving through the subsequently matured pension plan. The judgment of dismissal addressed only the former interest.
Based upon this record, I must conclude that there is insufficient identity of the thing demanded in these two lawsuits. Res judicata is strictly construed and the failure to establish any of the three elements required by Article 2286 is fatal to the plea. Consequently, the district court erred in sustaining the exception of res judicata.
In his brief, Frank Thurston also contends that the joint motion to dismiss and the judgment of dismissal with prejudice represent a compromise disposing of any claims Betty Thurston would have to Frank Thurston's retirement benefits. Pursuant to LSA-C.C. art. 3071, a compromise is an agreement, between two or more parties who adjust their differences by mutual consent, reduced to writing or recited in open court. Contrary to the above stated contention, neither the motion to dismiss nor the judgment of dismissal expressly refer to Betty Thurston's interest in a portion of the future retirement benefits payable to Frank Thurston. Thus, the record does not establish a compromise under Article 3071. The argument lacks merit.
For the foregoing reasons, I would reverse the district court's judgment sustaining the exception of res judicata and remand the case to the district court for further proceedings.
NOTES
[1] See Sims v. Sims, 358 So. 2d 919 (La.1978). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2245058/ | 383 F. Supp. 1294 (1974)
FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff,
v.
Louis J. LEFKOWITZ, as Attorney General of the State of New York, and Malcolm Wilson, as Governor of the State of New York, Defendants.
No. 74 Civ. 4293.
United States District Court, S. D. New York, Civil Division.
November 7, 1974.
*1295 Cadwalader, Wickersham & Taft by John J. Walsh, Dean J. Landau, Peter G. Bergmann, New York City, of counsel, for plaintiff.
Louis J. Lefkowitz, Atty. Gen. of the State of N. Y., New York City, by Stanley L. Kantor, Asst. Atty. Gen., of counsel, for defendants.
WHITMAN KNAPP, District Judge.
Plaintiff, the Federal National Mortgage Association (FNMA), has moved pursuant to 28 U.S.C. §§ 2281 and 2284 for the convening of a three-judge court to hear the above-entitled matter. In this action, plaintiff seeks a preliminary and permanent injunction restraining the enforcement, operation or execution of a recently enacted New York State law Chapter 119 of the Laws of 1974 (codified as Section 14-b of the Banking Law, McKinney's Consol.Law, c. 2, and Section 5-601 of the General Obligations Law, McKinney's Consol.Laws, c. 24-A,) on the ground that the statute is unconstitutional. As party defendants the complaint names the Attorney General and the Governor of the State.
Chapter 119 requires mortgage investing institutions, such as FNMA, to pay interest of at least two percent on "escrow accounts". Plaintiff contends that as applied to FNMA, Chapter 119 is unconstitutional in several respects: (1) insofar as it requires FNMA to pay interest on "escrow accounts", it improperly regulates and burdens the operations of a federal instrumentality in violation of Article VI of the Constitution; (2) insofar as it requires FNMA to pay interest on such accounts established pursuant to contracts entered into prior to April 1, 1974 all of which do not by their terms require such payments it violates the Contract Clause of the Constitution; (3) insofar as it requires FNMA to pay interest on such accounts under mortgage contracts which contain no terms requiring the payment of interest, but exempts from such requirement all mortgage contracts entered into prior to April 1, 1974 which expressly provide that no such interest shall be paid, it constitutes invidious discrimination and denies plaintiff equal protection of the laws in violation of the Fourteenth Amendment; and (4) insofar as Section 10.2(c) (1) of the General Rules and Regulations of the New York State Banking Board requires FNMA to pay two percent interest on escrow funds received under terms of mortgage contracts dated after April 1, 1974, but which are held by servicers rather than FNMA, it deprives FNMA of an exemption conferred by Section 14-b(4) (iii) of the New York State Banking Law, and violates the Fourteenth Amendment Due Process Clause.
There can be no doubt that the complaint and the constitutional issues it raises fulfill the requirements for convening a three-judge court as set out in *1296 Idlewild Bon Voyage Liquor Corp. v. Epstein (1962) 370 U.S. 713, 82 S. Ct. 1294, 8 L. Ed. 2d 794 and in Goosby v. Osser (1973) 409 U.S. 512, 93 S. Ct. 854, 35 L. Ed. 2d 36. Indeed, the defendants do not at all claim that the constitutional issues involved are insubstantial. The defendants, however, do oppose the convening of the three-judge court and have moved for dismissal of the complaint on the ground that they are not proper parties to this action.
I. Motion to Dismiss as to the Attorney General
The touchstone in any analysis of whether a particular state officer is a proper defendant in a suit to enjoin the enforcement, operation or execution of a state statute is the landmark case of Ex Parte Young (1908) 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714. In holding that the federal court had jurisdiction to enjoin a state officer from enforcing a state statute, the Court stated:
"In making an officer of the state a party defendant in a suit to enjoin the enforcement of an act alleged to be unconstitutional, it is plain that such officer must have some connection with the enforcement of the act, or else it is merely making him a party as a representative of the state, and thereby attempting to make the state a party.
"It has not, however, been held that it was necessary that such duty should be declared in the same act which is to be enforced. * * * The fact that the state officer, by virtue of his office, has some connection with the enforcement of the act, is the important and material fact, and whether it arises out of the general law, or is specifically created by the act itself, is not material so long as it exists." 209 U.S. at 157, 28 S.Ct. at 453.
Thus, it seems clear that in order to be a proper party the Attorney General must have some connection with the enforcement of Chapter 119. We find no merit in most of the bases put forward by plaintiff as grounds for establishing the attorney general's status as a party.[1]
However, we do find that such status is established pursuant to New York Executive Law § 63(12). That section provides:
"Whenever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply . . . for an order enjoining the continuance of such business activity." (emphasis supplied)
Thus, the Attorney General can affirmatively seek an injunction whenever a person engages in repeated illegal acts or otherwise demonstrates persistent illegality in the carrying on, conducting or transaction of business. If FNMA fails to comply with the provisions of Chapter 119, it would be engaging in such repeated and persistent violations of a statute. Chapter 119 places on plaintiff a continuing obligation to pay interest on its "escrow accounts". It should be noted that FNMA estimates that it holds about $5.6 million in "escrow accounts" established under 13,990 FHA-insured or VA guaranteed pre-August 10, 1970 mortgages, all secured by property in New York State. Since these mortgages have an average life of about twelve years, FNMA's liability if the rate set by the banking board were only two percent would be $112,000 per year, or over $1.3 million during the twelve year period. Failure to make such annual payments would clearly amount to the type of persistent, illegality which the State Attorney General could attempt to enjoin under § 63(12). Thus, the requirement of Ex Parte Young, supra, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 that there exist some connection with the enforcement of Chapter *1297 119 by virtue of the office held by the party defendant is met.
The Attorney General, in pressing his assertion that he lacks standing to enforce Chapter 119, relies heavily on Lefkowitz v. Parker (1972) 30 N.Y.2d 964, 335 N.Y.S.2d 827, 287 N.E.2d 618. In that case, the Attorney General had initiated suit pursuant to § 63(12) of the Executive Law to compel defendants engaged in the rental of housing accommodations to place security deposits of their tenants, which were received prior to September 1, 1970, in an interest-bearing bank account. The suit was based on an amendment to § 7-103 of the General Obligations Law, effective September 1, 1970, which provided in essence that security moneys received by the lessors of certain apartment units were to be deposited in interest-bearing accounts for the benefit of tenants. The defendants maintained that § 7-103 of the G.O.L. did not apply to moneys received before the effective date of the amendment. They did not challenge the validity of the statute as to deposits received after September 1. When the defendants failed to put the pre-September deposits in an interest-bearing account, the Attorney General brought suit, contending that such failure demonstrated persistent illegality within the purview and intent of § 63(12).
In a cryptic one-paragraph opinion [which relied on Matter of State of New York v. Parkchester Apts. Co. (1971) 28 N.Y.2d 842, 322 N.Y.S.2d 74, 270 N.E.2d 900] the Court of Appeals affirmed an Appellate Division decision which had reversed the trial court's decision in favor of the Attorney General. See, Lefkowitz v. Parker, 38 A.D.2d 542, 327 N.Y.S.2d 277, 67 Misc. 2d 36, 323 N.Y.S.2d 473. The affirmance was based explicitly "on the sole ground that the Attorney-General is without standing to maintain this proceeding under section 63 (subd. 12) of the Executive Law, Consol.Laws, c. 18." Lefkowitz v. Parker, supra, 30 N.Y.2d 964, 335 N.Y.S.2d 827, 287 N.E.2d 618.
Thus, based on Parker, the Attorney General argues that since he could not enforce rights stemming from a statute concerning security deposits involving private parties, he would not have enforcement authority in this suit which involves an analogous statute.
We must disagree with the Attorney General's interpretation of the Parker case. From a careful reading of the dissenting opinion as well as the two lower court opinions, it appears that the question upon which the decision turned was the narrow one whether the particular defendants then before the court had been engaged in "persistent" illegality.[2] The negative answer to that question as applied to defendants who conceded the application of the statute to their general activities, but merely challenged its allegedly retroactive application would not seem here determinative. Here the plaintiff, by bringing this action, has announced its intention to defy the statute in its entirety and utterly to ignore its mandate. Surely such defiance, if carried out, would constitute persistent conduct sufficient to trigger the Attorney General's § 63(12) obligation to enforce the law. Cf. Lefkowitz v. E. F. G. Baby Products Co. Inc. (3rd Dept., 1973) 40 A.D.2d 364, 340 N.Y.S.2d 39.
II. Motion to Dismiss as to the Governor
The Governor moves to dismiss because he has no specific enforcement *1298 authority with respect to Chapter 119. As stated above, a state officer is a proper defendant in a suit to enjoin the enforcement of a state statute only if he has "some connection with the enforcement of the act." Ex parte Young, supra, 209 U.S. 123, 28 S. Ct. 441.
The Governor of New York is charged by the state constitution with the duty to "take care that the laws are faithfully executed." N.Y.Const. Art. 4, § 3. As was decided in Socialist Workers Party v. Rockefeller (S.D.N.Y.1970) 314 F. Supp. 984, 988 n. 7 (three judge court), aff'd, 400 U.S. 806, 91 S. Ct. 65, 27 L. Ed. 2d 38, and Johnson v. Rockefeller (S.D.N.Y.1973) (Lasker, J.) 58 F.R.D. 42, this constitutional mandate, without more, provides a sufficient connection with the enforcement of the statute to make the Governor a proper defendant.[3]
Accordingly, defendants' motions to dismiss are denied, and plaintiff's motion for convening a three-judge district court is granted.
So ordered.
NOTES
[1] Standing cannot be justified in this case either under New York Executive Law § 71, McKinney's Consol.Laws, c. 18, or under § 63(1) of the Executive Law.
[2] The record of the Parker case at the Court of Appeals indicates that the landlords explicitly contended that there was lacking the requisite conduct which demonstrated persistent fraud or illegality. Point One of their brief was as follows:
"Section 63(12) of the Executive Law empowers the Attorney General to combat consumer frauds of a repetitious and persistent nature; it does not and was not intended to confer upon him the authority to compel the transfer of monies from a non-interest bearing trust account even if such transfer is required by statute."
[3] See also. Committee for Public Education & Religious Liberty v. Rockefeller (S.D.N. Y.1971) 322 F. Supp. 678, where Judge Lasker, while recognizing that the Governor could be a proper party, dismissed the complaint in the exercise of discretion. He found that full relief could be obtained against other named defendants in that case. Here, since the Attorney General is challenging this court's jurisdiction, it might well be prejudicial to the plaintiff to dismiss this action as to the Governor. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2253755/ | 858 F. Supp. 617 (1994)
DURHAM, INC. and Ronald C. Durham,
v.
VANGUARD BANK & TRUST COMPANY.
Civ. A. No. 94-650.
United States District Court, E.D. Louisiana.
June 28, 1994.
Carl W. Cleveland, Jean Paul Layrisson, Cleveland, Barrios, Kingsdorf & Casteix, New Orleans, LA, for plaintiffs.
Robin Bryan Cheatham, Philip Anthony Franco, Sean D. Moore, Adams & Reese, New Orleans, LA, for defendant.
PATRICK E. CARR, District Judge.
This matter is before the Court on defendant's motion to reconsider the Court's Minute Entry of May 18, 1994, denying defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), or for summary judgment. Determining in its discretion that oral argument is not necessary, the Court CANCELED the hearing previously scheduled, and considered the matter on the *618 memoranda. For the reasons that follow, the Court now GRANTS in part the motion to reconsider, and DENIES the motion to dismiss or for summary judgment.
BACKGROUND
In January of 1990, π (Durham) purchased "Randall Craft" in Pensacola, Fla., for $935,000. To finance the purchase, Durham executed a mortgage in favor of ?? (Vanguard) for slightly over $1 million. The mortgage covered movable and immovable properties owned by Durham located in Cantonment, Fla., and at 3101 Tulane Ave., New Orleans, plus an assignment of rents, leases and revenues on the Tulane Ave. property. Within six months, Durham's loan was delinquent. Ultimately, Durham filed suit for damages in Florida against Vanguard and others not material to this motion, alleging breach of fiduciary duty and tortious interference with a business contract. Vanguard counterclaimed against Durham to foreclose on the Florida property.
In January, 1991, Vanguard made demand on Durham by filing a Petition for Executory Process in Orleans Parish, to foreclose the mortgage on the Tulane Ave. property. The Florida lawsuit proceeded with a trial date set. In settlement of that lawsuit, a settlement agreement was entered into between Vanguard and Durham, which incorporated a resolution of all the issues between Vanguard and Durham, including Vanguard's suit against Durham in Louisiana. See πs' Opposition, ex. A. As part of that settlement agreement, Durham executed a quitclaim deed (i.e., dation en paiement, hereinafter "dation") in favor of Vanguard, on the Tulane Avenue property. Pursuant to the settlement agreement, Vanguard could only record the dation upon Durham's failure to pay Vanguard the sum of $246,091 by November 28, 1992. No payment was made to Vanguard, and Vanguard recorded the dation on February 4, 1993.
Durham subsequently filed suit against Vanguard in Louisiana state court alleging breach of contract, detrimental reliance, fraud, negligent misrepresentation, tortious conduct, tortious interference with contract and business relations, and unjust enrichment. According to Durham's complaint, after entering into the settlement agreement, he proceeded to attempt to find a buyer for the Tulane Avenue property, and during the process, he repeatedly received oral assurances from Vanguard's principals (a vice-president of the Bank and its attorney) that the redemption date would be extended, with the additional term that Durham would receive adequate notice of Vanguard's intent to record the dation, so he could close any transaction that he had in progress. Durham alleges that when Vanguard learned that a sale of the property for $525,000 to a buyer that he found was imminent, Vanguard recorded the dation without notice to him, and subsequently informed him that he could redeem the property for $500,000.
Vanguard removed the suit to this court, and moved to dismiss. The motion to dismiss was based entirely upon the applicability of La.Rev.Stat. § 6:1121, et seq.[1] Vanguard contends that the agreement at issue is a "credit agreement", and alleged oral modifications to a credit agreement are not enforceable under § 1122.[2] Furthermore, *619 according to Vanguard, it is a financial institution authorized to conduct business in the state pursuant to the statute because La.Rev. Stat. § 12:302[3] authorizes a foreign bank to conduct certain types of business in the state without being required to procure a certificate of authority to transact business in this state. See LSA-R.S. § 6:1121(4).
The Court denied the motion to dismiss, finding that Vanguard could not avail itself of the protection of LSA R.S. § 6:1121 et seq. because it was neither a "creditor" nor a financial institution authorized to transact business in the state within the meaning of the statute. Vanguard moved for reconsideration, and for summary judgment[4].
DISCUSSION
Strong policy considerations dictate that a motion to dismiss for failure to state a claim be viewed with disfavor. Kaiser Aluminum, Etc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982). In considering a motion to dismiss, the court must accept as true all well pleaded facts in the complaint, which is to be liberally construed in favor of the plaintiff; a court may dismiss a claim under Rule 12(b)(6) only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Id., (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957) (other citations omitted).
Chapter 16 of Title 6, entitled Credit AgreementsWriting Requirements, was adopted by the Louisiana legislature in 1989. There is scant jurisprudence interpreting the statute. No Louisiana court has addressed the question of whether a foreign bank doing business in Louisiana pursuant to LSA R.S. § 12:302 is also a financial institution authorized to do business pursuant to LSA R.S. § 6:1121(2) and (4). In the absence of controlling state precedent, the federal court must decide a case removed on diversity grounds as it believes the state's highest court would decide it. Green v. Amerada-Hess Corp., 612 F.2d 212, 214 (5th Cir.), cert. denied, 449 U.S. 952, 101 S. Ct. 356, 66 L. Ed. 2d 216 (1980); Balliache v. Fru-Con Const. Corp., 866 F.2d 798 (5th Cir.1989).
This matter is analogous to Gray and Company v. Stiles, 221 So. 2d 832 (La.App. 1 Cir.1969), a case not previously brought to the Court's attention. In Gray, surplus line insurance brokers sued the Administrator of Financial Responsibility Division of the Louisiana Department of Public Safety seeking to enjoin the defendant from refusing to accept certain policies as evidence of financial responsibility. It was the position of the defendant that R.S. § 32:872(C), enacted in 1968, forbade the acceptance of surplus line policies *620 as evidence of financial responsibility. The provision read as follows:
No such policy or bond shall be effective under this Section unless issued by an insurance company or surety company authorized to do business in the State of Louisiana....
Id. at 833.
The defendant took the position that the words "authorized to do business" as used in the Motor Vehicle Safety Responsibility Law were synonymous with the term "authorized" as applied to insurance companies which qualify under the Insurance Code, Title 22 of the Revised Statutes, either as domestic insurers or foreign insurers admitted to do business in the state. "Surplus line" insurance was regulated by the Insurance Code under the general heading of "Unauthorized Insurance" (R.S. § 22:1257 et seq.), and coverage could be written only if it was not obtainable from authorized insurers, and could be purchased only from licensed brokers. Therefore, according to the defendant, surplus line companies were "unauthorized companies" under the Insurance Code, and surplus line policies were not evidence of financial responsibility under the Motor Vehicle Safety Responsibility Law.
The trial court agreed with defendants and denied relief. The appellate court reversed, stating the issue as follows:
There can be no doubt that the surplus line insurers are `doing business' in this State. Neither can it be questioned that they are doing so under the authority of law. The question presented here is whether the word `authorized', as used in the Safety Responsibility Law refers to those companies to which the State has issued certificates of authority, or includes all companies permitted by law to do business in the State.
Id. The appellate court concluded that
"the better interpretation of the law is the one which harmonizes two section of the law rather than finds them repugnant,.... We find that surplus line companies are authorized to do business in Louisiana within the meaning of that phrase as contained in the Motor Vehicle Safety Responsibility Law."
Id. at 834.
In support of its motion, Vanguard offered affidavits of Fox McKeithen, Secretary of State for the State of Louisiana, and Larry Murray, Commissioner of the Office of Financial Institutions of the State of Louisiana. Mr. McKeithen attested that a foreign corporation not domiciled in the State is not required to obtain a certificate of authority from that office when it obtains a security interest in real property situated within the State as collateral for a loan initiated outside the State, when it sues or defends itself in a lawsuit, or when it obtains the property by deed in lieu of foreclosure or by dation en paiement. Mr. Murray testified that under those circumstances, a bank or other financial institution is authorized to transact business in the State of Louisiana and is not required to obtain any certificate, or other authority to transact business, from the Office of Financial Institutions in the State of Louisiana. See Vanguard's memorandum in support of Motion for Reconsideration, Exs. "C" and "D".
The Court concludes that the better interpretation of LSA R.S. § 6:1121 et seq., and the interpretation that a Louisiana state court would reach, is that a financial institution authorized to transact business in the state pursuant to LSA R.S. § 12:302 is also authorized to transact business in the state within the meaning of LSA R.S. § 6:1121 et seq. This, however, does not change the ultimate result, because the court concludes that the agreement at issue is not a credit agreement within the meaning of the statute.
The crux of the matter is whether the disputed agreement should be construed as a "settlement agreement" or a "credit agreement". Section 1121 defines a "credit agreement" as "an agreement to lend or forbear repayment of money or goods or to otherwise extend credit, or make any other financial accommodation." LSA-R.S. § 6:1121(1) (West Supp.1994). Section 1123 prohibits causes of action arising from an alleged oral credit agreement.
*621 A transaction of compromise is agreement between two or more parties to adjust their differences by mutual consent to prevent or put an end to a lawsuit. Clark v. Ark-La-Tex Auction, Inc., 593 So. 2d 870 (La.App. 2 Cir.1992), writ denied, 596 So. 2d 210. Public policy considerations favor compromise and settlement of lawsuits. Daigle v. Clemco Industries, 593 So. 2d 1282 (La. App. 1 Cir.1991), aff'd, 613 So. 2d 619 (La. 1993). Louisiana law regards a compromise or a settlement of a lawsuit as a contract. La.C.C. Art. 3071; TechniCAL, Inc. v. Allpax Products, Inc. 786 F. Supp. 581, 585 (E.D.La.1992) (citing Parich v. State Farm Mutual Ins. Co., 919 F.2d 906, 913 (5th Cir.1990), cert. denied, 499 U.S. 976, 111 S. Ct. 1621, 113 L. Ed. 2d 719 (1991)), aff'd, 977 F.2d 578 (5th Cir.1992). In Louisiana, written contracts can be modified by oral contracts and the conduct of the parties, even if the contract contains a provision that it can be modified only in writing. Pelican Electrical Contractors v. Neumeyer, 419 So. 2d 1, 5 (La.App. 4 Cir.1982) writ denied, 423 So. 2d 1150 (La.1982).
By its terms, the agreement at issue does fall within the scope of the definition of "credit agreement" in § 1121(1) as Vanguard does agree to "forbear the repayment of money". However, it also constitutes a compromise entered into by consent of the parties to settle a lawsuit. The agreement was confected in settlement of both the Florida lawsuit and Vanguard's foreclosure action brought in Louisiana. Because the underlying purpose of the comprehensive agreement was to compromise and settle all issues included in two lawsuits between the parties, and not specifically to extend credit to Durham, the Court concludes that the agreement at issue is a settlement agreement, not a credit agreement. Vanguard has not met its heavy burden to justify dismissal pursuant to Rule 12(b)(6) or summary judgment. Accordingly,
IT IS ORDERED that Vanguard's motion for reconsideration by GRANTED to the extent that the Court's Minute Entry dated May 18, 1994, be and is hereby VACATED, and
IT IS FURTHER ORDERED that Vanguard's motion to dismiss or for summary judgment be and is hereby DENIED.
NOTES
[1] Neither party has raised a choice of law issue, both apparently assuming that Louisiana law applies. Florida has adopted statute almost identical to LSA R.S. 6:1121 et seq., Fla.Stat.Ann. § 687.0304.
[2] § 1121. Definitions
For purposes of this Chapter, the following terms shall have the following meanings:
(1) "Credit agreement" means an agreement to lend or forbear repayment of money or goods or to otherwise extend credit, or make any other financial accommodation.
(2) "Creditor" means a financial institution or any other type of creditor that extends credit or extends financial accommodation under a credit agreement with a debtor.
(3) "Debtor" means a person or entity that obtains credit or seeks a credit agreement with a creditor or who owes money to a creditor.
(4) "Financial institution" means a bank, savings and loan association, savings banks, or credit union authorized to transact business in this state.
§ 1122. Credit agreements to be in writing
A debtor shall not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.
LSA-R.S. §§ 6:1121 and 1122 (West Supp.1994).
[3] Louisiana Revised Statutes Title 12 is Corporation Law. Chapter 3 (sections 301 et seq.) is entitled Foreign Corporation Law. The pertinent sections are as follows:
§ 320. Acts not considered transacting business
Without excluding other activities which may not constitute transacting business in this state, a foreign corporation or a business association shall not be considered to be transacting business in this state, for the purpose of being required to procure a certificate of authority pursuant to R.S. 12:301, by reason of carrying on in this state any one or more of the following activities:
A. Maintaining or defending any action or suit, or any administrative or arbitration proceeding, or affecting the settlement of claims or disputes.
* * * * * *
K. If the foreign corporation is a ..., bank or trust company organized under the laws of any state of the United States of America ...:
(4) Acquiring immovable property securing such loans under foreclosure sale or in lieu of foreclosure, and managing, operating, leasing, selling or otherwise disposing of such property.
* * * * * *
(6) Owning, modifying, renewing, extending, transferring or foreclosing on such loans, mortgages or mortgage notes, or accepting substitute or additional obligors thereon.
[4] When the Court considers evidence outside of the pleadings on a motion to dismiss pursuant to F.R.C.P. 12(b)(6), the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. F.R.C.P. 12(c). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3102338/ | NUMBER 13-11-00280-CR
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
____________________________________________________________
CLIFTON KEENE, Appellant,
v.
THE STATE OF TEXAS, Appellee.
____________________________________________________________
On appeal from the 105th District Court
of Nueces County, Texas.
____________________________________________________________
MEMORANDUM OPINION
Before Justices Benavides, Vela, and Perkes
Memorandum Opinion Per Curiam
Appellant, Clifton Keene, by and through his attorney, has filed a motion to dismiss
his appeal because he no longer desires to prosecute it. See TEX. R. APP. P. 42.2(a).
Without passing on the merits of the case, we grant the motion to dismiss pursuant to
Texas Rule of Appellate Procedure 42.2(a) and dismiss the appeal. Having dismissed
the appeal at appellant's request, no motion for rehearing will be entertained, and our
mandate will issue forthwith.
PER CURIAM
Do not publish. See TEX. R. APP. P. 47.2(b).
Delivered and filed the
4th day of August, 2011.
2 | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2420529/ | 988 S.W.2d 223 (1999)
COASTAL MARINE SERVICE OF TEXAS, INCORPORATED, Petitioner,
v.
Martha LAWRENCE, individually and as dependent administratrix of The Estate of John Ray Lawrence, deceased and John Roy Lawrence, Respondents.
No. 98-0287.
Supreme Court of Texas.
April 29, 1999.
Rehearing Overruled April 29, 1999.
*224 PER CURIAM.
The issue in this case is whether an independent contractor's willingness to follow a premises owner's instructions, though no such instructions were given, is legally sufficient evidence of the premises owner's "right to control" in a premises liability case. The court of appeals held that it was.[1] We hold that it was not.
On September 20, 1994, John Ray Lawrence, an employee of H.W. Campbell Construction Company, was killed when his head was crushed in the "pinch point" area of a crane. Coastal Marine Services of Texas, Inc. owned the crane, and Campbell employees were using it to offload skids on Coastal's property when the accident occurred. Campbell took custody of the crane and began continued occupation of Coastal's property in 1992. Campbell was an independent contractor of Coastal, and no written contract existed between the two companies. *225 Coastal employees were not directing or supervising Campbell's work on the project, nor were they on the job site when the accident occurred.
Lawrence's surviving family and estate (the "Lawrences") sued Campbell and Coastal alleging negligence, negligence per se, and gross negligence. During trial Coastal timely moved for a partial directed verdict. Coastal asserted that the Lawrences had presented no evidence that Coastal retained the right to control Campbell's work, a prerequisite for finding Coastal liable under a premises liability theory. The trial court granted Coastal's motion, and then submitted an instruction that precluded a finding of negligence based on the manner in which Coastal controlled the premises.[2] A broad form negligence question was submitted with the jury charge. The jury found no negligence on Coastal's part, and the trial court entered a take-nothing judgment.
At trial, in response to a series of hypothetical questions, Campbell employees testified that they would have complied with any instructions from Coastal about the movement of the crane if Coastal had given such instructions. Based on the Campbell employees' testimony, the court of appeals reversed the trial court's judgment, concluding that the testimony created a fact issue about Coastal's right to control the crane.[3] We disagree.
In this case, the Lawrences assert that liability arose from a premises defect. Under the premises defect theory of premises liability there are two subcategories: (1) defects existing on the premises when the independent contractor/invitee entered; and (2) defects the independent contractor created by its work activity.[4]
Under the first subcategory, the premises owner has a duty to inspect the premises and warn the independent contractor/invitee of dangerous conditions that are not open and obvious and that the owner knows or should have known exist.[5] As we explained in Shell Chemical Company v. Lamb, 493 S.W.2d 742 (Tex. 1973), premises defects of this type are ones "in which the danger did not arise through the work activity of the subcontractor/invitee."[6] Only concealed hazardsdangerous in their own right and independent of action by anotherthat are in existence when the independent contractor enters the premises fall into this first subcategory of premises defects. For example, in Smith v. Henger, 226 S.W.2d 425, 148 Tex. 456 (1950), we held that an open shaft, with inadequate warnings, in existence when contractors entered a property was such a defect.[7] The pinch point area on Coastal's crane, however, posed no danger until Campbell put the crane into operation. Therefore this case must be considered under the second premises defect subcategory.
Under the second subcategory when the dangerous condition arises as a result of the independent contractor's work activitythe premises owner normally owes no duty to the independent contractor's employees because an owner generally has no duty to ensure that an independent contractor performs its work in a safe manner.[8] However, a premises owner may be liable when the owner retains the right of supervisory *226 control over work on the premises.[9] In determining whether an owner has retained this right to control, the standard is narrow. The right to control must be more than a general right to order work to stop and start, or to inspect progress.[10] The supervisory control must relate to the activity that actually caused the injury, and grant the owner at least the power to direct the order in which work is to be done or the power to forbid it being done in an unsafe manner.[11]
Our most recent writing on this issue makes clear that a party can prove the "right to control" in two ways: first, by evidence of a contractual agreement which explicitly assigns the premises owner a right to control; and second, in the absence of a contractual agreement, by evidence that the premises owner actually exercised control over the job.[12] Here, no contractual agreement assigning control rights existed between Coastal and Campbell, and no Coastal employees were directing work on the job site when the accident occurred or at any other time. Instead, the Lawrences showed only that Campbell employees would have taken direction from Coastal if any had been offered. A possibility of control is not evidence of a "right to control" actually retained or exercised.
Accordingly, without hearing oral argument,[13] we reverse the court of appeals' judgment and render judgment that the Lawrences take nothing.
NOTES
[1] 983 S.W.2d 757. The court of appeals' opinion also considered an alleged jury charge error. Id. at 761-62. That issue is not before us, and we express no opinion on it.
[2] The relevant portion of the instruction reads:
In determining the negligence or gross negligence, if any, of Coastal Marine Service of Texas, Inc., you are instructed that such negligence or gross negligence must relate to the crane in question. As the premises owner, Coastal Marine Service of Texas, Inc. was not subject to any OSHA regulations as they pertain to the premises or safe operation of the project. Further, as the premises owner, Coastal Marine Service of Texas, Inc. had no duty to see that the H.W. Campbell Construction Company or its employees performed the work in a safe fashion.
[3] 983 S.W.2d at 761.
[4] See Clayton W. Williams, Jr., Inc. v. Olivo, 952 S.W.2d 523, 527 (Tex.1997).
[5] See Olivo, 952 S.W.2d at 527-28; Shell Chem. Co. v. Lamb, 493 S.W.2d 742, 746-47 (Tex.1973).
[6] 493 S.W.2d at 746 (citing Smith v. Henger, 148 Tex. 456, 226 S.W.2d 425 (1950)).
[7] 226 S.W.2d at 431-33.
[8] See Olivo, 952 S.W.2d at 527-28; Abalos v. Oil Dev. Co., 544 S.W.2d 627, 631-32 (Tex.1976).
[9] See Olivo, 952 S.W.2d at 528; Lamb, 493 S.W.2d at 747-48.
[10] See Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex.1985).
[11] See Olivo, 952 S.W.2d at 528; Exxon Corp. v. Tidwell, 867 S.W.2d 19, 23 (Tex.1993); Redinger, 689 S.W.2d at 418.
[12] See Olivo, 952 S.W.2d at 528; see also Redinger, 689 S.W.2d at 418.
[13] See TEX.R.APP. P. 59.1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2902766/ | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
BRUCE W. LEE,
Appellant,
v.
ELAINE FLORES LEE,
Appellee.
§
§
§
§
§
§
No. 08-05-00181-CV
Appeal from
383rd District Court
of El Paso County, Texas
(TC # 99CM2045)
O P I N I O N
Bruce W. Lee appeals from an order clarifying the terms of a previous decree of divorce. The
issue is whether the decree constitutes a child support order subject to clarification pursuant to
Tex.Fam.Code Ann. § 157.421 (Vernon 2002). Finding no error, we affirm.
FACTUAL SUMMARY
Bruce and Elaine Lee were divorced on June 11, 1999. Three children were born during
marriage. With regard to child support, the decree provides:
The parties have agreed that joint custody is appropriate in this case and that Bruce
W. Lee shall be the primary custodial parent of Robert James Lee and Elaine Omine
Flores Lee shall be the primary custodial parent of Christopher Allen Lee and
Michael Zachary Lee. The parties have agreed that Bruce W. Lee shall pay Elaine
Omine Flores Lee the sum of $500.00 per month child support for Christopher Allen
Lee and $500.00 per month child support for Michael Zachary Lee for a total of
$1,000.00 per month child support commencing on June 1, 1999.
Having considered the circumstances of the parties and of the children, the Court
finds that the arrangements agreed to by the parties are in the best interest of the
children and of each other.
It is Ordered and decreed that Petitioner and Respondent shall execute all instruments
necessary to effect this decree and that Petitioner and Respondent have all
appropriate and necessary writs, execution, and process, as many and as often as is
necessary, to accomplish the execution and final disposition of this judgment.
Elaine ultimately sought clarification and enforcement of the child support provisions. The trial
court clarified the decree by deleting the italicized language and substituting the following:
IT IS ORDERED AND DIRECTED that BRUCE W. LEE is obligated to pay and
shall pay to ELAINE OMINE FLORES LEE child support of $1,000.00 per month,
with the first payment being due and payable on June 1, 1999 and a like payment
being due and payable on the first day of each month thereafter until the first month
following the date of the earlier occurrence of one of the events specified below:
1. either child reaches the age of eighteen years, provided that, if the child is fully
enrolled in an accredited secondary school in a program leading toward a high school
diploma, the periodic child-support payments shall continue to be due and paid until
the end of the month in which the child graduates;
2. either child marries;
3. either child dies;
4. either child’s disabilities are otherwise removed for general purposes; or
5. further order modifying this child support.
Thereafter, IT IS ORDERED AND DIRECTED that BRUCE W. LEE is obligated
to pay and shall pay ELAINE OMINE FLORES LEE child support of $500.00 per
month, with the first payment being due and payable on the first day of the month
after the next occurrence of any of the events set forth above and a like payment
being due and payable on the first day of each month thereafter until the first month
following the date of the second occurrence of one of the events specified above.
FRAMING THE ISSUE
In a single issue for review, Bruce argues that the child support language in the decree was
merely an agreement and not a court order. He contends that the clarification turned an agreement
to pay child support into court-ordered child support payments. He offers two arguments in support
of this theory. First, the court may only clarify a prior court order, not a contractual agreement.
Second, the clarification here constitutes an impermissible substantive change. See Tex.Fam.Code
Ann. § 157.423. Elaine counters that the decree contained directive language allowing the parties
to pursue all appropriate and necessary process to effectuate the decree. Given this language, she
maintains that the decree constitutes a valid child support order, albeit one that is unenforceable. We
agree.
THE CLARIFICATION REMEDY
A court may clarify a prior order if it finds, on the motion of a party or on the court’s own
motion, that the order is not specific enough to be enforceable by contempt. See Tex.Fam.Code
Ann. § 157.421. The parties stipulated below that the decree is not enforceable. However, a trial
court is prohibited from substantively changing the provisions of an earlier order with a clarification
order. See Tex.Fam.Code Ann. § 157.423. Once upon a time, an attempt to impose a specific
obligation to pay where no such obligation had previously existed was an unlawful substantive
change, not a mere clarification or correction of a clerical error. McGehee v. Epley, 661 S.W.2d 924,
925-26 (Tex. 1983). Statutory changes have intervened, allowing a trial court to clarify a prior order
so that it will be enforceable. Clarification orders were added to Title I of the Family Code in 1983.
See Dechon v. Dechon, 909 S.W.2d 950, 958 (Tex.App.--El Paso 1995, no writ). The remedy was
added to what is now Title V in 1995. While Dechon involved the clarification of a property
division, the same principles apply to clarification of child support. A common error in the drafting
of orders is the absence of language ordering a party to act. Absent that specific magic language, an
order is not capable of enforcement by contempt. Id. Although McGehee holds that ordering a
spouse to pay where no prior obligation existed amounts to a substantive change in the decree, the
subsequent statutory scheme for enforcement is pointless if the court lacks the ability to clarify the
order so as to render it capable of enforcement through contempt. Thus, we do not view Subchapter
I of Title 5 as preventing the type of clarification which occurred below. We caution, however, that
the clarification order is not subject to enforcement by contempt retroactively. Tex.Fam.Code Ann.
§ 157.425.
Nor are we persuaded by Bruce’s argument that Elaine has a remedy through a breach of
contract action. The Family Code forbids such recovery. Terms of an agreement pertaining to child
support in the order may be enforced by all remedies available for enforcement of a judgment,
including contempt, but are not enforceable as a contract. Tex.Fam.Code Ann. § 154.124(c).
(Vernon Supp. 2006). We overrule the sole point and affirm the judgment of the trial court.
January 25, 2007
ANN CRAWFORD McCLURE, Justice
Before Chew, C.J., McClure, and Barajas, C.J. (Ret.)
Barajas, C.J. (Ret.), sitting by assignment, not participating | 01-03-2023 | 09-09-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1894286/ | (2008)
Stephen C. YOUNG, Plaintiff
v.
CITY OF RADCLIFF, et. al., Defendants.
Civil Action No. 3:06-CV-656-H.
United States District Court, W.D. Kentucky, Louisville Division.
May 22, 2008.
MEMORANDUM OPINION
JOHN G. HEYBURN, II, Chief Judge.
Plaintiff Stephen C. Young ("Young") has brought a 42 U.S.C. § 1983 claim alleging that Defendants violated his Fourth, Fifth, and Fourteenth Amendment rights by their actions in connection with a shooting and arrest which occurred at Young's residence (Count I). Young also brings various state law claims, including violation of Ky.Rev.Stat. Ann. § 344 (Kentucky Civil Rights Act), false arrest/false imprisonment (Count IV), assault (Count V), battery (Count VI), intentional infliction of emotional distress (Count VII), and outrageous conduct (Count VIII). There are two groups of Defendants: City of Radcliff and City of Radcliff Police Officer Tucker Raifsnider ("Raifsnider") and Kentucky State Police Troopers James Kevin Burton ("Burton") and Steven Eric Smallwood ("Smallwood") (collectively "Defendants").[1] Both groups of Defendants have moved for summary judgment and their arguments partially overlap.
This is a difficult and unfortunate case. Young was wrongly targeted as a suspect in a shoplifting with which he had no connection whatsoever. The police officers conducted an unusual "knock and talk" which included sending some officers to the rear of Young's property. Those officers observed that Young was armed with a .45 caliber automatic pistol in a holster. This concerned the officers who tried to alert their fellow officers at the front door. The resulting ruckus alarmed Young who appeared at his backdoor, and then drew his pistol. The combination of these misjudgements and confusion led to Young's shooting and arrest.
Certainly, these events should never have occurred. Indeed, Young believes that he should never have been charged with a crime because he did not intend to draw a gun on police, but only upon suspected intruders. Nevertheless, he was charged with two felonies, which were later reduced to misdemeanor charges. A Hardin Circuit Court jury found Young guilty of criminal menacing, which is a misdemeanor.
It is not easy to apply formal constitutional strictures to misjudgments piled onto mistakes combined with the unpredictability of split-second human reactions. Whether our rules of law are capable of untangling these conflicting rights, much less provide Young some satisfaction, is the subject of this Memorandum Opinion. Young's civil complaint attempts to redress all of the perceived wrongs. The Court must confess that its analysis leads to conclusions which conflict with the natural impulse to cooperate in that effort.
I.
The relevant evidence of these undeniably unfortunate events stated most favorably to Young follows.
On the evening of December 4, 2005 a shoplifting of approximately sixty to seventy dollars occurred at the Wal-Mart in Radcliff. Young was neither at the Wal-Mart nor in any way involved with the shoplifting. However, his specialty license plate bore the same number as that of the vehicle driven by the shoplifters (but whose license plate had a different background picture). Consequently, the Radcliff police identified Young's vehicle through a vehicle license plate database search. Young's vehicle information was reported to Raifsnider, who had responded to the initial shoplifting report from Wal-Mart. Raifsnider requested that the Kentucky State Police verify that the vehicle was at the address to which it was registered, and Smallwood, who was driving a marked Kentucky State Police cruiser at the time, confirmed that it was.
After obtaining consent from his supervisor, Raifsnider, without a search or arrest warrant, proceeded to Young's residence where he "intended to conduct . . . an investigative technique called a `knock-and-talk,' and ask questions, for instance about whether [the suspect] had been in Radcliff that night . . ." Mot. for Summ J. 3. Smallwood, Burton and two deputies from the Hardin County Sheriff Department[2] met Raifsnider at Young's residence at around 11:30 p.m. The Defendants pulled into Young's driveway with their headlights turned off.
Young was at home in his kitchen awaiting his wife's return from work. Young was armed with a handgun in a holster on his right hip. Raifsnider and one of the deputies approached the front door of Young's residence while Smallwood and Burton went to the rear of the residence and stood outside a fence located approximately 15-20 feet from Young's back door. Raifsnider knocked on the front door twice. Young, who is hearing impaired and who may have been distracted by a television, did not hear the knock.
Very near the time that Raifsnider was knocking, Burton looked through Young's glass back door and observed him inside his home with a pistol on his hip holster, which he had a perfect right to possess. Burton yelled to notify the other officers that Young was armed. Burton and Smallwood's Mot. for Summ. J. 7. Plaintiff, hearing the noise from his back yard went to the rear of his home, opened the back door and asked who was there. Burton identified himself as "State Police" and shouted statements to the effect of "put your hands up" and "don't touch the gun." Id. at 8. Young did not respond to the commands, which he says, were "distorted by his hearing impairment."
Young, apparently concerned about unidentified persons in his back yard, reached for his gun. Burton says that upon seeing Young draw his gun, and because Young had not responded to Burton's yelled commands, Burton fired a total of six rounds, one of which hit Young in the forearm. Young says that he was in the process of retreating from the back door to go inside and call 911 when he was shot. After he was shot, Young appeared with his hands up and then crawled onto the back porch and was handcuffed by one of the Hardin County deputies and was placed into custody. Young consented to a search of his home.
After Emergency Medical technicians arrived, Young requested that he not be transported to the hospital until his wife arrived home from work so that he could let her know he was okay. Young alleges that someone he could only identify as "a captain" responded, with explicatives, "[i]f you don't get in the ambulance, I am going to hog tie [you] and throw you on the floorboard of the cruiser." Young was treated for his injuries at the hospital. In his pleadings, but without reference to supporting evidence, Young says that it is "undisputed" that he was "h[eld] for hours in uncomfortable positions" and "kept in painful handcuffs for several hours" and "questioned late into the night" and subject to unspecified "dehumanizing acts." Resp. to Burton and Smallwood's Mot. for Summ. J. 8, 11.
The Kentucky State Police charged Young with two felony counts of wanton endangerment, charges Young says were reported to local news media. The prosecutor later reduced the charges to misdemeanor counts of menacing. "A person is guilty of menacing when he intentionally places another person in reasonable apprehension of imminent physical injury." Ky. Rev.Stat. Ann. § 508.050(1). Young was found guilty of menacing Burton. He was not charged a fine or sentenced to any time in jail in connection with his conviction. The jury found that Young was not guilty of menacing Smallwood.
II.
Defendants have moved for summary judgment under Fed.R.Civ.P. 56. The Court will grant a motion for summary judgment if the evidence submitted shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)(citing Fed.R.Civ.P. 56(c)). In applying Rule 56(c), a court views the evidence in a light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). A court properly enters summary judgment where there is not sufficient evidence in support of the non-movant's case upon which "a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
III.
As a threshold matter, the Court considers how Young's state court conviction of criminal menacing Burton affects various aspects of Young's § 1983 claim. The jury instructions in that trial required a "not guilty" verdict in a variety of circumstances: where Young had reason to believe that his actions were "necessary in order to protect himself from physical force by Burton, or "immediately necessary to prevent the commission of criminal trespass upon real property in his possession," or "immediately necessary to prevent burglary of his dwelling," or if Young had "reasonably believed that [ ] Burton was not a peace officer and posed a threat to his person or property."
Burton argues that Young's conviction bars Young's § 1983 claim relating to Burton's use of force (specifically the shooting) during Young's arrest. See Heck v. Humphrey, 512 U.S. 477, 486-87, 114 S.Ct. 2364, 129 L.Ed.2d 383 (1994) (where the Supreme Court held that a prior state court conviction may bar § 1983 claims which would label the conviction invalid). However, a Sixth Circuit panel recently held that the Heck bar does not apply where a plaintiff had not had an opportunity to vindicate his federal rights through a habeas action. See, e.g. Powers v. Hamilton County Public Defender Com'n, 501 F.3d 592, 603 (6th Cir.2007). The Court need not determine whether the Powers exception applies because the separate state law doctrine of res judicata seems a more appropriate fit. As the Supreme Court acknowledged in Heck, res judicata is a separate issue from the cognizability of § 1983 claims, and "the res judicata effect of state-court decisions in § 1983 actions is a matter of state law." Id. at 480 n. 2, 114 S.Ct. 2364 (citing Migra v. Warren City School Dist. Bd. of Ed., 465 U.S. 75, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984)).
"Under Kentucky law, res judicata, or claim preclusion, `may be used to preclude entire claims that were brought or should have been brought in a prior action, while the doctrine of collateral estoppel [or issue preclusion] only applies to issues actually litigated.'" Donovan v. Thames, 105 F.3d 291 (6th Cir.1997)(quoting City of Covington v. Board of Trustees of Policemen's and Firefighters' Retirement Fund. 903 S.W.2d 517, 521 (Ky. 1995)). Issue preclusion, or here non-mutual collateral estoppel, may also apply against a party to a prior suit even though the parties in the subsequent law suit are not identical to the parties in the prior action. City of Covington, 903 S.W.2d at 522 (citing Sedley v. City of West Buechel, 461 S.W.2d 556 (Ky.1970)). However, preclusion must be "based on rules of justice and fairness" rather than "an automatic imposition of a doctrine." City of Covington, 903 S.W.2d at 522. The Kentucky Court of Appeals has held that "under proper circumstances, a criminal conviction may be used for purposes of collateral estoppel in later civil proceedings." Gossage v. Roberts, 904 S.W.2d 246, 248 (Ky. Ct.App.1995) (citing Roberts v. Wilcox, 805 S.W.2d 152 (Ky.Ct.App.1991)). The Gossage court summarized Kentucky law on issue preclusion thusly:
The general rule is that a judgment in a former action operates as an estoppel only as to matters which were necessarily involved and determined in the former action, and is not conclusive as to matters which were immaterial or unessential to the determination of the prior action or which were not necessary to uphold the judgment.
904 S.W.2d at 248-49 (quoting Sedley, 461 S.W.2d at 558-59).
The difficult task here is to apply Kentucky's res judicata doctrine to various aspects of Young's § 1983 claim.
A.
The use of deadly force is only constitutionally reasonable if "the officer has probable cause to believe that the suspect poses a threat of serious physical harm, either to the officer or others." Sigley v. City of Parma Heights, 437 F.3d 527 (6th Cir.2006)(quoting Tennessee v. Garner, 471 U.S. 1, 11, 105 S.Ct. 1694, 85 L.Ed.2d 1 (1985)). "The `reasonableness' of a particular use of force must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight." Graham v. Connor, 490 U.S. 386, 396, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). Further, "the calculus of reasonableness must embody allowance for the fact that police officers are often forced to make split-second judgments-in circumstances that are tense, uncertain, and rapidly evolving-about the amount of force that is necessary in a particular situation." Id. at 396-97, 109 S.Ct. 1865.[3] Young's conviction for menacing means that a jury has already determined beyond a reasonable doubt that Burton was in reasonable apprehension of imminent physical injury from Young and his handgun. For Young to argue that Burton lacked probable cause to believe that Young posed a threat of serious physical harm, is completely contrary to this jury determination. Moreover, the court specifically instructed the jury as to the affirmative defenses of self-protection, protection of property and mistake of fact.
Undoubtedly, Young would believe that such a result compounds an already unjust series of events. However, this Court cannot undo or ignore the result in Hardin Circuit Court even though those not present may find it difficult to comprehend. These issues were actually litigated and the jury determined these facts adversely to Young. Kentucky's res judicata doctrine requires this Court to respect that verdict by precluding Young from contesting these facts again here.[4]
B.
An arrest without probable cause violates the Fourth Amendment. Donovan, 105 F.3d at 297 (citing Beck v. Ohio, 379 U.S. 89, 85 S.Ct. 223, 13 L.Ed.2d 142 (1964)). "The Supreme Court has held that the test for whether an arrest is constitutionally valid is ^whether, at the moment the arrest was made, the officers had probable cause to make it-whether at that moment the facts and circumstances within their knowledge and of which they had reasonably trustworthy information were sufficient to warrant a prudent man in believing that the petitioner had committed or was committing an offense.'" United States v. Dotson, 49 F.3d 227, 229 (6th Cir.1995) (quoting Beck, 379 U.S. at 91, 85 S.Ct. 223). Therefore, Young's menacing conviction precludes him from arguing that the officers who seized him lacked a reasonable belief that Young had committed or was committing an offense. In other words, he is barred from now denying that he engaged in intentional criminal conduct. See Gossage, 904 S.W.2d 246.
C.
Finally, Young's seizure claim requires two results. Young's menacing conviction does not preclude his pursuit of damages for any Fourth Amendment violation that occurred prior to the time his actions placed Burton in "reasonable apprehension of imminent physical injury."[5] Young claims that the Defendants seized him without lawful cause. Compl. ¶ 1. To the extent that Young alleges that an unreasonable seizure occurred after Young menaced Burton, however, his claim is barred by res judicata because Young's conviction establishes that Young intentionally placed Burton in reasonable apprehension of imminent physical injury by reaching for and/or drawing a firearm.
IV.
The Court now turns to Young's Fourth Amendment claims which involve events that occurred prior to Young's menacing and which collateral estoppel does not bar. Defendants have asserted the defense of qualified immunity.[6] Though the Sixth Circuit has struggled mightily to clarify it, qualified immunity remains a difficult concept to apply. The Sixth Circuit recently summarized the qualified immunity analysis:
Qualified immunity is an affirmative defense that shields government officials from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known. There are two steps in the analysis: (1) whether, considering the allegations in a light most favorable to the party injured, a constitutional right has been violated, and (2) whether that right was clearly established . . . When considering a claim of qualified immunity, "[t]he relevant, dispositive inquiry in determining whether a right is clearly established is whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted."
King v. Ambs, 519 F.3d 607, 610 (6th Cir.2008)(quoting Saucier v. Katz, 533 U.S. 194, 202, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001)) (other internal quotations omitted).[7] Specifically, Defendants argue that "a reasonable officer would not have been on notice . . . that it is a violation of the Fourth Amendment to walk around to the rear of a shoplifting suspect's residence in a rural area while remaining outside a fenced enclosure . . . especially where, as here, the officers [were] not on a quest for evidence but [were] merely observing to see if anyone exits the residence while another officer knocks at the front door." Reply 6.
The Court begins the analysis by determining whether constitutional violations have occurred. Defendants arrived at Young's residence without a search or arrest warrant. Raifsnider says that he intended to initiate a consensual encounter with Young based on the license plate match. Burton and Smallwood say that they intended to "provide assistance" while "operating under the good faith assessment that they were assisting in a criminal investigation at a residence where a vehicle allegedly involved in a recent shoplifting incident had been located." Reply 2-4. The undisputed evidence indicates that Burton and Smallwood went to the back of the house where they were able to see inside Young's residence from their vantage point fifteen to twenty feet from his glass back doors. In a number of ways Defendants' conduct here could amount to a Fourth Amendment violation resulting from either an unreasonable search or seizure. The Court will consider each one.
A.
The Court first considers Young's § 1983 claim to the extent that it can be construed as asserting a Fourth Amendment violation resulting from an unreasonable search. "It is a `basic principle of Fourth Amendment law' that searches and seizures inside a home without a warrant are presumptively unreasonable." Payton v. New York, 445 U.S. 573, 586, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980). In general, an unreasonable search is defined in terms of a person's "reasonable expectation of privacy" and is analyzed under a two-part test. Widgren v. Maple Grove Tp., 429 F.3d 575, 578 (6th Cir.2005)(citing Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967)). First, "has the individual manifested a subjective expectation of privacy in the object of the challenged search?" and (2) "is society willing to recognize that expectation as reasonable?" Widgren, 429 F.3d at 578 (quoting California v. Ciraolo, 476 U.S. 207, 211, 106 S.Ct. 1809, 90 L.Ed.2d 210 (1986)). "Assessing the degree of intrusion requires addressing both the methods used and the purpose for the intrusion." Id. at 583.
"A criminal investigation is generally more intrusive than an administrative or regulatory investigation." Id. Generally, a search involves looking "over or through for the purposes of finding something," Kyllo, 533 U.S. 27, 33 n. 1, 121 S.Ct. 2038, 150 L.Ed.2d 94 (2001), although "a search may occur even where the officer was not intentionally looking for something, so long as the `objective effect of his actions' infringed on a reasonable expectation of privacy." Widgren, 429 F.3d at 580 (quoting United States v. Maple, 348 F.3d 260, 263 (D.C.Cir.2003)). The Sixth Circuit has also described a search to imply "an examination of one's premises or person with a view to the discovery of contraband or evidence of guilt to be used in prosecution of a criminal action." Taylor v. Michigan Dept. of Nat. Res., 502 F.3d 452, 457 (6th Cir.2007)(quoting United States v. Blackburn, 389 F.2d 93, 95 (6th Cir.1968)).
Fourth Amendment protections hinge on the occurrence of a search. Burton and Smallwood argue that because they were "merely observing to see if anyone exited the rear of the residence" (as opposed to a "quest for evidence") and because they did not enter the fenced perimeter of Young's backyard, they were not engaged in a search for purposes of the Fourth Amendment. However, the subjective intent of the officers is impossible to discern and irrelevant to determining whether their actions amount to a search. See Taylor, 502 F.3d at 457 (6th Cir.2007)(citing Bond v. United States, 529 U.S. 334, 339 n. 2, 120 S.Ct. 1462, 146 L.Ed.2d 365 (2000)). The Court concludes that what Burton and Smallwood describe as "observing the rear of the residence" amounts to a search, if the Katz analysis indicates that the object of the search was subject to a reasonable expectation of privacy.
1.
The first question under Katz is whether Young manifested a subjective expectation of privacy in the object of the challenged search. Burton and Smallwood's testimony indicates that they were peering into the interior of Young's home through his glass back doors, effecting a visual search of the interior of Young's home.[8] The Supreme Court has described observation of the interior of the home as "the prototypical . . . area of protected privacy." Kyllo, 533 U.S. at 27, 121 S.Ct. 2038. Indeed, "[a]t the very core stands the right of a man to retreat into his own home and there be free from unreasonable governmental intrusion." Id. at 31, 121 S.Ct. 2038(quoting Silverman v. United States, 365 U.S. 505, 81 S.Ct. 679, 5 L.Ed.2d 734 (1961). It is hardly remarkable, therefore, to conclude that Young could subjectively expect privacy when he was inside a room at the back of his home at 11:30 at night. Cf. Ciraolo, 476 U.S. at 215, 106 S.Ct. 1809 (quoting Katz, 389 U.S. at 361, 88 S.Ct. 507)(Harlan, J. concurrence))(noting, "a man's home is, for most purposes, a place where he expects privacy. . .").
The second part of the Katz inquiry examines whether this expectation was one society recognizes as reasonable, or in other words "what the person wanted to protect his privacy from, for example, non-family members . . . strangers passing by on the street." Widgren, 429 F.3d at 579 (citation omitted). The Fourth Amendment protection of the home does not "require law enforcement officers to shield their eyes when passing by a home on public thoroughfares. Nor does the mere fact that an individual has taken measures to restrict some views of his activities preclude an officer's observations from a public vantage point where he has a right to be and which renders the activities clearly visible." Ciraolo, 476 U.S. at 213, 106 S.Ct. 1809.
2.
Next the Court must determine whether Burton and Smallwood had a "right to be" at the location on Young's property when they peered into his home. Burton and Smallwood argue that because they did not enter the fenced perimeter of Young's backyard, they were in "open fields," a term which defines an area in which a property owner has no reasonable expectation of privacy, and from which vantage point an officer can peer into constitutionally protected areas. See United States v. Dunn, 480 U.S. 294, 107 S.Ct. 1134, 94 L.Ed.2d 326 (1987)(concluding that, observation of objects protected by the Fourth Amendment from a vantage point in the open fields does not violate the Fourth Amendment); Oliver v. United States, 466 U.S. 170, 177, 104 S.Ct. 1735, 80 L.Ed.2d 214 (1984); United States v. Rapanos, 115 F.3d 367, 372 (6th Cir.1997). A related concept is that Fourth Amendment protections also extend to the curtilage around a home. See Oliver, 466 U.S. at 180, 104 S.Ct. 1735. Id. at 180, 104 S.Ct. 1735.
Curtilage includes the land surrounding and associated with the home which "harbors the intimate activity associated with the sanctity of a man's home and the privacies of life." Hardesty v. Hamburg Township, 461 F.3d 646 (6th Cir.2006)(quoting Dunn, 480 U.S. 294 at 300, 107 S.Ct. 1134 (1987))(internal quotation omitted). In Dunn, the Supreme Court explained that:
curtilage questions should be resolved with particular reference to four factors: (1) the proximity of the area claimed to be curtilage to the home, (2) whether the area is included within an enclosure surrounding the home, the nature of the uses to which the area is put, and (4) the steps taken by the resident to protect the area from observation by people passing by.
480 U.S. at 301, 107 S.Ct. 1134 (numbers added). Applying the four Dunn factors here, the Court concludes that the area where Burton and Smallwood stood was within the curtilage. First, Burton testified that he was "about 15 to 20 feet away from the backthe back door of the house. . ." Interview with James Kevin Burton Dec. 6, 2005 3. When courts have found an area to be beyond the curtilage, the distance from the home is typically far greater. See, e.g. Dunn, 480 U.S. at 302, 107 S.Ct. 1134 (barn located sixty yards not within curtilage); Rapanos, 115 F.3d at 372 (6th Cir.1997)(finding that property consisting of 175 acres, with no buildings, bordered by an interstate highway a major state highway is an "open field"). Thus the proximity to Young's home weighs heavily in favor of finding the area to be within the curtilage.
The second factor might suggest that they were in an area beyond the curtilage because Burton and Smallwood were standing outside a fence. It is true that courts often consider the fence as a strong indication of the boundary of the curtilage. The photographic exhibits of Young's residence submitted by Burton and Smallwood, however, reveal that the "nature and uses to which the area is put" indicate that the fence did not necessarily mark the boundary of the "intimate activity" and actually enclosed only a very small area directly adjacent to the house.
In addition, a covered grill, dinner triangle, chairs, and birdhouse all were situated just outside the small wooden fence in the area where Burton and Smallwood stood. Although these items were not within an enclosure, they manifest evidence that the area where the officers were standing was used for activities and privacies of domestic life, and was not as Burton and Smallwood argue, an "open field." See, e.g. Widgren, 429 F.3d at 582 (finding that a picnic table, a fire pit, and pruned trees sufficient to indicate an area is within curtilage); United States v. Jenkins, 124 F.3d 768, 773 (6th Cir.1997)(finding evidence of laundry and gardening to weigh in favor of finding an area to be within curtilage).
Finally, the very location of the area where the officers were standing, behind Young's house, was naturally protected from passers by on the public adjoining road. As the Sixth Circuit has recognized:
The backyard and area immediately surrounding the home are really extensions of the dwelling itself. This is not true simply in a mechanical sense because the areas are geographically proximate. It is true because people have both actual, and reasonable expectations that many of the private experience of home life often occur outside the house.
Daughenbaugh v. City of Tiffin, 150 F.3d 594, 601 (6th Cir.1998)(quoting Dow Chemical v. United States, 749 F.2d 307, 314 (6th Cir.1984), aff'd 476 U.S. 227, 106 S.Ct. 1819, 90 L.Ed.2d 226 (1986)). Thus consideration of the Dunn factors and reference to Sixth Circuit precedent indicate little to distinguish Young's backyard from other backyards that have been held to be curtilage. See Widgren, 429 F.3d at 582; Daughenbaugh, 150 F.3d at 600-01 ("The backyard and area immediately surrounding the home are really extensions of the dwelling itself."). Thus, the Dunn factors weigh in favor of finding that the area where Burton and Smallwood were standing was part of the curtilage of Young's home.
3.
Based on the foregoing analysis the Court concludes that when Burton and Smallwood peered into Young's home, they did so from within the curtilagea constitutionally protected area where an individual has a reasonable expectation of privacy. See Daughenbaugh, 150 F.3d at 598. Their vantage point was not the open fields of Young's property or a public thoroughfare, or an area of Young's property impliedly open to public use. It was an area more distinctly private and reserved for personal use. The Fourth Amendment does not "permit officers to begin a warrantless search while standing in a constitutionally protected area." Id. at 601.[9] The officers consequently violated Young's Fourth Amendment right by conducting a warrantless search of his home when they explored details of the activities on the interior of Young's home that would have been unknowable without physical intrusion into a constitutionally protected area on Young's property. Cf. Kyllo, 533 U.S. 27, 121 S.Ct. 2038; see Daughenbaugh, 150 F.3d at 602.
B.
Before proceeding to the second step of the qualified immunity analysis, the Court considers whether Defendants, in addition to effecting an unlawful search, also effected an unlawful seizure. "Absent exigent circumstances, [the threshold to a home] may not reasonably be crossed without a warrant." Payton, 445 U.S. at 590, 100 S.Ct. 1371. On some occasions, the law recognizes a "constructive entry" into the home even though the officers have not physically crossed the threshold. Of course, police officers may engage in consensual encounters with suspects without running afoul of the Fourth Amendment. See, e.g. Bennett v. City of Eastpointe, 410 F.3d 810, 821 (6th Cir. 2005); United States v. Waldon, 206 F.3d 597, 602 (6th Cir.2000). Specifically, the Sixth Circuit recognizes a "knock and talk," as "a legitimate investigative technique at the home of a suspect or an individual with information about an investigation." United States v. Thomas, 430 F.3d 274, 277 (6th Cir.2006); Ewolski v. City of Brunswick, 287 F.3d 492, 504-05 (6th Cir.2002). A "knock and talk" typically involves an officer going to the front door to speak with the occupants, or asking for consent to search the premises. See, e.g. United States v. Chambers, 395 F.3d 563, 568 n. 2 (6th Cir.2005); Ewolski 287 F.3d 492.
In any constitutional analysis, a consensual encounter in the course of a "knock and talk" may "evolve into a `constructive entry' when the police, while not entering the house, deploy overbearing tactics that essentially force the individual out of the home." Thomas, 430 F.3d at 277. This occurs when a suspect emerges "in response to coercive police conduct." Id. (quoting United States v. Morgan, 743 F.2d 1158 (6th Cir.1984)); United States v. Saari, 272 F.3d 804 (6th Cir.2001)(describing coercive police conduct as "such a show of authority that [the] Defendant reasonably believed he had no choice but to comply."). Thomas instructs that the difference between "a permissible consensual encounter and an impermissible constructive entry turns on the Show of force exhibited by police." 430 F.3d at 277.
The Court must apply the standards to determine whether Defendants' conduct amounts to an unreasonable seizure. Notably, several facts distinguish the cases where the Sixth Circuit has found a "constructive entry" and unreasonable seizure from the facts here. First, unlike the commands over a bullhorn shouted to the plaintiff in Morgan, Burton's initial yell seems to have been intended to alert his fellow officers that he had observed that Young was armed. Though the intent of the officer is certainly not dispositive in a Fourth Amendment analysis, shouts that someone is armed are distinguishable from direct commands to exit a residence. In this way, Burton's initial yell was less a show of force than the commands in Saari and Morgan. Young did not understand the initial shouts to be commands to emerge from his home. Furthermore, until Young attempted to draw his weapon, there is no evidence that the officers had their weapons drawn as the officers in Saari did.
On the other hand, the facts before the Court, are in several ways similar to those cases where a "knock and talk" included impermissibly coercive procedures. Here, as in Morgan, it is undisputed that Young was peacefully residing in his home prior to Defendants' arrival. He logically responded to the noise by going to his backdoor. Yelling from the rear of a person's home, for whatever reason, is not consistent with the initiation of a consensual encounter. Also, as in Morgan several patrol cars approached Young's residence in the dark, and strategically parked their cars to block movement of Young's vehicle. See 743 F.2d at 1164. Defendants here pulled into Young's driveway with their headlights off. And, as in Morgan, the officers had effectively surrounded Young's home when Burton and Smallwood went to the back of Young's residence, while Raifsnider approached the front door.
The incident also involved some conduct that the Saari court described might indicate a seizure, including "the use of language or a tone of voice indicating that compliance with the officer's request might be compelled." 272 F.3d at 808. Here, it is undisputed that Young emerged upon hearing noises from the back of his property. In the context of a "knock and talk," the Sixth Circuit has described that:
a person has been `seized' within the meaning of the Fourth Amendment only if, in view of all of the circumstances surrounding the incident, a reasonable person would have believed that he was not free to leave. Examples of circumstances that might indicate a seizure, even where the person did not attempt to leave, would be the threatening presence of several officers, the display of a weapon by an officer, some physical touching of the person of the citizen, or the use of language or tone of voice indicating that compliance with the officer's request might be compelled.
Saari, 272 F.3d 804, 808 (6th Cir.2001)(quoting United States v. Mendenhall, 446 U.S. 544, 554-55, 100 S.Ct. 1870, 64 L.Ed.2d 497 (1980)) (opinion of Stewart, J.). Applying the Mendenhall standard, the Morgan court rejected the government's contention that "once Morgan appeared at the door holding a weapon in plain view, the police were justified in immediately arresting him and seizing the weapon." 743 F.2d at 1164. The Morgan court concluded that, "[v]iewed objectively, Morgan was placed under arrest, without the issuance of the warrant, at the moment the police encircled the Morgan residence." Id. (emphasis added).
1.
This raises a question of precisely when, in the course of a warrantless police visit to a residence, a seizure occurs. Here, a number of answers are possible. The Morgan court pinpoints the seizure "at the moment the police encircled the Morgan residence." Id.[10] The broadest reading of Morgan suggests that the seizure occurred at the moment the police blocked Young's vehicle in his driveway and surrounded his home by sending officers to the front and back of his property, effectively surrounding all the exits. If blocking a vehicle and surrounding the home is, without more, enough to constitute a show of force and coercive behavior, then Defendants effected an unreasonable seizure even without saying a word.
However, other panels of the Sixth Circuit have analyzed the level of coercion based on what the person alleging an unreasonable seizure actually knew about the location or level of police presence. See, e.g. Thomas, 430 F.3d at 280 (finding an encounter with multiple officers, noncoercive and noting, "Thomas has never argued that he saw all of these [police] vehicles before leaving the house."); United States v. Grayer, 232 Fed.Appx. 446 (6th Cir.2007)(unpublished)(finding no constructive entry in the absence of drawn weapons, raised voices, coercive demand, or a large number of officers in plain sight and finding it significant that the police squad cars "were parked in a manner blocked from Grayer's view from the front door."). The difficulty of answering whether, under Sixth Circuit precedent, blocking a vehicle and surrounding a home effects a seizure is reflected in the subsequent qualified immunity analysis.
2.
In addition to blocking his vehicle and surrounding his home, Defendants also shouted from Young's backyard, shined a flashlight on him, and eventually ordered him to put his hands up and not touch his gun. Considering these additional facts, the seizure could, consistent with Morgan and subsequent Sixth Circuit decisions be said to have occurred at either of two points. The earlier point is the moment police shouted from the backyard, causing Young to emerge from his house. Under this view, Young emerged in response to police shouting (even though it may not have been directed at him or intended to compel him to exit his home) while his house was surrounded and his vehicle blocked. Here, the three factors indicating a police show of force include the blocking and surrounding combined with the shouting from the backyard. However, it is undisputed that Burton's initial shouts were directed not to compel Young to exit his home, but to alert his fellow officers that they were approaching an armed man.[11]
The latest point the Court could pin a pre-shooting seizure is when Burton shined a flashlight on Young, who was standing in the doorway, identified himself as state police and directed him not to touch his gun. These circumstances are more similar to those present in Morgan and Saari. In any case, if Defendants are confronted with exigent circumstances, a warrantless seizure at home does not violate the Fourth Amendment. See, e.g. Ewolski 287 F.3d at 492.
3.
In conclusion, Sixth Circuit precedent indicates three alternative moments when Young was arguably seized: (1) at earliest, under Morgan, when Defendants blocked his vehicle and surrounded the exits to his home; (2) slightly later, when Burton shouted to alert Raifsnider that Young had a gun; (3) at latest, when Burton yelled at Young to put his hands up and not to touch his gun. The Court need not definitively pinpoint the exact moment that the seizure occurred. The Court need only assume that at one of the three points described above the manner in which Defendants executed the "knock and talk" was impermissively coercive and effected an unreasonable seizure in violation of the Fourth Amendment.[12]
C.
Having concluded that the Defendants' conduct amounted to an unreasonable search and assuming an unreasonable seizure in violation of the Fourth Amendment, the Court considers the second step, whether any of these rights were clearly established. King, 519 F.3d at 610 (6th Cir.2008). Here, "[t]he relevant, dispositive inquiry in determining whether a right is clearly established is whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted." Saucier, 533 U.S. at 202, 121 S.Ct. 2151. The Court applies this step separately to the unreasonable search and to each potential unreasonable seizure.
1.
The Court begins with the unreasonable search. "The right of individuals to be free from unreasonable and warrantless searches is a clearly established constitutional right. Courts have accepted the general principle that, absent special circumstances, ^warrantless searches are presumptively unreasonable.'" Daughenbaugh, 150 F.3d at 603 (citing Horton v. California, 496 U.S. 128, 133, 110 S.Ct. 2301, 110 L.Ed.2d 112 (1990)). Burton and Smallwood's search from Young's backyard violated this general principle.
Whether a reasonable person would have known he was violating a clearly established constitutional right poses a much closer question. As the Sixth Circuit has noted, the "we know it when we see it" approach to curtilage . . . provides "little guidance to courts attempting to determine whether a particular area falls within a home's curtilage." Id. at 598; Jenkins, 124 F.3d at 772 (observing that "[t]he concept of curtilage, unfortunately, evades precise definition."); United States v. Reilly, 76 F.3d 1271, 1273 (2d Cir.1996)(noting that curtilage is "an area where the contours of search-and-seizure law are anything but clear"). The fact-intensive nature means that "every curtilage determination is distinctive and stands and falls on its own unique set of facts." Reilly, 76 F.3d at 1276.
Even though "the law seems relatively unambiguous that a backyard abutting the home constitutes curtilage and receives constitutional protection," Daughenbaugh, 150 F.3d at 603, reasonable officers could have concluded that the fenced enclosure marked that boundary to Young's backyard and curtilage. See Dunn. 480 U.S. at 302, 107 S.Ct. 1134. While such a conclusion would be wrong because the fence was close to the property, did not provide a privacy shield, and contained a grill that was outside the fence, it would not be an unreasonable one under the circumstances. If, as Defendants believed, they were standing beyond the curtilage in the open fields of Young's rural property, naked eye observation of the interior of his home or his constitutionally protected backyard would not amount to unconstitutional activity. See id. at 304, 107 S.Ct. 1134 (concluding "there is no constitutional difference between police observations conducted while in a public place and while standing in the open fields. . . the fact that the objects observed by the officers lay within an area . . . protected by the Fourth Amendment" does not alter this conclusion.)[13]
Because it was not unreasonable for Defendants to conclude that the area outside a fenced enclosure in a rural area was not within the curtilage, they are entitled to qualified immunity for the Fourth Amendment violation resulting from the unreasonable search.
2.
The Court now considers whether the unreasonable seizure resulting from the manner in which Defendants executed the "knock and talk" involved a clearly established constitutional right of which a reasonable person would have known. The Court's task is to determine whether, at each of the three points when a seizure could have occurred, an objectively reasonable officer, confronted with similar circumstances, could have reasonably believed that the conduct he was undertaking did not effect a warrantless seizure or that exigent circumstances justified his conduct. See Anderson v. Creighton, 483 U.S. 635, 641, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987).
The Court first assumes that, as the language in Morgan suggests, the seizure occurred at the moment that Defendants blocked his vehicle and surrounded his house without his knowledge. Even if the Court were to conclude that the Fourth Amendment violation occurred at that moment, qualified immunity is still appropriate. In the cases where courts have recognized a constructive entry (including Morgan), there has been more than simply blocked vehicles and surrounded homes. In Morgan, police used a bullhorn and bright floodlight to compel the suspect to emerge from his home. In Saari, the police appeared with their weapons drawn and pointed at a forty-five degree angle. In Ewolski the police paraded an armored -vehicle in front of the suspect's home.
Young argues vigorously that Defendants' deviation from the Radcliff Police Department Standard Operating Procedures regarding Police-Citizen Contacts is relevant to showing that Defendants "knew, or reasonably should have known, of the necessity of acting within the requirements of the constitutional principles set out in the [police manual]." Resp. to Mot. for Summ. J. 10. Young says the manual required Defendants "to know how to conduct a knock and talk within constitutional bounds." Although it is true that the manual defines the internal policy limits for the police department, the policy manual does not, as Young argues, render "the general state of the jurisprudence" regarding the legality of police conduct "academic." Although the policies contained in the manual may provide evidence that Defendants should have known their actions were inconsistent with the policy manual, the failure to follow internal policies does not amount to a constitutional violation. Fultz v. Whittaker, 261 F.Supp.2d 767, 782 (W.D.Ky.2003)(citing Barber v. City of Salem, Ohio, 953 F.2d 232, 240 (6th Cir.1992)). Even assuming that the operating procedures tracked the law on constitutional seizures, the existence of those procedures would not necessarily make it clear to an officer in Defendants' situation that his actions were per se unconstitutional.
Morgan notwithstanding, without precedent in the Sixth Circuit where blocking a vehicle and surrounding a home alone constitutes constructive entry in violation of the Fourth Amendment, and in light of the Sixth Circuit cases seemingly requiring some level of coercion notifying a person about the police activity, a reasonable officer could believe that blocking a driveway and surrounding a home, without more, did not effect a warrantless seizure. Therefore, Defendants are entitled to qualified immunity to the extent that such conduct did amount to an unreasonable seizure.
3.
The Court next considers a slightly later point in time when the combination of surrounding of Young's home, blocking his vehicle and shouting from the backyard could constitute a seizure. Here, the Court must consider what activity caused Young to emerge from his home where he was peaceably residing. Young's testimony is that: "I only heard my dogs barking and went to the back door. I saw intruders and heard them shouting to each other, but could not make out any details, and thought they were attacking me." Young's Response to Wal-Mart's Discovery Requests 5-6. In the light most favorable to Young, the Court will assume that the dogs were barking in response to Burton's shout that he had observed Young in his home with a gun. Even if this were true, the Court cannot conclude that Burton's decision to shout to alert his fellow officers that Young was armed, was objectively unreasonable.
Although the subjective intent of the officer is not dispositive, Young's emergence and seizure under these circumstances is distinguishable from those cases where the person emerged in response to direct and unequivocal demands to do so or in response to seeing police with weapons drawn.[14]See, e.g. Morgan, 743 F.2d 1158; Saari, 272 F.3d at 808. Although while he was in his home Young did not pose an immediate threat to the officers, Burton and Smallwood knew that other officers were attempting to initiate contact with an armed person. Upon observing Young with a gun, Defendants could have been reasonably alarmed and believed that the concern for officer safety at least justified alerting fellow officers that Young was armed. They could also have reasonably believed that shouting to alert a fellow officer did not rise to the level of coercion necessary to effect a seizure as a result of a constructive entry.
Thus, to the extent that Burton yelling to warn Raifsnider could be considered an impermissibly coercive show of force, Defendants are entitled to invoke qualified immunity.
4.
The latest that a pre-shooting seizure arguably occurred is at the moment Burton shined a flashlight on Young, yelled at him to put his hands up, and told him not to touch his weapon. Here, Young was armed and was reaching for his gun in response to the unexplained intruders in his backyard at 11:30 at night. See Young's Resp. to Wal-Mart's Discovery Requests. Young was standing in his doorway with a gun because he was aroused from his home where he was peaceably residing before hearing noises from police who were sneaking around and shouting from the back of his property. In other words, he appeared at the door because of the police activity taking place outside his home.
Assuming a Fourth Amendment violation on these facts, to conclude that an officer would be unreasonable and therefore liable for damages when he instructs an armed person not to touch or use his gun would seem to ignore the realities of officer safety, which are judged from the perspective of the reasonable officer on the ground. See Graham v. Connor, 490 U.S. 386, 396, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). Under the Supreme Court precedent, even though Defendants' mistakes led to the situation in which the circumstances arose, they could still be entitled to the benefit of qualified immunity if the mistakes as to the legality of their actions were reasonable. Cf. Saucier, 533 U.S. at 206, 121 S.Ct. 2151 ("Yet, even if a court were to hold that the officer violated the Fourth Amendment by conducting an unreasonable, warrantless search, Anderson still operates to grant officers immunity for reasonable mistakes as to the legality of their actions."). It follows that even if the Court were to conclude that Defendants did violate the Fourth Amendment before Plaintiff even emerged from his home, Defendants are not foreclosed from invoking qualified immunity for their subsequent conduct. See Dickerson, 101 F.3d at 1160. Even if Defendants' belief that Young's emergence with a gun justified their conduct was mistaken, "the officers are entitled to the benefit of the doubt under the qualified immunity standard." See id.
At the moment Young appeared, Defendants could have reasonably believed that Young's confusion and armed status justified attempting to prevent Young from drawing his weapon by yelling at him not to touch his gun and put his hands up. This is true because it could be reasonable for Defendants to believe (even mistakenly): (i) simply surrounding the house and blocking his vehicle did not effect a seizure as a result of impermissibly coercive conduct; (ii) the shouting that prompted Young to emerge was justified for officer protection; and (iii) then attempting to stop him from drawing his gun was also justified for officer safety.
"The qualified immunity inquiry's concern . . . is to acknowledge that reasonable mistakes can be made as to the legal constraints on particular police conduct." Saucier, 533 U.S. at 195, 121 S.Ct, 2151. Here, at each stage when a seizure could have occurred, the police were reasonable, though arguably mistaken, in their belief that they were operating within the legal restraints on their actions. As such, they are entitled to qualified immunity for any unreasonable seizure that occurred in violation of the Fourth Amendment.
V.
Young also brings several state law claims, alleging violation of Ky.Rev. Stat. Ann. § 344 (Kentucky Civil Rights Act), false arrest/false imprisonment, assault, battery, and intentional infliction of emotional distress (IIED).[15] The Court must look at each of these separately. Some are easier to resolve than others.
The basic purpose of the Kentucky Civil Rights Act is "to safeguard all individuals within the state from discrimination because of race, color, religion, national origin, sex, age forty (40) and over, or because of the person's status as a qualified individual with a disability." Ky. Rev.Stat. Ann. § 344.020(1)(b). In general, the Act protects individuals against discrimination in the employment context and also ensures that no individual may be denied the equal enjoyment of a place of public accommodation, resort or amusement facility. The statute does not apply to discrimination that may occur during an interaction between a citizen and a police officer and therefore Young has failed to state a claim for a violation of Ky.Rev.Stat. Ann. § 344. The Court will sustain Defendants' motion for summary judgment on this basis.
Young also argues that being "held for hours on felony charges that were so clearly excessive" was "so unreasonable" as to constitute a false arrest. Under Kentucky law, an action for false arrest may only be maintained when the arrest is without legal authority. Young's state court conviction for menacing bars him from arguing that his arrest was "without legal authority" or not supported by probable cause. But even if there were no probable cause to arrest Young for the felonies for which he was initially charged, proof of probable cause to arrest a person for a related office is a defense that would entitle an officer to qualified immunity. See Avery v. King, 110 F.3d 12 (6th Cir. 1997). For this reason, Defendants are entitled to judgment as a matter of law on Young's false arrest claim.
In the case of an action against a law enforcement officer, a claim for false imprisonment is for "detention without legal authoritythat is, detention without legal process." Dunn v. Felty, 226 S.W.3d 68, 71 (Ky.2007). Young complains of being held for hours after his arrest, but once again his menacing conviction precludes him from arguing that the detaining officers lacked legal authority in the first place, and Young had not offered specific information alleging that how he was denied any of his Fifth or Sixth Amendment rights to counsel which would be available to a person in custody. Without other evidence, the Court is unable to conclude that being held or questioned for "hours" denied Young "legal process" or that it states a claim for false imprisonment. The Court is likewise unable to assess the viability of Young's allegation that he was held in "uncomfortable positions" or that he was subjected to "dehumanizing acts." Without any further description or elaboration of the substance of these allegations, the Court lacks sufficient information to conclude that a reasonable juror could return a verdict in his favor based only on these vague allegations.[16]
Young alleges that Defendants committed battery by shooting him, "shoving him, handcuffing him and otherwise wrongfully touching him." [17] Under Kentucky law, a "battery" is an unlawful touching of another. A person is liable for "assault" if his acts intend to cause a harmful or offensive contact. Humphress v. United Parcel Service, Inc., 31 F.Supp.2d 1004 (W.D.Ky.1997). He has not put forth any evidence describing the circumstances under which the alleged shove occurred. Even assuming that Young was "kept in painful handcuffs for several hours" in an unlawful manner after his arrest, Defendants would only be liable for this injury if they: (1)observed or had reason to know that excessive force would be or was being used, and (2) had both the opportunity and the means to prevent the harm from occurring. Smoak v. Hall 460 F.3d 768 (6th Cir.2006)(quoting Turner v. Scott, 119 F.3d 425, 429 (6th Cir.1997)).
Here, Young does not allege that Burton, Smallwood, or Raifsnider personally shoved him, handcuffed him, or otherwise unlawfully touched him. Young has alleged no facts which could allow a reasonable juror to find that Raifsnider, Burton, or Smallwood even knew that the handcuffs were painful (i.e. heard Young complain of their tightness) or knew that they were kept on for "several hours" after his arrest. There is no evidence, for example, that Raifsnider, Burton, or Smallwood accompanied Young to the hospital or to the location where he was "questioned late into the night." Therefore, Young has failed to allege facts sufficient to prove his claim for assault or battery against Burton, Smallwood, or Raifsnider and their motion for summary judgment is sustained with respect to those claims.
In order to recover for IIED, Young must show that Defendants' conduct after the shooting was "so outrageous and intolerable so as to offend generally accepted standards of morality and decency, that a causal connection exists between the conduct complained of and the distress suffered, and that the resulting emotional stress was severe." Brewer v. Hillard, 15 S.W.3d 1 (Ky.Ct.App.1999). "Where an actor's conduct amounts to the commission of one of the traditional tort, such as assault, battery, or negligence for which recovery for emotional distress is allowed, and the conduct was not intended only to cause extreme emotional distress in the victim, the tort of outrage will not lie." Banks v. Fritsch, 39 S.W.3d 474, 480 (Ky. Ct.App.2001). Young argues that "all of Defendants' actions after the shooting were clearly only intended to inflict extreme emotional distress." Even if this were true, Young has offered no evidence that either Burton, Smallwood, or Raifsnider was the person who denied him an opportunity to speak with his wife, shoved him, placed him in handcuffs, or held him in uncomfortable positions. For this reason, no reasonable juror could conclude that the Defendants who have moved for summary judgment committed the tort of IIED.
VI.
Finally, the Court considers whether the City of Radcliff could be liable for any of injuries Young alleges. Section 1983 does not permit a plaintiff to sue a local government entity on the theory of respondeat superior. Monell v. New York City Dep't of Soc. Servs., 436 U.S. 658, 692-94, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). A plaintiff may only hold a local government entity liable under § 1983 for the entity's own wrongdoing. Id. A local government entity violates § 1983 where its official policy or custom actually serves to deprive an individual of his or her constitutional rights. Id. A city's custom or policy can be unconstitutional in two ways: 1) facially unconstitutional as written or articulated, or 2) facially constitutional but consistently implemented to result in constitutional violations with explicit or implicit ratification by city policymakers. Id.
Where the identified policy is itself facially lawful, the plaintiff "must demonstrate that the municipal action was taken with `deliberate indifference' as to its known or obvious consequences. A showing of simple or even heightened negligence will not suffice." Bd. of County Comm'rs v. Brown, 520 U.S. 397, 407, 117 S.Ct. 1382, 137 L.Ed.2d 626 (1997) (internal citation omitted). "Deliberate indifference is a stringent standard of fault, requiring proof that a municipal actor disregarded a known or obvious consequence of his action." Brown, 520 U.S. at 410, 117 S.Ct. 1382. In other words, the risk of a constitutional violation arising as a result of the inadequacies in the municipal policy must be "plainly obvious." Id. at 412, 117 S.Ct. 1382; see also Stemler v. City of Florence, 126 F.3d 856, 865 (6th Cir.1997).
Young points to no policy or custom which caused the Fourth Amendment violations described above. By contrast, he argues extensively that Raifsnider's knock and talk investigation deviated from the City of Radcliff's standard operating procedures. Young holds the City of Radcliff's standard operating procedures as the "definitive authority as to how the knock and talk should have been conducted." This characterization certainly does not permit the conclusion that the City of Radcliff's official policy was facially unconstitutional or was the cause of the deprivation of Young's rights.
Young also argues that the City was "deliberately indifferent" in the need to competently identify citizens holding "specialty" license plates, the need to train police officers to deal with hearing impaired citizens, and in the need to supervise employees to prevent the violations he alleged. "Allegations that a particular officer was improperly trained are insufficient to prove liability, as are claims that a particular injury could have been avoided with better training." Sova v. City of Mt. Pleasant, 142 F.3d 898, 904 (6th Cir.1998). "Deliberate indifference is a stringent standard of fault, requiring proof that a municipal actor disregarded a known or obvious consequence of his action." Board of County Comm'rs v. Brown, 520 U.S. at 410, 117 S.Ct. 1382.
Young has not presented any evidence, however, which could permit a jury to conclude that the City of Radcliff failed to train or supervise either Officer Raifsnider in particular or any of its officers in general. The City of Radcliff has provided evidence that the dispatch trainer completed mandatory dispatch training. In sum, there is not evidence before the Court that Young's injuries were the result of the policy or custom or deliberate indifference on the party of the City of Radcliff.
The Court will enter an order consistent with this Memorandum Opinion.
NOTES
[1] Young has also sued "Unknown Defendant Employees of Kentucky State Police." No motion for summary judgment has been made on behalf of those defendants.
[2] The Hardin County deputies are not parties to this suit.
[3] In considering how broadly to view the circumstances relevant to the excessive force issue, the Sixth Circuit analyzes § 1983 claims separately and in some circumstances will "carve up the incident into segments and judge each on its own terms to see if the officer was reasonable at each stage." See Dickersonv. McClellan, 101 F.3d 1151, 1161 (6th Cir.1996)(internal quotation omitted). Thus, the fact that Burton's decision to proceed to the rear of Burton's property may constitute a separate Fourth Amendment violation does not preclude a finding that his subsequent use of force was reasonable.
[4] Finally, even if collateral estoppel did not effectively bar Young's excessive force claim, Burton would likely be entitled to qualified immunity on his use of force since there is no controlling authority from the Supreme Court on Sixth Circuit that would put an officer on notice that use of deadly force in response to a person drawing a firearm would violate the Fourth Amendment, and there is precedent within this Circuit for qualified immunity in use of force cases involving the belief of presence of firearms. See, e.g. Bell v. City of East Cleveland, 125 F.3d 855, 1997 WL 640116 (6th Cir.1997)(Table); Leong v. City of Detroit, 151 F.Supp.2d 858 (E.D.Mich.2001).
[5] For purposes of this analysis, the Court concludes that this occurred at the moment Plaintiff appeared to reach for his gun. See Jury Instructions (describing the crime as placing Burton in "reasonable fear of immediate physical injury by reaching for and/or drawing a firearm.").
[6] Young argues that Defendants' actions were ministerial, not discretionary, and that Defendants were therefore not entitled to qualified immunity under Kentucky law. Young says that because the Radcliff Police Department Standard Operating Procedures establish mandatory practices for initiating police-citizen contact, Defendants' conduct was ministerial. Cases controlling governmental tort immunity under Kentucky law, however, do not control the analysis of whether the federal defense of qualified immunity is available to officers sued under 42 U.S.C. § 1983 for violating a federal right. See Hudson v. Hudson, 475 F.3d 741, 744 (6th Cir.2007). Under any analysis, the Court does not find the manner in which Defendants conduct a shoplifting investigation to be ministerial. See, e.g. Stratton v. Com., 182 S.W.3d 516 (Ky.2006)(comparing the discretionary decisions involved in child protective services investigations to those required in "police investigations."). In addition, the Sixth Circuit applies a qualified immunity analysis to a variety of alleged Fourth Amendment violations occurring in the course of police investigations. See, e.g. Hardesty v. Hamburg Tp., 461 F.3d 646 (6th Cir.2006); Ewolski v. City of Brunswick. 287 F.3d 492 (6th Cir.2002).
[7] The Sixth Circuit occasionally performs a third step which asks "whether the plaintiff offered sufficient evidence to indicate that what the official did was objectively unreasonable in light of the clearly established constitutional rights." Williams v. Mehra, 186 F.3d 685, 691 (6th Cir.1999)(en banc). "Both the two-step approach and the three-step approach can be said to capture the holding of [Saucier]." Estate of Carter v. City of Detroit, 408 F.3d 305, 311 n. 2 (6th Cir.2005). Here, the Court applies the two-step approach.
[8] "And they were the kind of doors that are full glassjust like aa full glass door. When he stood up, when I saw this man stand up, I saw that there was a gun in a holster on his right side." Resp. to Burton and Smallwood's Mot. for Summ. J. Exh. 3 (Burton Sworn Statement).
[9] A leading treatise on the subject describes that "courts have held `that police with legitimate business may enter the areas of the curtilage which are impliedly open to use by the public,' and in so doing they `are free to keep their eyes open and use their other senses.' This means, therefore, that if police utilize `normal means of access to and egress from the house,' for some legitimate purpose, such as to make inquiries of the occupant or to introduce an undercover agent into the activities occurring there, is not a Fourth Amendment search for the police to see or hear or smell from that vantage point what is happening inside the dwelling. On the other hand, if the policy stray from that path to other parts of the curtilage in order to conduct the surveillance, then the use of natural sight or hearing to detect what is inside is a search within the meaning of the Fourth Amendment." 1 Wayne R. LaFave, Search and Seizure: Looking at or Listening at the Residence § 2.3(c)(4th ed.2007)(emphasis added).
[10] Of course, prior to being summoned from his home in response to shouted commands, Morgan could not have known that his vehicle was blocked or his home surrounded by officers. The same is true here. Because Young apparently did not hear Raifsnider's knocking at the front door, he presumably did not know that police were present at the front and a the rear of his property or that his vehicle was blocked.
[11] "When he stood up, when I saw this man stand up, I saw there was a gun in a hoster on his right side. I yelled, told the officers that he had a gun." Burton's Resp. to Young's Interrog. 10.
[12] The Sixth Circuit has, under some circumstances, recognized the legitimacy of the knock and talk technique beyond the front door to inquiry at the back door. See Hardesty v. Hamburg Township, 461 F.3d 646, 654 (6th Cir.2006)(holding "where knocking at the front door is unsuccessful in spite of indications that someone is in or around the house, an officer may take reasonable steps to speak with the person being sought out even where such steps require an intrusion into the curtilage."); Thomas, 430 F.3d at 280 (officers knocking on back door did not violate the Fourth Amendment because there was no "reasonable expectation of privacy" in the use of a back door that "was customarily used as the entrance to the house."). Those circumstances, however, are quite unlike those here. Here, the officers were not concerned about the proper entrance because they had not tried one entrance unsuccessfully. This was an entirely different matter. Sneaking around the backyard is not part of a legitimate constitutional "knock and talk."
[13] "Nor is the government's intrusion upon an open field a `search' in the constitutional sense because that intrusion is a trespass at common law." Oliver v. U.S. 466 U.S. 170, 183, 104 S.Ct. 1735, 80 L.Ed.2d 214 (1984)
[14] "An officer's evil intentions will not make a Fourth Amendment violation out of an objectively reasonable use of force; nor will an officer's good intentions make an objectively unreasonable use of force constitutional." Graham, 490 U.S. at 397, 109 S.Ct. 1865.
[15] Young's complaint alleges separate counts for "intentional infliction of emotional distress" (Count VII) and "outrageous conduct," (Count VIII). Kentucky common law recognizes these as the same tort, and the Court therefore analyzes Counts VII and VIII as a single claim.
[16] The Court has thoroughly reviewed the record for evidence or facts which could support Young's claims. In Young's response to interrogatories posed by a party who is now dismissed, Young provides the most thorough summary of the post-shooting events, stating:
"I was bullied, pushed, shoved, made to stay in uncomfortable positions, was insulted, kept in uncomfortable positions, and treated much worse than I was trained by the Army to treat war prisoners . . . I was still kept in handcuffs and in uncomfortable positions, and still in pain . . . [following interrogation at KSP Post 4] . . . unknown Defendants wrongfully charged me, several hours later, with two felony counts . . . After the interrogation at Post 4, I was again placed in handcuffs and kept in painful positions, and was lodged in the jail through part of the next day. Unknown Defendants caused the false felony charges to be published, including to the news media."
PL's Resp. to Wal-Mart's Discovery Requests. Young does not allege that Burton, Smallwood, or Raifsnider personally took any of these actions. However, Young also appears to argue that Raifsnider is liable in a supervisory capacity for the alleged assault and battery committed by other unidentified officers because Raifsnider was in charge of the entire investigation at Young's home. This theory of liability also fails because Young must show that Raifsnider otherwise encouraged or condoned the actions of the other officers. See Bass v. Robinson, 167 F.3d 1041, 1048 (6th Cir. 1999); Copeland v. Machulis, 57 F.3d 476, 481 (6th Cir. 1995). The record contains no evidence that this occurred.
[17] Young's menacing conviction bars his claim for assault and battery with respect to the shooting because he cannot relitigate whether the shooting was justified. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8326677/ | Fabricant, Judith, J.
INTRODUCTION
This action seeks judicial review of an arbitrator’s partial award certifying a class for the purpose of arbitration of claims of violation of the Massachusetts Wage Act, G.L.c. 149, §148B. Before the Court is the defendants’ motion to dismiss or, alternatively, to confirm the award. For the reasons that will be explained, the Court will confirm the award.
BACKGROUND
The plaintiffs (respondents in the arbitration) operate businesses providing luxury transportation services. The defendants (claimants in the arbitration) are limousine drivers. The parties entered into written agreements that classified the drivers as independent contractors, and that also provided for arbitration of any disputes through JAMS and under its rules. The drivers brought two separate suits in this Court, alleging that they are employees, not independent contractors, and that the businesses — their alleged employers — deprived them of benefits guaranteed by the Massachusetts Wage Act. The alleged employers1 responded to those suits with motions to compel arbitration. After the Court allowed that motion in one case, the parties agreed to dismiss the second in favor of arbitration, based on the alleged employers’ agreement that although they “may oppose class certification on any lawful grounds,” they would not “take the position that the Arbitration Agreement itself precludes or limits the ability of an Arbitrator to certify a *301class.” The drivers’ claims were consolidated before a JAMS arbitrator, who issued a partial award certifying a claimant class.2 Relying on a JAMS rule authorizing immediate judicial review of class certification, the alleged employers brought this action seeking such review.
DISCUSSION
Judicial review of an arbitration award, whether under the Massachusetts Arbitration Act, G.L.c. 251, §12(a), or the Federal Arbitration Act, 9 U.S.C. §10(a), is exceedingly narrow. A reviewing court is “strictly bound by an arbitrator’s findings and legal conclusions, even if they appear erroneous, inconsistent, or unsupported by the record at the arbitration hearing ... Absent fraud, errors of law or fact are not sufficient grounds to set aside an award . . . Even a grossly erroneous [arbitration] decision is binding in the absence of fraud . . . An arbitrator’s result may be wrong; it may appear unsupported; it may appear poorly reasoned; it may appear foolish. Yet, it may not be subject to court interference.” Lynn v. Thompson, 435 Mass. 54, 61-62 (2001) (internal quotations and citations omitted). See Nat’l Cas. Co. v. First State Ins. Group, 430 F.3d 492, 496 (1st Cir. 2005) (review of arbitration awards is “extremely narrow and exceedingly deferential”); Bull HN Info. Sys., Inc. v. Hutson, 229 F.3d 321, 330 (1st Cir. 2000) (“Arbitral awards are nearly impervious to judicial oversight”); Boston Housing Auth. v. National Conference of Firemen & Oilers, Local 3, 458 Mass. 155, 161 (2010); Weiner v. Commerce Ins. Co., 78 Mass.App.Ct. 563, 565-66 (2011).
Among the few grounds that would warrant disturbing an arbitration award is that the arbitrator exceeded her authority. G.L.c. 251, §12(a)(3). Interpretation of a contract between the parties, including its arbitration clause, is well within the arbitrator’s authority. Jock v. Sterling Jewelers, Inc., 646 F.3d 113, 123 (2d Cir. 2011); Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., Inc., 407 Mass. 1006, 1007 (1990). An erroneous interpretation of the arbitration clause is not an excess of authority; it is merely an error of law, not subject to judicial review. Id. An arbitrator exceeds her authority, however, if she imposes class certification based not on an interpretation of the arbitration agreement as allowing that procedure, but instead on application of a superceding public policy established in state law. See AT&T Mobility LLC v. Concepcion, 563 U.S. _, slip op., at 13, 131 S.Ct. 1740, 1750 (April 27, 2011), citing Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp., 559 U.S. _, slip op., at 22, 130 S.Ct. 1758, 1773-76 (April 27, 2010) (arbitrator exceeds authority “by imposing class procedures based on policy judgments rather than the arbitration agreement itself or some background principle of contract law that would affect its interpretation”).
That is what plaintiffs contend that the arbitrator did here. Defendants disagree, contending that the arbitrator’s decision rests on her interpretation of the arbitration agreement, ,and thus falls squarely within her authority. Having carefully reviewed the arbitrator’s decision, the Court agrees with defendants.3
The arbitrator’s eleven-page decision recites that she heard argument on the issue of class certification, and then additional argument, requested by the arbitrator, “in the wake of’ the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 563 U.S. _, 131 S.Ct. 1740. The decision then states that the arbitrator “must construe the arbitration clause to determine as a threshold matter if the arbitration may proceed on behalf of or against a class.” After quoting the arbitration clause nearly in its entirety, the arbitrator observes that, although it does not mention class arbitration, it is “broadly written,” including statutory as well as other claims, and that it provides for construction pursuant to Massachusetts law. She then refers to the various statutory means of enforcement of the Wage Act, including a civil action brought by an aggrieved individual as a class representative. The arbitrator proceeds to note the Massachusetts public policy favoring class actions for private enforcement of certain statutes, citing Feeney v. Dell, Inc., 454 Mass. 192, 200 (2009). She concludes that “[t]he arbitration clause should be construed to provide the Claimants access to the statutory right to bring the claims in arbitration ‘in his own name and on his own behalf, or for himself and for others similarly situated.’ To close off this avenue would thwart the purpose of the statute. M.G.L.c. 149, sec. 150.”4 The decision then goes on to consider the propriety of class proceedings on the facts presented, concluding that class certification is warranted.
The arbitrator’s reasoning, as the Court understands it from her decision, may be summarized as follows. The agreement neither expressly prohibits nor expressly authorizes class proceedings. The arbitrator must therefore discern the intent of the parties on the issue from terms that do not address it directly, considered in the context of the surrounding circumstances. Among those surrounding circumstances is the backdrop of Massachusetts law, which the parties designated as the basis of interpretation. A clue to the parties’ intent appears in the broad scope of the arbitration clause, which extends to claims under Massachusetts statutes, including statutes that expressly authorize enforcement through class proceedings. Based on these considerations, the arbitrator concludes that the parties intended to authorize class arbitration of claims under statutes that authorizes class proceedings, when deemed appropriate by a JAMS arbitrator, pursuant to JAMS rules. She thus construes the agreement as authorizing class proceedings for the dispute before her.
Such reasoning is, by its nature, an exercise in contract interpretation, not the imposition of a super-ceding public policy in contravention of the contract. *302See Jock, 646 F.3d at 123. Whether this Court agrees with the arbitrator’s reasoning, or would interpret the agreement as she did, is of no significance. What matters is whether the arbitrator acted within her authority. The Court concludes that she did. Accordingly, the Court will confirm the arbitrator’s partial final award.
CONCLUSION AND ORDER
For the reasons stated, Defendants’ Motion to Dismiss Plaintiffs’ Complaint, Confirm Arbitrator’s Class Certification “Award” and Order Sanctions is ALLOWED insofar as it seeks confirmation, and otherwise DENIED.5 JUDGMENT shall enter confirming the arbitrator’s “Partial Final Award on Claimant’s Motion for Class Certification.”
For clarity, and without intending any conclusion or ruling on the point, the Court will at times refer to the plaintiffs here, who are respondents in the arbitration and were defendants in the earlier court actions, as the alleged employers.
The arbitrator is a retired judge of this Court.
Defendants argue also that the application for judicial review is premature, in the absence of a final award on the merits of the drivers’ claims; that the language of the agreement precludes review except on grounds amounting to corruption; and further, that the plaintiffs have waived the argument they now assert by agreeing not to argue that the arbitration clause precludes class certification. The Court will not address these issues, since it concludes that the arbitrator did not exceed her authority.
In a footnote, the arbitrator observed that “[i]t appears that Respondents recognized this construction of the arbitration clause,” based on the agreement described supra.
The Court has some sympathy for defendants’ perception that plaintiffs have attempted to renege on their agreement not to take the position that the arbitration clause precludes class proceedings, but perceives in that effort no basis for sanctions. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1101027/ | 702 So.2d 92 (1997)
Paul BROADHEAD and Morris Nicholson
v.
BONITA LAKES MALL, LIMITED PARTNERSHIP; Bonita Properties, Inc.; Lauderdale County Board of Education, Lauderdale County Board of Supervisors, and State of Mississippi.
No. 96-CA-00573-SCT.
Supreme Court of Mississippi.
October 23, 1997.
*93 John F. Hawkins, John L. Maxey, II, Samuel L. Begley, Maxey Wann & Begley, Jackson, for appellant.
Mack Cameron, Jackson, Ralph Edward Young, Jr., Paul Scott Phillips, Glover Young Walton & Phillips, Meridian, Robert H. Compton, John G. Compton, Witherspoon & *94 Compton, Meridian, Michael C. Moore, Atty. Gen., Nicole Akins Boyd and Susan Shands Jones, Special Asst. Attys. Gen., Jackson, for appellee.
Before PRATHER, P.J., and BANKS and McRAE, JJ.
BANKS, Justice, for the Court:
¶ 1. This case is before the Court on appeal from a decision in chancery court confirming two sixteenth section land leases. We conclude that the record amply supports a finding that the appraisals of school lands were performed by a competent appraiser, despite the fact that the appraiser had been assigned an interest in the proceeds of a sublease in the same sixteenth section. The appraiser's interest is fixed in value and unaffected by any value established for the subject property he appraised. Various other alleged violations of the USPAP appraisal standards are not sufficient to render the appraisals incompetent. We also conclude that the issues raised relating to the chancellor's evidentiary rulings and the school board's fiduciary duty have no merit. Accordingly, we affirm.
I.
¶ 2. The Lauderdale County Board of Education (LCBE), with supervision from the Lauderdale County Board of Supervisors (LCBS), holds sixteenth section lands in trust for the students within its district, and grants leases on these lands to raise revenue for their educational benefit. LCBE is represented by John Ed Ainsworth, a public administration consultant specializing in business related to school districts and state government agencies. In 1993, Ainsworth, on behalf of LCBE, entered into negotiations with developers Hardy Graham and Ed Johnson, owners of Bonita Lakes Mall Limited Partnership (BMLP) and Bonita Properties, Inc. (BPI) (referred to jointly as "Bonita" unless otherwise noted). These negotiations concerned a proposed shopping mall development on sixteenth section land in Meridian, Mississippi, which at that time was in two adjoining tracts, one containing approximately 120 acres and the other containing approximately 40 acres. In anticipation of granting a lease to Bonita, appraisals on these adjoining lands were conducted by Alex Smith to determine a fee market value upon which a lease value could be based. Smith, owner of Appraisers Associated, is a Member of the Appraisal Institute (MAI) and had conducted numerous appraisals for LCBE in the past. Separate appraisals on these properties were necessary because they had distinct chains of title and the smaller parcel was the subject of separate negotiations concerning release of previous leases back to LCBE.
¶ 3. The first of the appraisals was conducted on the 120-acre tract and was dated September 1, 1993. Smith placed a fee market value on this land of $264,000, or $2,200 per acre. The second appraisal was performed on the 40-acre tract and was dated September 10, 1993. Smith placed its value at $600,000, or $15,000 per acre. The higher value of the smaller parcel was due to flatter topography and valuable road frontage. Smith testified that even though this road frontage was encumbered by a pre-existing lease, he included the value of accessibility in his conclusion because his task was to assess a fee market value independent of leasehold interests. Smith declared the "highest and best use" of both properties to be commercial and/or industrial type development, predominantly commercial retail development.
¶ 4. After Smith's appraisals were completed, LCBE retained Jerry Mask, another MAI appraiser, to conduct review appraisals of the subject properties. Mask's review appraisals, dated October 12, 1993, indicated the values established by Smith were reliable. In conducting their appraisals, Smith and Mask both made use of the "sales comparison approach," in which the value of subject property is determined by examining assorted sales of other lands which are deemed, according to various factors, to be comparable.
¶ 5. Ainsworth checked the appraisal reports to insure they contained the required components and then relied on them in negotiating the land leases with Bonita. The development was negotiated as a single 160-acre tract, since it was contemplated there would be only one lease. Accordingly, Ainsworth *95 instructed Smith to review, update and combine the appraisals done earlier. The report for this combined appraisal update is dated May 26, 1995, and the calculations are made as of January 1, 1995. The subject property of this update appraisal contained 159.85 acres.[1] Smith placed the value of these combined parcels at $730,000, and Ainsworth demanded an annual rent of nine percent, or $65,700. Importantly, a small subparcel containing approximately five acres was not included in this update appraisal. This subparcel was land on which two restaurants were located, and was encumbered by a pre-existing leasehold interest to a company called Hannaford Properties.[2] Since this subparcel contained the roadway frontage, Smith determined the combined remaining parcels to be essentially "landlocked" and lowered their value accordingly.
¶ 6. BMLP and BPI subsequently decided to take separate leases. The land was again divided into two tracts though not in the same manner as they had originally been divided. In determining rent, Ainsworth prorated the annual rental amount of $65,700 between the two leases based on the number of acres to each lessee, and entered into leases with both Bonita entities on June 12, 1995. BMLP entered into a Commercial Lease Contract for 116.41 acres, at an annual rental cost of $48,338.62. BPI entered into a Commercial Lease Contract for 41.81 acres, at an annual rental cost of $17,361.38. Both leases were payable a year in advance over the forty years of the lease, with options to renew for twenty-five years.
¶ 7. After execution of the Commercial Lease Contracts, both were discovered to contain mistakes. The lease to BMLP missed a call in the metes and bounds description, and BMLP requested an amendment to correct the property description. In BMLP's case, there was no increase in the acreage as a result of this correction and Ainsworth determined that no updated appraisal was necessary. Accordingly, LCBE and BMLP executed an Amendment to Commercial Lease Contract in order to correct the error in the legal description. The property description in the lease to BPI also contained an error. The error omitted approximately 1.63 acres from the legal description along the Northern property line. BPI requested an amendment to include the additional acreage. Because additional acreage was being added to the lease, Ainsworth instructed Smith to perform an update appraisal on that tract, which now totaled 43.44 acres. Smith performed this update appraisal on August 23, 1995, and set the fee market value of this tract at $360,000, or $8,300 per acre. In accordance with Smith's update appraisal, an Amendment to Commercial Lease Contract was executed between LCBE and BPI providing for increased rent. Apparently, the increased rental amount was calculated by applying the increased per acre price to the additional 1.63 acres only.
¶ 8. On September 13, 1995, each Bonita entity filed a Complaint to Confirm Sixteenth Section Land Lease in the Lauderdale County Chancery Court. The Complaints sought to confirm the Commercial Lease Agreements and Amendments. The two actions were subsequently consolidated by the court below for trial purposes. Named defendants included LCBE, LCBS, the State of Mississippi and all other potentially interested parties. Appellants Paul Broadhead and Morris Nicholson were named as defendants since they had been involved in four previous lawsuits concerning the mall development site.[3]
*96 ¶ 9. Defendants LCBE and LCBS filed a joint answer to the Bonita Complaints on November 16, 1995, essentially admitting all averments by Bonita. Thus, defendants LCBE and LCBS support confirmation of the land leases and by their own admission are "more closely aligned" with plaintiff Bonita.[4] Defendants Broadhead and Nicholson, the only parties opposing the leases, filed for each Complaint an Answer, Defenses, Counter-Claim and Cross-Claim on October 16, 1995, alleging that the leases were void for failure of LCBE to obtain a rental of at least five percent of the current market value of the property as required by Miss. Code Ann. § 29-3-63(2), and that the leases and subsequent amendments were "furthermore illegal and void" under Miss. Code Ann. § 29-3-107. The Bonita entities, as counter-defendants, answered their respective counter-claims on November 13, 1995, denying them in all material respects. Likewise, LCBE and LCBS, as cross-defendants, answered the cross-claims on November 16, 1995.
¶ 10. The case was marked by numerous discovery disputes and motion hearings. Bonita filed a Motion for Partial Summary Judgment on March 15, 1996, requesting the court to adjudicate and confirm that the Commercial Lease Contracts and the Amendments were duly executed and recorded in compliance with Miss. Code Ann. § 23-3-1 et. seq. The chancellor granted the Motion for Partial Summary Judgment after a hearing conducted on March 25, 1996. The court found that only two issues were saved for trial: competency of the appraisals conducted on the properties and the adequacy of consideration in the two subject leases. At the same hearing, the chancellor considered argument on Bonita's Motion in limine requesting the court to exclude testimony during trial by David Bolton and Wayne Baer, witnesses whom the appellants sought to call as experts. The court granted Bonita's Motion.
¶ 11. At trial, Lynn G. Scogin, expert witness for the appellants, sought to discredit the appraisals and update appraisals performed by Smith and relied upon by LCBE in executing the leases with Bonita. His main contentions were that Smith was not a disinterested appraiser and that Smith neglected to include in his final estimate of value certain anticipated roadway and infrastructure improvements which were tied to the mall project and funded by public monies.
¶ 12. The chancellor confirmed both leases and issued her Judgment on May 10, 1996, incorporating by reference the findings and conclusions detailed in the court's earlier Memorandum Opinion and Judgment. Broadhead and Nicholson now bring this appeal.
II.
¶ 13. Our standard of review for factual determinations made by a trial judge sitting without a jury is the substantial evidence standard. Hill v. Thompson, 564 So.2d 1, 10 (Miss. 1989); UHS-Qualicare v. Gulf Coast Community Hosp., Inc., 525 So.2d 746, 753 (Miss. 1987). We will not disturb the findings of a chancellor when supported by substantial evidence unless the chancellor abused his discretion, was manifestly wrong, clearly erroneous or an erroneous legal standard was applied. Herring Gas Co. v. Whiddon, 616 So.2d 892, 894 (Miss. 1993).
III.
¶ 14. Appellants Broadhead and Nicholson first contend that the chancellor committed reversible error in holding that Alex Smith's appraisals were competent in light of the fact that Smith holds an interest in property located in the same sixteenth section as the land he was appraising. The property referred to is a McDonald's restaurant located across the road from the subject property in this case. Appellants argue this ethical violation invalidates Smith's appraisals and addendum updates upon which LCBE and *97 LCBS based their decision to lease school lands to Bonita, thus voiding the leases.
¶ 15. Appellants base their claim in part on an ethics provision in the Uniform Standards of Professional Appraisal Practice (USPAP), a set of standards statutorily imposed on licensed real estate appraisers under Miss. Code Ann. § 73-34-37 (1995). This provision reads as follows:
An appraiser must perform ethically and competently in accordance with the standards and not engage in conduct that is unlawful, unethical, or improper. An appraiser who could reasonably be perceived to act as a disinterested third party in rendering an unbiased appraisal, review, or consulting service must perform assignments with impartiality, objectivity, and independence and without accommodation of personal interests.
USPAP Ethics Provisions, Preamble at 2 (1993 ed.). The heart of Appellants' argument is that Smith was not "disinterested" as defined by this standard.
¶ 16. In support of their claim appellants also cite Hill, 564 So.2d at 12-13, a case involving appraisers who were freeholders of sixteenth section land leases at the times of the appraisals. The Hill Court defined the term "disinterested" as meaning "[n]ot concerned, in respect to possible gain or loss, in the result of the pending proceedings or transactions; impartial, not biased or prejudiced," and noted that "interested parties" were generally defined as "parties who have a pecuniary interest in the subject of the contest." Hill, 564 So.2d at 13 (quoting Black's Law Dictionary 421 (5th ed. 1979) and Provenza v. Provenza, 201 Miss. 836, 843, 29 So.2d 669, 670 (1947)). Other states have construed the term similarly in the appraisal context. See e.g., Schipper & Block, Inc. v. Carson Pirie Scott & Co., 122 Ill. App.2d 34, 256 N.E.2d 854, 857 (1970) ("[d]isinterested" defined as "[n]ot having any interest in the matter referred to or in controversy; free from prejudice or partiality; impartial or fair minded; without pecuniary interest; not previously interested; not biased or prejudiced.").
¶ 17. In Hill, this Court concluded that fellow lessees of sixteenth section land in the county were not disinterested, Hill, 564 So.2d at 13, and voided the leases on land which they had appraised. The statute at issue in Hill expressly required that appraisers of sixteenth section land be "disinterested freeholders." Under current sixteenth section land law there is no longer an express statutory requirement that appraisers be "disinterested." Instead, the law provides that "the board of education shall appoint a competent appraiser." Miss. Code Ann. § 29-3-65(1) (1990).
¶ 18. USPAP Standard Rule 2-3 lays out the certification requirements that an appraiser must include within every written real property appraisal report:
I certify that, to the best of my knowledge and belief:
the statements of fact contained in this report are true and correct.
the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses and conclusions
I have no (or the specified) present or prospective interest in the property that is the subject of this report, and I have no (or the specified) personal interest or bias with respect to the parties involved.
my compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.
my analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
I have (or have not) made a personal inspection of the property that is the subject of this report. (If more than one person signs the report, this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property) (footnote omitted).
*98 no one provided significant professional assistance to the person signing this report. (If there are exceptions, the name of each individual providing significant professional assistance must be stated.)
USPAP, Standards Rule 2-3 (1993 ed.). It is apparent from the above provision, as well as the USPAP preamble, that these standards do not render incompetent an appraiser with interests in nearby land or in the subject property being appraised. The emphasis of USPAP is on disclosure of any material interest which the appraiser may have.
¶ 19. In the present case, Smith's 1993 appraisal report clearly followed the form of the above certification requirements. The issue, then, is whether Smith's interest in the nearby McDonald's property was an interest which would have materially affected his opinion of value on the subject property, and if so, whether it was disclosed. Appellants argue that "Mr. Smith's interest in the McDonald's property will be more secure with the development of a major, regional commercial mall constructed immediately adjacent to the McDonald's property."
¶ 20. Smith and his company each hold a five percent assignment of rents from a sublease between McDonald's Corporation and the original sixteenth section leaseholders, which Smith accepted as commissions for negotiating the sublease. The underlying sixteenth section lease is a confirmed 99-year paid-up lease with approximately eighty years remaining. The sublease to McDonald's is a "base land lease which calls for an average annualized increase of 2% with the payment schedule amount adjusted every five years ... It began based upon an annualized 6.43% return figured against a lot value of approximately $350,000 ..." In other words, the starting point for the sublease is a percentage of a fixed amount which increases according to a schedule. This confirms Smith's testimony at trial that payments to him are predetermined and therefore unconnected with the value of surrounding properties. As the appellees correctly argue, "the dollars owed to Mr. Smith were set when the deal was done in 1990 and will remain set with 2% increases per year and re-adjusted every five (5) years." Moreover, Smith testified that he disclosed his interest in the property to the School Board attorneys through whom LCBE worked.
¶ 21. This case is factually distinguishable from Hill, in which the appraisers were found not to be disinterested after they set a nominal value on sixteenth section land. In Hill, one of the appraisers was a cousin of the original leaseholder of the subject property, and the appraisers themselves were sixteenth section land leaseholders. In addition, directly after they completed their appraisal of the property that was the subject of the suit their own sixteenth section leases were renewed. Id. Unlike the freeholders in Hill, Smith cannot be said to have a "pecuniary interest in the subject of the contest." Id. Thus, the chancellor was not manifestly in error when she found Smith competent, notwithstanding his interest in the McDonald's sublease contract.
IV.
¶ 22. Broadhead and Nicholson next contend that Smith, in performing his appraisals and update appraisals, violated numerous other professional standards under USPAP which rendered his appraisals incompetent. An initial question on which the parties disagree is whether Smith's alleged USPAP violations, standing alone, would invalidate the leases, or whether such violations merely weigh in favor of invalidation. Bonita contends this case is really about one issue: whether the leases issued by LCBE should be confirmed pursuant to the provisions of Miss. Code Ann. § 29-3-1 et. seq. because the leases were issued for amounts that were not grossly inadequate in violation of Miss. Const. Art. 4, § 95.[5] Implicit in this claim is that even if Smith had violated USPAP standards, his violations would not invalidate the leases unless they constituted a material breach. Appellants respond that Mississippi law requires "a disinterested, competent appraiser who, in the performance of the appraisals *99 complies with the legally mandatory provisions of [USPAP]" as codified by Miss. Code Ann. § 73-34-37.
¶ 23. Not every breach of an appraiser's professional standards will render an appraisal invalid. Like the other codes of ethics in Title 73, USPAP is codified so that state licensing agencies may pursue those who continuously or materially breach ethical standards. See Miss. Code Ann. § 73-34-9(2)(d) & (h)(1995) (granting Mississippi Real Estate Commission and Mississippi Real Estate Appraiser Licensing and Certification Board powers to establish appropriate administrative procedures for disciplinary proceedings and suspension or revocation of licenses).
¶ 24. The issue is whether there is substantial evidence to conclude that Smith did not commit material violations of USPAP, such that LCBE failed to appoint a competent appraiser as required under Miss. Code Ann. § 29-3-65 (1990). Lynn Scogin, the appellant's expert witness, reviewed Smith's work and testified that Smith violated the following provisions of USPAP: Rule 2-1(a), requiring an appraisal report to clearly and accurately set forth an appraisal in a manner that will not be misleading; Rule 2-1(b), requiring an appraisal report to contain sufficient information to enable the person(s) who receive or rely on the report to understand it properly; Rule 2-1(c), requiring an appraiser to clearly and accurately disclose any extraordinary assumptions or limited conditions that directly affect the appraisal and indicate its impact on value; Rule 2-2(h), requiring an appraisal report to set forth the information considered, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions; Rule 1-1(b), requiring appraisers not to commit a substantial error of omission or commission that significantly affects an appraisal; and Rule 1-1(c), requiring appraisers not to render services in a careless or negligent manner.
¶ 25. Scogin also opined that Smith had violated Rule 1-4(f), which provides:
In developing a real property appraisal, an appraiser must observe the following specific appraisal guidelines, when applicable:
(f) consider and analyze the effect on value, if any, of anticipated public or private improvements, located on or off the site, to the extent that market actions reflect such anticipated improvement as of the effective appraisal date.
USPAP, Rule 1-4(f) (1993 ed.). Lastly, Scogin testified that Smith had violated USPAP Advisory Opinion G-3, dealing with update appraisals.[6]
¶ 26. Violations of the first six general provisions are based in part on Scogin's opinion that two separate value opinions should have been rendered in the 1993 appraisals one based on comparisons of vacant lands and one based on lands already leased on the theory that this makes a difference in the underlying value of the subject property. This makes no sense. The land Smith was appraising was vacant and was being leased as a future shopping mall site. How the value of already leased lands could alter the inherent value of vacant property being leased by the school board is not explained. Neither does Scogin refer to any provisions in USPAP which would require this to be done as a matter of course.
¶ 27. It is evident from his testimony that Scogin also based the general violations on the subsequent charges that Smith had breached Rule 1-4(f) and Advisory Opinion G-3. After reciting that he had found violations of the first six rules, Scogin testified:
Then we move to Rule 1-4(f), which states, consider and analyze the effects of value, if any, of anticipated public or private improvements located on or off the site to the extent that market actions reflect such anticipated improvements as of the effective appraisal date.
Well, these are the major items that I found in reviewing the appraisal reports. *100 These sections and subsections that I point out in Standard Rule, both 1 and 2. But these run hand in hand, as I previously stated, if they're like a domino effect. If one is violated, then it tends to pick up the language in the other one. But these are the basic ones that pertain to my review of these two appraisal reports and the two updates.
Scogin then went on to discuss the alleged violations under Rule 1-4(f) and Advisory Opinion G-3 almost exclusively.
¶ 28. The violation of Rule 1-4(f) relates to Scogin's opinion that Smith's final appraised value should have included anticipated infrastructure and highway improvements in the shopping mall area which would be paid for with public monies, on the theory that absence of consideration of these improvements
... would have a strong effect on the highest and best use. It would have a strong effect on the final estimate of value. It would be extremely important to determine if this was the developer's cost, or if it was someone else's cost, and if it would be one of the controlling factors in the selection of comparable sales considered for the final estimate of value.
The record shows that Smith did not neglect to consider the proposed improvements, but merely arrived at a different conclusion than Scogin as to whether they affected the inherent value of the land. On cross-examination, Smith stated his reasons for not including the proposed improvements in his final estimate of value:
I don't believe I failed to consider anything that was pertinent to this. All these improvements, you're talking about, are site specific for this project. Improvements that will happen in the normal course of development in an area would be considered. If this project does not start, these will not happen. In my opinion, at this point, with those plans and these items being tied to whether or not this mall is or is not built, it is speculative with reference to the raw market value of that piece of property.
Smith stated that he had looked at the information from the area and concluded there had been no market impact in anticipation of the mall that showed any significant increase or change in property values. Another expert, James Horne, agreed that "if the road were going to be built and not tied to a specific development, it would probably enhance the market value. But if the road were tied to a specific development, then it would not enhance the market value, in my opinion."
¶ 29. In support of their view, appellees offer the case of Jabbour v. Bassatne, 673 A.2d 201 (D.C.App. 1996) wherein the parties got into a dispute as to the "market value" of certain property. As to the definition of this term, the court ruled that
[a] reasonable person would assume land to be equivalent to specified cash only if valued in its current condition on the competitive market, not after costly alterations as yet unmade had turned it from raw land into a "developable" condition.
Jabbour, 673 A.2d at 203.
¶ 30. Broadhead and Nicholson also allege a violation of Advisory Opinion G-3, which deals with update appraisals. The opinion provides:
Since the update is an extension of an original appraisal, three conditions must be met before an update assignment is accepted:
1. The original appraiser/firm and client are involved.
2. The real estate has undergone no significant change since the original appraisal.
3. The time period between the effective date of the original appraisal (or most recent update) and the effective date of the pending update is not unreasonably long for the type of real estate involved.
USPAP, Advisory Opinion G-3, at 87 (1995 ed.). Appellants allege the second of these requirements was breached because the subject property had undergone significant change since the first appraisals were completed. They base this contention on the tentative plans for infrastructure improvements and on the "entirely different configurations" of the properties appraised at various times and the confusion which this created. While appellants argue that Smith and Horne both admitted the land had undergone *101 significant change, this is refuted by their testimony at trial. Smith consistently denied it. Horne admitted only that the individual parcels ultimately leased had changed sizes, but that the combined tract was the same general configuration as originally leased. Scogin testified that the different configurations required a new appraisal.
¶ 31. Thus, two core issues were before the court: whether the anticipated improvements should have been included in the fair market value of the land Smith appraised, and whether an update appraisal was inadequate because the land had undergone significant change. As to other violations, Horne testified that Smith violated Rule 2-1(b), since Smith had not adequately explained the proposed road in his update appraisal. Horne stated that this omission would not have constituted a breach if the original appraisal had been a restricted report to be relied upon by the client himself. But since the original 1993 reports were "self-contained," Horne felt the proposed road should have been explained since a plat included in the update appraisal raised a question not discussed in the original appraisal. Horne also stated, however, that he nevertheless considered Smith's report a "reliable and valid indicator of value." Moreover, Broadhead and Nicholson offered no independent evidence of the value of the land which would call into question the materiality of any alleged violations by Smith. Scogin himself testified that he was not able to determine the impact on value of the alleged standards violations, but only that "it would raise additional questions that would require answers." When expressly asked whether he could state the fair market value of the sites, he replied, "No, sir."
¶ 32. The chancellor considered the sparse law on these issues and the testimony of the conflicting expert opinions in light of the facts, and found that Smith was correct in not considering the anticipated improvements to the property. The chancellor concluded that the "school board cannot lease that which is not there." She also noted that Scogin had conceded that the standards are so rigid that it would be almost impossible to fully comply with them. Where conflicting testimony is presented, expert and otherwise, the chancellor is required to make a judgment on the credibility of the witnesses in order to resolve the questions before the court. Doe v. Doe, 644 So.2d 1199, 1207 (Miss. 1994). The chancellor found that Smith prepared thorough appraisals of the subject property and letter updates. Further, the language of Rule 1-4(f) and Advisory Opinion G-3 clearly grant some discretion to an appraiser in Smith's position, and any violations of the standards were minor. Thus, we conclude that the record, taken as a whole, amply supports the chancellor's findings.
V.
¶ 33. Appellants Broadhead and Nicholson next contend that the lower court, in light of the duty imposed by the importance of a sixteenth section lease confirmation suit, abused its discretion in excluding the testimony of David Bolton and/or Wayne Baer. Appellants hired Bolton shortly before trial in response to the employment of expert witness James Horne by appellees:
With the designation of Mr. Horne as an additional expert appraiser, the defendants Broadhead and Nicholson immediately set about to find an appraiser qualified to conduct the research necessary to support a limited narrative appraisal report of the subject property. On or about March 12, 1996, David Bolton of David R. Bolton, Inc., Real Property Appraisers, was reached in Austin, Texas and invited to come to Meridian, Mississippi, to determine if there were sufficient time and resources available for him to write a competent limited narrative appraisal report based on the research necessary to write such a report. Mr. Bolton and Mr. Baer evaluated the resources in Meridian on or about March 13, 1996, and determined that through intensive research and writing, a report could be produced . ..
On March 15, 1996, Bonita filed a motion in limine to exclude the testimony and reports of Bolton based on the fact that the appellants had violated the court's discovery orders. Bonita had served its First Set of *102 Interrogatories and Requests for Production of Documents on Broadhead and Nicholson on November 29, 1995, asking them to identify their expert witnesses. The court's scheduling order as originally entered gave a deadline for the completion of discovery of February 16, 1996. This deadline was later extended to March 1, 1996, to accommodate the completion of discovery and depositions. The court extended the deadline yet again for designation of additional experts to March 8, 1996, and required depositions to be completed by March 15, 1996. Broadhead and Nicholson supplemented their interrogatory responses designating Bolton and Baer on March 13, 1996, but at this time not even resumes of these experts were provided to opposing counsel. Trial was set to begin on March 27, 1996, and no continuance was sought by either party.
¶ 34. At the hearing on March 25, 1996, Broadhead and Nicholson argued that Bonita's motion to exclude should be denied, emphasizing the importance that Bolton's upcoming report on the value of the subject property would bring to the lawsuit. They cited Eastover Bank for Savings v. Hall, 587 So.2d 266 (Miss. 1991) for the proposition that "there is no hard fast rule as to what amounts to seasonable supplementation or amendment of interrogatory answers." Appellants further proclaimed a "public policy overlay of giant proportions." While recognizing the potential prejudice to opposing counsel of allowing Bolton's testimony, counsel for appellants claimed it could be cured by allowing them to depose Bolton during the week the trial was in recess.[7] Counsel for Bonita responded that this action amounted to "trial by ambush" because Bonita did not know the contents or bases of Bolton's opinions, and thus did not know "what to meet." Bonita emphasized that it was a day and a half before trial and the report by Bolton on the value of the sixteenth section land was not yet complete.
¶ 35. "[A]dmission or suppression of evidence is within the discretion of the trial judge and will not be reversed absent an abuse of that discretion." Sumrall v. Mississippi Power Co., 693 So.2d 359, 365 (Miss. 1997); General Motors Corp. v. Jackson, 636 So.2d 310, 314 (Miss. 1992), cert. denied, 513 U.S. 928, 115 S.Ct. 317, 130 L.Ed.2d 279 (1994); Walker v. Graham, 582 So.2d 431, 432 (Miss. 1991).
¶ 36. Miss.R.Civ.P. Rule 26(b)(4)(A)(i) requires that, upon request from the opposing party, a party must disclose not only the name of his expert witnesses, but he also must "state the subject matter on which the expert is expected to testify, and to state the substance of the facts and opinions to which the expert is expected to testify and a summary of the grounds for each opinion." See also T.K. Stanley, Inc. v. Cason, 614 So.2d 942, 950 (Miss. 1992). The purpose of this, and other Rules of Civil Procedure was stated in Harris v. General Host Corp.:
We have long been committed to the proposition that trial by ambush should be abolished, the experienced lawyer's nostalgia to the contrary notwithstanding. We have sought procedural justice through a set of rules designed to assure to the maximum extent practicable that cases are decided on their merits, not the fact that one party calls a surprise witness and catches the other with his pants down.
Harris v. General Host Corporation, 503 So.2d 795, 796 (Miss. 1986); In re Conservatorship of Stevens, 523 So.2d 319, 320-21 (Miss. 1988). Accord Jones v. Hatchett, 504 So.2d 198, 201 (Miss. 1987). Rule 26(f)(1)(B) further requires a party to supplement responses in regard to "the identity of each person expected to be called as an expert witness at trial, the subject matter on which he is expected to testify, and the substance of his testimony." When a breach of the discovery rules occurs, one of the sanctions authorized under the rules is "an order refusing to allow the disobedient party ... from introducing designated matters in evidence." Miss.R.Civ.P. Rule 37(b)(2)(B); Conservatorship of Stevens, 523 So.2d at 321.
¶ 37. Conservatorship of Stevens is an appraisal case which is almost directly on point. In that case, the appellants claimed the lower court erred in not allowing the testimony of an appraiser. The appellant had failed to *103 respond to a request for production of appraisals or other documents concerning the land in question until one day prior to trial, when the appellant finally supplemented her responses to include the name of the appraiser and a copy of his appraisal report. Conservatorship of Stevens, 523 So.2d at 320. The lower court excluded the expert's testimony, and this Court ruled that the exclusion was not an abuse of discretion. Id. at 321. See also Jones, 504 So.2d 198 (providing medical expert's name four days before trial not sufficient to discharge rule to supplement interrogatory answers, where supplement did not also reveal substance of expert testimony).
¶ 38. In the present case, it was not until the day before trial began that Bolton produced a preliminary report based on his research. The final report was not delivered until three days after trial had begun. In arguing for admission, counsel for Broadhead and Nicholson offered vague justifications based on public policy and the importance of the information. Further, they offered no convincing reason for waiting so late to employ Bolton it is a mystery why they considered an independent appraisal of value important only "after the designation of Mr. Horne as an additional expert appraiser." In fact, Horne was not called in Bonita's case-in-chief. He was a rebuttal witness to be called in response to Scogin. As it happened he was subpoenaed and called by Broadhead and Nicholson during their case. The chancellor considered the appropriate rules of civil procedure in ruling to exclude Bolton's and Baer's testimony, and we conclude that her ruling was not an abuse of discretion.
VI.
¶ 39. In their next assignment of error appellants Broadhead and Nicholson raise additional evidentiary issues, claiming the trial court abused its discretion by excluding the admission of certain exhibits into evidence. These items fall into two groups: the first contains certain documents submitted for the court's consideration after trial, and the second consists of certain documents excluded by the court during trial.
¶ 40. The first group of exhibits for which appellants raise an issue are related to Alex Smith's interest in the nearby McDonald's property, and were offered by appellants in a Motion to Supplement the Record filed April 24, 1996. These three documents were a Consent Judgment Confirming Sixteenth Section Land Leases, a Revised Memorandum Lease, and a Partial Assignment of Ground Sublease and Rents. They were cumulative of Smith's undisputed testimony at trial and confirmed: that the original lease was a paid-up, ninety-nine year lease confirmed by the Lauderdale Chancery Court; that the ground lease had been sublet by the original leaseholders to McDonald's Corporation; that Smith and his company, Appraisers Associated, had received a partial assignment of this sublease and the rents derived from it; and that the rentals received by Smith represented a fixed sum.
¶ 41. Miss.R.Evid. 403 expressly allows a trial court to exclude evidence which it finds to be cumulative. Knotts by Knotts v. Hassell, 659 So.2d 886, 891 (Miss. 1995); see also Clark v. City of Pascagoula, 507 So.2d 70, 76 (Miss. 1987) (holding that trial judge did not abuse his discretion by excluding cumulative evidence). "The touchstone of Rule 403 is whether or not the evidence of whatever type is cumulative, and if evidence is in fact cumulative it is within the discretion of the court to exclude said evidence." Knotts, 659 So.2d at 891. Although these documents should be argued to be the best evidence of Smith's arrangement, see Miss.R.Evid. 1002, the nature of the arrangement is undisputed. The parties differ only over the consequences of the arrangement. Thus, the chancellor did not abuse her discretion by failing to consider these documents in her ruling.
¶ 42. The second group of items for which appellants raise an issue consist mainly of documents relating to the roadway infrastructure improvements proposed by various government agencies in connection with the Bonita Lakes mall development project. Another document in this group is the Participation Agreement entered into between LCBE and Hannaford Properties which settled the lease confirmation lawsuit between *104 those parties. It is worth noting that this document was already in evidence, absent the unidentified handwriting found on appellants' proffered copy.
¶ 43. The lower court issued clear instructions for how discovery was to proceed, and as noted above the court extended its deadlines numerous times. Moreover, when Broadhead did not comply fully with Bonita's requests for discovery, Bonita filed a Motion to Compel Discovery, and the chancellor issued an order compelling Broadhead to "produce any other documents which he relied upon in support of his answer, counterclaim and cross-claim on or before March 8, 1996." When asked at trial to explain the failure to produce these documents, Broadhead's lawyer admitted that he had been in possession of the documents for some time and that failure to produce them was due to "negligence" and "inadvertence on the part of counsel." The chancellor excluded the documents on the ground that "inadvertence is not sufficient excuse to avoid the Orders of this Court." She also noted that this was not the first discovery violation by counsel for appellants, and cited counsel for contempt of court.
¶ 44. The control of discovery is a matter committed to the sound discretion of the trial judge. Barnes v. A Confidential Party, 628 So.2d 283, 290 n. 7 (Miss. 1993); Dawkins v. Redd Pest Control Co., Inc., 607 So.2d 1232, 1235 (Miss. 1992). The trial court has need of great flexibility in dealing with abuses of the discovery rules, and this Court has stated that trial courts have considerable discretion in the imposition of sanctions under Miss.R.Civ.P. Rule 37. Cunningham v. Mitchell, 549 So.2d 955, 958 (Miss. 1989); White v. White, 509 So.2d 205, 207 (Miss. 1987). Where a party fails to comply with a court order permitting discovery, the court may refuse to allow the disobedient party to support its claims with the undisclosed evidence. Ladner v. Ladner, 436 So.2d 1366, 1370 (Miss. 1983). In the present case, there was no abuse of the chancellor's discretion.
VII.
¶ 45. Appellants Broadhead and Nicholson launch yet another attack to invalidate the leases, this time based on the claim that the members of LCBE and LCBS breached their fiduciary duties as trustees of school lands. The charge centers around the so-called Hannaford properties, which were the subject of a confirmation suit against LCBE by pre-existing leaseholders Hannaford Properties, L.P.[8] Settlement was reached and memorialized in a Participation Agreement between LCBE and Hannaford, by which Hannaford would receive a portion of the revenue from the portions of land it released back to LCBE. Broadhead and Nicholson contend
... The Court in this case merely relied on John Ed Ainsworth's formula of determining fair market rental without considering the effect of the loss of the Hannaford Properties revenues. Because of the Hannaford deal, 40% of gross revenue from significant portions of each of the leases in question is not going to benefit the school children at all, but rather is going to an interested, private third party... The Ainsworth formula conspicuously fails to consider the loss of these revenues and there is no testimony on behalf of the School Board or Board of Supervisors to explain how, with the loss of significant proceeds from the leases in questions [sic], the School Board will receive the statutory minimum from the leases in question in this case.
¶ 46. LCBE and LCBS argue that this claim was dispensed with in the court's grant of Partial Summary Judgment, which established that the lease contracts were made and recorded in substantial conformity with the law pursuant to Miss. Code Ann. § 29-3-52 and saved for trial only the issues of competency of the appraisals and adequacy of consideration. Appellants' claim goes to the fundamental issue of whether adequate consideration was obtained for the lease of sixteenth section land. Therefore, the claim must be addressed on the merits, and reversed if it is shown the chancellor was manifestly wrong in concluding that adequate consideration *105 was paid in spite of a breach of fiduciary duty on the part of LCBE and LCBS.
¶ 47. Sixteenth section school lands, or lands granted in lieu thereof, constitute property held in trust for the benefit of the public schools and must be treated as such. Miss. Code Ann. § 29-3-1(1) (1990). The standard of care chargeable to members of school boards in the performance of this statutory duty is the same standard applicable to a general trustee. As trustees, members of the Board "are bound in the management of all the matters of the trust to act in good faith and employ such vigilance, sagacity, diligence and prudence as in general prudent [persons] of discretion and intelligence in like matters employ in their own affairs." Turney v. Marion County Board of Education, 481 So.2d 770, 777 (Miss. 1985); (quoting Bogert, Law of Trusts, § 93 (5th ed. 1973)). see also Morrow v. Vinson, 666 So.2d 802, 806 (Miss. 1995). Included in this standard of care is a duty to obtain rental fees on leased land which meet the statutory minimum provided in § 29-3-63.[9]
¶ 48. The issue is whether LCBS and LCBE, in spite of the Participation Agreement with Hannaford, breached their fiduciary duties by obtaining less than the statutory minimum of five percent of current market value on lands currently being leased. However, it cannot be said that LCBE was under any statutory duty for already encumbered land. Hannaford had a 99-year paid-up lease on the entire 40-acre parcel. LCBE considered defending the confirmation lawsuit against Hannaford, but concluded that it was unclear whether the lease would be confirmed and that it was better to settle. The settlement, which released thirty-five crucial acres back to LCBE, allowed the shopping mall negotiations to proceed otherwise the land would have remained encumbered, and LCBE would have gained nothing more from those sixteenth section lands until the lease expired in the year 2061. The leases to Bonita do not extend beyond this time period. Thus, LCBE was under no duty to obtain the statutory minimum from the thirty-five acres released back to them.
¶ 49. When the two Bonita entities decided to take separate leases, the land was divided into two tracts, but were not divided as they originally had been in the original appraisals.[10] Thus, some portion of the land for which LCBE is under a statutory duty to collect five percent of current market value falls into each of these tracts. As to the 116.41-acre parcel, the amount obtained was well within the statutory minimum. It has already been established that Smith's appraisals and updates were an adequate and reliable indication of value. Ainsworth extracted nine percent of Smith's last appraised value in his negotiations with Bonita. As to the 43.44-acre parcel, Smith performed an update appraisal on this parcel after a mistake in the description added to its acreage, and he arrived at a new value figure of $360,000 for the entire parcel. The record indicates that LCBE obtained at least $18,038.23 for the lease of the 43.44-acre parcel.[11] Even assuming that LCBE was required to obtain five percent of this larger figure for the part of the land currently being leased, it can readily be concluded that it did so. Regardless of the portion of this parcel which was statutorily affected, it would be pro-rated according to the figures cited. Thus, since $18,000 constitutes five percent of $360,000, that percentage was obtained *106 for the statutorily affected portion, albeit barely.
¶ 50. Appellants offer no evidence that the decision not to defend the confirmation suit was fundamentally flawed. Absent convincing evidence to the contrary, it cannot be said that the members of LCBE or LCBS breached their fiduciary duties. There is substantial evidence to conclude that the school board extracted at least five percent of the fair market value of lands under the school board's control, and the chancellor was not manifestly wrong in determining that adequate consideration was obtained by LCBE on these lands in spite of the Participation Agreement with Hannaford Properties.
VIII.
¶ 51. Finally, Broadhead and Nicholson claim that the lease on the larger parcel rented to BMLP is invalid because "the uncontroverted testimony contained in the record is that there simply is no appraisal of the 116.41-acre tract of land representing the lease to [BMLP]." Appellees claim this issue is waived under Supreme Court procedure because it was not listed in the appellants' Statement of Issues on Appeal filed on June 5, 1996. The Statement of Issues is required under Miss. R.App. P. Rule 10(b)(4). However, the Comment to Rule 10 clearly states that "[a] designation of certain issues under subdivision (b)(4) does not preclude a party from stating other issues in its brief under Rule 28(a)(3)." Miss. R.App. P. Rule 10 cmt. Thus, the issue will be addressed on the merits.
¶ 52. Smith conducted appraisals of the original 120-acre parcel and the 40-acre parcel in 1993. On May 26, 1995, Smith combined these parcels and performed his update appraisal on the resulting 159.85-acre tract of land, setting its value at $4,614.00 per acre. BMLP and BPI subsequently decided to lease two separate properties for the mall development, and the land was again split into two parcels, one containing 43.44 acres and the other containing 116.41 acres. A separate appraisal was performed on the smaller parcel because an error in the metes and bounds description in the original Commercial Lease Contract added to its acreage. No separate appraisal was performed on the larger parcel.
¶ 53. As already noted, these parcels were not divided in the same manner as the earlier 120-acre and 40-acre tracts.[12] The 116.41-acre parcel thus includes the southern section of the original 40-acre parcel. The chancellor mischaracterizes the facts in her Opinion when she states that "[t]he 116.41 acre tract leased to [BMLP] is part of the 120-acre tract on which the previous appraisals were conducted." Appellants emphasize this mischaracterization by the court to form their argument.
Bonita attempts to persuade this Court to take the erroneous position adopted by the Chancery Court and mistakenly subsume the 116.41 acre tract into the original 120 acre tract appraised by Smith on September 1, 1993... . The 116.41 acre tract is not "part of" the 120 acres appraised by Smith, nor is it "the same parcel of land" as incorrectly stated by the Chancellor in this case. This can be easily seen by referring to the platted property descriptions of these entirely different tracts of land.
¶ 54. It is likely that the chancellor's mistake was inadvertent, but, in any event, the mistake is not material to the outcome of this issue. The character of the land is sufficiently similar to the original 120-acre tract. Approximately 100 of the acres were in that tract and the remainder was the southern portion of the former 40-acre parcel, which is topographically similar. Moreover, appellants put forth no contradictory evidence that there was any reason for LCBE to incur the expenses of conducting another appraisal on that land. A competent and reliable update appraisal was done on the combined tract, which was then divided. LCBE derived the same revenue that it would have gotten had the tract not been divided. When an error occurred adding 1.63 acres to the smaller portion, it was reappraised and adjusted accordingly. No acreage was added to the 116.41-acre parcel. *107 Thus, there is substantial evidence to support the chancellor's findings that "[a] competent appraisal has been performed, and an appropriate letter update of that appraisal was also prepared. The division of property into two parcels for leasing to the two Bonita entities is not a significant change which will require a separate appraisal of the 116.41 acres."
IV.
¶ 55. For the forgoing reasons, the chancery court's confirmation of the sixteenth section land leases is affirmed.
¶ 56. AFFIRMED.
PRATHER, P.J., and PITTMAN, McRAE, JAMES L. ROBERTS, Jr., SMITH and MILLS, JJ., concur.
DAN LEE, C.J., and SULLIVAN, P.J., not participating.
NOTES
[1] The tract was originally thought to contain 158.23 acres, due to a mistake which omitted approximately 1.63 acres.
[2] The so-called "Hannaford Properties" referred to in this litigation essentially comprise the land which was the subject of the original 40-acre appraisal. This land was the subject of a lawsuit between LCBE and Hannaford Properties, L.P., the plaintiffs/then leaseholders of a sixteenth section lease who sought confirmation as to adequacy of consideration. The suit was settled and memorialized in a Participation Agreement by which the five acres of road frontage was confirmed. The remaining thirty-five acres was surrendered back to LCBE and became a part of the two sixteenth section Commercial Lease Contracts now on appeal. Hannaford Properties would also be paid forty percent (40%) of the lease income from the land surrendered back to LCBE. The Participation Agreement was approved by the Secretary of State.
[3] Paul Broadhead owns the existing Village Fair Mall in Meridian, and there is disagreement between the parties over the relevance of his true motivations. Broadhead correctly argues he was a defendant in this lawsuit and merely answered the complaint. Therefore, the issues will be addressed on their independent merits without regard to Broadhead's alleged ulterior motives.
[4] Likewise, the State of Mississippi did not deny the averments of the complaint.
[5] Miss. Const. art. 4, § 95 provides that "[l]ands belonging to, or under the control of the state, shall never be donated directly or indirectly, to private corporations or individuals ..." This provision has been interpreted to prohibit inadequate consideration for leases on public lands.
[6] Scogin originally found multitudinous violations of the Rules, which he recited in an Appraisal Review dated December 27, 1995. However, many of these referenced rules appeared for the first time in the 1995 version of USPAP, and it was brought out at trial that the 1993 version of USPAP would apply to the appraisals being reviewed since they occurred in 1993.
[7] Trial was conducted on March 27, 28 and 29 and April 8, 9, 10 and 12, 1996.
[8] See supra note 2.
[9] Miss. Code Ann. § 29-3-63(2) (Supp. 1996), provides that "[t]he board of education shall not lease or extend a lease on land classified as industrial or commercial at an annual rental less than five percent (5%) of the current market value, exclusive of buildings or improvements not owned by the school district."
[10] The original 120-acre parcel consists of the northeast, southeast and southwest quarter-sections of the sixteenth section in issue. The original 40-acre parcel essentially comprised the remaining northwest quarter-section. In the subsequent division, the 43.44-acre parcel lies north of proposed Bonita Lakes Drive and covers roughly the top half of the northeast and northwest quarter-sections; the 116.41-acre parcel lies south and constitutes the remaining land from the combined tract.
[11] There is other evidence in the record to suggest that LCBE received slightly more for the lease. Whichever figure was ultimately obtained, it apparently was calculated by applying the new estimate of value only to the acreage which was added.
[12] See supra note 10. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1339217/ | 168 S.E.2d 500 (1969)
5 N.C. App. 501
STATE of North Carolina
v.
William E. PATTON, Jr.
No. 6915SC283.
Court of Appeals of North Carolina.
July 23, 1969.
Certiorari Denied August 29, 1969.
Atty. Gen. Robert Morgan and Staff Atty. Richard N. League, Raleigh, for the State.
*501 John D. Xanthos, Burlington, for defendant.
MALLARD, Chief Judge.
In the record before us defendant has 120 purported assignments of error based on 120 exceptions taken. A proper assignment of error is the statement of the error complained of when there is a grouping together of all exceptions taken during the trial of a case relating to one principle of law. In this case the defendant has ten exceptions and ten different assignments of error to the use by the judge in charging the jury of the two words "he testified." There are six exceptions and six assignments of error to the use by the judge in charging the jury of the three words "the witness testified," and six more exceptions and assignments of error to the use by the judge in charging the jury of the two words "he stated." The defendant in his brief states that forty-nine of the assignments of error pertain to expressions used by the court throughout the charge such as "he testified," "he stated," "the witness said" and similar phrases. It is thus seen that there was no grouping together under one assignment of error of all the exceptions taken relating to this one principle of law. There were altogether 116 exceptions and 116 purported assignments of error stated with respect to the charge. We have carefully read the charge and are of the opinion that, taken as a whole, no prejudicial error is made to appear therein.
Defendant also contends that the court committed error in granting the motion of the State to consolidate the safecracking case with the breaking and entering and larceny case. The evidence tended to show that the place of business operated by Carl Thomas Needham under the name of Needham's Produce Market, at 2223 Maple Avenue, Burlington, was broken into and entered on the evening of November 9, 1968, or early morning of November 10, 1968, by the defendant acting in concert with Everette O. Heritage and Jim Griggs. Heritage and Griggs testified as witnesses for the State. The defendant offered no witnesses. After the entry was made through a back window that had been broken out by the defendant, a safe containing over seven hundred dollars in money was stolen therefrom and taken to a garage. The defendant helped to open the safe with an iron bar and an acetylene torch. The money from the safe was divided between the three of them. The three charges included in the two bills of indictment were so connected as to make the three offenses one continuous criminal episode. The court did not commit error in ordering the cases consolidated. G.S. § 15-152. State v. Arsad, 269 N.C. 184, 152 S.E.2d 99 (1967).
Defendant's second contention is that the court committed error in failing to allow defendant's motion for judgment as of nonsuit at the close of the evidence. This contention is without merit and requires no discussion.
We have considered all of the assignments of error brought forward and discussed by defendant in his brief and find that no prejudicial error has been made to appear.
No error.
BRITT and FRANK M. PARKER, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1339218/ | 168 S.E.2d 9 (1969)
5 N.C. App. 113
STATE of North Carolina
v.
Donald Fredrick FAULKNER and Arthur Smith.
No. 6926SC235.
Court of Appeals of North Carolina.
June 18, 1969.
*11 Atty. Gen. Robert Morgan and Staff Atty. Richard N. League, Raleigh, for the State.
Arthur Goodman, Jr., Charlotte, for defendant Faulkner.
Franklin L. Teague, Charlotte, for defendant Arthur Smith.
MALLARD, Chief Judge.
At the trial when the confessions of the defendants were sought to be introduced into evidence, the trial court held a voir dire as to their admissibility and made the following findings of fact and conclusion of law:
"Based upon the foregoing testimony, this court finds as a fact that the defendant, Donald Fredrick Faulkner and the defendant Arthur Smith were advised of their right to remain silent, that anything that either of the defendants. * * * that anything that the defendant said could be used against him in a court of law; thirdly, that he has the right to remain silent, I mean, has the right to the presence of an attorney during the questioning and that if he could not afford an attorney that one would be provided for him at no cost, and that any statement which either of the defendants made to the witness were knowingly, and intelligently, understandingly and voluntarily made."
G.S. § 15-41 dealing with when an officer may arrest without a warrant provides in part:
"(2) When the officer has reasonable ground to believe that the person to be arrested has committed a felony and will evade arrest if not immediately taken into custody."
Conceding without deciding that the arrest of defendant Faulkner at 4:00 A.M. was illegal, it has little bearing on the *12 decision in this case. In the case of State v. Moore, 275 N.C. 141, 166 S.E.2d 53 (1969) we find the following language:
"We condemn any illegal act by police officers. However, when viewed in the narrow field of voluntary confession, we fail to see why an illegal arrestunaccompanied by violent or oppressive circumstanceswould be more coercive than a legal arrest.
Both reason and weight of authority lead us to hold that every statement made by a person in custody as a result of an illegal arrest is not ipso facto involuntary and inadmissible, but the facts and circumstances surrounding such arrest and the in-custody statement should be considered in determining whether the statement is voluntary and admissible. Voluntariness remains as the test of admissibility."
In the present case, the findings of fact and conclusion of law as to the voluntariness of the statements of the defendants are amply supported by the evidence and when viewed in the totality of the circumstances of this case we hold that their admission was not error. See Frazier v. Cupp, 394 U.S. ___, 89 S.Ct. 1420, 22 L.Ed.2d 684 (1969). See also State v. Vickers, 274 N.C. 311, 163 S.E.2d 481 (1968). However, since there were three witnesses who saw the crime committed it may be that the Solicitor will not deem it expedient to attempt to use these statements, as such, on the new trial.
The defendants contend that it was error to permit the State "to introduce the confessions of both defendants in a joint trial where the confession of each implicated the other." The defendants, by going upon the witness stand and subjecting themselves to cross examination by the other, waived this objection. In State v. Fox, 274 N.C. 277, 163 S.E.2d 492 (1968), there appears the following:
"The result is that in joint trials of defendants it is necessary to exclude extra-judicial confessions unless all portions which implicate defendants other than the declarant can be deleted without prejudice either to the State or the declarant. If such deletion is not possible, the State must choose between relinquishing the confession or trying the defendants separately. The foregoing pronouncement presupposes (1) that the confession is inadmissible as to the codefendant * * * and (2) that the declarant will not take the stand. If the declarant can be cross-examined, a codefendant has been accorded his right to confrontation." (Emphasis added).
In this case, both defendants later took the stand and were accorded their right to confrontation. Defendants cite no authority supporting their contention. However, the defendants say that both of them denied having made the confession and "if cross-examination can produce nothing more than a denial by the witness that he made the statement at all, then there is no cross-examination." Defendants were brought face to face with each other on the witness stand. Each had the right to cross-examine the other. The right to cross-examine does not mean that the cross-examination must produce that which is favorable. It is common knowledge that it frequently produces unfavorable results.
The trial judge instructed the jury that they could find each defendant guilty of armed robbery as charged or not guilty. Each of the defendants contend that the trial judge committed prejudicial error in failing to submit the lesser offense of common law robbery. Robbery at common law is defined as "the felonious taking of money or goods of any value from the person of another, or in his presence, against his will, by violence or putting him in fear." State v. Bell, 228 N.C. 659, 46 S.E.2d 834 (1948). The statute G.S. 14-87 "does not add to or subtract from the common-law offense of robbery except to provide that when firearms or *13 other dangerous weapons are used in the commission or attempted commission of the offense sentence shall be imposed as therein directed." State v. Jones, 227 N.C. 402, 42 S.E.2d 465 (1947).
In the case of State v. Davis, 242 N.C. 476, 87 S.E.2d 906 (1955) it is said:
"An indictment for robbery with firearms will support a conviction of a lesser offense such as common law robbery, assault with a deadly weapon, larceny from the person, simple larceny or simple assault, if a verdict for the included or lesser offense is supported by the evidence on the trial. State v. Bell, 228 N.C. 659, 46 S.E.2d 834; State v. Holt, 192 N.C. 490, 135 S.E. 324."
In the case of State v. Hicks, 241 N.C. 156, 84 S.E.2d 545 (1954) it is said:
"The necessity for instructing the jury as to an included crime of lesser degree than that charged arises when and only when there is evidence from which the jury could find that such included crime of lesser degree was committed. The presence of such evidence is the determinative factor. Hence, there is no such necessity if the State's evidence tends to show a completed robbery and there is no conflicting evidence relating to elements of the crime charged. Mere contention that the jury might accept the State's evidence in part and might reject it in part will not suffice."
The defendants' evidence was that they did not participate in any robbery and that they were at another place at the time the crime was committed. Each defendant testified and offered evidence tending to corroborate him in his testimony that he was at another place at the time the robbery occurred. In the evidence of the defendants there is nothing that would require the judge to charge on any lesser offense.
The State's evidence tended to show by three witnesses and the confession of each of the defendants that the two defendants robbed the cashier with a pistol. State's witness Smith testified that the defendant Arthur Smith told him that defendant Donald Faulkner got a "Roscoe" at a poolroom, and that Donald Faulkner told him that "he pulled a gun out of his pocket and hit the woman on the head."
A pistol is sometimes referred to as a "Roscoe." A pistol is a "short firearm, intended to be aimed and fired from one hand." Black's Law Dictionary, Fourth Edition. A gun is a portable firearm and usually includes pistols, carbines, rifles, and shot guns.
The State's witness Pearline Anthony testified that the defendant Faulkner hit her on the side of the head with a pistol. On cross-examination she stated "I couldn't be certain whether this was a real pistol or a toy pistol. It just looked like a pistol." The State's other two witnesses to the robbery testified that the defendant Faulkner had a .22 caliber pistol. This testimony of the State's witness Anthony that she couldn't be certain whether it was a real pistol or a toy pistol relates to a material element of the crime of armed robbery. This testimony is in conflict with the other testimony of this same witness that it was a pistol, and required the judge, without a request from the defendants, to also charge the jury that they could return a verdict of guilty of the lesser included offense of common law robbery. It was prejudicial error to fail to do so. If one of the witnesses could not tell whether it was a pistol or a toy, the jury should determine this conflict in the State's evidence.
The actual possession and use or threatened use of firearms or other dangerous weapon is necessary to constitute the offense of robbery with firearms or other dangerous weapon. Whether it was a firearm or a toy pistol, and if a toy pistol, whether it was a dangerous weapon were questions for the jury under proper instructions. State v. Keller, 214 N.C. 447, 199 S.E. 620 (1938). See annotation *14 in 61 A.L.R.2d 996, entitled "RobberyToy or Simulated Gun."
Defendants make other assignments of error, but since the case goes back for a new trial we do not deem it necessary to discuss them.
New trial.
BRITT and PARKER, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1339219/ | 168 S.E.2d 686 (1969)
5 N.C. App. 345
Lettie W. HUGHES
v.
Kendall Gene LUNDSTRUM.
Tony James HUGHES, by his next friend, Lettie W. Hughes
v.
Kendall Gene LUNDSTRUM.
No. 695SC333.
Court of Appeals of North Carolina.
July 23, 1969.
*689 James, James & Crossley, by John F. Crossley and J. C. Wessell, Jr., Wilmington, for plaintiff appellants.
W. G. Smith, Wilmington, for defendant appellee.
CAMPBELL, Judge.
The first assignment of error was to the action of the trial judge in interrupting the direct examination of the plaintiff in order to permit defense counsel to conduct a voir dire examination in the absence of the jury. At the time plaintiff was in the process of describing to the jury what occurred immediately prior to the automobile striking the bridge. The defense counsel interrupted and suggested to the judge that on a previous trial, the plaintiff had testified pertaining to the accident and then on cross-examination had stated that he did not know those things of his own knowledge and the testimony had been stricken. The Court suggested that the voir dire examination be conducted in order to eliminate any incompetent testimony by the plaintiff.
In this, there was no error, for the trial judge, in the interest of a fair and impartial trial, must frequently conduct voir dire examinations in order to eliminate incompetent and prejudicial testimony before the jury which might otherwise necessitate a mistrial.
The second assignment of error was to the refusal of the trial court to permit the plaintiff to testify that his memory was not as good six months or a year after the accident as it was at the time of the trial. Any error in this regard was cured, however, by the fact that the court did permit the plaintiff to testify that when he was adversely examined in July 1968 by the defendant, he did not recall but about two-thirds of the facts pertaining to the accident. He was permitted then to testify that he was able to recall more now than he was at the time "because my memory came back to me". The plaintiff also testified, "Well when you have a loss of memory, well my loss of memory, after the accident a few months after the accident I could remember portions of it but not all of it and then as I familiarized myself with the area where the accident happened and thinking about it constantly, it comes back to me like pieces to a puzzle or something." Plaintiff also testified as to the length of time that he remained unconscious and his various head injuries.
The evidence which was thus admitted, eliminated any prejudicial effect of the evidence which the plaintiff was not permitted to testify. There is no merit in this assignment of error.
The third assignment of error by the plaintiff was to the effect that the trial court permitted the introduction of evidence as to the manner in which the plaintiff drove his automobile during the early part of the evening just prior to the accident.
In this regard, the plaintiff was asked on cross-examination whether he tried to induce drivers of other vehicles to race with him when he was driving the defendant across the City of Wilmington in the plaintiff's automobile in order to show the defendant how his automobile operated and to compare its speed with the speed of the Corvette. The defendant denied that he had endeavored to get others to race with him. He did admit, however, that he talked about the speed of his automobile when he was racing it. He denied, however, doing anything to demonstrate its speed to the defendant. The defendant testified over objection that the plaintiff requested him to take the plaintiff for a ride in the Corvette, and that the plaintiff "said he would like to see how my car turned on in comparison with his". The defendant also testified that when this conversation took place, the plaintiff was driving the plaintiff's automobile, and that he would drive *690 up to a stop light and then would accelerate fast when the light changed.
All of this evidence was relevant and material to show the background of what had been going on between the plaintiff and the defendant with regard to testing and demonstrating automobiles and their respective speeds and ability to accelerate shortly before the accident.
There is no merit in this assignment of error.
The fourth assignment of error was to the effect that the defendant was permitted to cross-examine his own witness.
This assignment of error is directed to the fact that sometime prior to the trial the defendant had taken the deposition of Earl Bucko, a witness for the defendant whose testimony the defendant desired to preserve in the event the witness could not be present for the trial. This witness was the defendant's companion at the time the defendant became acquainted with the plaintiff. The witness Bucko was present at the trial and testified on behalf of the defendant.
On cross-examination of this witness, plaintiff questioned him about the deposition and some of the testimony contained in the deposition. On redirect examination, this witness was asked if he recalled some of the questions that defendant's attorney had asked him at the time of the deposition, and his answers thereto. The court restricted this testimony to corroboration of the witness Bucko in the event that the jury found that it did corroborate him. This testimony did not constitute a cross-examination of the witness Bucko, and it having been restricted to the purpose of corroboration, there was no error.
This assignment of error is without merit.
The fifth assignment of error was to the refusal of the court to submit an issue of wilful and wanton negligence on the part of the defendant. Such an issue was tendered in apt time by the plaintiff, and the court refused to submit same.
The evidence on behalf of the defendant was to the effect that the plaintiff asked him several times to take him for a ride in the Corvette automobile in order that the plaintiff would have an opportunity to see it and experience a ride in it as the plaintiff had never ridden in a Corvette. The defendant at first refused to do so, but finally acceded to the request of the plaintiff. He took the plaintiff out for a demonstration and was requested on this trip on at least two occasions "to turn it on", and by that it was meant to speed it up. When requested the last time to "turn it on", the defendant was then driving about 60 to 65 miles per hour. Pursuant to this request, the defendant stated, "I just kicked it" meaning "I stepped on the accelerator". At that time, he did not know how close he was to the bridge. In the language of the defendant:
"Well, it accelerated and I saw the bridge coming up and I felt a bump, I didn't know what it was, but the back end of the car started drifting.
* * * * * *
"Well, there is a curve there and the back end of the car started sliding to the right.
* * * * * *
Well, I tried to correct it with the steering.
* * * * * *
Before I knew it the road narrowed down to two lanes and I was in the outside lane and I didn't realize that the lane ended before the bridge, and to get on the bridge, I would have had to move one complete lane almost to the left and the car was drifting to [sic] badly to make that much of a correction.
* * * * * *
I struck the bridge.
*691 * * * * * *
* * * everything went black, there was a lot of noise, I don't actually remember striking the bridge, the next thing I remember was sliding down the road on my back."
The defendant testified that he did not apply the brakes as that would accentuate the skidding and that he tried to get out of the skid by turning the front wheels in the direction of the skid, but that he did not have time to do so.
All of the evidence in this case taken in the light most favorable to the plaintiff reveals two young men very much interested in automobiles, particularly with with regard to the speed of automobiles and the respective performance of automobiles with regard to rapid acceleration. They had discussed these matters for nearly five hours. The plaintiff was familiar with the area where the automobile was being driven; knew that the particular automobile was designed for high speed and rapid acceleration; knew that the driver was not familiar with the area and the road conditions. With this background and knowledge, plaintiff still urged the defendant driver to demonstrate the Corvette automobile. The defendant driver did do as requested. Did this constitute wilful and wanton negligence?
In Wagoner v. North Carolina R. R., 238 N.C. 162, 77 S.E.2d 701 we find:
"`The term "wanton negligence" * * * always implies something more than a negligent act. This court has said that the word "wanton" implies turpitude, and that the act is committed or omitted of willful, wicked purpose; that the term "willfully" implies that the act is done knowingly and of stubborn purpose but not of malice. * * * Judge Thompson says:
"The true conception of willful negligence involves a deliberate purpose not to discharge some duty necessary to the safety of the person or property of another, which duty the person owing it has assumed by contract, or which is imposed on the person by operation of law. Willful or intentional negligence is something distinct from mere carelessness and inattention, however gross. We still have two kinds of negligence, the one consisting of carelessness and inattention, whereby another is injured in his person or property, and the other consisting of a willful and intentional failure or neglect to perform a duty assumed by contract or imposed by operation of law for the promotion of the safety of the person or property of another." Thompson on Neg. (2d Ed.), § 20, et seq.' Bailey v. North Carolina R. Co., 149 N.C. 169, 62 S.E. 912, 914.
To constitute willful injury there must be actual knowledge, or that which the law deems to be the equivalent of actual knowledge, of the peril to be apprehended, coupled with a design, purpose, and intent to do wrong and inflict injury. A wanton act is one which is performed intentionally with a reckless indifference to injurious consequences probable to result therefrom. Ordinary negligence has as its basis that a person charged with negligent conduct should have known the probable consequences of his act. Wanton and willful negligence rests on the assumption that he knew the probable consequences, but was recklessly, wantonly, or intentionally indifferent to the results. Everett v. Receivers of Richmond & D. R. Co., 121 N.C. 519, 27 S.E. 991; Ballew v. Asheville & E. T. R. Co., 186 N.C. 704, 120 S.E. 334; Foster v. Hyman, supra [197 N.C. 189, 148 S.E. 36]; State v. Stansell, 203 N.C. 69, 164 S.E. 580; 38 Am.Jur., Negligence, Sec. 48. `In strictly accurate use, the terms "willfulness" and "wantonness" express different ideas and are clearly distinguishable, the distinction resting chiefly in the nature and extent of intent involved. It has been said that "the difference is that between him who casts a missile intending that it shall strike another and him who casts it where he has reason to believe *692 it will strike another, being indifferent whether it does so or not."' 65 C.J.S. Negligence § 9, p. 379."
It was not error under the facts of this case, for the trial court to refuse to submit the issue of wilful and wanton negligence tendered by the plaintiff.
Plaintiff relies upon the case of Pearce v. Barham, 271 N.C. 285, 156 S.E.2d 290 in support of the proposition that an issue of wilful and wanton negligence should have been submitted to the jury. The Pearce case is clearly distinguishable on its facts from the case sub judice. The charge of the court to the jury in the instant case was not brought forward and no error was assigned to any portion of the charge.
We find from the record as a whole that the plaintiff received a fair and impartial trial, and the case was submitted to the jury upon the issues raised by the pleadings and the evidence and under a charge to which no error has been assigned. In the trial we find
No error.
BROCK and MORRIS, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1856559/ | 235 B.R. 660 (1999)
In re Patrick A. PADGETT, Debtor.
W. Sharon Parker, Plaintiff,
v.
Patrick A. Padgett, Defendant.
Bankruptcy No. 98-07945-3F7. Adversary No. 99-53.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
May 18, 1999.
*661 W. Sharon Parker, Jacksonville, FL, pro se.
Edward P. Jackson, Jacksonville, Florida, for defendant.
Valerie Hall Manuel, Jacksonville, FL, Chapter 7 Trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
JERRY A. FUNK, Bankruptcy Judge.
This proceeding is before the Court on a Complaint Seeking Exception to Dischargeability filed by W. Sharon Parker ("Plaintiff") on February 17, 1999. (Doc. 1.) Patrick Arthur Padgett ("Defendant") filed an answer to Plaintiff's complaint on April 13, 1999. (Doc. 6.) A trial was conducted on May 13, 1999. Upon the evidence presented, the Court makes the following findings of fact and conclusions of law.
FINDINGS OF FACT
The facts of this case are not in dispute. On March 31, 1988, Defendant executed a promissory note in favor of Plaintiff in the amount of $6,000.00. That note provided that:
PAT PADGETT [Defendant] is authorized to apply proceeds to the purchase *662 of boats as an investment for profit, however, he understands that he will be responsible for payment of the Six Thousand and no/100 Dollars ($6,000.00) with no interest due if no profit is derived with said investments.
Plaintiff filed a complaint in the Circuit Court, Fourth Judicial Circuit, in and for Duval County, Florida in 1990 based on Defendant's failure to comply with terms of the promissory note. The state court complaint alleged counts of fraud and deceit, obtaining money by false pretense under Florida Statutes, Chapter 817, and breach of contract.[1]
On July 2, 1991, a Final Judgment was entered in the Circuit Court, Fourth Judicial Circuit, in and for Duval County, Florida. That Judgment provides[2]:
This action was tried before the Court. The Defendant was notified of the trial date and time, but failed to appear. On the evidence presented, the Court finds that Plaintiff, W. SHARON PARKER, sustained actual damages in the amount on Four Thousand Fifty Dollars ($4,050.00) and is entitled to recover treble damages, attorneys' fees and costs by reason of her cause of action for civil theft pursuant to § 772.11 and § 812.14(sic), Florida Statutes.
Accordingly,
IT IS ADJUDGED that Plaintiff, W. SHARON PARKER, recover from Defendant, PAT PADGETT, a/k/a PATRICK ARTHUR PADGETT, individually and doing business as PADGETT CUSTOM BOATS, damages in the amount of Twelve Thousand One Hundred Fifty Dollars ($12,150.00), interest to the date of this Judgement in the amount One Thousand Twenty One Dollars and Eleven Cents ($1,021.11), attorneys' fees in the amount of Five Thousand Dollars ($5,000.00) and costs in the amount of One Hundred Seven Dollars and Fifty Cents ($107.50), for the total amount of Eighteen Thousand Two Hundred Seventy Eight Dollars and Seventy One Cents ($18,278.71), that shall bear interest at the rate of Twelve Percent (12%) a year, for which let execution issue.
Plaintiff seeks to except from discharge pursuant to Section 523(a)(4) and (6) of the Bankruptcy Code the amount still owed under this Final Judgment. Defendant did not contest that a judgment should be entered in favor of Plaintiff in this action.
CONCLUSIONS OF LAW
The issues before the Court are dependent upon the collateral estoppel effect of the state court judgment. In Grogan v. Garner, the Supreme Court held that collateral estoppel does apply to discharge exception proceedings under 11 U.S.C. § 523(a). 498 U.S. 279, 285 n. 11, 111 S.Ct. 654, 658 n. 11, 112 L.Ed.2d 755 (1991). The Eleventh Circuit requires four factors to be met before collateral estoppel applies to preclude the relitigation of facts. Bush v. Balfour Beatty Bahamas, Limited (In re Bush), 62 F.3d 1319 (11th Cir.1995). Those factors are: (1) the issue at stake must be identical to the issue involved in the prior litigation, (2) the issue must have been actually litigated in the prior suit, (3) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that litigation, and finally, (4) the burden of persuasion in the current proceeding must not be significantly heavier than the burden of persuasion in the initial action. Id. at 1322.
*663 For collateral estoppel to apply in the case at hand, the Court must first find that the issues in this proceeding are identical to the issues before the state court. Plainly, the issue before this Court is whether the debt incurred by Defendant through the final judgment is nondischargeable under Section 523(a)(4) or (a)(6) of the Bankruptcy Code. Section 523 of the Bankruptcy Code provides that:
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny;
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
11 U.S.C. § 523(a)(4) and (6) (1998).
This Court finds the final judgment is based on causes of action sufficiently aligned with Section 523(a)(4) of the Bankruptcy Code as to satisfy the elements of that subsection. The Court holds, therefore, that the issues at bar pursuant to Plaintiff's claims under Section 523(a) and the issues before the state court are identical, satisfying prong one.
The Court will note that the decision to except from Defendant's discharge the amount still owed on the debt due under the state court Final Judgment is based on Section 523(a)(4) and not on Section 523(a)(6) of the Bankruptcy Code. The Supreme Court recently clarified the meaning of Section 523(a)(6), stating:
The word "willful" in (a)(6) modifies the word "injury," indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead "willful acts that cause injury." Or, Congress might have selected an additional word or words, i.e., "reckless" or "negligent," to modify "injury." Moreover, as the Eighth Circuit observed, the (a)(6) formulation triggers in the lawyer's mind the category "intentional torts," as distinguished from negligent or reckless torts. Intentional torts generally require that the actor intend "the consequences of an act," not simply "the act itself."
Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 977, 140 L.Ed.2d 90 (1998). The evidence before the Court and the issues previously litigated in state court do not meet the requirements to except this debt under Section 523(a)(6). However, the state court findings of liability under Florida Statutes § 812.014 and § 772.11 satisfy the requirements of Section 523(a)(4). See Landis v. Britt (In re Britt), 200 B.R. 409 (Bankr.M.D.Fla.1996) (Briskman, J.).
The second part of the collateral estoppel test requires that the issues were actually litigated before the prior court. The Court finds from the facts and final judgment that the essential issues were fully litigated in state court and that prong two is satisfied. This Court finds support in the holding of Jones v. Wilson (In re Wilson), 72 B.R. 956, 959 (Bankr.M.D.Fla. 1987). Judge George L. Proctor determined, in that case, that the bankruptcy court was estopped from re-litigating a claim of fraud previously adjudicated. Judge Proctor stated, "[I]t would be undeserved to give debtor/defendant a second bite at the apple when he knowingly chose not to defend himself in the first instance." Id. at 959.
The third prong requiring that the issue in the prior litigation was a critical and necessary part of the judgment is easily established. The issues are exactly the same. This proceeding is based on the same set of facts supporting the adjudication in the state court. The state court found Defendant's actions satisfactory to resolve all material issues in that case in favor of Plaintiff. Therefore, the Court finds the third prong to establish collateral estoppel satisfied.
*664 The final prong concerns the weight of the burdens of persuasion. The Supreme Court has concluded that "the standard of proof for the dischargeability exceptions in 11 U.S.C. § 523(a) is the ordinary preponderance-of-the-evidence standard." Grogan v. Garner, 498 U.S. 279, 111 S.Ct. at 661. The standard under Florida Statute § 772.11 is clear and convincing evidence. This standard exceeds the standard necessary to except a debt under Section 523 of the Bankruptcy Code. Accordingly, the Court finds this last prong satisfied.
Concerning the issue of excepting damages which have been trebled, the Court relies on the Supreme Court's recent decision in Cohen v. De La Cruz, 523 U.S. 213, 118 S.Ct. 1212, 140 L.Ed.2d 341 (1998). The Supreme Court interprets section 523(a)(2)(A) as preventing "discharge of all liability arising from fraud, and that an award of trebled damages therefore falls within the scope of the exception." 523 U.S. at 1215, 118 S.Ct. 1761. See also Landis v. Britt (In re Britt), 200 B.R. 409 (finding entitlement to treble damages under Florida Statutes § 772.11 to be nondischargeable under Section 523(a)(4) of the Bankruptcy Code). Under this holding, the Court finds an exception of the full amount owed under the final judgment to be in order.
CONCLUSION
This Court finds that it is collaterally estopped to determine liability and the extent of damage to Plaintiff. The issues presented were the same issues previously adjudicated in the case before the state court. The issues were actually litigated in the prior case where the determination of the issues was a critical and necessary part of the Final Judgment entered by the state court. Finally, the burden of persuasion in the current proceeding is not significantly heavier than the burden of persuasion in the state court action. This Court need not look beyond the factual findings and conclusions made by the state court as to the issues of liability and the extent of damages and finds no issues concerning the non-dischargeability of this debt under 11 U.S.C. § 523. A separate Judgment will be entered in accordance with these findings of fact and conclusions of law.
NOTES
[1] The Final Judgment is not based on counts alleged in Plaintiff's state court complaint. However, this Court will not second-guess the relief granted by the state court.
[2] The Final Judgment mistakenly cites Florida Statutes § 812.14 titled "Trespass and larceny with relation to utility cable or cable television fixtures." This Court deems the state court final judgment as intending the correct cite to be Florida Statutes § 812.014 titled "Theft." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2530417/ | 19 F.Supp.2d 157 (1998)
PICCOLI A/S, Plaintiff,
v.
CALVIN KLEIN JEANSWEAR CO., World Apparel Products Co., Azteca Production International, Inc., Interexport Marketing Ltd., Triglobal International Market Services, Inc., and Cobra Corp. U.S.A., Defendants.
No. 98 Civ. 0040(LAK).
United States District Court, S.D. New York.
September 8, 1998.
*158 *159 *160 Earl H. Nemser, Gary J. Mennitt, Shereff, Friedman, Hoffman & Goodman, L.L.P., New York City, Garret G. Rasmussen, Joe R. Reeder, Michael J. Nardotti, Jr., Stephen J. Kott, Patton Boggs, L.L.P., Washington, DC, for plaintiff.
Russell E. Brooks, Richard E. Rosberger, Milbank, Tweed, Hadley & McCloy, New York City, for defendant Calvin Klein Jeanswear Co.
Daniel S. Greenfeld, Parker Chapin Flattau & Klimpl, L.L.P., New York City, for defendant Azteca Production International, Inc.
Daniel A. DeVito, Cathy E. Shore-Sirotin, Laura A. Quintano, Weil, Gotshal & Manges L.L.P., New York City, for defendant World Apparel Products Co., Inc.
Martin Hong, for defendant TriGlobal International Market Services, Inc.
Barry J. Levine, Mineola, NY, for defendant Cobra Corp. U.S.A.
MEMORANDUM OPINION
KAPLAN, J.
Piccoli A/S ("Piccoli"), a former exclusive distributor of Calvin Klein jeans in Scandinavia, alleges that its American counterpart, defendant Calvin Klein Jeanswear Co. ("Jeanswear"), conspired with Jeanswear's co-defendants to export Jeanswear's surplus jeans to Scandinavia and thus to destroy plaintiff's market. Piccoli asserts that Jeanswear's actions constituted breaches of contract and of the duty of good faith and fair dealing and that each defendant is liable for unjust enrichment, unfair competition, tortious interference with contractual relations, and violations of the Lanham Act and the Paris Convention. Jurisdiction is premised on the federal claims as well as alienage.
Jeanswear and defendant Azteca Production International, Inc. ("Azteca") move to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Defendant World Apparel Products Co. ("World Apparel") moves for judgment on the pleadings on substantially the same grounds. For the reasons stated below, the motions are granted in part and denied in part.
Background
The following facts are culled exclusively from the complaint, the truth of which is assumed for purposes of this motion.
In 1991, Calvin Klein Inc. ("CKI"), the beneficial owner of the Calvin Klein trademarks,[1]*161 granted Piccoli an exclusive license to distribute Calvin Klein jeans in Scandinavia (the "CKI/Piccoli Agreement").[2] The CKI/Piccoli Agreement required Piccoli to purchase set amounts of jeans and to market, promote, and distribute them solely to upscale retailers.[3] Between 1991 and 1994, Piccoli successfully built relationships with upscale retailers and significantly increased sales "by making a substantial marketing effort, hiring additional skilled marketing personnel, spending thousands of hours and investing hundreds of thousands of dollars building and maintaining a distribution network."[4]
In 1994, CKI granted Jeanswear an exclusive license to manufacture, distribute, and wholesale Calvin Klein jeans in North America (the "CKI/Jeanswear Agreement").[5] The CKI/Jeanswear Agreement prohibited Jeanswear from selling Calvin Klein products outside North America and also from selling to third parties whom it knew or should have known would sell the products outside North America.[6]
In May 1995, CKI granted CK Jeanswear Europe, S.P.A. ("European") an exclusive license to manufacture, distribute, and wholesale Calvin Klein jeans in Europe (the "CKI/European Agreement").[7] A few months later, in August 1995, the CKI/Piccoli Agreement expired.[8] Piccoli then entered into an agreement with European which granted Piccoli another exclusive distributorship in Scandinavia (the "European/Piccoli Agreement").[9] The European/Piccoli Agreement imposed upon Piccoli essentially the same obligations as had the CKI/Piccoli Agreement.[10] In furtherance of those obligations, Piccoli expended "substantial time, money, and effort in promoting and trying to maintain the prestigious market for Calvin Klein jeans in Scandinavia."[11]
Trouble arose in the summer of 1995 when the defendants began to export Jeanswear's excess inventory of Calvin Klein jeans to Denmark.[12] The exported jeans were sold "through different distribution channels, to lower-end stores, and [were] advertised using different marketing methods."[13] Not surprisingly, the majority of them ended up on the shelves of Scandinavian discount stores.[14] In February 1996, Piccoli complained about these imports to European, noting "that its complaints to New York `have not been dealt with in a satisfactory' manner."[15]
In March 1996, Piccoli began to receive letters from its upscale customers complaining of the imported jeans and canceling orders.[16] This led to a second Piccoli complaint to European.[17] At some point prior to June 10, 1996, CKI gave Jeanswear some form of notice concerning Piccoli's complaints.[18]
In October 1997, Piccoli discussed with European the possibility of litigation against Jeanswear.[19] European, however, refused to participate in a suit against a fellow Calvin Klein distributor.[20] On December 18, 1997, Piccoli terminated the European/Piccoli *162 Agreement after learning that European also was exporting Calvin Klein jeans into Scandinavia.[21]
Piccoli contends that Jeanswear's products continue to appear in Scandinavian discount stores[22] and, as a result, that "virtually all of the retailers who in the past had regularly purchased Calvin Klein products from Piccoli [have] now either canceled orders or dropped the line altogether."[23]
Discussion
Contract Claims Against Jeanswear
A. Breach of Contract
Piccoli claims that by exporting its surplus jeans to Scandinavia, Jeanswear breached the clause in the CKI/Jeanswear Agreement prohibiting it from selling or distributing the jeans outside of North America. Though not a party to the CKI/Jeanswear Agreement, Piccoli asserts that it has standing to enforce that contract as a third party beneficiary.[24]
Under New York law,[25] only an intended beneficiary of a contract may assert a claim as a third-party beneficiary.[26] A third party is an intended beneficiary where either (1) "no one other than the third party can recover if the promisor breaches the contract"[27] or (2) "the language of the contract otherwise clearly evidences an intent to permit enforcement by the third party."[28]
Piccoli manifestly does not qualify as an intended third-party beneficiary under the first prong of the test. The CKI/Jeanswear Agreement explicitly states that CKI has the right "to be compensated for damages for breach of this Agreement and to enjoin the unlawful or unauthorized use of the Licensed Marks."[29] The complaint alleges also that European had the opportunity but refused to sue Jeanswear as a result of the alleged breach of contract.[30]
*163 Nor has Piccoli alleged facts sufficient to show that the CKI/Jeanswear Agreement "otherwise clearly evidences an intent to permit enforcement by [Piccoli]."[31] The requirement of an intent to permit enforcement by the third party is satisfied by demonstrating an intent to benefit that party.[32] Although a "party need not necessarily be specifically mentioned in a contract to be considered a third-party beneficiary,"[33] the parties' intention to benefit the third party nonetheless must be revealed "on the face of the agreement."[34]
Piccoli contends that such an intention is implicit in the "Cooperation Clause" of the CKI/Jeanswear Agreement, wherein Jeanswear promised that it
"shall not export Articles from the Territory [the Americas] and shall not sell Articles to any third party which [Jeanswear] knows or has reason to know will export Articles from the Territory ... [and] will cooperate with [CKI] with respect to prohibiting the diversion of Products into [CKI's] third party licensee's and distributors' territories."[35]
Piccoli argues that the clear intent of this clause was to benefit not only CKI, but also CKI's exclusive distributors in other territories, and that the face of the contract therefore demonstrates an intention to benefit Piccoli.[36]
Jeanswear responds that the CKI/Jeanswear Agreement not only does not evidence an intention to benefit third parties but, on the contrary, reveals an intention not to benefit anyone other than the signatories. Jeanswear draws this conclusion from a provision in the contract containing both non-assignment and inurement clauses:
"This Agreement is of a personal nature with respect to [Jeanswear] and, therefore, except as provided below, neither this Agreement nor the license or other rights granted hereunder may be sublicensed, assigned or transferred by [Jeanswear] except with [CKI's] prior written consent.... Except as otherwise provided herein, this Agreement shall inure to the benefit of and shall be binding upon the parties and permitted successors and assigns."[37]
The prohibition on assignments and the specification that the contract inures to the benefit of and binds the parties except as otherwise indicated, Jeanswear argues, makes plain the parties' intention to preclude third-party enforcement.
Courts in this district have construed similar provisions as inconsistent with the existence of an intention to confer a benefit upon a third party. In Sazerac Co. v. Falk,[38] for example, the court relied in part upon nearly identical provisions in concluding that the contract in question manifested the parties' intention not to benefit third parties.[39]
*164 Insofar as Sazerac stands for the proposition that the existence of a non-assignment clause alone suffices to preclude assertion of intended third-party beneficiary status, the Court cannot agree. After all, it is possible for parties to intend that a third party enjoy enforceable rights while at the same time intending to limit or preclude assignments. An inurement clause, when taken together with a prohibition of assignments, on the other hand, does suggest that the parties did not intend that third parties benefit from the contract. Language specifying that the benefit of a contract is to inure to the contract's signatories arguably is superfluous unless it serves to limit the category of beneficiaries.[40] This is the wisdom behind the maxim expressio unus est exclusio alterus. Accordingly, the Court holds that the CKI/Jeanswear Agreement was not intended to benefit third-party beneficiaries such as Piccoli.
Piccoli seeks to avoid the impact of the CKI/Jeanswear Agreement's plain language with arguments based on extrinsic evidence and reliance. Even if appropriately considered,[41] these arguments would not alter the Court's conclusion. According to Piccoli, the extrinsic evidence reveals that at the time the parties agreed to the CKI/Jeanswear Agreement, both were aware that Piccoli had possessed exclusive distribution rights in Scandinavia for years[42] and that CKI's global distribution network necessitated mutual respect of each distributors' territories,[43] and it was in CKI's own interest to secure protection of Piccoli's rights. These allegations, however, do not dilute the impact of the inurement and non-assignment clauses. Similarly, Piccoli's expenditure of "time, money, and effort in promoting and trying to maintain the prestigious market for Calvin Klein jeans in Scandinavia"[44] do not alter the plain meaning of the CKI/Jeanswear Agreement.
Piccoli cannot establish intended third-party beneficiary status because it is apparent from the face of the contract that the parties intended to limit to themselves the ability to enforce the agreement. Piccoli's breach of contract claim therefore is dismissed.
B. Breach of Duty of Good Faith and Fair Dealing
Piccoli next contends that Jeanswear breached its duty of good faith and fair dealing by exporting jeans to Scandinavia.[45] Jeanswear moves to dismiss this claim on the ground that no such duty existed.
It is well-settled under New York law that "an implied covenant of good faith *165 and fair dealing is inherent to every contract."[46] Here, however, Piccoli can point to no contract between itself and Jeanswear.[47] Nor, in view of what has been said already, may it enforce the implied covenant in the CKI/Jeanswear Agreement on a third-party beneficiary theory.
Piccoli's attempt to extend the duty of good faith and fair dealing throughout the network of independent contracts forming the CKI distribution system also fails. In re Houbigant[48] is instructive. There, the court rejected an argument that where "each of the various independent agreements are in fact part of a single unified agreement," the implied duty runs among all contracting parties, even in the absence of direct contractual relationships.[49] Here, the various contracts that Piccoli seeks to link are not even part of a single unified agreement.
Perhaps recognizing the infirmity of its good faith and fair dealing claim, Piccoli's motion papers attempt to relabel this contract claim as a tort claim. As remodeled, it asserts that Jeanswear breached not an implied covenant of good faith and fair dealing, as stated in the complaint, but, instead, a tort duty to respect the integrity of Piccoli's exclusive distribution territory.[50] Piccoli argues that this duty arises out of the CKI/Jeanswear Agreement and the circumstances surrounding it, such as the existence of CKI's other distribution contracts.[51] Even assuming that it were appropriately considered, this argument would be without merit.
Piccoli invokes a line of New York cases, beginning with Rich v. New York Central & H.R.R. Co.,[52] which establishes that a contract in certain circumstances generates not merely contractual obligations but also a relationship which gives rise to other legal duties between the parties.[53] Such duties arise where "extraneous circumstances and conditions, in connection with [the contract],... establish such a relation as to make [the contract's] performance a legal duty, and its omission a wrong to be addressed."[54] How this rule advances Piccoli's cause is unclear, as Piccoli can point to no contract to which both it and Jeanswear are parties.
Piccoli seeks to rely instead on the CKI/Jeanswear Agreement and its circumstances. Piccoli offers no authority, however, for the proposition that the rule in Rich may be detached from its contract moorings in this manner. In the absence of such authority, the Court declines to take the view that New York law imposes legal duties running between non-contracting parties merely on the basis that the parties share similar roles in a series of contracts comprising a distribution network. Piccoli's claim for breach of the duty of good faith and fair dealing is dismissed.
Other Claims All Defendants
In addition to its contract and federal law claims, Piccoli asserts that the defendants are liable for unjust enrichment, unfair competition, and tortious interference with business relations.
*166 Defendant World Apparel contends, as a threshold matter, that these non-federal claims must be dismissed because, under New York's choice of law rules, this action is governed by Danish law. This argument is flawed, however, because no party has identified any conflict between New York and Danish law warranting the choice of law inquiry. Indeed, in the absence of a purported conflict it is not possible even to begin that inquiry, as "[t]he first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved."[55] The Court therefore proceeds to the merits of defendants' other arguments for dismissal.
A. Unjust Enrichment
In support of its unjust enrichment cause of action, Piccoli alleges that it "has invested six years of effort, thousands of hours and hundreds of thousands of dollars in creating a reputable and prestigious market for Calvin Klein jeans in Scandinavia, where the Calvin Klein name had been virtually unknown prior to Piccoli's efforts."[56] Piccoli alleges further that defendants "are unlawfully exploiting and free-riding on Piccoli's efforts by producing and selling [Jeanswear's] products in large volumes to discount stores in [Scandinavia.]"[57] As a result, "Piccoli's carefully-cultivated upscale market for Calvin Klein jeans has been ruined; approximately 90% of Piccoli's customers have canceled their orders and discontinued future business relations."[58] Piccoli thus contends that it is entitled to restitution of the profits attributable to defendants' sales in Scandinavia.[59]
As a general matter, in order to state a claim for unjust enrichment claim under New York law "plaintiff must show that (1) defendant was enriched, (2) the enrichment was at plaintiff's expense and (3) the circumstances were such that equity and good conscience require defendant to make restitution."[60] Piccoli argues that its allegations are sufficient in light of the broad language of these three elements. But Piccoli fails to account for the nature of the unjust enrichment cause of action.
Unjust enrichment sounds in quasi-contract.[61] This is significant, particularly with regard to the third element of the claim, as a plaintiff, "in order to recover under a theory of quasi-contract, ... must ... prove that performance was rendered for the defendant, resulting in its unjust enrichment."[62] As the First Department stated in Kagan v. K-Tel Entertainment, Inc.:[63]
"[a]s reflected in the common law of the various states, to recover under a theory of quasi contract, a plaintiff must demonstrate *167 that services were performed for the defendant resulting in its unjust enrichment. It is not enough that the defendant received a benefit from the activities of the plaintiff; if services were performed at the behest of someone other than the defendant, the plaintiff must look to that person for recovery."[64]
In this case, the performance at issue is Piccoli's creation of demand in Scandinavia for Calvin Klein jeans, a performance indisputably not rendered for the defendants. On the contrary, Piccoli performed for its own benefit and perhaps the benefit of its customers and its contract partners, European and CKI. Defendants' actions in tapping into the demand created by Piccoli therefore cannot give rise to a claim for quasi-contractual relief.[65]
B. Tortious Interference with Business Relations
Piccoli contends that by exporting Jeanswear's jeans to Scandinavia, defendants caused "a number of Piccoli's customers ... to cancel orders for Calvin Klein jeans and to not place future orders that otherwise would have been made."[66] Piccoli does not allege, however, that defendants' conduct caused any of these customers to breach a contract with Piccoli. Thus Piccoli's cause of action is not one for tortious interference with contractual relations but, instead, for tortious interference with business relations.[67]
Piccoli's tortious interference with business relations claim rests on the allegation that the defendants exported Jeanswear's surplus Calvin Klein jeans to "lower-end stores" in Scandinavia and that the presence of these jeans in lower-end stores caused Piccoli's exclusively upper-end clients to cease doing business with it.[68] Defendants argue, correctly, that such an indirect relationship cannot form the basis of a tortious interference claim.
"It is clear ... that under New York law, in order for a party to make out a claim for tortious interference with prospective economic advantage, the defendant must interfere with the business relationship directly; that is, the defendant must direct some activities towards the third party and convince the third party not to enter into a business relationship with the plaintiff."[69]
Here, the defendants' alleged conduct concededly was not directed towards any third *168 party with whom Piccoli had an existing or prospective business relationship. In light of this failure to come within the limited scope of this cause of action, Piccoli has failed to state a claim for tortious interference with business relations.
C. Unfair Competition
"Under New York common law, the essence of unfair competition is `the bad faith misappropriation of the labors and expenditures of another, likely to cause confusion or to deceive purchasers as to the origin of the goods.'"[70] Defendants contend that Piccoli's unfair competition claim should be dismissed not because it fails to allege these elements but because Piccoli lacks sufficient interest in the Calvin Klein mark to establish standing. Defendants argues also that the unfair competition claim is duplicative of Piccoli's breach of contract claim. These arguments are without merit.
Defendants contend first that Piccoli cannot have any actionable interest in the Calvin Klein mark because the CKI/European Agreement specifically reserved the right to initiate litigation for trademark infringement to CKI and because Piccoli's rights cannot exceed European's.[71] Even if European possessed such a right, defendants argue, it is plain from the face of the European/Piccoli Agreement that no such interest could have been transferred to Piccoli.[72]
Defendants misconceive the nature of the standing requirement in this context. As the Second Circuit explained in Berni v. International Gourmet Restaurants of America,[73] standing to assert a cause of action for unfair competition under New York law requires pleading of facts "supporting a colorable property or pecuniary interest."[74] Although it is clear from the contracts that Piccoli lacks an ownership interest in the Calvin Klein mark sufficient, for example, to support a suit for trademark infringement under Section 32 of the Lanham Act,[75] it is equally clear that Piccoli, at the time of the alleged injury, had a pecuniary interest in the mark resulting from its exclusive distributorship.[76] Piccoli therefore has standing to assert a claim of unfair competition.
*169 Defendants contend next that the unfair competition claim should be dismissed as duplicative of the breach of contract action. The Court is not persuaded.
Defendants seek to analogize the present case to Tap Publications v. Chinese Yellow Pages (New York)[77] and Silverstar Enterprises, Inc. v. Aday.[78]Tap Publications dismissed a Lanham Act claim on the ground that it was nothing more than a claim for breach of contract where the crux of the underlying dispute was whether the defendant had licensed the disputed mark to a third party and whether that third party in turn properly had assigned its rights in the mark to the plaintiff.[79] Similarly, the plaintiff/licensee in Silverstar sued its licensors after learning that the licensors had granted a third party the right to use the mark in apparent violation of the plaintiff/licensee's contract rights.[80] The Silverstar court therefore dismissed the plaintiff's Lanham Act and unfair competition claims on the ground that they were nothing more than breach of contract claims.[81]
Unlike the plaintiffs in Tap Publications and Silverstar Enterprises, Piccoli's right to relief for unfair competition does not rest entirely, or even largely, upon issues of contract interpretation. The essence of the claim is that defendants' action in selling Calvin Klein jeans into plaintiff's arguably exclusive territory was akin to misappropriation or passing off, traditional bases of unfair competition relief. While it is true that the various licensing agreements among CKI. European, Piccoli, and Jeanswear determine the scope of Jeanswear and Piccoli's respective territories, there is no claim that the defendants' alleged conduct was legitimate under those contracts or that Piccoli's interest in the mark deriving from these contracts is open to question. Moreover, there is no contract between plaintiff and the defendants in this case, and the Court has rejected Piccoli's attempt to establish its status as an intended third-party beneficiary of the contract governing Jeanswear's trademark rights. Thus, this dispute cannot "be determined by the principles of contract law" alone but, instead, is subject to principles such as the common law of unfair competition, which "establish[ ] marketplace rules governing the conduct of parties not otherwise limited."[82] For all of these reasons, defendants' motion to dismiss Piccoli's unfair competition claim is denied.
Lanham Act and Paris Convention Claims All Defendants
Piccoli asserts that defendants' export of Calvin Klein jeans to Scandinavia, which allegedly deceived Scandinavian retailers and consumers as to the quality and origin of the jeans, violated Section 43(a) of the Lanham Act[83] as well as the prohibition against unfair competition contained in the International Convention for the Protection of Industrial Property (the "Paris Convention"),[84] as implemented by Section 44 of the Lanham Act.[85] Defendants argue that these claims must be dismissed because (1) the conduct alleged is not within the scope of the Lanham Act or the Paris Convention, (2) Piccoli lacks *170 sufficient interest in the Calvin Klein mark to assert these claims, (3) the claims are duplicative of Piccoli's contract claim, and (4) the Paris Convention does not provide a right to relief distinct from the Lanham Act.
A. Extraterritorial Application of the Lanham Act
Piccoli's false designation of origin claim seeks to apply the Lanham Act to conduct, any deceptive effect of which occurred in Scandinavia. Defendants assert that the Act may not be so applied.
The issue before the Court in the first instance is one of statutory interpretation determination of whether Congress intended that the Lanham Act be applied to the conduct at bar. And while the case finds analogies in other federal statutes,[86] the question ultimately depends upon Congress' intention with respect to the Lanham Act.[87]
There is little doubt that the Lanham Act has some extraterritorial effect. In Steele v. Bulova Watch Co.,[88] the Supreme Court applied the statute to an American defendant's manufacture and sale of fake Bulova watches in Mexico where the defendant purchased component parts in the United States and some of the watches found their way into Texas with consequent damage to Bulova's goodwill in this country. And in Vanity Fair Mills v. T. Eaton Co.,[89] the Second Circuit set forth three factors for courts to consider in determining whether extraterritorial application of the Lanham Act is appropriate:
"(i) whether the defendant is a United States citizen; (ii) whether there exists a conflict between the defendant's trademark rights under foreign law and the plaintiff's trademark rights under domestic law; and (iii) whether the defendant's conduct has a substantial effect on United States commerce."[90]
It is undisputed that the first two Vanity Fair factors are present in this case, but there is considerable dispute concerning whether the substantial effect factor is met. Piccoli points to an array of allegations concerning the domestic conduct of the defendants, while defendants argue that conduct is distinct from effect and that there is no domestic effect here. The dispute is significant, for the absence of a substantial effect on domestic commerce would be fatal to a plaintiff's attempt to apply the Lanham Act to extraterritorial conduct regardless of whether the first two factors are satisfied.[91]
A substantial effect on United States commerce clearly exists where a defendant's conduct results in consumer confusion or harm to the plaintiff's goodwill in the United States.[92] Some courts have concluded that a substantial effect on United States commerce exists also where "the defendant's activities are supported by or related to conduct in United States commerce."[93] Indeed, in Levi *171 Strauss & Co. v. Sunrise International Trading, Inc.,[94] a case quite similar to this one, the Eleventh Circuit upheld a preliminary injunction barring shipment of counterfeit jeans to foreign countries based on the fact that negotiations and arrangements for the shipments were made in the United States.[95] It is not clear, however, whether this second line of cases those finding a substantial effect on United States commerce on the basis of domestic conduct related to or supportive of deceptive actions abroad would be followed in this Circuit.
In Totalplan Corp. of America v. Colborne,[96] the Circuit held that packaging in and shipment of goods from the United States were an insufficient basis for application of the Lanham Act. More recently, in Atlantic Richfield Co. v. Arco Globus International Co.,[97] the Court of Appeals affirmed the dismissal of Lanham Act claims against a defendant who used colorable imitations of plaintiff's registered trademark to identify its own operations in Russia on the ground that the Lanham Act did not reach defendant's conduct despite the fact that the defendant conducted some business activities, although not allegedly infringing ones, in the United States. In doing so, it distinguished Bulova on the ground, inter alia, that "Bulova does not hold that a defendant's domestic activity, even if `essential' to infringing activity abroad, is alone sufficient to cause a substantial effect on United States commerce."[98]
While this comment strongly suggests that the Lanham Act does not reach conduct abroad unless it deceives U.S. consumers, there is other language in Atlantic Richfield that may point in the other direction. In summarizing its holding later in the opinion, the Court said:
"Where (i) an alleged infringer's foreign use of a mark does not mislead American consumers in their purchases or cause them to look less favorably upon the mark; (ii) the alleged infringer does not physically use the stream of American commerce to compete with the trademark owner by, for example, manufacturing, processing, or transporting the competing product in United States commerce; and (iii) none of the alleged infringer's American activities materially support the foreign use of the mark, the mere presence of the alleged infringer in the United States will not support extraterritorial application of the Lanham Act."[99]
This passage thus arguably suggests that the Lanham Act is inapplicable only where none of the three enumerated circumstances exists and thus that it applies where any is present.
In this case, Piccoli alleges that the defendants engaged in an organized scheme pursuant to which Jeanswear sent promotional materials to prospective purchasers which invited them to come to its U.S. showrooms to view, negotiate for and purchase Calvin Klein jeans for unrestricted international distribution.[100] This domestic activity thus allegedly went somewhat beyond that at issue in Totalplan and surely was a use of the physical stream of American commerce that was essential to the alleged infringement.
Complaints ought not be dismissed at the pleading stage unless it is clear that plaintiff *172 can prove no state of facts that would entitle it to relief. In all the circumstances, the Court is unable to reach such a conclusion at this stage of this lawsuit. Accordingly, the motion to dismiss the Lanham Act claim is denied, although the issue may be raised later on a fuller record.
B. Remaining Arguments
Defendants argue in the alternative that Piccoli lacks sufficient interest in the Calvin Klein mark to assert a false designation of origin claim. Defendants, however, confuse the interest necessary to establish standing in the context of a Section 32 trademark infringement claim with the level necessary to pursue a Section 43 false designation of origin claim. In the former case, the plaintiff must have an ownership interest in the mark but, in the latter, the plaintiff need show only potential commercial or competitive injury.[101] Piccoli's claim is of the latter variety. Piccoli's standing therefore is established by its pecuniary interest for the same reasons stated previously by the Court in the course of rejecting defendants' argument that Piccoli lacks standing to assert its unfair competition claim.
Defendants argue next that Piccoli's Lanham Act claim must be dismissed as duplicative of its contract claims. This argument is without merit for the reasons discussed above in the context of Piccoli's unfair competition claim.
Defendants are correct, however, in asserting that Piccoli's Paris Convention claim is duplicative of its Lanham Act claim and thus must be dismissed. In Vanity Fair, the Second Circuit held that the Paris Convention, as implemented by Section 44 of the Lanham Act, provides no additional substantive rights beyond those otherwise provided to domestic parties.[102] Courts in other jurisdictions have disagreed, contending that the Paris Convention creates a federal law of unfair competition applicable to international trademark disputes.[103] This Court, of course, is bound by Vanity Fair.
Liability of Defendants World Apparel and Azteca for Unfair Competition
The continuing vitality of Piccoli's unfair competition and Lanham Act claims raises an issue with respect to defendants World Apparel and Azteca, who have moved to dismiss Piccoli's claims not only on grounds common to all defendants but also on grounds specific to themselves.[104] Each contends that Piccoli has failed to allege facts sufficient to state unfair competition and Lanham Act claims against them.
Piccoli contends that it has alleged facts sufficient to establish Azteca's direct liability for unfair competition by alleging that Azteca manufactured and shipped Calvin Klein jeans to Scandinavia[105] and that an address label containing Jeanswear's address was obscured in one such shipment,[106] a fact presumably indicative of consciousness of guilt. Piccoli does not allege, however, that Azteca was responsible for obscuring the label giving Jeanswear's address. Rather, the complaint states merely that Azteca was the contractor on that shipment.[107] Piccoli's remaining allegations establish nothing more than that Azteca manufactured and shipped Calvin Klein jeans to Denmark. There is no *173 allegation that Azteca's right to engage in this conduct was limited by any agreement or law, let alone that Azteca was aware of any such limitation. Piccoli's allegations clearly are insufficient to establish Azteca's direct liability for unfair competition. For the same reason, Piccoli's allegations concerning Azteca's direct liability for violating the Lanham Act also fails.
Piccoli appears to concede that World Apparel cannot be held directly liable for violating the Lanham Act or for unfair competition and rests instead upon a theory of co-conspirator liability that seeks to link World Apparel to the viable unfair competition and Lanham Act claims against Jeanswear.[108] Piccoli asserts that the other co-defendants, including Azteca, are likewise liable as co-conspirators regardless of whether they are directly liable as well. It therefore is necessary to examine the sufficiency of Piccoli's allegations of conspiracy.
Because Piccoli's substantive claim of unfair competition claim is asserted under New York law, the Court looks to New York law to determine whether World Apparel and Azteca may be liable as co-conspirators on that claim. The elements of a civil conspiracy under New York law are "`(1) the corrupt agreement between two or more persons, (2) an overt act, (3) their intentional participation in the furtherance of a plan or purpose, and (4) the resulting damage.'"[109] Significantly, in determining whether Piccoli has adequately alleged these elements, the Court applies the fair notice standard of FED. R.CIV.P. 8(a) rather than the stricter requirements of FED.R.CIV.P. 9(b).[110] Here, Piccoli has alleged the existence of a conspiracy among the defendants, including Azteca and World Apparel, to facilitate Jeanswear's allegedly improper exports.[111] No more is required.
Piccoli's Lanham Act claim, of course, is a matter of federal law, and thus it is federal law that will determine the adequacy of Piccoli's conspiracy allegations with regard to that claim. In the words of a leading commentator on trademark law, "[t]he use of the word `conspiracy' is merely another way of describing a concert of action and intent which will extend tort liability beyond the active wrongdoer to those who merely planned, assisted or encouraged his acts. Such `conspirators' are, in civil law, called `joint tortfeasors.'"[112] Thus,
"[a]ll those who, in pursuance of a common plan to commit an act which is tortious, actively take part in it, or further it by cooperation or request, or lend aid or encouragement, or ratify and adopt the acts done, are as equally liable as the person who performs the tortious act itself."[113]
Mere knowledge of the primary actor's wrongful conduct is insufficient to establish that a defendant is a joint tortfeasor.[114] "[T]here must be a finding that the defendant and the direct infringer `have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control *174 over the infringing product.'"[115] Piccoli's allegations that all of the defendants, including World Apparel and Azteca, knowingly conspired with Jeanswear to effect the export of falsely designated Calvin Klein jeans to Scandinavia sufficiently assert both the requisite knowledge and control to satisfy this standard.
Conclusion
Jeanswear's motion to dismiss the complaint is granted in all respects except that it is denied as to Piccoli's Lanham Act and common law unfair competition claims. World Apparel's motion for judgment on the pleadings and Azteca's motion to dismiss are granted in all respects except that they are denied with respect to Piccoli's conspiracy allegations.
SO ORDERED.
NOTES
[1] Cpt. ¶ 15.
[2] Id.
[3] Id.
[4] Id. ¶¶ 16-18.
[5] Id. ¶ 19.
[6] Id. ¶ 20.
[7] Id. ¶ 22.
[8] Id. ¶ 23.
[9] Id. It appears that upon the expiration of the CKI/Piccoli Agreement, European in some manner obtained the Scandinavian distribution rights which it then sublicensed back to Piccoli.
[10] Id.
[11] Id. ¶ 24.
[12] Id. ¶ 25.
[13] Id.
[14] Id. ¶ 27.
[15] Id. ¶ 30.
[16] Id. ¶ 31.
[17] Id. ¶ 32.
[18] Id. ¶ 36.
[19] Id. ¶ 47.
[20] Id.
[21] Id. ¶ 48.
[22] Id. ¶ 49.
[23] Id. ¶ 50.
[24] Pl.Br. at 3.
[25] On a motion to dismiss, the Court is entitled to consider documents incorporated by reference into the complaint. See, e.g., Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir.1991). The CKI/Jeanswear Agreement, which is such a document, provides with an exception not here relevant that it shall be governed by New York law. Jeanswear Ex. A, CKI/Jeanswear Agreement ¶ 14.7.
[26] See Mortise v. United States, 102 F.3d 693, 697 (2d Cir.1996); Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d 38, 44, 495 N.Y.S.2d 1, 4-5, 485 N.E.2d 208 (1985).
[27] Fourth Ocean, 66 N.Y.2d at 45, 495 N.Y.S.2d at 5, 485 N.E.2d 208 (citing Seaver v. Ransom, 224 N.Y. 233, 239, 120 N.E. 639 (1918); Matter of International Ry. Co. v. Rann, 224 N.Y. 83, 88, 120 N.E. 153 (1918)).
[28] Id. (citing McClare v. Massachusetts Bonding & Ins. Co., 266 N.Y. 371, 379, 195 N.E. 15 (1935); Rigney v. New York Cent. & H.R.R. Co., 217 N.Y. 31, 38, 111 N.E. 226 (1916)). The example given in Fourth Ocean is a contract which, despite there being no duty between the promisee and the beneficiary, fixes the rate or price at which the beneficiary can obtain services or goods. Id. (citing Pond v. New Rochelle Water Co., 183 N.Y. 330, 336, 76 N.E. 211 (1906); Little v. Banks, 85 N.Y. 258 (1881)).
[29] CKI/Jeanswear Agreement ¶ 11.5. Even if, as Piccoli argues, this provision is triggered only by termination of the CKI/Jeanswear Agreement, CKI even so is entitled under ordinary principles of contract law to enforce the agreement.
[30] Cpt. ¶ 59.
Piccoli rejoins that it has satisfied this prong by alleging, in its brief but not in its complaint, that it has suffered unique damages and that no other entity has an exclusive right to distribute in Scandinavia. Pl.Br. at 11; id. n. 14. Because a party is not entitled to amend its complaint through statements made in its motion papers, the Court disregards these allegations. See, e.g., Wright v. Ernst & Young LLP, 152 F.3d, 169, 175 (2d Cir.1998) (citing IIT v. Cornfeld, 619 F.2d 909, 914 & n. 6 (2d Cir.1980); Jacobson v. Peat Marwick, Mitchell & Co., 445 F.Supp. 518, 526 (S.D.N.Y.1977)).
In any event, these allegations would not suffice to resuscitate Piccoli's claim. Piccoli complains that the imports destroyed the upscale market for Calvin Klein jeans in Scandinavia, but its contention that only it has been harmed by this loss rings hollow. The collapse Piccoli's customer base harmed European insofar as Piccoli was forced to reduce its own purchases from European, which in turn translated into a harm to CKI, even though Piccoli's contract obligation to make minimum purchases from European ameliorated this harm somewhat. Similarly, the emphasis on Piccoli's role as exclusive distributor is irrelevant in light of CKI's indisputable right to enforce the territorial restrictions contained in the CKI/Jeanswear Agreement.
[31] Fourth Ocean, 66 N.Y.2d at 45, 495 N.Y.S.2d at 5, 485 N.E.2d 208 (citations omitted).
[32] See id. (contract provision benefitting third party by entitling it to goods or services at a stated rate is sufficient to establish an intent to permit enforcement by the third party); Artwear, Inc. v. Hughes, 202 A.D.2d 76, 83, 615 N.Y.S.2d 689, 693 (1st Dept.1994) (necessary to demonstrate an intent that performance benefit the third party).
[33] Newman & Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 663 (2d Cir.1996) (citing Restatement (Second) of Contracts, § 302(1) (1981); In re Gulf Oil/Cities Service Tender Offer Litigation, 725 F.Supp. 712, 733 (S.D.N.Y.1989)).
[34] Id. (quoting In re Gulf Oil, 725 F.Supp. at 733).
[35] CKI/Jeanswear Agreement ¶ 1.5
[36] Piccoli emphasizes that it is identified as one of CKI's third party licensees in a schedule attached to the CKI/Jeanswear Agreement. Jeanswear points out, however, that Piccoli no longer was CKI's licensee by the time of the events of which Piccoli complains. By that time, Piccoli was a sub-licensee distributor. Thus, the question is whether, through the contract's cooperation provision, the parties contemplated conferring the benefit of Jeanswear's cooperation on sub-licensee distributors such as Piccoli.
[37] CKI/Jeanswear Agreement ¶ 14.2.
[38] 861 F.Supp. 253 (S.D.N.Y.1994).
[39] Id. 861 F.Supp. at 258 (citing In re Gulf Oil, 725 F.Supp. at 733; Grondin v. Rossington, 690 F.Supp. 200, 207 (S.D.N.Y.1988); MacDraw, Inc. v. CIT Group Equipment Financing, Inc., No. 91 Civ. 5153(SWK), 1994 WL 17952, at * 12 (S.D.N.Y. Jan. 18, 1994), vacated in part on other grounds, 73 F.3d 1253 (2d Cir.1996)); see also United International Holdings, Inc. v. Wharf (Holdings) Ltd., 988 F.Supp. 367 (S.D.N.Y.1997).
The court cited the following language:
"SECTION 13.4 Assignment. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason thereof shall be assignable by any party to this Agreement without the prior written consent of the other parties.
* * * * * *
"SECTION 13.6 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns." Sazerac, 861 F.Supp. at 258.
[40] A contract should be interpreted so as to give meaning to all of its provisions. See PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1198 (2d Cir.1996).
[41] There is considerable dispute concerning whether it is appropriate to consider extrinsic evidence on this point. Compare, e.g., Fourth Ocean, 66 N.Y.2d at 45, 495 N.Y.S.2d at 5, 485 N.E.2d 208; Newman & Schwartz, 102 F.3d at 663; with Trans-Orient Marine v. Star Trading & Marine, 925 F.2d 566, 573 (2d Cir.1991); Cutler v. Hartford Life Ins. Co., 22 N.Y.2d 245, 253, 292 N.Y.S.2d 430, 438, 239 N.E.2d 361 (1968).
Reliance upon a contract provision does not generate a right to enforce the contract in a third party. Artwear, 202 A.D.2d at 84, 615 N.Y.S.2d at 694.
[42] Cpt. ¶¶ 21, 54.
[43] Id. ¶ 53.
[44] Notably, Piccoli does not allege that it actually knew of Jeanswear's promise to CKI at the time that Piccoli signed the European/Piccoli Agreement. Rather, as it states in its brief, "[a]lthough Piccoli did not have a copy of the [CKI/Jeanswear Agreement], it reasonably assumed that it contained similar provisions to Piccoli's contract." Pl.Br. at 8 n. 10.
[45] Cpt. ¶¶ 62-66.
[46] Frutico S.A. de C.V. v. Bankers Trust Co., 833 F.Supp. 288, 300 (S.D.N.Y.1993) (citing Grad v. Roberts, 14 N.Y.2d 70, 75, 248 N.Y.S.2d 633, 637, 198 N.E.2d 26 (1964); Lowell v. Twin Disc, Inc., 527 F.2d 767, 770 (2d Cir.1975)).
[47] See Four Star Capital Corp. v. Nynex Corp., ___ F.R.D. ___, 1997 WL 598411, at *8 (S.D.N.Y. Sept. 25, 1997) (no duty of good faith and fair dealing absent enforceable contract) (citing Reprosystem, B.V. v. SCM Corp., 727 F.2d 257, 264 (2d Cir.), cert. denied, 469 U.S. 828, 105 S.Ct. 110, 83 L.Ed.2d 54 (1984) (no duty to negotiate in good faith absent underlying contract)).
[48] 914 F.Supp. 964 (S.D.N.Y.1995).
[49] Id. 914 F.Supp. at 994-95.
[50] Pl.Br. 11-13.
[51] Id.
[52] 87 N.Y. 382 (1882).
[53] Id. 87 N.Y. at 398-99; see also Meyers v. Waverly Fabrics, 65 N.Y.2d 75, 80 n. 2, 489 N.Y.S.2d 891, 894 n. 2, 479 N.E.2d 236 (1985); North Shore Bottling Co. v. Schmidt & Sons, Inc., 22 N.Y.2d 171, 179, 292 N.Y.S.2d 86, 92, 239 N.E.2d 189 (1968); Albemarle Theatre, Inc. v. Bayberry Realty Corp., 27 A.D.2d 172, 176, 277 N.Y.S.2d 505, 510-11 (1st Dept.1967).
[54] Albemarle Theatre, 27 A.D.2d at 176, 277 N.Y.S.2d at 510-11 (citing Rich, 87 N.Y. at 398-99).
[55] Matter of Allstate Insurance Co. and Stolarz, 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 905, 613 N.E.2d 936 (1993).
[56] Cpt. ¶ 2.
[57] Id. ¶¶ 3, 68.
[58] Id. ¶ 4.
[59] Id. ¶ 69.
[60] Violette v. Armonk Associates, L.P., 872 F.Supp. 1279, 1282 (S.D.N.Y.1995): accord Michel Pommier Models, Inc. v. Men Women NY Model Management, Inc., No. 97 Civ. 6837(SAS), 1998 WL 382004, at *7 (S.D.N.Y. Jul. 8, 1998); ICC Industries, Inc. v. Sifavitor S.p.A., No. 96 Civ. 5757(LAK), 1997 WL 214969, at *5 (S.D.N.Y. Apr. 28, 1997); In re Motel 6 Securities Litigation, Nos. 93 Civ. 2183(JFK), 93 Civ. 2866(JFK), 1997 WL 154011, at *7 (S.D.N.Y. Apr. 2, 1997);
[61] See Lightfoot v. Union Carbide Corp., 110 F.3d 898, 905 (2d Cir.1997) ("[U]nder the quasi-contractual doctrine of unjust enrichment, courts may infer the existence of an implied contract to prevent one person from unjustly enriching himself at the other party's expense.").
[62] Metropolitan Electric Manufacturing Co. v. Herbert Construction Co., Inc., 183 A.D.2d 758, 759, 583 N.Y.S.2d 497, 498 (2d Dept.1992) (citing Kagan v. K-Tel Entertainment, 172 A.D.2d 375, 376, 568 N.Y.S.2d 756, 757 (1st Dept. 1991)); see also Michele Pommier, 1998 WL 382004, at *7; Amana Elevation Corp. v. Ydrohoos-Aquarius, Inc., 244 A.D.2d 371, 664 N.Y.S.2d 88. 89 (2d Dept.1997), leave to appeal denied, 91 N.Y.2d 806, 668 N.Y.S.2d 561, 691 N.E.2d 633 (1998); Schuckman Realty, Inc. v. Marine Midland Bank, N.A., 244 A.D.2d 400, 664 N.Y.S.2d 73, 74-75 (2d Dept.1997), leave to appeal denied, 91 N.Y.2d 809, 670 N.Y.S.2d 404, 693 N.E.2d 751 (1998). Heller v. Kurz, 228 A.D.2d 263, 264, 643 N.Y.S.2d 580, 582 (1st Dept.1996).
[63] 172 A.D.2d 375, 568 N.Y.S.2d 756.
[64] 172 A.D.2d at 376, 568 N.Y.S.2d at 757.
[65] To the extent that Schmid, Inc. v. Zucker's Gifts, Inc., 766 F.Supp. 118 (S.D.N.Y.1991), is inconsistent with this result, the Court declines to follow it. Schmid denied a motion to dismiss an unjust enrichment claim in circumstances similar to these, after asserting that New York courts apply a "liberal interpretation to the elements for a cause of action for unjust enrichment." Id. 766 F.Supp. at 122. Schmid did not, however, cite any authority, other than an earlier reference to the adaptability of the doctrine of constructive trusts to new circumstances, for the proposition that New York law interprets the scope of unjust enrichment claims liberally. Id. Nor did Schmid mention either the actual elements of an unjust enrichment claim or, more significantly, the principle that recovery in quasi-contract will not lie absent an allegation that performance was rendered for the defendant. Similarly, the court in Italian & French Wine Co. v. Negociants U.S.A., 842 F.Supp. 693 (W.D.N.Y. 1993), in the course of upholding an unjust enrichment claim in like circumstances, did not discuss the requirement that performance be rendered for the benefit of the defendant. Id. 842 F.Supp. at 702.
[66] Cpt. ¶ 106.
[67] It is necessary to draw this distinction because Piccoli, despite properly styling this cause of action as one for tortious interference with business relations, relies in its memorandum at least in part on precedents addressing tortious interference with contractual relations. See, e.g., Pl.Br. at 19 n. 19 (citing Robert J. McRell Associates, Inc. v. Insurance Co. of North America, 677 F.Supp. 721, 729 (S.D.N.Y.1987) (stating elements of tortious interference with contractual relations claim)).
[68] Cpt. ¶¶ 25, 27, 31, 50, 103-106.
[69] Fonar Corp. v. Magnetic Resonance Plus, Inc., 957 F.Supp. 477, 482 (S.D.N.Y.1997) (citing G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762, 768 (2d Cir.), cert. denied, 516 U.S. 944, 116 S.Ct. 381, 133 L.Ed.2d 304 (1995) ("It is axiomatic that, in order to prevail on this claim [of tortious interference with prospective business relations], the [plaintiff] would have to show that the [defendant] intentionally caused the [customers] not to enter into a contractual relation with them.")); see Advanced Marine Technologies, Inc. v. Burnham Securities, Inc., 16 F.Supp.2d 375, 385 (S.D.N.Y.1998) (same).
[70] Forschner Group, Inc. v. Arrow Trading Co., Inc., 124 F.3d 402, 408 (2d Cir.1997) (quoting Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 34 (2d Cir.1995) (quotations and citations omitted)).
[71] Defendants point out that the CKI/European Agreement provides that CKI "is the beneficial owner of all right, title and interest in and to the Licensed Mark as to Products in the Territory in any form or embodiment thereof and is also the owner of the goodwill attached or which shall become attached to the Licensed Mark." Jeanswear Ex. B, CKI European Agreement ¶ 13.2. Further, CKI and European covenanted that "[European] will have no right to take any action with respect to the Licensed Mark without [CKI's] prior written approval." Id. ¶ 14.
[72] In the European/Piccoli Agreement, Piccoli acknowledged that its rights were "subject to the terms and conditions of the [CKI/European Agreement]." Jeanswear Ex. C, European/Piccoli Agreement ¶ 6.2 ("European/Piccoli Agreement"). The European/Piccoli Agreement provides also that
"[Piccoli] recognizes as of now that it does not have any rights with respect to the trademarks, copyrights, commercial names, brand names, registered names, distinctive markings, etc. of the Products, or with respect to patents or models and other industrial property rights ... nor will it have such rights after the termination of this Agreement." Id. ¶ 17.
"[Piccoli] shall not acquire any property rights in the `Calvin Klein' trademarks, copyrights, commercial names, brand names, registered names, distinctive markings, etc. through the use of the same hereunder, and shall immediately cease the use of the same upon the termination or expiration of this Agreement." Id. ¶ 18.3.
"[European] and [CKI] are responsible for the protection and maintenance of the trademarks, copyrights, commercial names, brandnames, registered names, distinctive markings, design patents, patents, etc. in connection with the Products in the Territory, and will bear all the costs and expenses relative to such protection and maintenance in the Territory." Id. ¶ 21.1.
Finally, Piccoli undertook to "assist [European] with respect to any legal proceedings that may be initiated by [European] and/or [CKI] for any infringement of the above intellectual and industrial property or other acts of unfair competition in the Territory." Id. ¶ 21.2.
[73] 838 F.2d 642 (1988).
[74] Id. 838 F.2d at 648.
[75] See id. 838 F.2d at 646-47.
[76] Defendants contend that, because the European/Piccoli Agreement is no longer in force, Piccoli no longer has a pecuniary interest and therefore lacks standing. This argument has no merit, because the injury of which Piccoli complains took place while the European/Piccoli Agreement was in force and thus Piccoli had the requisite pecuniary interest at the relevant time.
[77] 925 F.Supp. 212 (S.D.N.Y.1996).
[78] 537 F.Supp. 236 (S.D.N.Y.1982).
[79] 925 F.Supp. at 217.
[80] 537 F.Supp. at 237-38.
[81] Id. 537 F.Supp. at 241-42.
[82] Id. 537 F.Supp. at 242.
[83] 15 U.S.C. § 1125.
[84] 21 U.S.T. 1583, T.I.A.S. 6923; 24 U.S.T. 2140, T.I.A.S. 7727. Article 10bis of the Paris Convention states that "(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition." 24 U.S.T. 2140 (July 14, 1967). Article 10ter provides further that the "countries of the Union undertake to assure to nationals of the other countries of the Union appropriate legal remedies effectively to repress all the acts referred to in Articles 9, 10 and 10bis." Id.
[85] 15 U.S.C. § 1126(b).
[86] See, e.g., Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993) (antitrust laws apply to "foreign conduct that was meant to produce and did ... produce ... substantial effect in" U.S.); North South Fin. Corp. v. Al-Turki, 100 F.3d 1046, 1050-53 (2d Cir.1996) (Racketeer and Corrupt Organizations Act does not apply to acts in U.S. preparatory to fraud abroad); Itoba Ltd. v. Lep Group PLC, 54 F.3d 118, 121-22 (2d Cir.1995), cert. denied, 516 U.S. 1044, 116 S.Ct. 702, 133 L.Ed.2d 659 (1996) (antifraud provisions of federal securities laws apply where conduct material to the completion of the fraud or substantial effects occur in the U.S.).
[87] See North South Fin. Corp., 100 F.3d at 1052.
[88] 344 U.S. 280, 73 S.Ct. 252, 97 L.Ed. 319 (1952).
[89] 234 F.2d 633 (2d Cir.1956), cert. denied, 352 U.S. 871, 77 S.Ct. 96, 1 L.Ed.2d 76 (1956).
[90] Atlantic Richfield v. ARCO Globus International Co., Inc., 150 F.3d 189, 191-92 (2d Cir.1998) (citing Totalplan Corp. of America v. Colborne, 14 F.3d 824, 830 (2d Cir.1994) (citing Vanity Fair, 234 F.2d at 642)).
[91] See id., 150 F.3d at 193 (holding Lanham Act inapplicable to extraterritorial conduct where no substantial effect on U.S. commerce even though defendant was a United States citizen and there was no conflict with the law of another nation).
[92] See, e.g., id. 150 F.3d at 192; Totalplan, 14 F.3d at 830.
[93] Calvin Klein Industries, Inc. v. BFK Hong Kong, Ltd., 714 F.Supp. 78, 80 (S.D.N.Y.1989) (noting that in Bulova Watch, the Supreme Court relied in part upon defendant's purchase of component parts in the United States); see also Les Ballets Trockadero de Monte Carlo, Inc. v. Trevino, 945 F.Supp. 563, 567 (S.D.N.Y.1996) ("A substantial effect on United States commerce may arise from a defendant's activities that are supported by or related to conduct in United States commerce.")
This conduct-oriented test is akin to the "conduct test" employed in the context of the extraterritorial application of the federal securities laws. See, e.g., North South Finance Corp., 100 F.3d at 1051; cf. Aerogroup Intern., Inc. v. Marlboro Footworks, 955 F.Supp. 220, 228 n. 13 (S.D.N.Y. 1997) (observing that cases involving non-citizen defendants have augmented the substantial effect requirement by requiring also a nexus between the defendant's conduct in the United States and the infringing conduct, and comparing this requirement to the conduct test in the securities law context), aff'd, 152 F.3d, 948, 1998 WL 169251 (Fed.Cir.1998), petition for cert. filed, 67 U.S.L.W. 3149 (U.S. Aug. 17, 1998) (No. 98-290).
[94] 51 F.3d 982 (11th Cir.1995).
[95] 4 J. THOMAS McCARTHY, McCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 29:24[4] (4th ed.1998).
[96] 14 F.3d 824.
[97] 150 F.3d 189, 1998 WL 418104.
[98] Id. 150 F.3d at 192.
[99] Id. 150 F.3d at 193.
[100] Cpt. ¶¶ 39-41.
[101] See Berni, 838 F.2d at 645-48.
[102] See 234 F.2d at 640-44; see also Majorica S.A. v. Majorca International, Ltd., 687 F.Supp. 92 (S.D.N.Y.1988).
[103] See, e.g., General Motors Corp. v. Ignacio Lopez de Arriortua, 948 F.Supp. 684, 687-90 (E.D.Mich.1996) (collecting cases).
[104] In the context of claims other than the still-viable unfair competition and Lanham Act claims, it was unnecessary to consider grounds other than those applicable to all defendants, as those grounds proved dispositive.
[105] Cpt. ¶¶ 10 (Azteca manufactured Calvin Klein jeans), 43j (Azteca shipped jeans to Denmark), 44 (letter referred to Azteca as manufacturer). Piccoli's other allegations naming Azteca are either mere conclusory assertions of the existence of a conspiracy, id. ¶¶ 33, 109, or refer to actions taken by Jeanswear, id. ¶ 29.
[106] Cpt. ¶ 45 (jeans shipped to Denmark in boxes labeled with Azteca's address and an address for "USCJ" in New Jersey; under the "USCJ" label was another address label listing "USCJ's" address as Jeanswear's).
[107] Id.
[108] Pl.Br. (World Apparel) at 15-23.
[109] Kashi v. Gratsos, 790 F.2d 1050, 1055 (2d Cir.1986) (quoting Suarez v. Underwood, 103 Misc.2d 445, 447, 426 N.Y.S.2d 208, 210 (1980), judgment aff'd, 84 A.D.2d 787, 449 N.Y.S.2d 438 (2d Dept.1981)).
[110] Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 26 n. 4 (2d Cir.1990) (citing Rose v. Bartle, 871 F.2d 331, 366 (3d Cir.1989)). Hecht went on to assert nonetheless that "the complaint must allege some factual basis for a finding of a conscious agreement among the defendants." Id. As noted in Spira v. Nick, 876 F.Supp. 553, 560 n. 4 (S.D.N.Y.1995), however, this proposition is inconsistent with the subsequent decision of the United States Supreme Court in Leatherman v. Tarrant Co. Narcotics Intell. and Coord. Unit, 507 U.S. 163, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993). In Leatherman, the Court reaffirmed that Rule 8(a) means exactly what it says that the complaint need only give fair notice of the nature of the claim and the grounds upon which it rests and that greater specificity is required only in the specific circumstances in which Rule 9(b) is applicable. Id. 507 U.S. at 167-68, 113 S.Ct. 1160.
[111] See, e.g., Cpt. ¶¶ 34, 109.
[112] 3 McCARTHY ON TRADEMARKS § 25:23.
[113] Id.
[114] Id.
[115] Id. (quoting Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143, 1150 (7th Cir.1992) (citing David Berg & Co. v. Gatto International Trading Co., 884 F.2d 306, 311 (7th Cir.1989))). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3022041/ | United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 97-3103
___________
Jodi Michaelle Carlson, *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Hyundai Motor Company; Hyundai *
Motor America, Inc., *
*
Defendants - Appellees. *
___________
Submitted: June 10, 1998
Filed: January 15, 1999
___________
Before LOKEN and HEANEY, Circuit Judges, and JONES,* District Judge.
___________
LOKEN, Circuit Judge.
In this diversity action, Jodi Michaelle Carlson appeals the district court’s1
dismissal of her strict liability, negligence, and breach of warranty claims against
*
The HONORABLE JOHN B. JONES, United States District Judge for the
District of South Dakota, sitting by designation.
1
The HONORABLE RICHARD H. KYLE, United States District Judge for the
District of Minnesota.
Hyundai Motor Company and Hyundai Motor America, Inc. The district court
concluded that Minn. Stat. § 169.685, subd. 4, known colloquially as the seat belt gag
rule, bars these claims. We affirm.
In April 1995, Carlson was a passenger in a Hyundai Excel automobile that left
the road and rolled over. Though she was wearing a seat belt and a shoulder harness
anchored to the door frame, Carlson was thrown from the vehicle through an opening
in the upper rear portion of the front passenger door because, in the words of Carlson’s
Amended Complaint, “when the doorframe bent out it eliminated any effective
passenger restraint.” Carlson suffered serious injuries. In 1996, she brought this
action in Minnesota state court, seeking substantial damages. The non-resident
defendants removed.
All of Carlson’s claims are premised upon a crashworthiness theory -- that the
Hyundai vehicle had a defectively designed and manufactured seat belt system and
door frame that caused Carlson to be ejected during the accident, resulting in
substantially greater injuries than had she remained in the vehicle. For example,
Paragraph XI of Carlson’s Amended Complaint alleges that Hyundai Motor Company
is strictly liable because “[t]he defective and unreasonably dangerous condition of the
passive seat belt system and door frame and the vehicle were the direct cause of the
injuries and damage sustained by plaintiff.”
The statute in question, Minn. Stat. § 169.685, subd. 4, provides that “[p]roof
of the use or failure to use seat belts . . . or proof of the installation or failure of
installation of seat belts . . . shall not be admissible in evidence in any litigation
involving personal injuries or property damage resulting from the use or operation of
any motor vehicle.” This statute was enacted in 1963, before Minnesota courts
recognized crashworthiness as a theory of common law liability. In Olson v. Ford
Motor Co., 558 N.W.2d 491 (Minn. 1997), the Minnesota Supreme Court held that the
-2-
statute applies to crashworthiness claims and effectively bars all such claims that are
premised upon allegedly defective seat belt systems.
Relying upon Olson and the contemporaneous Minnesota Court of Appeals
decision in Schlotz v. Hyundai Motor Co., 557 N.W.2d 613 (Minn. App.), cert. denied,
118 S. Ct. 80 (1997), defendants moved to dismiss this action as barred by § 169.685,
subd. 4. After the Governor of Minnesota vetoed a bill that would have materially
amended the statute, the district court granted this motion. The court explained that
Carlson’s claim of a defective seat belt system is barred under Olson because, “If
Carlson cannot offer evidence of how her seat belt was installed in the car and that she
wore it during the accident, then she cannot prove that a defective seat belt caused her
injuries.” The court further held that Carlson’s claim of a defective door and window
frame are also barred by the seat belt gag rule because, “Nowhere in her Amended
Complaint does Carlson state that a defect in the door frame alone caused her injuries.
Thus, as alleged, all of Carlson’s claims are dependent upon evidence of her use of the
car’s seat belt, and the joint failure of it and the door frame to prevent her from being
ejected from the car.”
On appeal, Carlson concedes the district court (1) appropriately dismissed her
seat belt allegations, and (2) “correctly concluded that the seat belt allegations were
intertwined with the allegations that the car was defectively designed, manufactured,
and otherwise dangerously deficient.” However, Carlson argues, the court abused its
discretion by dismissing her claims without inviting her to amend the complaint to
assert independent claims based upon the allegedly defective door and window frame.
This contention was not properly preserved. Carlson did not ask the district court for
leave to file a second amended complaint, either before or after the court granted
defendants’ motion to dismiss her amended complaint. A district court does not abuse
its discretion in failing to invite an amended complaint when plaintiff has not moved
to amend and submitted a proposed amended pleading. See Oliver v. Resolution Trust
-3-
Corp., 955 F.2d 583, 585 (8th Cir. 1992); Clayton v. White Hall Sch. Dist., 778 F.2d
457, 460 (8th Cir. 1985).
Even if Carlson had properly preserved this issue in the district court, we
conclude that her proposed second amended complaint must be rejected as futile. See
Williams v. Little Rock Mun. Water Works, 21 F.3d 218, 225 (8th Cir. 1994) (“Good
reason to deny leave to amend exists if the amendment would be futile.”). Carlson
argues she has a viable claim independent of the allegedly defective seat belt system
because, during the accident:
the door frame was caused to deform causing an opening which allowed
the ejection of Jodi Carlson. The seat belt mechanism was not
significantly related to the creation of this hole. If she had had her seat
belt on she would have been ejected and if she had not had her seat belt
on she would have been ejected. Accordingly, there is no reason to refer
to the seat belt mechanism in this case.
However, the issue in a crashworthiness case is whether the vehicle design as a whole
evidences the manufacturer’s failure to use reasonable care to prevent auto accident
injuries. See O’Grady, Minnesota’s Seat Belt Evidence Gag Rule: Antiquated and
Unfair in Crashworthiness Cases, 15 WM. MITCHELL L. REV. 353, 367-69 (1989), and
cases cited. The seat belt gag rule does not bar evidence by Hyundai that its seat belt
system was designed to prevent passengers from being ejected from the vehicle during
accidents. But while that evidence is admissible, § 169.685, subd. 4, bars Carlson from
introducing evidence that the seat belt system was installed, in use, and failed to
prevent her ejection. If Carlson cannot prove that the seat belt system failed of its
essential crashworthiness purpose, then she cannot prove that Hyundai failed to use
reasonable care to prevent accident injuries in its vehicle design as a whole. In other
words, like the seat belt system and seat back at issue in Schlotz, and the airbag and
seat belt system discussed by Justice Page in his concurring opinion in Olson, 558
N.W.2d at 498, the alleged defects in the Hyundai seat belt system and door frame
-4-
were inseparably intertwined in causing Carlson’s increased injuries. In these
circumstances, any amended complaint attempting to separate the two alleged defects
so as to prevent application of § 169.685, subd. 4, to bar Carlson’s claims would be
futile.
Finally, Carlson argues the district court erred in dismissing defendant Hyundai
Motor Company because that Korean company was never served and thus the court
lacked personal jurisdiction to grant a judgment in its favor. We disagree. Carlson
failed to raised this issue in the district court and therefore may not raise it on appeal.
Moreover, Hyundai Motor Company voluntarily appeared in the district court and
joined in defendants’ Rule 12(b)(6) motion to dismiss without contesting the court’s
personal jurisdiction, thereby waiving that issue. See Fed. R. Civ. P. 12(h)(1).
“Because the requirement of personal jurisdiction represents first of all an individual
right . . . an individual may submit to the jurisdiction of the court by appearance.”
Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694,
703 (1982). In this case, Hyundai Motor Company consented to the district court’s
jurisdiction by voluntarily appearing and is entitled to the res judicata effect of the
court’s judgment in its favor.
The judgment of the district court is affirmed.
HEANEY, Circuit Judge, dissenting.
From this day forward, passengers thrown from a vehicle due to an alleged
structural defect are precluded from pursuing crashworthiness claims under Minnesota
law. In my view, this result is mandated by neither the seat belt gag rule nor the
decisions of the Minnesota Supreme Court. Accordingly, I respectfully dissent.
The Minnesota seat belt gag rule, enacted in 1963, precludes introduction of any
evidence pertaining to seat belt use or nonuse in a suit involving “‘personal injury
-5-
resulting from the use of a motor vehicle.’” Olson v. Ford Motor Co., 558 N.W.2d
491, 494 (Minn. 1997) (quoting Swelbar v. Lahti, 473 N.W.2d 77, 79 (Minn. Ct. App.
1991)). Five years after the legislature enacted the seat belt gag rule, this court
recognized the crashworthiness doctrine, which imposes liability for injuries
exacerbated, rather than caused, by defective design or manufacture of a vehicle. See
Larsen v. General Motors Corp., 391 F.2d 495, 502 (8th Cir. 1968). In Larsen, we held
that an automobile manufacturer "is under a duty to use reasonable care in the design
of its vehicle to avoid subjecting the user to an unreasonable risk of injury in the event
of a collision." Id. at 502. We explained:
Any design defect not causing the accident would not subject the
manufacturer to liability for the entire damage, but the manufacturer
should be liable for that portion of the damage or injury caused by the
defective design over and above the damage or injury that probably
would have occurred as a result of the impact or collision absent the
defective design.
Id. at 503. In Mitchell v. Volkswagenwerk, AG, we elaborated:
[T]he extent of the manufacturer’s liability depends upon whether or not
the injuries involved are divisible such that the injuries can be clearly
separated and attributed either to the manufacturer or the original
tortfeasor. If the manufacturer’s negligence is found to be a substantial
factor in causing an indivisible injury such as paraplegia, death, etc., then
absent a reasonable basis to determine which wrongdoer actually caused
the harm, the defendants should be treated as joint and several tortfeasors.
669 F.2d 1199, 1206 (8th Cir. 1982) (citing Mathews v. Mills, 178 N.W.2d 841 (Minn.
1970)).
When the seat belt gag rule was enacted, there “was still considerable debate as
to the efficacy of seat belts as a safety device.” Olson, 558 N.W.2d at 495. In 1986,
-6-
the Minnesota legislature formally ended the debate by enacting legislation requiring
seat belt use. See Minn. Stat. Ann. § 169.686 (West Supp. 1999). The Minnesota
Supreme Court has noted that the legislature may not have solely intended “to protect
a plaintiff from being penalized for contributory negligence for failure to wear a seat
belt” by enacting the seat belt gag rule. Olson, 558 N.W.2d at 495. Instead, the
legislature intended to strike a balance between car crash victims and auto
manufacturers. See id. Contrary to the majority’s holding, there is no evidence
suggesting that the legislature intended the seat belt gag rule to preclude all
crashworthiness claims when a passenger is thrown from a vehicle and alleges
structural defect.2 In fact, by construing the seat belt gag rule so broadly, the majority
ignores the balance struck by the legislature and, instead, virtually immunizes auto
manufacturers from crashworthiness claims as long as seat belts were installed in the
vehicle.
Here, Carlson wishes to amend her complaint to assert that the opening created
when the roof of her car peeled off during the crash stated a cause of action under the
crashworthiness doctrine. She argues that she would have been thrown from the
vehicle regardless of whether she was wearing a seat belt. The majority asserts that
since Carlson cannot introduce evidence stating that the seat belt system was in use and
failed to prevent ejection and since “the alleged defects in the Hyundai seat belt system
and door frame were inseparably intertwined in causing Carlson’s increased injuries,”
she “cannot prove that Hyundai failed to use reasonable care to prevent accident
injuries in its vehicle design as a whole.” I do not read “as a whole” so narrowly nor
2
While the court of appeals’ decision in Schlotz may suggest a contrary result,
we are not bound by that decision, see Horstmyer v. Black & Decker, Inc., 151 F.3d
765, 773-74 n.10 (8th Cir. 1998), and I do not read it as a final statement of the law by
Minnesota’s highest court. In fact, the Minnesota Supreme Court decision in Olson
came out almost a full month after Schlotz, yet did not even refer to Schlotz and its
expansive interpretation of the seat belt gag rule. I therefore do not believe that the
Minnesota Supreme Court would adopt the view endorsed by the majority.
-7-
do I see the logical or legal necessity in raising the seat belt issue to determine whether
Hyundai was negligent in the design of the vehicle.3 In short, the facts of each car
crash will vary, and the jury, rather than a federal court of appeals sitting in a diversity
action, is the proper body to determine whether an auto manufacturer exercised
reasonable care in the design or manufacture of a vehicle. It is entirely inappropriate
for this court to decide the issue as a matter of law.
Under these circumstances, I disagree with the majority’s conclusion that
Carlson’s proposed second amended complaint must be rejected as futile and would
remand the case so the district court could entertain her motion to amend her
complaint. Accordingly, I respectfully dissent.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
3
I concede that, absent the seat belt gag rule, knowing whether a passenger was
wearing her seat belt may be relevant in determining whether her injuries were
exacerbated by the defective design or manufacture of the vehicle. It is possible,
however, that a design defect would exacerbate injury regardless of whether a seatbelt
mechanism exists or is in use.
-8- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1475095/ | 875 A.2d 1050 (2005)
378 N.J. Super. 396
STATE of New Jersey, Plaintiff-Respondent,
v.
Stanley MATTHEWS, Defendant-Appellant.
Superior Court of New Jersey, Appellate Division.
Argued May 25, 2005.
Decided June 22, 2005.
*1051 Stephen P. Hunter, Assistant Deputy Public Defender, argued the cause for appellant (Yvonne Smith Segars, Public Defender, attorney; Mr. Hunter, of counsel and on the brief).
Samuel Marzarella, Senior Assistant Prosecutor, argued the cause for respondent (Thomas F. Kelaher, Ocean County Prosecutor, attorney; Mr. Marzarella, of counsel; Mr. Marzarella and William Kyle Meighan, Assistant Prosecutor, on the brief).
Before Judges CONLEY, BRAITHWAITE and WINKELSTEIN.
The opinion of the court was delivered by
WINKELSTEIN, J.A.D.
On January 14, 2003, an Ocean County Grand Jury indicted defendant, Stanley Matthews, charging him with sixteen counts of third-degree burglary, six counts of third-degree theft, one count of third-degree attempted burglary, and one count of fourth-degree theft. The following week, he applied for placement into the Ocean County drug court program. The prosecutor objected. The Law Division judge concluded that the objection was not a patent and gross abuse of discretion, and denied defendant admission into the program. *1052 Then, before another judge, defendant pleaded guilty to three third-degree burglary counts and three third-degree theft counts, with the remaining counts to be dismissed. The judge imposed three consecutive five-year terms, each with a two and one-half-year period of parole ineligibility.
On appeal, defendant challenges the order denying his admission into the drug court program, and the imposition of the fifteen-year sentence, claiming the sentence violated the terms of his plea agreement. We affirm.
We first address the court's order denying defendant admission into the drug court program. Drug courts have been developed as an alternate to incarceration for certain drug-addicted defendants. While no statutory definition of a "drug court" exists, the Administrative Office of the Courts (AOC), by Directive No. 2-02 issued on July 22, 2002, promulgated a Manual for Operation of Adult Drug Courts in New Jersey (the manual), which defines drug courts as "a highly specialized team process that function within the existing Superior Court structure to address nonviolent drug-related cases." The manual was issued on the heels of legislation enacted on September 6, 2001, creating an additional six Superior Court judges to effectuate the use of drug courts on a statewide basis. See N.J.S.A. 2B:2-1; Senate Judiciary Committee, Statement to S. 2227 (March 26, 2001) (statute enacted to permit expansion on statewide basis of drug court program in Superior Court over two-year period).
"The target population [for drug courts] was offenders eligible for sentencing pursuant to N.J.S.A. 2C:35-14." This statute was amended in 1999 to establish a program of "special probation" for certain offenders under certain conditions. State v. Hester, 357 N.J.Super. 428, 438, 815 A.2d 543 (App.Div.) (quoting L. 1999, c. 376, § 2), certif. denied, 177 N.J. 219, 827 A.2d 287 (2003). In part, N.J.S.A. 2C:35-14a provides:
Notwithstanding the presumption of incarceration pursuant to the provisions of subsection d. of N.J.S.A. 2C:44-1, and except as provided in subsection c. of this section, whenever a drug or alcohol dependent person is convicted of ... an offense, other than one described in subsection b. of this section, the court ... may ... place the person on special probation....
A defendant is only eligible for special probation, however, if he or she
is "drug or alcohol dependent," committed the underlying offense while "under the influence" of a controlled dangerous substance, "did not possess a firearm" at the time of offense or any pending charge, and that defendant will "benefit" from the program which "will thereby reduce the likelihood that [he or she] will thereafter commit another offense."
[Hester, supra, 357 N.J.Super. at 438-39, 815 A.2d 543 (quoting N.J.S.A. 2C:35-14a(1)-(5)).]
In addition to these restrictions, defendants who are convicted of certain offenses are per se ineligible for the program. Id. at 439, 815 A.2d 543; N.J.S.A. 2C:35-14a(6) & (7). Additional limitations are placed upon admission making a person ineligible for special probation if he or she is convicted of:
(1) a crime of the first degree;
(2) a crime of the first or second degree enumerated in subsection d. of N.J.S.[A.] 2C:43-7.2 [the No Early Release Act];
(3) a crime, other than that defined in N.J.S.[A.] 2C:35-7 [the sale or distribution of a controlled dangerous substance on or near school property], for which a *1053 mandatory minimum period of incarceration is prescribed ...; or
(4) an offense that involved the distribution or the conspiracy or attempt to distribute a controlled dangerous substance or controlled substance analog to a juvenile near or on school property. [N.J.S.A. 2C:35-14b.]
The statute further limits admission, even if a person is not disqualified under N.J.S.A. 2C:35-14a or b. N.J.S.A. 2C:35-14c provides:
c. A person convicted of ... an offense under ... [N.J.S.A.] 2C:35-7, ... [N.J.S.A.] 2C:35-4.1, or any crime for which there exists a presumption of imprisonment pursuant to subsection d. of N.J.S.[A.] 2C:44-1 or any other statute, or who has been previously convicted of an offense under subsection a. of N.J.S.[A.] 2C:35-5 or a similar offense under any other law of this State, any other state or the United States, shall not be eligible for sentence in accordance with this section if the prosecutor objects to the person being placed on special probation. The court shall not place a person on special probation over the prosecutor's objection except upon a finding by the court of a gross and patent abuse of prosecutorial discretion....
[(emphasis added).]
It is upon this provision that the Law Division relied when it considered the prosecutor's objections to defendant's admission into the program under a patent and gross abuse of discretion standard.
The manual anticipates that other defendants, not sentenced under N.J.S.A. 2C:35-14, may be eligible for drug court disposition. Specifically, the manual states: "[s]ubstance abusing non-violent offenders who are not subject to N.J.S.A. 2C:35-14 are also eligible for drug court disposition under the general sentencing provisions of the Code of Criminal Justice [N.J.S.A. 2C:45-1]. This includes both prison-bound and non-prison bound offenders." This language in the manual is the focal point of defendant's argument that he should have been placed in a drug court program. He claims the manual authorizes a court to sentence a defendant to a drug court program under N.J.S.A. 2C:45-1 as well as under N.J.S.A. 2C:35-14; and, because his convictions were for offenses that do not carry a presumption of incarceration, he should have been sentenced under the former statute rather than the latter. Had that occurred, while the prosecutor would still have had the right to object to his admission into a drug court program, the court would not have been required to consider the prosecutor's objections under a patent and gross abuse of discretion standard.
N.J.S.A. 2C:45-1, effective September 1979, see L. 1978, c. 95, is the successor to N.J.S.A. 2A:168-1, which authorized the court to suspend sentences and place defendants on probation. Both statutes provided the court with the authority to impose, as a condition of probation, institutional and outpatient treatment. See The New Jersey Penal Code, Volume II: Commentary, Final Report of New Jersey Criminal Law Revision Commission, October 1971, § 3c; see also State v. Davis, 68 N.J. 69, 84, 342 A.2d 841 (1975) (methadone treatment program for drug addicts authorized by N.J.S.A. 2A:168-1 and R. 3:21-10(a)); State v. Reyes, 207 N.J.Super. 126, 141, 504 A.2d 43 (App.Div.) (drug program a permissible condition of probation pursuant to N.J.S.A. 2C:45-1), certif. denied, 103 N.J. 499, 511 A.2d 671 (1986); N.J.S.A. 2C:45-1b(3) (as a condition of probation, court may order a defendant to "undergo available medical or psychiatric treatment and to enter and remain in a specified institution").
*1054 For purposes of ordering a defendant into a drug court program, two notable differences exist between a sentence under N.J.S.A. 2C:35-14 and N.J.S.A. 2C:45-1. First, the former statute renders ineligible for the program defendants who have been convicted of the offenses listed in N.J.S.A. 2C:35-14a and b. Subject to the statutory limitations on probation for persons convicted of crimes of the first and second degree, see N.J.S.A. 2C:44-1d, that is not the case with a sentence under N.J.S.A. 2C:45-1. Second, N.J.S.A. 2C:35-14c establishes conditions under which a prosecutor's objections to a defendant entering a drug program are subject to a patent and gross abuse of discretion standard. This standard is not applicable should a defendant be sentenced to a drug program under N.J.S.A. 2C:45-1.
Here, the prosecutor objected to defendant's admission into the drug court program based upon his prior convictions for violations of N.J.S.A. 2C:35-7, which the judge found to be similar to offenses under N.J.S.A. 2C:35-5; these convictions triggered N.J.S.A. 2C:35-14c to make the prosecutor's objections subject to a patent and gross abuse of discretion standard. The judge then determined that the prosecutor's objections were not a patent and gross abuse of discretion, and consequently denied defendant admission into the drug court program.
On appeal, defendant does not challenge the Law Division's conclusion that the prosecutor's objections were not a patent and gross abuse of discretion, but instead, he challenges the court's use of the criteria in N.J.S.A. 2C:35-14 to determine whether he was eligible for a drug court program. Defendant suggests that the judge may, in his or her discretion, decide which statute to use. The State, on the other hand, argues that N.J.S.A. 2C:35-14 is the controlling statute, and that in every instance a defendant may only be admitted into the drug court program over the State's objections upon a showing of a patent and gross abuse of discretion. We reject both positions.
We do not read the two statutes as mutually exclusive, but rather read them together to harmonize their intent and language. See State ex rel. G.C., 179 N.J. 475, 481-82, 846 A.2d 1222 (2004) ("[w]hen reviewing related statutory provisions we generally consider them in pari materia, harmonizing their meaning with the Legislature's intent"). On the one hand, N.J.S.A. 2C:45-1 is a general statute; it provides the court with the authority to impose a variety of conditions on probation. On the other hand, N.J.S.A. 2C:35-14 is specific, in that it provides for the imposition of a sentence of special probation only under certain circumstances. When faced with a statute that
deals with a subject in general terms, and another deals with a part of the same subject in a more detailed way, the two should be harmonized if possible; but if there is any conflict, the latter will prevail, ... unless it appears that the legislature intended to make the general act controlling.
[Lewis v. Bd. of Trs., 366 N.J.Super. 411, 417, 841 A.2d 483 (App.Div.) (quoting 2A Norman J. Singer, Sutherland Statutory Construction 51:05 (6th ed., 2000)), certif. denied, 180 N.J. 357, 851 A.2d 650 (2004).]
It follows then, when the express conditions enumerated in N.J.S.A. 2C:35-14 the specific statute are extant, admission into special probation, i.e., a drug court program, is governed by N.J.S.A. 2C:35-14. It is only when a defendant is not precluded from a drug court program by the restrictions in N.J.S.A. 2C:35-14a and b, and the prosecutor does not have the right to object under the patent and gross *1055 abuse of discretion standard under subsection c, that admission into a drug treatment program under N.J.S.A. 2C:45-1b(3) may be appropriate.
Looking first to the requirements of N.J.S.A. 2C:35-14 is given further support by the plain language of subsection a of the statute. It provides that a person sentenced to special probation under its terms must also comply with conditions required by the court "pursuant to N.J.S.[A.] 2C:45-1." The clear implication being that the court must first consider N.J.S.A. 2C:35-14 and if sentencing is appropriate under that statute, the court then looks to N.J.S.A. 2C:45-1 to determine if any additional conditions of probation may apply.
Nevertheless, circumstances may exist that allow a sentence into a drug court program exclusively under N.J.S.A. 2C:45-1. For example, if here, defendant simply had the burglary and theft convictions, which do not per se disqualify him from drug court under N.J.S.A. 2C:35-14a or b, and he did not have his prior convictions for offenses similar to N.J.S.A. 2C:35-5, the judge could have opted to sentence defendant under N.J.S.A. 2C:45-1, because it was only defendant's prior convictions that gave the prosecutor the right to object under the patent and gross abuse of discretion standard. But, because defendant does have those prior convictions, to allow a sentence under N.J.S.A. 2C:45-1b(3) would be contrary to the legislative intent of N.J.S.A. 2C:35-14c, rendering it essentially meaningless, a result to be avoided. See State v. Sisler, 177 N.J. 199, 214, 827 A.2d 274 (2003). In short, while not all admissions to a drug court program necessarily take place under N.J.S.A. 2C:35-14, if a defendant is barred from participation in a drug court program by that statute, or the prosecutor has a right to object under subsection c of its provisions, the court cannot override those legislative directives simply by proclaiming that a defendant be sentenced under N.J.S.A. 2C:45-1.
Defendant argues the manual gives the court the right to sentence a defendant under either statute; that, in effect, the court can disregard the constraints in N.J.S.A. 2C:35-14, and impose a condition that may include a drug court program exclusively under N.J.S.A. 2C:45-1b(3). We disagree. By its own terms, the manual is a procedural tool for operational guidance for New Jersey judiciary staff. The manual does not, either explicitly or implicitly, give a sentencing judge the authority to disregard the constraints in N.J.S.A. 2C:35-14. Cf. State v. Bausch, 83 N.J. 425, 433, 416 A.2d 833 (1980) (while courts have inherent power to provide for probation, judiciary "has no power to create a penalty for a statutory crime where none exists ... to mete out a punishment in excess of that prescribed by the Legislature... or to lessen or reduce a sentence where the Legislature has provided a mandatory penalty").
In sum, defendant's convictions for offenses similar to N.J.S.A. 2C:35-5 triggered the prosecutor's right to object to defendant's admission into the program. We affirm the Law Division's order that the prosecutor's objections to defendant's admission into a drug program were not a patent and gross abuse of discretion for the reasons expressed by the Law Division judge in his written opinion.
Finally, we turn to defendant's argument that his sentence exceeded that for which he bargained in his plea agreement. We are not persuaded.
"A guilty plea may be accepted as part of a plea bargain when the court is assured that the defendant enters into the plea knowingly, intelligently and voluntarily." State v. Johnson, 182 N.J. 232, 236, 864 *1056 A.2d 400 (2005) (citing R. 3:9-2). To ensure a plea complies with the requirements of Rule 3:9-2, the court "at a minimum,... must ensure that the defendant is made fully aware of [the] consequences [that flow from the plea] that are `direct' or `penal.'" Ibid. (quoting State v. Howard, 110 N.J. 113, 122, 539 A.2d 1203 (1988)). A judge must advise a defendant of the maximum custodial sentence and fine imposable before the requirements of Rule 3:9-2 are satisfied. State v. Kovack, 91 N.J. 476, 481-82, 453 A.2d 521 (1982) (internal quotations omitted).
Here, defendant was aware of the consequences that could flow from his negotiated plea. His plea form states: "Your total exposure as the result of this plea is: TOTAL: 30yrs." It also states that the "State will leave sentence to Court's discretion.... State will seek consecutive time on 2 counts." The form indicates that defendant acknowledged: (1) the sentencing judge was "not bound by any promises or recommendations of the prosecutor" and could "impose a more severe sentence;" and (2) defendant could "take back [his] plea" if the sentencing judge imposed "a more severe sentence than recommended by the prosecutor."
At the plea hearing, defendant testified under oath that he reviewed the plea agreement with his attorney. He acknowledged the sentencing judge's statement that the maximum penalty for each of the six counts to which he was pleading was "five years in prison and a $15,000 fine." The judge also explained: "[I]t's inferred [the State] ha[s] no objection to the counts being run concurrent, but they may seek consecutive sentences with regard to at least two of the counts." (emphasis added). Defendant said he understood. He acknowledged that sentencing was within the court's discretion and that the judge could have imposed the maximum term of incarceration along with a period of parole ineligibility. Following an exchange with the court in which the above consequences were discussed, defendant freely and voluntarily pleaded guilty to the six counts specified on the plea agreement form.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1532424/ | 831 S.W.2d 463 (1992)
Kenneth L. RANKIN, Appellant,
v.
ATWOOD VACUUM MACHINE COMPANY, Appellee.
No. C14-90-01074-CV.
Court of Appeals of Texas, Houston (14th Dist.).
May 14, 1992.
Rehearing Denied June 11, 1992.
*464 Roger A. Rider, Susan E. Brownlee, Houston, for appellant.
B. Stephen Rice, Houston, for appellee.
Before JUNELL, ROBERTSON and DRAUGHN, JJ.
OPINION
ROBERTSON, Justice.
Kenneth L. Rankin appeals from a take nothing judgment rendered in his products liability suit. Rankin raises seven points of error, challenging the trial court's submission of instructions regarding sole proximate cause and negligence per se, exclusion of testimony, and failure to grant a new trial based on newly discovered evidence. We affirm.
On the date of the accident forming the basis of the suit, Rankin and a co-worker, Russell Dougherty, were to retrieve a Coca Cola trailer. Either Rankin or Dougherty attached the trailer to the truck by use of a coupler manufactured by appellee. Both Dougherty and Rankin testified that the trailer was latched securely. The two then proceeded onto the freeway. While driving, the trailer uncoupled from the truck and veered to the outside shoulder of the freeway, hit a vehicle, and then veered back into traffic. Dougherty parked the truck three or four feet behind the trailer and turned on his emergency flashers. Unable to reattach the trailer, Dougherty and Rankin began directing oncoming cars around the disabled trailer. The trailer had come to a stop in a valley between two overpasses, leaving oncoming drivers approximately 150 yards after cresting the overpass to see the disabled vehicles and change lanes.
While directing traffic, Rankin and Dougherty heard a passing motorist yell "flare" and saw him throw something. Rankin kneeled between the trailer and the truck to look for the flare. Dougherty was continuing to direct traffic when a vehicle driven by Bill McCoy approached at a high rate of speed. Dougherty jumped out of the way before McCoy's vehicle crashed into the rear of the truck. Rankin, however, was crushed between the truck and the trailer.
*465 Rankin filed suit against appellee and Demco Trailer Company, not a party to this appeal, alleging strict liability for defective design, negligent design, failure to warn, breach of warranty under the Texas DTPA. The jury found no design or marketing defect in the coupler that was a producing cause of Rankin's injuries. The jury found no negligence by appellee, Demco, or Rankin, but found Rankin responsible for 100% of the injury. The jury further found no breach of warranty or violation of the DTPA.
In points of error one and two, Rankin claims the trial court erred by including a sole cause instruction in its definitions of producing and proximate cause because there was no evidence to support it. The trial court included the following instructions:
"Producing cause" means an efficient, exciting or contributing cause that, in a natural sequence, produced the occurrence. There may be more than one cause of an occurrence, but if an act or omission of any person not a party to the suit was the sole cause of the occurrence then no act, omission or product of any party to the suit could have been a cause of the occurrence.
....
"Proximate cause" means that cause which, in a natural continuous sequence, produces an event, and without which cause such event would not have occurred. In order to be a proximate cause, the act or omission complained of must be such that a person using ordinary care would have foreseen that the event, or some similar event, might reasonably result therefrom. There may be more than one proximate cause of an event, but if an act or omission of any person not a party to the suit was the "sole proximate cause" of an occurrence, then no act or omission of any other person could have been a proximate cause.
Each party is entitled to submission of all of his theories if they have support in the evidence. Ahlschlager v. Remington Arms Co., Inc., 750 S.W.2d 832, 835 (Tex.App.Houston [14th Dist.] 1988, writ denied). In its answer, appellee alleged as an affirmative defense that the accident proximately resulted solely from the negligence of Rankin, McCoy, or Rankin's employer. Sole proximate cause is an inferential rebuttal issue, which means that it is a defense presenting a contrary or inconsistent theory from the claim relied upon for recovery. Reid v. Best Waste Systems, Inc., 800 S.W.2d 644, 646 (Tex. App.Houston [14th Dist.] 1990, writ denied). Although inferential rebuttal defenses may not be submitted as questions for the jury, they may be included in the instructions. Id.
The trial court has discretion to submit necessary and proper instructions. Tex.R.Civ.P. 277; Green Tree Acceptance, Inc. v. Combs, 745 S.W.2d 87, 89 (Tex. App.San Antonio 1988, writ denied). We may find no abuse of discretion unless appellant shows that the instruction caused or probably caused rendition of an improper verdict. TEX.R.APP.P. 81(b)(1).
We find that the evidence did support submission of the instructions on sole cause. The doctrine of sole cause applies to the conduct of others not a party to the suit. Thus, in this case, the sole cause instruction could only relate to the conduct of McCoy or Rankin's employer, Coca Cola. As to McCoy, the evidence showed that the impact resulting in injury to Rankin was caused by McCoy. The evidence also showed that Coca Cola used the wrong size coupler to pull the trailer, removed the brakes from the trailer, and failed to put flares or flags in the truck for use when the vehicle was disabled on a roadway. Other evidence implicated Rankin's coworker, Dougherty. Rankin testified that Dougherty latched the trailer and Dougherty testified that Rankin latched it. Because we find evidence supporting the submission of a sole cause instruction in the definitions of producing and proximate cause, we overrule points of error one and two.
In points of error three through five, appellant claims the trial court erred in submitting instructions of negligence per *466 se regarding trailer brakes and the use of red flags, fuses, lights or reflectors because appellee is not within the class of persons protected by the statute. At appellee's request and over appellant's objection, the trial court submitted the following three instructions regarding negligence per se:
Every trailer, semitrailer and pole trailer with a gross weight in excess of three thousand (3,000) pounds, shall be equipped with brakes acting on all wheels and of such character as to be applied automatically and promptly, and remain applied for at least fifteen (15) minutes, upon breakaway from the towing vehicle. A failure to comply with this law is negligence in itself.
When any truck, bus, truck tractor, trailer, semitrailer or pole trailer eighty (80) inches or more in overall width or thirty (30) feet or more in overall length, is disabled or stopped for more than ten (10) minutes upon the roadway of a divided highway, the driver of the vehicle shall display two (2) red flags; one (1) flag shall be placed approximately one hundred (100) feet and one (1) flag approximately two hundred (200) feet to the rear of the vehicle in the center of the lane occupied by such vehicle. A failure to comply with this law is negligence in itself.
When any truck, bus, truck tractor, trailer, semitrailer or pole trailer eighty (80) inches or more in overall width or thirty (30) feet or more in overall length is disabled or stopped for more than ten (10) minutes within five hundred (500) feet of a curve, hillcrest or other obstruction to view, a lighted fusee, a lighted red electric lantern or a portable red emergency reflector shall be so placed as to afford ample warning to other users of the highway, but in no case less than one hundred (100) feet nor more than five hundred (500) feet from the disabled vehicle. A failure to comply with this law is negligence in itself.
The unexcused violation of a penal statute constitutes negligence as a matter of law if such statute was designed to prevent injuries to a class of persons to which the injured party belongs. Murray v. O & A Express, Inc., 630 S.W.2d 633, 636 (Tex. 1982). The instructions submitted related to alleged violations of Tex.Rev.Civ. StatAnn. art. 6701d, §§ 132, 137, 138 (Vernon 1977) by Coca Cola, Dougherty, and Rankin.
Appellant contends that the statute was intended to protect persons traveling on Texas roads. Thus, appellant asserts that appellee was not within the class of persons protected by the statute and the trial court abused its discretion in submitting these instructions. Citing State Highway Dept. v. Pinner, 531 S.W.2d 851 (Tex.Civ. App.Beaumont 1975, no writ), appellee responds that a person not within the class protected by the statute may assert affirmative defenses based on violations of art. 6701d.
Even if we were to find the submission of these instructions error, any such error would not be reversible because there is no proof that the submission of these instructions caused or probably caused rendition of an improper verdict. The jury issue regarding negligence asked the jury whether the negligence of appellant, appellee, or Demco Trailer proximately caused the occurrence. The jury answered "no" as to each of these parties. Finding no reversible error in the submission of these instructions, we overrule points three through five.
In point of error six, appellant claims the trial court erred in excluding the testimony of Bill McCoy as a sanction for appellant's failure to designate McCoy as a witness in its answers to appellee's interrogatories. Rule 166b provides for discovery of potential witnesses. TEX.R.CIV.P. 166b(2)(d). A party who has been served with a discovery request is under a duty to supplement the response if he later determines the response was incorrect or incomplete when made. TEX.R.CIV.P. 166b(6)(a). This supplemental response must be made not less than thirty days before trial unless the trial court finds good cause for later supplementation. TEX.R.CIV.P. 166b(6). The sanction for noncompliance with this *467 rule is the automatic exclusion of the unidentified witness' testimony, unless there is good cause to excuse imposition of this sanction. TEX.R.CIV.P. 215(5); Alvarado v. Farah Mfg. Co., Inc., 830 S.W.2d 911, 914-15 (1992) (op. on reh'g); Sharp v. Broadway Nat'l Bank, 784 S.W.2d 669, 671 (Tex. 1990). The trial court has discretion to determine whether the offering party has met its burden of showing good cause to admit the testimony. Alvarado, 830 S.W.2d at 914-15.
Appellee served appellant with interrogatories asking for identification of potential witnesses or persons with knowledge of relevant facts. Appellant did not include McCoy in its answer to this interrogatory and did not supplement those answers to include McCoy. When appellant attempted to offer the deposition of Bill McCoy, appellee objected on the ground that appellant had not designated McCoy as a potential witness. Although appellant admitted he had not listed McCoy, appellant claimed there was good cause to allow the testimony because there was notice that McCoy was a person with knowledge of relevant facts since appellees had deposed McCoy and indicated they intended to use his testimony at trial. Furthermore, appellant argued that Rule 207 allows any party to use deposition testimony regardless of who took the deposition. Thus, appellant claimed Rule 207, rather than Rule 215(5), should control.
We disagree with appellant's argument. Even if a witness has been fully deposed, and only his deposition testimony will be offered at trial, this is not enough to establish good cause for admitting the testimony where the witness was not identified in response to discovery. Alvarado, 830 S.W.2d at 914-15 (citing Sharp, 784 S.W.2d at 671). We find no error in the trial court's refusal to admit McCoy's testimony. We overrule point of error six.
In point of error seven, appellant claims the trial court erred in failing to grant a new trial based upon newly discovered evidence. A trial court properly grants a motion for new trial on the basis of newly discovered evidence where the movant shows: (1) the evidence came to his knowledge after the trial; (2) the failure to discover this evidence sooner was not caused by lack of due diligence; (3) the evidence is not cumulative; and (4) the evidence is so material that it would probably produce a different result if a new trial were granted. Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex.1983). The decision whether to grant a new trial is within the sound discretion of the trial court and we must uphold this decision absent a showing of abuse of discretion. Id.
Appellee contends appellant failed to satisfy any of the required elements for a new trial based on newly discovered evidence. First, appellee notes that appellant learned of the evidence during, not after, the trial. This evidence consists of a report prepared by John Abromavage which critiques the depositions of two witnesses in another case involving appellee and presents an inspection and critique of the design of an Atwood coupler. Appellant argues, however, that he did not receive this report until after it could be used effectively at trial. Appellant further charges appellee with abuse of the discovery process, claiming that appellee intentionally delayed supplementing answers to interrogatories that would have enabled appellant to discover this report.
The transcript shows that appellant served appellee with its first set of interrogatories in December 1985. Appellant responded to these interrogatories in April 1986. In these interrogatories, appellant asked for the style, cause number, and court for each lawsuit filed against appellee to date involving the same trailer hitch coupler involved in the accident forming the bases of this suit. Appellee responded that it would supplement its answer to this interrogatory "upon discovering the identity of the coupler made the basis of the lawsuit." In April 1990, appellee supplemented this answer as follows:
ANSWER:
1) Elaine Bondsteel vs. Trailer Craft and Atwood Industries, Inc., Third Judicial District at Palmer, Alaska, Cause No. 3PA-89-286 Civil;
*468 2) Kay Wooten vs. Big Boy, Inc. Trail-R-Craft, Inc. Atwood Vacuum Machine Company; Circuit Court of Newton County, Missouri Division 2; Cause No. CV1850235CC;
3) Brey; Salt Lake City, Utah; No other information known;
4) Donte; California; No other information known;
5) Brenda Carper; No other information known;
6) Lakely; No other information known.
In the depositions of Jerry Bonacorsi and Steven Koerner, employees of appellee, appellant's counsel inquired about other cases involving the Model 80050 coupler. These witnesses testified that all records regarding litigation were destroyed once the case was resolved. Documents included as exhibits to appellant's motion for new trial indicate that the Brey case and the Carper case were not concluded at the time appellant served its interrogatories on appellee. Thus, appellant argues that these files existed when appellant first requested information, but that they were apparently later destroyed pursuant to appellee's policy and were not produced to appellant. By letter dated June 1, 1990, counsel for appellee advised counsel for appellant of a case in San Diego County Superior Court involving a party named Dante, and that the Lakely case mentioned in appellee's supplemental response was actually styled Cox v. Mark Twain Marine, filed in Jackson County Missouri.
Although appellant's counsel learned of the Brey case in April, he did not contact the attorney representing the plaintiffs in that case until two months later, well after trial had begun. The trial began on June 6, 1990. In his affidavit, the attorney who represented the Brey plaintiffs stated that appellant's counsel first contacted him on June 12, 1990 and requested information. This attorney further stated that he telecopied the Abromavage report to appellant's counsel on June 14, 1990. The statement of facts indicates that appellant's counsel attempted to offer this report for admission into evidence and to use it in crossexamination. The trial court refused to admit this exhibit into evidence and it was made part of appellant's bill of exception. The affidavit of appellant's counsel, which was attached to appellant's motion for new trial, includes the statement that appellant's counsel received a "garbled copy" of a report prepared by John Abromavage on June 14, 1990, and that he received a complete copy of this report on June 18, 1990.
We agree with appellee that appellant has failed to meet the first required element for a new trial based on newly discovered evidence. Appellant discovered the new evidence during trial and attempted to use it in cross-examination. Thus, appellant fails to show an abuse of discretion by the trial court in refusing to grant the motion for new trial. See Southwest Inns, Ltd. v. General Elec. Co., 744 S.W.2d 258, 265 (Tex.App.Houston [14th Dist.] 1987, writ denied). We overrule point of error seven.
We affirm the trial court's judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1532423/ | 383 B.R. 316 (2007)
In re Matthew/Sherrie GONYER, Debtor(s).
No. 07-32375.
United States Bankruptcy Court, N.D. Ohio.
November 5, 2007.
*317 *318 Ronald L. Nagy, Maumee, OH, for, Debtor.
Dean Wyman, Office of the US Trustee, Cleveland, OH, for U.S. Trustee.
DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court after a Hearing on the Motion of the United States Trustee to Dismiss Case Pursuant to 11 U.S.C. § 707(b)(1) and § 707(b)(3). At the conclusion of the Hearing, the Court took the matter under advisement so as to afford time to thoroughly consider the issues raised by the Parties. The Court has now had this opportunity, and finds, for the reasons now explained, that the Motion of the United States Trustee should be Denied.
DISCUSSION
This matter is before the Court on the Motion of the United States Trustee to Dismiss. Matters concerning the dismissal of a case, which affects both the ability of a debtor to receive a discharge and directly affects the creditor-debtor relationship, are core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(J)/(0). As a core proceeding, this Court has been conferred with the jurisdictional authority to enter a final order in this matter. 28 U.S.C. § 157(b)(1).
The United States Trustee (hereinafter "UST") brings its Motion to Dismiss pursuant to 11 U.S.C. § 707(b)(1) and § 707(b)(3). These provisions operate in *319 concert. First, § 707(b)(1) sets forth the blanket rule that a Chapter 7 ease may be dismissed where abuse is found to exist, providing, in relevant part:
(b)(1) After notice and a hearing, the court . . . may dismiss a case, filed by an individual debtor under this chapter whose debts are primarily consumer debts . . . if it finds that the granting of relief would be an abuse of the provisions of this chapter.
Section § 707(b)(3) then sets forth two mandatory considerations against which a court is to assess the existence of abuse under § 707(b)(1). This provision provides:
(3) In considering under paragraph (1) whether, the granting of relief would be an abuse of the provisions of this chapter in a case in which the presumption in subparagraph (A)(i) of such paragraph does not arise or is rebutted, the court shall consider
(A) whether the debtor filed the petition in bad faith; or
(B) the totality of the circumstances (including whether the debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor's financial situation demonstrates abuse.
As set forth in its two subparagraphs, abuse under § 707(b)(3) is assessed by looking to whether, under subparagraph (A), the debtor filed the petition in bad faith, or whether, as provided in subparagraph (B), the totality of the circumstances demonstrate abuse.
In seeking to have the Debtors' case dismissed under § 707(b)(3), the Motion of the UST initially relied on subparagraph (B), the totality of the circumstances. Particularly, in its Motion, the UST pointed to what is often a primary consideration when evaluating abuse under the totality of the circumstances: whether a debtor has the ability to repay their debts out of future earnings. Behlke v. Eisen (In re Behlke), 358 F.3d 429, 434-35 (6th Cir. 2004). According to the UST's Motion, the Debtors in this matter had the ability to repay their debts because, as set forth in their, original bankruptcy schedules, they had available $882.75 in excess monthly income which, if devoted to a Chapter 13 repayment plan, could pay 100% of the Debtors' unsecured debts which total just under $48,000.00: (Doc. No. 16).
At the Hearing held in this matter, however, the UST, based on subsequent information provided by the Debtors, did not actively pursue its position regarding the Debtors' ability to repay their debts; in effect, the UST dropped its position that the `totality of the circumstances' warranted a dismissal of the Debtors' case under § 707(b)(3)(B). And insofar as the Court can tell, this appears to be the proper course of action.
Based upon the information before the Court, the Debtors, besides having very little excess income available to repay their debts, have and will continue to have strains on their household budget. For example, it was brought to the Court's attention that the Debtors' son has autism and requires special care. Also, it is unlikely that, if the Debtors were to file a Chapter 13 petition, they could make any meaningful repayment toward their unsecured debts; in addition to their $48,000.00 in unsecured debt, the Debtors also face a steep deficiency as the result of surrendering their marital residence.
Notwithstanding, the UST continued to maintain that the Debtors' case should be dismissed for abuse, citing now to subparagraph (A) of § 707(b)(3). This provision provides that a court, when considering whether to dismiss a case for abuse under *320 § 707(b), must consider "whether the debtor filed the petition in bad faith." This provision was added to the Bankruptcy Code in 2005 by the Congressional Act known as BAPCPA. The implementation of this provision resolves an earlier ambiguity.
Prior to the enactment of § 707(b)(3)(A), some courts had declined to dismiss a debtor's Chapter 7 case based solely on the petition being filed in bad faith. The reason: unlike Chapters 11, 12 and 13 of the Bankruptcy Code, Chapter 7 had no explicit good faith requirement. Neary v. Padilla (In re Padilla), 222 F.3d 1184, 1191-92 (9th Cir.2000). Other courts took the opposite view, finding that a debtor's case could be dismissed based solely on the petition being filed in bad faith. Industrial Insurance Services Inc. v. Zick (In re Zick), 931 F.2d 1124 (6th Cir.1991) (lack of good faith is valid basis to dismiss Chapter 7 case `for cause' under § 707(a)). See also, First USA v. Lamanna (In re Lamanna), 153 F.3d 1, 5 fn. 9 (1st Cir. 1998) (bad faith may be a part of a § 707(b) `substantial abuse' calculation).
Section 707(b)(3)(A), thus, makes explicit what some courts had found to be implicit: on the basis of bad faith alone, it is permissible for a court to dismiss a debtor's Chapter 7 petition. In this way, this Court has held that the "bad faith" ground for dismissal under § 707(b)(3)(A) is best understood as simply a codification of those pre-BAPCPA decisions which had recognized bad faith as a basis for dismissal. In re Oot, 368 B.R. 662, 666 (Bankr. N.D.Ohio 2007). As it regards pre-BAPCPA decisions, especially relevant for this Court is the Sixth Circuit's decision in Industrial Insurance Services Inc. v. Zick (In re Zick), 931 F.2d 1124 (6th Cir.1991).
In the case of In re Zick, the Sixth Circuit Court of Appeals found that a lack of good faith on the part of a debtor in filing a bankruptcy petition constituted a valid ground for dismissal. Id. at 1127. In doing so, the Court stated:
Dismissal based on lack of good faith must be undertaken on an ad hoc basis. It should be confined carefully and is generally utilized only in those egregious cases that entail concealed or misrepresented assets and/or sources of income, and excessive and continued expenditures, lavish lifestyle, and intention to avoid a large single debt based on conduct akin to fraud, misconduct, or gross negligence.
Id at 1129 (citation omitted).
On its Motion for Dismissal, the UST, in support of its position that the Debtors filed their petition in bad faith, relied on these two facets of the Debtors' case. First, in the time period immediately preceding the filing of their bankruptcy petition, the Debtor, Mrs. Gonyer, took a cash advance on her credit card in the amount of $3,000.00. Second, the Debtors, in their bankruptcy schedules, listed as a current monthly expenditure a mortgage expense which was not actually being paid.
On the first point made by the UST, it can be agreed that the protections of the Bankruptcy Code were not intended to shield debtors who, in the time period leading up to their bankruptcy filing, engage in a scheme to accumulate consumer debt with no actual intention of ever repaying it. This is sometime referred to as a "bust out" scheme. Neary v. Padilla (In re Padilla), 222 F.3d 1184 (9th Cir.2000). Yet, merely because a debtor has not dealt honestly with a particular creditor does not preclude that debtor from seeking bankruptcy relief.
Various provisions of the Bankruptcy Code operate so as to render nondischargeable debts to a particular creditor which were incurred through a debtor's *321 wrongful acts. Prominent examples include: (1) § 523(a)(2), rendering nondischargeable debts incurred through fraud; (2) § 523(a)(4), providing that debts incurred by way of embezzlement and lame. ny may not be discharged in bankruptcy; and (3) § 523(a)(6), which excludes from discharge debts incurred by the willful and malicious actions of the debtor. These provisions, however, would be rendered largely redundant if, in most instances, the same, wrongful acts supported both a finding of nondischargeability and the dismissal of the debtor's case under § 707(b)(3)(A) for "bad faith." A creditor with a § 523(a) could simply seek the dismissal of the debtor's bankruptcy case.
Reading § 707(b)(3)(A) with too close a focus on the debtor's actions toward an individual creditor thus ignores the basic principle of statutory construction that an interpretation that renders another statute superfluous, especially one within the same statutory scheme, is to be avoided. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 35, 123 S. Ct. 2041, 2048, 156 L. Ed. 2d 18 (2003). Additionally, affording too much weight to a debtor's conduct toward a single creditor ignores the statute's focus on the bankruptcy case as a whole.
Section 707(b)(3)(A) sets forth that abuse will be found when the debtor "filed the petition in bad faith." (emphasis added). The operative word for this purpose being "filed." Under the Bankruptcy Code, the filing of a bankruptcy petition has the legal effect of commencing a bankruptcy case. 11 U.S.C. § 301(a). It follows, therefore, that § 707(b)(3)(A) touches upon all aspects of a debtor's bankruptcy case. In other words, § 707(b)(3)(A) is not directly concerned with a debtor's conduct toward individual creditors, but is rather focused on the debtor's conduct toward the bankruptcy process as a whole.
Still, it goes without saying that a debtor's conduct toward an individual creditor is still relevant in any action to dismiss under § 707(b)(3)(A). A basic function of the Bankruptcy Code is to maximize a debtor's available assets for distribution to creditors. As such, there always exists the possibility that a debtor's conduct toward an individual creditor could appreciably impact the bankruptcy process as a whole. However, so as to strike a proper balance, conduct directed toward a particular creditor or creditors will not normally support the dismissal of a case on the basis of "bad faith" unless, as set forth by the, Sixth Circuit in In re Zick, the debtor's conduct was particularly "egregious." And, as best as this Court can tell, the $3,000.00 cash advance taken by the Debtor does not rise to this level. For this conclusion, a few observations are in order.
First, the $3,000.00 cash advance taken by Ms. Gonyer only involves one creditor, and relatively, speaking, does not involve a significant amount of unsecured debt. This is inapposite to a bust out scheme which often involve tens of thousand of dollars in fraudulent debt. Also there is no indication that the Debtors purchased any luxury items with the cash advance. Moreover, the creditor making the $3,000.00 cash advance has filed a complaint to determine dischargeability. (Doc. No. 26). Thus, if fraud on the part of the Debtor, Sherrie Gonyer, is ultimately shown to exist, the creditor will be protected notwithstanding the further administration of the Debtors' case.
Even more important, the events precipitating the filing of the Debtors' bankruptcy petition seem "largely driven by an ever increasing decline in their financial situation. Particularly, it did not go unnoticed that, in an attempt to regain control of their financial situation before filing bankruptcy, *322 the Debtors surrendered their home, which they could no longer afford, using the $3,000.00 cash advance to help defray the costs of moving into a trailer. While this very well may constitute a fraud upon the particular creditor, these circumstances hardly resemble an artifice against the bankruptcy process as a whole.
The second argument raised by the UST follows a slightly different path. In seeking to have the Debtors' case dismissed under § 707(b)(3)(A) for "bad faith," the UST brought to the Court's attention that the Debtors placed inaccurate information in their bankruptcy schedules. Specifically, the UST points out that, contrary to their bankruptcy schedules, which listed the payment of a mortgage expense on their marital residence, the Debtors were not, and had not for some time been making a mortgage payment at the time they sought relief in this Court.
The integrity of the bankruptcy process rests upon a debtor's full and honest disclosure of all required information. See, e.g., In re Gotham, 327 B.R. 65, 78 (Bankr.D.Mass.2005). Consequently, to the extent reasonably possible, a debtor seeking the protection of this Court' must file bankruptcy schedules which are both thorough and accurate. In re Bayless, 78 B.R. 506, 509 (Bankr.S.D.Ohio 1987). This duty continues throughout the duration of the case. FED. R. BANKR.P. 1009.
Debtors who intentionally falsify their bankruptcy petition and schedules are subject to having their discharge denied. 11 U.S.C. § 727(a)(4). Even if there exists no actual intent to falsify, a debtor who is careless with regards to their disclosures is subject to having their bankruptcy case dismissed for bad faith. In re Jones, 335 B.R. 203, 214 (Bankr. M.D.Fla.2005). Either way, the ability of a debtor to receive a discharge is conditioned on their complete candor with regards to the information contained in their schedules.
Yet, the existence of an inaccuracy in a debtor's schedules will not, standing alone, warrant any adverse action so long as the inaccuracy is inadvertent. In re McVay, 345 B.R. 846, 849 (Bankr.N.D.Ohio 2006). The reality is that mistakes do occur. Id. And' in this particular matter, the facts are consistent with an inadvertent mistake.
This Court has observed that debtors who are less than forthright will not normally disclose pertinent information. In re Boyer, 321 B.R. 457, 459 (Bankr.N.D.Ohio 2004). This Court has also previously admonished: when in doubt, disclose. United States Trustee. v. Halishak (In re Halishak), 337 B.R. 620, 630 (Bankr.N.D.Ohio 2005). Placed in this context, what particularly stands out for the Court is that the error for which the UST complains involves not an omission, but a commission: The Debtors claimed an expense for which they, at the time their petition was filed, were legally obligated to pay, but against which they were not making any payments. Thus, while the Debtors may have committed a technical errorBankruptcy Schedule J asks for the "Current Expenditures of Individual Debtor(s)"their decision to expense their mortgage payment in their bankruptcy schedules is hardly indicative of carelessness or an intent to deceive, (emphasis added).
There is also no indication that the Debtors attempted to hide the fact that, at the time of their bankruptcy filing, they were no longer paying the debts secured against their marital residence. To the contrary, in the statement of intention filed with their petition, the Debtors set forth that it was their intention to surrender their residence. (Doc. No. 1). Thus, it *323 could be easily ascertained that, at the time they filed their petition, the Debtors were either no longer paying the debt secured against their residence or would soon be ceasing to make such payments.
It is also noted that it would have been wrong for the Debtors not to disclose their monthly contractual liability on the debts secured against their residence. In order to ascertain a debtor's financial situation for purposes of § 707(b)(3), not only is it necessary to know the debtor's current financial condition, but it is also necessary that the debtor's prior financial condition be examined. Thus, by listing their mortgage obligation in their current` monthly expenditures, the Debtors were simply disclosing requisite information, albeit not in a technically correct manner.
In conclusion, the Court, for the reasons explained, cannot find that the Debtors filed their petition in "bad faith." As such, the dismissal of the Debtors' case under 11 U.S.C. § 707(b)(3)(A) is not warranted. In reaching the conclusions found herein, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in this Decision.
ORDERED that the Motion of the United States Trustee to Dismiss pursuant to 11 U.S.C. § 707(b)(1) and § 707(b)(3), be, and is hereby, DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1115713/ | 410 So. 2d 1048 (1982)
Larry KRAAZ and Joyce Kraaz
v.
LA QUINTA MOTOR INNS, INC.
No. 81-C-0937.
Supreme Court of Louisiana.
March 1, 1982.
*1049 William H. Howard, III, and Jesse R. Adams, Jr., of Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, for defendant-applicant.
George P. Vedros, & Ralph L. Barnett, of Barnett & Vedros, Gretna, for plaintiff-respondent.
WATSON, Justice.
The primary issue is the delictual liability of an innkeeper for an employee's negligence which is a substantial factor in the armed robbery of a guest. A secondary issue is the quantum of damages awarded plaintiffs.
Plaintiffs, Larry and Joyce Kraaz, are in an itinerant business: buying, selling, racing *1050 and betting on horses. Their only permanent home is the residence of his parents in Chicago.
On December 31, 1978, Mr. and Mrs. Kraaz were attending the race meeting at the Fair Grounds and were staying at the La Quinta Motor Inn in Metairie, Louisiana. At approximately 4:00 A.M. the seventeen year old desk clerk, David Ulmer, was approached by two men. One of them identified himself as Benson in 233, who had lost his key. Since there was a Benson registered in 233 and no room key available, Ulmer gave the man a pass key to all the rooms in the motel. This was contrary to company policy. Subsequently, Ulmer became apprehensive, discovered that Benson knew nothing about the key request, and observed two men coming from the direction of the Kraaz's room, one of them with a gun in his waistband.
In the interim, the two men had unlocked the door of the room occupied by Mr. and Mrs. Kraaz and broken the chain. They hog-tied Larry Kraaz, physically abused Joyce Kraaz, and took a package containing about $23,000 from Mrs. Kraaz's purse. They also took a .25 caliber Smith & Wesson automatic but overlooked another $15,000 in cash which was lying near the gun. The thieves also failed to find an additional $3,000 in the purse. The money was intended for the purchase of race horses. The testimony was that these are generally cash transactions.
Thomas Tomillo, a horse trainer, testified that he was training two horses for Kraaz in December of 1978 and working with him on the purchase of additional horses. Mrs. Kraaz gave him between $1,000 and $1,500 that day from the package which was stolen that night. It originally contained $25,000.
Larry Kraaz said he was knocked out of bed and pinned down on the floor by two men with a gun. His wife started screaming and got hit in the face. Kraaz feared he would be killed and his wife raped and killed. He heard the hammer clicking on a large caliber weapon being held against his head. After he was tied with wire and his mouth taped, they mauled his wife and put her in the bathtub. Then they came out of the bathroom, picked up her purse, emptied it out, grabbed the bundle of cash and ran. Kraaz broke the wire, threw his pants on and reached for his pistol, but it was gone. He got a .44 magnum from his car and tried unsuccessfully to intercept the thieves at the back door of the motel. While chasing through the motel with his gun, Kraaz observed the elderly security guard sound asleep on the steps behind the office. Since the crime, Joyce Kraaz has become paranoid about motels and Larry has lost her companionship. She had previously travelled around the country with him ten months of the year. Now Joyce Kraaz feels more secure in Chicago, where there are other people and a dog in the house. After the accident, he described her as "a complete basket case".
One of the two assailants wore a mask. Joyce Kraaz was convinced that she and her husband would be killed, because she could identify the man without the mask. Her mouth, leg and hip were bruised and swollen. She remained in the room until her husband took her to the hospital that afternoon about 5:00 P.M. She could not walk and thought her hip might be broken. The emergency room doctor told her that the swelling was just a very bad bruise and would go away in time. She has been too frightened and uncomfortable to resume her former life and now takes sleeping pills and tranquilizers regularly. She has lost weight and has no appetite. Because she needs help, she intends to undergo therapy with a Chicago psychiatrist.
Dr. Terry E. Passman, a board certified psychiatrist, saw Joyce Kraaz shortly after the robbery on January 3, 1979. He described her as extremely frightened, apprehensive, and essentially unable to function. He gave her some medication to calm her down enough to converse. Dr. Passman diagnosed an acute traumatic neurosis. Despite her total incapacity, he decided hospitalization might aggravate the anxiety. Sodium Amytal, an extremely strong sleeping drug, was administered intravenously at a hospital emergency room to help her over *1051 the initial period of shock. According to Dr. Passman, Joyce Kraaz had experienced several traumatic incidents as an adolescent, which she had repressed.[1] The experience at the La Quinta broke down this defense mechanism and caused an exaggerated reaction to the situation. In Dr. Passman's opinion, Mrs. Kraaz could have lived a normal life except for this incident.
Dr. Passman saw Joyce Kraaz again on January 17 when she was still extremely upset, crying and fearful, with a feeling of impending doom. Another tranquilizer was prescribed. On January 22, she was less anxious, but still had problems at night. The incident had created a fear of rape which had adversely affected her sex life with her husband, previously a strong point in the marriage.
Dr. Passman next saw Joyce Kraaz on January 29. She had improved, but still had early morning awakening, a symptom of depression, fear and guilt. She was still extremely anxious and her sex life unsatisfactory. When she next came to New Orleans, Dr. Passman could not fit her into his schedule. Dr. Passman advised Joyce Kraaz to continue psychotherapy.
Mr. Kraaz became convinced that the sessions with Dr. Passman were doing his wife more harm than good because she was so upset afterward. His solution was to let time take care of the problem, but this did not work. She went back to Dr. Passman. On March 18, 1980, Dr. Passman described Joyce as haggard and tense. Her marriage and sex life have been significantly impaired by the crime. On March 20, Larry Kraaz told Dr. Passman their sex life is terrible and the marriage is deteriorating. Dr. Passman discussed the need for future treatment with both Mr. and Mrs. Kraaz and recommended therapy at least twice a week for two years, possibly longer. He referred them to several psychiatrists in Chicago. According to Dr. Passman, his current fee is $65 a session and this is comparable to Chicago fees.
Detective Alfred Cantrell of the Jefferson Parish Sheriff's Department participated in the investigation. He confirmed that a key had been used to open the door, the chain lock was broken, and a large roll of cash remained on the night stand. The detective did not count the roll which Larry Kraaz said contained $15,000. Gary Croutcher, the manager of the motel, told Cantrell they had been having security problems.
An earlier incident at the motel involved W. L. Quattlebaum, Jr., an insurance company employee, who also owns, buys and sells race horses. Someone knocked on his door the night before the Kraaz robbery and identified himself as the manager. Quattlebaum cracked the door and saw a man wearing a ski mask and gloves. He managed to push the door closed and reported the attempted robbery to the motel office. Although the desk clerk said he would take care of calling the police, the police never came.
A notice allegedly posted on the door of the Kraaz room quotes some "Louisiana Hotel Laws" in very small print. The entire notice measures approximately three inches by seven inches. The last two items are LSA-C.C. arts. 2968 and 2971.[2] C.C. art. 2968 reads as follows:
"Every landlord or keeper of a public inn or hotel, shall be required to provide with an iron chest or other safe deposit for valuable articles belonging to his guests or customers, and each landlord or hotel *1052 keeper shall keep posted upon his doors and other public places in his house of entertainment, written or printed notices to his guests and customers that they must leave their valuables with the landlord, his agent or clerk, for safe keeping, that he may make safe deposit of the same in the place provided for that purpose."
When such a safe is provided and a notice to that effect is "conspicuously posted", liability is limited to $100. LSA-C.C. art. 2971. Significantly, Civil Code article 2969[3] exempts from this limitation losses which "occur through the fraud and negligence of the landlord, or some clerk or servant provided by him in such inn or hotel." Laubie v. Sonesta Intern. Hotel Corp., 398 So. 2d 1374 (La., 1981) held that the limitation of liability in LSA-C.C. art. 2971 only applies to the innkeepers' contractual liability as a depositary. The innkeeper remains liable for damages resulting from fault on the part of him or his employees.
Neither the investigating officers nor the Kraazs saw the notice allegedly posted in the room. Joyce and Larry Kraaz both said they didn't know the La Quinta had a safe.
Gary Croutcher, the manager at La Quinta, testified that he checked the Kraaz room for damage between 9:00 and 10:00 A.M. the day after the accident and observed a notice posted behind the door. Joyce Kraaz testified in rebuttal that Croutcher did not appear in her room that morning. According to Croutcher, the housekeeper is instructed to automatically replace any missing notices. The La Quinta has six safes. Croutcher admitted that he had not pointed out the notice to Mr. and Mrs. Kraaz or anyone else at the time of the crime and had not been asked about it until three or four weeks before trial. There is no sign at the registration desk advising that there is a safe for valuables. Croutcher's testimony was contrary to that of Detective Alfred Cantrell and other witnesses in many particulars.
The trial court concluded that La Quinta's employee was grossly negligent in providing a pass key to criminals and the motel was liable for the Kraazs' damages. Mrs. Kraaz was awarded $3,500 for physical injuries, $30,000 for traumatic neurosis, and future medical expenses of $13,000. Mr. Kraaz was awarded $2,500 for his physical and mental pain and suffering and $23,000 for the lost cash. The trial court was not satisfied that there was a notice posted on the motel door, but stated that, even if present, it was not sufficient to alert the Kraazs to the fact that a depositary was available for the protection of their valuables. The Court of Appeal affirmed. Kraaz v. La Quinta, 396 So. 2d 455 (La.App. 4 Cir. 1981). A writ was granted to review the judgment. 401 So. 2d 992 (La., 1981).
Defendant relies heavily on LSA-C.C. art. 2970 which provides:
"He [the innkeeper] is not responsible for what is stolen by force and arms, or with exterior breaking open of doors, or by any other extraordinary violence."
The Court of Appeal held that Civil Code art. 2970 was not applicable because, even though the chain on the door was broken, the initial entry to the room was made with a pass key. Laubie also involved a forcible entry; a chain lock was severed. Laubie states that LSA-C.C. art. 2970, like LSA-C.C. art. 2971, relates only to the innkeeper's contractual obligations as a depositary. 398 So. 2d 1377. If a forcible armed entry were unaccompanied by fault on the part of *1053 the innkeeper or his employees, there would be no liability. However, that is not the case. The elderly security guard was asleep. The seventeen year old boy on duty gave a pass key to the entire motel to two strangers. There was unquestionably negligence. Since the pass key was a key element in the robbery, Civil Code article 2970 does not exonerate the innkeeper from liability.
Defendant also relies upon Robbins v. Pontchartrain Apartment, 175 La. 278, 143 So. 263 (1932). In Robbins, the trial court's determination that the landlord's clerk was negligent was reversed. Leaving the safe unlocked at 3:00 A.M. was held to be "not negligence". 143 So. 265. That somewhat dubious conclusion distinguishes the matter from this one.
An innkeeper does not insure his guests against the risk of injury or property loss resulting from violent crime. LSA-C.C. art. 2970, supra. The innkeeper's position vis-a-vis his guests is similar to that of a common carrier toward its passengers. Wilson v. Iberville Amusement Co., 181 So. 817 (Orl.App.Ct.1938). Thus, a guest is entitled to a high degree of care and protection. See Galland v. New Orleans Public Service Inc., 377 So. 2d 84 (La., 1979), and Green v. TACA, 304 So. 2d 357 (La., 1974). The innkeeper has a duty to take reasonable precautions against criminals. Safeguarding the room keys is a minimum requirement. The duty to avoid handing a pass key to any stranger is even stronger. Breach of this duty was a direct cause of plaintiffs' physical, emotional and financial damages. La Quinta's employee, Ulmer, was at fault in giving the two armed robbers a pass key. The employer is liable for the resulting damages. LSA-C.C. arts. 2315; 2320.
The attitude of La Quinta's management toward the safety of its guests is emphasized by Quattlebaum's testimony about the lack of interest in the attempted robbery of his room. See Nordmann v. National Hotel Co., 425 F.2d 1103 (5 Cir. 1970). In Quattlebaum's case, the thief's lack of a key enabled him to avoid being robbed.
Contributory negligence of the Kraazs in having the money with them is urged as a defense. Mere possession of money does not constitute negligence. The trial court was unconvinced that a notice about safe keeping was posted in the room. The trier of fact was well justified in disregarding Croutcher's testimony to the contrary. Even if posted and adequate, the notice was certainly not conspicuous. The Kraazs could not foresee that assailants would open their room door with a pass key in the middle of the night, leaving them no time to defend themselves or call for help. They were not negligent.
There is no abuse of discretion in the award of damages. LSA-C.C. art. 1934. The facts more than amply support the amounts awarded.
For the foregoing reasons, the judgment of the Court of Appeal is affirmed.
AFFIRMED.
BLANCHE, J., dissents and assigns reasons.
MARCUS, J., dissents for reasons assigned by BLANCHE, J.
BLANCHE, Justice (dissenting).
Plaintiff, a horse-racing man who makes his living betting horses, called his wife in Chicago to bring him $25,000 out of the refrigerator where they kept their life savings. After a day at the Fairgrounds flashing their bank roll around, plaintiffs went out to dinner and then retired to their room in the LaQuinta Inn.[1] In their possession at that time was $41,000 in cash. Although plaintiffs have a permanent home in the *1054 residence of their parents in Chicago, they are usually on the road, as the majority notes, travelling around the country about ten months of the year. Thus, staying in motels should not be an unfamiliar surrounding, nor should hotel and motel rules concerning the deposit of valuables be unknown, especially to racing enthusiasts who carry such big bank rolls.
With regard to whether or not the notice was posted, I believe the notice required by C.C. art. 2968, that a safe was available, was posted. The only positive testimony on this issue came from the manager of the hotel, who stated that it was hotel policy for the maids to check for the notice each day as part of the cleaning routine and to replace it if it were missing. Additionally, he said he checked for the notice the day after the incident and it was posted on the door at that time. The testimony of the two detectives who came to the room in connection with the criminal investigation was of little assistance due to the fact that they said they did not recall seeing the notice, but added that they were not looking for it, because they were only interested in gathering evidence for the criminal investigation and had no interest in potential civil liability. Mr. Kraaz' testimony was to the effect that he did not believe the notice was posted, but did not really remember. Because of the indefinite nature of the testimony of the officers and Mr. Kraaz, I find the hotel manager's testimony persuasive.
With regard to the law, whose plain, unambiguous provisions were disregarded, the liability of an innkeeper for valuables is governed by C.C. arts. 2968, 2969 and 2971. The majority opinion relies on this Court's interpretation of these Codal provisions in Laubie v. Royal Sonesta International Hotel Corp., 398 So. 2d 1374 (La.1981). That decision held that the above mentioned Civil Code articles only limited an innkeeper's liability as a depositary, but did not restrict his delictual liability. Laubie overruled a long line of prior jurisprudence which held that the articles limited an innkeeper's liability on either basis and, to the extent the majority relies on that case, I am unable to agree. An interpretation that these articles limit an innkeeper's liability only as a depositary renders C.C. art. 2971 useless. The innkeeper would only have occasion to rely upon the limitation of liability found in C.C. art. 2971 if the loss occurred through fraud or negligence, because without fraud or negligence, he is not liable at all. See C.C. art. 2969. The requirements found in C.C. art. 2968 are that an innkeeper (1) shall provide an iron chest or other safe deposit for valuable articles belonging to his guests or customers and (2) post notices of the availability of the safe. If the innkeeper complies with these two requirements, C.C. art. 2969 provides that he shall not be liable for any valuables unless the loss occurs through the fraud or negligence of the landlord, or some clerk or servant employed by him. At this point, it would appear that the innkeeper might be liable if the loss of the valuables occurs because of negligence on his part; however, C.C. arts. 2968 and 2969 should not be viewed in isolation and must be read in pari materia with C.C. art. 2971, which provides that no innkeeper shall be liable under the provisions of C.C. arts. 2965-2970 to any guest in any sum exceeding one hundred dollars unless a greater liability has been contracted for in writing if the innkeeper has posted the notice required in C.C. art. 2971. When the applicable articles are interpreted together, the result clearly limits the liability of an innkeeper to one hundred dollars, even if his negligence has been a factor in the loss and this restriction should be recognized to constrain his liability both as a depositary and under a delictual theory. Negligence is specifically mentioned in C.C. art. 2969, and the innkeeper's liability for it is clearly limited in C.C. art. 2971; the intent to allow the innkeeper a measure of protection should not be circumvented by an interpretation that would protect him as a depositary but leave him totally vulnerable under a delictual theory.
Considering the nature of the hotel business, the fact that the rooms are available to public access, and the number of people who are in and out of hotel rooms on a day to day basis (hotel guests, visitors, hotel *1055 employees and others), there is always the potential for burglary. Realistically, in almost any instance of burglary, it is arguable that the hotel was negligent in some way. If the rule is established that innkeepers are liable for valuables, including large sums of money, where some degree of negligence can be established on the part of the hotel or one of its employees, the burden placed on the innkeepers of this state will be unduly inequitable and onerous. It is patently unfair to provide no limit on the amount a guest may claim, even if the innkeeper is negligent in some respect, when the innkeeper provides a safe deposit and notice that it is available and the guest instead chooses to undertake the safekeeping of his valuables himself.
For the reasons stated above, I am unable to agree with the majority opinion; therefore, I respectfully dissent.
NOTES
[1] At age thirteen, Joyce Kraaz saw her mother's jaw broken by her stepfather. The stepfather had made frightening sexual advances toward her.
[2] LSA-C.C. art. 2971 provides:
"No landlord or innkeeper shall be liable under the provisions of the foregoing six articles to any guests or party of guests occupying the same apartments for any loss sustained by such guests or party of guests by theft or otherwise, in any sum exceeding one hundred dollars, unless by special agreement in writing with the proprietor, manager or lessee of the hotel or inn a greater liability has been contracted for.
"Provided that no guest shall be held bound by the limitation of value established in this Article unless this Article is conspicuously posted in the guest room."
[3] LSA-C.C. art. 2969 provides:
"Every landlord, hotel or inn keeper who shall comply with the requirements of the preceding articles [article], shall not be liable for any money, jewelry, watches, plate, or other things made of gold or silver, or of rare and precious stones, or for other valuable articles of such description as may be contained in small compass, which may be abstracted or lost from any such public inn or hotel, if the same shall not be left with the landlord, his clerk or agent, for deposit, unless such loss shall occur through the fraud or negligence of the landlord, or some clerk or servant employed by him in such inn or hotel; provided, however, that the provisions of this article shall not apply to a wearing watch, or such other articles of jewelry as are ordinarily worn about the person."
[1] A suspect had been arrested in the criminal investigation at the time this case came to trial. In this civil suit, a detective assigned to the case testified that the suspect said he was familiar with Mr. and Mrs. Kraaz from the racetrack and knew that they usually carried twenty-five to one hundred thousand dollars in cash with them. Although hearsay, and not relevant in the case presently before this Court, it certainly indicates that Mr. and Mrs. Kraaz made little effort to conceal or protect the large sums of money they frequently carried. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1728367/ | 372 So. 2d 560 (1979)
Wallace NATHAN, Jr. et al.
v.
Henry Zac CARTER et al.[*]
No. 63935.
Supreme Court of Louisiana.
June 25, 1979.
*561 A. Remy Fransen, Jr., New Orleans, Paul Aucoin, Vacherie, for plaintiff-applicant.
Terry Christovich Gay, A. R. Christovich, Jr., Christovich & Kearney, New Orleans, for defendant-respondent.
MARCUS, Justice.
As a result of Wallace Nathan, Sr.'s death, his son, Wallace Nathan, Jr., and wife, Odessa Nathan (individually and as natural tutrix of her seven minor children) instituted this action to recover damages on August 6, 1976, against certain named executive officers, directors and supervisory employees of Avondale Shipyards, Inc. Also named defendants are Highlands Insurance Company and American Employers Insurance Company, public liability and/or executive liability insurers of the officers and/or employees of Avondale.
Plaintiffs alleged in their petition that Wallace Nathan, Sr. was employed by Avondale as a labor leaderman. On November 5, 1970, as he was walking along a "gangplank" situated between a vessel on which he had been working and the dock, the "gangplank" suddenly and without warning collapsed, causing him to suffer serious injuries, fall into the water and drown. Plaintiffs contended that decedent's death was caused by the negligence of the named executive officers, directors and employees of Avondale. Mrs. Nathan further averred that, at the time of her husband's death, all of her children, including Wallace Nathan, Jr., were minors and that she allowed the one-year period of limitation (applicable to this action) to lapse before instituting suit because of misrepresentations and fraudulent conduct of certain employees and representatives of Avondale designed to prevent her from asserting her cause of action. She also claimed that she was pregnant with the last of her eight children at the time of her husband's death and was under great strain and stress as well as being emotionally depressed when meeting with Avondale officials after her husband's death.
Defendants' answers generally denied the allegations of plaintiffs' petition. Subsequently, a peremptory exception of prescription was pleaded by defendants grounded on the claim that plaintiffs' action had prescribed on its face in that it was filed on August 6, 1976, which was more than one year after the date of the alleged accident (November 5, 1970). A hearing was set on the exception of prescription.
In opposition to the exception of prescription, plaintiffs, relying upon the doctrine of contra non valentem agere non currit (prescription does not run against a person who could not bring his suit), argued that the action was not barred by the one-year period of limitation because of acts of fraud and misrepresentation committed by defendants. In support of this contention, plaintiffs alleged (in their petition and affidavits filed by Mrs. Nathan and her brother) that, approximately two or three days after the death of her husband, Mrs. Nathan and her brother went to the offices of Avondale and met with Mr. Edward Benecech III (claims manager at Avondale). *562 During this meeting, Mr. Benecech assured Mrs. Nathan that a full investigation would be made of her husband's death, that she would be provided with a copy of the final report, that, once the investigation was completed, she would be given a large lump sum settlement as compensation for her husband's death, and that Avondale would settle her claim without the necessity of her hiring an attorney. Mr. Benecech told Mrs. Nathan not to contact an attorney because, if she did, her workmen's compensation benefits would be terminated, all benefits would be cut off while the matter was litigated in court, and the litigation might last five to seven years during which she would receive no benefits. In November 1975, foreclosure proceedings were instituted against Mrs. Nathan's home because of her inability to make the mortgage payments. It was at this time that Mrs. Nathan contacted an attorney.
Defendants offered no evidence contradicting plaintiffs' allegation of misrepresentation and fraudulent conduct. Instead, defendants contended that, even assuming (without admitting) that such conduct occurred, plaintiffs failed to exercise "reasonable diligence" in pursuit of their claim and thus were not barred from asserting it.
The trial court sustained the exception of prescription and dismissed plaintiffs' action against defendants. It noted that, although plaintiffs' uncontroverted allegations might establish that fraudulent conduct on the part of defendants actually prevented plaintiffs from judicially asserting their claims within the one-year prescriptive period, six years was not a period during which such conduct could reasonably be expected to prevent plaintiffs from instituting this action. The court concluded, "[e]ven though plaintiffs shouldn't be held to a timely filing, six years is too long." The court of appeal affirmed, finding that plaintiffs had failed to exercise "reasonable diligence" in asserting their claim.[1] On application of plaintiffs, we granted certiorari to review the correctness of this decision.[2]
The sole issue presented for our consideration is whether, under the facts and circumstances as contained in the record before us, the courts below erred in sustaining defendants' exception of prescription.
It is conceded by the parties herein that the period of limitation applicable to this action is one year from November 5, 1970 (the date of the accident). As a general rule, prescription runs against all persons unless they are included in some exception established by law. La.Civil Code art. 3521. This court has, however, accepted in certain limited situations the common law doctrine contra non valentem agere non currit which means that prescription does not run against a person who could not bring his suit. Cartwright v. Chrysler Corp., 255 La. 598, 232 So. 2d 285 (1970); Hyman v. Hibernia Bank & Trust Co., 139 La. 411, 71 So. 598 (1916).
This equitable doctrine has been applied to cases wherein defendant has concealed the fact of the offense or has committed acts (including concealment, fraud, misrepresentation, or other "ill practices") which tend to hinder, impede, or prevent the plaintiff from asserting his cause of action, as long as plaintiff's delay in bringing suit is not willful or the result of his own negligence. See Cartwright v. Chrysler Corp., supra; Dufrene v. Tracy, 232 La. 386, 94 So. 2d 297 (1957); Ayres v. New York Life Ins. Co., 219 La. 945, 54 So. 2d 409 (1951); Smith v. Tyson, 193 La. 571, 192 So. 61 (1939); Hyman v. Hibernia Bank & Trust Co., supra; Martin v. Jennings, 10 La.Ann. 553 (La.1855); Boyle v. Mann, 4 La.Ann. 170 (La.1849). As indicated in Hyman v. Hibernia Bank & Trust Co., supra, the doctrine of contra non valentem is, in part, but an application of the long-established principle of law that one should not be able to take advantage of his own wrongful act:
A defendant, who has kept a plaintiff in close confinement during the prescriptive *563 period so as to preclude his bringing suit, could certainly not be allowed to invoke prescription against plaintiff's suit, and thereby reap the fruit of his own wrong. And between incapacitating a plaintiff by confining his body and incapacitating him by fraudulently lulling his mind into a false security and keeping him in ignorance there is no difference in principle. The one mode of preventing the bringing of suit, if equally effective, is as bad as the other. It is equally a wrong of which the perpetrator cannot be allowed to reap the benefit. 139 La. at 418, 71 So. at 600.
The equitable nature of the circumstances in each individual case has determined the applicability of the doctrine. Dagenhart v. Robertson Truck Lines, Inc., 230 So. 2d 916 (La.App. 1st Cir. 1970).
In applying the law to the facts as contained in the record before us, it is clear that plaintiffs alleged acts of fraud and misrepresentation intentionally committed by defendants (or their representative) designed to hinder, impede, or prevent plaintiffs from asserting their cause of action or lull them into a false security. It is equally apparent that the record herein does not support a finding that plaintiffs' delay in bringing this action was either willful or resulted from plaintiffs' own negligence. As alleged by plaintiffs, defendants threatened Mrs. Nathan with termination of her compensation benefits if she ever contacted an attorney. Viewed in this light, the acts of fraud and misrepresentation committed by defendants constituted a continuing threat calculated to prevent assertion of this claim for as long as the compensation payments continued. As such, plaintiffs' delay in bringing this action was a direct result of the fraud or misrepresentation allegedly committed by defendants rather than of their own willfulness or negligence.
No evidence was adduced on the exception of prescription in the trial court. We conclude that defendants' exception of prescription cannot be sustained on the record before us (i. e., the uncontroverted facts alleged in plaintiffs' petition and set forth in the affidavits filed in opposition to the exception of prescription). Therefore, we must set aside the judgment of the trial court sustaining the exception of prescription and refer the exception to the merits. See Pearson v. Hartford Accident & Indemnity Co., 281 So. 2d 724 (La.1973); Hyman v. Hibernia Bank & Trust Co., supra. The case is remanded to the district court to be proceeded with according to law.
Reversed and remanded.
DENNIS and BLANCHE, JJ., concur.
SUMMERS, C. J., dissents for the reasons assigned by the Court of Appeal.
NOTES
[*] Editor's Note: The opinion of the Supreme Court of Louisiana in Cosey v. Cosey, published in the advance sheets at this citation (372 So. 2d 560) was withdrawn from the bound volume because rehearing is pending.
[1] 367 So. 2d 56 (La.App. 4th Cir. 1979).
[2] 368 So. 2d 145 (La.1979). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2462430/ | 34 F. Supp. 2d 448 (1999)
Linda L. CASH
v.
TIDEWATER MARINE, INC.
No. Civ.A. G-98-257.
United States District Court, S.D. Texas, Galveston Division.
January 29, 1999.
Ronald L. White, Brown Sims Wise & White, Houston, TX, for Ron White, mediator.
Dennis M. McElwee, Schechter and Marshall, Houston, TX, for Linda L. Cash, plaintiff.
Chris Andrew Lorenzen, Crain, Caton and James, Houston, TX, for Tidewater Marine Inc., defendant.
ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
KENT, District Judge.
Plaintiff brings this suit under the Jones Act, 46 U.S.C.App. § 688 et seq., and general maritime law. Two separate incidents or groups of incidents form the basis of the suit. First, Plaintiff alleges that she suffered severe injuries as a result of an accident aboard the vessel on which she served, the DISCOVERY SEAHORSE. Second, Plaintiff alleges that she suffered repeated incidents of physical and verbal sexual harassment at the hands of crewmembers and superior officers and that Defendant negligently allowed those incidents to continue. Now before the Court is Defendant's Motion for Partial Summary Judgment of December 3, 1998. Defendant argues that the Jones Act offers no remedy for the type of sexual harassment Plaintiff alleges and asks the Court to dismiss all such claims made under the Jones Act. For the reasons set forth below, Defendant's Motion is DENIED.
I. FACTUAL SUMMARY
In September 1995, Plaintiff was serving as a seaman aboard the ESTAY TIDE, a vessel owned by Defendant.[1] On the second day of her hitch aboard that vessel, she alleges, the first mate made an overtly sexual *449 overture toward her. Plaintiff responded to the mate that she was not there to be his sexual plaything but rather to perform her job. She subsequently reported the mate's conduct to a supervisor. She never worked on the same vessel with that mate again.
A few months later, Plaintiff was serving as a seaman aboard the MOBILE SEAHORSE when the vessel's captain and another crewmember approached her. Plaintiff was watching television in the vessel's galley during her off time when the two men entered the room, sat on either side of her, and allegedly began poking her in the ribs. After they failed to heed her requests to stop, she crawled under the galley table to get away from them. A few days after that incident, the captain allegedly approached her in the galley and told her to get on her knees so she could perform her "job." She stated that she jumped up to get away from him and that he responded by grabbing her arm and pulling her back down. She sustained a bruise to her arm.
In March 1996, Plaintiff was on light duty status for Defendant. She was driving a co-employee to a shipyard in Houma, Louisiana when he told her that he wanted more than a work relationship with her. She told him that she was not interested, but he allegedly responded by saying that "he would kill anyone who told him no and that he was on a fine line between sane and insane." A few days later, he allegedly confronted her as she parked her truck by opening her door, grabbing her head, and kissing her on the lips. He then pushed her down against the seat, "popping" her back, and left only after a guard approached.
Later that spring, Plaintiff was serving aboard the vessel SABER SERVICE with the same worker who had accosted her in March. During the second week of her hitch aboard that vessel, the man entered her room. After a brief verbal exchange, Plaintiff stated, he got angry, jerked her shorts down, and threw her on the floor. He then allegedly tried to pull his pants down. However, Plaintiff told him that if he would get off of her and leave, she would not report his actions to their superiors. The man left, but returned the following morning. When he entered her room, Plaintiff stated, he jumped on her, pulled her shirt up, and began pressing his genitalia between her breasts. After a few minutes, she stated, he thanked her and then left her room. Plaintiff did not state whether or not she reported this incident to her supervisors.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986). When a motion for summary judgment is made, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Issues of material fact are "genuine" only if they require resolution by a trier of fact. See id. at 248, 106 S. Ct. at 2510. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Only disputes over facts that might affect the outcome of the lawsuit under governing law will preclude the entry of summary judgment. See id. at 247-48, 106 S. Ct. at 2510. If the evidence is such that a reasonable fact-finder could find in favor of the nonmoving party, summary judgment should not be granted. See id.; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Dixon v. State Farm Fire & Casualty Co., 799 F. Supp. 691 (S.D.Tex.1992) (noting that summary judgment is inappropriate if the evidence could lead to different factual findings and conclusions). Determining credibility, weighing evidence, and drawing reasonable inferences are left to the trier of fact. See Anderson, 477 U.S. at 255, 106 S. Ct. at 2513.
III. ANALYSIS
Defendant argues that Plaintiff cannot maintain a Jones Act claim with respect to her allegations of sexual harassment and intimidation *450 by Defendant's employees. Defendant cites Wilson v. Zapata Off-Shore Co., 939 F.2d 260 (5th Cir.1991) for the proposition that the Jones Act permits recovery only where a plaintiff has suffered some significant physical injury. Here, Defendant points out, Plaintiff has alleged only emotional injury and thus cannot recover under the Jones Act.
Upon initial analysis, the Court questions why Plaintiff did not bring suit for sexual harassment under Title VII, 42 U.S.C. § 2000e et seq. Whatever the reason for that decision was, the Court declines to here speculate. However, the import of that decision is that Plaintiff must now satisfy the requirements of the Jones Act. That is significant because the Jones Act does not permit a cause of action for sexual harassment per se. See id. at 264-65. What the Jones Act does cover is harassment of the sort that would amount to common-law battery. Id. at 265.[2] The requirements for such a cause of action appear to include (1) tortious physical contact and (2) physical injury. Id. at 265-66.
Plaintiff has clearly alleged several instances of tortious physical contact. She was subjected to poking from her captain and one other crewmember and was later grabbed by the arm. In another instance, a crewmember forcibly grabbed her head and kissed her, then pushed her down onto the seat of the truck she was driving. Later, the same crewmember jerked her shorts down and pushed her to the floor of her room aboard Defendant's vessel. Finally, that crewmember entered her room, jumped on her, pulled her shirt up, and placed his genitalia between her breasts. These examples of unconsented contact by various employees of Defendant obviously satisfy the tortious physical contact requirement.
The second requirement, that of physical injury, is more problematic. Plaintiff has made several allegations of emotional injury, pointing out that she has undergone counseling and that she continues to feel humiliated, betrayed, and angry. In Wilson, the Fifth Circuit declined to reach the issue of whether the Jones Act permits a cause of action based on pure emotional injury. Wilson, 939 F.2d at 266 n. 8. Consequently, it remains unsettled in this Circuit whether Plaintiff's emotional injuries would suffice to create a Jones Act cause of action.[3] However, Plaintiff has alleged at least one ostensibly physical injury. Since the incidents of sexual harassment at the hands of Defendant's employees, Plaintiff alleges that she has suffered from sexual dysfunction. While such injury is not a direct result of the physical contact suffered by Plaintiff, it is a result of the emotional trauma caused by those contacts. See Williams v. Treasure Chest Casino, Nos. Civ.A. 95-3968, Civ.A. 97-0947, 1998 WL 42586, at *6 (E.D.La. Feb.3, 1998) (holding that vomiting, sexual dysfunction, and weight *451 loss satisfied the physical injury requirement where they resulted from emotional trauma caused by tortious physical contact); see also Wilson, 939 F.2d at 265 (holding that weight loss, vomiting, and diarrhea satisfied the physical injury requirement where they accompanied physical contact). As physical injuries go, sexual dysfunction by itself does not provide the strongest possible basis for Jones Act liability. However, in light of the present state of this Circuit's case law, sexual dysfunction may satisfy the physical injury requirement where it can be traced to tortious physical contact. Accordingly, the Court is unwilling at this juncture to grant partial summary judgment against Plaintiff's claim of sexual harassment under the Jones Act for lack of a physical injury. Defendant's Motion is DENIED.
IV. CONCLUSION
For the reasons set forth above, Defendant's Motion for Partial Summary Judgment with respect to Plaintiff's claim of sexual harassment under the Jones Act is DENIED. This case will be set for trial at a later date. Without further commenting on the merits of the claims or defenses asserted, the Court will examine them again at that time. The parties are ORDERED to bear their own taxable costs and expenses incurred herein to date.
IT IS SO ORDERED.
NOTES
[1] As Defendant's Motion concerns only Plaintiff's claims of sexual harassment, the Court will not go to any lengths in summarizing her personal injury claim.
[2] The Jones Act incorporates by reference the Federal Employers' Liability Act, 45 U.S.C. § 51 et seq. ("FELA"). See 46 U.S.C.App. § 688 (providing that "all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply" to Jones Act seamen). FELA does not create new substantive torts; rather, it simply protects railway workers from common law torts. See Wilson, 939 F.2d at 264-65. Because the cause of action for sexual harassment is a creation of statute, not common law, it is not recognized under FELA, or by extension the Jones Act. Id. Where sexual harassment includes instances of nonconsensual physical contact, however, it may amount to common-law battery. Id. In those cases, a seaman plaintiff might have a cause of action under the Jones Act.
[3] Plaintiff argues in her response to Defendant's Motion for Partial Summary Judgment that pure emotional injury resulting from physical impact is actionable in Jones Act cases under a theory of negligent infliction of emotional distress. See Consolidated Rail Corporation v. Gottshall, 512 U.S. 532, 554-56, 114 S. Ct. 2396, 2410-11, 129 L. Ed. 2d 427 (1994) (holding that a plaintiff may bring a claim for negligent infliction of emotional distress under the "zone of danger" theory, by demonstrating that he either suffered a physical impact or was placed in immediate risk of physical harm by defendant's negligent conduct). While that may be the case, the Court, try as it might, is unable to read anything in Plaintiff's complaint as alleging negligent infliction of emotional distress. The Court may not consider such a theory raised for the first time at the summary judgment stage. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2147331/ | 94 Cal. App. 3d 580 (1979)
156 Cal. Rptr. 640
JAMES REGINALD DAUDERT, Plaintiff and Respondent,
v.
THE PEOPLE, Defendant and Appellant.
Docket No. 33793.
Court of Appeals of California, Second District, Division Three.
June 28, 1979.
*582 COUNSEL
George Deukmejian, Attorney General, Jack R. Winkler and Robert H. Philibosian, Chief Assistant Attorneys General, S. Clark Moore, Assistant Attorney General, James H. Kline and Beverly K. Falk, Deputy Attorneys General, for Defendant and Appellant.
Glen Mowrer, Jr., Public Defender, and James L. Crowder, Deputy Public Defender, for Plaintiff and Respondent.
OPINION
POTTER, Acting P.J.
The People appeal from the denial of their motion to vacate an order issuing a certificate of rehabilitation to petitioner James Reginald Daudert (hereinafter petitioner).
*583 Petitioner was convicted by a plea of one count of armed robbery (former Pen. Code, § 211a) involving use of a knife on April 18, 1972. He was sentenced to prison for the "term prescribed by law," released on parole on February 22, 1974, and discharged from parole on March 12, 1976.
On April 3, 1978, he petitioned the Santa Barbara Superior Court for a certificate of rehabilitation and application for pardon pursuant to the procedure set forth in Penal Code[1] section 4852.01 et seq., for the restoration of civil and political rights. A hearing was held on the petition on June 5, 1978. The People, represented by the District Attorney of Santa Barbara County, announced they had no opposition to granting the certificate. The district attorney's office had previously conducted an investigation of the matter and on June 2, 1978, had filed a written report of its "Findings," recommending that the petition be granted. The report revealed that petitioner had been a model prisoner while incarcerated, had led an exemplary life since his release on parole, had been continuously employed in progressively more responsible employment, had not violated any laws, and had received highly favorable references from the prison psychologist, employers, fellow employees, and friends. The "Findings" also stated that petitioner had satisfied the required postrelease statutory rehabilitative period of 3 years plus 30 days for each year of the maximum term for armed robbery under the determinate sentencing law.[2] On June 5, 1978, the court issued an order granting petitioner a certificate of rehabilitation and recommending that the Governor grant a full pardon to him.
On September 1, 1978, the People, represented by the Attorney General, filed a motion to vacate the order issuing the certificate of rehabilitation on the ground that petitioner had not completed the period of rehabilitation provided in section 4852.03. The People did not challenge the finding of petitioner's exemplary behavior since his release on parole. However, they claimed that the certificate was void as prematurely granted. They argued that the required rehabilitation period must be based on the maximum period of imprisonment which could have been imposed upon petitioner at the time he committed the offense; *584 that in 1972 the maximum term for first degree robbery was life imprisonment which, pursuant to section 4852.03, subdivision (2), was regarded for computation purposes as 50 years; and therefore petitioner's rehabilitation period was 7 years and 40 days (which period would not expire until 1981).
The public defender filed his opposition to the motion to vacate on September 13, arguing that the rehabilitation period had been properly determined under current sentencing law. On October 16, 1978, the court denied the People's motion to vacate the order issuing a certificate of rehabilitation. The People appealed, pursuant to Penal Code section 1238, subdivision (a)(5).
Contentions
The People contend that (1) the order denying the motion to vacate is appealable, and (2) computation of the period of rehabilitation required by section 4852.03 is based on the maximum imprisonment which was prescribed by statute at the time petitioner committed the offense for which he was convicted. Petitioner responds that (1) the order is not appealable, and (2) calculation of the period of rehabilitation required by section 4852.03 is based on the maximum imprisonment which is prescribed under current law for the crime of which petitioner was convicted.
Discussion
Summary
The denial of the People's motion to vacate the certificate of rehabilitation is reviewable on appeal to determine whether the certificate is void.
The certificate of rehabilitation, however, was validly issued and the order granting it must be affirmed. The rehabilitation period required under Penal Code section 4852.03 is calculated by adding to the petitioner's release date 3 years plus an additional 30 days for each year of the maximum term of imprisonment which is prescribed by current statutory law for the crime of which the petitioner was convicted. At the time of the proceedings herein, the maximum punishment for armed robbery with use of a deadly weapon was five years. Petitioner had, therefore, satisfied the statutory requirement since more than 3 years and *585 150 days had elapsed between his release on parole in February 1974 and his filing of an application for the certificate of rehabilitation in April 1978.[3]
(1) The Order Denying the Motion to Vacate the Granting of the Certificate of Rehabilitation Is Appealable
Preliminarily, we note that the People can appeal from the order of October 16, 1978, denying their motion to vacate the June 5, 1978 order granting petitioner a certificate of rehabilitation as an order made after the June 5 order (or judgment) which affects their substantial rights (§ 1238, subd. (a)(5)).
Section 4852.03 provides in relevant part: "Unless and until the period of rehabilitation, as stipulated herein, has passed, the petitioner shall be ineligible to file his petition for a certificate of rehabilitation with the court. Any certificate of rehabilitation which is issued and under which the petitioner has not fulfilled the requirements of this chapter shall be void." (Italics added.)
The People claim that the order of June 5, 1978, issuing petitioner a certificate of rehabilitation is void on its face and should have been vacated because the requisite statutory period of rehabilitation had not passed.
As our Supreme Court stated in Luckenbach v. Krempel (1922) 188 Cal. 175, 176-177 [204 P. 591]: "A judgment or order which is void on the face of the record thereof may be set aside at any time by the court that made it, on the ground that it is void. (People v. Davis, 143 Cal. 675 [77 P. 651]; Wharton v. Harlan, 68 Cal. 422 [9 P. 727]; People v. Greene, 74 Cal. 400-405 [5 Am. St. Rep. 448, 16 P. 197].) If the court refuses to vacate such an order on motion, it being an order made after judgment, the party aggrieved may appeal and have the order reviewed and reversed." (Italics added.)
*586 We, therefore, turn to the merits of the appeal to determine whether the certificate of rehabilitation was void.
(2a) The Statutory Period of Rehabilitation Is Based on the Current Maximum Penalty for the Crime
Chapter 3.5 of title 6, part 3 of the Penal Code (consisting of § 4852.01 et seq.) establishes a procedure for the restoration of rights to an ex-felon by obtaining a certificate of rehabilitation and application for pardon.
Section 4852.03 provides the method for computing the required time period of rehabilitation which must elapse before a petitioner is eligible to file for a certificate of rehabilitation. That section provides in pertinent part: "The period of rehabilitation shall begin to run upon the discharge of the petitioner from custody due to his completion of the term to which he was sentenced or upon his release on parole or probation, whichever is sooner. For purposes of this chapter, the period of rehabilitation shall constitute three years' residence in this state, plus a period of time determined by the following rules:
"(1) To the three years there shall be added 30 days for each year of the term prescribed by statute as the maximum penalty of imprisonment for the crime of which the petitioner was convicted." (Italics added.)
In ruling on petitioner's application for a certificate of rehabilitation, the superior court, in accord with the district attorney's findings, calculated the period of rehabilitation according to the maximum sentence under current California law for the crime of armed robbery. The People, however, claim that for persons (such as petitioner) who committed crimes prior to July 1, 1977, the period of rehabilitation is computed according to the maximum sentence under the law which was in effect at the time the crime was committed. We disagree.
(3) Provisions of the Penal Code must be construed according to the fair import of their terms with a view to effect the objects of the code and to promote justice. (§ 4; People v. King (1978) 22 Cal. 3d 12, 23 [148 Cal. Rptr. 409, 582 P.2d 1000].) (4) Section 4852.03 is obviously a remedial measure which was originally enacted as part of the act (Stats. 1943, ch. 400, § 1), adding chapter 3.5 (comprising §§ 4852.01 to 4852.2) to title 6 of part 3 of the Penal Code. As its official chapter title indicates (see Bowland v. Municipal Court (1976) 18 Cal. 3d 479, 489 [134 Cal. Rptr. *587 630, 556 P.2d 1081]), the purpose of the act was to provide a "Procedure for Restoration of Rights and Application for Pardon." (See also 15 Ops.Cal.Atty.Gen. 38, 38-39.) Accompanying sections of the act further manifest the Legislature's intent to facilitate securing a certificate of rehabilitation by providing petitioner with legal counsel (§ 4852.08), counsel and assistance from parole and probation officers (§ 4852.04), and exemption from any court or filing fees (§ 4852.09).
As remedial legislation, section 4852.03 should be liberally construed to promote the objective of alleviating the collateral consequences of a felony conviction. (See Alford v. Pierno (1972) 27 Cal. App. 3d 682, 688 [104 Cal. Rptr. 110].) Where the language is capable of more than one construction, it must be interpreted to extend the remedy. (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal. 2d 423, 434-435 [296 P.2d 801, 57 A.L.R. 2d 914]; People v. White (1978) 77 Cal. App.3d Supp. 17, 21 [144 Cal. Rptr. 128].)
(5) Moreover, it is "the established policy `to construe a penal statute as favorably to the defendant as its language and the circumstances of its application reasonably permit; ... the defendant is entitled to the benefit of every reasonable doubt as to the true interpretation of words or the construction of language used in a statute.' (Keeler v. Superior Court (1970) 2 Cal. 3d 619, 631 [87 Cal. Rptr. 481, 470 P.2d 617, 40 A.L.R. 3d 420].)" (People v. Walker (1976) 18 Cal. 3d 232, 242 [133 Cal. Rptr. 520, 555 P.2d 306].)
(2b) Applying the above standards, we conclude that the phrase "the term prescribed by statute as the maximum penalty of imprisonment for the crime of which the petitioner was convicted" refers to the current maximum term. Logically, that language connotes the present tense. The statute does not say that the rehabilitation period shall be determined by the maximum which was prescribed by statute at the time the petitioner committed his crime. If the Legislature intended to tie the rehabilitation period to the maximum penalty which could have been imposed on petitioner at the time he committed the offense, it could easily have so provided by merely inserting the words "which was."[4] Since the section does not include any such language, we cannot ascribe to the Legislature an intent to condition the issuance of a certificate of rehabilitation and *588 recommendation for pardon on prior penalty provisions which are no longer in force.
The maximum term of imprisonment prescribed by statute represents the Legislature's judgment of the seriousness of the offense. By repealing prior law authorizing a maximum of life imprisonment for armed robbery and substituting a lesser maximum under the determinate sentencing law, the Legislature expressly determined that a life sentence was too severe a penalty by contemporary standards. No valid purpose or policy would be served by basing the determination of the necessary time presently required for rehabilitation on a former social judgment that has since been rejected by the Legislature.
(6) As our Supreme Court stated in Newland v. Board of Governors (1977) 19 Cal. 3d 705, 710 [139 Cal. Rptr. 620, 566 P.2d 254]: "A certificate of rehabilitation is a document which certifies that its possessor, during a period of at least three years following his release from prison (see Pen. Code, § 4852.03), `has demonstrated by his course of conduct his rehabilitation and his fitness to exercise all of the civil and political rights of citizenship.' (Pen. Code, § 4852.13.)"
(2c) It is therefore more reasonable to measure whether sufficient time has elapsed (beyond the three-year minimum) to demonstrate that a petitioner is fit to fully participate in contemporary society by laws which reflect present societal standards, rather than outdated notions of the gravity of the prior criminal conduct.[5]
We therefore hold that the rehabilitation period required by section 4852.03 consists of 3 years plus 30 days for each year of the maximum *589 term of imprisonment which is prescribed under statutory law at the time of the filing of a petition for a certificate of rehabilitation.[6]
In April 1978, when petitioner filed for a certificate of rehabilitation, the maximum penalty for the crime of robbery (§ 213) with use of a knife (§ 12022, subd. (b)) was five years.[7] The required rehabilitation period was therefore 3 years and 150 days. Petitioner was released on parole in February 1974 and did not file his petition for a certificate of rehabilitation until more than four years later. Accordingly, the certificate of rehabilitation was valid, and the court properly denied the motion to vacate the order.
The order denying the motion to vacate is affirmed.
Cobey, J., and Allport, J., concurred.
NOTES
[1] All statutory references are to the Penal Code.
[2] The "Findings" erroneously stated that the requisite time was 3 years plus 120 days. By our calculations, the proper time period was 3 years plus 150 days, since to the maximum 4-year punishment in 1978 for robbery (§ 213) would be added 1 year for use of a deadly weapon (§ 12022, subd. (b)). The error, however, does not affect the validity of the subsequently issued order since more than 3 years plus 150 days had elapsed by the time the petition was filed.
[3] Since we hold as a matter of statutory construction that the rehabilitation period is computed according to current sentencing law, we need not decide whether the determinate sentence law would otherwise have had to be considered retroactively applicable to this petitioner or whether a calculation of the rehabilitation period based on the former maximum penalty of life imprisonment would have deprived petitioner of equal protection of the law under the rationale of In re Kapperman (1974) 11 Cal. 3d 542 [114 Cal. Rptr. 97, 522 P.2d 657].
[4] Section 4852.03, subdivision (1), would then read: "To the three years there shall be added 30 days for each year of the term which was prescribed by statute as the maximum penalty of imprisonment for the crime of which petitioner was convicted."
[5] The issue here is rehabilitation, not punishment. We are concerned with determining the required period of rehabilitation, not with fixing the term of punishment. The People's reliance, therefore, on People v. Superior Court (Gonzales) (1978) 78 Cal. App. 3d 134 [144 Cal. Rptr. 89], and In re Coronado (1978) 87 Cal. App. 3d 788 [151 Cal. Rptr. 433], is misplaced. The issue is not what petitioner's maximum sentence could be if he were first sentenced today for an armed robbery he committed in 1972. It is true that a person who had committed a crime prior to July 1, 1977, would be sentenced under the indeterminate sentencing law with the Community Release Board later fixing his determinate term. Petitioner, however, has already been sentenced, has completed his term of imprisonment, and has been discharged from parole. The right to apply for and be given a pardon is not part and parcel of one's punishment but a separate matter related to the appropriate period of rehabilitation.
[6] Since the maximum penalty prescribed by statute for the crime of which petitioner was convicted was less at the time of the filing of the petition than it was at the time petitioner committed the crime, we need not reach the question whether if the maximum penalty had been increased in the interim, the petitioner's rehabilitation period could be measured by that increased maximum without violating rules against ex post facto legislation.
[7] Section 213 (Stats. 1977, ch. 165, § 5) then provided that robbery was punishable by imprisonment for two, three or four years. Section 12022, subdivision (b), imposed an additional one-year term for use of a deadly or dangerous weapon (Stats. 1977, ch. 165, § 91). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2148253/ | 473 F. Supp. 560 (1979)
ALLIED ARTISTS PICTURES CORPORATION, Avco Embassy Pictures Corp., Buena Vista Distribution Co., Inc., Columbia Pictures Industries, Inc., Metro-Goldwyn-Mayer, Inc., Paramount Pictures Corporation, Twentieth Century-Fox Film Corporation, United Artists Corporation, Universal Pictures division of Universal City Studios, Inc., Universal Film Exchanges, Inc., and Warner Bros. Inc., Warner Bros. Distributing Corporation, Plaintiffs,
v.
James A. RHODES, Governor, State of Ohio, Ted W. Brown, Secretary of State of Ohio, Vernal G. Riffe, Jr., Speaker, Ohio House of Representatives, and Richard F. Celeste, Lt. Governor, Ohio Senate, Defendants.
No. C-2-78-1031.
United States District Court, S. D. Ohio, E. D.
June 22, 1979.
*561 Earl F. Morris, Harry Wright, III, Robert W. Trafford, Dixon F. Miller, Porter, Wright, Morris & Arthur, Columbus, Ohio, Louis Nizer, New York City, Alan Dershowitz, Cambridge, Mass., Barbara Scott, William Nix, New York City, for plaintiffs.
William J. Brown, Atty. Gen. of Ohio, Paul D. Eklund, Richard M. Firestone, Gregory E. Young, Asst. Attys. Gen., Columbus, Ohio, for defendants.
MEMORANDUM AND ORDER
DUNCAN, District Judge.
Preliminary Statement
This is an action for declaratory and injunctive relief by Allied Artists Pictures Corporation and nine other companies engaged in the business of producing and distributing motion pictures. Defendants are James A. Rhodes, the Governor of Ohio; Ted W. Brown and Richard F. Celeste, the former Secretary of State and Lieutenant Governor respectively; and Vernal G. Riffe, Jr., Speaker of the Ohio House of Representatives.
Plaintiffs seek to have declared unconstitutional Sections 1333.05, 1333.06 and 1333.07 of the Ohio Revised Code (hereafter referred to as the Act). This Act,[1] which became effective on October 23, 1978, regulates *562 the procedures by which motion picture distributors and exhibitors contract for the rights to exhibit motion pictures. The Act prohibits the practice known as "blind bidding" under which the distributors solicit bids for their films from exhibitors before the exhibitors have had an opportunity to "trade screen" or preview the film, § 1333.06; and also regulates the bidding procedure itself so as to provide exhibitors with liberal notice and inspection rights. § 1333.07.
*563 Plaintiffs ask the Court to declare the Act unconstitutional and to enjoin its enforcement, claiming that the Act: infringes their First Amendment rights of free speech; violates the Commerce, Supremacy and Equal Protection clauses of the United States Constitution; violates the Sherman Antitrust and Federal Copyright Acts; and deprives the plaintiffs of property without due process of law. It is claimed the Court's jurisdiction arises under the above provisions of the Constitution and laws of the United States, and is asserted under 28 U.S.C. §§ 1331(a), 1337, 1338 and 1343(3).
The case is presently before the Court on defendants' joint motion to dismiss plaintiffs' complaint or alternatively to abstain from assuming jurisdiction. The issues presented by this motion are substantial. They erect before the Court a constitutional threshold which cannot be lightly crossed. Indeed, the Court has paused to give the matter lengthy and deliberate consideration. Upon such consideration the Court has become convinced that defendants' motion is not well taken at this time, and for the reasons set forth below, and with the exceptions noted, must be denied.
Positions of the Parties
According to plaintiffs' complaint, on June 22, 1978, Amended Substitute House Bill 806 was enacted by the Ohio General Assembly. On that day defendant Riffe, acting as Speaker of the Ohio House of Representatives, and defendant Celeste, as Lieutenant Governor and President of the Ohio Senate, "approved and certified that . . . House Bill 806 had been duly enacted by the Ohio General Assembly." The complaint further recites that on July 24, 1978, defendant Governor Rhodes "approved said Act," and that defendant Brown, as Secretary of State, "accepted said Act for filing as and to become a part of the Revised Code of Ohio." The essence of plaintiffs' complaint is then built on the premise that these actions taken by the above parties to enact what plaintiffs claim is an unconstitutional statute, are for that reason void, invalid and beyond defendants' power, and constitute a sufficient basis to render those parties proper defendants in an action brought to declare the statute unconstitutional.[2]
The defendants claim that the Court is without jurisdiction over this matter for the reason that they are defendants in name only, the real party defendant being the State of Ohio. Defendants also claim that the complaint fails to demonstrate the existence of an actual and justiciable case or controversy between the parties as required by Article III of the United States Constitution. The Court will now address these issues.
I. The Eleventh Amendment
The Eleventh Amendment to the Constitution states:
The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
Adopted in 1798, the Amendment was enacted in direct response to widespread dissatisfaction with the Supreme Court's decision in Chisholm v. Georgia, 2 Dall 419, 2 U.S. 419, 1 L. Ed. 440 (1793), holding that the State of Georgia was amenable to suit in federal court by a citizen of another state. Because the Amendment was intended to reverse the Chisholm result it has been interpreted not literally but according to its purpose of restoring to Article III the "fundamental rule of jurisprudence" that "a State may not be sued without its consent." Ex parte New York, 256 U.S. 490, 497, 41 S. Ct. 588, 589, 65 L. Ed. 1057 (1921). Thus the Supreme Court stated:
[T]he entire judicial power granted by the Constitution does not embrace authority to entertain a suit brought by private parties against a state without consent given: not one brought by citizens *564 of another state, or . . . foreign state, because of the Eleventh Amendment; and not even one brought by its own citizens, because of the fundamental rule of which the Amendment is but an exemplification. Id.
See also, Monaco v. Mississippi, 292 U.S. 313, 54 S. Ct. 745, 78 L. Ed. 1282 (1934); Hans v. Louisiana, 134 U.S. 7, 10 S. Ct. 504, 33 L. Ed. 842 (1890).
In accordance with the above principle, it follows that a plaintiff cannot pierce the shield of Eleventh Amendment immunity simply by naming as defendant a party other than the State. Looking to substance rather than form the Supreme Court has decided that such immunity should not depend on "the mere names of the titular parties but [on] the essential nature and effect of the proceeding, as it appears from the entire record." Scheuer v. Rhodes, 416 U.S. 232, 237, 94 S. Ct. 1683, 1687, 40 L. Ed. 2d 90 (1974); Ex parte New York, supra, 256 U.S. at 500, 41 S. Ct. 588; Harrison Construction Co. v. Ohio Turnpike Comm., 272 F.2d 337, 339 (6th Cir. 1959). Thus if an examination of this proceeding demonstrates that defendants are in fact here only as surrogates for the sovereign State of Ohio, then perforce the Eleventh Amendment shield must apply and bar further action against them. See, Georgia R. Co. v. Redwine, 342 U.S. 299, 303-04, 72 S. Ct. 321, 96 L. Ed. 335 (1952).
On the other side of the coin, however, the law is equally clear that the Eleventh Amendment will not bar a suit against state officials to enjoin their enforcement of an unconstitutional state statute. This is the doctrine of Ex parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908). Ex parte Young has been called not only "one of the cornerstones of our legal system," Great Western United Corp. v. Kidwell, 577 F.2d 1256, 1265 (1978) (Wisdom, J.) (prob. juris. noted, 439 U.S. 1065, 99 S. Ct. 829, 59 L. Ed. 2d 30 (1979)); but also, "one of the three most important decisions the Supreme Court of the United States has ever handed down," 17 Wright & Miller, Federal Practice & Procedure § 4231, p. 352 (1978). The Supreme Court has recently and expressly refused to overrule or restrict the Young doctrine, in Ray v. Atlantic Richfield Co., 435 U.S. 151, n.6, 98 S. Ct. 988, 55 L. Ed. 179 (1978). Neither plaintiffs nor defendants here attack the continuing viability of Ex parte Young; however, they hotly dispute its proper application to this case. The Court will now consider this matter and its present implications.
Ex parte Young
In 1907 the Minnesota legislature passed a law reducing railroad rates and providing very severe penalties for failure to comply with the law. Plaintiffs sued in federal court to enjoin enforcement of the law against the railroads, claiming that the new rates worked to deprive the companies of their property without due process, contrary to the Fourteenth Amendment. Plaintiffs named as a defendant Edward T. Young, Attorney General of Minnesota, seeking to restrain him from enforcing the new rate structure. The federal court issued a preliminary injunction. Young then went to state court where he sought and received a writ of mandamus directing the railroads to comply with the new rates. For this act he was held in contempt, fined and ordered to jail by the federal court. Young then applied to the Supreme Court for a writ of habeas corpus, presenting there the issue whether the suit against him was in reality one against the state, to which the state had not consented, and thus barred by the Eleventh Amendment.
The decision of the Supreme Court on the above issue is now bedrock law. The Court rejected the Eleventh Amendment claim and in doing so created the famous "fiction" by which in certain cases allegedly unconstitutional state legislation may be tested in federal courts:
If the act which the state attorney general seeks to enforce be a violation of the Federal Constitution, the officer, in proceeding under such enactment, comes into conflict with the superior authority of that Constitution, and he is in that case stripped of his official or representative *565 character and is subjected in his person to the consequences of his individual conduct. The state has no power to impart to him any immunity from responsibility to the supreme authority of the United States. 209 U.S. at 159-60, 28 S.Ct. at 454.
Thus did the court find the suit to be one not against the state, but against the individual, Edward T. Young. Through this artful fiction the court was able to characterize a single act as state action for purposes of the Fourteenth Amendment, and non-state action for purposes of the Eleventh Amendment, and the case thus became the "watershed . . . which sanctioned the use of the Fourteenth Amendment . . .. As a sword as well as a shield against unconstitutional conduct of state officers." Juidice v. Vail, 430 U.S. 327, 335, 97 S. Ct. 1211, 1217, 51 L. Ed. 2d 376 (1977).
Given the above, the parties in the present case are greatly at odds over the issue whether the defendants, and in particular defendant Rhodes, the Governor of Ohio, can be stripped of his official or representative character in the same manner as was defendant Young, so as to allow plaintiffs' constitutional sword to be used against him. Defendants argue that Governor Rhodes' position is not analogous to that of Attorney General Young for the basic reason that whereas the attorney general in Young was vested with the power to collect the challenged fees and to seek heavy fines to enforce the new rate law against the plaintiffs, Governor Rhodes derives no such enforcement power from the new Act challenged here. In fact the Ohio Act contains no provision for state enforcement whatsoever. Defendants maintain that such enforcement power is a prerequisite to Ex parte Young applicability.
Plaintiffs on the other hand contend that enforcement power is not necessary, but that if it is, the governor possesses such power under other "general" Ohio law. Crucial to this consideration is the discussion in Ex parte Young of an earlier Supreme Court decision, Fitts v. McGhee, 172 U.S. 516, 19 S. Ct. 269, 43 L. Ed. 535 (1899). In Fitts the Court had invoked the Eleventh Amendment to bar a suit naming a state attorney general as defendant and challenging the constitutionality of a statute regulating bridge tolls. The statute provided for no enforcement power in state officials. The Court held that in the absence of any "special relation" to the challenged statute on the part of the defendant state official, the Eleventh Amendment bar could not be avoided. As the Young court summarized the Fitts principle:
As no state officer who was made a party bore any close official connection with the act fixing the tolls, the making of such officer a party defendant was a simple effort to test the constitutionality of such act in that way, and there is no principle upon which it could be done. A state superintendent of schools might as well have been made a party. 209 U.S. at 156, 28 S.Ct. at 452.
Defendants here claim that plaintiffs are doing precisely the above naming Governor Rhodes and the other public officials as defendants simply to test the constitutionality of the Ohio Act. The Fitts court stated that although such a suit
would be a very convenient way for obtaining a speedy judicial determination of questions of constitutional law which may be raised by individuals, . . . it is a mode which cannot be applied to the states of the Union consistently with the fundamental principle that they cannot, without their assent, be brought into any court at the suit of private persons. 172 U.S. at 530, 19 S.Ct. at 274.
Continuing from this premise derived from Fitts in Young, defendants emphasize the Supreme Court's position that in order to properly make a state official a party defendant in a suit to determine the constitutionality of a statute, "it is plain that such officer must have some connection with the enforcement of the act . . ." 209 U.S. at 157, 28 S.Ct. at 453. Defendants claim they have no such enforcement connection in this case, and that therefore plaintiffs' case must fall.
*566 Plaintiffs counter defendants' argument with the following language from Young (emphasis added):
It has not, however, been held that it was necessary that such [enforcement] duty should be declared in the same act which is to be enforced. In some cases, it is true, the duty of enforcement has been so imposed . . . but that may possibly make the duty more clear; if it otherwise exist it is equally efficacious. The fact that the state officer, by virtue of his office, has some connection with the enforcement of the act, is the important and material fact, and whether it arises out of the general law, or is specially created by the act itself, is not material so long as it exists.
Id. Thus plaintiffs' position is that any general duty of enforcement arising out of Ohio law will suffice to meet the Fitts requirement as clarified by Young. Plaintiffs purport to find this general enforcement power in Article III, Section 6 of the Ohio Constitution which provides that the governor "shall see that the laws are faithfully executed," and in § 2733.02 of the Ohio Revised Code, which states:
A civil action in quo warranto may be brought in the name of the state against a corporation:
(D) When it has misused a franchise, privilege, or right conferred upon it by law, or when it claims or holds by contract or otherwise, or has exercised a franchise, privilege, or right in contravention of law . . .
After carefully considering the matter, the Court is of the opinion, at this stage of the proceedings at least, that the Ex parte Young fiction is available to plaintiffs to divest the defendant governor of his "official or representative character" and to place him outside Eleventh Amendment protection. In reaching this conclusion the Court has studied closely the Supreme Court's language in Ex parte Young, and is simply not persuaded that the Young court meant to limit the fiction to state officers having a clear-cut law enforcement capability. All that Young requires, as plaintiffs point out, is that the official have "some connection with the enforcement of the act . . ." 209 U.S. at 157, 28 S.Ct. at 453. Young unequivocally concedes that a state officer's connection with the enforcement of the challenged act can "[arise] out of the general law . . . so long as it exists." Id.
My reading of Young and the cases that follow it does not convince me that the thrust of Young can be limited to cases in which there is a showing of precise legal machinery which a state official can use in exercising his enforcement connection. As noted above, the Young court, distinguishing the Fitts case, wrote, "no state officer who was made a party bore any close official connection with the act fixing the tolls." The word "connection" is used. Surely, if the court had intended to limit the fiction to only those officials having real enforcement power, the frequent use of the word "connection" is most difficult to explain.
Looking at this troublesome problem another way, if the Ohio Constitution provided that the governor is charged with the duty of enforcement of all laws of Ohio, arguably such a provision would be a general grant of enforcement power, and well within even a narrow reading of Young. However, absent a constitutionally or statutorily prescribed means to fulfill the enforcement duty, the argument could be made that the governor's enforcement powers are illusory, not real. Given the hypothetical constitutional mandate, however, it would be an extremely narrow view to say that a governor has no "connection" to the enforcement of the laws of Ohio. Since I can discern no real difference in the use of the word "executed" in Article III, Section 6 of the Ohio Constitution, from the use of the word "enforce," I believe that the governor does possess, by virtue of general Ohio law, a "connection" to the enforcement of the Act.
It may be argued that such reasoning over-extends an already illusory fiction or amounts to a fiction upon a fiction. Defendants argue they have no specific enforcement *567 function to perform regarding the Act.[3] While that may be true as far as it goes, it is not to say that the governor has no general duty or obligation concerning the Act. It must be remembered that the Young doctrine is truly a fiction, and it is erroneous to expect reality from it.
This Court is not the first to find that a governor's general duty to take care that state laws are faithfully executed, as mandated by a state constitution, is sufficient "enforcement" power to allow plaintiffs to invoke the Young fiction. For example, in Federal National Mortgage Association v. Lefkowitz, 383 F. Supp. 1294 (S.D.N.Y.1974) (three-judge court), plaintiffs named the governor of New York as a defendant in their suit challenging the constitutionality of a state law requiring mortgage investment institutions to pay interest of at least two percent on certain escrow accounts. The governor moved to dismiss, claiming that he had no specific enforcement authority with respect to the challenged law. In denying the motion, the district court examined the Young doctrine and decided that the governor's general duty under the New York Constitution to "take care that the laws are faithfully executed" amounted to "[some] connection with the enforcement of the [act]" so as to make him a proper party defendant. Accord, Johnson v. Rockefeller, 58 F.R.D. 42 (S.D.N.Y.1973); Socialist Workers Party v. Rockefeller, 314 F. Supp. 984 (S.D.N.Y.1970) (three-judge court); but cf., Coon v. Tingle, 277 F. Supp. 304 (N.D.Ga.1967) (three-judge court); Oliver v. Board of Education, 306 F. Supp. 1286 (S.D.N.Y.1969). Also cited in support of the plaintiffs' position is City of Altus v. Carr, 255 F. Supp. 828 (S.D.Texas 1966) (three-judge court), aff'd per curiam, 385 U.S. 35, 87 S. Ct. 240, 17 L. Ed. 2d 34 (1966). Although Altus is instructive, the Court notes that there the state officer moving to dismiss, the attorney general, was vested with specific enforcement power with regard to water laws of the state, one of which was the challenged statute. Thus Altus is not directly apposite to this case, in which the defendant governor has no such specific enforcement power.
In deciding this issue the Court has given careful consideration to the analysis by Judge Friendly of a similar problem in Gras v. Stevens, 415 F. Supp. 1148 (S.D.N.Y.1976) (three-judge court). There the court faced a challenge to the constitutionality of certain provisions of a New York domestic relations statute which permitted a wife, but not a husband, to apply to a state court for an order requiring the spouse to pay incurred costs in divorce actions. Among others, the plaintiff named as defendants the state attorney general and governor.
As stated above, the New York governor like the Ohio governor is charged by the state constitution to "take care that the laws are faithfully executed." In rejecting the proposition that this endows the governor with sufficient enforcement power to make him a proper party defendant under Young, Judge Friendly read a reasonable limitation into Young's resort to "general law" for such power.
In our view this would extend Ex parte Young beyond anything which the Supreme Court intended or has subsequently held.
415 F.Supp. at 1152. Judge Friendly discusses and distinguishes a number of cases, also cited by this Court supra, which have found sufficient enforcement power in a governor's duty to see the faithful execution of state laws:
The cases that have applied the statement first quoted [see quotation from Young cited by plaintiffs at p. 566 supra] have been concerned with the enforcement of programs, civil or criminal, dealing with the relations between the state and the individual the regulation of railroad rates as in Ex parte Young itself; *568 the forfeiture of civil rights upon imprisonment, Johnson v. Rockefeller, 58 F.R.D. 42, 45-46 (S.D.N.Y.1972), aff'd sub nom., Butler v. Wilson, 415 U.S. 953, 94 S. Ct. 1479, 39 L. Ed. 2d 569 (1974); the rules determining access to a position on the ballot, Socialist Workers Party v. Rockefeller, 314 F. Supp. 984 (S.D.N.Y.) (three-judge court), aff'd, 400 U.S. 806, 91 S. Ct. 65, 27 L. Ed. 2d 38 (1970); and water control, City of Altus v. Carr, 255 F. Supp. 828, 834-37 (W.D.Texas) (three-judge court), aff'd 385 U.S. 35, 87 S. Ct. 240, 17 L. Ed. 2d 34 (1966). Even in such cases there is an opposing view as to the propriety of joining a governor as a defendant, see Coon v. Tingle, 277 F. Supp. 304, 306-07 (N.D.Ga.1967) (three-judge court) (statute prohibiting employment of females in liquor stores); Oliver v. Board of Education, 306 F. Supp. 1286, 1288 (S.D.N. Y.1969) (election procedures for local board of education). However all this may be, we know of no case in which the general duty of a governor to enforce state laws has been held sufficient to make him a proper party defendant in a civil rights action attacking the constitutionality of a state statute concerning matrimonial or other private civil actions. Id.
Although I disagree with Gras insofar as it declines to find Young enforcement power in the governor's general duty to see to the execution of state laws, I agree with the Gras result. Furthermore, I believe to be accurate Judge Friendly's evaluation that the cases which have permitted a governor to be joined as a defendant concerned the enforcement of programs, civil or criminal, dealing with the relations between the state and the individual. This valid limitation serves to preclude parties from testing the constitutionality of state legislation by simply naming the governor as a defendant, a practice which if unchecked would effectively eviscerate the Eleventh Amendment. Thus, to satisfy the Young fiction, as I understand it, not only must there be a state officer who has a connection with the enforcement of the challenged statute, but there must also be a real, not ephemeral, likelihood or realistic potential that the connection will be employed against plaintiffs' interests. Thus in Gras, for instance, there was no realistic potential that the governor would have taken any interest in the underlying divorce proceeding or in the challenged statute itself, the constitutionality of which could well have been advocated by the private party seeking its benefits. On the other hand, in cases such as Federal National Mortgage, Socialist Workers Party or Altus, all supra, it was reasonable to believe that the defendant state officers' connection with enforcement of state laws would have been brought to bear upon offending parties. Thus in the Court's view the proper balance between the Ex parte Young sword and the Eleventh Amendment shield can be struck only on a case-by-case basis after a searching review of the relationship between the Act, the defendant state officials, and the plaintiffs.
In reviewing the case law, the Court finds it helpful to picture these relationships on a continuum. At one end of the continuum would be cases such as Gras in which the challenged statute regulates relationships between private parties, and which creates rights which can be amply protected by private action. In these cases the realistic potential that a state official would intercede to vindicate statutory rights is minute. At the other end of the continuum would lie cases which for example challenge state election laws or voting-district apportionment laws. There, statutes have created rights and relationships of substantial public interest which cannot be readily protected in litigation between private parties. Thus in a case such as Socialist Workers Party v. Rockefeller, supra, a case involving a challenge to the New York Election Act, it does not stretch the Young fiction too far to make the governor a party defendant by assuming that his general connection to the enforcement of state election laws might potentially be brought to bear on parties violating the law under attack. In fact at this end of the continuum the Court notes that in certain *569 cases attacking state election laws a plaintiff's decision to name a governor as defendant has gone unchallenged even through review at the Supreme Court level. E. g., Moore v. Ogilvie, 394 U.S. 814, 89 S. Ct. 1493, 23 L. Ed. 2d 1 (1969); Wells v. Rockefeller, 394 U.S. 542, 89 S. Ct. 1234, 22 L. Ed. 2d 535 (1969); Williams v. Rhodes, 393 U.S. 23, 89 S. Ct. 5, 21 L. Ed. 2d 24 (1968).
Thus the problem now before the Court becomes that of properly placing this case on the continuum. Defendants would argue that since the Act purports to regulate contractual rights between private parties, namely motion picture distributors and exhibitors, there is no realistic potential that the defendant governor would act to enforce the statutory rights which could be vindicated by private action. Plaintiffs on the other hand would claim that the alleged substantial and immediate impact upon them of the Act is tantamount to direct state regulation which could reasonably require the governor's attention under his general duty to see to the faithful execution of the laws.
One can reasonably take the viewalthough there is an opposing viewthat the Act makes "blind bidding" unlawful in Ohio. Using that as a starting point I believe it can be reasonably maintained that the Act amounts to state regulation of movie producers and distributors doing business in Ohio. Presumably, then, this exercise of the state's regulatory power is designed to implement and serve the public interest of Ohio. The Court is aware that there is no criminal sanction attached to the Act, and also that plaintiffs could possibly await a dispute with an exhibitor and sue, raising there the question of the Act's constitutionality. However, that begs the question in the case at bar. The pertinent question is: does the governor of Ohio, as the chief executive of the state, have an interest in the enforcement of the Act? Or, on the other hand, is this simply an Act near the Gras end of the continuum where the public interest is not crucial, the dispute is such that the governor's interest is absent, and the matter can be adequately decided in an action between concerned private parties?
The question is difficult; the real thrust of the Act is somewhat obscure on its face. However, in ruling on this motion to dismiss, the Court must view the complaint most favorably for plaintiffs. Thus, in the exercise of great caution, as required in deciding a motion to dismiss, I hold that plaintiffs have alleged facts sufficient to invoke the Young fiction and to avoid the Eleventh Amendment bar.[4]
Accordingly, defendants' joint motion to dismiss the cause on Eleventh Amendment grounds will be denied as to defendant Governor Rhodes. However, given the reasoning above, the Court cannot find that defendants Brown, Celeste or Riffe have any connection whatsoever with the enforcement of the Act. Accordingly they are protected by the Eleventh Amendment, *570 and defendants' motion to dismiss must be granted as to them. Further, because of the extremely close question presented by this issue, and the caution exercised by the Court as required at this stage of the litigation, the Court's ruling must include a caveat to plaintiffs that the issue raised herein will be reexamined at the close of plaintiffs' case when the law can be applied in a clearer factual setting.
II. Case or Controversy
In considering the multi-faceted doctrines which are subsumed under the heading "case or controversy," especially in light of the facts of this case, the Court finds itself in ready agreement with Chief Justice Warren's insight that the two words have "an iceberg quality, containing beneath their surface simplicity submerged complexities which go to the very heart of our constitutional form of government." Flast v. Cohen, 392 U.S. 83, 94, 88 S. Ct. 1942, 1949, 20 L. Ed. 947 (1968). As early as Marbury v. Madison, 1 Cranch 137, 2 L. Ed. 60 (1803), it was plain that a court has power to declare a statute unconstitutional only when that statute is brought before the court in a case "properly susceptible of judicial determination." Wright, Federal Courts § 12 (3d Ed. 1976). Such a case, to be justiciable, must "present a real, substantial controversy between parties having adverse legal interests, a dispute definite and concrete, not hypothetical or abstract." Babbitt v. United Farm Workers Nat'l Union, ___ U.S. ___, ___, 99 S. Ct. 2301, 2308, 60 L. Ed. 2d 895 (1979).[5]
The question for this Court in the case at bar is simply whether, as plaintiffs claim, the mere enactment by defendants of a statute which at present adversely affects plaintiffs' rights and interests is sufficient to raise a justiciable controversy.
Once again the Court must view plaintiffs' claims in their most favorable light. Thus it appears that the provisions of § 1333.06 of the Act absolutely forbid blind bidding at plaintiffs' instance. This interdiction has a direct and substantial impact on plaintiffs' heretofore established business practices. Moreover, provisions of the Act, contained in § 1333.07, also substantially alter the procedures by which plaintiffs distribute their motion pictures. Viewing plaintiffs' complaint most favorably, the Act operates to disrupt plaintiffs' nationally-coordinated distribution system and imposes upon them substantial financial uncertainty.
Further, as noted above, the Act is drafted to be self-enforcing; thus the alleged impact upon plaintiffs is immediate and occurs without the active participation of or enforcement by state officers. In such a context a concrete case or controversy may exist, even absent overt adverse action by named defendants. In the Court's opinion an actual threat of enforcement by state officials is not required for justiciability where, as in this case, the statute is mandatory, self-enforcing, and results in immediate economic injury. For example, in Pennsylvania v. West Virginia, 262 U.S. 553, 43 S. Ct. 658, 67 L. Ed. 1117 (1923) plaintiffs challenged the constitutionality of a West Virginia statute which required gas pipeline operators to give preference to instate customers under certain conditions. Although the statute had only been in force for several days when the suit was brought, and it apparently had yet to be enforced, the Supreme Court found that the case was justiciable:
Turning to the act, we find that by its first section it lays on every pipe line company a positive duty . . . whose terms are both direct and certain, and to which immediate obedience is commanded. *571 . . . it prescribes a definite rule of conduct and in itself puts the rule in force.
262 U.S. at 593, 43 S. Ct. at 664 (emphasis added). See also, Pierce v. Society of Sisters, 268 U.S. 510, 45 S. Ct. 571, 69 L. Ed. 1070 (1925) (suit to enjoin statute held justiciable 15 months prior to its effective date where its immediate impact resulted in "present and very real" injury to the plaintiffs' business). See generally, Comment, 62 Col.L.Rev. 106, 114 (1962).
In Lake Carriers' Assn. v. MacMullan, 406 U.S. 498, 92 S. Ct. 1749, 32 L. Ed. 2d 257 (1972), the court considered a constitutional challenge to a Michigan statute which prohibited the discharge of sewage into state waters and required vessels with marine toilets to be equipped with sewage storage devices. The district court had dismissed the case, finding it non-justiciable. The Supreme Court found to the contrary, stating:
The immediacy and reality of appellants' concerns . . . depend . . . only on the present effectiveness in fact of the obligation under the Michigan statute to install sewage storage devices. For if appellants are now under such an obligation, that in and of itself makes their attack on the validity of the law a live controversy, and not an attempt to obtain an advisory opinion.
406 U.S. at 507, 92 S. Ct. at 1755 (emphasis added). The court went on to find that plaintiffs were faced with the threat of future enforcement of the act which had an immediate coercive impact upon them.
In the case at bar plaintiffs similarly claim they are being coerced into compliance, although here the coercion arises out of the self-enforcing provisions of the Ohio Act. Given the language of the Act, enforcement arguably commenced against plaintiffs upon its enactment. In such a case the Court feels that an actual threat of enforcement by state officials is unnecessary. At this stage of the litigation at least the Court must assume that plaintiffs are presently being injured by the operation of the Act, and therefore the Court finds that a live controversy exists in this case sufficient to give the Court jurisdiction under Article III of the United States Constitution.
Once again, however, the Court makes the above finding with a caveat. The Court has found the justiciability issue to be a close one. Out of the extreme caution required on a motion to dismiss, I have decided to let the matter go forward. However, I intend to carefully scrutinize the evidence presented at trial to ensure that the foundation is established for this Court's jurisdiction under Article III and to ensure that the plaintiffs are not merely attempting to "survey the statute books" of Ohio, Younger v. Harris, 401 U.S. 37, 52, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971), in order to receive a premature constitutional adjudication of the challenged Act.
III. Abstention
As an alternative to their motion to dismiss, defendants argue that the Court should abstain from deciding the issues presented in this case pending a construction of the challenged Act by the Ohio courts. In particular defendants claim that despite the Act's apparently clear prohibition contained in § 1333.06(B) against distributors' conditioning license agreements on certain minimum payment guarantees, such guarantees may in fact be offered to distributors by exhibitors, thereby avoiding the Act's prohibition. Likewise defendants claim that the prohibition contained in § 1333.06(C) of the Act against distributor-required advance payments can be circumvented by advance payment agreements offered by the exhibitors. Defendants' position is that if in fact these practices can occur despite the Act, then the impact of the Act claimed by plaintiffs, and its constitutional ramifications, are significantly altered. Therefore, they argue, the Act should be construed initially by the Ohio courts. Defendants also argue that there are several ambiguities inherent in terms used in the language of the Act which require definitive construction.
*572 The Court has carefully considered defendants' arguments on this matter and finds the issue a close one. In reaching its decision the Court notes that the Supreme Court has set out rigid standards defining the circumstances under which a federal court may properly abstain.
Abstention from the exercise of federal jurisdiction is the exception, not the rule. The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it. Abdication of the obligation to decide cases can be justified under this doctrine only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.
Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, 813, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976) (citation omitted).
In view of the "extraordinary" nature of such a decision, the Court is not persuaded that abstention is warranted at this time. In speaking of cases appropriate for abstention, the Supreme Court has stated:
Among the cases that call most insistently for abstention are those in which the federal constitutional challenge turns on a state statute, the meaning of which is unclear under state law. If the state courts would be likely to construe the statute in a fashion that would avoid the need for a federal constitutional ruling or otherwise significantly modify the federal claim, the argument for abstention is strong.
Harris County Comm'rs v. Moore, 420 U.S. 77, 84, 95 S. Ct. 870, 876, 43 L. Ed. 2d 32 (1975). The Court is presently of the opinion that, given its language, construction of the Act by a state court would not avoid the need for a constitutional ruling, nor would it "significantly modify" the federal claims brought here by plaintiffs. If development of the case at trial demonstrates otherwise, however, the Court will not hesitate to alter its ruling accordingly. At present, however, defendants' motion to abstain will be denied.
Conclusion
In summary, for the reasons and with the reservations stated above, the Court is of the opinion that defendants' joint motion to dismiss must be GRANTED as to defendants Brown, Celeste and Riffe, and DENIED as to defendant Governor Rhodes. Further, upon consideration of defendants' motion to abstain, the Court is not persuaded that abstention is warranted, and the motion will be DENIED.
So ORDERED.
NOTES
[1] Sections 1333.05, 1333.06 and 1333.07 of the Ohio Revised Code are as follows:
§ 1333.05 [Definitions.]
As used in sections 1333.05 to 1333.07 of the Revised Code:
(A) "Theater" means any establishment in which motion pictures are exhibited regularly to the public for a charge.
(B) "Distributor" means any person engaged in the business of renting, selling, or licensing motion pictures to exhibitors.
(C) "Exhibitor" means any person engaged in the business of operating a theater in this state.
(D) "Exhibit" or "exhibition" means showing a motion picture to the public for a charge.
(E) "Invitation to bid" means a written or oral solicitation or invitation by a distributor to one or more exhibitors to bid or negotiate for the right to exhibit a motion picture in this state.
(F) "Bid" means a written or oral proposal by an exhibitor to a distributor, which proposal is in response to an invitation to bid or negotiate and states the terms under which the exhibitor will agree to exhibit a motion picture in this state.
(G) "License agreement" means any contract between a distributor and an exhibitor for the exhibition of a motion picture by the exhibitor in this state.
(H) "Trade screening" means the showing of a motion picture by a distributor in one of the five municipal corporations within this state having the largest population which showing is open to any exhibitor interested in exhibiting the motion picture.
(I) "Blind bidding" means bidding, negotiating, offering terms, accepting a bid, or agreeing to terms for the purpose of entering into a license agreement prior to a trade screening of the motion picture that is the subject of the agreement.
(J) "Run" means the continuous exhibition of a motion picture in a defined geographic area for a specified period of time. A "first run" means the initial exhibition of a motion picture in a designated geographic area for a specified period of time. A "subsequent run" means any continuous exhibition of a motion picture in a designated geographic area for a specified period of time after the first run. § 1333.06 [Certain practices of distributors prohibited; effect on license agreements.]
(A) No distributor shall engage in blind bidding.
(B) No distributor shall condition the granting or execution of a license agreement on a guarantee of a minimum payment to the distributor, if the exhibitor is required by the license agreement to make any payment to the distributor that is based on the attendance or the box office receipts at a theater at which the motion picture is exhibited.
(C) No distributor shall condition the granting or execution of a license agreement on the exhibitor's advancing, more than fourteen days prior to his first exhibition of a motion picture, any money that is to be used as security for the exhibitor's performance of the license agreement or is to be applied to any payments that the exhibitor is required by the agreement to make to the distributor.
(D) Any provision of a license agreement that waives any of the prohibitions of, or fails to comply with, this section or section 1333.07 of the Revised Code is void and unenforceable. Any license agreement that fails to comply with this section and section 1333.07 of the Revised Code is voidable by the exhibitor, if the exhibitor gives the distributor written notice, prior to the exhibitor's first exhibition of the motion picture that is the subject of the agreement, of his intent to have the agreement voided.
§ 1333.07 [Invitations to exhibitors to bid; inspection, notice.]
(A) If bids are solicited from exhibitors for the purpose of entering into a license agreement, the invitation to bid shall specify:
(1) The number and length of runs to which the invitation to bid applies;
(2) Whether the invitation to bid applies to a first or subsequent run;
(3) The geographic area for each run;
(4) The names of all exhibitors who are being given an invitation to bid;
(5) The date, hour, and location at which the bid is required to be made;
(6) The name and address of the location where the bids will be opened, which location shall be within this state.
(B) If the motion picture that is the subject of a bid has not already been trade screened within this state, the distributor soliciting the bid shall include in the invitation to bid the date, time, and location of the trade screening of the motion picture that is the subject of the invitation to bid.
(C) Every distributor shall furnish to all exhibitors in this state reasonable and uniform notice of all trade screenings that are held within this state of motion pictures that he is distributing.
(D) All bids shall be submitted to the distributor in written form. The distributor or his agent shall open all bids at the same time and in the presence of at least one of the exhibitors, or the agent of an exhibitor, who has submitted a bid.
(E) Any exhibitor, or the agent of an exhibitor, who submits a bid for a particular run of a motion picture may, at reasonable times within sixty days after the bid is opened, examine any bid that is made for the same run of the motion picture by another exhibitor. The exhibitor may inspect the bids even if the distributor rejects all bids that are submitted. Within seven business days after a bid for a particular run of a motion picture is accepted, the distributor shall notify in writing each exhibitor who submitted a bid for that run of the motion picture of the terms of the accepted bid and the identity of the successful bidder. Any bid submitted is nonreturnable.
(F) If a distributor issues invitations to bid for a motion picture, he shall not enter into a license agreement for the exhibition of the motion picture except by means of the bidding process specified in this section. If the distributor rejects all bids submitted pursuant to an invitation to bid, he shall notify all exhibitors who submitted bids that he rejected all bids and shall issue a new invitation to bid.
[2] Although, as detailed infra, plaintiffs also take the position that the defendant governor and secretary of state possess the power to enforce this statute, that contention is nowhere contained in plaintiffs' complaint.
[3] However, the Court notes that a governor may resort to his quo warranto powers in "extraordinary" situations involving corporate infringement of public or state interests. See, R.C. 2733.02, 2733.04; State ex rel. Day v. Superior Savings & Loan Assn., 25 Ohio St. 2d 79, 80, 266 N.E.2d 842, 843 (1971); State ex rel. Brown v. Regional Public Safety Service Corp., 47 Ohio App. 2d 300, 353 N.E.2d 851 (C.A. Franklin Cty. 1975).
[4] Plaintiffs fix a second string to their bow with a more general argument on the meaning of the Eleventh Amendment. Arguing from Milliken v. Bradley, 433 U.S. 267, 97 S. Ct. 2749, 53 L. Ed. 2d 745 (1977) and Edelman v. Jordan, 415 U.S. 651, 94 S. Ct. 1347, 39 L. Ed. 2d 662 (1974), plaintiffs claim that the only real bar imposed by the Eleventh Amendment is to retroactive relief in the form of money damages from the state treasury. The inquiry into a state official's enforcement power is relevant, plaintiffs claim, only insofar as it determines who is a proper party defendant in the suit. In other words, plaintiffs take a broad view of Ex parte Young and find that through its progeny it stands for the general proposition that unconstitutional state action is not insulated by the Eleventh Amendment from the scrutiny of a federal court.
While the Court understands how such a broad view of the Young doctrine might be inferred from the facts of Milliken or Edelman, neither of those cases gives any explicit support to such a view. The Court does not write on a clean slate in this area of the law. Absent a clear statement by the Supreme Court that it intends to abrogate the Eleventh Amendment whenever state legislation is challenged on constitutional grounds, except when a suit seeks money damages against the state, this Court cannot find a warrant to make the modification of Eleventh Amendment law, as it understands it, that plaintiffs seek. Indeed, the Supreme Court has recently expressly reaffirmed the vitality of the Eleventh Amendment in a non-damages setting. Alabama v. Pugh, 438 U.S. 781, 98 S. Ct. 3051, 57 L. Ed. 2d 1114 (1978).
[5] Defendants argue that the recent decision of the Supreme Court in Babbitt should be dispositive on the justiciability issue here. Although the Court finds Babbitt instructive, it notes the Supreme Court's admonition there that the difference between an abstract question and a "case or controversy" is one of degree, not being discernible by any precise test. Taking that to mean that each case must be carefully considered on its facts, the distinctions I find between the Babbitt situation and this one prevent this Court from giving conclusive weight to Babbitt. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1759269/ | 635 So. 2d 391 (1994)
STATE of Louisiana
v.
Jorge RODRIGUEZ.
No. 93-KA-0461.
Court of Appeal of Louisiana, Fourth Circuit.
March 29, 1994.
*393 Harry F. Connick, Dist. Atty., Jack Peebles, Asst. Dist. Atty., New Orleans, for plaintiff-appellee State of Louisiana.
Robert T. Myers, Young, Richaud, Theard & Myers, New Orleans, for defendant-appellant Jorge Rodriguez.
Before BARRY, KLEES and WARD, JJ.
KLEES, Judge.
On January 28, 1982 the appellant, Jorge Rodriguez was charged by bill of indictment with the second degree murder of Alberto Gonzales. He was tried by a jury on June 30, 1982 and found guilty as charged. On August 17, 1982 he was sentenced to life imprisonment at hard labor without benefit of probation, parole or suspension of sentence. The conviction and sentence were affirmed in an errors patent appeal. State v. Jorge Rodriguez, KA-0844, unpub. (La.App. 4th Cir., November 14, 1983).
Following the denial of several applications for post conviction relief, at 92-K-1301 this court ordered the trial court to grant the appellant an out-of-time appeal, pursuant to the holding in Lofton v. Whitley, 905 F.2d 885 (5th Cir.1990). The appeal was granted on August 3, 1992.
FACTS
Maria Gonzales and her husband, Alberto, were acquainted with the defendant because he used to live with Alberto's cousin, Dolores Soto. On December 29, 1991, at about 3:30 p.m., Maria was watching television in the bedroom of her shotgun house at 2470 Verbena Street when the doorbell rang. Alberto answered the doorbell. Maria heard the defendant cursing and heard Alberto tell the defendant to respect his house. Alberto told the defendant if he had a problem to settle it outside. Maria then heard a shot. She went to the hall and saw the defendant, who shot her in the hand and ran out. Maria also saw another man in the hall. She only saw the other man from the back as he was going towards the door. She described him as short with short black hair.
After Maria was shot, she ran back to the bedroom because she was afraid they would come back and kill her. She then hid in a shelter in the backyard. Eventually she went back to the house and asked her neighbor to call the police.
Officer Norman McCord was called to the scene around 4:00 p.m. and found Alberto lying dead, face down in the hall, having been shot in the back of the head, and found Maria bleeding from the hand. Maria told McCord what had happened. He then called the crime lab and left to find the defendant. Three revolvers and $18,000.00 were found in the victim's home. The victim did not work, but received checks in connection with an accident and back injury.
McCord with Officer Paul Mattio found the defendant at his apartment on Chef Menteur Drive. Also at the apartment were Raphielle Rosales, known as "Peaches," and a third person. When the officers found out which one was the defendant, they handcuffed and arrested him for the murder of Alberto Gonzales. They checked the cushion of a chair, so that the defendant could sit down, and found a 380 caliber Beretta automatic weapon under the seat cushion. The defendant was taken into custody and the others were taken in for investigation. Rosales was subsequently arrested, although it is not apparent what became of that charge. Over two weeks later, on January 16, 1991, Mr. Frank Culotta called the N.O.P.D. relative to a weapon found in the defendant's apartment. Mr. Culotta lived in the apartment below the *394 defendant. He observed a leak coming from his ceiling and went upstairs to find its source. He found the door had been kicked in and the apartment in disarray. Culotta called the police to report it and was told that the incident had already been checked out. He then called the maintenance man to go back upstairs with him. They found that the leak was coming from the roof. They then took a bag of garbage out of the garbage pail so that the pail could be used to catch the water leaking from the roof. In the bottom of the pail underneath the bag they found a .38 caliber Taurus revolver. The weapon found in the apartment that date was determined from ballistics tests to be the murder weapon.
Radeem Machado, the murder victim's brother, testified that he recognized the Taurus as belonging to the defendant. Machado testified that the defendant carried it with him all the time. He further testified that he saw the defendant and "Peaches" on the day of the murder. They asked him to go with them to Alberto's house, but he refused. Machado identified the murder weapon as the one he saw next to the defendant in the car on the day of the murder. He also identified the Beretta automatic as Peaches's gun.
Odalis and Miguel Abraham, sister and brother-in-law of Alberto, testified that the defendant and Peaches came to their house two nights before the murder. Odalis testified that her husband opened the door and the defendant and Peaches came into the kitchen. Miguel told the defendant he did not want Peaches in his apartment. Odalis further testified that the defendant came into the bedroom where she was. She identified the murder weapon as the one that the defendant had tucked in the back of his pants that night, and the long gun as the one which Peaches had in the kitchen.
The victim's family all testified as to not wanting to associate with Peaches. They further testified to a rumor relative to a threat on Maria's life from Peaches's father. The particulars of the alleged phone call varied from witness to witness. However, the witnesses all denied that it affected their testimony.
The defendant testified that, on the day of the murder, Raphielle insisted that he drive him to Alberto's house to collect some money. The defendant noticed that Raphielle had a gun in his vest, but did not know he would use it. The defendant denied ever carrying or owning a gun. The defendant further testified that he went in and told Alberto that Raphielle needed to speak with him. Raphielle then went into the next room with Alberto, while the defendant waited in the front room. According to the defendant, he heard a shot and started for the door. He then heard another shot and a woman screaming. He ran three blocks and caught a bus to his apartment. The defendant testified that he could not call the police because he did not speak English. Raphielle arrived a short time later and threatened him with a gun. Angela Perdoma arrived shortly after that. The defendant further testified that he was relieved when the police arrived because he thought Peaches was going to kill him next because he was a witness to the other shooting.
PATENT ERROR REVIEW
A review of the record for patent errors reveals that there were none.
ASSIGNMENT ONE
The appellant avers that trial court counsel was ineffective. This assignment is assessed by the two part test of Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984); State v. Fuller, 454 So. 2d 119 (La.1984). The defendant must show that counsel's performance was deficient and that the deficiency prejudiced him. Counsel's performance is ineffective when it can be shown that he made errors so serious that counsel was not functioning as the "counsel" guaranteed the defendant by the Sixth Amendment. Strickland, 466 U.S. at 686-88, 104 S.Ct. at 2064. Counsel's deficient performance will have prejudiced the defendant if he shows that the errors were so serious as to deprive him of a fair trial. To carry his burden, the defendant "must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been *395 different. A reasonable probability is a probability sufficient to undermine confidence in the outcome." Strickland, 466 U.S. at 694, 104 S.Ct. at 2068. The defendant must make both showings to prove that counsel was so ineffective as to require reversal.
Generally, the issue of ineffective assistance of counsel is a matter more properly addressed by an application for post-conviction relief, filed initially in the trial court where a full evidentiary hearing can be conducted. State v. Prudholm, 446 So. 2d 729 (La.1984); State v. Reed, 483 So. 2d 1278 (La.App. 4th Cir.1986). However, in the interest of judicial economy, the court may consider a claim of ineffective assistance if the record contains sufficient evidence to address the merits of such claim.
The appellant avers that trial counsel was ineffective for his failure to timely investigate the crime scene. Specifically, he avers that it was six months before counsel sent his investigator to the victim's home, and that had he investigated sooner he would have found drugs, large sums of money and weapons, evidence of a drug deal between the victim and Raphielle Rosales. In fact, the police found weapons and a large sum of money, but denied knowledge of finding drugs in the victim's home. In addition, the fact that the witnesses wanted nothing to do with Rosales suggested that he was involved in some kind of illegal activity, or was an otherwise unsavory character. However, this evidence did not influence the jury that Rosales was the one who shot the victim. Had drugs also been found in the victim's home, it is unlikely that it would have affected the verdict. This claim has no merit.
The appellant also avers that counsel was ineffective for his failure to locate witnesses for his defense. Specifically, he avers that Acquiles Quintana, a cousin of the victim, and Acquiles's mother and stepfather, could have testified to impeach the testimony of the victim's widow. In a post-conviction application following his first appeal, this appellant claimed new evidence and furnished a letter purportedly signed by Quintana, which stated that Maria told the family that it was Rosales who was arguing with her husband and who shot her in the hand; however, because Rosales had threatened the family, they should pin the murder on the defendant. The testimony of Acquiles Quintana or others relative to the alleged prior inconsistent statement of Maria would have been inadmissible hearsay.[1] Even were the alleged statement admissible to impeach the credibility of Maria Gonzales or show bias, it would have had no effect, as the alleged threatening phone call and dangerous character of Raphael Rosales was put before the jury by several witnesses. In writ K-6896 dated January 22, 1987, this court reviewed the record and the written statement of the newly found witness and concluded that the new evidence, even if accepted as true, would not have changed the verdict. Accordingly, the failure of counsel to find and call these witnesses did not prejudice the defendant.
The appeal record is insufficient to review the appellant's claims relative to the adequacies of counsel's pre-trial visits, counsel's failure to hire independent ballistics and fingerprint experts, his failure to move for a continuance due to the non-appearance of Raphael Rosales as a witness, and his inability to communicate with the defendant in Spanish. These claims may be raised by an application for post-conviction relief.
The assignment relative to ineffective assistance of counsel is without merit.
ASSIGNMENT TWO
The appellant argues that he was denied due process and equal protection under *396 the law because the court-appointed interpreter was ineffective in her translation and because she failed to adequately communicate the defendant's emotions and passions. The minute entry from June 30, 1982, the first day of trial, states, "Interpreter Gloria A. Requena was stipulated to by both State and Defense and recognized by the Court as a qualified interpreter in the Spanish Language." The transcript indicates that the Court cautioned each witness to speak loudly and clearly for the benefit of the interpreter. The example given by the appellant does not show that the translation was inaccurate. Accordingly, this assignment is found to be without merit.
ASSIGNMENT THREE
The appellant avers that he was denied due process and equal protection under the law when he was denied an opportunity to be tried by a jury with some Latin or Spanish speaking members. Purposeful racial discrimination in selection of the jury venire violates a defendant's right to equal protection because it denies him the protection that a trial by jury is intended to secure. Batson v. Kentucky, 476 U.S. 79, 86, 106 S. Ct. 1712, 1717, 90 L. Ed. 2d 69 (1986); Strauder v. West Virginia, 10 U.S. 303, 100 U.S. 303, 25 L. Ed. 664 (1879).
An objection to the general venire or the petit jury venire should be urged by a motion to quash prior to trial, otherwise the objection is waived. Official Revision Comment (c)(2) to La.C.Cr.P. art. 535. The failure to file such a motion constitutes waiver of the objection. State v. Durr, 343 So. 2d 1004 (La.1977). No motion to quash was filed in the instant case. In any event, the appellant has failed to make even a prima facie case that Hispanics were excluded from the jury venire. This assignment has no merit.
ASSIGNMENT FOUR
The appellant avers that the evidence against him was circumstantial and insufficient to support a verdict of guilty of second degree murder. As noted by this court in 89-K-1678, on September 28, 1989, "The issue of the sufficiency of the evidence was reviewed in the [appellant's prior] appeal. The appropriate standard for review when the evidence is circumstantial was used and the evidence was found to be sufficient." The claim is repetitious and has no merit.
ASSIGNMENT FIVE
The appellant avers that the trial court gave jury instructions which were later held to be unconstitutional. He complains that an incorrect charge was given as to both the law of principals and the reasonable doubt standard. A claim that a jury charge was improper will not be considered on appeal if no contemporaneous objection was made. La.C.Cr.P. art. 841. State v. Berniard, 625 So. 2d 217 (La.App. 4th Cir.1993) on rehearing; State v. Dobson, 578 So. 2d 533 (La.App. 4th Cir.1991), writ den., 588 So. 2d 1110 (La.1991). Certification from the court reporter in this case indicates that there were no objections to the jury instructions. This assignment thus cannot be reviewed.
ASSIGNMENT SIX
The appellant avers that he has discovered new evidence which would have affected the verdict. As discussed previously, this claim was considered by this court in an application for post-conviction relief and property denied. It will not be reconsidered.
ASSIGNMENT SEVEN
The appellant avers that he has been denied due process because the appellate record is incomplete. A review of the record indicates that the record has been supplemented with the trial transcript. As to voir dire, opening and closing statements and jury instructions, the certification from the court reporter indicates that there were no objections raised. Accordingly, those transcripts were not transcribed as the issues would not be reviewable on appeal. The appellant further avers that the following additional documents are missing from the record: the subpoena and subpoena return for Raphielle Rosales, the brief filed by counsel in the appellant's original appeal, and the application and trial court disposition of the post-conviction application for which this court granted the relator this out-of-time appeal. *397 Because no motion to continue was made for the non-appearance of Raphielle Rosales, the issuance and return of the subpoena is irrelevant to this appeal. Similarly, where the appellant has here been given an out-of-time appeal, the patent error brief of appellate counsel in the original appeal and the application and trial court disposition requesting the out-of-time appeal are not essential to a review of the claims raised herein. The appellant has thus not been prejudiced by the omission of these documents from the record. This assignment has no merit.
Accordingly, for the above reasons the conviction and sentence of appellant Jorge Rodriguez are hereby affirmed.
AFFIRMED.
NOTES
[1] The Louisiana Code of Evidence was adopted in 1989 and was thus not in effect on the date of the appellant's trial. La.C.E. Art. 801(D)(1)(a) provides that a prior inconsistent statement by a witness is non-hearsay if it was given under oath subject to the penalty of perjury at the accused's preliminary examination or the accused's prior trial and the witness was subject to cross-examination by the accused. (Emphasis added.) This subparagraph creates a "limited variation" from the former Louisiana rule that assertive use of a witness' prior inconsistent statement is subject to a hearsay objection. Although admissible to attack credibility, a witness's prior inconsistent statement (even one given under oath in a judicial proceeding) is subject to the ban against the admission of hearsay for its substantive value, which is equally applicable to the Code of Evidence and prior law. See La.C.E. Art. 801, Author's Note 3. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1826488/ | 691 So. 2d 452 (1997)
MISSISSIPPI GAMING COMMISSION; W.W. Gresham, Chairman; Victor Smith, Commissioner; Robert Engram, Commissioner; Major General Paul Harvey, Executive Director; and Mike Moore, Attorney General,
v.
BOARD OF EDUCATION, Harrison County, Mississippi and Royal Casino Corporation.
No. 95-CA-00133-SCT.
Supreme Court of Mississippi.
March 20, 1997.
Rehearing Denied May 22, 1997.
*453 Michael C. Moore, Attorney General, M. Carole Brand, Sp. Asst. Attorney General, Jackson, for Appellant.
Albert L. Necaise, Gulfport, James B. Persons, Alben N. Hopkins, Thomas A. Waller, Hopkins Dodson Crawley Bagwell Upshaw & Persons, Gulfport, for Appellee.
Before PRATHER, P.J., and BANKS and McRAE, JJ.
McRAE, Justice.
The Mississippi Gaming Commission files an appeal from a December 30, 1994 order of the Harrison County Circuit Court finding arbitrary, capricious, and unsupported by the evidence or applicable law its determination that Sixteenth Section land located on Bernard Bayou in Gulfport, Mississippi, which Royal Casino sought to develop, was not a legal gambling site. Aggrieved by the circuit court's ruling, the Commission now asks this *454 Court to consider: (1) whether there is a right to appeal the denial of a preliminary site approval, a licensing decision of the Mississippi Gaming Commission; (2) whether it acted in excess of its statutory authority in denying the preliminary site approval to Royal Casino; (3) whether its finding of fact that Bernard Bayou is a bayou and therefore not a suitable site for gaming operations was arbitrary and capricious; and (4) whether the Board, which was not the license applicant, has standing to appeal a licensing decision made by the Commission.
We find that the circuit court had jurisdiction to entertain Royal Casino's appeal of the Commission's denial of its preliminary site request and that the Board of Education was a proper party to the action. We further find that the circuit court erred in ruling that the Commission exceeded its authority in determining that Bernard Bayou was not a proper gaming site and that denial of the preliminary site approval was arbitrary, capricious and unsupported by the evidence. Accordingly, we reverse the order of the circuit court and reinstate the Commission's decision.
I.
Royal Casino Corporation, headquartered in Rochester, New York, leased a parcel of Sixteenth Section land from the Board of Education of Harrison County. On April 20, 1993, Royal Casino filed its Application for State Gaming License with the State Gaming Commission, with the intent of constructing a gaming facility on the 125 acre site. Touted as "The Gateway to the Gulf Coast," the proposed development would include two casinos and a shopping mall. It was estimated that the $300 million project would create eight thousand new jobs and generate $24 million in sales tax and annual gaming taxes of approximately $326 million. The Board anticipated some $180 million in rental revenues over the forty year term of the lease.
The proposed Royal Casino site is located northeast of the intersection of Interstate 10 and U.S. Highway 49 on Bernard Bayou. Bernard Bayou meanders for more than two miles to the west and north toward the interstate from Big Lake, which is located at the far western end of the Back Bay of Biloxi. Variously described as a bayou and as an estuary, the site experiences some effect from the ebb and flow of the average tide.
A site assessment hearing was held on April 21, 1994. The Gaming Commission was presented with expert affidavits and testimony regarding the hydrographic properties of the site. Proponents and opponents of the site discussed the economic and social impact of the project. Based on this evidence, maps, a site visit, and the statutes and regulations governing gaming sites, the Commission's Executive Director recommended against approval of the Bernard Bayou site, as reflected in the minutes of the April 21, 1994 site assessment hearing.
Based upon a physical inspection of the site, maps depicting the site and adjacent development, presentations by both the proponents and opponents of the site, a review of statutory and regulatory provisions relating to suitable locations for gaming operations, following commission past practice and directives codified at Mississippi Gaming Commission Regulation No. 2, it is the recommendation of the Executive Director that preliminary site approval be denied. Substantial, if not overwhelming evidence shows the Bernard Bayou site to be located on a bayou. It cannot credibly be defined as a permissible extension of the waters of the Mississippi Sound, St. Louis Bay, Biloxi Bay, or Pascagoula Bay. Bernard Bayou is not a suitable site allowed by state law or the Mississippi Gaming Commission Regulation No. 2. The site, if approved, could and would open the State of Mississippi to inland landbased casino gaming. In order to promote and maintain public confidence and trust in gaming, the Commission intends to strictly regulate the location of gaming operations in Mississippi. In the recognition of public interest in restricting gaming to the waters of the Mississippi Sound, Biloxi Bay and St. Louis Bay, and being consistent with past practice, the Gaming Commission will not recommend sites that are located on tributaries emptying into those waters.
(emphasis added). The Director's recommendation was accepted by a 2-1 vote at the *455 May 31, 1994 Special Interim Commission Meeting.
The Board of Education of Harrison County and Royal Casino Corporation filed a Petition for Review with the Harrison County Circuit Court on July 18, 1994. The petitioners charged that neither state statutes nor Commission Regulation No. 2 prohibited gaming operations on the proposed site.[1] In the alternative, they argued that if Regulation No. 2 were found to bar development of the site, it should be declared void and in violation of Miss. Code Ann. § 97-33-1 (1993). Keeping all avenues open, they further argued, in the alternative, that § 97-33-1 was unintelligible and unconstitutional.
In response, the Gaming Commission asserted that the circuit court lacked jurisdiction over the matter because preliminary site approval is not statutorily subject to appeal. The Commission sought to dismiss the complaint against the Commissioners as charged in their individual capacities. It further asserted that the Board of Education of Harrison County, which had not filed the application for site approval, was not a proper party to the case. In its July 28, 1994 Motion to Dismiss Petition for Review, the Commission specifically asserted that the site decision, the initial phase of a licensing decision, was not subject to judicial review pursuant to Miss. Code Ann. § 75-76-127(2). The Commission, in a separate Motion to Dismiss a Party to Petition for Review, sought to dismiss the Board from the appeal, again arguing that it did not have standing.
A hearing was held on November 21, 1994. On December 30, 1994, the circuit court entered its opinion, reversing the Commission's order and finding that Bernard Bayou was "a lawful and legal site" for a casino. The circuit court further denied the Commission's motion to dismiss the Board of Education as a party and dismissed the action against the Commissioners and the Executive Director in their individual capacities.
II.
This Court affords great deference to an administrative agency in interpreting its own regulations. Casino Magic Corp. v. Ladner, 666 So. 2d 452, 463 (Miss. 1995)(Banks, J., concurring); Mississippi Department of Environmental Quality v. Weems, 653 So. 2d 266, 273 (Miss. 1995). This deference will be of "no material force where agency action is contrary to the statutory language." Casino Magic, 666 So.2d at 459 (quoting Gill v. Mississippi Department of Wildlife Conservation, 574 So. 2d 586, 593 (Miss. 1990)). See also Mississippi Casino Operators Ass'n v. Mississippi Gaming Commission, 654 So. 2d 892, 894 (Miss. 1995). When reviewing decisions of the Mississippi Gaming Commission, the circuit courts and Supreme Court may reverse a Commission order if the petitioner's rights were prejudiced because the decision was "(a) [i]n violation of constitutional provisions; (b) [i]n excess of statutory authority or jurisdiction of the commission; (c) [m]ade upon unlawful procedure; (d) [u]nsupported by any evidence; or (e) [a]rbitrary or capricious or otherwise not in accordance with law." Miss. Code Ann. § 75-76-125(3)(1990).
III.
The circuit court ruled that it had jurisdiction over the appeal of the Commission's denial of the preliminary site request pursuant to Miss. Code Ann. § 75-76-121(1)(1990) of the Gaming Control Act, which provides that "[a]ny person aggrieved by a final decision or order of the commission may obtain judicial review thereof in the circuit court of the county in which the petitioner resides or has his or its principal place of business." In *456 support of its assertion that the denial of Royal Casino's request for preliminary site approval is not subject to judicial review, the Commission relies on the statutory framework from which it derives its authority as well as this Court's decision in Casino Magic Corp. v. Ladner, 666 So. 2d 452 (Miss. 1995). These authorities exclude licensing decisions from the spectrum of Commission business subject to appeal and judicial review, based on the premise that a license is but a revocable privilege and not a right. Miss. Code Ann. § 75-76-3(5)(1990).
Miss. Code Ann. § 75-76-127(2)(1990) expressly states that "[j]udicial review is not available for actions, decisions, and orders of the commission relating to the denial of a license or to limited or conditional licenses." In Casino Magic, this Court likewise was faced with the issue of whether the circuit court had jurisdiction to hear a property owner's challenge to the Commission's finding that a proposed casino site was not a lawful site. The Court, following an extensive discussion of the applicable statutes, found that "the Mississippi Gaming Act prohibits the ability to appeal an action, decision, or order relating to the denial of a license, which we find includes preliminary site approval." Casino Magic, 666 So.2d at 458.
The Casino Magic decision, however, was careful to not shut the door on aggrieved property owners or license applicants, or to give the Commission carte blanche in its decision-making powers. Rather, recognizing that the Commission could not deny site approval for proper, legal areas, or in the alternative, approve sites in areas not legally designated for casino development, we found that "unless the MGC acts outside its statutory boundaries ... denial of a site and license request is generally not reviewable." Id. at 460 (emphasis in original). We further stated:
We find that property owners in Mississippi do not have a statutory right to appeal a site request denial of the MGC so long as the MGC acts within its statutory framework as it did here. However, the MGC does not enjoy plenary power incapable of judicial review under all circumstances.
Id. at 456 (emphasis in original). Thus, finding that the Commission had not exceeded its statutory authority in determining that the Ladner property was located on a bayou and thus not suitable as a gaming site, we held that the circuit court had no jurisdiction over the matter.
In Mississippi Casino Operators v. Mississippi Gaming Commission, 654 So. 2d 892 (Miss. 1995), we reversed the Commission's decision to grant a license for a gaming site on a proposed man-made waterway. The Casino Operators, like Royal Casino and the Board, had invoked the circuit court's jurisdiction pursuant to Miss. Code Ann. § 75-76-121. We pointed out that the language of Miss. Code Ann. § 75-76-127(2) stating that judicial review was not available "for actions, decisions and orders of the commission relating to the denial of a license" was construed as follows:
Section 75-76-127 makes the statutory appeal scheme exclusive for disciplinary actions and denies any appeal from the denial or limitation of a license. That section does not speak to the grant of a license and we have not found a section which explicitly grants or denies appellate review of such orders. For present purposes, it should suffice to say that we accept the commission's interpretation that judicial review of its decisions granting licenses or approving sites is authorized by Section 75-76-121.
Casino Operators, 654 So.2d at 893 n. 1 (emphasis added). Therefore, while the circuit court may entertain the appeal of any decision to grant a license, appeal of a decision to deny any aspect of a license is subject to an "in excess of statutory authority" test.
Justice Banks, in his separate opinion in Casino Magic, articulated the obvious question raised by the conditional limitations placed by the majority on the judicial review of Commission licensing. He interpreted the majority opinion as stating
in essence, that the trial court lacks jurisdiction to hear an appeal of this type, except when the Mississippi Gaming Commission acts contrary to its statutory authority. A court must first have the right of review in order to make that determination. *457 A question of statutory authority goes to the merits of the controversy and is always at issue [i]n the review of administrative decisions. The right to review cannot, in my view, come from the determination itself.
Id. at 460 (emphasis added). If judicial review is available only when the Commission has exceeded its statutory authority in denying a license, or when a decision has been made to grant a gaming license, who is to make the determination that its authority was exceeded so as to trigger judicial review?
Our cases construing §§ 75-76-121 and 75-76-127(2) allow for the appeal of the Commission's approval of a gaming license or of any decision where the Commission has exceeded its authority in denying a license request. In this case, a determination of whether the circuit court had jurisdiction to hear this case can be made only by first considering whether the Commission exceeded its authority in denying the preliminary site application for Bernard Bayou. How can such decision be made without judicial review? We find therefore that the circuit court did not err in allowing the appeal, since judicial review of the denial of a license or any part thereof is necessary to determine whether the Commission has exceeded its authority.
IV.
Finding that the Commission exceeded its authority in denying Royal Casino's preliminary site request, the circuit court further determined that Gaming Commission Regulation No. 2, to the extent that it "declare[s] Bayou Bernard as not being part of the Biloxi Bay or the Mississippi Sound," was neither authorized by statute nor supported by other legal authority. In Mississippi Casino Operators Ass'n v. Mississippi Gaming Commission, 654 So. 2d 892 (Miss. 1995), however, we recognized that Miss. Code Ann. § 75-76-7 provides the Commission with the authority "to determine the locations of casinos which wish to build in the Gulf Coast area." Id. at 894.
Miss. Code Ann. § 97-33-1(a) provides for gaming in counties bordering the Gulf Coast as follows:
On a cruise vessel as defined in Section 27-109-1 whenever such vessel is in the waters within the State of Mississippi, which lie adjacent to the State of Mississippi south of the three (3) most southern counties in the State of Mississippi, and in which the registered voters of the county in which the port is located have not voted to prohibit such betting, gaming or wagering on cruise vessels as provided in Section 19-3-79.
Asked to determine whether the Commission had exceeded its authority by approving a proposal to construct an artificial inlet upon which to float a gaming ship, we addressed the failure of § 97-33-1(a) to define specifically "waters within the State of Mississippi, which lie adjacent to the State of Mississippi south of the three (3) most southern counties... ." The Court noted that "unlike the provisions regarding gaming on the Mississippi River, the Gulf Coast gaming provision does not expressly state that gaming is allowed on all `navigable waters' within the counties which border on the Gulf of Mexico." Casino Operators, 654 So.2d at 894. Regulation No. 2 was drafted, therefore, to provide some definition to the statutory language.[2] It provides as follows:
Waters within the State of Mississippi which lie adjacent to the three (3) most southern counties of the State. In addition to the Mississippi Sound, this would include St. Louis Bay, Biloxi Bay, and Pascagoula Bay. However, the rivers and bayous leading into these bays, including but not limited to Jourdan River, Wolf River, Bernard Bayou, Tchoutacabouffa River, Pascagoula River and Escatawpa are not within the authorized area. In determining where the river ends and the bay begins, an imaginary line shall be drawn from the foremost land mass at the intersection of the river and bay, straight *458 across the river to the foremost land mass of the intersection on the other side.
(emphasis added).
In Casino Operators, we expressly held that Regulation No. 2 was "a reasonable interpretation of the statute." Id. at 894-895.
Royal Casino and the Board of Education, however, argue that the site in question is part of Biloxi Bay, because its waters, shallow and stagnant as they may be, are subject to the ebb and flow of the tide. Their position is based on a creative, if not disingenuous, interpretation of Cinque Bambini Partnership v. State, 491 So. 2d 508 (Miss. 1986) and State ex rel. Rice v. Stewart, 184 Miss. 202, 184 So. 44 (1938). They assert, as they did at the hearing:
More recently, in Bambini, supra, the Mississippi Supreme Court, relying on both Borax [Consolidated, Ltd. v. City of Los Angeles, 296 U.S. 10, 56 S. Ct. 23, 80 L. Ed. 9 (1935)], supra, and Stewart, supra, described the site proposed by Royal Casino as "Bayou Bernard, an admittedly commercially navigable portion of Biloxi Back Bay." Bambini, 491 So.2d at 516. In reaching this conclusion, the Court in Bambini, supra, held as "[t]his Court has repeatedly stated ... `the beds of all its shores, arms and inlets of the sea, [are] wherever the tide ebbs and flows.'" Id. (quoting Stewart, 184 So. at 49).
Because the Supreme Court of Mississippi has spoken on the issue, then, no "opinion," ruling or regulation of an administrative agency can contradict that ruling. It is fundamental that regulations of the MGC and opinions of the Attorney General cannot nullify or contravene established law. Biloxi Bay consists of all areas within the ebb and flow of the tide, including Bayou Bernard and the Royal Casino site.
(emphasis added). We have made no such pronouncement. In Cinque Bambini, discussing the distinction between the navigable waters test and the ebb and flow test to determine whether waters were held in trust for the public benefit, it was noted that:
This Court has repeatedly stated its understanding of the geographical scope of the federally created trust as including, at least,
the soil, and ... the minerals therein contained, the beds of all its shores, arms and inlets of the sea, wherever the tide ebbs and flows.
Id. at 516 (quoting Stewart, 184 Miss. at 230, 184 So. at 49). The opinion further states that "Cinque Bambini argue that our cases to date have failed to recognize as within the federal grant any tidal waters which were not navigable in fact," which statement is followed by a string cite, with parentheticals, of some eleven cases, including "State ex rel. Rice v. Stewart, 184 Miss. 202, 219, 184 So. 44, 45 (1938)(Bernard Bayou, an admittedly commercially navigable portion of Biloxi Back Bay)." Bambini, 491 So.2d at 516. Turning to Stewart, we find language to the effect that "the bill of complaint charged that Bayou Bernard in Harrison County, Mississippi, an inlet of the Mississippi Sound, is a navigable body of water... ." Stewart, 184 So. at 49. Thus, it appears that what Royal Casino and the Board are considering a "holding" of this Court is merely dicta from one case based on an allegation or admission in a complaint from a prior case. There is no merit to this argument.
Based on our express finding in Casino Operators that Gaming Commission Regulation No. 2 is a reasonable interpretation of Miss. Code Ann. § 97-33-1(a), we find that the circuit court erred in ruling that the Commission exceeded its authority in determining that Bernard Bayou was not a legal gaming site.
V.
The circuit court also found that the Commission's decision to deny the request for site approval was arbitrary and capricious. The Commission asserts, pursuant to Miss. Code Ann. § 75-76-125(3)(d), that its findings can be challenged only when not supported by "any evidence." The parties agree as to the standard applied to determine whether an administrative agency has acted arbitrarily or capriciously:
"Arbitrary" means fixed or done capriciously or at pleasure. An act is arbitrary when it is done without adequately determining *459 principle; not done according to reason or judgment, but depending upon the will alone, absolute in power, tyrannical, despotic, nonrational, implying either lack of understanding of or disregard for the fundamental things.
"Capricious" means freakish, fickle, or arbitrary. An act is capricious when it is done without reason, in a whimsical manner, implying either a lack of understanding or of a disregard for the surrounding facts and settled controlling principles... . [citation omitted].
McGowan v. Mississippi State Oil & Gas Board, 604 So. 2d 312, 322 (Miss. 1992) (quoting Mississippi State Dept. of Health v. Southwest Mississippi Regional Medical Center, 580 So. 2d 1238, 1240 (Miss. 1991)). Given the deference we afford agencies in interpreting their own regulations, an agency hardly can be charged with acting arbitrarily or with caprice or whimsy when it has made a decision that is consistent with its own published policies and regulations. To the contrary, had the Commission found Bernard Bayou not to be a bayou, but rather a suitable place for gaming operations, in defiance of Regulation No. 2's express exclusion of those waters from the choice of suitable sites, we would have to say that it acted arbitrarily and capriciously. As discussed supra, we found Regulation No. 2 to be a reasonable interpretation of Miss. Code Ann. § 97-33-1(a) in Mississippi Casino Operators Ass'n v. Mississippi Gaming Comm'n, 654 So. 2d 892, 894 (Miss. 1995). Thus, the Commission properly followed Regulation No. 2 in reaching its decision.
At the site assessment hearing on April 21, 1994, the Commission heard evidence from both opponents and proponents of Royal Casino's proposed development plan. Notwithstanding the validity of Regulation No. 2 and its delineation of suitable and unsuitable sites for gaming operations, the Commission's decision is supported by the evidence with which it was presented. A variety of topographic and quadrangle maps illustrated Bernard Bayou's attenuated relationship to the Back Bay of Biloxi. The affidavit of Rear Admiral Wesley Hull (Ret.) of the National Oceanic and Atmospheric Administration, who has made tidal observations and hydrographic surveys while mapping the area for several decades articulated the standard definitions of different waterways, such as bays, rivers, creeks, bayous and sloughs, explaining, "All of these waterways may or may not be tidal. Just because a waterway is tidal does not classify it as a particular feature." He concluded that
In my review of the surveys, charts, maps, publication[s], and documents of the area, the waterway that leads from Big Lake to northwest of the intersection of U.S. Highway 49 and Intersection [sic] 10 is clearly marked as a Bayou. It is recognized on the products and publications of the Federal and State agencies as Bernard Bayou. The standard accepted definition of Bayou describes the waterway as it previously and presently exists. The site requested by Royal Casinos is on a Bayou; it is not on the Back Bay of Biloxi, Biloxi Bay or the Mississippi Sound.
Phillip LaMoreaux, Sr., a certified professional hydrologist, reviewed United States Geological Survey topographic quadrangle maps of the site and concluded that
In my opinion, the body of water that runs through this site areas in the upper portion or drainage area of Bernard Bayou and that it is a bayou and not a bay. It certainly is not part of the back bay of Biloxi.
* * * * * *
... the identification of a body of water as a bay, lake, river, bayou or creek is not done based on chance or the whim of the mapmaker, but on hydrography uniform standards. The body of water on which the Royal Casino site is to be located is identified on the USGS Gulfport North Quadrangle as Bernard Bayou. The classification of this body of water as a bayou is consistent with identification of similar bodies of water along the Gulf Coast as bayous and not a bay.
George Cole, a professional engineer and surveyor, who opined that the mean tidal affect at the site made it part of the tidal waters of the Mississippi Sound and the Back Bay of Biloxi, albeit as an estuary,
*460 It is noted that delineation of the interior limits of an estuary deals strictly with hydrological and legal concepts. It would therefore follow that whether or not the water body in question is called a bay or a bayou or a river would have no bearing on its legal standing as a juridical bay (Beazley 1978). This is an important concept since, for navigational or cartographic convenience, geographic areas, such as channels, may be identified with place names using other criteria.
Reflecting the concerns of his constituency, former State Representative Mark Garriga stated that opposition by Gulf Coast residents was so great that the Legislature rejected proposals to amend the legislation so as to allow gaming on "navigable waters" defined as "naturally occurring rivers, creeks, bayous or lakes" located "in any county bordering on the Gulf Coast of Mexico that in their unimproved state, have sufficient depth and width of water for floating a vessel for 30 consecutive days." Garriga indicated that there had been widespread opposition to inland gaming and that the Attorney General's August 29, 1990 letter to Senator Vic Franckiewicz, Jr., had rendered an opinion that it was not legal. Having served on the House Ways and Means Committee which considered proposals to open more areas to gaming, Garriga construed the statute as follows:
The statutory language of the Gaming Control Act is not that complicated. It says the waters south of the three coastal counties. It may be difficult to say exactly what that includes, but it is not difficult to determine what it is not. It is not an inland canal; it is not an inland waterway; it is not a river; it is not a creek that flows north from the bay or the sound or from north to south. It is none of these things.
Royal Casino and the Board of Education base their argument that the Board acted arbitrarily and capriciously on several comments made by the Commissioners, taken out of context, at the May 31, 1994 special interim meeting. For example, they cite Commissioner Gresham's comment that "if I had my druthers, I'd sit down with you and Bob and me and I guess we'd go into executive session ... [and] I'd get a map of the Mississippi coast and draw me a line." They neglect to point out that Gresham concluded his remark by stating, "That's good, but we're appointed to uphold the law, and that's my thinking about it."
The Commission's decision is consistent with its own Regulation No. 2. Moreover, its finding that Bernard Bayou is a bayou is supported by the evidence in the record. Finally, the position that the decision was arbitrary and capricious is supported only comments and observations taken out of their proper context. We therefore find that the circuit court erred in finding that the Commission had acted arbitrarily and capriciously.
VI.
The circuit court denied the Commission's motion to dismiss the Board as a party to the appeal and ruled that the Board was a proper party to challenge the Board's decision. The Commission now argues that the Board did not have standing because, unless specified otherwise by statute, only parties to disputes may bring an appeal. Citing Miss. Code Ann. § 75-76-3(5), it contends that the Board cannot show that a substantial right has been violated because there is no vested right in conducting gaming operations on one's property. The Board, on the other hand, asserts that it is aggrieved by the Commission's decision because it stands to lose some $180,000,000 in rental revenues it had anticipated receiving from Royal Casino over the next forty years if the license is not approved. Moreover, it claims that it is a proper party because Miss. Code Ann. § 75-76-5(z) defines "party" as "the Mississippi Gaming Commission and any licensee or other person appearing of record in any proceeding for judicial review of any action, decision or order of the commission."
Mississippi's standing requirements are quite liberal. Van Slyke v. Board of Trustees of State Institutions of Higher Learning, 613 So. 2d 872, 873 (Miss. 1993); Calcote v. Wise, 219 Miss. 270, 68 So. 2d 477 (1953). In Fordice v. Bryan, 651 So. 2d 998 (Miss. 1995), we explained:
*461 Under article III, § 2 of the United States Constitution, the federal courts limit review to actual "cases and controversies." Such restrictive language is not found in the Mississippi Constitution. "Therefore, we have been more permissive in granting standing to parties who seek review of governmental actions." Van Slyke v. Board of Trustees, 613 So. 2d 872, 875 (Miss. 1993). We have ruled that parties have standing to:
sue or intervene when they assert a colorable interest in the subject matter of the litigation or experience an adverse effect from the conduct of the defendant, or as otherwise authorized by law.
State ex rel. Moore v. Molpus, 578 So. 2d 624, 632 (Miss. 1991).
Fordice, 651 So.2d at 1003. The Board, by virtue of its participation in the site approval hearings and its joining with Royal Casino in a timely appeal to the circuit court of the denial of the site approval application, is a "party" pursuant to Miss. Code Ann. § 75-76-5(z). Further, the $180,000,000 the Board stood to earn from Royal Casino's lease on the property gives it a "colorable interest" in the proceedings at issue. Because the School Board has a colorable interest and the statutory definition of "party" is met, there is standing to challenge this action by the Gaming Commission.
Because the site in question includes sixteenth section land, the Board has the legal responsibility to manage the property:
An overwhelming body of law sets forth that in the State of Mississippi sixteenth section land is trust land and title to such lands in the trust was granted to and resides in, the State of Mississippi.
* * * * * *
"Sixteenth section lands are held in trust for the benefit of the school children and these trusts with the attendant responsibilities of the trustee must be considered as other trusts are considered." Bragg v. Carter, 367 So. 2d 165, 167 (Miss. 1979).
Morrow v. Vinson, 666 So. 2d 802, 805-806 (Miss. 1995). The Board, as trustee of the land, is, therefore, a "person aggrieved by a final decision or order of the commission" pursuant to Miss. Code Ann. § 75-75-121. In addition, "[a]s record titleholder, the State of Mississippi, through its managing or supervising agent, the Board of Education, has standing to bring or defend actions in federal or state courts respecting these trust lands, the same as any common-law trustee." Hill v. Thompson, 564 So. 2d 1, 6 (Miss. 1989).
Given the Board's early and active participation in the site approval proceedings, its more than "colorable interest" in the Commission's decision and its special role as trustee of the sixteenth section lands involved, the circuit court properly found that it had standing to appeal the Commission's decision.
VII.
On July 26, 1996, four months after the last briefs were filed in this case pursuant to M.R.A.P. 31(b), the Board of Education of Harrison County filed a Motion for Leave to File Supplemental Brief. The Gaming Commission responded on August 5, 1996 with its objection to the motion. The twenty-six (26) page Supplemental Brief which the School Board seeks to file purports to "offer alternative grounds even more persuasive to the legal mind than those relied on by the Circuit Court and upon the basis of which the case has been briefed to this point." Drawing heavily from Cinque Bambini Partnership v. State, 491 So. 2d 508, 516 (Miss. 1986), the proposed Supplemental Brief attempts to add new legal meaning to the concept of "waters," broadening its parameters so as to allow river boat gambling wherever the tides may ebb and flow. It suggests that "[i]nexplicably, the Circuit Court failed to refer to the far more powerful functional commonality between floating casino vessel gaming and the admiralty and maritime industry that when grasped commands a common jurisdictional course." Not only were such arguments not before the circuit court for its consideration, but further, they serve only "to muddy the waters of the bayou."
With the exception of M.R.A.P. 28(c)'s provision that once reply briefs and cross-appeals have been filed, "no further briefs may be filed except with leave of Court," the Rules make no provision for "supplemental *462 briefs." Rule 28(j) allows for citation of supplemental authorities, wherein a party may file a letter which "shall, without argument, state the reasons for the supplemental citations."
Nowhere do our rules of appellate procedure provide for the filing of such an out-of-time brief. While no time restrictions are placed upon citations of supplemental authorities pursuant to Rule 28(j), we do not consider a twenty-six page brief setting forth a new legal argument and authorities in support thereof to be a Rule 28(j) letter. We therefore deny the motion for leave to file the supplemental brief.
VIII.
The circuit court correctly entertained Royal Casino's appeal of the Commission's decision and allowed the Board to remain as a party. We further find that the evidence in the record supports the Commission's decision to deny preliminary approval for the proposed Bernard Bayou development site. It cannot be said that the Board acted arbitrarily, capriciously or in excess of its statutory authority. We therefore reverse the order of the circuit court and reinstate the Commission's decision.
REVERSE THE ORDER OF THE CIRCUIT COURT AND REINSTATE THE COMMISSION'S DECISION.
PRATHER and SULLIVAN, P.JJ., and PITTMAN, BANKS, JAMES L. ROBERTS, Jr., SMITH and MILLS, JJ., concur.
DAN M. LEE, C.J., concurs in result only.
NOTES
[1] Gaming Commission Regulation No. 2, as promulgated November 14, 1990, provides locations where cruise vessels can operate as follows:
Waters within the State of Mississippi which lie adjacent to the three (3) most southern counties of the State. In addition to the Mississippi Sound, this would include St. Louis Bay, Biloxi Bay, and Pascagoula Bay. However, the rivers and bayous leading into these bays, including but not limited to Jourdan River, Wolf River, Bernard Bayou, Tchoutacabouffa River, Pascagoula River and Escatawpa are not within the authorized area. In determining where the river ends and the bay begins, an imaginary line shall be drawn from the foremost land mass at the intersection of the river and bay, straight across the river to the foremost land mass of the intersection on the other side.
(emphasis added).
[2] Regulation No. 2 was drafted in accordance with the Attorney General's August 29, 1990 letter opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1586808/ | 352 Mich. 383 (1958)
89 N.W.2d 510
SCHWALK
v.
SCHWALK.
Docket No. 65, Calendar No. 46,935.
Supreme Court of Michigan.
Decided April 15, 1958.
Casper C. Cutler, for plaintiff.
George F. Curran, for defendant.
KELLY, J.
Plaintiff husband filed a bill of complaint and defendant wife filed her answer and cross bill asking for a divorce. Plaintiff withdrew his bill of complaint and answer to cross bill, and contested only on the issue of the real property partition and personal property division.
*385 At the close of proofs Hon. John V. Brennan, circuit judge of Wayne county, stated that the record showed a complete estrangement with an animosity existing that was incompatible with the marriage relationship and that "the relish with which each charged, and recounted the faults and shortcomings of the other, bespeaks the state of mind of the parties and the complete collapse of the marital status." There were no children of this marriage.
The court, discussing the evidence before him in the presence of defendant, plaintiff and their respective counsel, stated as follows:
"For the sake of the parties themselves, it is to be hoped that the stenographic record of this case may never have to be transcribed.
"In a divorce proceeding where the parties have lived together as husband and wife for nearly 20 years, it is difficult to determine the property division to a dollar and cent degree. The relationship does not admit of a money exactness. Household duties over the years do not admit of exact evaluation or accounting.
"In the case now before the court, the parties are of mature years the wife 47, the husband 50. Both have worked at gainful occupations for the greater part of their married lives. The wife has been a teacher in the public schools during her entire married life. This occupation itself carries with it its own stamp of patent daily industry in public service. The work record of the husband, as well as his experience in business, is not quite equal to that of the wife. Between them they have accumulated a fair amount of property, among which is an 8-room house. Five and 3, it is an income bungalow, with 1 furnace, valued at approximately $10,000; some furniture therein, stocks of considerable value, some cash; 2 automobiles and a few sundries best known to the parties themselves. There are no debts except on the car now in the name of Mr. Schwalk.
*386 "The court is of the opinion and so finds that as nearly as possible the property should be apportioned equally, 1/2 to each. As indicated, this is not possible of exact estimation or division. Approximation and the rule of reason apply here. Some few of the household utensils or articles have a sentimental value. They are hereinafter noted and should be awarded to the proper person.
"At this point the court is going to adjourn this matter for a half hour to give these 2 people here and their counsel an opportunity to make a disposition of the property in accordance with what the court has heretofore stated. If that cannot be done then the court will continue the rest of this matter. I think out of all due deference to all the parties here, each understanding exactly now what is in the record before the court, that this should be done, to the end that they, themselves, may come to a conclusion or at least be of some aid in the apportionment of each to each of the entire property that is involved in this issue here. We will take half an hour to give you that opportunity."
At the conclusion of the adjournment above referred to, the parties to this litigation and their attorneys returned to the courtroom and informed the court that while they were able to make an agreeable division in regard to certain personal property, they could not come to such an agreement in regard to the real property. Upon being so informed, the court said:
"The court has already confirmed the settlement and disposition of the personal property heretofore enumerated by counsel for the respective parties. The court, therefore, now makes disposition by order and decree of the balance of the property. In doing this, the court has taken into account the money that was drawn from the bank at or about the time of the filing of the bill of complaint by the plaintiff this being withdrawn by the plaintiff husband. Also, the sale of stocks at or about the time of the *387 filing of this bill of complaint by the husband the sale by him the items being sum withdrawn from the bank $3,200, the sale of stock $6,400.
"In arriving at the disposition of the property, the court has set the value of the house and lot, that is, the premises in question, at $10,000. Dividing that on a 50/50 basis would give to each the sum of $5,000 as an interest in the property. Dividing the total sum withdrawn from the bank and the sale of the stock heretofore mentioned, viz., $3,200 plus $6,400, making a total of $9,600, dividing that by 1/2, would leave to each $4,800. That sum is to be kept in mind, and is being kept in mind by the court in the disposition of the property as he now proceeds to divide it.
"It is the order and decree of the court that the house and lot known as 19124 Cameron avenue, in the city of Detroit, be decreed to be the sole and separate property of the wife. Also, that she be deemed to be the sole and separate owner of the 3 United States bonds, valued about $60. Also, the sum of credit now in the Teachers' Credit Union, approximately $150, the sum of money loaned to her sister, viz., $1,200. Also, the automobile belonging to her now and in her own name. All of these items, as the court has indicated, are ordered and decreed to be the sole and separate property of the wife.
"To the husband, the court orders and decrees that the sum of $3,200 withdrawn from the bank, heretofore mentioned, and the sum of $6,400, being the proceeds of the sale of the stock, heretofore mentioned, be decreed to be the sole and separate property of the husband.
"It will be noted in this connection that 1/2 of that sum was $4,800, and the 1/2 value in the house was $5,000.
"It is also the order and decree of the court that the husband be decreed to be the sole and separate owner of the textile stock now in his name, and the sugar stock now in his name. The court omitted to order and decree that the sugar stock owned by the *388 wife be decreed to be her sole and separate property. I had omitted that in the list, decreed to be the property of the wife.
"Also the order and decree of the court that the automobile now in the possession and name of the husband be decreed to be his sole and separate property, he to assume the debt attached thereto.
"Viewing all of the testimony in the case in the light of the facts and equities involved, the court believes that this is an equitable disposition of the property on the basis indicated by the court, and as one of the elements that evens up what might be termed a money discrepancy as to dollars and cents in the over-all picture, the right of immediate possession of the wife to the premises in question has been taken into account.
"And while this matter figured on a strictly money basis, gives the husband a little more, not too much more than half of the estimated values of the tangible things, the court has already indicated that this disposition the court has made seems equitable to all of the parties here on the basis indicated by the court."
The record before us discloses that the trial court patiently and thoroughly received testimony from both husband and wife and endeavored to make an equitable division on a 50/50 basis. In his opinion the court emphasized that a division from an exact dollar and cents standpoint was almost impossible, and in this regard this Court made a similar comment in Whittaker v. Whittaker, 343 Mich. 267, 268, as follows:
"We do not propose to reconcile the arithmetical differences between the parties for we do not decide the division of property and income upon a mathematical basis. We stress again that there is no rigid rule for division of property in divorce actions. * * * `We have held that under the law of this State a division of property need not be equal but *389 rather should be fair and equitable under all of the circumstances involved.'"
We have examined appellant's reasons for a reassessment and re-evaluation of certain items of property and, after such examination, we do not disagree with the trial court's division between the husband and wife.
Appellant claims that the court erred in not reopening the case when he informed the court that he had discovered that appellee (wife) had more than $1,126.62 in the teachers' retirement fund. In Grossman v. Langer, 269 Mich. 506, 513, we said:
"A motion for a new trial, upon the ground of newly-discovered evidence, is not regarded with favor. The policy of the law is to require of parties care, diligence, and vigilance in securing and presenting evidence."
The court did not abuse its discretion in refusing to reopen the case.
There is no merit to appellant's final point, namely that appellant was entitled to either a reasonable time, or to the usual appeal time, or to await appeal decision, before vacating the home awarded to the wife, instead of being required by the decree to forthwith vacate said home.
Decree affirmed. Costs to appellee.
DETHMERS, C.J., and CARR, SMITH, BLACK, EDWARDS, VOELKER, and KAVANAGH, JJ., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1377094/ | 81 S.W.3d 319 (2002)
David FRANCO, Appellant,
v.
Barbara Ann FRANCO, Appellee.
No. 08-00-00011-CV.
Court of Appeals of Texas, El Paso.
February 14, 2002.
*321 Russell D. Leachman, Diamond Rash Gordon & Jackson, P.C., El Paso, for appellant.
Gary A. Aboud, Chris Bradley, El Paso, for appellee.
Before Panel No. 1: LARSEN, McCLURE, and CHEW, JJ.
OPINION
ANN CRAWFORD McCLURE, Justice.
This is a relocation case. David Franco appeals the trial court's decision to lift the domicile restriction contained within the parties' final decree of divorce which required the residence of their twin daughters to be maintained in El Paso County, Texas. We affirm.
FACTUAL SUMMARY
Barbara Ann Franco, now Barbara Ann Pulcini, and David Franco were divorced on January 26, 1996.
Provisions of the Final Decree of Divorce
The decree itself is a bit unusual. The parties were designated as joint managing conservators of their twin daughters, Alicia and Olivia. Neither parent was denominated as the joint managing conservator having the right of primary possession, although the decree specified that Barbara "shall have the custody and possession of the children at all times during the time [David] does not have custody and possession pursuant to this order." The possession order provided:
IT IS ORDERED AND DECREED that [David] and [Barbara] shall have alternate possession of the children every other week from 6:00 p.m. Friday to 6:00 pm. [sic].
This provision was immediately followed by a standard possession order which provided that David would have possession at all times mutually agreeable and, absent an agreement, during the times set forth in the standard possession order, which tracks the provisions of the Texas Family Code in existence at the time. It includes the provisions for parents residing 100 miles or less apart as well as the provisions for parents residing more than 100 miles apart. And, as we have already noted, the decree provided that the "county of residence of the children shall be El Paso County, Texas, and the parties are enjoined from removing the children from El Paso County, Texas, for the purpose of changing the residence until altered by further order of the court of continuing jurisdiction." Finally, the decree dictates the following child support orders:
The Court finds that no child support provisions shall be DECREED AND ORDERED in this Decree. IT IS ORDERED AND DECREED if [David] moves over 100 miles from [Barbara], then an amount of child support will be payable and determined at that time.
Since the divorce, the parties have alternated weeks of possession and the provisions of the standard possession order have been largely ignored.
*322 David is a special agent with the Federal Bureau of Investigation. At the time of the divorce, he had been with the FBI for three years and because of his concern that he might be transferred away from El Paso "to an environment that wasn't conducive to the kids," the decree provided for long distance visitation.
Both Barbara and David are from New Orleans, Louisiana, and their respective families continue to live there. The record is replete with references to David's desire to move back to New Orleans. Barbara claimed that David planned to move to New Orleans soon after the divorce and that this was the reason for the long distance visitation provisions. At one point, David testified that he had not requested a transfer to New Orleans since 1995, but later in the proceedings, he testified that he had not removed his name from the transfer list until 1998. Nevertheless, even after the divorce, it was "absolutely" his intention that he, Barbara, and the twins would move back to New Orleans and the girls would continue to have access to both parents. Given his seniority at the time of trial, if he were to put his name on the list, it would take six months to a year for a transfer to New Orleans to come through.
The Modification Pleadings
In her original petition in suit affecting the parent-child relationship filed April 1, 1999, Barbara sought a continuation of the joint managing conservatorship, but sought the designation as primary caretaker with David having only "standard visitation rights." She also sought the imposition of child support. David responded with a counter-petition in which he requested that he be appointed the primary joint managing conservator and that Barbara be allowed visitation in accordance with the standard possession order. He also sought child support. In Barbara's first amended petition filed September 3, 1999, she requested authorization to relocate to San Antonio, specifically pleading, "[Barbara] secured employment in San Antonio, Texas that enhances her career as well as creating a better environment for the children." On November 12, 1999, shortly before trial began, she filed a second amended petition in which she alleged:
[Barbara] has recently been married to Joseph Pulcini, who currently resides in San Antonio, Texas and is unable to relocate to El Paso. Furthermore, [Barbara] has secured employment with Southwestern Bell Wireless in San Antonio, Texas, which provides [Barbara] with a greater salary and benefits package. The move would be in the best interest of the children to be with their mother, and the environment for the children in San Antonio would greatly enhance the social and educational growth of the minor children.
We turn now to the evidence presented on the grounds raised in the various pleadings: (1) the remarriage of the parties and their anticipated or actual relocation; and (2) Barbara's current employment situation and pending employment opportunity.
David's Remarriage
David married Carla Hoffer in June of 1998 and he claimed that Barbara was upset about his remarriage. She made a variety of remarks, including "what did Carla have that I didn't have," "I need to know when you're going to get married because I need to know when to start panicking," and "isn't that convenient, you're marrying yourself a baby-sitter." Problems developed over the Thanksgiving and Christmas schedule that year and when David had to be out of town for three weeks, Barbara insisted that the girls be with her during David's customary week, rather than spending the time with Carla. *323 She then expected David to pay the day care expenses for the additional time the children were with her. When Barbara learned from the girls that Carla was pregnant, she told David that she intended to take both girls as a tax deduction rather than split the deductions with him, as she had historically done.
Carla has two sons from her prior marriage to Craig Hoffer. Although the divorce decree granted Hoffer visitation with the boys on the first and third weekends of the month, by agreement, he has the boys each and every weekend. In July of 1998, shortly after David and Carla's wedding, the older boy told Hoffer that the family planned to move to New Orleans. Within a week, Hoffer called Carla to discuss the situation. Barbara's name did not come up in the discussion concerning the family's intention to move.[1] In October 1998, Hoffer filed suit seeking a domicile restriction which would prevent Carla from moving with the boys. In January 1999, Barbara paid Hoffer an unexpected visit. They talked for roughly an hour, during which time Barbara expressed her concerns that David and Carla planned to move to New Orleans, that she didn't want the girls to move to New Orleans without her, and that if David moved, she needed to obtain child support. They had several conversations over the next few months. Ultimately, Hoffer's concern over his sons' entanglement in an escalating custody battle caused him to resolve the suit. Temporary orders were entered which allowed the children to relocate to New Orleans and provided that a 90-day transition period would begin on the date of the move. Child support would terminate during the transition period, the wage withholding order would be revoked, Hoffer would visit with the children every weekend, and he would bear 100 percent of the travel expenses. At the end of the 90-day transition period, a final hearing would be conducted. Although plans to move had not yet been formalized, according to Hoffer, the move was to take place "possibly [in] two years." Carla admitted that she had represented to the court that she would move to New Orleans within six months, even though she didn't really know when David's job transfer would come through. These recitations are in direct contrast to David's trial testimony that he removed his name from the transfer list in 1998.
In February 1999, Barbara's attorney wrote David a letter suggesting Barbara perceived a communication breakdown, was concerned by the antagonism from David and Carla on visitation issues, believed David may be relinquishing joint communication duties to Carla, and that while Barbara was pleased he had remarried, "the situation currently is not necessarily friendly between the mother and stepmother." The letter suggested changes to the visitation schedule which would allow both parties access to the children weekly rather than every other week. At trial, Barbara admitted that she retained counsel right after she learned about Carla and that she was concerned *324 how the marriage would affect her relationship with the girls. Although she didn't offer a specific proposal before she filed the modification action, she wanted to change the week on/week off arrangement to provide weekly and more frequent contact with both parents. She was considering overnight Wednesday access because there were "a lot of changes" at David's house and the girls had told her that a week away from their mother was too long. She admitted to changing the tax deductions unilaterally and to showing up at Hoffer's home to coordinate lawsuits because she believed David planned to move to New Orleans.
Barbara's Remarriage
The circumstances and timing surrounding Barbara's remarriage were hotly contested at trial. Barbara and Joe Pulcini began dating in February 1998. Joe is a 39-year-old physician in the United States Army and at the time, he was the chief clinical pathologist at William Beaumont Army Medical Center in El Paso. In early April or May of 1999, he and Barbara were discussing marriage and by then she knew he would likely be moving to San Antonio. In June, he was transferred to Brooke Army Medical Center, where he will probably be stationed for at least three years. He can pursue his specialty certification in pathology only in San Antonio, and although it is not guaranteed, it is likely he can stay there the remainder of his military career. Because they were both of the Catholic faith, the couple wanted to be married in the church. Due to Barbara's divorce, annulment proceedings were necessary and the marriage plans were delayed as a result. The annulment hearing was conducted on October 1, 1999. Barbara was told by the presiding priest at the conclusion of the tribunal hearing that she was free to remarry. They married in a civil service before a justice of the peace on October 23, 1999, planning to remarry in the church at a later date. At the time of trial, they believed the annulment was final, although no church wedding had been scheduled and the couple had not registered for the requisite "precana" program which could take up to six months. They married not knowing whether the children would be able to move to San Antonio. Barbara did not tell David or the children of the marriage beforehand[2] and, surprisingly, she and Joe had never even discussed the possibility that the court might not allow the children to relocate. During her deposition a few weeks before trial, Barbara testified that she didn't know what she would do if the court denied the relocation. At trial, she testified that she did not plan to divorce Joe if the children were not allowed to move, but that she would probably remain in El Paso as well, although she had not discussed that possibility with Joe either. When finally pressed by the trial court as to her intentions if the relocation were denied, Barbara testified that she didn't have a plan, "but I can't leave my kids. I know it would be devastating for them." Other than weekend visits, the couple had not lived together as husband and wife since the date of their marriage. David characterized the marriage within thirty days of trial as a calculated move designed to manipulate the relocation. He emphasized that during her deposition, Barbara testified that the reason for the timing of the marriage was to get on the list for army housing, but in fact the couple was not planning on living on base and *325 had located a home they wanted to rent. There was also a debate over the status of the annulment proceedings, an issue we detail more fully in our discussion of Point of Error No. Three below.
Financial and Employment Issues
At the time of the divorce, David was earning a base salary of $42,641 and at the time of trial, his salary was $76,000. He "never had a clue" as to what Barbara was earning during the marriage.[3] Because possession of the children was evenly divided, and because he had assumed $10,000 in credit card debt which included Barbara's college tuition, the decree did not provide for any child support obligations. Post-divorce, David never offered Barbara additional financial assistance despite the disparity in their earnings.
Barbara is an accountant and since September 1996, she has been employed by SC Group, Inc., referred to throughout the record as Security Capital. Recently promoted to team leader, she works in the business services group, which is part of the accounting department. Barbara testified that she had concerns over her job security and that 28 percent of the employees had been laid off between January and October of 1999. The work force had been scaled down to 200 and was anticipated to be cut down to 155 in 2000. Seventy-five percent of her workload was related to a company called Urban Growth Property Trust. She anticipated losing them as a customer in January 2000.
When Barbara first felt that her job was at risk, she discussed with David whether he would be willing to help her financially with the children if she lost her job. He told her "point blank that he would not. I have to support myself." David never denied making the statement. Consequently, she began looking elsewhere for work,[4] concentrating on El Paso, Houston, New Orleans[5] and, ultimately, San Antonio. She received an offer from Southwestern Bell Wireless in San Antonio in August 1999 and spoke to David about her relocating. He told her that he would not allow her to move:
We spoke for quite a while. He just, basically, insisted that I move to New Orleans if I needed to move. I spoke to him about my concerns financially if I were to lose my job. I asked him if he would offer to help me support the children if I lose my job. He refused. He offered, as a solution, I could move to New Orleans and live with my parents.
Paul Szurek, the managing director of Security Capital, testified that the company was in a transitional period due to automation and software integration and that a number of employees had been laid off. The work force had been reduced from 290 to 180. The company was losing Urban Growth Properties as a customer due to a merger but they would try to move Barbara to another company position. He estimated her chance of keeping her job at 80 percent, but he did not know if that would be true in six months. While he characterized her job security as "very high" and noted that she was not "at risk," *326 he understood that employees worry about "where the other shoe is going to drop" and would rather move on. Indeed, during trial, Barbara learned that her immediate supervisor, the financial comptroller, was leaving the company.
Szurek also testified concerning the company benefits package. Barbara had life insurance coverage equal to her annual salary, a "better than average" medical plan which required employees to pay 25 percent of the premium, a 401(k) plan featuring an employer contribution of company stock equal to 50 percent of the employee's contribution up to 6 percent of her annual salary, stock options, seven sick days per year, "a standard menu of holidays," two to four weeks vacation tied to her tenure, one personal day per year, and a potential for bonuses. The bonuses were traditionally given to employees at the level of vice president and above, as well as to some team leaders, although Szurek did not know whether Barbara was in this category.[6] Tuition reimbursement was unavailable. The stock options for 1999 were granted down to the team leader level and varied between 500 and 1500 shares at $15 to $16 per share; the stock price at the time of trial was 131/8. Szurek did not testify whether Barbara was granted any options, although he did mention that her promotion to team leader had been "fairly recent."[7] Her base salary was $46,000. He speculated that she could receive a salary adjustment of 4 percent.[8]
Patricia Erb is the director of human resources for the greater Texas region of Southwestern Bell Wireless, a subsidiary of SBC, Incorporated, which offers cellular service, wireless services, equipment, and accessories. Erb testified concerning the employment offer to Barbara as well as the benefit package. Barbara's title would be manager of financial analysis and the position was not available anywhere but San Antonio, which is the corporate headquarters. Her starting salary would be $46,000 with an annual bonus of 11¼ percent of her salary. Medical coverage is offered at a low price to management employees.[9] She will receive, without cost to her, total disability insurance of 100 percent of her salary for a period of fifty-two weeks. Other benefits include tuition reimbursement up to $10,000 per year, seven days of sick leave, seven personal days off, ten paid holidays, and two weeks of vacation during her first year of employment. Stock options are uniformly offered to management based on the performance of the company, and while they are not guaranteed, options had been granted for the past four years. Erb's recollection was that for 1998, an employee with a salary of approximately $50,000 received 300 options, which as of the date of her deposition, were trading at $50.88 per share. That year, there was also a stock split which generated a total of 600 option shares. To enable the employees to exercise their options, the company lends the employee the purchase money. It also provides base salary market adjustments, formerly called merit increases, which "traditionally come in at approximately four percent of salary."
*327 The Modification Order
The trial court granted the motion to modify, retained the joint managing conservatorship, ordered that Barbara have the right to establish the primary residence of the children, entered a standard possession order, ordered that David pay child support of $993 per month for the months of January through May and the months of August through December, and ordered that Barbara pay child support in the amount of $790 per month for the months of June and July. David filed a request for findings of fact and conclusions of law on January 14, 2000, the very day the order at issue was signed by the court. He filed a notice of past due findings on February 15, 2000. By letter dated February 21, 2000, the trial judge, the Honorable Bonnie Rangel, advised counsel that she had not been notified of the request for findings until February 17, when she received the past due notice. We first note that presentment to the district judge has not been required since the Supreme Court's ruling in Cherne Industries, Inc. v. Magallanes, 763 S.W.2d 768, 772 (Tex. 1989). Rule 296 was amended the next year to provide that it is the express duty of the court clerk to call the request to the attention of the judge. See Tex.R.Civ.P. 296. Secondly, Judge Rangel correctly noted that the notice of past due findings was untimely. Rule 296 requires an initial request for findings to be made within twenty days after judgment is signed; Rule 297 requires the court to file its findings within twenty days of the initial request. If the court fails to timely file the findings, the requesting litigant must file a reminder request within thirty days of the date the original request was filed. See Tex.R.Civ.P. 296, 297. Because David's notice of past due findings was not filed until February 15, it was two days late and therefore untimely. While the due date of February 13 fell on a Sunday, Rule 4 would have extended the filing deadline only until Monday, February 14. See Tex.R.Civ.P. 4. Consequently, this appeal proceeds without the benefit of formal findings.
IN CAMERA INTERVIEW
In Point of Error No. One, David complains that the trial court exceeded its statutory authority in conducting and relying upon an in camera interview of the twins which deprived him of due process of law. He admits that discussions concerning the interview took place in chambers and off the record, but that the trial court was well aware of his objections. We disagree and conclude that any error has been waived.
A review of the record before us reveals that the issue of an interview first arose during the morning session of December 2, 1999, which was the second day of trial:[10]
Mr. Phil Franco:[11] We have two short witnesses. We expect to finish before lunch time.
Mr. Aboud: Great.
The Court: And then Mr. Leachman, did you tell Mr. Franco I did request the children?
Mr. Leachman: It's Ms. Pulcini. You're going to present them at 4 o'clock.
The Court: Thank you. We're in recess.
During the afternoon session after Barbara rested her case, David moved for a directed verdict, requesting the court to enter judgment denying the modification *328 because Barbara had failed to establish that the proposed modification was in the best interest of, and would be a positive improvement for, the children. The trial court denied the motion because she had not heard all of the evidence since she wanted to hear the testimony of Carla Franco and she had not talked to the children. Finally, the following exchange occurred, and we repeat it in its entirety:
The Court: Thank you very much, Mr. Leachman. As I told the parties as relation [sic], it's a difficult, difficult issue. It's evenit's even much more difficult becauseyou have on both sides you have parents and I'm including Carla on your side and I'm including the doctor on your side. You've got parents who are loving, and caring, and nurturing, and loving, and obviously, truly involved with the children. And that was the reason, once I heard from Mr. Franco and once I heard from Ms. Pulcini, that I determined it was best to speak to the children, because we do have such wonderful parents. And you're right, Mr. Leachman, I mean, this is all about the children.
Mr. Leachman: That's why the children have got to be spoken to.
Mr. Leachman: Okay.
The Court: So with that being said, I am going to speak with them at 4 o'clock.
Mr. Leachman: The arrangement, we are going tothey will be here at 4 o'clock; is that correct?
Mr. Aboud: That's correct.
The Court: Counsel, I don't anticipate making a decision today. I don't because I'm returning very late. I've got a 2 o'clock, 1:30 motion, 1 o'clock motion to compel and a revo[cation], and then I've got you all, 4 o'clock again. So I will be out of town, so ityou all need somesome decision and some closure and some direction in this case. And I can understand that, so I'm not going to sit on it for two weeks, but we will make our decision next week. I don't think we need to come back, Mr. Franco. No New Orleans. Basically, do a findings and the order drafted accordingly. Okay. Very well. Anything else, Mr. Leachman? Mr. Aboud?
Mr. Aboud: Nothing.
Mr. Leachman: Only, Judge, I know you're going to have an in camera inspection. Did you have plans to have the court reporter present for that?
The Court: I generally don't.
Mr. Leachman: Okay.
The Court: I don'tare you requesting that and then do you have any objection? I mean
Mr. Leachman: I think that theI don't know what theI think the rule says, basically, that you can have the lawyers present, if you want, and you indicated to us you didn't think you wanted that. In lieu of that, then I think youthe rule, you can have a court reporter present.
The Court: So you have any objection to the court reporter present [sic]?
Mr. Aboud: I don't have an objectioon [sic].
The Court: Okay. Then the court reporter will be present taking the testimony. And what I do and there's nothing in the rules that require, well, as far as for appeallate [sic] purpose, I guess, it is there because generally what the children tell me, I'm putting them in a precarious situation, you know, that all rightall right, in a very precarious situation. And what I preface these conversations and discussion *329 with the children in chambers is `Your mommy and daddy are not going to know what you're telling me.' So my fear is that based on you all have your right to appeal, but then what Iit's not going to be confidential. So that's okay. And I understand the position you're in and you've got to vigurously [sic] defend it, defend your client Mr. Leachman, if that's what you want to do.
Mr. Leachman: I understand it counsel, from theyou're telling me you can seal it?
The Court: Yes.
Mr. Leachman: And we certainly have to object.
The Court: Then what's the purpose of having the court reporter there, Mr. Leachman? Thank God you're here to help us coordinate. Thank God we brought our reinforcements. If I do seal it, what's the purpose of having the court reporter? If you have sealed it, the Court of Appealsthe parties will not and the court reporterthe Court of Appeals will review it in camera, just as youokay? Okay.
Phil Franco: May I, Your Honor?
The Court: Yeah, you may, Mr. Franco.
Mr. Franco: First of all, thank you very much for the hospitality, I appreciate it very much. You know, I don't practice here ordinarily and you made it very easy. From my point of view, whatever you think is best for those children, whether that meeting with you is what should be done. If you think having someone else in there with you, be the court reporter [sic], then don't have them.
Mr. Leachman: If you think it is not a problem and there is a need for it to be preserved for somebody to take a look at in the event that that makes your decision or is the reason for your decision, then have the court reporter present, but I appreciate it. I'm willing to defer to you and you can make a decision after you're in there with them.
The Court: That will give us, I hope, the likeableI'm not second-guessing you, but if I can do it, Mr. Leachman, where the parties will not bemom and dad and counsel will not know what the children told me. I have no problems with the court reporter because two things: I need toI need there has been a request made by an attorney of a party and I cannot take this lightly in terms of what I think should or shouldn't be done. With that request being made for appellate purposes, I really do think we need to preserve that testimony, Mr. Franco.
And we all have to look for, you know, look to appeal, if indeed one of you doesn't like what I say, and it's going to happen, one of you is not going to like what I do or say. So with that being said and with the request being made, I think for the protection and for the benefit of all parties concerned, Mr. Franco, I think [it] may be a good idea to have the Court reporter there, sir.
And I will tellI mean, these children, I'm sure, are very bright children and I'm going to tell them they're taking down the testimony. And just for appellate purpose, but I'm going to make sure if it's not in there, I think I can make an order inin saying it's sealed and the parties and attorneys are not going to be provided. It's purposely for appellate purpose for review.
Mr. Leachman: That's fine. That's right.
*330 The Court: Anything further? Anything further, Mr. Aboud?
Mr. Aboud: Nothing.
The Court: Thank you. Best of luck to all of you and I will be rendering my decisioon [sic] sometime next week. Court's in recess and you all may be excused.
Mr. Aboud: Thank you, Judge.
Mr. Leachman: Thank you, Your Honor.
Judge Rangel then interviewed Alicia and Olivia in chambers from approximately 4:15 until 5:30 p.m.
The attorneys appeared again on December 14, 1999. After an informal discussion in chambers concerning Judge Rangel's ruling, Leachman requested that the court unseal the record of the interview and that he be allowed to reopen the evidence based upon information the children had told their father since the interview which led him to believe Barbara had talked to the children about the move to San Antonio in an effort to manipulate their comments to Judge Rangel. The following exchange occurred on the record:
Mr. Leachman: Well, my view on it is this, Judge, and you'll recall from our prior meetings and I don't know if these were all on the record or not, but if they weren't, I'd ask you to recollect that in chambers I had concerns about having the children come and
The Court: To speak with me period.
Mr. Leachman:to speak with the judge period.
The Court: That's correct.
Mr. Leachman: And obviously if that sort of thing were, you knowand when we entered into the case you said you didn't know whether you'd need them for sure or not.
The Court: That's correct.
Mr. Leachman: And I believe you made that decision after the conclusion of evidence because, as you've previously stated, it was important to your decision. My point is, Judge, is that this is a case that we spent two full days trying; we did a lot to prepare for. One thing that we did not prepare for is the testimony of the children, and we had no discussions with them whatsoever. We know that what they said was critical to what you decided. We believe that there have [sic] been some influence on them. No psychologist or psychiatrist had an opportunity to evaluate or talk with these children as is customary in these kinds of cases when they're going to testify or when they're going to be interviewed. And because none of those things occurred and because it is so important, I felt like at the time that you were going to interview them, at the very least, we needed to make a transcript so we had some ability to evaluate that at a subsequent date if we believed that was the problem. And without unsealing it we don't have an ability to do that.
I guess that'syou know, they aren't subject to cross-examination. They aren't subject toI mean, even us having any knowledge or ability to determine what might have been said, and if they were manipulated in connection with the process and we can't even see it, we can't even attempt to ferret that out, Judge. So that's the reason that we think it's important it be unsealed.
[Argument of Mr. Aboud deleted].
The Court: I need to tell you, these kids unequivocably [sic] did not know why they were here. They gave me a totally different reason why they were here, truly, Mr. Leachman. So any *331 concerns you have about manipulation and any indication on one party's part as to this is what it's all about and this is why and you better say this, as I reassured you in my chambers when you did have some questions and some concerns about me speaking to the children, I told you I'm leaning towards that but I haven't decided yet because, of course, I hesitate and don't involve the children unless I truly do need their help, okay. And I thought it was necessary in this case. As I assured you off the record and I'm going to assure you on the record, I asked them questions about what happens at your home when this, and who cooks and who takes care of you and who does this for you and who does that for you, and those were the kinds of questions. And basically I took these children through their lifestyle when they're with mommy and compared those to when they're with daddy. Those questions were notI did not ask the children, Do you want to be with mommy or daddy? Do you want ... I mean, no. These were questions, who picks you up and then what do you do and then where do you go, and where do youI mean, those were the kinds of questions, just to get an insight as to the lifestyle of these children with mommy versus daddy.
So as far as your concern about manipulation, as far as your concern about these children knowing why they were here, they gave me a totally different reason as to why they were here.[12] I was even a little surprised. I anticipated that these children knew why they were here. No. No, they gave me a totally different reason why they were here to talk to me. So those concerns truly are not founded, sir, based on my conversations with these children, so I am going to go ahead and deny your motion to reopen based on manipulation or newly discovered evidence or whatever the children may have told Mr. Franco.
It is clear from these excerpts that concerns were voiced in chambers regarding an in camera interview. It is equally clear that the discussion in chambers occurred before Leachman told the court in the exchange just before the interview, "That's why the children have got to be spoken to" and before Phil Franco advised the court, "From my point of view, whatever you think is best for those children, whether that meeting with you is what should be done."
In his reply brief, David contends that Leachman's comment was actually posed in the form of a question rather than an affirmative statement. He also points to the following objection:
Mr. Leachman: I understand it counsel, from theyou're telling me you can seal it?
The Court: Yes.
Mr. Leachman: And we certainly have to object.
He contends this objection related to the in camera interview. On the contrary, it appears to us to be an objection to sealing the reporter's record of the interview. Moreover, he wholly fails to address the statements made by his attorney/brother inviting the court to meet with the girls if the judge thought it best. Finally, he does not complain on appeal of Judge Rangel's *332 determination to seal the record[13] nor of her denial of his motion to reopen the evidence. Because we conclude that David has failed to preserve error, we overrule his first point of error.
POSITIVE IMPROVEMENT
In his second point of error, David complains that the trial court abused its discretion in modifying the terms and conditions of the joint managing conservatorship because Barbara presented no evidence that the modification would be a positive improvement for the children. Where these two standards of review overlap, as they frequently do in family law cases, we employ a hybrid analysis.
Standard of Review
In considering a legal sufficiency or "no evidence" point, we consider only the evidence which tends to support the jury's findings and disregard all evidence and inferences to the contrary. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965); Jenkins v. Jenkins, 16 S.W.3d 473, 477 (Tex.App.-El Paso 2000, no pet.). If any probative evidence supports the jury's determination, it must be upheld. Jenkins, 16 S.W.3d at 477. In an appeal from a bench trial, findings of fact are the equivalent of jury answers to special issues. Lindsey v. Lindsey, 965 S.W.2d 589, 591 (Tex.App.-El Paso 1998, no pet.). The reviewing court cannot substitute its conclusions for those of the trial court if there is sufficient competent evidence of probative force to support the trial court's findings. Id.
A trial court's order modifying a joint managing conservatorship will not be disturbed on appeal unless the complaining party can show a clear abuse of discretion. Gillespie v. Gillespie, 644 S.W.2d 449, 451 (Tex.1982); Jenkins, 16 S.W.3d at 477. The test for abuse of discretion is whether the trial court acted in an arbitrary and unreasonable manner, or whether it acted without reference to any guiding principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986). The mere fact that a trial judge may decide a matter within her discretionary authority in a different manner than an appellate justice in a similar circumstance does not demonstrate that an abuse of discretion occurred. Downer, 701 S.W.2d at 241-42; Jenkins, 16 S.W.3d at 477. The question of conservatorship of a child is addressed to the sound discretion of the trial court when it sits as trier of fact. Id. citing Jeffers v. Wallace, 615 S.W.2d 252, 253 (Tex.Civ.App.-Dallas 1981, no writ). The trial court is in the best position to observe the demeanor and personalities of the witnesses and can "feel" the forces, powers, and influences that cannot be discerned by merely reading the record.[14]Id. Thus, an abuse of discretion does not occur as long as some evidence of a substantive and probative character exists to support the trial court's decision. Jenkins, 16 S.W.3d at 477, citing Valdez v. *333 Valdez, 930 S.W.2d 725, 731 (Tex.App.-Houston [1st Dist.] 1996, no writ).
Most of the appealable issues in a family law case are evaluated against an abuse of discretion standard, be it the issue of property division incident to divorce or partition, conservatorship, visitation, or child support. Jenkins, 16 S.W.3d at 477. In some instances, the abuse of discretion standard overlaps the traditional sufficiency review. Id. In Lindsey, we addressed the conflict between the traditional sufficiency review and the abuse of discretion standard in the context of a child support modification and determined that once it has been determined that the abuse of discretion standard applies, an appellate court should engage in a two-pronged inquiry: (1) Did the trial court have sufficient information upon which to exercise its discretion; and (2) did the trial court err in its application of discretion? Lindsey, 965 S.W.2d at 592. The traditional sufficiency review comes into play with regard to the first question; however, our inquiry cannot end there. Id. We must proceed to determine whether, based on the elicited evidence, the trial court made a reasonable decision. Id. Stated inversely, we must conclude that the trial court's decision was neither arbitrary nor unreasonable. Id.; see also, In the Interest of De La Pena, 999 S.W.2d 521 (Tex.App.-El Paso 1999, no pet.).
Modification Standards Under Tex.Fam.Code Ann. § 156.202
Historically, Texas law has tried to ensure stability and continuity for children by imposing significant hurdles to modifications of managing conservatorship. Jenkins, 16 S.W.3d at 478. When the Family Code was enacted in 1973, modification of sole managing conservatorship was measured by the now familiar test of a material and substantial change in circumstances, coupled with a best interest test. Id. In 1975, an additional prong was added, requiring a finding that retention of the existing managing conservator would be injurious to the welfare of the child. Id. Twenty years later, the "injurious retention" element, as it had come to be known, was abandoned. Id. Currently, Section 156.101 provides that a court may modify a sole managing conservatorship if the circumstances of the child, sole managing conservator, or possessory conservator have materially and substantially changed, and the appointment of a new sole managing conservator would be a positive improvement for the child. Id.
Joint managing conservatorship was not authorized by statute absent the agreement of the parties until 1987. Id. The standard for modifying a joint managing conservatorship has always been less stringent, allowing a modification in the terms and conditions of the joint managing conservatorship upon a showing of a material and substantial change in circumstances or upon a showing that the decree has become unworkable or inappropriate under the circumstances, and upon a showing that the modification would be a positive improvement for and in the best interest of the child.[15]Id.; see also Tex.Fam. *334 CODE ANN. § 156.202 (Vernon 1996). On appeal, David challenges only the legal sufficiency of the evidence to support a finding that the modification would be a positive improvement for Alicia and Olivia.
We have already recounted the testimony concerning Barbara's employment status, her marriage to Joe, and David's marriage to Carla. We next address the testimony regarding the environment the children enjoy in El Paso and the environment Barbara plans for them in San Antonio.
The El Paso Environment
The Homes
There is very little testimony concerning Barbara's home, but we can discern from the record that Barbara and the girls live in an apartment on the west side. David and Carla live in a three bedroom home with a loft, encompassing 1,500 square feet. There are seven full-time residents, including Alicia and Olivia, Carla's two sons, and David and Carla's infant daughter, Caitlyn. Alicia and Olivia share one bedroom, Carla's sons share a room, and although Caitlyn was sleeping in David and Carla's room, a nursery had been prepared in the loft for when she grew a little older. Although David traveled at times, he tried to arrange it so that he was out of town during Barbara's weeks with the children.
David testified that he believed the El Paso environment was more stable than the San Antonio environment. He was questioned concerning a letter his attorney/brother had written and indicated he agreed with the statements:
The truth is that David and his wife have provided the children with a very stable family atmosphere. Certainly this stable family environment existing while the children are with David, his wife, and other children is more conducive to true family life than a single parent dating boyfriends and working full time.
He explained that the girls were doing very well in school, were accustomed to their stepmother, were attached to their baby sister, have close friends nearby as well as their step-grandparents. They have no grandparents in San Antonio and "[t]hey do not have a school that they have done well in, in San Antonio." Judging from what he knew, the children's elementary school is one of the best in the state, not just in El Paso, and it was hard for him to imagine that anybody could surpass it. There was structure in El Paso, and to a lesser extent in San Antonio, although he "never ever said San Antonio was a miserable town to live in." However, his view on where the girls should live was unmistakably clear:
Q: And so El Paso or New Orleans and nothing in between?
A: That's the way I feel about it.
David characterized Barbara as a "good to excellent mother." He believed that relocating the girls to San Antonio would be an adjustment for them and would be a "negative situation." It would have an adverse affect on the children if they couldn't be with him to talk with him or do things with him on a regular basis.
The School
Alicia and Olivia are third-graders attending Polk Elementary School on El Paso's west side. Both girls are "A" students and Olivia is in the gifted and talented program. Under the state rating system, Polk has been rated as an exemplary *335 school, meaning the students do well on the TAAS exam. No other school in El Paso has consistently received such a rating. Principal Kathy Reaves testified the twins have never had disciplinary problems or appeared unhappy or maladjusted at school. They perform well academically and attend school regularly. Olivia's teacher indicated that both Barbara and David are equally involved in discussions about her schooling. Her school journal indicates that her home life is happy in both David's and Barbara's homes. Alicia's teacher described her as a happy girl and her learning experience at Polk as positive. Alicia had never expressed anything negative about her home life and her teacher had not noticed any difference in her demeanor during the times she is with David compared to the time she spends with Barbara. Alicia seems very happy at both households and loves both parents. Barbara and David have taken an active interest in her schooling and it is apparent that both are well meaning and want the best for their children. The children attend Peace Lutheran Church day care after school. Although neither parent lived within the Polk District, David sought a waiver based on security issues related to his FBI employment and the proximity of the day care they were attending. David had not been involved in registering the children in their extracurricular activities since the divorce. He believed they "were in way too many activities;" he "didn't approve of the Brownie meetings and [Barbara] went ahead and did it anyway." Although he indicated the girls did not have Brownie meetings on the weeks they spent with him, the girls indicated that they only went to the meetings when they were with their mother "because um-um, our mom told our teacher that they're divorced and our dad can't really make it there."
San Antonio Environment
The Home
The Pulcinis have not made a decision about where to live, but have placed a deposit on a four bedroom home in the Olympia Hills area. Joe described the neighborhood:
Q: Can you describewell, first, I would like to know why you looked at that area specifically.
A: Well, as I said, I lived there for six years and I was very comfortable with my knowledge of the various neighborhoods, although some of the newer neighborhoods have changed some of the dynamographics [sic]. I looked in to, first all, if it was physically feasible based on where I work and where she works and fortunately all the best school district[s] coincide with the workplaces so that's fortunate.[16] Obviously, I looked at the quality of the school in proximity to our church, the proximity of a number of private schools that we looked into and a lot of subtle things about the neighborhood that really appeal to me.
Q: Like?
A: It's a newer neighborhood and it's I like to use the word, enclave. It's a place where the prices range from 125 to half a million in terms of homes. So, it's a solidly middle class, upper middle class neighborhood. It's not snooty other than the few homes on the golf course. *336 But, it's bounded on one side by a golf course, on another a polo grounds and a race track and it back ups [sic] to Randolph Air Force Base which is a large pilot training base. And on one side of the neighborhood is a street called Apacol Road, which is the closest analogy I can make is Mesa Street. It's sort of the main strip where you know there's shopping, supermarkets, et cetera, et cetera. So, it's kind of isolated by the golf course and the military base and it doesn't back up to any less desirable areas. I felt like it was a very safe area with a tremendous community spirit in the neighborhood. They have a very active homeowners' association that [sic]. The elementary school is separated and it's across the street from the community center with a pool and picnic areas and that sort of thing.
Q: How far are you from the community center?
A: Two blocks.
Q: And how far are you from the school?
A: The same.
The School
Joe took primary responsibility for investigating the elementary school situation in San Antonio. He contacted the State Board of Education and the State Education Commission to look at the standardized test scores, the assessment criteria, dropout rates, truancy rates, and talked with many parents. However, Barbara communicated with him on school issues and has flown to San Antonio twice a month to look at schools, churches, and neighborhoods. She has communicated by e-mail with the principal at Olympia Hills Elementary who has referred her to the school's website which provides information about teachers, students, and activities. In her view, Olympia Hills is a good school with an excellent reputation and its TAAS scores compare favorably with Polk's. Barbara had investigated extracurricular activities and was particularly concerned whether a Brownie troop would be available. Olympia Hills offers both a Brownie and Girl Scout troop. Joe also mentioned the possibility of the girls attending a private Catholic parochial school affiliated with the church he attends. Both Olympia Hills Elementary and Our Lady of Perpetual Help have after school care programs.
The Nature of the Parental Relationships
Although he has never been married before and has no children, Joe adores the girls and has a positive relationship with them. He informed the court about his income and benefits, as well as his love for and willingness to support Alicia and Olivia. He earns $122,000 per year and expected raises in January and June 2000 which would increase his salary to $127,000. The twins will be eligible for dependent benefits through the military. While Joe believed that relocation would be an adjustment for girls, there was no question in his mind that living together in San Antonio would best serve their needs, and be in their best interest. He also described the relationship between Barbara and the girls:
Q: Why would your household be a better household than the children are currently now [sic]?
A: Well, specifically I when I referred to it as my household with respect to the children, I refer to it as their mother's household. I believeI mean, it's not a positive in a child's life to be removed from day to day contact with the other parent. I *337 firmly believe that the character of the bond between the girls and their mother is of a different character and a stronger character than the character of the bond between the girls and their father. I am not minimizingDavid obviously loves his children and I'm not minimizing their love for him. But, I personally believe that the character of the bond between the girls and their mother is stronger. I think it was be [sic] a negative impact on the girls to loose [sic] day to day contact with their father and I think it would devastating [sic] is [sic] they lost daily contact with their mother.
Barbara described her relationship with her daughters in a similar vein:
Q: Do you believe your relationship with the girls is the same or different than their relationship with David? And if so, how?
A: I believe the children love us both, but, no, I would not say that David's relationship is the same as my relationship with the children.
Q: Could you tell me why?
A: I think I'mI have been, since they were born, a more significant and consistent presence in their life as far as my diligence in participating and even for them, doctors' appointments, extracurricular activities, their religious education, their school. I've always been responsible for that and David always led me to believe that it was his preference that I would do that.
Barbara informed the court that she and David had previously talked about living over 100 miles apart and they had discussed extending summer vacation and holiday visits in that regard, as evidenced by the provisions of the divorce decree. San Antonio is equal distance between New Orleans and El Paso550 miles to each city. There are frequent non-stop flights from San Antonio to El Paso via Southwest Airlines; the fares were reasonable, and Barbara was willing to pay 100 percent of the travel expenses. She planned initially to accompany the children on the flights until they adjusted to flying alone. She candidly admitted it will be an adjustment for Alicia and Olivia to move away from David, but did not state, as David asserts, that it would not be in their best interest to move to San Antonio without him. She described the relocation as inevitable and something that she and David had discussed from the date of divorce forward. She did not believe it would be in the children's best interest for her to remain in El Paso and become unemployed.
The New Orleans Factor
The New Orleans factor permeates this record. David testified:
Q: Mr. Franco, isn't it a little idealistic to think that two people are divorced and you're wanting to move about the country as a family unit?
A: Barbara had always expressed to me that she wanted to move to New Orleans and I knew that's where I wanted to go; and with the FBI, that was the more likelihood based on the places that FBI agents want to go and New Orleans is not one of them for the most part. So, I realized I had a better chance of getting to New Orleans than I did in most places, and I was fortunate that that just happened to be the place I was from, and if Barbara's family is back there, and she was back there, and she had told me she didn't want to move to El Paso and she didn't want to be here and that she would *338 eventually move back to New Orleans.
...
Q: Okay. So, at this particular stage of both of your lives, being Barbara and yourself, the game plan has been disrupted because you can't back [sic] to New Orleans and Barbara doesn't want to go back to New Orleans; right?
A: Incorrect.
Q: Okay. Can you correct me then.
A: I can get back to New Orleans.
Q: How can you get back to New Orleans?
A: Put my name on the list.
Q: Okay. And now [sic] long would that take?
A: Six months to a year and that's my guess. It depends on the money, and travel and everything. But in the past two or three years, I would say it's an average of six months to a year.
Q: Okay. Now, that was not the situation when you mentioned earlier you put a transfer in?
A: Right. My seniority is much greater now than it was in the past.
Q: So, you can leaveI'm not saying at any time. But, you can leave within the next year to New Orleans?
A: Absolutely.
Q: Okay. Let me as [sic] you this. Supposing this Court granted Mrs. Franco primary conservatorship and she moves to San Antonio. How fast would you put your transfer order in?
A: Really I have no idea, sir.
Q: Do you still have a desire to go back to New Orleans?
A: It's where my family is. Yes, sir.
David's family has been in New Orleans for generations and "knows everything about the schools, knows the neighborhoods and knows what's best for the kids." Barbara commented that the public schools in New Orleans do not have a good reputation and that even the parochial schools did not measure up to Polk's standards.
Analysis
Bearing in mind that David has raised only a legal sufficiency complaint, we have presented the foregoing testimony in a light most favorable to the trial court's judgment. Certainly David provided evidence of a positive relationship with his children and testimony that he is a constant presence in their lives. His characterization of the evidence, simply stated, is that because relocation will require an adjustment on the part of the children, it cannot possibly be a positive improvement. Were that the case, relocation would never be permissible, because any move necessarily causes some disruption in a child's routine and environment. We are keenly aware that relocation in this particular instance will cause the girls to see their father far less frequently. David construes that as a negative situation which cannot possibly be considered a positive improvement. And if that were the case, relocation would never be permissible, because sheer geography dictates that virtually any move from El Paso County would in practical terms cause the girls to see David less frequently.
We frame the question differently. In determining positive improvement, do we compare the status quoweek on/week off in El Pasowith long distance visitation between San Antonio and El Paso? Or do we accept the premise that there has been a material and substantial change in circumstances, which David does not contest, *339 and determine positive improvement based on the options available? In some cases, the options are status quo versus a parent's relocation. In that instance, certainly a court would inquire into the motivation for the move, the impact on the children in terms of time spent with the non-relocating parent,[17] the age of the child, the nature of the relationship between the child and the non-relocating parent, and the desires of the child, to name just a few. These factors have indeed been considered by the courts.
We begin our analysis with Lenz v. Lenz, 40 S.W.3d 111 (Tex.App.-San Antonio 2000, pet. granted). Romy and Rudi Lenz are German citizens and were married in Germany in 1980. They moved to Arizona in 1991 with their four-year-old son. A second son was born the following year. The couple ultimately entered into a legal separation under Arizona law which included a joint custody agreement naming Romy as the primary residential parent. The agreement recited the parents' intent to relocate to San Antonio and to restrict residency of the children to Texas. Both parents moved to San Antonio in 1997. They divorced the next year and the decree incorporated by reference the Arizona joint custody agreement. While Romy had the exclusive right to determine the children's residency, she was required to live with the children in Texas.
One month after the divorce, Romy filed a motion to modify in which she sought to remove the residency restriction based upon her desire to return to Germany and her plans to remarry. A jury determined that Romy should have the exclusive right to determine the children's residency. Rudi filed a motion for judgment non obstante veredicto, alleging that Romy had failed to meet the statutory requirements for modification. He also asked the trial court to issue orders specifying a fixed geographical location for the residence of the children. The trial court entered an order which did not delete the Texas residency restriction and it went further in restricting Romy's right to establish the primary residence of the children in Bexar County. Inasmuch as Rudi had limited his challenge of the jury's verdict to the best interest prong, the appellate court construed the trial court's actions as having found no evidence to support the jury's finding that removal of the Texas residency restriction was in the best interest of the children. Id. at 114. In concluding that Romy had failed to meet her burden, the court stated:
Although the evidence may suggest that the boys' living situation in Germany would be similar to or equal with their current situation, this does not satisfy Romy's statutory burden of establishing that relocation would be in the boys' best interest and a positive improvement. At best the evidence suggests that modification to allow a move to Germany could be a positive improvement for Romy, but not for the boys. While the trial court stated that its order did not restrict Romy's freedom to `change her address and domicile,' the obvious practical impact of the order is that Romy must remain in Texas where she is unhappy if she wants to maintain custody of her boys. Romy is offered the chance of a fresh start in Germany where she is more comfortable; but under Texas law with the `best interest of the child' as the standard, Romy cannot undertake that fresh start with her children. She must choose between her *340 interests and the best interest of her boys. Unfortunately, in this case the interest of the parties are at odds. The Family Code specifies that the best interest of the children must prevail....
Id. at 116-17.
David argues that Lenz is directly on point and clearly controlling authority. We are of the view that Lenz addresses the first of our hypotheticals. Romy wanted to move the boys from San Antonio to Germany, while Rudi would remain in San Antonio, a place the boys considered home and where they have established relationships with their friends. Lenz, 40 S.W.3d at 117. Here, however, abundant testimony exists from which the trial court could reasonably infer that David has no plans to remain in El Paso, that it has always been his intention to relocate to New Orleans, that he and Carla were planning to move shortly after their marriage, that the plans were so well known to the children that Craig Hoffer initiated a lawsuit, that Carla represented to the court that she would be moving to New Orleans within six months, and that Barbara's name never came up in the discussion. While David changed his testimony from time to time concerning his immediate plans, a reasonable fact finder could well conclude that the parties had contemplated the relocation of one or both parents from the time of divorce, that David has moved past contemplation toward implementation, and that the status quo of week on/week off with each parent was not an available option. Absent what we have termed the New Orleans factor, we would be more receptive to David's complaints. We must also consider that Barbara believed her job to be in jeopardy,[18] that the company had laid off 28 percent of its work force in a nine-month period, that Barbara approached David for financial assistance in the event she lost her job, that he refused to help her and instead advised her she could move to New Orleans to live with her parents, and that he never offered any financial assistance despite a salary which was twice that of Barbara's. Moreover, he never disapproved of uprooting the children from El Paso, their exemplary school, their friends, and their activities; he just wanted to dictate the location of the move:[19]
Q: And so El Paso or New Orleans and nothing in between?
A: That's the way I feel about it.
We recognize that evidentiary review in relocation cases is inherently fact specific, and that is certainly true here. However, based upon our review of the record, we conclude that the trial court had sufficient information upon which to exercise her discretion, and while perhaps we would not have lifted the domicile restriction, the mere fact that Judge Rangel decided this matter in a different manner than we would does not demonstrate that an abuse of discretion occurred. We thus conclude that based on the elicited evidence, Judge Rangel made a reasonable decision. Point of Error No. Two is overruled.
EXCLUSION OF EVIDENCE
In Point of Error No. Three, David contends that the trial court erred in excluding documents from the Catholic Diocese of El Paso concerning Barbara's petition for annulment. We review a trial court's decision on the admissibility of evidence for an abuse of discretion. Apresa *341 v. Montfort Ins. Co., 932 S.W.2d 246, 249 (Tex.App.-El Paso 1996, no writ); Fandey v. Lee, 880 S.W.2d 164, 168 (Tex.App.-El Paso 1994, writ denied).
David issued a subpoena for the documents in order to determine whether, in fact, the annulment proceeding was final and in order to impeach Barbara's credibility. When the Diocese declined to produce them, he moved to compel production. In response, the Diocese sought a protective order. Judge Rangel conducted a hearing on David's motion to compel five days before trial at which the Diocese claimed that (1) the documents were protected under the First Amendment because the records were purely ecclesiastical, related to a church proceeding, were governed entirely by canon law, and had nothing to do with civil law; (2) the records were protected under the clergy communication privilege countenanced in Tex.R.Evid. 505; and (3) the documents were tendered to David only after he signed a confidentiality agreement in which he agreed that he would review them for purposes of the ecclesiastical proceeding and not for any other purpose. The Diocese then offered to produce testimony which would elicit certain evidence David sought to compel:
Counsel for the Diocese: It's my understanding that the primary concern is to make a determination whether the annulment is actually final and whether or not the parties received notification of the finality of it. We canand I have provided Father Rick Zamorano, who is the Judicial Vicar and who is in charge of the Tribunal and who has had an opportunity to look at the file. He can explain to the Court what the process is, where it currently stands, and whether or not the annulment is final and whether or not the parties have actually received notification as to that.
The Court: Mr. Leachman, will you agree with [counsel] that would be the reason for the subpoenaing of the annulment records?
Mr. Leachman: Judge, that is the partial reason of the subpoenaingthat I subpoenaed the records, and I would be interested in pursuing that middle ground, if that's the only way we can address the issue.
Leachman explained that the impeachment material would become relevant because of testimony Barbara gave in her deposition concerning her plans for a church wedding to Joe:
In her deposition she said she was not going to get married until her annulment was final and that the reason she got married October the 23rd was because her annulment was final at that time. We believe that the documents will showand indeed if we can't have the documents, I'm going to ask the Judicial Vicar [to] testify that it still isn't final. It becomes very relevant in the case before the Court because we think that that's one more instant [sic] of her taking the action and trying to affect these proceedings.
Leachman also alleged that during the annulment proceeding, Barbara had represented to the church certain information David believed to be "absolutely false,"[20] that the tribunal reached conclusions with respect to the veracity of Barbara's testimony, and that this information would be relevant to character and credibility.
The judicial vicar for the Diocese offered brief testimony concerning the tribunal proceedings of the church and the annulment *342 process. When a petition for annulment is filed, the respondent is given an opportunity to review the petition, and it is customary for the Diocese to require that a respondent sign a confidentiality agreement. The Court of First Instance determines whether the marriage was a sacramental marriage under canon law. Once a decision is reached, it proceeds to the Court of Second Instance, which the vicar described as an appellate court. This Province or Provincial Court is located in San Antonio. Under canon law, the Court of Second Instance must review the matter before the annulment becomes final. Thereafter, the parties have the option of pursuing an appeal to the Roman Congregation, the Roman Roda, and then to the Apostolic Signatora, the Supreme Court. The latter two procedures are not automatic and must be initiated by a party to the proceeding.
At the time of the hearing on the motion to compel, the Court of First Instance in El Paso had rendered its decision on Barbara's petition and forwarded the matter to the Court of Second Instance in San Antonio; the San Antonio court had not yet ruled on the petition. Consequently, the annulment was not final and the parties would have been provided an explanation of the appellate process. Canon law provides that a person may not contract another marriage in the church until notified by the Court of Second Instance. Whether a person decides to remarry in a civil ceremony is of no consequence to the annulment proceedings. At the conclusion of the hearing, Judge Rangel denied the motion to compel without stating the basis for her ruling.
Evidence is presumptively discoverable and the burden is on the party resisting discovery to plead the privilege claimed and to present evidence supporting the claim. Loftin v. Martin, 776 S.W.2d 145, 147 (Tex.1989); Turner v. Montgomery, 836 S.W.2d 848, 850 (Tex. App.-Houston [1st Dist.] 1992, no writ). Rule 193.4 allocates the burdens for pleading and proving a claim of privilege. Any party may at any reasonable time request a hearing on an objection or claim of privilege. Tex.R.Civ.P. 193.4(a). The party asserting the privilege must produce any evidence necessary to support its claim of privilege. Id. If the court determines that an in camera review is necessary, the material must be segregated and produced to the court in a sealed wrapper within a reasonable time following the hearing. Id. Here, despite having requested in the motion to compel that Judge Rangel conduct an in camera inspection of the documents, David made no such request during the hearing. The records were never tendered to the court for her review nor preserved for ours.
David was able to cross-examine the judicial vicar regarding the finality of the annulment proceedings, and by this information, he was able to thoroughly, and effectively, cross-examine Barbara and Joe concerning their civil marriage and the timing of it. He does not complain on appeal that he was unable to develop this line of impeachment. Instead, he focuses on the issue that the statements Barbara made to the Diocese in seeking an annulment were false, were found by the church tribunal to be false, and demonstrated her willingness to manipulate quasi-judicial proceedings to obtain a favorable result.
Rule 103(a) provides that error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected and, if the trial court excludes evidence, the substance of the evidence was made known to the court by offer, or was apparent from the context within which the questions were asked. Tex.R.Evid. 103(a)(2). Because *343 the Diocesan documents were not preserved for our review, we have only the testimony of the judicial vicar:
Q: And is it uncommon for the decision to speak toto make findings with respect to the truthfulness of the witnesses and that sort of thing?
A: Does it state as far as the truthfulness of the witnesses? Is that what you're asking?
Q: It is.
A: The canonical word that we use is `Moral Servitude'that is part of our Church lingo if you want to call it thatthat says from the evidence presented to us in both Petitions and all of the witness statements, that the Judge makes by moral servitude, that he is declaring this marriage to be valid or invalid depending.
Q: Okay. What I'm understanding, that that's sort of like the standard on which the Judge makes their decision; is that correct? They have to find a finding that it should be annulled to a degree of moral servitude?
A: That's correct.
The Court: This would be the burden of proof, what you're asking. The witness has to swear to the evidence.
Q: Did they swear to the evidence, and is it common for the Tribunal to make findings as to the veracity of the witnesses in connection with the proceeding?
A: Well, I'm not real sure if I understand your question, but the Judge looks at all the information, you know, the Petitioner, the Respondent, the witness statements, and from that makes a decisionfirst of all, I mean very early on in the process you have to find grounds to see if there are grounds forfor the Petition. The Petitioner or the Respondent, neither of them make the grounds. The grounds come up in the information that we have. We have a long list of possible grounds, and once the grounds are established, all thateverything is brought in and reviewed, then the Judge makes a decision whether the marriage was invalid according to certain grounds.
Q: Okay. And I don't want to belabor the point, but it would not be uncommon for the decision to have some language in there like `One witness was not forthcoming' or something like that or that
A: Possibly, yes.
Thus, the record does not establish that a misrepresentation was made, that any of Barbara's statements were "absolutely false," or that the tribunal so found. We might speculate that David wanted to demonstrate that Barbara either lied about her extramarital affair or in some other manner, diverted fault in the breakup of the marriage to David rather than taking responsibility for her own actions. However, even if we were to agree that the trial court erroneously excluded the evidence, we must still conduct a harm analysis. Texas Department of Transportation v. Able, 35 S.W.3d 608, 617 (Tex.2000); Tex. R.App.P. 61.1.
Formulations of the harmless error rule vary from time to time; since 1989, however, the Supreme Court has consistently followed the formulation contained in former Tex.R.App.P. 81(b)(1). E.g., Hill v. Winn Dixie Texas, Inc., 849 S.W.2d 802, 803-04 (Tex.1992); Elbaor v. Smith, 845 S.W.2d 240, 251 (Tex.1992); Alvarado v. Farah Manufacturing Company, Inc., 830 S.W.2d 911, 917 n. 8 (Tex. 1992); McCraw v. Maris, 828 S.W.2d 756, 757-58 (Tex.1992); Gee v. Liberty Mutual Fire Insurance Company, 765 S.W.2d 394, *344 396 (Tex.1989). Harmful error is shown under this test when the evidence is controlling on a material issue and is not cumulative. Mentis v. Barnard, 870 S.W.2d 14, 16 (Tex.1994). A successful challenge to evidentiary rulings usually requires a showing that the judgment turns on the particular evidence in dispute. Able, 35 S.W.3d at 617, citing City of Brownsville v. Alvarado, 897 S.W.2d 750 (Tex.1995). In the absence of a record demonstrating the precise nature of the disputed evidence, we cannot ascertain whether it was merely cumulative or whether it would have been so controlling on a material issue dispositive to the case such that the judgment would have turned upon it. Because David has not brought forward a record by which we can perform a harm analysis, Point of Error No. Three is overruled.
CUMULATIVE ERROR
Finally, David contends that the cumulative nature of the errors committed below require reversal, even if each standing alone would not. Because we have found no error on the record before us, we overrule Point of Error No. Four and affirm the judgment of the trial court.
NOTES
[1] This is significant in light of David's trial testimony:
Q: If the Court were to make you the primary conservator in connection with this case, would you move the children to New Orleans even today? If the Judge says you have primary rights to determine residency, would you move to New Orleans without their mother?
A: No. Absolutely not.
Q: I mean, if you did that and she was living here under that circumstance, do you think that that would be in their best interest?
A: To move them away from their mother?
Q: Even to New Orleans where all their family is away from their mother?
A: No, no. I would never do that.
[2] Barbara testified that she and David had agreed not to, and were enjoined from, discussing relocation with the girls, and if they had been informed of the marriage, questions of where they would live would certainly arise.
[3] The record does not precisely indicate Barbara's income at the time of divorce. However, if she earned the same wages she earned for the calendar year 1998$21,308David's income at divorce was twice that of hers.
[4] Barbara testified that she started looking for another job about a year before trial, which would have been in November or December of 1998.
[5] As we have already noted, by January 1999, Barbara had received information from the girls and Craig Hoffer that David and Carla were planning a move to New Orleans, and in fact, Carla had represented as much in court.
[6] Barbara testified that she received a $1,000 bonus in 1998.
[7] Barbara testified that she had been promoted in June 1999 and that her annual salary had been increased to $46,000 at that time, up from $21,308 in 1998. She had never received stock options during her employment with Security Capital.
[8] Barbara pegged a potential pay raise at 2 percent.
[9] Specifically, Erb testified that each month, she "pay[s] $31 for incredible coverage. SBC is known for its benefits."
[10] Trial began on November 24, 1999, the day before Thanksgiving, and recessed for the holidays.
[11] Philip Franco, David Franco's brother, participated as co-counsel at trial.
[12] Both children said they were talking to the judge so she would know how they feel about their parents being divorced.
[13] By order dated January 27, 2000, we ordered the reporter's record from the in camera interview unsealed for the limited purpose of briefing the issues on appeal.
[14] We find a description by the Beaumont Court of Appeals to be particularly apropos:
A trial judge is much like a conductor of an orchestra in that he or she, during trial, is best able to read from the score, hear the sounds and determine individual performances. When these matters then come before an appellate court, the ability to personally observe is lost and we are left with only the written notes.
Warchol v. Warchol, 853 S.W.2d 165, 169 (Tex.App.-Beaumont 1993, no writ).
[15] Modification from a joint managing conservatorship to a sole managing conservatorship may be premised on additional elements. The petitioner may show that the child's present living environment may endanger the child's physical health or significantly impair the child's emotional development; there has been a substantial and unexcused violation of the terms and conditions established in the existing conservatorship order; or the circumstances of the child or one or both of the joint managing conservators have so materially and substantially changed since the rendition of the order that it has become unworkable or inappropriate under existing circumstances; and the appointment of a sole managing conservator would be a positive improvement for and in the best interest of the child. Tex.Fam.Code Ann. § 156.203.
[16] Barbara explained that the home is ten minutes from Joe's office and ten to fifteen minutes from her office.
[17] Relocation away from a parent who visited infrequently or visited pursuant to the standard possession order would have far less impact upon a child than relocation away from a parent who had possession every other week for several years, as David has here.
[18] We reiterate yet again that in conducting a legal sufficiency review, we do not consider conflicting testimony but instead consider the evidence in the light most favorable to the judgment.
[19] Barbara's attorney characterized it as an issue of control"his way or the highway."
[20] David alleged that Barbara made misrepresentations about the fault in the breakup of their marriage. While the record before us does not include the Diocesan documents, it does reveal that Barbara engaged in an extramarital affair during the marriage. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1023717/ | UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-4174
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
OCTAVIO CRUZ BELTRAN,
Defendant - Appellant.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Robert J. Conrad, Jr.,
Chief District Judge. (3:06-cr-00198)
Submitted: September 11, 2007 Decided: September 13, 2007
Before WILKINSON, MOTZ, and TRAXLER, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Angela Parrott, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA, INC.,
Charlotte, North Carolina, for Appellant. Gretchen C.F. Shappert,
United States Attorney, Charlotte, North Carolina; Amy E. Ray,
Assistant United States Attorney, Asheville, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Octavio Cruz Beltran pled guilty to possession of a
firearm by an illegal alien. At sentencing, the district court
overruled Beltran’s objections to the presentence report and
sentenced him to forty-eight months in prison, a sentence within
the Guidelines range. On appeal, Beltran contends that the
sentence is unconstitutional because he was sentenced under a de
facto mandatory Guidelines system. Accordingly, he asserts that
his sentence, which was based on the judge’s factual findings
rather than his admissions or jury findings, violated his Fifth and
Sixth Amendment rights. We affirm.
Because Beltran did not raise this issue in the district
court, our review is for plain error. United States v. Hughes, 401
F.3d 540, 547 (4th Cir. 2005). We have concluded that sentencing
decisions made by the district court based upon the preponderance
of the evidence comport with the Sixth Amendment. See United
States v. Morris, 429 F.3d 65, 69 (4th Cir. 2005), cert. denied,
127 S. Ct. 121 (2006). We review a sentence “to determine whether
the sentence is within the statutorily prescribed range and is
reasonable.” United States v. Moreland, 437 F.3d 424, 433 (4th
Cir.), cert. denied, 126 S. Ct. 2054 (2006). “[A] sentence within
the proper advisory Guidelines range is presumptively reasonable.”
United States v. Johnson, 445 F.3d 339, 341 (4th Cir. 2006).
However, while a sentence outside the Guidelines range is not
- 2 -
presumptively unreasonable, United States v. Green, 436 F.3d 449,
457 (4th Cir.), cert. denied, 126 S. Ct. 2309 (2006), the further
the sentencing court diverges from the Guidelines, the more
compelling the reasons for the divergence must be. See Moreland,
437 F.3d at 434.
In light of our precedents, we find no merit to Beltran’s
claims that he was sentenced under a mandatory system. See United
States v. Rita, 127 S. Ct. 2456, 2462 (2007) (upholding presumption
of reasonableness). In addition, our review of the record shows
that the district court properly applied our precedents and that
the sentence is reasonable.
We therefore affirm the sentence imposed by the district
court. We dispense with oral argument, because the facts and legal
contentions are adequately presented in the materials before the
court and argument would not aid the decisional process.
AFFIRMED
- 3 - | 01-03-2023 | 07-04-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2241949/ | 685 N.E.2d 705 (1997)
SPANGLER, JENNINGS & DOUGHERTY, P.C., Appellant-Plaintiff,
v.
INDIANA INSURANCE COMPANY, Appellee-Defendant.
No. 71A03-9603-CV-89.
Court of Appeals of Indiana.
July 28, 1997.
Robert D. Brown, Spangler, Jennings & Dougherty, P.C., Merrillville, for Appellant.
Philip E. Kalamaros, Edward N. Kalamaros & Associates, P.C., South Bend, for Appellee.
OPINION
HOFFMAN, Judge.
Appellant-plaintiff Spangler, Jennings & Dougherty, P.C. (Spangler) appeals the entry of summary judgment in favor of appellee-defendant Indiana Insurance Company (IIC) on Spangler's claim for attorney's fees in a pro-rata amount of the saved future medical expenses which IIC was obligated to pay on a worker's compensation settlement. The facts relevant to review are recited below.
IIC is the worker's compensation insurance carrier for Korellis Roofing. In December 1988, a Korellis employee, Kirk Weidenaar, sustained catastrophic injuries during the course of his employment. Weidenaar and IIC entered into a stipulation awarding Weidenaar worker's compensation benefits for 500 weeks and noting that IIC would be responsible for medical expenses incurred pursuant to the Worker's Compensation Act.
*706 The worker's compensation board approved the stipulation as part of its award dated July 6, 1992.
Spangler, acting on behalf of Weidenaar, filed suit against third parties Amoco Oil Company and Northern Indiana Public Service Company. In December 1992, after a trial by jury, a verdict was returned against both companies. Thereafter, IIC suspended its payments to Weidenaar.
On January 14, 1994, Spangler instituted the present proceedings to recover from IIC a pro-rata share of attorney's fees attributable to IIC's subrogation claim and for future benefits and medical costs for which IIC was obligated. Spangler's suit is based upon the statutory attorney's fees provision of the Worker's Compensation Act and upon quantum meruit.
IIC filed a motion requesting inter alia summary judgment. Spangler filed its motion in opposition together with its request for summary judgment on the issue of liability for the attorney's fees which would have left remaining only the issue of the amount owed. As noted above, the trial court granted IIC's motion for summary judgment. This appeal ensued.
When reviewing an entry of summary judgment, this Court uses the same standard used by the trial court. Ramon v. Glenroy Const. Co., Inc., 609 N.E.2d 1123, 1127 (Ind. Ct.App.1993), trans. den. Summary judgment is appropriate only if the pleadings and evidence designated show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Computers Unlimited v. Midwest Data Systems, 657 N.E.2d 165, 167 (Ind.Ct.App. 1995). The movant bears the burden to prove the non-existence of a genuine issue of material fact and may meet the burden with a demonstration that the undisputed material facts negate at least one element of the claim against it. Id. at 168. If the movant sustains the burden, then the opponent may not rest upon the pleadings but must set forth specific facts which show a genuine issue exists for trial. Id.
Summary judgment may be sustained upon any theory which is supported by the designated materials. Ind. Trial Rule 56(C); Ind. Bd. of Public Welfare v. Tioga Pines, 622 N.E.2d 935, 940 (Ind.1993), cert. den., 510 U.S. 1195, 114 S.Ct. 1302, 127 L.Ed.2d 654 (1994). Where material facts are not in dispute, the issue is the application of the law to the facts. Belford v. McHale Cook & Welch, 648 N.E.2d 1241, 1244 (Ind.Ct.App.1995); Fidelity Financial Services v. Sims, 630 N.E.2d 572, 574 (Ind.Ct.App.1994).
Here, two dispositive questions arise: Whether the worker's compensation settlement required IIC to pay Weidenaar's future medical expenses and whether the statute requires IIC to contribute a pro-rata share of the attorney's fees for the amounts paid and subrogated and the future benefits including medical expenses saved by IIC due to the third-party recovery Weidenaar pursued through Spangler.
Whether the Worker's Compensation Act requires payment of attorney's fees on the pro-rata share of the saved expenses including future medical expenses for which IIC, as the worker's compensation insurance carrier, was obligated is purely a question of law. With regard to contribution by the insurance carrier to the attorney's fees necessary to recover from third parties, the statute is clear. In pertinent part, the applicable worker's compensation statute provides:
The employer or the employer's compensation insurance carrier shall pay its pro rata share of all costs and reasonably necessary expenses in connection with asserting the third party claim, action or suit, including but not limited to costs of depositions and witness fees, and to the attorney at law selected by the employee or his dependents, a fee of twenty-five per cent (25%), if collected without suit, of the amount of benefits which benefits shall consist of the amount of reimbursements, after the expenses and costs in connection with the third party claim have been deducted therefrom, and a fee of thirty-three and one-third per cent (33 1/3%), if collected with suit, of the amount of benefits after deduction of costs and reasonably necessary expenses in connection with the third party claim action or suit. The employer *707 may, within ninety (90) days after receipt of notice of suit from the employee or his dependents, join in the action upon his motion so that all orders of court after hearing and judgment shall be made for his protection. An employer or his compensation insurance carrier may waive its right to reimbursement under this section and, as a result of the waiver, not have to pay the pro-rata share of costs and expenses.
IND.CODE § 22-3-2-13 (1993 Ed.).
Indiana's seminal case regarding the carrier's obligation to share in attorney's fees once a recovery is made from a third party is Ind. State Highway Comm. et al. v. White, 259 Ind. 690, 291 N.E.2d 550, 554 (1973). In White, the court made clear that the carrier is obligated to pay its pro-rata share of the attorney's fees based upon a percentage of the entire compensation award, not just the amount actually paid at the time the recovery is made from the third party. It was determined that attorney's fees were due on the entire amount, including future expenses, because it represented a value to the employer or carrier when it is relieved of the duty to pay future installments of benefits.
In Calvary Temple Church, Inc. v. Paino, 555 N.E.2d 190, 194-195 (Ind.Ct.App.1990), this Court found that the compensation carrier was required to pay a one-third pro-rata share of the employee's attorney's fees computed on the total amount already paid by the carrier for medical and disability expenses and the amount the carrier was obligated to pay for future expenses. Id. This Court in Divine v. Galen & Lowell Graber, 600 N.E.2d 160, 162-163 (Ind.Ct.App.1992) held that the employer was required to pay attorney's fees for future medical expenses which it was obligated to pay but which were saved by the recovery from a third party. In Divine, the following excerpt from White reiterated the obligation:
`In addition, the Legislature obviously recognized that a judgment or settlement by an injured employee ... inures to the benefit of the employer or its compensation insurance carrier in every case ... to the full extent of the employer's obligation under the Act. It is therefore fair and equitable that the employer should pay counsel's fee for recovering that which inures to its benefit.
In construing this section, and the term "reimbursements" as used in it, we conclude that the attorney fee for which the employer or its compensation carrier is chargeable in a case such as this, is properly calculated as a percentage of the award, and not as a percentage of the sum actually paid out by the employer or carrier pursuant to the award....'
Id. at 162, quoting White, 259 Ind. at 696-697, 291 N.E.2d at 554.
To the extent that IIC argues that it is not required to pay a pro-rata share of attorney's fees for amounts for which it was obligated to pay, but had not yet paid, it is mistaken. The cases make clear that the carrier must pay its pro-rata share of attorney's fees on the entire amount of future benefits it would have paid if not for the third-party recovery. Accord Brown v. Globe Union, Div. of Johnson Controls, Inc., 694 F.Supp. 795 (D.Colo. 1988); Maryland Casualty Co. v. Tiffin, 537 So.2d 469 (Ala.1988); Lemery v. Buffalo Airways, Inc., 14 Kan.App.2d 301, 789 P.2d 1176 (1990); Zuber v. Illinois Power Co., 135 Ill.2d 407, 142 Ill.Dec. 871, 553 N.E.2d 385 (1990); Chaney v. National Steel Corp., 272 Ill.App.3d 850, 209 Ill.Dec. 553, 651 N.E.2d 731 (1995); Wood v. Firestone Tire & Rubber Co., 123 Misc.2d 812, 475 N.Y.S.2d 735 (1984) (all finding that the employer's pro-rata share of attorney's fees would be based upon total benefit realized, not just amount actually paid at time of third-party recovery). Thus pursuant to statute, Indiana common law and the weight of authority, IIC's contention that it is not required to pay attorney's fees to attorneys it did not engage, its contention that the amount it saved was not truly a benefit to IIC, and its contentions attendant thereto are without merit.
The requirement that the employer or compensation carrier contribute a pro-rata share of attorney's fees has been applied even where the employer's attorney participated to some extent in the third-party claim by the injured worker. In Hartwig v. Zacky Farms, 2 Cal.App.4th 1550, 3 Cal.Rptr.2d 828, 832 (1992), the employer's attorney participated *708 in the third-party claim. The company which had been assigned the worker's compensation lien was required to pay a pro-rata share of attorney's fees incurred by the employee despite participation because the evidence did not support a finding that the employer's attorney actively participated in generation of the fund out of which fees and costs were sought. Id.
In the present case, IIC is required to pay a pro-rata share of attorney's fees for the amount subrogated as well as the future benefits for which IIC was obligated under the Worker's Compensation Act pursuant to the award. Such would include any future medical benefits for which IIC was obligated.
IIC argues that because future medical expenses for Weidenaar have not been reduced to a sum certain, it cannot be obligated to pay attorney's fees. Such is not the case. Spangler presented evidence regarding the amounts which IIC had been paying. Courts and juries regularly make calculations of this nature.
Turning to the question of the extent to which IIC was obligated for future medical expenses, the stipulated settlement between Weidenaar and IIC, which became the award of the worker's compensation board, provided in relevant part:
8. That pursuant to the Indiana Worker's Compensation Act, [IIC] has paid in excess of $700,000.00 to date in hospital and medical expenses attributable to this accidental injury and any other medical, pharmaceutical and/or hospital bills or statements to date, other than those heretofore paid by [IIC], are the expenses of the plaintiff and [IIC] is obligated only for the payment of any additional medical as pursuant to the provisions of the Worker's Compensation Act.
* * * * * *
12. That it is specifically agreed and understood between the parties that this compromise agreement does in no way affect any third party litigation instituted by the parties and will in no way act as a release in discharge of such third party claim and that [IIC] shall still maintain all of its rights under the Indiana [Worker's] Compensation Act involving such third parties and its lien rights pertaining thereto.
The parties dispute the meaning of the last line of paragraph eight which states both that Weidenaar is responsible for his own medical expenses and that IIC remains obligated for those medical expenses payable under the act. The agreement leaves intact the rights and obligations of the parties regarding a third-party recovery. The act provides for the payment of medical expenses. See IND.CODE § 22-3-1-3(b)(2) (board authorized "to require medical service for injured employees").[1]
Whether IIC's obligation to pay future medical expenses was diminished by the settlement agreement adopted by the worker's compensation board is a material issue of fact which has not been addressed by the trial court. The partial summary judgment requested by Spangler should be granted. The cause must be remanded for a determination of the amount of the award.
The summary judgment is reversed and the cause is remanded for proceedings consistent with this decision.
Reversed and remanded.
STATON and CHEZEM, JJ., concur.
NOTES
[1] Because the cause was disposed of on summary judgment, some factors critical to resolution of the action have not been determined. However, IIC's contention that the agreement which formed the basis of the board's award does not provide for payment of "future" medical expenses, and its contention that its payment of medical expenses beyond the time of the award was not payment of "future" medical expenses, but was instead payment of "current" medical expenses, appears disingenuous. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2315752/ | 98 N.H. 251 (1953)
JEANNETTE M. REYNOLDS
v.
BOSTON & MAINE TRANSPORTATION COMPANY.
No. 4203.
Supreme Court of New Hampshire.
July 1, 1953.
*252 George P. Cofran, Thomas E. Flynn Jr., and Paul A. Rinden (Mr. Rinden orally), for the plaintiff.
Burns, Calderwood & Bryant (Mr. Bryant orally), for the defendant.
LAMPRON, J.
The defendant takes the position that, although the provisions of R. L., c. 392, s. 23, do not directly govern this case, this section sets up a policy which should be applied to it. Consequently it maintains that the Court's denial of plaintiff's motion should be sustained as a matter of law or at least as a proper exercise of the Court's discretion.
The plaintiff contends that section 23 is not applicable to discovery and that the modern concept of discovery and justice require that the information sought be made available in order that the trial be rendered fair.
R. L., c. 392, s. 23, reads as follows: "No party shall be compelled, in testifying or giving a deposition, to disclose the names of the witnesses by whom nor the manner in which he proposes to prove his case, nor, in giving a deposition, to produce any writing which is material to his case or defense, unless the deposition is taken in his own behalf."
"Discovery is the disclosure by defendant of facts, deeds, documents, or other things which are in his exclusive knowledge or *253 possession, and which are necessary to the party seeking the discovery as a part of a cause or action pending . . . ." 27 C.J.S. 5; Reynolds v. Fibre Co., 71 N. H. 332, 340.
"The right to discovery and inspection is necessarily preliminary, remedial and discretionary and is favored as a method `to ascertain the truth by rational means' . . . in order that the case may be decided on the basis of pertinent evidence rather than the rules of evidence." State v. Cote, 95 N. H. 108, 111.
However plaintiff's right to discovery does not extend to all facts which may be material to the issue but is confined to facts which are material to her cause of action. Their production will be ordered if the Court can fairly find that they may in any way be material to plaintiff's cause which may mean simply material to the proper preparation of her case. Ingram v. Railroad, 89 N. H. 277, 279; Lefebvre v. Somersworth Co., 93 N. H. 354, 356. We have no doubt that it could be found that the names and addresses of passengers contained on these cards are material to the proper preparation of plaintiff's case.
It is true, as pointed out by defendant, that the plaintiff has not shown that any of these witnesses knows any facts which are material to the case. However, the materiality of the evidence sought need not be definitely established. Ingram v. Railroad, supra. It is sufficient that they may have such knowledge, which is likely.
It is also true that discovery is not to be granted the plaintiff to enable him to pry into defendant's case or to find out the evidence by which that case will be supported. Ingram v. Railroad, supra. These passengers as witnesses to this accident are not the exclusive property of either party. In the interest of justice both parties are entitled to have their testimony introduced in this action for whatever help it may furnish in arriving at a just determination. Plaintiff is not endeavoring to ascertain what defense the defendant contemplates making nor facts that exclusively relate to its case but is seeking discovery of facts which will enable her to prove her case. We fail to see how an order that the defendant produce the names and addresses in its possession would violate the letter or the spirit of R. L., c. 392, s. 23, or any of the equitable safeguards which surround the remedy of discovery. Reynolds v. Fibre Co., 71 N. H. 332, 345; LaCoss v. Lebanon, 78 N. H. 413, 418.
As we have already said the right to discovery is discretionary. State v. Cote, 95 N. H. 108, 111. However the record in this case *254 tends to show that discretion was not exercised. In this situation the appropriate procedure is to return the case to the Superior Court. Vallee v. Company, 89 N. H. 285, 291; Colby v. Varney, 97 N. H. 130, 134.
Case discharged.
All concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2105097/ | 13 S.W.3d 791 (2000)
Ex parte John LEMKE, Applicant.
Nos. 73594 to 73602.
Court of Criminal Appeals of Texas.
March 8, 2000.
*792 John Lemke, pro se.
Monica Tegeler Bar, Ganado, for appellant.
Bobby E. Bell, Dist. Atty., Edna, Matthew Paul, State's Atty., Austin, for State.
OPINION
MEYERS, J., delivered the opinion of the Court, joined by MANSFIELD, PRICE, HOLLAND, WOMACK, JOHNSON and KEASLER, J.J.
On December 13, 1993, applicant pled guilty to nine separate offenses: six for Unlawful Delivery of Cocaine and three for Possession of Cocaine. In exchange for his guilty pleas, the State recommended that applicant be sentenced to forty years confinement for each of the delivery offenses and twenty years confinement for each of the possession offenses, all to run concurrently. Applicant was sentenced in accordance with the State's recommendation.
*793 On August 17, 1994, applicant filed in the district court an Application for Writ of Habeas Corpus (the "initial application"), alleging he was deprived of effective assistance of counsel on the ground that his trial lawyer had been disbarred at the time of his representation of applicant. The initial application was denied by this Court on May 17, 1995. Applicant filed in the district court a second application for writ of habeas corpus (the "instant application") on November 28, 1995.[1] In the instant application, applicant alleges he was denied effective assistance of counsel on the ground that his attorney did not inform him of plea bargain offers made by the State.[2] We ordered an evidentiary hearing and the trial court entered Findings of Fact. We dismissed the instant application on February 5, 1997. Applicant filed a Motion for Reconsideration (On the Court's Own Motion) of the Refusal to Grant Relief in Application for Writ of Habeas Corpus ("Motion for Reconsideration"), arguing that the instant application should not be barred as a "subsequent application" under Texas Code of Criminal Procedure article 11.07, section 4, because applicant did not become aware of the facts giving rise to the instant application until several months after the initial application was denied. We granted the Motion for Reconsideration and filed and set the instant application for submission.
I. Section 4
We initially address whether the instant application is barred as a "subsequent application" under Section 4, or whether it falls within an exception to such bar. Section 4 provides, in relevant part:
(a) If a subsequent application for writ of habeas corpus is filed after final disposition of an initial application, challenging the same conviction, a court may not consider the merits of or grant relief based on the subsequent application unless the application contains sufficient specific facts establishing that:
(1) the current claims and issues have not been and could not have been presented previously in an original application or in a previously considered application filed under this article because the factual or legal basis for the claim was unavailable on the date the applicant filed the previous application[.]
(c) For purposes of Subsection (a)(1), a factual basis of a claim is unavailable on or before a date described by Subsection (a)(1) if the factual basis was not ascertainable through the exercise of reasonable diligence on or before that date.
Tex.Code Crim. Proc. art. 11.07 § 4. Thus, we are barred from considering the merits of the instant application unless the facts giving rise to the claims made in the instant application (the existence of the State's plea bargain offers) could not have been presented in the initial application because they were "not ascertainable through the exercise of reasonable diligence on or before" the date of the initial application.
On May 27, 1994, applicant's trial attorney, William Satterwhite, Jr., was indicted in Jackson County for falsely holding himself out as an attorney to applicant. Tex. Penal Code § 38.122 (felony offense of Falsely Holding Oneself Out as a Lawyer); see Satterwhite v. State, 979 S.W.2d 626 (Tex.Crim.App.1998)(affirming Satterwhite's conviction under section 38.122). In August of 1995, several months after this Court's denial of the initial application, applicant was bench warranted to Jackson County to testify against Satterwhite pursuant *794 to the section 38.122 charges. During the course of preparing for such testimony, in a conversation with Jackson County District Attorney Robert E. Bell, the same district attorney who had prosecuted applicant's underlying conviction, applicant learned that the State had made two plea offers (for twenty and sixteen years) that were never communicated to him.[3] Applicant testified that during his pending cases Satterwhite had repeatedly told him that there were no plea bargain offers on the table. Applicant's wife also testified that she was present during many discussions between applicant and Satterwhite and at no time during those meetings did Satterwhite inform applicant of any plea bargain offers by the State for sixteen and twenty years.
"Reasonable diligence" within the context of Section 4 has not been defined or explored by this Court. The term suggests at least some kind of inquiry has been made into the matter at issue. Cf. Anderson v. State, 621 S.W.2d 805, 809 (Tex.Crim.App.1981)(in context of best evidence rule, stating that production of original document depends on circumstances of each case, the only requirement being that "all reasonable avenues of search should be explored to the extent that reasonable diligence under the circumstances would dictate" and holding that copy should be admitted where "a reasonable effort has been made to obtain the original and there is no suspicion that the copy might differ from the original"); Jordan v. State, 520 S.W.2d 388 (Tex.Crim.App.1975)(viewing "reasonable diligence" by grand jury as some inquiry of the relevant witnesses on the issue). In the instant case, the plea bargain offers were not made a part of the record, so any review of the record would not have uncovered their existence. Applicant testified he asked Satterwhite during the pending cases whether the State had made any plea bargain offers, and Satterwhite told him repeatedly that the State had made no offers.[4] We hold applicant exercised "reasonable diligence" by making several inquiries of his lawyer as to the existence of plea bargain offers by the State. Applicant was not required to query the district attorney about the existence of a plea bargain offers when he had been assured by his attorney that there were none. Given that applicant had previously *795 asked his attorney about the existence of plea bargain offers, was told that none were made, and applicant otherwise did not doubt his attorney's representations,[5] applicant satisfied section 4's requirement of "reasonable diligence."
We conclude the instant application "contains sufficient specific facts establishing" that applicant's claim is one that could not have been presented in the initial application because the factual basis for the claim was "unavailable" (in that it was not ascertainable through the exercise of reasonable diligence) on the date the initial application was filed. We therefore address the merits of applicant's claim.
II. Ineffective Assistance of Counsel
In order to establish a claim for ineffective assistance of counsel, applicant must prove that (1) counsel's representation fell below an objective standard of reasonableness; and (2) counsel's deficient performance resulted in prejudice to the defense. Ex parte Wilson, 724 S.W.2d 72, 73 (Tex.Crim.App.1987) (applying two-part test set forth in Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984)). Failure of defense counsel to inform a criminal defendant of plea offers made by the State is an omission that falls below an objective standard of professional reasonableness. Id. at 73-74 (failure of counsel to advise defendant of plea bargain offer by government constitutes "gross deviation from accepted professional standards"); see also United States v. Blaylock, 20 F.3d 1458, 1466 (9 th Cir.1994) (failure to communicate plea bargain offer constitutes unreasonable performance under prevailing professional standards); Johnson v. Duckworth, 793 F.2d 898, 902 (7 th Cir.) (recognizing defense attorneys have duty to inform clients of plea agreements proffered by state and failure to do so constitutes ineffective assistance), cert. denied, 479 U.S. 937, 107 S. Ct. 416, 93 L. Ed. 2d 367 (1986); United States ex rel. Caruso v. Zelinsky, 689 F.2d 435, 438 (3rd Cir.1982)(failure to communicate plea bargain offer is denial of 6th and 14th amendment rights); Barentine v. United States, 728 F. Supp. 1241, 1251 (W.D.N.C.)("federal *796 courts have been unanimous in finding that [defense counsel's failure to inform the defendant of a plea offer] constitutes a violation of the defendant's Sixth Amendment constitutional right to effective assistance of counsel"), aff'd, 908 F.2d 968 (4 th Cir.1990).
In its Findings of Fact on the instant application, the trial court found that (1) prior to applicant's guilty pleas, the State had conveyed to applicant's attorney a plea bargain offer of twenty years and an amended plea bargain offer of sixteen years; (2) applicant's attorney never advised applicant of the State's plea bargain offers of twenty and sixteen years; (3) applicant would have accepted the State's proposed plea bargain offer of twenty years, if it had been conveyed to him; (4) applicant would have accepted the State's amended plea bargain offer of sixteen years, if it had been conveyed to him; and (5) at the time applicant entered his pleas of guilty on December 13, 1993, in exchange for a plea bargain offer of forty years as to the six delivery offenses and twenty years as to the three possession offenses, applicant was not aware of and had not been advised of, any prior plea bargain offers by the State.
The trial court's findings are supported by the record. While this Court is not bound by the findings of a habeas court, we should follow them where they are supported by the record. Ex parte Minott, 972 S.W.2d 760, 761 (Tex.Crim. App.1998); Ex parte Torres, 943 S.W.2d 469, 476 (Tex.Crim.App.1997); Ex parte Brandley, 781 S.W.2d 886 (Tex.Crim.App. 1989), cert. denied, 498 U.S. 817, 111 S. Ct. 61, 112 L. Ed. 2d 35 (1990); Ex parte Adams, 768 S.W.2d 281 (Tex.Crim.App. 1989). We therefore accept the trial court's findings that the State conveyed two plea bargain offers to applicant's attorney (the first offer was for twenty years, and the second offer for sixteen years) that were never communicated to applicant, and that applicant would have accepted either offer had they been communicated to him. Satterwhite's failure to inform applicant of the State's plea bargain offers was an omission that fell below an objective standard of reasonableness. Wilson, 724 S.W.2d at 74.
The further question is whether applicant was prejudiced by Satterwhite's unprofessional conduct. While a trial court is not obligated to accept the terms of a bargain reached by the parties, courts generally have not required that the defendant show the trial court would have accepted a plea bargain in establishing prejudice in these circumstances. The prevailing view is that a defendant is prejudiced by the missed opportunity of accepting such bargain and presenting it to the trial court for consideration in sentencing.[6]Caruso, 689 F.2d at 438 ("[f]ailure *797 by defense counsel to communicate a plea offer to defendant deprives defendant of the opportunity to present a plea bargain for the consideration of the state judge and, on acceptance by the state judge, to enter a guilty plea in exchange for a lesser sentence"); State v. Simmons, 65 N.C.App. 294, 309 S.E.2d 493, 498 (1983) (because of attorney's failure to inform defendant of plea bargain offer, defendant was "denied the opportunity to accept the plea offer, which, according to his affidavit, he would have accepted" and in this regard defendant was "clearly prejudiced"). Applicant was deprived of the opportunity of accepting the State's twenty year plea bargain offer and presenting it to the trial court for consideration in setting applicant's sentence. We hold applicant was prejudiced in this respect. Caruso, supra.
III. Remedy
Courts have held that tailoring the remedy to the injury suffered where defense counsel failed to convey a plea bargain offer means reinstating the offer:
If, after the evidentiary hearing, [the applicant] prevails on his ineffective assistance claim, the district court will have to fashion a remedy that is "tailored to the injury suffered from the constitutional violation and should not necessarily infringe on competing interests." United States v. Morrison, 449 U.S. 361, 364, 101 S. Ct. 665, 668, 66 L. Ed. 2d 564 (1981). Since the remedy for counsel's ineffective assistance should put the defendant back in the position he would have been in if the Sixth Amendment violation had not occurred, in certain circumstances granting a new trial may not be the appropriate remedy. Several courts have recognized that where the ineffective assistance occurred before trial, as in cases where the harm consisted in defense counsel's failure "to communicate a plea offer to defendant, ... [granting a] subsequent fair trial does not remedy this deprivation." Caruso, 689 F.2d at 438 (citation omitted). See also, Alvernaz v. Ratelle, 831 F. Supp. 790, 797-99 (S.D.Cal.1993)(Rhoades, J.) (granting specific performance of original plea offer)(citing cases); Turner, 858 F.2d at *798 1208 (requiring reinstatement of the original plea offer unless the prosecution can show nonvindictive reasons for withdrawing the offer).
Requiring the government to reinstate its original plea offer is constitutionally permissible. [citations omitted] Thus, where, as here, the defendant was deprived of the opportunity to accept a plea offer, putting him in the position he was prior to the Sixth Amendment violation ordinarily will involve reinstating the original offer. The government may of course, in proper cases, seek to demonstrate that intervening circumstances have so changed the factual premises of its original offer that, with just cause, it would have modified or withdrawn its offer prior to its expiration date....[7]
Requiring the government to reinstate its original offer would also accommodate the policy articulated by the Supreme Court in Kimmelman v. Morrison, 477 U.S. 365, 106 S. Ct. 2574, 91 L. Ed. 2d 305 (1986), where the Court held that "[t]he Constitution constrains our ability to allocate as we see fit the cost of ineffective assistance. The Sixth Amendment mandates that the State [or the government] bear the risk of constitutionally deficient counsel. Id. at 379, 106 S. Ct. at 2585. Under Kimmelman, even if one might perceive that the government's competing interest might be infringed by requiring that the original offer be reinstated, a contrary result would impermissibly shift the risk of ineffective assistance from the government to [the defendant].
Blaylock, 20 F.3d at 1468-69. We agree with this rationale and hold the harm suffered as a result of applicant's ineffective counsel is best redressed by reinstatement of the State's plea bargain offer of twenty years.[8]
Relief is granted. These causes are remanded to the trial court with orders that the trial court withdraw applicant's pleas, require the State to reinstate its twenty year plea bargain offer,[9] and allow applicant to re-plead to the indictments in these causes.
KELLER, J., concurs in Part I and otherwise joins the opinion. McCORMICK, P.J., concurs.
NOTES
[1] A First Amended Application was filed on January 8, 1996. We consider the First Amended Application as part of the "instant application."
[2] Applicant also alleges his pleas were not the result of a knowing and voluntary waiver since he had not been informed of the State's previous offers due to his ineffective counsel. This argument is not fully developed in the instant application, and we need not reach it given our resolution of this case based on applicant's ineffective assistance claim.
[3] Bell testified in part:
The first time that I became knowledgeable that or at least it was brought to my attention that perhaps Mr. Lemke had not received the plea bargain offers that I had originally given was when Mr. Lemke was bench warranted back for William Satterwhite's trial. During our conversations in my office in preparation for trial, I casually mentioned to Mr. Lemke I never really understood why he seriously didn't consider the 16 years. It was at that time that Mr. Lemke told me there wasn't [sic] any offers on the table. I simply want the record to reflect that that's the first time I ever became aware that Mr. Lemke had not received or was alleging to have not received the offers. I did not know as we were progressing in the negotiations that Mr. Lemke was or was not receiving these offers.
[4] While applicant's testimony on this issue is not as fully developed as it might have been, it is clear that he asked Satterwhite on more than one occasion about the existence of a plea bargain offer:
Q. [Defense counsel] I'm going to direct your attention to the day that you pled guilty on December 13, 1993 and ask if that was the day that these causes were set for trial by jury here in Jackson County, Texas?
A. [Applicant] Yes.
Q. And on that day, did you ask Mr. Satterwhite about any plea bargain in this case?
A. Yes, I did.
Q. And what did he tell you if there was a plea bargain in this case?
A. He said there was not a plea bargain.
Q. Did you insist that he discuss a plea bargain with the D.A. on that day?
A. Yes, I did.
Q. And did he refuse to do that?
A. Yes, he did.
Q. Did you ask about plea bargains during the time Mr. Satterwhite was representing you?
A. Yes, I did.
Q. And you met with him on several occasions?
A. Yes, I did.
[5] The State questioned applicant about a bondsman who may have had knowledge of the sixteen year offer:
Q.[Prosecutor] Mr. Lemke, you're aware that David Egg is in the bonding business, are you not?
A.[Applicant] Yes.
Q. And he bonded you out, as a matter of fact?
A. No.
Q. What I'm asking you now, Mr. Lemke, is by way of explanation. I will be testifying in a minute as to what, if any, plea bargain offers were made to you. And in support of that, I'm going to ask you this question; do you recall at some point in timeand I don't know exactly when it was, but prior to the 40 years being offered to you and the 20 yearsthat Mr. Egg had made an inquiry of you as to why you wouldn't take the 16 years that was offered to you.
Did Mr. Egg ever mention to you, "Why don't you take the 16 years?"
And you said to him, "Because there's been no offer to that effect?"
A. Correct.
Q. My point being, if the 16 years wasn't on the table and hadn't been offered at some point in time, how would Mr. Egg know to say to you, "Why don't you take the 16 years?"
A. I have no idea.
Q. You do recall him saying that and you saying to Mr. Egg, "Well, the reason I haven't taken the 16 years is because there is no offer of 16 years."
Do you recall that?
Do you recall Mr. Egg saying something to you to the effect of, "You should have taken the 16 years" or "Why don't you take the 16 years"; and your response to Mr. Egg was, "Well, there is no offer to me of that amount"?
A. Correct.
Q. Okay.
The point to this line of inquiry by the State is not clear. Perhaps they were trying to show that applicant had some reason to doubt Satterwhite's representations that there were no plea bargain offers. However, applicant's responses to Mr. Egg's inquiries demonstrate (1) that applicant had not been told about any plea bargain offers, and (2) that applicant viewed Mr. Egg as simply mistaken about the existence of a plea offer.
[6] One court suggested, but didn't decide, that a defendant may be required to prove the trial court would have accepted the plea bargain. Compare Alvernaz v. Ratelle, 831 F. Supp. 790, 792-93 (S.D.Cal.1993)(stating that in order to prove prejudice resulting from defense attorney's failure to inform petitioner of plea bargain offer, petitioner was required to show (1) that he would have accepted the offer, and (2) that trial court would have accepted the plea)) with id. at 796 (holding that "this Court does not decide whether a petitioner must demonstrate that a trial court would have accepted the plea offer to prove prejudice" because "assuming such a requirement exists," petitioner met the requirement). Another court explicitly declined to place a burden on the petitioner to prove the trial court would have accepted the plea agreement, but allowed the State the opportunity to prove the trial court would not have accepted the arrangement:
[W]e are unpersuaded by the State's argument that [petitioner] failed to prove prejudice because he did not establish that the state trial court would have approved the two-year plea arrangement. Although the State is correct in stating that a plea agreement must be approved by the trial court before it becomes dispositive [citations omitted], we do not believe that [petitioner] was required to demonstrate a reasonable probability that the trial court would have approved the two-year plea arrangement. [citation omitted] We know of no case or statute that imposes such a requirement and we think it unfair and unwise to require litigants to speculate as to how a particular judge would have acted under particular circumstances.[fn]
We find it much more significant that the State can point to no evidence that indicates that the state trial court would not have approved the two-year plea bargain arrangement. We believe that, if the State wishes to suggest that the trial court would not have approved this plea arrangement, the State, and not [petitioner], bears the burden of persuasion. The prosecution may, therefore, argue that a prisoner, who has established a reasonable probability that, but for his counsel's ineffective assistance, he would have accepted a plea arrangement offered by the prosecution, was nevertheless, not prejudiced because the trial court would not have approved the plea arrangement. To prevail on such an argument, however, the prosecution must offer clear and convincing evidence that the trial court would not have accepted the plea arrangement.
Turner v. Tennessee, 858 F.2d 1201, 1207 (6th Cir.1988), cert. granted and judgment vacated, 492 U.S. 902, 109 S. Ct. 3208, 106 L. Ed. 2d 559 (1989). We do not view after-the-fact speculation into whether or not the trial court would have granted the plea bargain as particularly meaningful. Even if a trial judge were to testify that he would not have accepted the plea bargain, the existence of the plea agreement might have affected his judgment as to the sentence he would have ultimately imposed. It makes more sense to reinstate the plea offer and if accepted by the defendant, allow the trial judge the opportunity to accept or reject it at that point.
The single case in which this issue has previously arisen before this Court provides no guidance. In Wilson, 724 S.W.2d at 74, we held that the applicant's statement that "he would have agreed to the plea bargain offer and would have had to serve thirteen years rather than life ... shows that applicant has suffered prejudice due to counsel's failure to inform him of the State's offer." It is not clear whether the applicant's assertion that he "would have had to serve thirteen years rather than life" was based on evidence that the trial court would have accepted the plea agreement or was simply an assumption on the applicant's part that the trial court would have accepted the agreement.
[7] The State makes no such allegations in this case. The State has not responded to the instant application.
[8] Because applicant testified he would have accepted the twenty year plea bargain if it had been offered, we do not provide for reinstatement of the plea bargain offer of sixteen years, which was made subsequent to the twenty year offer.
[9] District Attorney Bell testified that the plea bargain offer was for "20 years in each of the captioned causes to run concurrently." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1894287/ | 418 N.W.2d 782 (1988)
STATE of North Dakota, Plaintiff and Appellee,
v.
Jerry JONES, Defendant and Appellant.
Cr. No. 870188.
Supreme Court of North Dakota.
February 2, 1988.
Alan K. Duppler, State's Atty. for Mercer County, Stanton, for plaintiff and appellee; on brief.
Jerry Jones, defendant and appellant, pro se; on brief.
VANDE WALLE, Justice.
Jerry Jones appealed from an order denying his motion for correction of sentence pursuant to Rule 35(a), N.D.R.Crim.P. We affirm.
*783 In 1983 Jones was charged with, and pleaded guilty to, the crime of gross sexual imposition in violation of Section 12.1-20-03, N.D.C.C. The trial court sentenced Jones to serve six years in the State Penitentiary. However, the trial court suspended execution of the sentence for five years and placed Jones on probation.
Subsequently, the State petitioned the trial court to revoke Jones's probation, alleging that he had violated the conditions of his probation. The trial court found that Jones had violated the conditions of his probation and therefore it revoked his probation. The trial court then sentenced Jones to serve six years in the State Penitentiary, with the final two years of the sentence suspended for a period of six years during which time Jones would be on probation. This period of probation was not to begin until Jones had served four years of his prison sentence.
Subsequently, Jones moved in the trial court for a correction of sentence pursuant to Rule 35(a). The trial court denied the motion. It is that order from which Jones has appealed.
I
Jones argues that the trial court lacked jurisdiction to revoke his probation because he contends that where a sentence is pronounced and then suspended the only authority to revoke probation lies with the State Parole Board.
Initially we note that we can find no indication in the record that this argument was raised in the court below. This court has held that "Matters raised for the first time on appeal will not be considered by this Court." State v. Manke, 361 N.W.2d 247, 249 (N.D.1985). Therefore, this issue is not properly before the court.
However, even if Jones had properly raised this issue we believe it lacks merit. Jones relies on the decision in John v. State, 160 N.W.2d 37, 42 (N.D.1968), for the proposition that "where sentence is pronounced and then suspended under Section 12-53-06, N.D.C.C., the trial court loses jurisdiction of the defendant, and, thereafter, the only authority to revoke the probation is in the Parole Board." However, the decision in John was partially based on Section 12-53-11, N.D.C.C., which then provided "that the Parole Board may revoke the suspension of sentence ..." [Emphasis added.] 160 N.W.2d at 42. Since the decision in John the Legislature has amended Section 12-53-11 [see 1975 N.D.Sess.Laws ch. 114, § 5], wherein it substituted the court for the parole board in the revocation process. It was clearly the intent of the Legislature to give the trial court authority to revoke a suspension of sentence. This is readily borne out by comments made in the House Judiciary Committee by a proponent of the bill: "This bill [S.B. 2332] allows the judge to maintain jurisdiction over the defendant who has a suspended sentence. The court will hold the hearing rather than the parole board." H.Jud.Comm.Minutes (March 5, 1975). Thus the trial court has authority to revoke a suspension of sentence, and Jones's claim that the trial court lacked jurisdiction to revoke his probation is without merit.
II
Jones next claims that when the trial court sentenced him after revocation of his probation to something greater than that to which he was originally sentenced, the trial court violated Jones's Federal constitutional right under the Fifth Amendment to the United States Constitution to not "for the same offense to be twice put in jeopardy of life or limb." After Jones pleaded guilty to gross sexual imposition the trial court initially sentenced him to serve six years in prison, but it then suspended execution of the sentence and placed Jones on probation for five years. After Jones violated probation and the court revoked his probation the court sentenced him to six years' imprisonment, suspending the last two years of the sentence for a period of six years during which time Jones was to be on probation. Jones claims that because the sentence to imprisonment plus probation after revocation exceeded the initial sentence to six years' imprisonment, he has been unconstitutionally subjected to double jeopardy.
*784 The guarantee against double jeopardy arising out of the Fifth Amendment to the United States Constitution is enforceable against the States through the Fourteenth Amendment. Benton v. Maryland, 395 U.S. 784, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969). The guarantee consists of three separate constitutional protections: "It protects against a second prosecution for the same offense after acquittal. It protects against a second prosecution for the same offense after conviction. And it protects against multiple punishments for the same offense." [Footnotes omitted.] North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 23 L.Ed.2d 656 (1969). In this case the defendant apparently contends that he is being subjected to double jeopardy because the greater sentence after revocation of probation subjects him to multiple punishments for the same offense. We disagree.
When a defendant's probation is revoked, Section 12.1-32-07(4), N.D.C.C., clearly provides the trial court with the authority to resentence him to any sentence that was available at the initial time of sentencing. That section provides:
"If the defendant violates a condition [of probation] at any time prior to the expiration or termination of the period, the court may continue him on the existing sentence, with or without modifying or enlarging the conditions, or if such continuation, modification, or enlargement is not appropriate, may impose any other sentence that was available under section 12.1-32-02 or 12.1-32-09 at the time of initial sentencing." [Emphasis added.]
This statute reflects the policy that a sentence which includes probation is not final, but is designed to provide a flexible alternative which allows the court to monitor the defendant's conduct while on probation. State v. Miller, 418 N.W.2d 614 (N.D.1988). Thus a decision to resentence a defendant to a sentence greater than his original sentence does not subject the defendant to multiple punishments for the same offense; rather, this practice reflects the need to alter the defendant's sentence in light of the fact that the court's initial sentence of probation was not effective and must be altered. Because the defendant is not being subjected to multiple punishments for the same offense there is no violation of the guarantee against being subjected to double jeopardy.
Our decision that a sentence imposed after revocation of probation which is greater than that originally imposed does not violate the guarantee against subjection to double jeopardy is supported by decisions from other courts. In Smith v. State, 261 Ind. 510, 307 N.E.2d 281 (1974), the defendant was convicted of carrying a pistol without a license. He was sentenced to one year in prison and fined $200. The sentence was suspended and the defendant was placed on probation. The defendant violated the conditions of his probation and the probation was revoked. The defendant was then sentenced to ten years' imprisonment. The court considered and rejected the defendant's argument that sentencing him anew subjected him to double jeopardy, noting:
"This same argument has been used in situations where an appellant has been successful in obtaining a reversal of a conviction and then has argued that a second trial would amount to double jeopardy. In North Caroline v. Pearce (1969), 395 U.S. 711, 89 S.Ct. 2072, at pages 2079-2080, 23 L.Ed.2d 656, the United States Supreme Court addressed itself to this problem and at page 723 stated:
`We hold, therefore, that neither the double jeopardy provision nor the Equal Protection Clause imposes an absolute bar to a more severe sentence upon reconviction. A trial judge is not constitutionally precluded, in other words, from imposing a new sentence, whether greater or less than the original sentence, in the light of events subsequent to the first trial that may have thrown new light upon the defendant's "life, health, habits, conduct, and mental and moral propensities." Williams v. New York, [1949], 337 U.S. 241, 245, 69 S.Ct. 1079, 1082, 93 L.Ed. 1337, 1341. Such information *785 may come to the judge's attention from evidence adduced at the second trial itself, from a new presentence investigation, from the defendant's prison record, or possibly from other sources. The freedom of a sentencing judge to consider the defendant's conduct subsequent to the first conviction in imposing a new sentence is no more than consonant with the principle, fully approved in Williams v. New York, supra, that a State may adopt the "prevalent modern philosophy of penology that the punishment should fit the offender and not merely the crime." Id., 337 U.S. at 247, 69 S.Ct. at 1083, 93 L.Ed. at 1342.'
The situation in the case at bar is analogous. The appellant for obvious reasons for his own benefit chose to accept probation under the terms set forth by the trial court and under the conditions set out in the pertinent statutes. When he violates the probation so afforded him, he cannot be heard to complain that the operation of the statute constitutes double jeopardy." 307 N.E.2d at 282-283.
See also State v. Payne, 404 So.2d 1055 (Fla.1981), and State v. Perkins, 121 N.H. 713, 435 A.2d 504 (1981); Contra, Nelson v. State, 617 P.2d 502 (Alaska 1981), and Commonwealth v. Tomlin, 232 Pa.Super. 147, 336 A.2d 407 (1975).
Our decision is also supported by statements made by the United States Supreme Court in United States v. DiFrancesco, 449 U.S. 117, 101 S.Ct. 426, 66 L.Ed.2d 328 (1980). In DiFrancesco the Court considered whether a Federal statute which allowed the Government to appeal a sentence imposed by the trial court under a statute providing for increased sentences for convicted dangerous special offenders violated the Double Jeopardy Clause of the Fifth Amendment. In considering this issue the Court discussed the application of the Double Jeopardy Clause, noting the special weight given to an acquittalthat once a defendant is acquitted, there is an absolute prohibition against a retrial. 449 U.S. at 129, 101 S.Ct. at 443. The Court then described the issue before it as being
"to determine whether a criminal sentence, once pronounced, is to be accorded constitutional finality and conclusiveness similar to that which attaches to a jury's verdict of acquittal. We conclude that neither the history of sentencing practices, nor the pertinent rulings of this Court, nor even considerations of double jeopardy policy support such an equation." 449 U.S. at 132, 101 S.Ct. at 435.
Thus the Court concluded that allowing the Government to appeal a sentence imposed on a dangerous special offender did not violate the Fifth Amendment protection against subjection to double jeopardy. 449 U.S. at 139, 101 S.Ct. at 438.
In reaching this decision the Court stated:
"The Double Jeopardy Clause does not provide the defendant with the right to know at any specific moment in time what the exact limit of his punishment will turn out to be. Congress has established many types of criminal sanctions under which the defendant is unaware of the precise extent of his punishment for significant periods of time, or even for life, yet these sanctions have not been considered to be violative of the Clause. Thus, there is no double jeopardy protection against revocation of probation and the imposition of imprisonment. There are other situations where probation or parole may be revoked and sentence of imprisonment imposed. While these criminal sanctions do not involve the increase of a final sentence, and while the defendant is aware at the original sentencing that a term of imprisonment later may be imposed, the situation before us is different in no critical respect. Respondent was similarly aware that a dangerous special offender sentence is subject to increase on appeal. His legitimate expectations are not defeated if his sentence is increased on appeal any more than are the expectations of the defendant who is placed on parole or probation that is later revoked." [Citations omitted.] 449 U.S. at 137, 101 S.Ct. at 437.
In this case Jones was on probation, and Section 12.1-32-07(4) gave Jones notice that a violation of the conditions of his probation could result in the imposition of any sentence which was originally available. *786 This includes a sentence which is more severe than the sentence originally imposed. Thus Jones should have expected that a violation of the conditions of his probation could result in a harsher sentence.
Therefore, we conclude that resentencing a defendant after revoking his probation to a sentence greater than that originally imposed does not violate the Fifth Amendment guarantee against subjection of the defendant to double jeopardy.
III
Finally, Jones claims that our decision in State v. Nace, 371 N.W.2d 129 (N.D. 1985), prohibited the trial court from imposing a greater sentence at the time of resentencing than was imposed in the initial sentence. We disagree.
In State v. Nace, this court held that the term of a combined sentence of imprisonment and probation may not exceed the maximum term for which a defendant might have been imprisoned. 371 N.W.2d at 132. Thus Nace does not prohibit the court from sentencing a defendant who has violated the conditions of his probation to a sentence greater than the one originally imposed upon the defendant.
In this case Jones was sentenced at the time of resentencing to four years in prison and six years of probation. This equals a combined sentence of ten years. Jones was convicted of gross sexual imposition in violation of Section 12.1-20-03(1)(d), which is classified as a Class A felony. A Class A felony is punishable by up to twenty years' imprisonment. Thus the ten-year term of Jones's combined sentence was well within the maximum term of twenty years to which Jones might have been sentenced. Therefore, the trial court did not violate the holding of State v. Nace.
The order is affirmed.
ERICKSTAD, C.J., and LEVINE, MESCHKE and GIERKE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2230099/ | 702 N.W.2d 586 (2005)
SNYDER
v.
MIDWEST MOBILE HOMES, INC.
No. 127770.
Supreme Court of Michigan.
August 30, 2005.
SC: 127770, COA: 256270.
On order of the Court, the application for leave to appeal the December 2, 2004 order of the Court of Appeals is considered and, pursuant to MCR 7.302(G)(1), in lieu of granting leave to appeal, we REMAND this case to the Court of Appeals for consideration as on leave granted.
We do not retain jurisdiction. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2451264/ | 767 S.W.2d 759 (1989)
David Lee POWELL, Appellant,
v.
The STATE of Texas, Appellee.
No. 67630.
Court of Criminal Appeals of Texas, En Banc.
January 11, 1989.
*760 Will Gray, Houston, for appellant.
Ronald Earle, Dist. Atty., Philip A. Nelson, Jr., Asst. Dist. Atty., and Robert Huttash, State's Atty., Austin, for the State.
Before the court en banc.
OPINION ON REMAND FROM THE UNITED STATES SUPREME COURT
WHITE, Judge.
Appellant was convicted of capital murder. V.T.C.A., Penal Code Sec. 19.03(a)(1). Punishment was assessed at death. Art. 37.071(b), V.A.C.C.P. On direct appeal to this Court his conviction was affirmed. Powell v. State, 742 S.W.2d 353 (Tex.Cr. App.1987). Appellant then filed a petition for writ of certiorari which was summarily granted by the United States Supreme Court. Upon consideration, the Supreme Court vacated our judgment and remanded for "further consideration in light of Satterwhite v. Texas," 486 U.S. ___, 108 S. Ct. 1792, 100 L. Ed. 2d 284 (1988) (Satterwhite II.) After renewed review, under the mandates of Satterwhite II, we will again affirm appellant's conviction.
An explanation of the precise procedural posture of this case is essential to our present disposition. On original submission to this Court, appellant alleged, inter alia, Estelle v. Smith error in the admission of psychiatric testimony at punishment. Estelle v. Smith, 451 U.S. 454, 101 S. Ct. 1866, 68 L. Ed. 2d 359 (1981) (Smith). Specifically, appellant contended that it was error to admit psychiatric testimony concerning future dangerousness where such testimony was based on pre-trial competency examinations conducted without the appropriate warnings or notice. We overruled this contention, and found no error stating, "[A]t first glance, this case seems to be ruled by the Supreme Court's decision in [Smith]. However, a thorough review of the record and a careful reading of both [Smith ] and Battie [v. Estelle, 655 F.2d 692 (5th Cir.1981)] brings us to the conclusion that the instant case is distinguishable and is a case of first impression." Powell, supra, at 357-358. We opined that where the defendant raises the defense of insanity, which is applicable to guilt-innocence as well as punishment issues, he waives his Fifth and Sixth Amendment rights under Estelle v. Smith, supra *761 concerning such psychiatric testimony.[1] After finding no error, we gratuitously added the following harmless error argument:
Finally, we conclude that even if there was error in admitting the [psychiatric] testimony ... the error was harmless.
. . . .
We must conclude, as we did in Satterwhite v. State, 726 S.W.2d 81 (Tex.Cr. App.1986) that: `the properly admitted evidence was such that the minds of an average jury would have found the State's case sufficient on the issue of the "probability that the defendant would commit criminal acts of violence that would constitute a continuing threat to society" even if [the psychiatric] testimony had not been admitted. The admission of the testimony was harmless error beyond a reasonable doubt.' [citation omitted].
Powell, supra at 359-360. Thus, our response to appellant's Smith allegation was two-fold: (1) there was no error and (2) even if error could be discerned, such was harmless under our then recent decision of Satterwhite v. State, 726 S.W.2d 81 (Tex. Cr.App.1986) (Satterwhite I).
After being unsuccessful on direct appeal, appellant then filed a petition for writ of certiorari in the United States Supreme Court. In his petition appellant challenged, inter alia, both of our holdings on the Smith issue. In his first question for review, appellant challenged our core holding that a defendant waives his Fifth and Sixth Amendment Smith rights when he introduces psychiatric testimony in favor of an insanity contention. In his fifth question for review, appellant challenged our "f[a]ll back" holding that even if there was error, such was harmless under Satterwhite I. Appellant's petition was granted.
At that time, the harmless error analysis of Satterwhite I was pending review in the Supreme Court. See, Powell, supra at 370-371 (Teague, J., dissenting) (noting that the instant case should be held pending the outcome of Satterwhite I). Soon thereafter, the Supreme Court reversed Satterwhite I to hold that the Chapman v. California, 386 U.S. 18, 24, 87 S. Ct. 824, 828, 17 L. Ed. 2d 705 (1967), harmless error test applies to Smith error. Satterwhite II, supra at 486 U.S. ___, 108 S. Ct. 1797-98. The Court stated,
Accordingly, we hold that the Chapman v. California, [supra,] harmless error rule applies to the admission of psychiatric testimony in violation of the Sixth Amendment right set out in Estelle v. Smith.
. . . .
Applying the Chapman, supra, harmless error test, we cannot agree with the Court of Criminal Appeals that the erroneous admission of Dr. Grigson's testimony was harmless beyond a reasonable doubt. The question ... is not whether the legally admitted evidence was sufficient to support the death sentence, which we assume it was, but rather, whether the State has proved `beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained.'
After handing down Satterwhite II, the Supreme Court summarily vacated and remanded the instant case with a cursory order that it be further considered in light of Satterwhite II.[2]Powell v. Texas, ___ U.S. ___, 108 S. Ct. 2891, 101 L. Ed. 2d 926 (1988). Thus, the Court's remand of the instant case under Satterwhite II subjects only our secondary reliance on the harmless error analysis of Satterwhite I to renewed review. See, Whan v. State, 485 S.W.2d 275, 277 (Tex.Cr.App.1972), cert. denied, 411 U.S. 934, 93 S. Ct. 1906, 36 *762 L.Ed.2d 394 (1973) (reversal and remand as to specific point affects only that point). Cf., Schwerdtfeger v. State, 749 S.W.2d 781, 783 (Tex.Cr.App.1988) (Clinton, J., dissenting to refusal of appellant's petition for discretionary review) (reversal and remand on one ground does not limit lower court's authority to address grounds not previously addressed); Garrett v. State, 749 S.W.2d 784, 787 (Tex.Cr.App.1986); Spindler v. State, 740 S.W.2d 789, 791 (Tex.Cr.App. 1987); Ware v. State, 736 S.W.2d 700, 701 (Tex.Cr.App.1987); Granviel v. State, 723 S.W.2d 141, 147 (Tex.Cr.App.1986) cert. denied, ___ U.S. ___, 108 S. Ct. 205, 98 L. Ed. 2d 156 (1987) (law of case doctrine).
Because we initially held that there was no error, the harmless error analysis of our original opinion was superfluous to the disposition and constituted nothing more than obiter dictum. However, in this dictum we utilized a harmless error standard which the Supreme Court has now denounced. Satterwhite II, supra. Thus, we withdraw that portion of our original opinion which gratuitously applied a harmless error analysis and we further disavow our prior reliance on the now overruled Satterwhite I. Our initial determination of no Smith error, as well as the remaining holdings of our original opinion, were not addressed by the Court; thus, they remain undisturbed. Consequently, appellant's conviction stands affirmed.
CLINTON, Judge, dissenting.
This is a capital murder case in which judgment of the trial court assessed the death penalty. That judgment was affirmed by the judgment of this Court pursuant to its opinion in Powell v. State, 742 S.W.2d 353 (Tex.Cr.App.1987).
In due course appellant filed his petition for writ of certiorari to review the judgment of this Court, and the Attorney General of the State of Texas responded with his brief in opposition. See Rules of the Supreme Court of the United States, Part V, Rules 17.1(c), 21.1(a), (h) and (j), and 22.1.[1]
On May 31, 1988, the Supreme Court delivered its opinion in Satterwhite v. Texas, 486 U.S. 249, 108 S. Ct. 1792, 100 L. Ed. 2d 284 (1988). Given the single question presented, see ante at n. 1, the Supreme Court first decided that "the use of *763 Dr. Grigson's testimony at the capital sentencing proceeding on the issue of future dangerousness violated the Sixth Amendment," id., at ___, 108 S.Ct., at 1797, 100 L. Ed. 2d, at 293; then it held that "the Chapman harmless error rule applies to the admission of psychiatric testimony in violation of the Sixth Amendment right set out in Estelle v. Smith," id., at ___, 108 S.Ct., at 1798, 100 L. Ed. 2d at 295; finally, it concluded, "Having reviewed the evidence in this case, we find it impossible to say beyond reasonable doubt that Dr. Grigson's expert testimony on the issue of Satterwhite's future dangerousness did not influence the sentencing jury," id., at ___, 108 S.Ct., at 1799, 100 L. Ed. 2d at 296.[2]
Considering the question presented to the Supreme Court and its decision, holding and conclusion in Satterwhite, see ante, at 761, to say, as the majority now does, that Satterwhite "solely concerned harmless error," at 761, is to disregard much in Part II of that opinion finding a violation of the Sixth Amendment right to assistance of counsel.
Thereafter, on June 30, 1988, in ___ U.S. ___, 108 S. Ct. 2891, 101 L. Ed. 2d 926 David Lee Powell, Petitioner, v. Texas, the Supreme Court ordered a summary disposition of this cause under Rule 23.1.[3] First it granted leave to proceed in forma pauperis and granted his petition for writ of certiorari; then it entered a separate order stating in pertinent part, viz:
THIS CAUSE having been submitted on the petition for writ of certiorari and response thereto,
ON CONSIDERATION WHEREOF, it is ordered and adjudged by this Court that the judgment of the above court in this cause is vacated, and that this cause is remanded to the Court of Criminal Appeals of Texas for further consideration in light of Satterwhite v. Texas, 486 U.S. ___ [108 S. Ct. 1792, 100 L. Ed. 2d 284] (1988).
See Powell v. Texas, ___ U.S. ___, 108 S. Ct. 2891, 101 L. Ed. 2d 926 (1988).[4]
The majority characterizes as "cursory" the summary reconsideration order entered by the Supreme Court in this cause. However, more than a superficial examination of the situation will dispel its belief that the remand order "subjects only our secondary reliance on the harmless error analysis of Satterwhite I to renewed review." At 761-762.
Formerly its practice of summary disposition on account of one or more recent intervening decisions produced a reversal or affirmance on the merits, but lately the Supreme Court "prefers to delegate the task to the lower courts." R.L. Stern, E. Gressman & S.M. Shapiro, Supreme Court Practice (6th Ed.1986) 277-279. Once relatively rare, such summary reconsideration orders have become fairly common. See A. Hellman, Error Correction, Lawmaking, and the Supreme Court's Exercise of Discretionary Review, 44 U.Pitt.L.Rev. 795, at 837, n. 239, discussed in R.L. Stern et al., supra, at 279, n. 73.[5]
When the Supreme Court enters a summary reconsideration order "the lower court is being told to reconsider the entire case in light of the intervening precedent which may or may not compel a different result." R.L. Stern et al., supra, at 280. *764 In my view, there is more to reconsider than just "secondary reliance on the harmless error analysis of Satterwhite I," at 762.
In the first place, it is most unlikely that the Supreme Court would remand this cause for us to reconsider a superfluous harmless error analysis, albeit it was utterly flawed. Unless the Supreme Court believed "there was error in admitting the testimony of Drs. Coon and Parker," Powell v. State, supra, at 359, there is nothing to test for harm.
Secondly, in Satterwhite v. Texas the Supreme Court restricted its review to a violation of defendants' "Sixth Amendment right to consult with counsel before submitting to psychiatric examinations to designed to determine their future dangerousness." 486 U.S., at ___, 108 S.Ct., at 1794, 100 L. Ed. 2d, at 290; see ante at 761. That was the sole violation found by this Court in Satterwhite, 726 S.W.2d, at 92-94.
Similarly, in Bennett v. Texas, ante, n. 4, at 763, the germane question presented for review is almost identical (even naming the same Dr. Grigson) to that in Satterwhite v. Texas, except that it also alludes to the Fifth Amendment; because this Court found error in admitting his testimony under state law, 742 S.W.2d, at 671, the Supreme Court necessarily determined that implications of the Sixth Amendment raised a substantial federal question, else it would not have granted the petition for writ of certiorari.
Likewise in Cook v. State, ibid., the question presented the issue of harmless error in admitting testimony of Dr. Grigson "in violation of petitioner's right to counsel under the Fifth and Sixth Amendments;" from the opinion of this Court that trial counsel specifically objected on "right to counsel" and preserved his Sixth Amendment error is manifest, 741 S.W.2d at 944.[6]
In Powell v. State, supra, the majority opinion demonstrates that both the Fifth and Sixth Amendments were violated, viz:
"... The record reflects that at no point in time did Coons or Parker inform appellant or his attorneys that they were asked to or had examined appellant on the issue of future dangerousness. Nor did Coons or Parker give appellant, who was in custody, Miranda warnings."
Id., at 357. Thus, but for the theory of waiver indulged by the majority, the trial court plainly committed error of constitutional dimension.
On that matter two points are immediately germane: First, in finding a "waiver" the majority relied primarily on dicta in Battie v. Estelle, 655 F.2d 692 (CA5 1981), which involves only the Fifth Amendment (indeed the Fifth Circuit expressly disclaimed any consideration of the Sixth Amendment right to counsel, id., n. 1, at 694); only tangentially did the majority include the Sixth Amendment error, Powell, supra, at 359. Second, before the Supreme Court the State gently declined to support that theory of "waiver," specifically advancing its own idea in the premises, viz:
"The state recognizes that, while the court below stated that Powell `waived' his Sixth Amendment right by introducing psychiatric testimony, the record does not reflect an intelligent and understanding waiver of Powell's right to counsel. See Barker v. Wingo, 407 U.S. 514 [92 S. Ct. 2182, 33 L. Ed. 2d 101] (1972). Rather, the `waiver' of which the court speaks is in terms of estoppel or a bar to objection to the introduction of the evidence."
Brief, n. 3, at 9. Patently, the Supreme Court was not persuaded that either the "waiver" theory applied by the majority of this Court or the alternative pursued by the State warranted summary affirmance of the judgment of this Court or a denial of certiorari. See Rule 23.1, supra.
*765 Accordingly, its remand for reconsideration of "the entire case" was on account of the Sixth Amendment error confirmed and found to be harmful in Satterwhite v. Texas. Contrary to the view of the majority, at 762, "the holdings of our original opinion do not "remain undisturbed."
Because the majority refuses to reconsider the Sixth Amendment violation, and thereby invites another petition for writ of certiorari, I respectfully dissent.
TEAGUE, Judge, dissenting.
The Supreme Court of the United States has entered an Order that pertains to this cause, namely, "this cause is remanded to the Court of Criminal Appeals of Texas for further consideration in light of Satterwhite v. Texas, 486 U.S. 249, 108 S. Ct. 1792, 100 L. Ed. 2d 284 (1988)." What does this Order mean?
It appears to me and Joe Vargo of the Austin American-Statesmen, if no one else, that the Supreme Court's Order must be read literally, and, if read literally, it is obvious to me and Vargo, if no one else, that, as Vargo put it, the Supreme Court of the United States ruled that "In vacating Powell's [the appellant's] sentence, the Supreme Court said the trial court erred during the punishment phase of the trial by allowing testimony from a psychiatrist [sic]."
I find that the Supreme Court of the United States disagrees not only with what this Court stated and held when this cause was previously before this Court regarding the Estelle v. Smith, 451 U.S. 454, 101 S. Ct. 1866, 68 L. Ed. 2d 359 (1981), issue, i.e., it disagrees with what this Court's previous majority opinion stated and held regarding the admission of the opinion testimony of Drs. Coons and Parker on the issue of appellant's future dangerousness at the punishment stage of appellant's trial, but also disagrees with this Court's previous majority opinion's holding that any error in admitting such testimony was harmless under Chapman v. California, 386 U.S. 18, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967).
When this cause was previously before this Court I agreed with what Presiding Judge Onion, now retired, stated in the dissenting opinion that he filed in this cause, but honestly believed that the Supreme Court of the United States, if given the opportunity, would adopt in principle what the majority opinion of this Court by Judge Mc Cormick, now Presiding Judge Mc Cormick, stated and held. Thus, I went out on the limb and made a prediction, which has now been proved wrong, and therefore must acknowledge that I should not ever predict in print what a majority of the present Supreme Court of the United States might state and hold in a given capital murder case.
My oath of office requires that when it comes to decisions of the Supreme Court of the United States, that concern federal constitutional law, I must acknowledge that that Court's decisions are the Supreme Law of the Land. See Article VI, Federal Constitution. Also see Massachusetts v. Upton, 466 U.S. 727, 104 S. Ct. 2085, 80 L. Ed. 2d 721 (1984). Of course, if a state court judgment is based upon an independent and adequate state ground, the Supreme Court of the United States has no jurisdiction to decide the case so long as the state court's decision does not fall below the federal ceiling imposed on the States through the Fourteenth Amendment. See Michigan v. Long, 463 U.S. 1032, 103 S. Ct. 3469, 77 L. Ed. 2d 1201 (1983). Also see Collins, Plain Statements: The Supreme Court's New Requirement, 70 A.B.A.J. 92 (1983).
Therefore, I respectfully dissent to the majority of this Court's refusal to adopt Presiding Judge Onion's well reasoned and well written dissenting opinion on original submission as "The Opinion of the Court of Criminal Appeals on Remand from the Supreme Court of the United States" and also respectfully dissent to this Court's majority opinion's feeble efforts to delay doing what its federal constitutional law duty requires that this Court must do.
NOTES
[1] Since Powell, supra, this Court has reiterated this position. Barber v. State, 757 S.W.2d 359, 365-367 (Tex.Cr.App.1988).
[2] The Court took the same action with other cases in which review had been granted pending the outcome of Satterwhite II. Cook v. State, ___ U.S. ___, 109 S. Ct. 39, 102 L. Ed. 2d 19 (1988); Lankford v. Idaho, ___ U.S. ___, 108 S. Ct. 2815, 100 L. Ed. 2d 917 (1988); Bennett v. Texas, ___ U.S. ___, 108 S. Ct. 2815, 100 L. Ed. 2d 917 (1988).
[1] Appellant presented for review the following germane (paraphrased) questions, viz:
1. Whether a defendant waives the Fifth and Sixth Amendment rights articulated in Estelle v. Smith and Miranda v. Arizona by introducing psychiatric testimony at the guilt stage of trial on the defensive issue of insanity at the time of the offense.
Petition, at 8.
2. Whether he was denied effective assistance of counsel, a fair and impartial trial, equal protection and due process of law and the right to be free from cruel and unusual punishment guaranteed by respective constitutional amendments because the trial court allowed expert witnesses of the State to give evidence obtained in violation of the Fifth, Sixth and Fourteenth Amendments. See Satterwhite v. Texas, No. 86-6284 [486 U.S. 249, 108 S. Ct. 1792, 100 L. Ed. 2d 284] (cert. granted, June 1, 1987).
Petition, at 8. (That one is practically identical to the sole question presented in Satterwhite. See 41 CrL 4062, 4068).
5. Whether the Court of Criminal Appeals of Texas applied an unconstitutional standard in holding admission of testimony of those expert witnesses was harmless on the basis stated in its opinion in Powell v. State, 742 S.W.2d, at 360.
Petition, at 9.
In opposition the Attorney General contended the Supreme Court "suggested" in Estelle v. Smith and "held" in Buchanan v. Kentucky, 483 U.S. 402, 107 S. Ct. 2906, 97 L. Ed. 2d 336 (1987) that when defendant presents psychiatric testimony in support of an insanity defense the State may respond with competing testimony from its own expert witness, so that alert counsel "must be presumed to have consulted with Powell on the advisability of submitting to an examination," and would have anticipated that the State could rebut his expert testimony with its own psychiatric evidence. Brief, at 6-9.
As to waiving his Sixth Amendment right, the State conceded that "the record does not reflect an intelligent and understanding waiver of Powell's right to counsel," and instead conjured up that this Court had in mind a "waiver" more "in terms of estoppel or bar to objection due to the introduction of the evidence." Brief, n. 3 at 9.
Finally, the State asserted, "The proper inquiry is not whether the evidence `might' have affected the jury's verdict, but whether, absent the evidence, the jury would nonetheless have reached the same verdict. Chapman, 386 U.S. at 26 [87 S.Ct. at 829]." It said that was the test applied by this Court, and its conclusion was "justified by the facts in this case." Brief, at 13-14.
[2] All emphasis above and throughout is mine unless otherwise noted.
[3] "After consideration of the papers distributed pursuant to Rule 22, the Court may enter an appropriate order. The order may be a summary disposition on the merits."
[4] Above content of the summary reconsideration order is reproduced from a true copy attested by the Clerk of the Supreme Court.
[5] Close on the heels of Satterwhite, June 13, 1988, the Supreme Court vacated respective judgments in two causes and remanded for reconsideration in light of Satterwhite, viz: Bennett v. Texas, ___ U.S. ___, 108 S. Ct. 2815, 100 L. Ed. 2d 917, reversing Bennett v. State, 742 S.W.2d 664 (Tex.Cr.App.1987), and Lankford v. Idaho, ___ U.S. ___, 108 S. Ct. 2815, 100 L. Ed. 2d 917, reversing State v. Lankford, 113 Idaho 688, 747 P.2d 710 (1987). See ___ U.S. ___, 108 S. Ct. 2815, 100 L. Ed. 2d 917 (1988).
On October 3, 1988, in Cook v. Texas, ___ U.S. ___, 109 S. Ct. 39, 102 L. Ed. 2d 19, the Supreme Court similarly remanded for reconsideration of Cook v. State, 741 S.W.2d 928 (Tex.Cr.App.1987). ___ U.S. ___, 109 S. Ct. 39, 102 L. Ed. 2d 19 (1988).
[6] The certiorari papers in Lankford v. Idaho, supra, are not readily available, so one cannot know what questions were presented to the Supreme Court that produced that "GVR" order. The opinion of the Idaho Supreme Court in State v. Lankford, ante, n. 4, at 763, 761 P.2d 1169, considered and rejected many asserted errors, and its order on remand for rebriefing does not reveal grounds it will reconsider. See State v. Lankford, 114 Idaho 817, 761 P.2d 1169 (1988). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2376687/ | 55 F. Supp. 2d 1248 (1999)
GREENPEACE, et al., Plaintiffs,
v.
NATIONAL MARINE FISHERIES SERVICE, et al., Defendants.
No. C98-492Z.
United States District Court, W.D. Washington. at Seattle.
July 13, 1999.
*1249 *1250 *1251 *1252 Patti A. Goldman, Earthjustice Legal Defense Fund, Seattle WA, Peter Van Tuyn, Trustees for Alaska, Anchorage, AK, Eric Paul Jorgensen, Douglas A. Ruley, Earthjustice Legal Defense Fund, Juneau, AK, for plaintiffs.
Brian C. Kipnis, U.S. Attorney's Office, Seattle, WA, Michael J. Robinson, Anthony P. Hoang, U.S. Dept. of Justice, General Litigation Section ÔÇö Environment Division, Washington DC, Lyn Jacobs, U.S. Dept. of Justice, Environmental & Natural Resources, Washington DC, for defendants.
Jay H. Zulauf, Christopher s. McNulty, Mundt, MacGregor, Hapel, Falconeer, Zulauf & Hall, Seattle WA, for At-Sea Processors Association, et al., for intervenor-defendants.
James Alexander Smith, Jr., Smith & Leary, Seattle WA, George J. Mannina, Jr., Gary C. Adler, O'Connor & Hannan, Washington DC, for Westward Seafoods, Inc., et al.
Linda Rae Larson, Heller, Ehrman, White & McAuliffe, Seattle WA, for United Catcher Boats.
Marc Slonim, Ziontz, Chestnut, Varnell, Berley & Slonim, Seattle WA, Michael A.D. Stanley, Juneau AK, for Aleutians East Borough, et al.
AMENDED ORDER
ZILLY, District Judge.
I. INTRODUCTION
The Gulf of Alaska (GOA) and the Bering Sea/Aleutian Islands region (BSAI), collectively referred to as the North Pacific ecosystem, is home to the largest commercial fishery in the United States. This region is also home to the western population of Steller sea lions, which were listed under the Endangered Species Act (ESA) as a threatened species in 1990 and reclassified as endangered in 1997. This case arises out of the complex and difficult-to-assess interaction between the fisheries and the Steller sea lion population.
The federal defendants in this case are subject to the complicated legal dictates of the ESA, the National Environmental Policy Act (NEPA), and the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson Act). Pursuant to the Magnuson Act, the North Pacific Fisheries Management Council (Council) authorizes Fishery Management Plans (FMPs) which regulate all aspects of the fisheries in the GOA and BSAI. Under the ESA, the National Marine Fisheries Service *1253 (NMFS) must consult, either formally or informally, to ensure that these FMPs are not likely to jeopardize the continued existence of the Steller sea lions, nor to modify their critical habitat. NEPA requires that environmental information is made available to decision-makers, including the Council and the Secretary of Commerce, as well as to the public, for use in such decision-making as the creation and amendment of the FMPs.
Plaintiffs[1] filed suit against NMFS and William M. Daley, Secretary of Commerce (collectively NMFS), in April 1998, challenging the 1998 North Pacific Fishery Management Plans under both the ESA and NEPA. Representatives of the fishing industry intervened (collectively intervenors or industry)[2]. The Court granted additional environmental organizations leave to file amicus briefs in support of plaintiffs.[3] The focus of the litigation has now shifted to the parameters of the 1999 fisheries in the GOA and BSAI. In particular, plaintiffs and intervenors challenge determinations made in NMFS's Biological Opinion issued December 3, 1998 regarding the 1999-2001 atka mackerel fishery and the 1999-2001 pollock fisheries.[4] S1-55. Plaintiffs and intervenors also challenge the "Final Reasonable and Prudent Alternatives" passed by the Council and approved by NMFS. Finally, plaintiffs challenge the legal adequacy of the Supplemental Environmental Impact Statement (SEIS), issued on December 18, 1998, regarding the North Pacific fisheries.[5]
This matter currently is before the Court on cross-motions for summary judgment: plaintiffs' motion, docket no. 181, defendants' motion, docket no. 184, and intervenors' motion, docket no. 187. On May 13, 1999, the Court heard argument on these motions and took the matter under advisement in order to carefully study the issues presented. Having considered the arguments of counsel, the motions, all materials filed in support and in opposition, the amicus briefs, and the record in this case, the Court hereby GRANTS in part and DENIES in part the motions of plaintiffs, defendants, and intervenors.
II. BACKGROUND
A. Steller Sea Lions
Steller sea lions are closely related to other types of sea lions and to fur seals. The genus to which Steller sea lions belong is thought to be at least 3 million years old. Female Steller sea lions average 2.3 meters in length and 263 kilograms weight, while males are somewhat larger, at 2.8 meters and 566 kilograms. Males live to about 20 years old, and females can reach 30 years old. In 1965, the population of the western stock of Steller sea lions was estimated at 230,000 animals. *1254 They inhabit coastal areas around the North Pacific Rim, from Southern California to Japan. Before the recent population decline, approximately 75% of the world's population of Steller sea lions were found in Alaska. The majority of Steller sea lions are still found in Alaska, primarily in the Gulf of Alaska and Bering Sea/Aleutian Islands area.
Over the last three decades, however, the population of Steller sea lions in the North Pacific has declined approximately 85%. In 1990, NMFS listed the Steller sea lion as a threatened species under the ESA, and established emergency protective regulations in an attempt to stop the population decline and to begin the process of recovery.[6] In 1993, NMFS designated "critical habitat" for the Steller sea lion, based in significant part on protecting food resources for the sea lions.[7] This critical habitat consists of the area around 40 rookeries and 82 haulouts, which provide areas for reproduction, feeding, rest, and protection from predators and weather.[8] In 1997, based on genetic distinctions, the Steller sea lion species was separated into the western and eastern populations; the western population's status was then changed to endangered. During the 1990s, the rate of decline has slowed to single-digits, but nevertheless continues. AR-125 at 4; S1-236. NMFS has determined that the next twenty years will likely be crucial for Steller sea lion survival and recovery. S1-55 at 60.
B. Fishing Industry
1. Pollock and Mackerel
The North Pacific is home to the largest commercial fishing industry in the United States. The most abundant fish in the region, and the major component of the North Pacific fishing industry, is the walleye pollock (pollock). Pollock is a bottom-dwelling fish and a member of the cod family. S1-55 at 21. Mature female pollock are approximately 40 cm in length, and males are longer. Id. Pollock have a fairly short life-span and a high mortality rate, in part because they are sometimes highly cannibalistic.
The estimated biomass of pollock in the North Pacific ecosystem has fluctuated significantly since the 1960s. In the east Bering Sea, for example, the estimated biomass was less than 2 million metric tons (mmt) in the mid-1960s, rose to nearly 8 mmt in 1971, declined to 4 mmt in 1978, peaked at 14 mmt in 1984, declined to 8 mmt in 1990, increased again to over 12 mmt in 1993, and dropped to 7 mmt in 1997. S1-55 at 25. The fishing effort directed toward pollock has also fluctuated. From 1964 to 1970, the pollock catch in the BSAI rose from approximately 200,000 to 1 million mt. Id. at Fig. 13. In the late 1980s, the total catch peaked at approximately 2.7 mmt. Id. A significant portion of this catch came from what later was designated as Steller sea lion critical habitat. Id. By the mid-1990s, the total pollock catch in the BSAI had declined to approximately 1.25 mmt, but much of the catch came from within Steller sea lion critical habitat. Id. Scientists believe that the pollock population changes stem in large part from climate changes which have effected the rest of the North Pacific ecosystem as well. In part because of *1255 these changes, Steller sea lions have become increasingly dependent on pollock as their major source of prey.
In the Aleutian Islands, atka mackerel (mackerel) also form a very significant part of the sea lions' diet. Mackerel are a pelagic, dense schooling fish. They reach a maximum size of 50-55 cm, at age 4 to 6 years. S1-55 at 7. Biomass trends for the atka mackerel are similar to those for pollock: in 1977, the biomass in the BSAI was approximately 300,000 mt. It rose in the early 1980s, fell again, then peaked at approximately 1.3 mmt in 1991. Id. at Fig. 2. In the 1990s, the biomass has declined steadily, to approximately 600,000 mt in 1998. Id. The amount of mackerel caught has been generally rising since the late 1970s, with a brief peak in the mid-1980s at 30,000 mt, a decline in the late 1980s to approximately 18,000 mt, then sharp and steady growth throughout the early 1990s. Id. at Fig. 5. By 1996, the total atka mackerel catch reached nearly 80,000 mt. Id. Since 1980, the percentage of the catch occurring in Steller sea lion critical habitat has been almost always above 75%, and in many years was well over 90%. Id.
2. Legal Parameters
The Magnuson Act provides the legal framework for federal management of the fisheries in the North Pacific. This Act establishes eight Regional Fishery Management Councils, including the North Pacific Fishery Management Council, that have primary responsibility for designing fishery management measures, including the Fishery Management Plans (FMPs) and implementing regulations. The Secretary of Commerce reviews these proposals, and can either approve or disapprove, in whole or in part, those recommendations; the Secretary cannot make changes to the proposals or take action based on a policy disagreement with the Councils' recommendations. The FMPs must specify each fishery's optimum yield, the catch level which would provide the greatest benefit to the nation. The plans must also state how much of that optimum yield can be expected to be harvested by vessels from the United States. Additionally, the FMPs must specify the level of fishing that would constitute overfishing.
The FMPs typically contain a high level of detail concerning all the variables involved in fishing, including Total Allowable Catch (TAC) limits for targeted species, "time and area closures, gear restrictions, by catch limits of prohibited species, and allocation of TACs among vessels delivering to different types of processor groups, gear types, and qualifying communities." S2-350 at 9. With respect to some fisheries, including the atka mackerel fishery, there has been no temporal allocation of the TAC; in other words, the fleet fishes until the TAC is met, and then fishing stops for the year. In other fisheries, the TAC has been allocated among fishing seasons: for example, the 1998 BSAI pollock fishery involves 45% of the TAC being taken in the "A" season, which ran from approximately January 20th to March 20th, and the remaining 55% of the TAC was taken in the "B" season, during September and October.[9] TACs may also be allocated by location, by type of vessel, and by numerous other factors.
C. Biological Opinions Under the ESA
The ESA imposes on all federal agencies a duty to "insure" that action taken by the agencies does not jeopardize endangered species or adversely modify their critical habitat.[10] Section 7 of the ESA provides *1256 for the "action" agency to consult with an expert agency to determine whether jeopardy or adverse modification is likely to occur. The final product of a formal consultation is the issuance of a Biological Opinion (BiOp), which sets forth the expert agency's conclusions regarding jeopardy and adverse modification, as well as the reasoning supporting the opinion.
Since the Steller sea lions were first listed as threatened, NMFS's Office of Sustainable Fisheries (the action agency for ESA purposes) has participated in formal and informal consultation with NMFS's Office of Protected Resources (the expert agency), regarding the effect of the fisheries on Steller sea lions.[11]See S1-55 at 141 (summarizing previous consultations). These prior consultations considered the role of the fisheries in sea lion population decline, and concluded that the effect of the fisheries on the sea lions was as yet undetermined. See, e.g., AR-34 at 6, 13; AR-36 at 6. All Biological Opinions issued prior to 1998 concluded that the fishery management processes were taking into account the needs of the Steller sea lions, and that the FMPs under review did not depart significantly from prior practices, so they concluded that no jeopardy or adverse modification was occurring. See, e.g., AR-34 at 17-18; AR-36 at 8.
On December 3, 1998, NMFS issued its BiOp on the effect of the 1999-2001 pollock and mackerel fisheries on the Steller sea lions. S1-55. The BiOp set forth at great length the current scientific information about the sea lions, mackerel, and pollock. It acknowledged the continued scientific uncertainty about competition between the fisheries and sea lions. Importantly, however, it discussed new evidence that the mackerel fishery caused localized depletions of available prey in Steller sea lion critical habitat. The Biological Opinion also noted that the Council had taken precautionary action based on this data, by proposing a series of new regulations designed to spread out the mackerel fishery, both spatially and temporally. The BiOp concluded that the proposed changes to the fishery structure as contained in the FMP minimized the risk of localized depletion, and therefore that the mackerel fishery would not cause jeopardy or adverse modification.
For the first time in the lengthy consultation process, however, NMFS concluded that the BSAI and GOA pollock fisheries were likely to result in jeopardy to the Steller sea lions and adverse modification of their critical habitat. While lacking the direct evidence of localized depletion found regarding the mackerel fishery, the BiOp nevertheless found that competition probably does occur between the pollock fisheries and sea lions "because the pollock fisheries: (1) operate in the same areas where sea lions feed; (2) operate during seasons when sea lions may be especially vulnerable to competition and reduction in availability of prey; (3) catch pollock at the same or overlapping depths at which sea lions feed; and (4) catch the same size pollock on which sea lions feed." Def. Mem. in Supp., docket no. 185, p. 16; see also S1-55 at 98-111. The BiOp concluded that this competition results in localized depletions of pollock. The BiOp, without clearly and specifically analyzing the proposed pollock fisheries, concluded that the pollock fisheries were likely to jeopardize *1257 the continued existence of Steller sea lions and to adversely modify their critical habitat.
Federal law requires that once a jeopardy or adverse modification determination has been made, the consulting agency must propose "Reasonable and Prudent Alternatives," which are alternative actions that can be taken consistent with the purpose of the original project but the consulting agency believes would avoid jeopardy or adverse modification. See 50 C.F.R. 402.02. The BiOp therefore proposed three "principles" (temporal dispersion, spatial dispersion, and pollock trawl exclusion zones) for reasonable and prudent alternatives, then gave examples of measures which would fulfill these objectives. On December 13, 1998, the Council approved new measures, which became the "Final RPAs" when the Director of the consulting agency concurred in the proposal on December 16, 1998. See S1-56. The Final RPAs included a number of measures proposed in the December 3rd BiOp, but also involved numerous changes.
Both plaintiffs and intervenors now challenge the December 1998 BiOp and the Final RPAs. The plaintiffs and amici support NMFS's jeopardy assessment regarding the pollock fisheries. They contend, however, that the draft and Final RPAs are arbitrary and capricious because they do not apply the governing legal standards and because they do not remedy the problems on which NMFS based its jeopardy assessment. Plaintiffs also challenge the no-jeopardy or adverse modification finding regarding the mackerel fishery, claiming that management measures on which the agency relies for its findings of no jeopardy or adverse modification are even less adequate than the Final RPAs proposed for the pollock industries. The intervenors support NMFS's determination of no jeopardy from the mackerel fishery, and argue that the existing scientific evidence renders a jeopardy finding for the pollock fisheries arbitrary and capricious. Intervenors further argue that the NMFS has not met its burden of showing that each component of the RPAs is essential and effective for avoiding jeopardy and adverse modification. Finally, the defendants argue that NMFS's determinations in the BiOp are well-reasoned, rationally-based, and "resulted from an intense deliberative process that considered all relevant factors." Def.Mem. in Supp., docket no. 185, p. 1. They also contend "that the RPAs are NMFS's best evaluation of measures that would avoid competition between the fisheries and the sea lions and mitigate the [BiOp's] jeopardy conclusion." Id.
D. Supplemental Environmental Impact Statement
This case also involves claims by plaintiffs based on the National Environmental Policy Act (NEPA). NEPA requires that an environmental impact statement (EIS)[12] be prepared on proposals for legislation and other major federal actions significantly affecting the quality of the human environment.[13]See 40 C.F.R. 1502.3. The Fishery Management Plans (FMPs), such as those for the fisheries in this case, undisputedly constitute major federal actions requiring an EIS. Accordingly, NMFS published an EIS for the GOA fishery in 1978, in connection with the FMP for that year. AR-19. The Bering Sea EIS was published in 1981. AR-20. These FMPs and their accompanying *1258 EISs address numerous issues, including when, where, and how the fish are caught, TAC levels, bycatch, habitat destruction, socioeconomic issues, and other marine mammals affected.
NEPA requires continuing environmental analysis for changes to ongoing federal actions, such as the dozens of amendments to the FMPs for the North Pacific fisheries. If an agency finds that a change is not substantial, however, it can prepare an Environmental Assessment (EA) and Finding of No Significant Impact (FONSI) rather than a supplemental environmental impact statement (SEIS).[14] The key difference, for present purposes, between an EA/FONSI and an SEIS is that the latter must consider a broad range of alternatives to the proposed federal action, while an EA can simply approve the action as proposed.[15] NMFS had prepared EAs/FONSIs for all prior amendments to the FMPs, and had never prepared an SEIS until December 1998.
During the approximately twenty years since the original EISs were prepared, however, there have been dramatic changes to the North Pacific ecosystem. Steller sea lions were listed as a threatened species nine years after preparation of the original EISs, and the western population was classified as endangered sixteen years after their preparation. In fact, the original EISs considered the Steller sea lion population as being at an optimal sustainable level. This period also saw significant population declines of fur seals, harbor seals, and several species of whales, birds and fish in the North Pacific ecosystem. This area went through a major climate change during this period, which significantly affected the prevalence of various fish species, which in turn affected the focus of the fishing industry. When the original EISs were prepared, the fishing fleet was dominated by foreign vessels; it is now almost entirely composed of American vessels. This change has significantly altered the fishing industry's economic effects on Alaskan communities. The size and capacity of the trawlers used has also increased considerably, which allows more fish to be caught in a shorter amount of time. This highlights only a small fraction of the changes which occurred in the North Pacific in the 1980s and 1990s.
These extensive changes in the North Pacific led to sharp criticism within NMFS over the adequacy of the existing documents for NEPA compliance. Some NMFS employees have urged the preparation of a supplemental EIS since the early 1990s. NMFS did not take its first formal step towards doing so, however, until March 1997, when NMFS issued a notice of intent to prepare an SEIS regarding the BSAI and GOA groundfisheries. AR-7 (62 Fed.Reg. 15,151 (1997)). NMFS announced that the SEIS would "incorporate[] the following: The amendments to the groundfish FMPS; the annual process for determining the TAC specifications; and the public process in place for implementing new regulations, revising existing ones, and incorporating new information." AR-7 at 2. After 18 months of preparation, the agency issued a draft EIS for public review and comment in September 1998. The final SEIS (FSEIS) was issued on December 18, 1998. S2-350. It discussed in great detail the new developments regarding *1259 the North Pacific fisheries, from the changes in the way the fisheries occur to the listings of the Steller sea lion and several other species under the ESA, to the new scientific information obtained since the prior EISs had been prepared. The critical "alternatives" section of the FSEIS, however, analyzed this information only under a range of alternative TAC levels. Plaintiffs contend that this narrow scope violates NEPA; the defendants argue that this approach fulfills their NEPA obligations.[16]
III. Endangered Species Act Claims
A. Standard of Review
Challenges to Biological Opinions issued pursuant to ESA Section 7, 16 U.S.C. 1536, are reviewed under the Administrative Procedures Act ("APA") to determine whether the Biological Opinion was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. 706(2)(A); See Bennett v. Spear, 520 U.S. 154, 174, 117 S. Ct. 1154, 137 L. Ed. 2d 281 (1997); Southwest Ctr. for Biological Diversity v. U.S. Bureau of Reclamation, 143 F.3d 515, 522 (9th Cir.1998). In determining "whether an agency decision was `arbitrary or capricious,' the reviewing court `must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.'" Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 378, 109 S. Ct. 1851, 104 L. Ed. 2d 377 (1989). "Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983). An agency action is also arbitrary when it fails "to articulate a satisfactory explanation for its action." Northern Spotted Owl v. Hodel, 716 F. Supp. 479, 482 (W.D.Wash.1988). "In applying [the arbitrary and capricious] standard, the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142, 93 S. Ct. 1241, 36 L. Ed. 2d 106 (1973); Inland Empire Pub. Lands Council v. Glickman, 88 F.3d 697, 703 (9th Cir.1996).
"Deference to an agency's technical expertise and experience is particularly warranted with respect to questions involving engineering and scientific matters." United States v. Alpine Land and Reservoir Co., 887 F.2d 207, 213 (9th Cir. 1989). When scientific evidence is equivocal, a court is to defer to an agency's reasonable interpretation of that evidence. Central Ariz. Water Conservation Dist. v. United States EPA, 990 F.2d 1531, 1540 (9th Cir.1993). "When specialists express conflicting views, an agency must have discretion to rely on the reasonable opinions of its own qualified experts even if, as an original matter, a court might find contrary views more persuasive." Marsh, 490 U.S. at 378, 109 S. Ct. 1851. "The deference a court must accord an agency's scientific ... expertise is not unlimited, however. Thus the presumption of agency expertise may be rebutted if its decisions, even though based on scientific expertise, are not reasoned." Defenders of Wildlife v. Babbitt, 958 F. Supp. 670, 679 (D.D.C. 1997). See also Northern Spotted Owl, 716 F.Supp. at 482 ("Judicial deference to agency expertise is proper, but the Court will not do so blindly.").
B. ESA Obligations
The ESA imposes on all federal agencies a duty to insure that their actions will not "jeopardize" endangered species or "adversely *1260 modify" their critical habitat. The statute does not define "jeopardize," but the implementing regulations provide:
Jeopardize the continued existence of means to engage in an action that reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood of both the survival and recovery of a listed species in the wild by reducing the reproduction, numbers, or distribution of that species.
50 C.F.R. 402.02. The regulations also define "adverse modification:"
Destruction or adverse modification means a direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species. Such alterations include, but are not limited to, alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical.
50 C.F.R. 402.02. The Biological Opinion correctly cites these definitions, and the parties agree that they provide the relevant legal standards by which to evaluate the BiOp.[17]
To effectuate the ESA's duty to avoid jeopardy and adverse modification, the Act provides for consultation by an expert agency, to evaluate the consequences of a proposed action on a listed species. 16 U.S.C. 1536(a)(2).[18] The expert agency then prepares a Biological Opinion, which sets forth the expert agency's:
opinion, and a summary of the information on which the opinion is based, detailing how the agency action affects the species or its critical habitat. If jeopardy or adverse modification is found, the [expert agency] shall suggest those reasonable and prudent alternatives which [it] believes would not violate subsection (a)(2) of this section and can be taken by the Federal agency ... in implementing the agency action.
16 U.S.C. 1536(b)(3)(A). In this case NMFS's Office of Protected Resources prepared a Biological Opinion on the 1999-2001 BSAI and GOA fishery management plans.[19] This December 1998 BiOp constitutes the final agency action for purposes of judicial review pursuant to the APA. Bennett, 520 U.S. at 178, 117 S. Ct. 1154.
C. Pollock Fisheries Jeopardy Assessment
To logically evaluate the ESA issues presented, the Court must begin by considering the pollock fishery jeopardy determination. Plaintiffs and defendants argue that the Court should uphold this determination. The intervenors, however, contend that NMFS failed to make the pollock jeopardy determination "based on the best scientific and commercial data available," as required by 16 U.S.C. 1536(a)(2). Specifically, the intervenors contend that: (1) NMFS failed to consider relevant information contrary to its conclusion, (2) the existing scientific data does not support NMFS's conclusion, and (3) the method used in the Biological Opinion is merely speculation based on an absence of data. Each contention is discussed in order.
*1261 1. Evidence Regarding Lack of Appropriate Prey and Climate Change
Industry contends that the Steller sea lion decline is caused by environmental changes and the resulting lack of appropriate prey. See Int. Mem. in Supp., docket no. 188, p. 3-5. They further contend that there is "growing agreement in the scientific community that this general collapse is not associated with fishing activities but is due to a reduced `carrying capacity' of the North Pacific ecosystem as a whole." Id. at 4. They argue that NMFS's treatment of these issues in the Biological Opinion violated the ESA both by failing to use the best scientific data available and by reaching arbitrary and capricious conclusions based on the available data.
These challenges must fail under the prevailing legal standards. The Biological Opinion stated that environmental changes may have contributed to the decline, which may have multiple causes. S1-55 at 72-73. The BiOp concluded, however, that: "[t]he existence of a strong environmental influence on sea lion trends does not rule out the possibility of significant fisheries-related effect." Id. at 73. Similarly, the BiOp noted that:
The amount of [diet] diversity has varied considerably and may be an important factor ... but clearly sea lions are not limited to the extreme of only one prey type.... In spite of any debate about the nutritional value of pollock, the fact remains that pollock is a major prey of sea lions. Simply put, sea lions eat, and therefore depend, on pollock. In the present context, the question to be addressed is whether fishery removal of pollock from critical habitat is to the sea lions' advantage, disadvantage, or of no particular consequence.
Id. at 73-74. Although the intervenors point to scientific testimony disagreeing with NMFS's conclusion, "an agency must have discretion to rely on the reasonable opinions of its own qualified experts." Marsh, 490 U.S. at 378, 109 S. Ct. 1851. NMFS considered and rejected the theory favored by the intervenors. This rejection was not arbitrary and capricious.
2. Evidence Supporting Competition Theory
Similarly, the Court rejects intervenors' contention that NMFS's conclusion was not based on sufficient scientific evidence. NMFS based its jeopardy determination on the theory that sea lions and the fisheries "compete" with each other for available prey. See S1-55 at 75-82, 98-111. In support of this theory, NMFS relied on scientific evidence establishing a significant overlap between the size of pollock taken by the fisheries and that consumed by the Steller sea lions. Id. at 76-78. Specifically, NMFS found that sea lions consume a wide range of pollock, including the larger pollock targeted by the fishery. Further, NMFS concluded that biomass consumed at each length, rather than number consumed of a given size, was the relevant measure for dietary significance. Id. NMFS also found that the fisheries catch pollock at the same or overlapping depths at which sea lions feed, relying on studies of sea lion foraging patterns and of fishing industry practice. Id. at 78-79. The agency found that the fisheries operated extensively in sea lion critical habitat. Id. at e.g. 27-28. Additionally, much of the fishing activity in sea lion critical habitat occurs in the winter months; NMFS relied on scientific evidence that sea lions are particularly vulnerable to competition during this period. See id. at 79-80. Finally, a key new study showed that the mackerel fishery was causing localized depletions of prey, for similar reasons. Id. at 17-20. Thus, the Biological Opinion relied on significant evidence that the pollock fisheries were competing with the Steller sea lions for prey, at times which were particularly likely to harm the endangered species.
3. Methodology
NMFS acknowledged that this scientific evidence is not "conclusive." Id. *1262 at 99. The ESA, however, only requires that decisions be made on the basis of "the best scientific and commercial data available." 16 U.S.C. 1536(a)(2). This standard requires "far less" than conclusive proof. See Defenders of Wildlife, 958 F.Supp. at 680. In fact, Congress intended that agencies give "the benefit of the doubt to the species." Conner v. Burford, 848 F.2d 1441, 1454 (9th Cir.1988) (citing H.R.Conf.Rep. No. 96-697, at 12, reprinted in 1979 U.S.C.C.A.N. 2572, 2576). One of the express purposes of the ESA is "to provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved." 16 U.S.C. 1531(b). NMFS did so by evaluating the best evidence currently available and concluding that jeopardy and adverse modification were likely to occur.
Besides the specific evidence discussed above, the Biological Opinion supported its jeopardy assessment by a two-step approach. First, it considered a number of potential non-fishery causes for the Steller sea lions' decline: predation, disease, toxic substances, oil and gas or mineral development, disturbance by non-fishing activities, research, commercial and/or subsistence harvest of sea lions, natural environmental changes, and prey quality. S1-55 at 66-74. Based on consideration of the scientific evidence related to these factors, the BiOp concluded that these factors were not likely to be major causes of the decline, and/or that they were not likely to still pose significant impediments to recovery. Id. Having thus eliminated non-fishery related causes for the decline, and acknowledging that no data conclusively established a positive or negative impact from the fisheries on Steller sea lions, NMFS then turned to three "assumptions:" (1) "the abundance of any species in a particular space at a particular time is finite;" therefore removing hundreds of thousands of tons of fish per day must, "at least on a very local scale and for short periods of time, reduce the biomass of the [remaining] targeted fish;" (2) the likelihood of localized depletions rises when fish are patchily distributed, as pollock are; and (3) "[i]f the reductions in schools of pollock or mackerel occur within the foraging areas of the endangered western population of Steller sea lions, the reduced availability of prey is likely to reduce the foraging effectiveness of sea lions." Id. at 100. The BiOp then detailed the evidence supporting these assumptions, and concluded that based on the available data and the reasonable assumptions, jeopardy and adverse modification were likely to occur.
Such an approach can hardly be considered arbitrary and capricious. NMFS examined a number of other potential causes for the Steller sea lions' decline. They evaluated a great deal of evidence indicating that the fishery was competing with the sea lions for prey during critical times of the year, especially in light of the three reasonable assumptions discussed above. NMFS found that although the fishery may not be the sole cause of the decline, nor the sole factor preventing recovery, the fishery was nevertheless likely to jeopardize the continued existence of the Steller sea lion population. In so finding, NMFS provided a reasonable interpretation of equivocal evidence, to which this court must defer. See Central Ariz., 990 F.2d at 1540. Accordingly, plaintiffs and NMFS are entitled to summary judgment upholding the determination that the pollock fisheries in the GOA and BSAI were likely to result in jeopardy and adverse modification.
D. Mackerel Fishery Finding of No Jeopardy
The plaintiffs argue that the same evidence on which NMFS relied to find jeopardy for the pollock fisheries compels a similar finding for the mackerel fisheries. In fact, plaintiffs contend, the evidence is even stronger in the latter context: the only study to find occurrences of localized depletion concerned the mackerel fishery. See S1-55 at 17-19. The plaintiffs thus *1263 argue that the BiOp's conclusion that the mackerel fishery is not likely to cause jeopardy or adverse modification is arbitrary and capricious. Instead of analyzing the relevant differences, or even providing any comparative discussion of the two fisheries at all, the BiOp simply set forth a great deal of data, then stated its conclusions, without making its reasoning explicit. After reviewing the Opinion closely, however, the Court concludes that the Biological Opinion provided a rational basis for the different treatment of the effect of the pollock and mackerel fisheries on the Steller sea lions.
First, the pollock fishery accounted for a much larger percentage of the overall groundfish catch in the BSAI than did the mackerel fishery. Compare S1-55 Figs. 11 and 7.[20] Secondly, the two fisheries have historically been conducted very differently. The mackerel fishery has involved a single season, with 100% of the total mackerel TAC taken between January and late March or early April. Id. at 103. The BSAI pollock fishery, in contrast, has been split between two seasons, with more than half of the catch occurring in September and October. Id. at 115. The spatial allocation involved is different as well. The mackerel fishery is broken up into three distinct management areas; fishing begins in the easternmost subarea, then moves westward through the other two. Id. at 8. The pollock fishery does not operate under similar spatial-management measures.
Most importantly, however, in early 1998, the North Pacific Fishery Management Council considered the evidence of localized mackerel depletion and proposed significant changes to the mackerel fishery, while no such changes were made regarding the pollock fishery. Beginning in 1999, the mackerel fishery will be split into two seasons, with the TAC split evenly between them. Id. at 104. This measure will therefore cut in half the total number of mackerel taken during the critical winter months.[21] Additionally, the percentage of mackerel caught in sea lion critical habitat will be reduced from the recent levels of 70-98% to 40% by 2002. These changes spatially and temporally distribute the mackerel fishery, and represent significant changes from the status quo that was found to result in localized depletions. These measures are also similar to the changes that NMFS proposed for the pollock fishery as RPAs.
The Biological Opinion could be written much more clearly. Nevertheless, when viewed under the deferential "arbitrary and capricious" standard, the BiOp contains enough information to justify the no-jeopardy conclusion reached for the mackerel fishery. This conclusion finds further support in the administrative record, particularly in the Environmental Assessment prepared for NEPA compliance, on the environmental effects of the proposed changes to the mackerel fishery on the Steller sea lions. See AR-28. Defendants and intervenors are therefore entitled to summary judgment upholding the determination that the mackerel fishery is not likely to cause jeopardy or adverse modification.
*1264 E. Pollock Fisheries Reasonable and Prudent Alternatives
Broadly speaking, "reasonable and prudent alternatives" (RPAs) are the solutions to the problems inherent in a proposed federal action which lead the consulting agency to find that the action will result in jeopardy. Specifically, the ESA provides, "If jeopardy or adverse modification is found, the Secretary shall suggest those reasonable and prudent alternatives which he believes would not violate subsection (a)(2) of this section and can be taken by the Federal agency or applicant in implementing the agency action." 16 U.S.C. 1536(b)(3)(A).[22] Further definition of the term "reasonable and prudent alternatives" is found in the regulations:
Reasonable and prudent alternatives refer to alternative actions identified during formal consultation that can be implemented in a manner consistent with the intended purpose of the action, that can be implemented consistent with the scope of the Federal agency's legal authority and jurisdiction, that is economically and technologically feasible, and that the Director believes would avoid the likelihood of jeopardizing the continued existence of listed species or resulting in the destruction or adverse modification of critical habitat.
50 C.F.R. 402.02. This definition contains four distinct requirements for any valid RPA: it must (1) be consistent with the purpose of the underlying action; (2) be consistent with the action agency's authority; (3) be economically and technically feasible; and (4) "avoid the likelihood" of jeopardy or adverse modification. Plaintiffs contend that the draft and final RPAs violate the fourth prong of this definition; the intervenors argue that the RPAs violate the third prong. Defendants argue in support of the RPAs.
1. Defining "RPAs" Being Reviewed
In evaluating these challenges, the Court must define what constitutes the RPAs under review. In this case, that is a somewhat complicated question for a number of reasons. The Biological Opinion contains proposes solutions at various levels of generality. The BiOp sets forth three principles that any reasonable and prudent alternative must accomplish: (1) temporal dispersion of the fishery; (2) spatial dispersion of the fishery; and (3) protection of rookeries and haulouts by implementation of additional no-trawl zones. S1-55 at 114-120. Within the discussion of each general principle, the BiOp then provides more specific goals which "must" be accomplished, for example "[d]istribute the pollock trawl harvest into at least four seasons (two in the period of January through May and two in the period from June through October)." Id. at 117. The case also involves "draft" and "final" RPAs; the former are found in the December 1998 BiOp, while the latter are the emergency measures that the North Pacific Fishery Management Council adopted ten days later in response to the BiOp. See S1-56 (memorandum from Director of action agency to Director of consulting agency outlining changes; signed concurrence by consulting agency).
The parties discussed these issues at oral argument. The Court agrees with the parties' consensus that the Court should evaluate the management measures as a whole for compliance with the four-prong standard for evaluating RPAs. This represents the middle ground between defining the RPAs as either the three general principles mentioned above or looking at each individual management measure in isolation. There is no serious dispute over the appropriateness of the three general principles; the dispute centers instead over their implementation. On the other hand, looking at the effectiveness of each *1265 specific measure or its scientific and economic feasibility would provide a distorted view of the situation. It is therefore appropriate to analyze the overall management scheme proposed.
The Court also finds that it can consider both the draft and final RPAs in evaluating NMFS's compliance with the ESA. The only substantive analysis of the RPAs found in the record is in the Biological Opinion. The action agency, NMFS's Office of Sustainable Fisheries, prepared a memorandum summarizing the Council's changes. The Director of the consulting agency, NMFS's Office of Protected Resources, then signed the memorandum, thereby indicating her approval of the Council's changes. In other words, the voluminous record does not contain a single sentence reflecting the reasons why NMFS found the final RPAs to be adequate. Under these circumstances, the Court looks to the record as a whole, and to the BiOp's section on draft RPAs in particular, to determine whether NMFS acted arbitrary and capriciously.
2. Avoiding Jeopardy and Adverse Modification
Plaintiffs challenge both the proposed and final RPAs for their failure to analyze jeopardy and adverse modification separately. The ESA requires that each federal agency "shall ... insure that any action ... is not likely to jeopardize the continued existence of any endangered species ... or result in the destruction or adverse modification of habitat of such species." 16 U.S.C. 1536(a)(1) (emphasis added). Jeopardy relates to the overall continued existence of a species, and examines the effects of an action on the species.[23] Adverse modification, in contrast, concerns the effects of an action on the species' critical habitat.[24] Although there is considerable overlap between the two, the Act establishes two separate standards to be considered. See Conservation Council for Haw. v. Babbitt, 2 F. Supp. 2d 1280, 1287 (D.Haw.1998). NMFS should therefore have analyzed the two separately or provided an explanation for why, in this case, the two could be treated together. Id.
Although NMFS should thus have applied both standards in analyzing the RPAs, NMFS actually failed to apply either standard. For example, the BiOp states that one specific goal of spatial dispersion is to reduce the level of catch taken from critical habitat. The ESA requires consideration of what catch levels would "reduce appreciably the likelihood of survival and recovery" of the Steller sea lions, or would avoid "appreciably diminish[ing] the value of critical habitat." 50 C.F.R. 402.02. The BiOp, however, only looks at what would be "consistent with past fishery practices and still provide[] a considerable reduction from the current" levels. S1-55 at 118. The Court recognizes the difficult line-drawing issues presented in deciding, for instance, exactly what level of catch inside critical habitat would result in jeopardy or adverse modification. Nevertheless, NMFS must comply with the mandates of the Endangered Species Act, including asking the required questions.
The Council's modifications to the RPAs aggravated this problem. For example, the BiOp stated that temporal dispersion of the winter/spring roe fishery was necessary, and suggested splitting 45% of the winter TAC into two seasons, beginning *1266 January 20th and March 1st, respectively. Id. at 117, 121.[25] The Council, however, moved the Bering Sea A2 season's starting date to February 20th, and eliminated the A2 season entirely for the Gulf of Alaska. S1-56 at 3, 5. Additionally, the BiOp proposed allocating 20% of the yearly Bering Sea TAC to the A1 season, and 25% to the A2 season. S1-55 at 121. The Council changed the allocation to 27.5% and 12.5%, respectively. S1-56 at 3. Because the BiOp only related its proposed allocations to current practices rather than the standards for adverse modification and jeopardy, it is impossible for the Court to evaluate the changes made by the Council and to review NMFS's approval of these changes. Similarly, NMFS's failure to analyze either the draft or final RPAs under the appropriate legal standards makes it impossible for this Court to find that the agency has "articulated a rational connection between the facts found and the choice made." Pyramid Lake, 898 F.2d at 1414 (emphasis added).
3. Fit Between Individual Measures and Principles Guiding RPAs
Furthermore, the plaintiffs correctly argue that several of the individual management measures do not seem to accomplish the RPAs' principles of temporal dispersion, spatial dispersion, and protection of rookeries and haulouts.[26] For example, the BSAI pollock fishery over the last several years has been divided into two seasons: a winter "A" season running from January to March, and a fall "B" season of September and October. S1-55 at 115, 116. In 1998, 45% of the TAC was allocated to the A season, and 55% was allocated to the B season. Id. In finding that the proposed 1999-2001 BSAI pollock fisheries would result in jeopardy, NMFS cited this temporal compression as "of particular concern." Id. at 108.
The final RPAs, however, do not seem to disperse the fishery temporally. The new A1 season begins January 20th, the same day that the A season used to begin. The A2 season is scheduled to begin February 20th, with a five-day "stand-down" period in-between. S1-56 at 3, 5. This stand-down period ensures that the A1 season can only last 26 days. The combined annual harvest for the A1 & A2 seasons is set at 40% of the total yearly TAC, with 27.5% allocated to the A1 season. Id. If the fishery took the entire 27.5% TAC in A1, as permitted, and trawling occurred at the same rate during A1 and A2, it would only take an additional 11 days to catch the A2 TAC. This in turn would mean that the A1 & A2 seasons would end, with 40% of the yearly TAC taken, by March 2nd. Thus, it seems entirely possible that the final RPA would not lengthen the winter fishery at all; the only dispersive effect would be that 40% rather than 45% of the total TAC would be taken. Further, these figures concern percentages of TAC levels rather than tons of pollock caught. If the Bering Sea TAC was increased from, for example 100,000 metric tons to 150,000 metric tons, fishing under the RPAs would actually result in the removal of more pollock during this period.[27]
It is possible that this analysis does not consider some other aspect of the *1267 problem, which would explain NMFS's approval of this measure as "consistent with the spirit and intent" of the Biological Opinion. This, however, illustrates the problem discussed in the previous subsection of this Order: NMFS has completely failed to analyze how these individual measures avoid jeopardy or adverse modification. NMFS also has not explained how the various management measures work together. At oral argument, counsel responded to this Court's question about analysis by saying "NMFS is relying on the statistics. We're relying on the numbers. ..." Tr. at p. 53, 11. 16-17. The record, however, does not demonstrate this reliance. "Where an agency fails to articulate a rational connection between the facts found and the choice made, the Court [or counsel] may not supply a reasoned basis for the agency's action that the agency itself has not given." Defenders of Wildlife, 958 F.Supp. at 679 (internal citation and punctuation omitted). Even under the "arbitrary and capricious" standard of review, the government must establish that its RPAs fulfill their purpose of "avoid[ing] the likelihood of jeopardizing the continued existence of listed species or resulting in the destruction or adverse modification of critical habitat." 50 C.F.R. 402.02. The RPAs in this case may do so, but NMFS has not provided any analysis justifying that conclusion.
NMFS's ESA Section 7 Consultation Handbook makes it clear that NMFS must provide such analysis: "When a reasonable and prudent alternative consists of multiple activities, it is imperative that the [biological] opinion contain a thorough explanation of how each component of the alternative is essential to avoid jeopardy and/or adverse modification." AR-18 at 4-41. NMFS must explain how the management measures proposed fit together to accomplish the goal of avoiding jeopardy and adverse modification.[28] Without some rational explanation, the Court cannot conduct a meaningful review. The Court therefore finds the RPAs to be arbitrary and capricious under Pyramid Lake, 898 F.2d at 1417, and Defenders of Wildlife, 958 F.Supp. at 679. Accordingly, the Court grants plaintiffs summary judgment on their claims regarding the RPAs.
4. Scientific and Technical Feasibility
The intervenors contend that the RPAs should also be found to be arbitrary and capricious because NMFS failed to establish that they meet the third part of the definition of an RPA, i.e. that they are "economically and technologically feasible." 50 C.F.R. 402.02. It remains an open question whether this requirement should be interpreted as referring only to whether the RPA is feasible for the agency, or whether it relates to the effects on third parties.[29] The intervenors, however, contend that NMFS must balance the benefit to the species against the economic and technical burden on the industry before approving an RPA. Such a result would be fundamentally inconsistent with the purposes of the ESA and with case law interpreting the Act. See, e.g., Tennessee Valley Auth. v. Hill, 437 U.S. 153, 98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978) (enjoining the opening of a nearly completed dam because *1268 opening the dam would wipe out all of endangered species' critical habitat). The "guiding standard" for determination of RPAs is jeopardy, Idaho Dept. of Fish & Game v. NMFS, 850 F. Supp. 886, 896 (D.Or.1994), vacated as moot, 56 F.3d 1071 (9th Cir.1995), not economic impact on third parties such as the fishing industry.[30]
This is not to say, however, that NMFS cannot consider industry concerns when shaping RPAs. NMFS must come up with reasonable and prudent alternatives that are consistent with the purposes of the underlying action and the action agency's authority, that are economically and technologically feasible, and which avoid the likelihood of jeopardy and adverse modification. 50 C.F.R. 402.02. When faced with a range of possible measures that are consistent with this definition, NMFS can pick amongst them based on other factors, including effects on the fishing industry. Southwest Center, 143 F.3d at 523; see also Bennett, 520 U.S. at 176, 117 S. Ct. 1154 (finding that an important purpose of the "best scientific data" requirement is to avoid needless economic dislocation, and noting that the ESA allows a project to go forward if no RPAs exist and the benefits of the action outweigh harm to the species).
These two determinations are separate steps, however, and contrary to intervenors' arguments, they should not be combined. In the present case, NMFS approved changes in management measures based solely on an attempt to minimize the impact on the fishing industry, without explicitly considering what effect the changes would have on the Steller sea lions.[31] Similarly, although NMFS must explain how the RPAs would avoid jeopardy and adverse modification, they do not have to discuss or recommend every management measure that would achieve these results. The Court therefore rejects intervenors' contention that the RPAs are arbitrary and capricious because they are not economically and technically feasible for the fishing industry.
Nevertheless, the intervenors point to examples where NMFS's failure to analyze the RPAs according to the applicable legal standards worked to the intervenors' detriment. For example, the Biological Opinion stated that spatial distribution of the TAC should be based on existing study or management areas. S1-55 at 119. The BiOp then recommended combining the Catcher Vessel Operation Area (CVOA) with the Southeast Bering Sea foraging area, which is critical habitat, to form one management complex. Id. Both the foraging area and the CVOA are very large areas; although they overlap substantially, large areas in the CVOA are not Steller sea lion critical habitat. See S1-55 at Fig. 9. Unlike most critical habitat, the foraging area at issue here is not simply around rookeries and haulouts ÔÇö it extends far out to sea. Id. The record does not disclose any explanation for treating the two together as a CVOA-CH complex. There is no analysis of how this measure, alone or in combination, is likely to avoid jeopardy or adverse modification, or how it is economically or technically feasible. Although NMFS is not required to pick the best option for the industry any more than for the species, it must provide *1269 some analysis of the options it selects.[32] The Court therefore finds that intervenors are also entitled to summary judgment that NMFS arbitrarily and capriciously failed to analyze the RPAs under the appropriate legal standards.
F. Conclusion
In preparing the December 1998 BiOp, NMFS faced an extremely difficult task. The scientific evidence of the fisheries' effect on the Steller sea lion population remained somewhat uncertain. They faced ongoing litigation from both environmental groups and the fishing industry. NMFS also struggled to reconcile Magnuson Act requirements with ESA mandates. The North Pacific ecosystem poses complex scientific and management issues, to which there are no easy answers.
NMFS considered the available evidence and the ESA's legal standards, and concluded that the pollock fisheries were likely to result in jeopardy and adverse modification, while the mackerel fishery was not. The Court finds that NMFS is entitled to summary judgment upholding these determinations.[33]
When assessing the ways to remedy the identified problems, however, NMFS failed to apply the appropriate legal standards or to explain its proposed measures. Instead, NMFS recommended a complicated set of interrelated fishery management measures, which then were modified by the action agency and re-approved by NMFS. The plaintiffs and the intervenors are entitled to summary judgment that NMFS violated the Endangered Species Act by failing to articulate a rational connection between the facts found and the choices made regarding the RPAs.
IV. NEPA CLAIMS
A. Standard of Review
Compliance with the National Environmental Policy Act of 1969 (NEPA) is reviewed under the Administrative Procedure Act, 5 U.S.C. 706(2)(A). Northwest Resource Info. Ctr., Inc. v. NMFS, 56 F.3d 1060, 1066 (9th Cir.1995). Factual disputes, which implicate substantial agency expertise, are reviewed under the arbitrary and capricious standard, while legal disputes are reviewed under the reasonableness standard. Price Road Neighborhood Ass'n v. United States DOT, 113 F.3d 1505, 1508 (9th Cir.1997). "In evaluating whether an agency's [environmental impact statement] complies with NEPA's requirements, we must determine whether it contains a reasonably thorough discussion of the significant aspects of the probable environmental consequences." Muckleshoot Indian Tribe v. United States Forest Serv., 177 F.3d 800, 809 (9th Cir.1999) (internal quotation omitted). "In short, we must ensure that the agency has taken a `hard look' at the environmental consequences of its proposed action." Blue Mountains Biodiversity Project v. Blackwood, 161 F.3d 1208, 1211 (9th Cir.1998).
B. NEPA Obligations
NEPA "is our basic national charter for protection of the environment." 40 C.F.R. 1500.1(a). "The NEPA process is intended to help public officials make decisions that are based on understanding of environmental consequences, and take actions that protect, restore, and enhance the environment." 40 C.F.R. 1500.1(c).
NEPA therefore requires that when "proposals for legislation and other major *1270 Federal actions significantly [affect] the quality of the human environment," the responsible federal agency must prepare a detailed statement which includes the environmental impact of the proposed action, any unavoidable negative environmental effects of the proposal, and alternatives to the proposed action. See 42 U.S.C. 4332(C). This detailed written document is an Environmental Impact Statement (EIS). 40 C.F.R. 1508.11. An EIS serves "as an action-forcing device to insure that [NEPA's] policies and goals" are taken into account during agency decision-making. 40 C.F.R. 1502.1. The alternatives section, which should "present the environmental impacts of the proposal and the alternatives in comparative form [in order to] sharply defin[e] the issue," is therefore "the heart of the" EIS. 40 C.F.R. 1502.14.
NEPA also requires an agency to continue evaluating a project's environmental effects, even after preparation of an initial EIS. The EIS can form the basis for subsequent NEPA documentation, allowing the agency to incorporate by reference prior discussions of general issues and to focus on the specific issues relevant to the subsequent action. See 40 C.F.R. 1502.20. If the agency determines that a subsequent action will not have a significant effect on the environment, it can prepare an Environmental Assessment (EA) and Finding of No Significant Impact (FONSI), and can "tier" these documents off the existing EIS.[34] An EA/FONSI is not sufficient, however, in certain circumstances:
(C) Agencies:
(1) Shall prepare supplements to either draft or final environmental impact statements if:
(i) The agency makes substantial changes in the proposed action that are relevant to environmental concerns; or
(ii) There are significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts.
40 C.F.R. 1502.9(c).
NMFS prepared environmental impact statements for the GOA and BSAI groundfisheries in 1979 and 1981, respectively. The supplemental EIS was released in December 1998. It updated the scientific information known about the North Pacific ecosystem, and analyzed this information by considering a range of alternative TAC levels under which the fisheries could be conducted. Plaintiffs argue that such a focus violates NEPA by being too narrow. Specifically, plaintiffs contend that NEPA required preparation of an SEIS "of broad scope, with alternatives and analyses that considered and addressed the fisheries' multiple environmental issues and impacts." Pl.Mem. in Supp., docket no. 182, p. 39. Defendants counter that they properly defined the scope of the SEIS and that they considered an adequate range of alternatives.
C. History of NEPA Compliance/Decision to Prepare SEIS
In support of their argument that NEPA required preparation of a broad SEIS, plaintiffs rely on the history of NEPA compliance in this case. They point out that the Final Supplemental EIS, which NMFS issued in December 1998, was the first EIS prepared regarding the North Pacific groundfisheries in almost twenty years. Since the original EISs were prepared, significant changes occurred within the fishing industry and the FMPs for the GOA and BSAI were each *1271 amended more than forty times. The North Pacific ecosystem also underwent major changes, including the steep decline of the Steller sea lion population.[35]
Since the early 1990s, there has been criticism within NMFS regarding the overall adequacy of the existing documents for NEPA compliance. See, e.g., S2-338, S2-339, S2-347. For example, the record contains a draft letter, written in 1990, stating that the environmental analysis in the original documents "would be considered grossly inadequate by today's standards." S2-338 at 3. Another memorandum, written in 1992, around the time of the emergency listing of the Steller sea lions as a threatened species, called for the preparation of a supplemental EIS, since the existing one treated Steller sea lions as being at "optimum sustainable population levels." S2-339 at 2. Despite these criticisms, however, NMFS did not begin preparation of an SEIS on the groundfisheries until March 1997, when it published a notice of intent to prepare an SEIS.[36] AR-7. In this scoping notice, NMFS relied on the "[n]ew information about the ecosystem, impacts of the fisheries, and management tools" to explain its decision to prepare an SEIS. Id. NMFS also noted the major changes made to the FMPs as relevant to its decision to prepare an SEIS Id. NMFS therefore seems to have acknowledged that an SEIS was necessary under both the "substantial changes to the action" and the "significant new information" prongs of 40 C.F.R. 1502.9(c).
D. Scope of the SEIS
In support of its motion for summary judgment, NMFS relies on the fact that the SEIS undisputedly included a great deal of new "information relevant to environmental concerns and bearing on the proposed action or its impacts." 40 C.F.R. 1502.9(c)(1)(ii). They correctly note that the "Affected Environment" section of the SEIS discussed the various components of the North Pacific ecosystem, updating the information known about each component. For example, the SEIS contains twelve pages on the ESA Section 7 Consultations regarding the Steller sea lion, providing a detailed history of the data available and the actions taken based on that data. S2-250 at 207-218. The SEIS also discussed the changes made to the structure and composition of the fisheries, providing a high level of detail about such things as the various Alaskan communities affected by the fishing industry and the types of vessels used in the industry. See id. at 235-274.
The plaintiffs, however, point out that the SEIS analyzed this detailed new information, not by looking at a range of alternatives reflecting the broad scope of the FMPs, but instead only under a range of alternatives dealing with one particular aspect of the FMPs: TAC levels. The SEIS considered the environmental effects on the North Pacific ecosystem of using four alternative TAC levels: (A) the status quo method of setting TAC levels annually, for each species complex, within the optimum yield (OY) range based on the biological status of the species and "other ecological and socio-economic aspects of the fisheries"; (B) setting TAC levels at the lower end of the OY range; (C) setting TAC levels at the upper end of the OY range; and (D) no directed groundfishing. S2-350 at 10-11. As a result of this approach, the EIS did not consider how the vast array of new information about the affected environment relates to the other aspects of the fisheries that the FMPs regulate, such as "time and area closures, gear *1272 restrictions, bycatch limits of prohibited species, and allocations of TACs among vessels delivering to different types of processors groups, gear types, and qualifying communities." Id. at 9.
1. Federal Action Under Review
The plaintiffs argue that this approach violates NEPA for a number of reasons. NEPA requires preparation of an SEIS when "[t]he agency makes substantial changes in the proposed action that are relevant to environmental concerns;" or when "[t]here are significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts." 40 C.F.R. 1502.9(c). Applying these standards to the present case, plaintiffs argue that the FMPs as a whole, not the method used to set TAC-levels, is "the proposed action" about which there are significant new circumstances and to which substantial changes have been made. Pl.Mem. in Supp., docket no. 182, p. 42. In support of this argument, plaintiffs point to the scoping notice, which indicated that the SEIS would analyze:
... decisions about location and timing of each fishery, harvestable amounts, exploitation rates, exploited species, groupings of exploited species, gear types and groupings, allocations, product quality, organic waste and secondary utilization, at-sea and on-land organic discard, species at higher and lower trophic levels, habitat alterations, and relative impacts to coastal communities, society, the economy, and the domestic and foreign groundfish markets.
AR-7 at 2. As prepared, however, the SEIS discussed these issues generally, but did not consider a range of alternatives dealing with them. Plaintiffs argue that by narrowing the range of alternatives to those specifically dealing with TAC levels rather than the FMPs as a whole, NMFS failed to "take a hard look" at the environmental consequences of the agency action, the FMPs.
NMFS responds that the federal action under review in the SEIS was not the FMPs generally, but rather was merely the more limited issue of "setting of TACs in the GOA and BSAI groundfish fisheries." S2-350 at 2. They argue that the scoping notice reflected this narrow focus as well: "NMFS announces its intention to prepare a supplemental environmental impact statement (SEIS) on the Federal action by which the total allowable catch (TAC) specifications and prohibited species catch limits ... are annually established and apportioned." AR-7. A "proposed alternative is reasonable only if it will bring about the ends of the federal action" being considered. Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190 (D.C.Cir.1991). "When the purpose is to accomplish one thing, it makes no sense to consider the alternative ways by which another thing might be achieved." City of Angoon v. Hodel, 803 F.2d 1016, 1021-22 (9th Cir. 1986). Thus, NMFS argues that the range of alternatives was properly tailored to meet this definition of the federal action at issue.
NMFS's argument is legally flawed. Although NMFS contends that the scoping notice and the SEIS clearly establish that the federal action under review was only the setting of TAC levels, both documents are in fact ambiguous on this point. The language quoted above, on which NMFS relies, indicates a narrow scope. On the other hand, the scoping notice also stated that "[t]he SEIS will analyze the process by which annual TAC specifications and prohibited species catch limits are determined, together with the procedures for implementing changes to these processes." AR-7 at 2 (emphasis added). The notice then defines "the process" as including the numerous elements relied on by plaintiffs, quoted above.
The SEIS itself reflects similar ambivalency. The section describing the "purpose" of the SEIS detailed the
changes that have occurred since the original EISs were prepared for the *1273 original FMPs (1978 and 1981). These include changes in the following: 1) the BSAI and GOA ecosystems and our understandings of them; 2) the marine species and population frequencies of marine mammal, seabird, and fish in the biological assemblages of the BSAI and GOA; 3) the marine species listed under the Endangered Species Act, some of which may be affected by the BSAI and GOA groundfish fisheries; 4) the information about the biological characteristics of the groundfish stocks; 5) the information about the ecosystem impacts of the fisheries; 6) the fishery management tools that are being used or are available; 7) the characteristics of the groundfish fleets; and 8) the distributions of catch by fleet, area and season.
S2-350 at 2. Plaintiffs are correct that this discussion demonstrated a need for a broad SEIS, which analyzed the effect of this myriad of changes on the North Pacific ecosystem. The SEIS then continued: "A programmatic SEIS was developed to analyze and display the effects of the fisheries on the affected human (biological, physical, and economic) environment.... The scope of actions in this analysis includes a range of levels for setting of TACs in the GOA and BSAI groundfish fisheries." S2-350 at 2. This language implies both a broad scope (programmatic SEIS) and a narrow one (scope of action concerns TAC levels). While the SEIS contained language indicating that the federal action under review was merely the setting of TAC levels, the weight of the language pointed to a broader scope.[37]
Furthermore, as discussed below, a narrow SEIS dealing only with TAC levels would not satisfy NEPA. The FMPs involve "a myriad of interrelated regulations to manage the fisheries." In light of the significant changes to these FMPs and the new information about the broad range of issues covered by these regulations, the Court concludes as a matter of law that NEPA required a broad programmatic SEIS in order to fairly evaluate the dramatic and significant changes which have occurred in the GOA and BSAI groundfisheries.
2. Cumulative Effects Analysis
The plaintiffs correctly argue that NEPA required creation of a document that thoroughly analyzed the cumulative effects of the FMPs:
Cumulative impact is the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions.... Cumulative impacts can result from individually minor but collectively significant actions taking place over a period of time.
40 C.F.R. 1508.7. "If several actions have a cumulative environmental effect, this consequence must be considered in an EIS." Blue Mountain, 161 F.3d at 1214 (internal quotation omitted). Plaintiffs therefore argue that the SEIS needed to analyze the changes to the FMPs.
Each amendment to the FMPs may have been individually minor and therefore properly dealt with in an EA/FONSI rather than in an SEIS. See Greenpeace Action v. Franklin, 14 F.3d 1324, 1332 (9th Cir. 1992) (1991 amendments too minor to warrant an EIS). Nevertheless, NEPA does not permit NMFS to continue making individually *1274 minor but collectively significant changes to the FMPs without preparing an SEIS analyzing these changes. "Significance exists [and thus an EIS must be prepared] if it is reasonable to ÔÇö anticipate a cumulatively significant impact on the environment. Significance cannot be avoiding by ... breaking [an action] down into small component parts." 40 C.F.R. 1508.27(b)(7). By preparing only EA/FONSIs for each FMP amendment, NMFS tried to avoid "significance" for many years. The Court has no doubt that the vast changes to the FMPs have reached the threshold of "cumulatively significant impact on the environment," thereby requiring preparation of an SEIS addressing these vast changes. For the same reasons, NMFS cannot then break the FMPs down "into small component parts" by analyzing only the setting of TAC levels rather than these FMPs in their entirety. The Court therefore concludes that NEPA's cumulative effects provision requires a programmatic analysis of the FMPs in their current form.
E. Range of Alternatives Considered
1. Fully Informed Decisions
The Court's determination that the SEIS must be treated as a broad, programmatic analysis of the FMPs as a whole leads directly to its conclusion that the range of alternatives considered was inadequate. One of the goals of the NEPA process is "to identify and assess the reasonable alternatives to proposed actions that will avoid or minimize adverse effects of these actions upon the quality of the human environment." 40 C.F.R. 1500.2(e). The regulation regarding alternatives, 40 C.F.R. 1502.14, provides:
Based on the information and analysis presented in the sections on the Affected Environment ( 1502.15) and the Environmental Consequences ( 1502.16), [the alternatives section] should present the environmental impacts of the proposal and the alternatives in comparative form, thus sharply defining the issues and providing a clear basis for choice among options by the decision-maker and the public.
40 C.F.R. 1502.14.[38] The SEIS in this case, however, does not "sharply [define] the issues and [provide] a clear basis for choice among options" related to the FMPs. It does not help future decision-makers assess whether the fisheries should continue to be conducted under the current structure of the FMPs, or whether other alternatives would be more beneficial. The Environmental Protection Agency's final comments on the SEIS correctly note that NEPA's requirement that NMFS "rigorously explore and objectively evaluate all reasonable alternatives," dictates
inclusion of more comprehensive alternatives which look at and programmatically address all elements of the FMP (i.e. location and timing of each fishery, harvestable amounts, exploitation rates, exploited species, groupings of exploited species, gear types and groupings, allocations, product quality, organic waste and secondary utilization, at-sea and on-land organic discard, species at higher *1275 and lower trophic levels, habitat alterations, and relative impacts to coastal communities, society, the economy, and the domestic and foreign groundfish markets) and varies TAC levels outside of the present status quo range.
Pl.Ex. 3 at p. 5, attached to docket no. 182. As written, however, the SEIS does not provide decision-makers with any way of assessing the trade-offs between gear-restrictions and bycatch, for example, or the way that the timing of the various fisheries interact. The difficulty of the issues presented in the Biological Opinion and its Reasonable and Prudent Alternatives highlight the need for consideration of the range of environmental effects of the various regulations contained in the FMPs. One important goal of NEPA is to help "public officials make decisions that are based on understanding of environmental consequences." 40 C.F.R. 1500.1(c). The SEIS does not provide the information necessary for decision-makers to make fully informed choices. The SEIS is therefore inadequate under NEPA.
2. "Practical Analysis" of Fisheries
NMFS contends that by analyzing the fisheries under various TAC levels, the SEIS nevertheless considered the full range of environmental impacts from the fisheries as conducted under the array of regulations contained in the FMPs. Specifically, NMFS argues that this Court should defer to NMFS's determination "that an examination of the fishery under alternative TAC levels would result in a practical analysis of the environmental impacts of the fisheries." S2-350 at 3 (emphasis added). NMFS contends that this determination is entitled to substantial deference, and therefore that analysis of alternative TAC levels fulfills NEPA's purpose of ensuring informed decision-making regarding the FMPs in their entirety.
The case law providing for substantial deference to an agency's determination of the scope of an EIS, however, does not support NMFS's argument. NMFS relies on cases involving deference to an agency's decision about the scope of the federal action under review. See, e.g., Kleppe v. Sierra Club, 427 U.S. 390, 96 S. Ct. 2718, 49 L. Ed. 2d 576 (1976) (deference to agency's determination that no regional proposal for federal action existed and therefore no regional EIS was necessary); Marsh, 490 U.S. at 376-77, 109 S. Ct. 1851 (deference to agency's determination that new information did not require preparation of a supplemental EIS). These cases do not require the Court to defer to NMFS's assertion that an analysis of TAC levels will provide a practical analysis of the fisheries. The SEIS completely lacks any explanation of why and how analysis of TAC levels "results in a practical analysis" of the impact of the fisheries, as governed by a myriad of regulations. NMFS merely stated: "Analysis of the `process' or actual procedure employed by the NMFS in developing annual TAC specifications would not be as illustrative of the impacts that could occur to the environment as a result of a change from the current TAC levels under the current baseline." Id. Judicial deference to such an unexplained assertion on a critical point would render judicial review meaningless. Even under "arbitrary and capricious" review, the appropriate inquiry is "whether the agency `considered the relevant factors and articulated a rational connection between the facts found and the choice made.'" Pyramid Lake, 898 F.2d at 1414 (emphasis added). Here, the government's failure to explain the connection between setting various TAC levels and the impact of other fishery regulations is not entitled to deference, and even if the Court were to defer, the result would be the same. The Court cannot excuse NMFS's total failure to analyze or explain this critical point. The Court concludes that an analysis of the fisheries under various TAC levels was not sufficient to fulfill NEPA's requirements.[39]
*1276 3. Programmatic Analysis
Clearly, a programmatic analysis would not require consideration of detailed alternatives with respect to each aspect of the plan ÔÇö otherwise a programmatic analysis would be impossible to prepare and would merely be a vast series of site specific analyses. See Robertson, 35 F.3d at 1306 ("specific analysis is better done when a specific development action is to be taken, not at the programmatic level."). The level of detail necessary in an EIS is directly related to the scope of the federal action under review. California v. Block, 690 F.2d 753, 761 (9th Cir.1982). Thus, if a multi-step project is proposed that nevertheless has a very broad scope at the initial stage, a high level of detail may be required even in a programmatic EIS. Id. at 765. In the present case, however, the programmatic EIS was necessary because of the significant cumulative effects of the amendments to the FMPs over the years, rather than because there were particular new amendments pending. The programmatic EIS should therefore present a more general picture of the environmental effects of the plans, rather than focusing narrowly on one aspect of them.
F. NEPA Conclusion
The administrative record in this case demonstrates that NMFS's employees faced a very difficult task in preparing this SEIS. The "Affected Environment" section synthesized a great deal of new information regarding the North Pacific ecosystem, and took an important step toward full compliance with NEPA. The Act, however, requires NMFS to analyze the ways in which the groundfisheries effect the North Pacific ecosystem, and to provide decisionmakers and the public with a document that will help further informed decision-making as to the consequences of these plans. The present SEIS, by focusing its analysis only on TAC levels, does not fulfill this mandate. Accordingly, the Court grants plaintiffs' motion for summary judgment as to their NEPA claims, and denies defendants' cross-motion.
V. CONCLUSIONS
For the reasons discussed above, the Court finds that NMFS did not act arbitrarily or capriciously in concluding that the pollock fishery was likely to jeopardize the Steller sea lions but that the mackerel fishery was not likely to cause such a result. The Reasonable and Prudent Alternatives, however, were arbitrary and capricious on this record because they were not justified under the prevailing legal standards and because the record does not support a finding that they were reasonably likely to avoid jeopardy. The Court further finds that NEPA required preparation of a programmatic supplemental environmental impact statement analyzing the environmental impacts of the FMPs as a whole on the North Pacific ecosystem.
Accordingly, the Court GRANTS plaintiffs' motion for summary judgment, docket no. 181, on their Endangered Species Act claims regarding the pollock fishery's jeopardy determination, and that the Reasonable and Prudent Alternatives are arbitrary and capricious. The Court also GRANTS plaintiffs' motion on their National Environmental Policy Act claim. The Court DENIES plaintiffs' motion in all other respects. The Court GRANTS intervenors' motion, docket no. 187, as it relates to NMFS's failure to analyze the RPAs under the appropriate legal framework, and as to the mackerel fishery no-jeopardy determination. The Court DENIES intervenors' motion in all other respects. *1277 The Court GRANTS defendants' motion, docket no. 184, as it relates to the pollock jeopardy determination and the mackerel non-jeopardy finding. The Court DENIES defendants' motion in all other respects.
Pursuant to the ESA, the Court will therefore order a remand of the Biological Opinion to the National Marine Fisheries Service, for preparation of Revised Final Reasonable and Prudent Alternatives consistent with this Order. Pursuant to NEPA, the Court will also enter an order remanding the Environmental Impact Statement to NMFS for action consistent with this Order. The Court directs plaintiffs to serve and file a proposed Order of Remand by July 19, 1999. Objections to the proposed order shall be filed on or before July 30, 1999. The Court SCHEDULES a status conference for Friday, August 6, 1999 at 9:00 a.m. to consider the form of the Order of Remand and to set a briefing schedule in connection with further proceedings consistent with this Order.
IT IS HEREBY ORDERED.
NOTES
[1] The plaintiffs in this action are Greenpeace, the American Oceans Campaign, and the Sierra Club.
[2] The intervenors are Aleutians East Borough, Westward Seafoods Inc., Wards Cove Packaging Company, North Pacific Processors Inc., Nelbro Packaging Company, Unisea Inc., Peter Pan Seafoods Inc., Kodiak Salmon Packers Inc., Alyeska Seafoods Inc., Western Alaska Fisheries Inc., Kanaway Seafoods Inc., Royal Viking Inc., Morning Star LP, Great Pacific Limited Partnership, Alaskan Command Company, Pacific Knight LLC, the city of Unalaska, United Catcher Boats, and At-Sea Processors Association.
[3] The "American Amici" are the National Wildlife Federation, International Marine Mammal Project of Earth Island Institute, the Humane Society, and Defenders of Wildlife. The "Russian Amici" are Sergei Vakhrin, Save the Salmon Fund, North Pacific, the North Pacific Journal, Russian Far East Fisheries Film School, Olga Cherniagina, Kamchatka League of Independent Scientists, and the Pacific Environment and Resources Center.
[4] References in this Order to the "BiOp" relate to the Opinion issued December 3, 1998. Prior Biological Opinions will be identified by the year in which they were issued.
[5] See Notice of Availability of Final Supplemental Environmental Impact Statement, 63 Fed.Reg. 71,285 (1998).
[6] A threatened species is "likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range." 16 U.S.C. 1532(20). The listing of a species as threatened triggers an obligation of the Secretary to "issue such regulations as he deems necessary and advisable to provide for the conservation of the species." 16 U.S.C. 1533(d). An endangered species is "in danger of extinction throughout all or a significant portion of its range." 16 U.S.C. 1532(6).
[7] Critical habitat are those areas "essential to the conservation of the species" and that "may require special management consideration or protection" in order for the species to survive and recover. 16 U.S.C. 1532(5)(A)(i).
[8] The primary difference between haulouts and rookeries is that only rookeries are used in connection with the reproductive process, including mating, giving birth, and nursing.
[9] The BiOp analyzes the effects of the 1998 fishery on the Steller sea lions, and makes recommendations as to how the 1999-2001 fisheries should be conducted to minimize their impact. The ESA claims in this case involve challenges to NMFS's conclusions based on this data, and on the recommendations they make to avoid the problems that occurred with the 1998 fisheries. Thus, the 1998 fisheries data provides the appropriate baseline for this Court's analysis.
[10] An action that "jeopardizes" a listed species is one that "reasonably would be expected to reduce appreciably the likelihood of both the survival and recover" of the species. 50 C.F.R. 402.02. An action that adversely modifies a species' critical habitat is one that "appreciably diminishes the value of [the] critical habitat for both the survival and recovery" of the species. Id. The terms are discussed in more detail, infra, Section III(B).
[11] Although the North Pacific Fishery Management Council makes recommendations regarding amendments to the FMPs, the Secretary of Commerce must approve them before they become final. This structure leads to NMFS's Office of Sustainable Resources being the action agency for ESA purposes. Because most of the decisions are actually made by the Council, however, NMFS's role as expert/consulting agency is more significant to the issues presently before the Court. Thus, references to "NMFS" in this Order, unless otherwise specified, refer to NMFS in its role as expert/consulting agency.
[12] An EIS is "an action-forcing device to insure that insure that [NEPA's] policies and goals ... are infused into the ongoing programs and actions of the Federal Government. It shall provide full and fair discussion of significant environmental impacts and shall inform decisionmakers and the public of the reasonable alternatives which would avoid or minimize adverse impacts or enhance the quality of the human environment." 40 C.F.R. 1502.1.
[13] Major federal actions are those which may have significant effects on the environment and which are "potentially subject to Federal control and responsibility." 40 C.F.R. 1508.18.
[14] An Environmental Assessment is a concise public document that helps an agency determine whether an EIS is necessary, facilitates preparation of an EIS when one is necessary, and aids in the agency's NEPA compliance. 40 C.F.R. 1508.9. A Finding of No Significant Impact briefly presents "the reasons why an action ... will not have a significant effect on the human environment and for which an [EIS] therefore will not be prepared." 40 C.F.R. 1508.13.
[15] The section on alternatives to the proposed agency action is "the heart of the environmental impact statement." 40 C.F.R. 1502.14. This section "should present the environmental impacts of the proposal and the alternatives in comparative form, thus sharply defining the issues and providing a clear basis for choice among options by the decisionmaker and the public." Id.
[16] The intervenors do not raise NEPA claims.
[17] Plaintiffs' contention that NMFS failed to apply this definition by analyzing adverse modification and jeopardy separately will be discussed infra, Section III(E)(2).
[18] Section 1536(a)(2) provides: "Each Federal agency shall, in consultation with and with the assistance of the Secretary, insure that any action authorized, funded, or carried out by such agency (hereinafter in this section referred to as an "agency action") is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species which is determined ... to be critical.... In fulfilling the requirements of this paragraph each agency shall use the best scientific and commercial data available."
[19] See supra footnote 11 for a precise explanation of the expert-consulting agency structure in this case.
[20] The BiOp's presentation of this information is confusing and opaque at best. The 125 pages of text never include TAC levels for the BSAI; instead, the information is only given in percentages ÔÇö e.g. the percentage increase or decrease from prior years, percentage of TAC taken from critical habitat, etc. Such a presentation makes it very difficult for a reviewing court to understand the agency's decisions and to assess their legal sufficiency. Neither has the government's brief always helped the court, because its citations to the record on critical points are sometimes inaccurate. See, e.g., Def.'s Resp., docket no. 205, p. 3 (citing as authority for BSAI TAC levels a chart dealing with total catch in the GOA).
[21] The second season will occur in September through October or November. AR-28 at 32; S1-55 at 104. This division of the mackerel fishery into two seasons provides a much more significant change from 1998 practices than does the division of the pollock fishery into A1 and A2 seasons. See Part III(E)(2) & (3), infra.
[22] Subsection (a)(2) requires the secretary to review agency action to determine whether jeopardy or adverse modification will result.
[23] An action results in jeopardy when it "directly or indirectly, ... reduce[s] appreciably the likelihood of both the survival and recovery of a listed species in the wild by reducing the reproduction, numbers, or distribution of that species." 50 C.F.R. 402.02.
[24] Adverse modification is "a direct or indirect alteration that appreciably diminishes the value of critical habitat for both the survival and recovery of a listed species ... [including] alterations adversely modifying any of those physical or biological features that were the basis for determining the habitat to be critical." 50 C.F.R. 402.02.
[25] The record reveals that NMFS scientists, when drafting the RPA section of the Biological Opinion, had proposed that the A2 season start even later, on March 15th. S1-40.
[26] The Court declines the intervenors' invitation to evaluate the RPAs in light of what actually occurred in the 1999 A1 and A2 pollock seasons. The regulations define RPAs in part as measures which the consulting agency believes would avoid the likelihood of jeopardy and adverse modification. 50 C.F.R. 402.02. The Court must evaluate whether that belief was arbitrary and capricious. The Court must therefore analyze the RPA's logical effect, viewed when the RPAs were proposed and approved, rather than evaluating the RPAs' actual effect.
[27] These numbers are illustrative only, and do not reflect the actual TAC levels. As stated in footnote 20, the Biological Opinion does not contain the Bering Sea's TAC levels in metric tons, so it is impossible for the Court to use the correct figures here.
[28] The ESA itself may not require explanations of RPAs to contain this level of detail. The Handbook's introduction, however, states that it "establishes national policy for conducting consultation" pursuant to the ESA. AR-18 at 0001b. NMFS may therefore be bound by this higher standard: "Courts have found agencies to have violated the APA by deviating from an announced policy without sufficient reason." Southwest Center, 143 F.3d at 523 n. 4. The Court need not decide this issue, however, because NMFS failed to articulate any connection between the facts found and the choices made in the RPAs, or to provide any explanation demonstrating why "the Director believes [the measures] would avoid the likelihood of jeopardizing the continued existence of [Steller sea lions] or resulting in the destruction or adverse modification of critical habitat." 50 C.F.R. 402.02.
[29] See Westlands Water District v. United States Dept. of Interior, 850 F. Supp. 1388, 1425-26 (E.D.Cal.1994) (noting but not resolving these arguments).
[30] See also Aluminum Co. of America v. Bonneville Power Admin., 175 F.3d 1156, 1162 (9th Cir.1999) (agency's exercise of statutory obligations to consider economic interests can only be accomplished within framework of compliance with environmental mandates.)
[31] One NMFS scientist's correspondence describes this problem: "[P]rotective measures for [sea lions] appear to be less urgent than consideration of impacts to the fishing industry. I though that we were still in the role of the consultation agency in deciding what needed to be done for the Stellers and later, as action agency, we would find the best way to implement RPAs with industry concerns in mind. Have I misunderstood the process, or does it appear that several steps are going on at the same time here?" S1-484.
[32] Similarly, the record does not explain the closure of the Aleutian Islands to pollock fishing. This measure is not found in the Biological Opinion; it first arose as part of the Council's changes to the RPAs, and is part of the final measures adopted. Nothing in the record provides any indication of NMFS's analysis as to whether this measure fulfills the four-part definition of reasonable and prudent alternatives.
[33] Plaintiffs are also entitled to summary judgment regarding the pollock fishery jeopardy determination, and intervenors are entitled to summary judgment regarding the mackerel fishery finding of no-jeopardy.
[34] The regulations define "Environmental Assessment" in relevant part as "a concise public document ... that serves to ... [b]riefly provide sufficient evidence and analysis for determining whether to prepare an environmental impact statement or a finding of no significant impact." 40 C.F.R. 1508.9. The regulations define Finding of No Significant Impact as "a document by a Federal agency briefly presenting the reasons why an action ... will not have a significant effect on the human environment and for which an [EIS] therefore will not be prepared." 40 C.F.R. 1508.13.
[35] See supra Section II(D) for a more detailed discussion of the extensive changes which had occurred in the North Pacific ecosystem during this period.
[36] The regulations require an agency to publish in the Federal Register a notice of intent to prepare an EIS. 40 C.F.R. 1501.7. This scoping notice should, among other things, invite public participation, determine the breadth and depth of the significant issues to be analyzed in the EIS, and provide a tentative schedule for EIS preparation. Id.
[37] Additionally, the SEIS refers repeatedly to the fact that it is a "programmatic analysis" of the fisheries as they affect the environment. See, e.g., S2-350 at 2, & vol. 2 at p. 2. The government's counsel conceded at oral argument that the document should be treated as a programmatic analysis. Tr. at p. 105. Programmatic analyses look to the environmental consequences of a project as a whole, and do not necessarily contain the same level of detail or specificity as a site or project-specific EIS. See Resources Ltd. v. Robertson, 35 F.3d 1300, 1306 (9th Cir.1993). Instead, they often form the basis for tiering future NEPA documents focusing on specific facets under review. NMFS's description of the SEIS as "a programmatic analysis" provides further support for the conclusion that the SEIS must be a broad document considering the FMPs as a whole.
[38] The section further provides that agencies shall:
(a) Rigorously explore and objectively evaluate all reasonable alternatives, and for alternatives which were eliminated from detailed study, briefly discuss the reasons for their having been eliminated.
(b) Devote substantial treatment to each alternative considered in detail including the proposed action so that reviewers may evaluate their comparative merits.
(c) Include reasonable alternatives not within the jurisdiction of the lead agency.
(d) Include the alternative of no action.
(e) Identify the agency's preferred alternative or alternatives, if one or more exists, in the draft statement and identify such alternative in the final statement unless another law prohibits the expression of such a preference.
(f) Include appropriate mitigation measures not already included in the proposed action or alternatives.
40 C.F.R. 1502.14.
[39] This conclusion is even stronger when one realizes that the three of the four "alternatives" were closely related to the status quo. As the EPA final comments correctly point out, "Not only were the alternatives limited to variations of TAC, but three of the four existed within the current status quo range: Alternative A maintained the entire range, Alternative B low-balled the existing range, and Alternative C high-balled the existing range. Alternative D, which called for ceasing all fishing activities ... seems unreasonable and therefore unlikely to be considered." Pl.'s Ex. 3 at p. 5, attached to docket no. 182. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1889511/ | 60 S.W.3d 169 (2001)
RESCAR, INC., Appellant,
v.
James WARD, Appellee.
No. 01-99-00038-CV.
Court of Appeals of Texas, Houston (1st Dist.).
July 5, 2001.
Rehearing Overruled December 6, 2001.
*173 Joseph M. Nixon, William J. Boyce, Houston, Shayle P. Fox, Daniel R. Madock, Chicago, IL, for appellant.
Stuart M. Nelkin, Houston, for appellee.
Panel consists of Justices WILSON, HEDGES, and SMITH.[*]
OPINION
WILSON, Justice.
Rescar, Inc., appellant, challenges the $3,312,055 judgment following a jury trial after its termination of its at-will employee, James Ward, appellee. We reverse the finding of intentional infliction of emotional distress and render that the judgment be reduced to reflect Ward takes nothing on that cause of action. We affirm on all other grounds.
I. Facts
Rescar repairs and cleans railroad tank cars at three facilities in Texas. Ward was hired as an at-will employee and became plant manager for Rescar's Orange, Texas facility in March of 1992. At the time he was hired, Ward was told he would have no authority over the cleaning operation in the plant. Instead, Robert Mitchem, a *174 Rescar vice president, and Fred Keil directed Rescar Cleaning.
In December 1992 a Texas Water Commission (TWC) investigator told Ward that the Orange County Water Control District No. 2 (the District) had discovered a hazardous chemical in its sewer system.[1] The TWC and Ward confirmed Rescar was the source of the chemical. Keil told the TWC and Ward that the chemical entered the sewer by a crack in the pipe that ran directly through the concrete containment pad in the cleaning area. Ward told the TWC he would plug the pipe with concrete. When he did, Mitchem confronted Ward and angrily asked him, "What are you doing plugging into my pipe ... ?"
On March 24, 1993, after independently discovering several other violations of state and federal environmental laws, Ward sent copies of a letter outlining violations since December 1992 to Rescar's owner (Joe Schieszler), President (Bill Groos), and Vice President in charge of Rescar Cleaning (Mitchem). The letter stated, "It is obvious [Rescar Cleaning's] lawless disposal tactics are causing serious environmental violations." Because plugging the pipe in 1992 had caused Ward to get involved in Rescar Cleaning's daily operations, Ward concluded his letter by stating:
By way of this document, I as Plant Manager of Rescar Incorporated in Orange, Texas hereby notify all involved parties that I am relieving myself of any wrongful misconduct resulting from these illegal proceedings conducted by [Rescar Cleaning].
Don Loyd, Ward's supervisor, told Ward he would have fired him immediately, but Rescar's headquarters told him he "could not fire him immediately and to take care of it."
On April 28, 1993, several members of Rescar's upper management and Ward inspected a field adjacent to Rescar Cleaning. Ward again expressed concern over violations he saw that had obviously not been corrected in the month since he sent the letter.
On May 10, 1993, Loyd told Ward he would be transferred to Rescar's Channelview, Texas facility which was not yet operational.[2] While in Channelview, Ward was responsible for hiring new employees. Despite being instructed by his employer not to hire minorities because they were pro-union, Ward hired a female as a forklift operator and an African American male as paint supervisor.
On December 30, 1993, Loyd terminated Ward. Ward told Loyd that Meryl Whitmeyer, a supervisory employee, told him that morning that Rescar was upset because he hired too many minorities and he was going to be fired.
Less than one month after he was terminated, Ward was contacted by Pat Everett. Everett, who sells coatings to Rescar and has been in the industry for 25 years, told Ward she had attended an industry meeting also attended by Rescar's Executive Vice President, Myron Harkins. Harkins told Everett that Rescar was very upset about Ward's letter outlining the environmental violations, and advised Everett to tell Ward, he would
find it very difficult to run with the big boys; that [he] wouldn't win if [he] tried *175 it and if [he] pursued it, [he] would not work in the industry anymore, and it could very adversely affect [his wife's] business also.
Everett testified Ward was visibly shaken by Harkins's threat.
Ward sued Rescar alleging wrongful termination, retaliation in violation of the Texas Commission on Human Rights Act (TCHRA), and intentional infliction of emotional distress.
The jury returned a verdict in favor of Ward on all counts. It awarded $2,000,000 in actual damages, reflecting $240,000 for past lost earnings and benefits, $560,000 for future lost earnings and benefits, $150,000 past mental anguish, and $50,000 for future mental anguish for the common-law and statutory termination causes of action, in addition to $1,000,000 for mental and physical pain and suffering caused by Rescar's intentional infliction of emotional distress. The jury awarded an additional $500,000 in exemplary damages and pre- and post-judgment interest.
II. Common Law Claim
Rescar argues Ward's Sabine Pilot claim fails as a matter of law.
In reviewing a legal sufficiency or "no evidence" challenge to a jury finding, we must consider the evidence and inferences that tend to support the finding in the light most favorable to the party in whose favor the verdict has been rendered and disregard all evidence and inferences to the contrary. See State Farm Fire & Cas. Co. v. Simmons, 963 S.W.2d 42, 44 (Tex.1998). There must be more than a scintilla of evidence in the record to support the finding in order to survive a no-evidence challenge. Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex.1996).
A. Sabine Pilot
The Supreme Court established a very narrow exception to the employment-at-will doctrine, which previously allowed for termination at will and without cause. Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 734-35 (Tex.1985). That narrow exception covers only the discharge of an employee for the sole reason that the employee refused to perform an illegal act. Id. at 735. The Court further held that in a trial of such a case, it is the plaintiff's burden to prove by a preponderance of the evidence that his discharge was for no reason other than his refusal to perform an illegal act. Id.
In Question No. 2 of the jury charge, the jury was asked:
Excluding the opposition to a discriminatory practice which you found was a motivating factor in Rescar, Inc's decision to discharge James Ward, was James Ward discharged for the sole reason he refused to perform an illegal act?
After this question, there was an instruction that explained that an illegal act constituted either (1) violating the Texas Commission on Human Rights Act by discriminating against individuals on the basis of race, sex, and national origin; or (2) intentionally, knowingly, or negligently participating in a list of eight environmental violations. The jury responded that Ward was discharged for the sole reason that he refused to perform both the TCHRA illegal acts and the environmental illegal acts.
Rescar objected to this jury question on the ground that there cannot be two sole reasons. Ward argues, however, two wrongs do not make a right. Just because Rescar asked Ward to perform two illegal acts does not mean he is prohibited from raising a Sabine Pilot claim. We agree.
*176 B. Illegal Acts
In Winters v. Houston Chronicle Pub. Co., 795 S.W.2d 723 (Tex.1990), the Supreme Court narrowed the Sabine Pilot exception even further by holding a plaintiff may only recover if he was "unacceptably forced to choose between risking criminal liability or being discharged." Id. at 724. This does not mean an employer must directly confront an employee and make an affirmative statement that the employee will be terminated if he refuses to perform an illegal act. Higginbotham v. Allwaste, Inc., 889 S.W.2d 411, 413 (Tex. App.Houston [14th Dist.] 1994, writ denied). An employee's refusal to perform an act is an act of insubordination, worthy of discharge. Id. As such, when an employer asks an employee to perform some act which is illegal, he automatically puts the employee to the "unacceptable" choice of risking criminal liability or being discharged because the employee is placed under the onus of being terminated for insubordination. Id.
Ward testified that, in December 1992, he was contacted by the Texas Water Commission when the Commission found chemicals in a nearby waterway. After investigating the complaint, Ward discovered a pipe in Rescar Cleaning that went directly into the sewer. Rescar Cleaning was using the pipe to dispose of some chemicals. Ward was surprised to discover this pipe, because he had been told Rescar used a closed loop system which would prevent such contamination. Ward testified runoff of chemicals in the sewer was hazardous and could have subjected him to criminal penalties. It was after this incident with the TWC that Ward realized that, despite being expressly told he had no involvement with Rescar Cleaning, he was in fact liable for their environmental violations, given the fact he was the plant manager. The representative from the TWC did not seek out Mitchem, the head of Rescar Cleaning. He wanted to speak with Ward, the plant manager.
Ward testified that, on February 24, 1994, a few months after the TWC incident, George McDermott, Rescar's director of environmental and regulatory administration, wanted a tour of the Orange plant. During the tour, Ward pointed out barrels with improper labels leaking "product," and hoses with product in them, as well. The grass around the hoses showed signs of chemical burns. McDermott said he would discuss the violations with Mitchem.
On March 22, 1993, Ward saw sludge coming out of a PVC pipe in a field. There were limbs covering the pipe in an attempt to conceal it. Ward testified he tested some liquid he found in a field at the same time he found the PVC pipe, and the liquid was acidic and had a chemical smell. Ward realized that, when he sealed the pipe in Rescar Cleaning after the TWC incident, they started dumping directly into the field. Ward testified Mitchem admitted pouring the chemicals on the field. The conditions at Rescar got "extremely worse" the month after the tour with McDermott, so Ward took photographs to document the violations.
He wrote a letter to the president and owner of Rescar, Inc., as well as to Mitchem, the director of Rescar Cleaning. In the letter, Ward outlined Rescar Cleaning's "lawless action" and offered ways to clean up the violations. Upon hearing about the letter, Loyd, Ward's boss, told Ward he wanted to fire him immediately, but he was told to handle it. On April 10, 1993, Loyd sent Ward a letter which stated Ward was in charge of Rescar Cleaning, retroactive to the beginning of the year.
*177 On April 28, 1993, Bill Groos (Rescar's President), Loyd, Mitchem, Keil, and McDermott toured the plant with Ward. There were still no labels on the drums, in violation of environmental laws. Ward told Loyd and Groos he did not believe Mitchem's explanation for the violations, but Loyd and Groos just walked away from him. Less than two weeks later, Ward was told he was being transferred to the Channelview plant.
Loyd remained Ward's boss even after he moved to Channelview. In December 1993, shortly after the Channelview plant became operational, Ward approached Loyd with some environmental concerns about the new facility. One such concern was that the Channelview plant did not have a proper storage facility for the paint. Ward testified that paint is treated similarly to hazardous waste, and there must be a containment area in case there is a spill. Rescar had no such containment area at its Channelview plant. Ward also complained to Mitchem that there was sandblasting being conducted at the new facility without the proper ventilation, thus potentially exposing the workers to silicosis. Mitchem responded that the equipment was broken, and the employees continued to sandblast.
Loyd terminated Ward on December 30, 1993. Ward was told he was being fired due to communication problems. Ward testified Loyd told him he was being fired on that particular day, because if Loyd waited two days longer, he would have to give Ward two weeks of vacation pay.
In Jury Question No. 2, the jury was informed that an illegal[3] act meant intentionally, knowingly, recklessly, or negligently doing any of the following:
1. disposing of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
2. as a member of management, permitting or allowing the disposal of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
3. releasing or introducing into the sewer system of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
4. as a member of management, permitting or allowing the release or introducing into the sewer system of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
5. storing of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
6. as a member of management, permitting or allowing the storage of any pollutant or hazardous substance in violation of the environmental laws of the State of Texas or the United States
7. introducing into a publicly owned water treatment facility any pollutant or hazardous substance which causes such facility to violate the environmental laws of the State of Texas or the United States or permits issued to such facilities under those laws
8. as a member of management, permitting or allowing the introduction *178 into a publicly owned water treatment facility any pollutant or hazardous substance which causes such facility to violate the environmental laws of the State of Texas or the United States or permits issued to such facilities under those laws
There was more than a scintilla of evidence in the record to support the jury's finding that Ward was discharged for the sole reason he refused to perform one of these illegal acts. See Cazarez, 937 S.W.2d at 450.
C. Election of Remedies
Although a party may assert any and all causes of action it may have against another, it will be limited to only one recovery of damages. Thywissen v. Cron, 781 S.W.2d 682, 687 (Tex.App. Houston [1st Dist.] 1989, writ denied). A party who seeks redress under two or more theories of recovery for a single wrong must, before judgment is rendered, elect the remedy it wishes the court to enter judgment upon. Star Houston, Inc. v. Shevack, 886 S.W.2d 414, 422 (Tex. App.Houston [1st Dist.] 1994, writ denied). A party is entitled to the greatest relief under any theory that the verdict will support. Id.
Having held the record supports the verdict on Ward's Sabine Pilot claim relating to the environmental violations, we need not review the jury's common-law and statutory findings on the alleged violations of the Texas Commission on Human Rights Act or alleged violations of the Labor Code.
D. Damages
Rescar argues the evidence is legally and factually insufficient to support the jury's findings of actual damages.
When reviewing a factual sufficiency challenge, we must consider all of the evidence supporting and contrary to the finding. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). The jury finding should be set aside when the supporting evidence is so weak as to render the finding clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). In ordering a remittitur of excessive damages, we must examine all of the evidence in the record to determine whether sufficient evidence supports the damage award, remitting only if some portion is so factually insufficient or so against the great weight and preponderance of the evidence as to be manifestly unjust. Pope v. Moore, 711 S.W.2d 622, 624 (Tex.1986).
The jury awarded Ward $240,000 for lost earnings and employee benefits in the past (between the date of discharge and the date of trial). Ward testified he was paid $67,000 a year and received a company car. After his termination, Ward sent his resume and letters to numerous places. He called several people, including headhunters, and even attempted to get work through the Professional Railroad Placement Services. Ward estimated he contacted 50 companies seeking employment. No one expressed interest in hiring Ward, so he began working for On-Track Railcars, a company his wife owned, inspecting railcars. He was paid $40,000 a year with On-Track Railcars, and received minimal benefits.
Ward's economic expert testified Ward's economic losses to the date of trial were $240,466. Rescar's economic expert did not calculate any lost benefits, and he testified Ward's past economic losses were $113,000.
The jury awarded Ward $560,000 for lost earnings and employee benefits that, in reasonable probability will be lost in the *179 future. Ward's economic expert testified Ward's future economic losses were between $793,988 and $934,018, and Rescar's expert estimated the future economic losses were $437,818.
We find there was legally and factually sufficient evidence to support the jury's award of past and future economic losses.
The jury also awarded Ward $150,000 for mental anguish in the past and $50,000 for mental anguish in the future.
In Texas, a party may recover damages for mental anguish without having suffered any physical injury. Shevack, 886 S.W.2d at 418-19. However, to recover damages for mental anguish, one must show more than mere worry, anxiety, vexation, embarrassment, or anger. Phar-Mor, Inc. v. Chavira, 853 S.W.2d 710, 712 (Tex.App.Houston [1st Dist.] 1993, writ denied). Mental anguish is defined as a high degree of mental suffering, beyond disappointment, anger, resentment, or embarrassment, although it may include all of these. Id. The proof must show such painful emotions as grief, severe disappointment, indignation, wounded pride, shame, despair, or public humiliation. Id. Jurors are best suited to determine whether and to what extent a defendant's conduct caused compensable mental anguish by referring to their own experience. Shevack, 886 S.W.2d at 418-19. Matters of pain and suffering are necessarily speculative, and it is within the province of the jury to set the amount of such damages. Rosenboom Mach. & Tool, Inc. v. Machala, 995 S.W.2d 817, 829 (Tex.App.Houston [1st Dist.] 1999, pet. denied).
Ward's wife testified that, after her husband was terminated, he paced a lot, was very nervous, and had stomach problems so bad that he could not keep anything down. He became withdrawn and quiet. Ward contacted a doctor who prescribed Zantac and Tagamet for his stomach problems.
Ward went to a psychiatrist 32 months after the termination. Based on Ward's description of his maladies, the psychiatrist concluded Ward's "major depression was mild to medium" in severity and cleared up on its own without treatment. The psychiatrist also testified Ward still gets upset, anxious, and has stomach problems when he has to go to Rescar to inspect railcars as is sometimes required in his work for On-Track Railcars.
Given the evidence before us, we will not disturb the jury's province in determining the award of emotional damages. See Machala, 995 S.W.2d at 829.
III. Statutory Claim
Rescar contends Ward cannot obtain a $2.5 million judgment based on his Labor Code claim. Rescar argues there is no evidence of discriminatory conduct, and Ward's statutory damages are capped at $540,000.
Having found the evidence supported the award of damages under Sabine Pilot, we need not address the statutory causes of action.
IV. Intentional Infliction of Emotional Distress
Rescar argues there is no evidence to support the jury's finding that it intentionally inflicted emotional distress. The trial court denied Rescar's motion for instructed verdict, motion to disregard, motion to modify the judgment, and motion for new trial relating to Ward's claim of intentional infliction of emotional distress.
To recover for intentional infliction of emotional distress, a plaintiff must prove that: (1) the defendant acted intentionally or recklessly; (2) the defendant's *180 conduct was extreme and outrageous; (3) the defendant's actions caused the plaintiff emotional distress; and (4) the emotional distress suffered by the plaintiff was severe. Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993); Colson v. Grohman, 24 S.W.3d 414, 421 (Tex.App.Houston [1st Dist.] 2000, pet. denied). Rescar argues its termination did not rise to the level of "extreme and outrageous" conduct, and Ward's emotional distress was not "severe." We agree.
"Extreme and outrageous conduct" is conduct so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994); Beiser v. Tomball Hosp. Authority, 902 S.W.2d 721, 725 (Tex.App.Houston [1st Dist.] 1995, writ denied). Whether a defendant's conduct may reasonably be regarded as extreme and outrageous is a question of law. Wornick Co. v. Casas, 856 S.W.2d 732, 734 (Tex.1993).
We have previously held that, even when the employer's conduct rises to the level of illegality, except in the most unusual cases, it is not the sort of conduct, deplorable as it may sometimes be, that constitutes extreme and outrageous conduct. Beiser, 902 S.W.2d at 725; but see Higginbotham, 889 S.W.2d at 416 ("Unlawful conduct is intolerable in a civilized community" and can be extreme and outrageous conduct.).
In Beiser, Tomball Regional Hospital allegedly fired Beiser after he notified the Food and Drug Administration that the hospital was storing patient blood samples and donor units of blood in violation of FDA regulations. Id. at 723. In Beiser's whistleblower case, we held the hospital's actions did not rise to the level of intentional infliction of emotional distress. Id. For the same reasons as in Beiser, Ward's allegations that Rescar terminated him for failing to perform illegal acts do not, as a matter of law, constitute extreme and outrageous conduct.
Ward also claims Rescar's threat to "blackball" him in the industry was an intentional infliction of emotional distress. Liability does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities. See Gaspard v. Beadle, 36 S.W.3d 229, 238 (Tex.App.-Houston [1st Dist.] 2001, pet. denied); Restatement (Second) of Torts, § 46 (1977). We need not condone or agree with Rescar's conduct to conclude that, as a matter of law, it falls short of being "beyond all possible bounds of decency," "atrocious," and "utterly intolerable in a civilized community." See Diamond Shamrock Refining v. Mendez, 844 S.W.2d 198, 202 (Tex.1992) quoting Restatement § 46, comment d.
We now review the expert testimony at trial regarding Ward's emotional distress. Richard Pesikoff, M.D., a psychiatrist, testified he examined Ward for 45 minutes on three separate occasions. The first meeting, which took place on August 20, 1996, basically consisted of Ward telling Dr. Pesikoff about the lawsuit and the facts surrounding his termination. After Dr. Pesikoff's recitation of the history conveyed to him by Ward, Dr. Pesikoff testified he came to the opinion that Ward had suffered major depression that lasted one year, but cleared up on its own. Ward had suffered from a mild to medium form of major depression, but he did not suffer from severe depression.
Dr. Pesikoff last examined Ward on January 13, 1998, during which Ward explained that he had been keeping busy doing his own consulting work; his marriage was going well; his moods were pretty good/normal; his stomach sometimes *181 got upset when he had to go out to Rescar; he still had some anxiety; his sleeping was good; he had no sexual problems; he was socially active and seeing people; he was no longer nervous and edgy; he had gone back to school to take some classes; he was seeing more friends; and he was exercising again. Dr. Pesikoff re-evaluated Ward and came to the opinion Ward had fully recovered from his depression and did not need any treatment. Dr. Pesikoff did explain, however, that a patient who has suffered from major depression is more vulnerable to suffer from it again, but he is more likely to seek treatment at an early stage to shorten its duration.
Dr. Pesikoff explained there are numerous life stresses that could be a cause of depression, including divorce. Ward divorced his first wife in 1992, and he was terminated in December of 1993. Dr. Pesikoff testified the causes of Ward's depression, based on the history provided by Ward, were: pre-terminationhe felt uncomfortable that his supervisors were unhappy with his hiring minorities and he felt he was in trouble for doing the right thing, and post-terminationhis depression was caused by being blackballed in the industry and the threats to his wife's business. The only expert testimony on the degree of emotional distress sustained by Ward indicated his depression was a "serious psychiatric disorder" that cured itself in a year.
"Severe emotional distress" means distress so severe that no reasonable person could be expected to endure it. GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 618 (Tex.1999); Fields v. Teamsters Local Union No. 988, 23 S.W.3d 517, 533 (Tex. App.Houston [1st Dist.] 2000, pet. denied). We recognize that determining whether reasonable minds could differ as to the requisite level of severity is a difficult threshold issue. See Fields, 23 S.W.3d at 534. What is unquestionably reasonable to one person may be clearly unreasonable to another. See id. Emotional distress was held to be severe when a plaintiff feared for his life, slept with a pistol, cried in public, and lost his appetite. Behringer v. Behringer, 884 S.W.2d 839, 844-45 (Tex.App.-Fort Worth 1994, writ denied). Similarly, emotional distress was held to be severe when a plaintiff refused to speak or see anyone, became ill and disoriented, and experienced extreme anger. Tidelands Auto. Club v. Walters, 699 S.W.2d 939, 945 (Tex.App.-Beaumont 1985, writ ref'd n.r.e.). In contrast, feelings of anger, depression, and humiliation (even when embarrassed in front of one's children), are insufficient to constitute severe distress. Regan v. Lee, 879 S.W.2d 133, 136-37 (Tex.App.-Houston [14th Dist.] 1994, no writ).
We hold Ward did not suffer emotional distress to the degree required to recover for intentional infliction of emotional distress. While his distress may have been "serious," the evidence did not support a finding that it was "severe." We hold the evidence was insufficient as a matter of law to support a finding that Ward's emotional distress was severe.
We sustain Rescar's point of error as it relates to Ward's claim for intentional infliction of emotional distress. We reverse and render judgment that Ward's recovery be reduced by $1,000,000 to reflect he takes nothing on his intentional infliction of emotional distress claim.
V. Punitive Damages
The jury awarded $500,000 in punitive damages after it found Rescar acted with malice. Rescar argues this finding fails as a matter of law, because the record is insufficient to establish the "clear and *182 convincing" level of evidence needed to show malice.[4]
Consistent with Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 16-17 (Tex.1994), the trial court, on Rescar's motion, bifurcated the trial reserving the issue of exemplary damages until after malice was determined.
The jury was asked if it found by "clear and convincing evidence that the harm to James Ward resulted from malice." It was then provided the following definition of "malice" based on Texas Civil Practice and Remedies Code section 41.001(7):
(a) a specific intent by Rescar to cause substantial injury to James Ward;
or
(b) an act or omission by Rescar,
(i) which, when viewed objectively from the standpoint of Rescar at the time of its occurrence, involved an extreme degree of risk, considering the probability and magnitude of the potential harm to others; and
(ii) of which Rescar had actual, subjective awareness of the risk involved, but nevertheless proceeded with conscious indifference to the rights, safety, or welfare of others.
See Tex. Civ. Prac. & Rem.Code Ann. § 41.001(7) (Vernon 1997). Because neither party objected to this instruction, we are bound to review the evidence in light of this definition. City of Fort Worth v. Zimlich, 29 S.W.3d 62, 71 (Tex.2000).
Every tort involves conduct that the law considers wrong, but punitive damages are proper only in the most exceptional cases. Cazarez, 937 S.W.2d at 454. Rescar, citing Wal-Mart Stores, Inc. v. Holland, 956 S.W.2d 590 (Tex.App.-Tyler 1997), rev'd on other grounds, 1 S.W.3d 91 (Tex.1999), argues, as a matter of law, this is not such an exceptional case to warrant punitive damages.
In Holland, Wal-Mart allegedly terminated an employee after for filing a worker's compensation claim. Holland injured her back on the job. She informed her boss of the injury, but was told she had to continue lifting heavy objects. After lifting one such object, she exacerbated her back injury and was unable to return to work. Id. at 597. The definition of "malice" submitted to the Holland jury was substantially different than the one submitted in our case. In essence, that definition required evidence showing Wal-Mart must have had actual awareness the act would, "in reasonable probability, result in human death, great bodily harm, or property damage." Id. The Tyler Court held there was no evidence of malice, given the fact Holland did not provide any doctor-ordered medical restrictions to her supervisor; therefore, he could not have had the requisite awareness that great bodily harm would result from his ordering her to continue lifting. Id.
Here, the question of "harm" to Ward is a bit more complicated. Rescar was certainly aware of the environmental violations and the potential criminal liability which could be imposed on Ward, its plant manager. Ward pointed out the various violations on no fewer than four occasions. The "harm," however, is not the harm caused by the environmental violations, because Ward, personally, suffered no harm from Rescar's environmental practices. If Ward had brought a suit alleging silicosis from the sandblasting, that would be a different matter, and part (b) of the definition *183 of "malice" relating to Rescar's acts or omissions would apply.
The suit before us, however, is one for wrongful termination. The "harm" to Ward is therefore the loss of his employment in the future, and we must determine if "there was a specific intent by Rescar to cause substantial injury to James Ward."
Ward testified Rescar "blackballed" him in the rather close-knit railroad community, giving him no choice but to work for his wife at a substantially decreased salary. These events were connected to the method used to terminate Ward.
Pat Everett, who had been in the industry for more than 25 years, testified she was approached by Rescar's Executive Vice President while attending an industry meeting. Everett, who has never worked for Rescar, was told by Rescar's officer that Ward would find it "difficult to run with the big boys," and he "would not work in the industry anymore."
Ed Mooneyham became plant manager at Rescar's Channelview, Texas plant six months after Ward was terminated. Mooneyham testified that Ward was sent by Shell to inspect some of the railcars at Rescar. When Rescar management found out about Ward's presence, Mooneyham was asked to tell Shell not to send Ward. There was additional testimony from Ward's psychiatrist that Ward told him Rescar had called G.E. Capital and asked them not to hire Ward, because that would adversely affect Rescar's relationship with G.E. Capital.
We hold the testimony was sufficient to show malice because Rescar exhibited specific intent to cause substantial injury to Ward, continuing even after Rescar terminated him.
We overrule the punitive damages point of error.
VI. Other Errors in Record
Rescar further argues the case should be remanded because the trial court's errors during the trial were manifest on the record.
A. Improperly Admitted Evidence
1. Environmental Record
Rescar claims that over its objections, the trial court allowed evidence of Rescar's environmental record for times other than when Ward was employed.
A person seeking to reverse a judgment based on evidentiary error need not prove that but for the error a different judgment would necessarily have been rendered, but only that the error probably resulted in an improper judgment. City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex.1995); Bracewell v. Bracewell, 31 S.W.3d 610, 614 (Tex.App.-Houston [1st Dist.] 1999, no pet.).
The trial court granted Rescar's motion in limine and instructed the parties that before any testimony was introduced about Rescar's environmental records and violations for any facility other than Orange and Channelview, they must approach the bench and get a ruling. The same applied for testimony relating to the Orange and Channelview plants for times when Ward was not employed by Rescar. There was no ruling on the merits, and no error was preserved. See Hartford Accident & Indem. Co. v. McCardell, 369 S.W.2d 331, 335 (Tex.1963); Collins v. Collins, 904 S.W.2d 792, 798 (Tex.App.-Houston [1st Dist.] 1995, no writ).
After making its ruling on the motion in limine, the trial court asked Rescar if it intended to abide by the rulings, as well. Rescar's attorney stated, "My understanding [sic] if I would not abide by them, I would open the door for them to offer *184 evidence." The trial court agreed and advised that in addition, Rescar would "run afoul of the representation to the Court. These are mutual."
In its opening statement, Rescar's attorney discussed how "Rescar restored [the Channelview] facility and made it clean from the pigpen it was under Mr. Ward." Clearly, this statement referred to Rescar's actions at a time other than when Ward was employed there, namely, after his departure. As such, Rescar opened the door. See Southwestern Elec. Power Co. v. Burlington Northern R.R., 966 S.W.2d 467, 473 (Tex.1998).
In addition, Rescar refers us to at least 40 pages of allegedly objectionable testimony. At no time in the referenced testimony did Rescar ask to approach the bench and discuss the motion in limine. In fact, none of the objections lodged even relate to the motion in limine. Rescar has waived any error regarding admission of erroneous evidence. See Tex.R.App. P. 33.1.
2. Hearsay
Rescar also contends the trial court erred in admitting the hearsay "shop rumor" regarding Ward's upcoming termination due to his minority hiring practices. Because the verdict supports another theory of recovery, we need not address the Labor Code claims.
B. Jury Selection
Finally, Rescar argues the trial court "skewed" the jury selection process by excluding all business persons and eliminating all "managers" from the jury. A customer service manager, a senior vice president for Chase Bank, and a former GTE Wireless supervisor and Burger King manager were members of the jury. There is no merit to this claim.
VII. Conclusion
We reverse the judgment insofar as it awards damages for the intentional infliction of emotional distress and render judgment that Ward take nothing on that cause of action. In all other respects, the judgment is affirmed.
JACKSON B. SMITH, J. (Retired), concurring and dissenting.
JACKSON B. SMITH, Jr., Justice (Retired), concurring and dissenting.
I concur with the majority opinion in all respects, except for its reversal of the $1,000,000 damage award to James Ward for intentional infliction of emotional distress. I would affirm the entire trial court judgment.
The majority opinion holds that Rescar's actions toward Ward were neither extreme and outrageous nor Ward's emotional distress sufficient to be classified as "severe." I disagree.
To recover damages for intentional infliction of emotional distress, a plaintiff must prove: (1) the defendant acted intentionally or recklessly; (2) the defendant's conduct was extreme and outrageous; (3) the defendant's actions caused the plaintiff emotional distress; and (4) the emotional distress suffered by the plaintiff was severe. Twyman v. Twyman, 855 S.W.2d 619, 621 (Tex.1993).
It is manifest from the evidence that Rescar's actions toward Ward were intentional and that Ward suffered emotional distress as a result of those actions. These two matters appear to be uncontested. However, Rescar vehemently contests Ward's claim that Rescar's actions were extreme and outrageous and that the emotional distress Ward suffered was sufficient to be classified as "severe."
*185 The Texas Supreme Court has held that whether a defendant's conduct may reasonably be regarded as extreme and outrageous is a question of law. Wornick v. Casas, 856 S.W.2d 732, 734 (Tex.1993). The supreme court also has held that, for a defendant's conduct to be considered extreme and outrageous, the conduct must be "so outrageous in character, and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community." Twyman, 855 S.W.2d at 621. That court has further held that bad faith and rudeness cannot reasonably be regarded as so extreme as to go beyond all possible bounds of decency. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994).
FACTS
The evidence shows that Ward was hired in 1992 by Rescar as a plant manager. Rescar contracted to clean and repair railroad cars. Although Ward was responsible for the entire plant, the cleaning portion of the plant was under the authority of Mitchem and Keil. Mitchem was a Rescar vice-president.
In December 1992, a Texas Water Commission investigator and Ward discovered that Rescar Cleaning (RC) was disposing of hazardous chemical waste in a sewer system. Ward had the pipe plugged through which the chemical was flowing. Mitchem, Rescar's vice-president, asked Ward what he was doing plugging Mitchem's pipe. Shortly thereafter, Ward showed McDermott, Rescar's highest official responsible for environmental issues, a number of chemical drums lying in a field near the RC cleaning area. Some of the drums were unmarked, some mislabeled, and some were leaking. McDermott told Ward that RC would clean up the drums as well as some chemical hoses that had been dumped in the field. The hoses had spilled chemicals, leaving burned spots on the field. No action was taken by RC to clean up the field.
In March 1993, another pipe was discovered leaking liquid flowing from a sludge separation in the RC area. More hoses and areas of ground contamination also were observed in the same field. Tests revealed that the leaking liquid, black sludge, was highly acidic.
Ward was becoming increasingly concerned about the environmental hazard being created and its potential effect on the public. He also was well aware of his own responsibilities and, as plant manager, he was the person who could be found guilty of violating federal and state environmental laws. To protect himself, Ward wrote letters to the owner, the president of Rescar, as well as the vice-president of RC. In those letters, Ward outlined the various violations taking place in the RC area. He recommended immediate remedial action, and disclaimed any responsibility for any misconduct resulting from RC's illegal activities.
Upon hearing of Ward's letter, Dan Loyd, Ward's immediate supervisor, wanted to fire Ward. However, Loyd was told, "he could not fire him immediately and to take care of it."
On April 10, Loyd sent Ward a memorandum stating that, effective January 1, 1993, Ward had been given authority over RC's cleaning area.
Loyd did not know if anyone had told Ward about his changed responsibilities before he sent the memo to Ward on April 10. Ward was upset when he received the memo, because he was the one who had reported to Rescar's officers the various violations that had occurred between January 1, 1993 and April 10, 1993, and now, the company was trying to place the responsibility *186 on him by giving him an organizational chart that had been back-dated by approximately four months. Ward and others had never seen or heard of the chart prior to April 10.
Shortly thereafter, in May 1993, Ward was transferred to another Rescar plant that was not operational at that time. Ward was responsible for hiring new employees. During the balance of 1993, Ward and his supervisor, Loyd, had several confrontations concerning the hiring of employees and, on December 30, 1993, Loyd terminated Ward's employment. Meryl Whitmeyer, a Rescar supervisory employee, told Ward that morning that he was going to be fired because he had hired too many minorities. Loyd had accomplished what his supervisors had told him to do in March 1993, "he could not fire him [Ward] immediately and to take care of it."
Less than a month after Ward's termination, Pat Everett, a sales person, informed Ward of a conversation she had had with Rescar's executive vice-president, Myron Hawkins. She said Hawkins told her that Rescar officials were very upset by Ward's letter which informed them of the company's various violations. She said that Hawkins then told her to tell Ward that: (1) Ward and Geri (Ward's wife) would find it difficult to run with the big boys; (2) that he would not win if he tried and pursued; (3) he would not work in the industry anymore; and (4) it could adversely affect Ward's wife's business.
Hawkins's threat and caveat sent to Ward was not an idle threat. Notwithstanding his qualifications and extensive experience in the specialized cleaning and repairing rail car industry, Ward was unable to obtain and retain employment. Rescar formulated a plan that, when Ward obtained employment with Shell Oil, a Rescar vice-president would request Shell not to send Ward to inspect Shell's own railcars that Rescar worked on for Shell. When Ward was employed by GE, Rescar contacted GE and told it that employing Ward would hurt Rescar's relationship with GE. Ward finally went to work for his wife's company at a much lower salary than he would have made in the cleaning and repairing railcar industry.
It is not unusual for an employer to terminate an at-will employee when disputes arise. In fact, it is well established that an employer does not need a reason to terminate an at-will employee. See Montgomery County Hosp. Dist. v. Brown, 965 S.W.2d 501, 503 (Tex.1998). It is not even unusual when heated disputes arise between two parties that threats may be made. However, when an employer terminates an employee, threatens to ruin that employee's ability to ever obtain employment, and then carries through on the threats by exerting pressure and leverage on the former employee's new employers to such an extent that the former employee cannot keep employment, all of which Rescar did, the employer's actions exceed common decency and become extreme and outrageous.
To add insult to injury, Rescar's executive vice president also threatened to take action that would affect the business of Ward's wife. The continuity of Rescar's actions to remonstrate and even harm Ward make it readily apparent that Rescar intended to inflict as much emotional distress upon Ward, and his family, as it possibly could. This evidence is sufficient to support the jury's verdict that Rescar's actions toward Ward were intentional and its conduct was extreme and outrageous.
Rescar also asserts that Ward is not entitled to recover damages for intentional infliction of emotional distress because Ward did not introduce sufficient proof to demonstrate "severe" emotional distress.
*187 The question of whether evidence is sufficient to classify emotional distress as severe is a two-step process. First, the trial court must determine as a matter of law whether the evidence is such that severe emotional distress can be found. Second, if the trial court answers the first question affirmatively, whether severe emotional distress in fact exists becomes a question for the finder of fact to determine from the evidence. Restatement (Second) of Torts § 46 cmt. d (1965); Behringer v. Behringer, 884 S.W.2d 839, 844 (Tex.App.-Fort Worth 1994, writ denied); Tidelands Auto. Club v. Walters, 699 S.W.2d 939, 945 (Tex. App.Beaumont 1985, writ ref'd n.r.e.).
In this case, because the trial court submitted the question of severe emotional distress to the jury, it, of necessity, found as a matter of law that the evidence was such that the jury, if it chose to do so, could find that there had been intentional infliction of severe emotional distress on Ward by Rescar.
At what point emotional distress becomes severe emotional distress is a matter of degree and depends upon the specific facts of each case. Other than enumerating specific factual situations that do or do not constitute severe emotional distress, case law has not established firm or specific standards to determine what constitutes sufficient emotional distress to classify it as severe.
In a case factually similar to the instant case, a former employer phoned the ex-employee and told her that she would ruin her, would call any employer she worked for and get her fired, would get her for setting her up, and that the ex-employee had better watch her back always, and watch her children always. For approximately two years "hang-ups" were made by the employer to the ex-employee's business. The employer's actions caused the ex-employee debilitating headaches and severe emotional distress. The former employer sent a black floral arrangement to the ex-employee, which was interpreted as a death threat and caused the ex-employee to become paranoid. The jury found severe emotional distress. The appellate court held that there was some evidence to show that the findings of fact by the jury were not clearly wrong or manifestly unjust. Qualicare of East Texas, Inc. v. Runnels, 863 S.W.2d 220, 223 (Tex.App.-Eastland 1993, no writ).
More recently, the Texas supreme court affirmed a judgment awarding damages for intentional infliction of emotional distress where employees suffered illness as a result of a supervisor's continued verbal abuse and threatening gestures. GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 618 (Tex.1999).
In Bruce, the court held that severe emotional distress is distress that is so severe that no reasonable person could be expected to endure it. Id. The evidence in Bruce showed that three employees experienced a variety of symptoms, including crying spells, emotional outbursts, nausea, stomach disorders, difficulty sleeping and eating, stress, anxiety, depression, and fear. This evidence was held to be legally sufficient to support the jury's findings that the three employees suffered severe emotional distress. Id.
In the instant case, Rescar attempted, by backdating an organizational chart, to shift the responsibility to Ward for its own unlawful activities in disposing of waste. Rescar used a false pretext to dismiss Ward, made threats to keep Ward from ever working in the industry, and threatened to harm Ward's wife's business. These combined actions apparently made Ward ill.
The evidence shows that Ward became upset and depressed when Rescar terminated *188 his employment. When Everett informed Ward of Rescar's threats toward Ward's wife, Ward's condition worsened. The evidence describing Ward's lifestyle before and after Rescar's actions makes it apparent that Ward changed from being a happy person to being a very depressed person. He developed eating disorders, would not leave his home, and developed stomach problems. His problems with Rescar weighed on his mind continuously, resulting in loss of sleep. This in turn caused Ward to be nervous, edgy, irritable, moody, and diminished his ability to think clearly or concentrate. During this time, Ward lost interest in doing things that he had enjoyed previously. He became defensive and lacked motivation. His condition deteriorated to the point where he refused to drive a car. During this period of depression his weight dropped from 190 to 160 pounds.
Ward's expert witness, Dr. Pesikoff, testified that Ward's condition was major depression. Pesikoff explained that, according to the Diagnositc and Statistical Manual, 4th Edition, there are nine criterion for making a diagnosis of major depression. Pesikoff testified that Ward's condition met six of the nine criterion and only five were necessary to characterize the condition as major depression.
Rescar contends that Ward's emotional distress could not have been severe because he did not seek medical attention. Dr. Pesikoff explained that it is not unusual for a person experiencing depression for the first time not to recognize the symptoms and not to seek medical attention. Pesikoff's testimony was not rebutted, and, although he did not classify Ward's depression as severe, the facts appear to justify the jury's finding that Ward suffered severe emotional distress.
In this case, based on the evidence, the trial court found as a matter of law that severe emotional distress can be found. The court then submitted the proper issue to the jury inquiring whether severe emotional distress in fact existed. The jury answered that it did.
The question of whether severe emotional distress exists is a question of fact. The Texas Supreme Court has admonished courts of appeals that they are never permitted to substitute their opinion for that of the trier of fact merely because they might have reached a different fact conclusion. Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex.1988). It is my view of the majority opinion that they are doing what the caveat of the Supreme Court told us not to do; that is, substitute their opinion for that of the fact finder.
I would hold that there is some evidence; that is, legally and factually sufficient evidence, to support the jury's verdict against Rescar on Ward's claim for intentional infliction of emotional distress. Accordingly, I dissent from the majority opinion reversing the award of $1,000,000.00 to Ward for intentional infliction of emotional distress.
NOTES
[*] The Honorable Jackson B. Smith, Jr., retired Justice, Court of Appeals, First District of Texas at Houston, participating by assignment.
[1] The chemical was ethyl acrylate. Based on the Material Safety Data Sheet, ethyl acrylate is a known carcinogen that is also toxic to fish and should not be discharged into sewers or waterways. John Schuller, Rescar's paint superintendent, testified he and Keil knew it was illegal to dump ethyl acrylate.
[2] The Channelview office had recently been acquired from Itel, Ward's previous employer.
[3] Ward's environmental expert, Jim Haley, was with TNRCC for 15 years and had served as Chair of a Texas-Federal interagency committee regarding criminal enforcement of environmental laws. He confirmed that the environmental violations Ward encountered were prohibited by state and federal laws which call for criminal penalties.
[4] Rescar does not argue the amount awarded is excessive; it simply argues there is no evidence to support the finding. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1400793/ | 374 S.E.2d 174 (1988)
92 N.C. App. 218
Dorothy H. COCKERHAM Plaintiff-Appellant,
v.
PILOT LIFE INSURANCE COMPANY, INC., Defendant-Appellee.
No. 8823SC130.
Court of Appeals of North Carolina.
December 6, 1988.
*175 Edward Jennings, Taylorsville, for plaintiff-appellant.
W.G. Mitchell, North Wilkesboro, for defendant-appellee.
PHILLIPS, Judge.
When Richard Walter Cockerham, plaintiff's late husband, died of an acute myocardial infarction on 28 August 1985, his life was insured by a policy of defendant's for $10,000. Defendant refused to honor the policy on the ground that in applying for it Cockerham answered an insurability question falsely; and this action to recover on the policy was dismissed at the close of plaintiff's evidence by a directed verdict on the ground that the evidence established defendant's right to void the policy as a matter of law. The evidence bearing upon that issue, upon which defendant, of course, had the burden of proof, was to the following effect:
In 1973 defendant insured Cockerham's life for $5,000 and the policy was still in effect in April, 1984 when defendant notified him that since inflation had eroded its value it was pleased to present him a special opportunity to increase his "protection by $10,000," and that all he had to do to apply for this insurance was "answer the two `insurability' questions on the application below and sign it." One question is irrelevant to the appeal; the other called for a yes or no answer and read: "Have you within the past two years consulted or been treated by a physician for any condition other than a routine physical examination?" Cockerham answered the question "no," signed the application, and the policy, naming plaintiff as beneficiary, was issued 1 July 1984. Cockerham had consulted Dr. Hal Stuart on June 21, July 9, November 8, and December 2 of 1982 and on February 24, March 7, March 24, and April 13 of 1983 for a lingering cold or respiratory infection of unknown origin, and according to Dr. *176 Stuart's testimony he was examined, treated and diagnosed as follows: Cockerham's main complaint was congestion and coughing at night, for which he prescribed medications to ease the cold symptoms and a chest X-ray which contained no evidence of cardiac disease except for a mild enlargement of the heart when compared with X-rays taken in 1982; Cockerham had mild obstructive disease of the lung, a very common condition that probably every smoker in his forties has or will have; the ailment was not life threatening, no cautionary instructions were necessary, and he did not restrict Cockerham's activities; the tests done were standard diagnostic procedures for mild respiratory ailments; he had been Cockerham's doctor for many years; "his visits were not of a strictly routine nature," as he was not one to come for routine checks as a rule, but came only when he had a problem.
The validity of the judgment dismissing plaintiff's action is governed by G.S. 58-30, which provides as follows:
All statements or descriptions in any application for a policy of insurance, or in the policy itself, shall be deemed representations and not warranties, and a representation, unless material or fraudulent, will not prevent a recovery on the policy.
This statute, so our Supreme Court has held many times, entitles an insurer to void a life insurance policy when in applying for it the applicant made a false statement as to his health that was either material or fraudulent. Inman v. Woodmen of the World, 211 N.C. 179, 189 S.E. 496 (1937). Fraud not being claimed in this case the question before us is whether Cockerham's written answer to the application question stated above was both false and material as a matter of law. In our opinion it was neither, as both the falsity and materiality of the statement are questions of fact for a jury.
An answer to a question in an application for life insurance that is ambiguous and calls for a yes or no answer cannot be false as a matter of law. 1A J. Appleman, Insurance Law and Practice Sec. 272, pp. 221-222 (1981). And the question in the application herewhether Cockerham had within the preceding two years "consulted or been treated by a physician for any condition other than a routine physical examination?"is ambiguous and required a yes or no answer. The question, though seemingly simple at first blush, has several difficulties: One is that a routine physical examination is not a "condition" that leads either to medical consultation or treatment; another is that it does not specify the kind of routine physical examination that was not being asked about; and still another is that it required the applicant to characterize the examination made, as well as the condition that prompted him to consult the doctor, and the treatments received. Dr. Stuart's testimony indicates, as is commonly known in any event, that there are standard examinations and treatment for minor respiratory ailments such as Cockerham had, and that there are other routine physical examinations for other minor ailments is also commonly known. Thus, the question does not necessarily mean, as the court ruled, that the only consultation, examination, or treatment that was not asked about was a routine annual or other periodic physical examination. The question can also be construed, in our opinion, to exclude routine physical examinations and treatments for temporary and harmless ailments such as coughs and colds. See, 7 Couch on Insurance 2d Secs. 35:131, 35:136 (rev. ed. 1985). Dr. Stuart's testimony that Cockerham's visits were not of a strictly "routine" nature is neither decisive nor material; for the issue is not what the question meant to the doctor, but what it meant to Cockerham. If he reasonably interpreted the question as not applying to routine examinations and treatments for his cold the answer was not false; if he interpreted it as applying to such examinations and treatments it was false. For similar questions that have been deemed to be susceptible of more than one interpretation see, 13 J. Appleman, Insurance Law and Practice Sec. 7401, pp. 197-269 (1976).
Nor was the answer to the question, even if false, material as a matter of law. *177 In a case like this whether the representation was material "depends upon whether it was such as would naturally and reasonably influence the insurance company with respect to the contract or risk." Wells v. Jefferson Standard Life Insurance Co., 211 N.C. 427, 429, 190 S.E. 744, 745 (1937). In that case at 430, 190 S.E. at 745, it was held that the applicant's failure to inform the insurer about a mild attack of malaria, a more serious malady certainly than the common cold, was not "such a withholding of information as would necessarily have been calculated to influence the action or judgment of the insurance company," and that the materiality of the statement was for the jury to determine, rather than the court. Our ruling in this case is the same; because it is by no means certain, in our opinion, that defendant would have refused the application or charged more for the policy if it had known that during the period from fifteen to twenty-four months before the policy was issued Cockerham had a lingering cold or minor respiratory illness, the most common, routine, and generally harmless illness known to either the public or medical science; an ailment that neither endangered his life nor restricted his activities or work.
VACATED AND REMANDED.
WELLS and BECTON, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1645726/ | 480 So. 2d 587 (1985)
Bert P. NOOJIN
v.
MOBILE CITY PLANNING COMMISSION, an appointed agency of the City of Mobile, and the City of Mobile.
Civ. 4735.
Court of Civil Appeals of Alabama.
November 6, 1985.
*588 Donald C. Partridge of Noojin & McNair, Mobile, for appellant.
John L. Lawler of Finkbohner, Lawler and Olen, and J. Manson Murray of Vickers, Riis, Murray and Curran, Mobile, for appellees.
HOLMES, Judge.
This is a land use case.
Bert P. Noojin (the developer) sought the approval of the Mobile City Planning Commission (the commission) for a resubdivision of property he owns in the Springhill area of Mobile. He proposed to divide one lot and part of a second lot into three lots and to construct townhouses upon each of the three lots. The townhouse project was named Croydon Place.
The commission denied approval for the resubdivision, and the developer filed a petition in the Mobile County Circuit Court for a writ of mandamus to compel the commission to issue a certificate of approval for Croydon Place. The circuit court denied the petition, and the developer appealed to this court. We reverse and remand.
We note at the outset that our review of the commission's action is limited. The commission's denial of approval for the proposed subdivision should not be invalidated unless it is clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare. City of Mobile v. Waldon, 429 So. 2d 945 (Ala.1983). Because the evidence is so lacking to support the reason given for the denial of approval of Croydon Place, we find that such denial was arbitrary and unreasonable and is due to be reversed.
The developer presented his proposal to the commission at a public meeting on November 1, 1984. At the meeting much opposition to the project was voiced by residents of the Springhill neighborhood in which Croydon Place would be built. A petition in opposition to the project signed by sixty-six of these residents was presented to the commission.
*589 Following the hearing the commission met in executive session and voted to deny approval for Croydon Place. By letter dated November 5, 1984, the commission notified the developer that it had denied approval of his proposed resubdivision "because it was felt the resubdivision would have a downgrading effect on the neighborhood."
After the developer had filed his petition for a writ of mandamus, by letter dated December 6, 1984, the commission sought to "explain" the earlier reason given for denialthe alleged downgrading effect. Therein the commission stated for the first time that the proposed resubdivision would violate or fail to meet four of the purposes of the subdivision regulations of the City of Mobile.
The commission stated with some particularity that Croydon Place violated purposes 2. Health and Safety, 3. Social and Economic Stability, 4. Land Uses, and 7. Environment, which are contained in part C, Section I. General Provisions of the subdivision regulations.
On appeal the developer argues that the criteria used by the commission to deny approval for Croydon Place are invalid and void because they exceed the statutory authority of the commission. He argues that his proposed resubdivision meets all valid requirements of the subdivision regulations and that it must, therefore, be approved. The developer further argues that the criteria used to deny approval for Croydon Place and certain criteria set forth in the subdivision regulations, both on their face and as applied to his project, violate his constitutional rights.
The commission's authority to adopt subdivision regulations is derived from Ala. Code (1975), § 11-52-31. The commission is authorized to adopt regulations "not inconsistent with the statutes." Boulder Corp. v. Vann, 345 So. 2d 272, 275 (Ala. 1977). See also Sigler v. City of Mobile, 387 So. 2d 813 (Ala.1980).
The developer argues that, because Ala. Code (1975), § 11-52-31, does not specify that a city planning commission's regulations may address such matters as preventing the downgrading of a neighborhood, the reason used by the commission to deny his resubdivision, such a criterion is void as being outside the scope of the commission's statutory authority. While we note that § 11-52-31 does not prohibit a commission from addressing such a matter in its regulations, we also recognize the principle that statutes, such as § 11-52-31, which impose restrictions on the use of private property "are strictly construed and their scope cannot be extended to include limitations not therein included or prescribed." Smith v. City of Mobile, 374 So. 2d 305, 307 (Ala. 1979).
We need not resolve the issue of the validity of the reason used by the commission to deny approval for the resubdivision, however, because the evidence presented at the commission's hearing and, subsequently, at the circuit court hearing, does not support that reason. In other words, assuming for purposes of this case that the reason given by the commission for denialthe downgrading effectis valid, the case is due to be reversed because the evidence does not support the commission's determination that such a downgrading effect would, in fact, occur.
At both the commission and the circuit court hearings, residents from the Springhill area wherein Croydon Place would be located testified vociferously to their opposition to the project. At least two neighbors testified that they believed their privacy would be diminished because persons in the two-story townhouses would be able to look down on their homes and patios, and they felt that the townhouses would affect the value of their homes.
Another neighbor stated, "I don't think there is any question but what a bunch of houses close by is going to devaluate my property. Just the fact that there are more people, more traffic, more animals more everythingis just going to make it less attractive to be there." The President of the Springhill Preservation Society testified that she believed developers were *590 threatening the aesthetic integrity of the neighborhood by "indiscriminately chopp[ing] up lots."
While the feelings of these neighbors are certainly entitled to consideration, "`[n]eighboring property owners do not possess the right to impose, for their own special benefit, restrictions upon the lawful use of a tract of land.'" Smith, 374 So.2d at 308 (citing E.C. Yokley, The Law of Subdivisions, § 54 (1963 and Supp.1979). See also Sigler, 387 So.2d at 814. More importantly, for purposes of this case, the testimony of the neighbors (and the evidence of the commission) did not show that the proposed townhouses would have a tendency to actually lower the value of their property or otherwise downgrade the neighborhood. The neighbors, in effect, testified only that they feared that the townhouses would do so.
The developer, on the other hand, presented an expert witness, a real estate appraiser, who testified that past Springhill resubdivisions had not, in his opinion, lowered the value of surrounding properties and that he would not anticipate that Croydon Place would have any devaluing effect on the surrounding properties.
We should not be understood as saying that an expert witness would always be necessary in a case such as this to testify as to the downgrading effect of a proposed subdivision. We only find that, under the circumstances of this case, there was no credible evidence that the townhouse project would have a devaluing or downgrading effect on the Springhill neighborhood, while there was credible evidence to the contrary. Under such circumstances the denial of approval for Croydon Place based upon its downgrading effect was arbitrary and unreasonable.
We note that a developer must ordinarily demonstrate complete compliance with all requirements in connection with his subdivision plat for a mandamus to issue to compel approval. Smith, 374 So.2d at 309. Here, however, the commission, in denying approval, cited only one reasonthe alleged downgrading effect, which is not supported by the evidence. Therefore, mandamus is proper to compel approval. Sigler, 387 So.2d at 814; Smith, 374 So.2d at 309.
The commission would have this court judge the validity of the denial of approval, not just in terms of the reason given in the official denial letter of November 5, 1984, but also in terms of the four purposes of the subdivision regulations which were set forth in the subsequent letter of December 6, 1984. This we cannot do.
Ala.Code (1975), § 11-52-32 requires the commission to either approve or disapprove a subdivision plat within thirty days after the submission to it of the plat. If it disapproves the plat, it must state the ground therefor on its records. The Alabama Supreme Court has ruled that the thirty-day requirement of § 11-52-32 is mandatory. Boulder Corp., 345 So.2d at 275.
The commission's December 6 letter, in which it tried to enumerate certain purposes of the subdivision regulations as further grounds or the "real grounds" for the original denial based upon the alleged downgrading effect, was sent more than thirty days after the developer's resubdivision plat had been submitted to the commission on November 1, 1984. Accordingly, that letter has no effect on the denial originally given by the letter of November 5, and we have not considered the reasons stated in the December 6 letter in determining the validity of the denial in this case.
In view of the above, the developer's claims that the criteria used by the commission violate his constitutional rights on their face and as applied are preempted.
The judgment of the trial court is reversed, and the cause is remanded for the issuance of the writ of mandamus directing the commission to approve the subdivision plat.
REVERSED AND REMANDED WITH DIRECTIONS.
WRIGHT, P.J., and BRADLEY, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1845776/ | 458 So. 2d 694 (1984)
Ethel Mae THOMAS
v.
DEVINEY CONSTRUCTION COMPANY and The Insurance Company of North America.
No. 54403.
Supreme Court of Mississippi.
September 12, 1984.
Rehearing Denied November 14, 1984.
W.O. Luckett, Dan T. Bing, Luckett, Luckett, Luckett & Thompson, Clarksdale, for appellant.
David H. Nutt, Rhoden & Nutt, Jackson, for appellee.
Before BOWLING, HAWKINS and SULLIVAN, JJ.
BOWLING, Justice, for the Court:
This case comes to us from the Circuit Court of Coahoma County. Appellant Ethel Mae Thomas was plaintiff below. Upon the conclusion of her evidence, the trial court, on motion of defendants, directed a verdict for the defendants. The question before us is whether or not the trial court did this correctly. We hold that its action was error and reverse and remand the cause.
On September 6, 1979, appellant received a judgment in the amount of $10,000 against one Chester B. Thomas. The judgment grew out of a motor vehicle collision between a vehicle operated by appellant Thomas and a vehicle owned by appellee Deviney Construction Company and operated by Chester B. Thomas.
The present cause of action was filed by appellant Ethel Mae Thomas against Deviney Construction Company, contending that it owed the judgment against Chester *695 B. Thomas under the financial responsibility laws of the State of Mississippi, particularly, what is hereinafter discussed and known as the "omnibus clause."
In the first declaration filed, appellant alleged that appellee Deviney was "self-insured" within the meaning of the Mississippi statutes. Deviney answered the first declaration and affirmatively admitted that it was "self insured at the time of the accident."
Further, the defendant, in abiding by the trial court's order, filed a pre-trial statement on July 23, 1981, stipulating that Deviney "was self-insured at the time of the accident."
On January 20, 1982, Deviney filed an amended answer stating that at the time of the accident it did have a policy of insurance, and "defendant denies that it was totally self-insured at the time of the accident, but alleges to the contrary that it was insured under a policy of insurance which provided excess coverage above an amount in excess demanded by this action, and accordingly as a practical matter, is self-insured for the purposes of this action."
Thereafter, the plaintiff filed an amended declaration joining as a defendant, in addition to Deviney Construction Company, the Insurance Company of North America (hereinafter INA), alleging that Deviney's truck was covered by this company's policy at the time of the collision and that appellant was entitled to recover under the omnibus clause of the policy.
On February 25, 1982, Deviney Construction Company filed its amended answer admitting that it was an insured under a policy of automobile liability insurance issued by INA and that the policy covered the vehicle involved in the collision "under certain terms and conditions contained in said policy."
On February 25, 1982, INA filed its answer to the amended declaration admitting an automobile liability insurance policy insuring Deviney was in existence but denied appellant's allegations as to the policy's coverage.
The trial of the case started on Monday, July 19, 1982, at 8:30 a.m., with all parties present and announcing ready for trial. Included in the record were certain requests for admissions of fact filed by appellant [plaintiff below] on May 17, 1982. This instrument requested that Deviney admit or deny that the company had ever filed any application to be self insured or had ever been issued any certificate of self insurance under the provisions of Mississippi Code Annotated, Section 63-15-1, et seq. (1983 Supp.) [specifically § 63-15-53], providing for application of any owner in whose name more than twenty-five motor vehicles are licensed.
On June 16, 1982, Deviney filed its answers to the amended request and admitted that it had never filed an application to be a self insurer and that it had never been issued a certificate of self insurance under the applicable statutes.
The reason the above information is important is that it later developed that the insurance policy issued by INA provided for a deductible of $100,000. In other words, it provided that Deviney was responsible for the first $100,000 damage its vehicles did to users of Mississippi highways. It developed in the cause in oral argument that Deviney is a rather large construction company owned by a non-resident conglomerate. Its principal activities are subcontracting work for utilities.
Not the least question in the cause is what is the effect of Deviney ignoring the statute under which it did not become a self insurer, as required, up to the sum of $100,000. We are forced to refresh our recollection that in its first answer Deviney affirmatively stated that it was self insured. In its stipulation of facts filed pursuant to the court's usual order, it was affirmatively stated that "defendant, Deviney Construction Company, was self insured at the time of the accident complained of, ... ." In its amended answer Deviney stated "accordingly as a practical matter, it is self insured for the purposes of this action." In its answer to the amended declaration Deviney admitted the *696 insurance policy existed but did not divulge its terms. It however denied the allegation of the declaration that the insurance policy provided for excess coverage above a certain amount and denied that "Deviney may be self insured to the extent of said certain amount."
AT TRIAL
The trial thereof started on the morning of July 19, 1982, with the burden on the part of appellant to prove that its judgment against Deviney's driver Thomas was collectible under either INA's omnibus clauses under its insurance policy or from Deviney as a matter of law under the type of insurance it was required to have which also would have included an omnibus clause.
Appellant introduced only one witness. He happened to be Chester B. Thomas, Deviney's driver at the time appellant was damaged. The purpose of this interrogation, of course, was to prove that at the time of the collision Thomas was driving the truck "with the permission" of Deviney.
We carefully have studied all of the testimony given by Mr. Thomas. It is charitable to say that he agreed with anyone who was asking him questions. It developed that Deviney's nearest sub-office was in Greenwood, Mississippi, under the direction of a man named Robert Gilbert. The work at Clarksdale was being performed with the use of one truck with which we are involved. This truck and the crew working were under the supervision and control of one Roosevelt Kilpatrick, the foreman. On direct examination by appellant's attorney, Thomas testified that he drove the truck in question "pretty often." He stated that the truck had normally been parked at night behind a "station" but that because of vandalism, Kilpatrick had been instructed to keep it at his home overnight on Paul Edwards Street in Clarksdale. According to Thomas, Kilpatrick kept the keys to the truck and could use it anytime he wanted.
According to Thomas, on December 29, 1978, the day the collision occurred, they had come from work [installing poles] and Kilpatrick had driven the truck to a parking area near a cafe that he ran as a sideline. The truck was locked and Kilpatrick assumed whatever duties he performed in the cafe.
Thomas needed to look at a house he wanted to move into, so he asked Kilpatrick to let him make the trip in the truck. Kilpatrick agreed and gave Thomas the truck keys. The collision with appellant occurred during the course of that trip.
Thomas gave the following testimony on direct examination:
Q. At the time on December 29, 1978, when you got the truck, were you aware of any rules prohibiting the use of this truck for personal use without permission?
A. Yes.
Q. If you got permission?
A. Yes, he definitely said "don't use the truck unless you have permission to use it."
Q. All right. Were you ever given any kind of ... anything in writing that prohibited you from using the truck for personal errands?
A. No.
Thomas stated that he had permission from Kilpatrick to drive the truck on the occasion in question.
On cross examination Thomas stated that he knew that Mr. Robert Gilbert [the superintendent in Greenwood] had made it clear that the truck was not to be used for personal use. He knew that it was not to be used for such. He agreed that he received word from Mr. Gilbert at least once a month that the truck was not to be used for personal use.
Thomas then was subjected to redirect examination. The paramount question and answer was:
Q. And Roosevelt Kilpatrick had control of the truck. He had the keys to the truck, did he not? (emphasis ours)
A. Yes, he did.
*697 Q. And he kept it in his possession all the time?
A. Yes, that's right.
After the testimony of Thomas, appellant introduced the INA policy and rested her case. The attorneys for both appellees [defendants below] dictated motions for a directed verdict at that point. The court granted both motions. The question therefore is whether or not at that point appellant had introduced sufficient evidence to "get by" a directed verdict.
This Court has held in too many cases to list that in determining whether or not a directed verdict is given, the trial judge is forced to accept as true all evidence favorable to the plaintiff, together with all reasonable inferences to be gained therefrom. See Paymaster Oil Co. v. Mitchell, 319 So. 2d 652 (Miss. 1975); and Buford v. Jitney Jungle Stores of America, Inc., 388 So. 2d 146 (Miss. 1980), Vise v. Vise, 363 So. 2d 548 (Miss. 1978), and National Mortgage Company v. Williams, 357 So. 2d 934 (Miss. 1978).
We have to bear in mind that what we are dealing with here is not the liability involving negligence of Thomas, the truck driver. We are to determine whether or not appellant made a case for the jury to determine if appellant's judgment came within the terms of the omnibus clause of either the INA policy or the situation Deviney found itself in under that policy or in violation of law, by either having only a policy with $100,000 deductible or not being self-insured. We have already seen that Deviney ignored the laws of the State of Mississippi by not becoming a self-insured for the sum of $100,000 before its insurance coverage was supposed to be reached. There also is the question as to whether or not INA's policy protected the appellant under its omnibus clause, regardless of its deductible provision between it and Deviney. We are constrained to say at first blush, Deviney was "playing" with the financial responsibility laws of this state and consequently subjecting highway users to exposure the statutes were designed to prevent.
We said in Travelers Indemnity Co. v. Watkins, 209 So. 2d 630 (Miss. 1968), that "there is an abundance of authority that the public policy is to protect those injured by careless drivers." We further said:
The insurance business is affected with a public interest and is regarded generally as quasi-public in character. The authorities abundantly support this statement. There are numerous statutes enacted by the legislature regulating insurance and in many instances specifying precise clauses that are written into insurance policies by law. Policies insuring automobile owners against public liability is the subject of the Mississippi Motor Vehicle Safety Responsibility Act, Mississippi Code 1942 Annotated section 8285-01 et seq. (1956) [MCA § 63-15-3 (1972), and the Uninsured Motor Vehicle Act, Mississippi Code 1942 Annotated section 8285-51 et seq. (Supp. 1966)] [MCA § 83-11-101 (1972)]. The latter statute became effective after the accident in this case. The Safety Responsibility Act specifically provides in section 8285-21 [MCA § 63-15-43 (1972)] that an owner's policy of liability insurance within the meaning of that act "shall pay on behalf of the insured named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured. * * *" The Motor Vehicle Safety Responsibility Act in its various sections is a clear manifestation of the public policy of this state that an automobile liability insurance policy is intended to protect those injured by careless drivers as well as the named insured and permittees.
In Travelers we further said:
The purpose of an omnibus clause is to protect the named insured, the persons within the omnibus clause, and the public generally and its members injured by the negligent operation of the insured automobile on a public highway.
The pronouncements in Travelers, were reiterated in Vaughn v. State Farm Mutual Automobile Ins. Co., 359 So. 2d 339 *698 (Miss. 1978). The majority held there however that at the time of the collision the vehicle was being operated by a "third permittee" and under the facts of that particular case, the omnibus coverage did not apply. There the parents of a fifteen year old girl were divorced. The ex-husband and father bought an automobile and turned it over to his ex-wife. She permitted the young daughter to make a trip in the vehicle. Later on the young daughter permitted a friend to drive the vehicle. During the course of that drive, the collision occurred.
The paramount question is do we have a situation here such as in Vaughn? It is obvious we do not. It is undisputed that Kilpatrick was the foreman of the corporate defendant. According to Thomas, Kilpatrick had control of that truck. Thomas' testimony, although weakened by cross examination, was that the alter ego of the corporation in regard to this one truck's activities in Clarksdale was Kilpatrick, the company foreman who kept the keys to the truck and kept it in his sole possession at all times, day and night. Undisputedly, he and he alone gave Thomas "permission" to use the truck, gave him the keys to be used to unlock the truck and start the ignition. Undisputedly, Thomas had "permission" from foreman Kilpatrick to use the truck.
We therefore find that at the time the directed verdicts were requested, there was a jury question presented as to whether or not at the time of the collision, Thomas was a first permittee in the use of the truck and was covered under either the INA omnibus clause of its policy or was covered under the requirements for such by appellant Deviney Construction Company.
As hereinbefore stated, Deviney after affirmatively stating it was a self-insurer, admitted that it had failed even to apply for a certificate of self insurance. The legal ball as to whether INA or Deviney should pay appellant's judgment is now in INA and Deviney's court. As usual, INA's policy does not coincide with the Mississippi statutory requirements describing omnibus clauses. We say "as usual" for the reason that as this writer stated in Vaughn, an examination of a number of policies reveals that no company's policy examined was worded as required by the Mississippi statute. Be that as it may, the insurance policy covering the truck in question has written into it the Mississippi statute requiring that it cover any person driving the vehicle with the express or implied permission of the insured. If, due to any contractual relationship between INA and Deviney, the former refuses to pay, that is a matter between INA and Deviney.
We further hold that regardless of the relationship between INA and Deviney, the latter has the legal obligation under this state's Safety Responsibility Act § 63-15-1, et seq. to abide by those laws which makes it responsible for appellant's judgment for damages caused by the driver permitted by the foreman Kilpatrick to be the driver.
We hold that the lower court was in error in finding that appellant did not present a question for the jury at the point when appellees' motions for directed verdicts were granted. It is therefore necessary to reverse and remand the cause for the proper issues to be presented to a jury, if that should develop to be the situation on retrial.
REVERSED AND REMANDED.
WALKER, P.J., and HAWKINS, DAN M. LEE, PRATHER, ROBERTSON and SULLIVAN, JJ., concur.
PATTERSON, C.J., and ROY NOBLE LEE, P.J., not participating. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1091716/ | 463 So. 2d 1056 (1985)
MISSISSIPPI PUBLIC SERVICE COMMISSION, et al.
v.
MUNICIPAL ENERGY AGENCY OF MISSISSIPPI.
No. 55762.
Supreme Court of Mississippi.
January 23, 1985.
*1057 Bennett E. Smith, Jackson, for appellants.
David R. Hunt, Sullivan, Hunt, Spell & Henson, Clarksdale, for appellee.
En Banc.
WALKER, Presiding Justice, for the Court:
This is an appeal from the Circuit Court of Leflore County, Mississippi wherein summary judgment was granted upon motion of appellee, Mississippi Energy Agency of Mississippi (hereinafter MEAM). Cross motion of appellant, Mississippi Public Service Commission (hereinafter PSC) for summary judgment was denied.
MEAM is a political subdivision of the State of Mississippi organized to supply electric power and energy to the cities of Canton, Clarksdale, Durant, Greenwood, Itta Bena, Kosciusko, Leland and Yazoo City. MEAM was created as a joint agency pursuant to section 9(1) Chapter 363, Mississippi Law 1978.
Mississippi Code Annotated section 77-5-713 (Supp. 1984) of that Act made provision for application for licenses, permits, certificates or approvals. That section further stated in part:
... provided, however, nothing herein contained shall be construed to require a municipality to obtain any license, certificate, permit, or approval from the public service commission of Mississippi.
In Mississippi Code Annotated section 77-5-725(r) (Supp. 1984) under "Rights and powers of joint agencies", it is provided:
(r) To apply to the appropriate agencies of the state, the United States or any state thereof, and to any other proper agency for construct, maintain and operate projects in accordance with, and to obtain, hold and use, such licenses, permits certificates or approvals in the same manner as any other person or operating unit of any other person; provided, however, nothing herein contained shall be construed to require the joint agency to obtain any permit, license, certificate or approval from the public service commission of Mississippi.
The question presented on this appeal is whether or not the Municipal Energy Agency of Mississippi (MEAM) must obtain a certificate of public convenience and necessity from the Mississippi Public Service Commission for the purpose of construction of electric generating facilities.
LEGISLATIVE HISTORY
In 1956 the Mississippi Legislature enacted the Public Utilities Act to vest authority in the PSC to regulate certain public utilities. *1058 Mississippi Code Annotated section 77-3-11(1) (1972) of the Act required a certificate of public convenience and necessity be obtained from the commission before the beginning of construction of facilities to generate, transmit, or distribute electric energy. However, Mississippi Code Annotated section 77-3-1 (1972) specifically exempts public utilities owned or operated by a municipality from the provisions of the Act, except as to extension of utilities greater than one mile outside the corporate boundaries. That exemption was carried forward in the Act through the last amendment in 1983. In 1983 there was enacted section 77-3-14 (a new section), which provides:
(1) Notwithstanding the provisions of section 77-3-11 and section 77-3-13, no public utility or other person shall begin the construction of any facility for the generation and transmission of electricity to be directly or indirectly used for the furnishing of public utility service in this state, even though the facility be for furnishing the service already being rendered, without first obtaining from the commission a certificate that the public convenience and necessity requires, or will require, such construction.
If there were no other statutory provision to consider, it would appear obvious that all generation and transmissions of electricity would come under the authority of the Public Service Commission.
The controlling rule of construction dispositive of this case is that each section of the Code dealing with the same or similar subject matter must be read in pari materia and to the extent possible each section of the Code must be given effect so that the legislative intent can be determined. Atwood Chevrolet-Olds, Inc. v. Aberdeen Municipal School District, 431 So. 2d 926 (Miss. 1983); Lamar County School Board of Lamar County v. Saul, 359 So. 2d 350 (Miss. 1978). It is clear that the Legislature created the Public Service Commission for the purpose of overseeing and regulating various public utilities, including the generation and transmission of electricity by the enactment of the original Public Utility Act in 1956 and subsequent amendments thereto.
When the original Public Utility Act became law, it contained a provision codified as Mississippi Code Annotated section 77-3-1 (1972) which provides:
Any public utility as defined in paragraph (d) of section 77-3-3, owned or operated by a municipality shall not be subject to the provisions of this article, except as to extension of utilities greater than one mile outside corporate boundaries after March 29, 1956.
This section exempts municipalities from the provisions of the Act.
At that time the generation of electricity by the joint efforts of several municipalities had not come into being in this State.
However, as above outlined, in 1978 the Legislature authorized two or more municipalities to join together for the purpose of owning and operating jointly, among themselves or others, facilities for the generation and transmission of electric power and energy. That Act specifically provided under Mississippi Code Annotated section 77-5-779 (Supp. 1984) the following:
The foregoing sections of this article shall be deemed to provide an additional, alternative and complete method for the doing of the things authorized thereby and shall be deemed and construed to be supplemental and additional to powers conferred by other laws, and shall not be regarded as in derogation of any powers now existing; provided, however, that insofar as the provisions of this article are inconsistent with the provisions of any other general, special or local law, the provisions of this article shall be controlling. Nothing in this article shall be construed to authorize the issuance of bonds for the purpose of financing the ownership of any facilities or any interest therein by any private corporation.
*1059 That provision of the joint municipal electric power and energy Act has been carried forward and is still in force and effect. In addition to that section bearing on the subject, the Legislature in 1984 amended section 77-5-725 entitled "Rights and powers of joint agencies" (MEAM) with respect to a matter not related to the issue presented in this opinion, and in doing so, carried forward that part of section 77-5-725(r) which provides:
To apply to the appropriate agencies of the state, the United States or any state thereof, and to any other proper agency for such permits, licenses, certificates or approvals as may be necessary, and to construct, maintain and operate projects in accordance with, and to obtain, hold and use, such licenses, permits, certificates or approvals in the same manner as any other person or operating unit of any other person; provided, however, nothing herein contained shall be construed to require the joint agency to obtain any permit, license, certificate or approval from the public service commission of Mississippi.
Therefore, applying the governing rules of construction that every statute must be given meaning unless found to be in hopeless conflict with another statute, we are of the opinion that the Act authorizing the creation of the municipal energy agency of Mississippi clearly specifically exempts the agencies created under the Act from obtaining a certificate of public necessity and convenience from the Mississippi Public Service Commission prior to the construction of facilities for the generation or transmission of electricity by such agencies.
Therefore, the judgment of the lower court is affirmed.
AFFIRMED.
PATTERSON, C.J., ROY NOBLE LEE, P.J., and BOWLING, HAWKINS, DAN M. LEE, PRATHER, ROBERTSON and SULLIVAN, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1097120/ | 338 So. 2d 391 (1976)
The HOME INSURANCE COMPANY
v.
THUNDERBIRD, INC.
No. 48831.
Supreme Court of Mississippi.
October 5, 1976.
Rehearing Denied November 9, 1976.
Watkins & Eager, James L. Carroll, Jackson, for appellant.
*392 Watkins, Pyle, Ludlam, Winter & Stennis, Ross F. Bass, Jr., Jackson, for appellee.
Before GILLESPIE, ROBERTSON and LEE, JJ.
GILLESPIE, Chief Justice, for the Court:
Thunderbird, Inc., sued Home Insurance Company, hereinafter Home, and Robinson & Julienne, Inc., an insurance agency, in the Circuit Court of Hinds County for damages sustained to a boat which had been insured by Home. The trial judge peremptorily instructed the jury for Thunderbird on the question of liability and the jury returned a verdict for $33,000 against Home. Thunderbird nonsuited as to Robinson & Julienne.
Thunderbird, Inc., and Van Every Ford, Inc., are two corporations owned principally by E.L. Van Every. Van Every Ford is engaged in the automobile business and Thunderbird is qualified to write insurance, principally in connection with the sale of automobiles. Robinson & Julienne is a local insurance agency.
Thunderbird purchased a 54-foot boat, "Top Luck," which was then located in North Carolina where it was built. Home issued to Thunderbird its "Sports Fishing Vessel Hull" insurance policy on an agreed value of $100,000. The policy was written through and countersigned by Robinson & Julienne, Home's authorized agent. Dated June 15, 1973, the policy warranted navigation to "a 250-mile radius of Biloxi, Mississippi, but not to exceed 100 miles off shore." Before the boat left North Carolina, an endorsement was attached which granted permission for one trip from North Carolina to Miami, Florida, and while there "warranted navigation confined to a 250-mile radius of Miami, Florida, but not to exceed 100 miles off shore." On February 26, 1973, the "Top Luck" struck a reef near Chub Cay, Bahamas, causing extensive damage. The loss occurred when the "Top Luck" was more than 100 miles off shore of the continental United States, but within a few miles of the shore of the Bahama Islands.
This appeal presents two questions.
I.
Was the policy of insurance effectively cancelled prior to the loss?
This question has two points of inquiry.
(A) Was a return of the premium a condition precedent to effective cancellation?
Paragraph No. 6 of the "general conditions" of the insurance contract provided:
Unless otherwise provided in the form(s) attached, this policy may be cancelled at any time upon written request of the insured, the company retaining or collecting the customary short rates for the time it has been in force; or, it may be cancelled by the company by delivering or mailing to the insured at the insured's last known address five days written notice of such cancellation and, if the premium has been paid, by tendering in cash, postal money order, or check, the pro-rata unearned premium thereon. From all returned premiums the same percentage of deductions (if any) shall be made as was allowed by this Company on receipt of the original premium.
Paragraph No. 8 of the attached "Sports Fishing Vessel Hull" policy provided:
(a) This policy may be cancelled at any time at the insured's request, or by this company, by giving ten days written notice of such cancellation.
(b) In the event of any change in the ownership of the vessel or if it be chartered to others on a bare-boat basis, then unless this company agrees thereto in writing, this policy shall thereupon become cancelled upon time of such change in ownership or charter.
(c) In the event of cancellation of this policy as above, the following PERCENTAGE OF THE PREMIUM to be returned NET: For each 15 consecutive days of unexpired time of the navigation period 3.54% of the period warranted laid up ____%, and arrival.
*393 The appellant argues that a prompt return of the unearned premiums was not a condition precedent to effective cancellation.
Paragraph No. 6 (above) provides that the return of the unearned premium is a condition precedent to effective cancellation. However, the appellant urges that paragraph No. 8 (above) controls the case. Paragraph No. 8 does not contain a provision with regard to the manner in which unearned premiums will be returned. Therefore, the appellant argues that the return of the premiums was not a condition precedent.
Paragraph 6 of the general conditions of the policy states as follows: "Unless otherwise provided in the form(s) attached, this policy may be cancelled... ." The provisions of paragraph 8 differ from paragraph 6 in that paragraph 6 provides for five days' notice and paragraph 8 requires ten days' notice. The two paragraphs also differ as to the manner of computing the unearned premium. The only provision concerning the manner of returning the unearned premium is provided in paragraph 6 which requires as a condition precedent to cancellation the tendering of the unearned premium in cash, money order, or check. We are of the opinion that under the terms of the policy the return of the unearned premium in the manner provided by paragraph 6 was a condition precedent to the effective cancellation of the policy. Home apparently gave notice under Paragraph 6 because the notice given Thunderbird provided that the termination date would be five days from the date of notice rather than the ten days as provided by Paragraph 8.
The question of which paragraph controls appears to be of little consequence. Absent some provisions to the contrary (see, Employers Mutual Casualty Co. v. Nosser, 250 Miss. 542, 164 So. 2d 426 [1964]) the return of unearned premiums is a condition precedent to effective cancellation. See 43 Am.Jur.2d, Insurance § 416 at 464 (1969); Annot., 127 A.L.R. 1341, 1343 (1940); Annot., 16 A.L.R. 2d 1200, 1202 (1951).
(B) Did Thunderbird waive its right to a return of the unearned premium?
Since the requirement of a tender of unearned premiums is for the benefit of the insured, he may waive such requirement as a condition precedent to cancellation of the policy. Where the insured, upon receipt of a notice of cancellation, voluntarily and unconditionally surrenders the policy to be cancelled, he has been held to have waived the return of the unearned premium. Similarly, a cancellation by agreement between the parties, independently of the terms of the policy, waives such requirement. If the insured directs the agent to procure other insurance, such direction has been held to be a waiver of tender. 6A Appleman, Insurance Law and Practice § 4192 at 594-596 (1972).
The facts of the present case do not bring the case within the rule stated in Appleman. In the present case there was no surrender of the policy. The acts of the agent hereinafter related renders the stated rule inapplicable.
The unearned premium of $942 was not tendered to Thunderbird until after the loss. In March, 1973, Home credited Robinson & Julienne's account with the unearned premium. On June 1, 1973, Robinson & Julienne sent Thunderbird a check for $942, representing the unearned premium. The check was never negotiated. When Thunderbird received the cancellation notice sent by Home on December 27, 1972, which stated that the policy would terminate on January 2, 1973, Jerry Osborn, the business manager of Thunderbird, immediately talked to Richard L. Lanning, the general manager of Van Every Ford. Lanning called John W. Robinson, Jr., of Robinson & Julienne, and he was assured then that the "Top Luck" was bound and he was placing the insurance with another company. Osborn talked to Robinson & Julienne later the same day and was told not to worry, that the boat was definitely covered.
During the latter part of January an annual audit of Thunderbird was being performed, *394 and the CPA was concerned about how to handle the unearned premium on the "Top Luck." He discussed this with Osborn, who again called the Robinson & Julienne Agency, and talked with a lady in the office who told Osborn "that the boat was covered and that the policy was being rewritten with another company, and that we should receive either should receive the money in the mail or it would be applied to the new premium ... that the boat was definitely covered and that it had been placed with another company."
We find no substantial dispute in the testimony concerning the acts and statements of the parties relating to the stated question. It is, therefore, a question for the Court rather than for the jury.
The proof shows that except for the cancellation notice Thunderbird dealt through Robinson & Julienne and not directly with Home. Aside from the agency statute, Mississippi Code Annotated section 83-17-1 (1972), Home selected Robinson & Julienne as their agent in ultimately tendering the unearned premium. Home and Thunderbird had no contract in connection with the return of the unearned premium. Home's agent gave Thunderbird officials false assurance that the vessel was covered. Thunderbird officials had a right to believe that the premium was working to purchase coverage. The false statements of Home's agent was the act of Home. A waiver may not be claimed by one whose false representation is the foundation of the waiver. Thunderbird failed to demand return of the premium because of its ignorance of the true facts as to what was being done with the unearned premium.
In Jefferson Life & Casualty Co. v. Johnson, 238 Miss. 878, 120 So. 2d 160 (1960), the Court said in quoting from an earlier case: "It is one of the oldest maxims of the law that no man shall, in a court of justice, take an advantage which has his own wrong as a foundation for that advantage." 238 Miss. at 884, 120 So.2d at 163. We hold that there was no waiver of the requirement that unearned premiums be returned as a condition precedent to cancellation. See Riverside Ins. Co. v. Parker, 237 Ark. 594, 375 S.W.2d 225 (1964); Annot., 3 A.L.R. 3d 1135 (1965).
(C) Did the trial judge err in construing the term "Off Shore" to mean off any shore?
Home argues that the trial judge erred in not construing the term "off shore" to mean off the shore of the continental United States. Appellant also argues that the trial judge should have at least submitted the issue to the jury for determination.
The following are principles of law quoted from 1 Couch on Insurance 2d (1959):
As a general rule, the construction and effect of a written contract of insurance is a matter of law, to be determined by the court and not by the jury, where there is no occasion to resort to extrinsic evidence for the purpose of resolving an ambiguity. § 15:3 at 638-639.
In accord with the general standard of giving effect to the purpose of the contract, the rule is that provisos, exceptions, or exemptions, and words of limitation in the nature of an exception, are strictly construed against the insurer, where they are of uncertain import or reasonably susceptible of a double construction. A risk that comes naturally within the terms of a policy is not deemed to be excluded unless the intent of the parties to exclude it appears clearly. A condition tending to defeat a policy must be expressed or so clearly implied that it cannot be misconstrued. § 15:92 at 835-838.
The record shows that the loss occurred when the "Top Luck" was within 100 miles of the shore of the Bahama Islands, and when the vessel traveled from Miami to the Bahamas it was never more than 100 miles off of some shore. The condition with reference to the limitations on the warranted navigation area does not limit navigation to 100 miles off the shore of the continental United States, as Home now argues. Because the limitations on the warranted area of navigation are words of limitation, they are strictly construed against the insurer, *395 however, we are of the opinion that in the ordinary meaning of the words "off shore," it is not to be restricted to the shore of the continental United States in the absence of a statement in the policy to that effect.
It is argued that the officials of Thunderbird construed the policy in accordance with Home's contentions with reference to the limitations on navigation, but we find no merit in this argument.
We are of the opinion that the trial judge correctly instructed the jury to find for Thunderbird on the issue of liability. Therefore, the case is affirmed.
AFFIRMED.
PATTERSON and INZER, P. JJ., and SMITH, ROBERTSON, SUGG, WALKER, BROOM and LEE, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541907/ | 76 B.R. 866 (1987)
In re LAWRENCE PAPERBOARD CORP., Lawrence Packaging Corp., Harriman Paperboard Corp., Debtors.
LAWRENCE PAPERBOARD CORP., Lawrence Packaging Corp., and Harriman Paperboard Corp., by their Official Creditors' Committee, Plaintiffs,
v.
ARLINGTON TRUST COMPANY, Defendants.
Bankruptcy Nos. 84-00367-JG to 84-00369-JG, Adv. No. 84-257-JG.
United States Bankruptcy Court, D.Massachusetts.
August 14, 1987.
Thomas Billings, Foley, Hoag & Eliot, Boston, Mass., for plaintiffs.
Joseph S.U. Bodoff, Kaye, Fialkow, Richmond & Rothstein, Boston, Mass., for defendants.
*867 MEMORANDUM
JAMES N. GABRIEL, Chief Judge.
The Debtors, Lawrence Paperboard Corp. ("Lawrence"), Lawrence Packaging Corp. ("Packaging"), and Harriman Paperboard Corp. ("Harriman") (collectively the "Debtors") filed bankruptcy petitions under Chapter 11 of the Bankruptcy Code on March 15, 1984. The Court approved joint administration one week later on March 22, 1984. The Official Unsecured Creditors' Committee (the "Committee") commenced this adversary proceeding on July 13, 1984 against the Arlington Trust Company ("Arlington"), seeking a determination of Arlington's secured status and the recovery of alleged fraudulent conveyances, preferential transfers and improper charges. The Committee amended its eight count complaint on August 22, 1984. Arlington now seeks partial summary judgment with respect to Counts One, Two and Five of the Committee's Amended Complaint.
Through Count One, the Committee alleges that the guaranties, security interests and mortgages executed by the Debtors and delivered to Arlington to secure the performance of their various obligations were ultra vires and unauthorized. Through Count Two, the Committee alleges that the guaranties, security interests and mortgages which Lawrence, Packaging and Harriman each granted to secure performance of the obligations of the other Debtors to Arlington were void and unenforceable for want or failure of consideration. Finally, through Count Five, the Committee alleges that the various guaranties, security interests and mortgages granted, the obligations incurred and the payments of money or transfers of property pursuant to the guaranties, security interests and mortgages lacked fair consideration and constituted fraudulent transfers pursuant to Mass. Gen.Laws Ann. ch. 109A, § 4 (West 1958 & Supp.1987), which section is made applicable to this proceeding by 11 U.S.C. § 544(b) (West 1987).
FACTS
The facts presented are gleaned from materials submitted by Arlington in support of its Motion for Summary Judgment and from portions of deposition testimony given by Robert J. DeLuca ("DeLuca") and Joseph D. Caimi ("Caimi") that are attached to the affidavit of Thomas P. Billings. The Billings' affidavit was submitted with the Committee's opposition to Arlington's motion. The materials submitted by Arlington in conjunction with its motion consist of the following:
1) Affidavit of Joseph D. Caimi;
2) Unaudited Financial Statements for the year ending September 30, 1984 prepared by Coopers & Lybrand
3) Affidavit of Philip McGlone, Assistant Treasurer of Arlington;
4) Affidavit of Mary Caimi, Clerk of Lawrence Paperboard Corp.;
5) Affidavit of Robert J. DeLuca, Senior Vice-President of Arlington (with exhibits E-1 through E-16);
6) First Amended Disclosure Statement to First Amended Consolidated Joint Plan of Reorganization;
7) Plaintiff's Answers and Objections to Defendant's First Set of Interrogatories;
8) Articles of Organization (for all three Debtors); and
9) Report of Examiner.
The Court, where appropriate, has supplemented these materials with information available from the dockets for these cases. The facts presented in Arlington's Motion for Summary Judgment essentially are undisputed. However, the inferences to be drawn from the facts, as well as the need for additional facts, have generated considerable controversy.
Lawrence, Packaging and Harriman are Massachusetts corporations that formerly were engaged in the manufacture of paperboard and the production of printed folding boxboard. Lawrence and Packaging were located at 242 Canal Street in Lawrence, Massachusetts. The companies occupied, according to the Examiner appointed pursuant to 11 U.S.C. § 1104 and Joseph D. Caimi, typical, former textile mill structures that were erected around the turn of the century on approximately 7.5 acres of land along the banks of the Merrimack *868 River. The production processes of Lawrence and Packaging were integrated since the companies occupied connecting buildings and shared office space. Lawrence sold approximately 35 per cent of its output of paperboard to Packaging, and Packaging obtained nearly all of the paperboard it used to manufacture boxes from Lawrence. The paperboard sheets manufactured by Lawrence simply were passed through an open door to the space occupied by Packaging where they were processed into boxboard.
Unlike the Lawrence and Packaging plants, the Harriman plant is not located in Massachusetts. Rather, that company's plant is located on the banks of the Emory River on a 30 acre site in Harriman, Tennessee. Harriman produced paperboard from hardwoods for use as the inner layer of corrugated board. It was acquired by Lawrence from the Meade Corporation in 1975.
None of the Debtors are operating. All the assets of Lawrence and Packaging were sold at various private sales and at a public auction. A sale of Harriman's assets was noticed out to creditors, but this Court declined to approve the sale. Just recently, a second notice of intended private sale of the Harriman assets was filed with the Court.
Caimi owns all the stock of Lawrence. Lawrence, in turn, owns all the stock of Packaging and Harriman. The officers and directors of all three companies are virtually identical. Caimi, as the president and a director of each of the Debtors, controlled the three companies. Caimi, like his sister Mary Caimi, who served as the clerk of Lawrence and was responsible for the books and records of Lawrence and its two wholly-owned subsidiaries, considered the three companies as a single unit.
According to the Debtors' First Amended Disclosure Statement, the Debtors historically and consistently lost money on a consolidated basis and continued to operate at a loss on a consolidated basis during the Chapter 11 proceeding until they ceased doing business. Additionally, according to the Disclosure Statement,
The Debtors have historically borrowed [sic] a large amount of interest bearing debt. Prior to filing the Chapter 11 petition, the Debtors owed Chase [Manhattan Bank] $9,000,000 in the aggregate and Arlington was owed approximately $3,000,000. The interest expense was a substantial drain on the Debtors' financial condition. The combination of a disproportionately large interest expense, combined with substantial expenditures for capital improvements to increase the efficiency of the Harriman mill and depressed market conditions for corrugating medium resulted in the Debtors not having sufficient funds to pay their debts as they came due, necessitating the filing of the Chapter 11 petitions.
In addition to the high level of outside borrowing, the Debtors are linked by a web of intercorporate loans, dating back to the organization of Lawrence and Packaging in 1971 and the organization of Harriman in 1975. The Debtors' consolidated financial Statements for the year ended September 30, 1984 reveal the following:
LAWRENCE LAWRENCE HARRIMAN TOTAL
PAPERBOARD PACKAGING PAPERBOARD
CORPORATION CORPORATION CORPORATION
Intercompany
Liabilities
$1,674,791 $12,731,719 $10,635,818 $25,042,328
Intercompany
Receivables
$13,720,206 $10,781,095 $767,442 $25,268,743
*869 The affidavit of Philip McGlone, an Assistant Treasurer and a commercial finance auditor for Arlington, further reveals that Harriman owed Packaging $10,607,954 (up from $2.4 million in September 1980); Packaging owed Lawrence $12,449,958 (up from $2.9 million in September 1980); and Lawrence owed Harriman $2,433,901.
With respect to the intercorporate debt, Mary Caimi indicated that from time to time between 1981 and 1985 she would call officers at Chase Manhattan Bank ("Chase") (not Arlington) to determine how much money Chase was willing to advance to one or the other of the three Debtors. After Chase made a wire transfer of funds, she testified that she "would then transfer funds from that account to the accounts of the other two companies in order to meet their short-term cash needs." Mary Caimi explained Harriman's substantial debt to Packaging and Packaging's substantial debt to Lawrence as follows:
If the funds were transferred initially to the account of Lawrence, I would generally transfer funds from that account to the accounts of Packaging and/or Harriman. If the funds were initially transferred to the account of Packaging, I would generally transfer funds from that account to the account of Harriman.
The Examiner also indicated that "the funds flowed from a profitable Lawrence Paperboard to Harriman."[1] Like, Mary Caimi, the Examiner, however, did not substantiate his observations with specifics, such as 1) the dates of the transfers; 2) the amounts of the transfers; and 3) the relationship between Chase disbursements and Arlington's guaranties. Accordingly, the Committee disputes the inference drawn by Arlington that the intercorporate debt was the result of the transfers described by Mary Caimi, suggesting instead that the high intercorporate debt was the result of the transfer of goods, cash or credits in ways unrelated to the disbursement of loan proceeds.
Arlington's relationship with Lawrence and Packaging commenced in 1971 and its relationship with Harriman commenced in 1975 when that company was organized. Robert J. DeLuca ("DeLuca"), Senior Vice-President of Arlington, testified by way of affidavit, that Arlington made various loans to the Debtors either individually or jointly between 1971 and 1984. In addition to loans, evidenced by promissory notes, DeLuca indicated that Arlington permitted the Debtors to overdraw their accounts and also participated in the loan agreements between the Debtors and Chase. DeLuca, however, did not specify the nature of Arlington's participation in the Debtors' loan agreements with Chase.
DeLuca also indicated that Arlington relied upon consolidated financial statements that it received from the Debtors from time to time, and that Arlington sought and obtained guaranties from the Debtors whenever it required additional security for loans made or funds advanced. Arlington received the following guaranties from the Debtors:
Principal
Date Guarantor Debtor Amount Classification[2]
6/30/75 Packaging Harriman $1,800,000 Cross-stream
6/30/75 Lawrence Harriman $1,800,000 Downstream
*870
3/24/82 Harriman Packaging $2,000,000 Cross-stream
3/24/82 Harriman Lawrence $2,000,000 Upstream
7/27/82 Harriman Packaging $2,000,000 Cross-stream
7/27/82 Harriman Lawrence $2,000,000 Upstream
8/19/82 Lawrence Packaging $2,000,000 Downstream
8/19/82 Packaging Lawrence $2,000,000 Upstream
DeLuca asserted that "[i]f the Debtors had not executed the guaranties . . . Arlington would have ceased to loan funds to all the Debtors, and would have demanded payment of loans already outstanding."[3] Caimi added that "[w]hen Arlington . . . asked that the companies provide guaranties of each other's obligations to Arlington, I executed such guaranties, because I believed that funds advanced to each company would not only benefit that company, but other companies as well."
An examination of the guaranties reveals, however, that, on their face, the only consideration recited is in the following language:
For valuable consideration, the receipt of which is hereby acknowledged, and in consideration of the Arlington Trust Company (hereinafter called the "Bank") having made, or now or in the future making, advances or otherwise giving credit to [the "Borrower"], however such advances may be made or evidenced, and to induce the Bank to continue existing credits and loans extended to the Borrower, and from time to time hereafter to make further loans, advances, extensions of credit or other financial accommodations to the Borrower and otherwise to assist the Borrower in financing its business or sales by obtaining credit under revolving loan security agreements with discretionary advances by the Bank, the undersigned does hereby unconditionally guarantee. . . .
DISCUSSION
The United States Supreme Court, in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), recently considered the issue of whether a defendant satisfied its initial burden of production in moving for summary judgment on the ground that the plaintiff lacked evidence to establish an essential element of her case at trial. In reversing the Court of Appeals for the District of Columbia Circuit, the Supreme Court succinctly stated the summary judgment rule as follows:
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is `entitled to judgment as a matter of law' because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.
Id. at 2552-53 (emphasis supplied).
Noting that "[o]ne of the principal purposes of the summary judgment rule is to *871 isolate and dispose of factually unsupported claims or defenses," id. at 2553, the Supreme Court reiterated its statement in Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), that "`both the commentary on and the background of the 1963 Amendment [to Fed.R. Civ.Pro. 56(e)] conclusively show that it was not intended to modify the burden of the moving party . . . to show initially the absence of a genuine issue concerning any material fact.'" Celotex Corp. v. Catrett, 106 S.Ct. at 2554, quoting Adickes, 398 U.S. at 159, 90 S.Ct. at 1609. However, the Court then indicated that
[W]e do not think the Adickes language quoted above should be construed to mean that the burden is on the party moving for summary judgment to produce evidence showing the absence of a genuine issue of material fact, even with respect to an issue on which the nonmoving party bears the burden of proof. . . . the burden on the moving party may be discharged by "showing"that is, pointing out to the District Courtthat there is an absence of evidence to support the nonmoving party's case.
Id. at 2554.
In a dissenting opinion, Justice Brennan, joined by Justice Blackmun and Chief Justice Rehnquist, criticized the majority for failing to clearly explain what is required of a moving party seeking summary judgment on the ground that the nonmoving party cannot prove its case. Justice Brennan, in a discussion of the summary judgment rule that he believed to be consistent with the court's opinion, observed that the burden of establishing the nonexistence of a "genuine issue" has two components: "an initial burden of production, which shifts to the nonmoving party if satisfied by the moving party; and an ultimate burden of persuasion, which always remains on the moving party." Id. at 2556. With respect to the burden of production, Justice Brennan indicated that, if the burden of persuasion at trial is on the nonmoving party, the burden of production may be satisfied by the submission of affirmative evidence that either 1) negates an essential element of the nonmoving party's claim; or 2) demonstrates that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim. Id. at 2557. Noting that the mechanics of discharging the burden of production are "trickier" when the moving party choses the second option, Justice Brennan reiterated that the moving party must clearly show that there is no evidence in the record to support a judgment for the nonmoving party.
In its brief in opposition to Arlington's Motion for Summary Judgment, the Committee concedes that there is no genuine issue of fact with respect to whether the guaranties were properly authorized or were subsequently ratified. Accordingly, Arlington is entitled to judgment on Count One of its Amended Complaint.
Additionally, the Committee concedes that Lawrence's guaranties of the debts of Harriman and Packaging, the so-called downstream guaranties, were supported by fair consideration, since Lawrence received the benefit of any loans by Arlington as a result of its stock ownership. See Carl, supra note 2, at 115 ("Downstream guaranties do not pose special transfer problems since the guarantor owns the stock of the principal debtor."). Thus, the Court only must consider whether the so-called upstream and cross-stream guaranties, on the facts now before it, were supported by fair consideration.
Under section four of the Uniform Fraudulent Conveyance Act (the "UFCA"), "[e]very conveyance made and every obligation incurred by a person who is or who will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration." Mass.Gen.Laws Ann. ch. 109A, § 4 (West 1958 & Supp.1987). Fair consideration is defined at section three of the Act as follows:
Fair consideration is given for property or obligation
(a) When in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property is *872 conveyed or an antecedent debt is satisfied, or
(b) When such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property or obligation obtained.
Mass.Gen.Laws Ann. ch. 109A, § 3 (West 1958 & Supp.1987).[4]
One commentator has pointed out that fair consideration for a subsidiary's guaranty of its parent's obligation is governed by subsection (a) of section 3 of the UFCA, while fair consideration for the grant of security interests is governed by subsection (b). See Coquillette, "Guaranty of and Security for the Debt of a Parent Corporation by a Subsidiary Corporation," 123 Case W.Res.L.Rev. 433, 451 (1980). It appears from an examination of the guaranties attached to the DeLuca affidavit and a review of the Amended Complaint that only the June 30, 1985 guaranties and the August 19, 1982 guaranties executed by Lawrence and Packaging involved security interests. However the parties did not address this point in their memoranda, and it is not dispositive of the instant dispute.
There is no question that the UFCA covers the giving of guaranties, as well as the granting of security interests, because the giving of a guaranty is an "obligation incurred," Rubin v. Manufacturers Hanover Trust, 661 F.2d 979, 990-91 (2nd Cir.1981), and the granting of a security interest in property is a transfer, 11 U.S.C. § 101 (48). See generally Carl, supra at 118. Moreover, since the UFCA does not specify to whom the property must be conveyed, the existence of fair consideration is safely determined by what the subsidiary (or sister corporation in the case of cross-stream guaranties) has obtained in the transaction. See Coquillette, supra at 452.
In its brief in support of its motion, Arlington concedes, for purposes of its motion only, that the Debtors were insolvent at the time the guaranties were given and at all later points in time, thereby obviating consideration of the insolvency aspect of section 4 of the Act.[5] With respect to Count Two, Arlington asserts that the Committee's answer to interrogatory number six dealt only with the existence of any consideration, not want or failure of consideration. In its brief, the Committee does not directly address its contentions in Count Two that the guaranties are void for want or failure of consideration. Rather, the Committee has chosen to subsume the questions raised by Count Two in the issue of fair consideration. Both parties in their briefs indicate that the only issue in dispute is whether the Debtors' intercorporate upstream and cross-stream guaranties were executed in exchange for fair consideration.[6] However, the issue may be framed more specifically than that. It is whether Arlington or the Committee has the burden of quantifying the consideration received by Harriman and Packaging, in exchange for their reciprocal guaranties of each other's debts to Arlington, as well as their respective guaranties of Lawrence's obligations to Arlington, so that the Court can *873 compare the value of what Harriman and Packaging received with the value of their guaranties.
Like the question on insolvency, fairness of consideration is a question of fact. In re Roco Corp., 701 F.2d 978, 981-82 (1st Cir.1983); Klein v. Tabtchnick, 610 F.2d 1043, 1047-48 (2nd Cir.1979). But see American Fidelity Co. v. Harney, 351 Mass. 163, 217 N.E.2d 905 (1966) (The issue of the fairness of consideration within the fraudulent conveyance statute is a mixed question of law and fact.) To determine whether the value of what Harriman and Packaging actually received was the fair equivalent of or was disproportionately small compared to the value of their guaranties, "the court must attempt to measure the economic benefit, if any, that accrued to each bankrupt as a result of the third person's indebtedness. . . ." Rubin, 661 F.2d at 993.
Arlington maintains that the undisputed facts demonstrate that Harriman and Packaging received fair consideration for the upstream and cross-stream guaranties. Arlington cites the following as establishing fair consideration: 1) direct benefits, in the form of funds disbursed by the principal obligors to the guarantors, as well as reciprocal guaranties given by the principal obligors; 2) in the case of Packaging, indirect economic benefits attributable to the business relationship between Packaging and Lawrence; and 3) the strong identity of interest among the Debtors.
Arlington, relying on the affidavit of Mary Caimi, notes that the Debtors' practice of distributing funds virtually compels a finding that Packaging's guaranty of Lawrence's obligations was supported by fair consideration because a significant part of funds loaned to Lawrence were distributed to Packaging. Likewise, Arlington asserts that Harriman's guaranties of Lawrence's and Packaging's obligations also were supported by fair consideration because of the way funds were distributed, pointing to the high level of intercorporate debt to establish that funds were distributed as a result of Harriman's and Packaging's guaranties. Arlington finds additional direct benefits in the reciprocal nature of the guaranties of Lawrence and Packaging executed on August 19, 1980, as well as all the other guaranties.
With respect to Packaging's guaranty of Lawrence's obligations, Arlington relies on the affidavit of Caimi to establish indirect business benefits as fair consideration for Packaging's, guaranty. These benefits obstensibly flowed from the supply by Lawrence of virtually all of the raw materials used by Packaging.
Finally, Arlington relies on the strong identity of interests among the Debtors to satisfy the fair consideration requirement of Mass.Gen.Laws Ann. ch. 109A. In support of this position, Arlington cites the ownership and control of the Debtors by Caimi and advances the same arguments used by the Committee in support of the substantive consolidation of the Debtors. The Debtors' and the Committee's First Amended Consolidated Plan of Reorganization was predicated on the substantive consolidation of the Debtors. In the Disclosure Statement to the Plan, the Committee and the Debtors state the following:
All of the outstanding stock of Lawrence is owned by Joseph Caimi. Each of Harriman and LPG is a wholly owned subsidiary of Lawrence. The officers and directors of Lawrence were at all time prior to the filing identical to the officers and directors of its subsidiaries. All of the lending facilities of the Debtors were obtained on a consolidated basis with each of the Debtors cross-guaranteeing the debts of the other Debtors. The funds which were advanced by Chase, both before and after the filing of the petition, were made available to the Debtors on a consolidated basis. Although most of the loans were made directly to Lawrence, the funds were in fact distributed by Lawrence to whichever of the Debtors needed the proceeds of the Chase loans at any particular time. In addition, the Debtors' financial statements show total intercompany indebtedness of approximately $25,000,000. This large level of intercompany indebtedness which exceeds the aggregate amount of *874 all other indebtedness of these Debtors to third party creditors illustrates the extent to which the business and operations of these three Debtors were intermingled.
The Committee, in its response to Arlington's motion argues that Arlington merely identified types of benefits that might constitute or contribute to fair consideration and failed to establish how much these benefits, if they existed at all, were worth. The Committee criticizes each source of fair consideration identified by Arlington.
As an initial matter, the Committee notes that the only consideration recited on the face of the guaranties is consideration passing to Arlington, not the guarantors. The Committee argues that the Court must begin its review with the premise that the guaranty of a third party's debts is prima facie not made for consideration.
According to the Court of Appeals for the Second Circuit,
if the debt secured by the transaction is not the debtor's own, then his giving of security will deplete his estate without bringing in a corresponding value from which his creditors can benefit, and his creditors will suffer just as they would if the debtor had simply made a gift of his property or obligation. Accordingly, courts have long recognized that `[t]ransfers made to benefit third parties are clearly not made for a `fair consideration,' and, similarly, that `a conveyance' by a corporation for the benefit of an affiliate [should not] be regarded as given for fair consideration as to the creditors of the conveying corporation.
Rubin, 661 F.2d at 991 (citations omitted). Although the Rubin case stands for the proposition that transfers solely for the benefit of third parties do not furnish fair consideration, the Rubin court and others have recognized that indirect benefits may furnish fair consideration. The court in Rubin stated its view of indirect benefits as follows:
If the consideration given by the third party has ultimately landed in the debtor's hands, or if the giving of the consideration to the third person otherwise confers an economic benefit upon the debtor, then the debtor's net worth has been preserved . . . provided, of course, that the value of the benefit received by the debtor approximates the value of the property or obligation he has given up. In . . . these situations, the net effect of the transaction on the debtor's estate is demonstrably insignificant, for he has received, albeit indirectly, either an asset or the discharge of a debt worth approximately as much as the property he has given up or the obligation he has incurred.
Id. at 991-92.
Other courts have referred to an "identity of interest" as an exception to the rule that an insolvent debtor receives less than a reasonable equivalent value when it transfers its property in exchange for consideration which passes to a third party. For example, in In re Royal Crown Bottlers of North Alabama, Inc., 23 B.R. 28 (Bankr.N.D.Ala.1982), the court observed: "A clear distinction from this rule exists, however, if the debtor and the third party are so related or situated that they share an `identity of interests,' because what benefits one, will in such case, benefit the other to some degree." Id. at 30. The Alabama court, however, indicated that "[t]he ultimate question then becomes one of determining the value of this vicarious benefit and testing it by the measure of `reasonably equivalent' for the property transferred to the debtor." Id.
The Court is convinced, based upon the preceding authorities, that the mere failure of the guaranties themselves to recite fair consideration passing to the guarantor of an affiliate's debt is not inevitably fatal to a finding of fair consideration. Additionally, the Court is convinced that indirect benefits in the form of funds flowing from the parent to the guarantor subsidiary, or intangible benefits in the form of maintenance of the parent's financial strength, may constitute fair consideration.[7] Nevertheless, the Court is impressed *875 by Committee's responses to the alleged benefits proposed by Arlington as providing fair consideration.
The Committee challenges the inference Arlington draws from the affidavit of Mary Caimi. Despite Arlington's assertions that the amount of intercorporate debt and the pattern of disbursing funds from Lawrence through Packaging to Harriman establishes, indeed compels, a finding of direct economic benefits, the Committee maintains that Arlington did not establish 1) that the amount of intercorporate debt was the result of the transfers, particularly since the funds involved were borrowed from Chase: and 2) that the guarantors bargained for, or were promised, access to the funds disbursed. According to the Committee, the coincidence that benefits flow both ways does not mean that there is a contract or consideration. See, e.g., In re Stolrow's Inc., 813 F.2d 997, 998-99 (9th Cir.1987); In re Kennebago Corp., 50 B.R. 153, 156 (Bankr.D.Me.1985). With respect to Caimi's affidavit, the Committee notes that it fails to even mention intercorporate sharing of loan proceeds and that even if the expectation of a benefit could be construed as a binding promise, an executory contract does not constitute fair consideration. See generally McLauglin, "Application of the Uniform Fraudulent Conveyance Act," 46 Harv.L.R. 404, 414 (1933). As has been mentioned, the Committee maintains that the high intercorporate debt can be explained just as easily as the result of the transfer of cash, goods or credits in ways unrelated to the loan proceeds.
Although the Committee recognizes that there may have been some indirect benefit to Packaging from Packaging's upstream guarantee of Lawrence's obligations, it points out that Arlington made no effort to show how much benefit Packaging derived. Indeed, the Committee suggest that, unlike the situation in cases such as Telefest Inc. v. VU-TV, Inc., 591 F.Supp. 1368 (D.N.J. 1984) and In re Jones, 37 B.R. 969 (Bankr. N.D.Tx.1984), the evidence on the record suggests Packaging derived no benefits and was merely a "captive" of Lawrence.
Finally, with respect to Arlington's identity of interest argument, the Committee admits that such an identity of interest existed but argues that it merely provided the opportunity for abuse. In the Committee's words, the identity of interest among the Debtors "supplies cold comfort to creditors whose claims are defeated by transfers that result in the depletion of the estate." The Court notes, as well, that the In re Crown Bottlers of North Alabama, Inc., 23 B.R. 28 (Bankr.N.D.Ala.1982), case strongly suggests that the value of the vicarious benefit must be quantified for the Court to find fair consideration.
Neither Arlington nor the Committee attempted to quantify the consideration passing to Harriman and Packaging in exchange for their upstream and cross-stream guaranties. Clearly, such a quantification is necessary because without it the Court cannot compare the consideration given by Arlington and ostensibly passed through Lawrence to Packaging and Harriman with the value of the guaranties given by Packaging and Harriman.
The Rubin court and all other courts considering the issue of fair consideration under the Uniform Fraudulent Conveyance Act, section 67(d) of the Bankruptcy Act or section 548 of the Bankruptcy Code squarely place the burden of showing that a conveyance was made without fair consideration on the plaintiff, in this case the Committee. The Committee acknowledges this. Thus, as Justice Brennan recognized, the burden of production issue with respect to a motion for summary judgment is trickier where, as here, the defendant Arlington is the moving party. Has Arlington submitted affirmative evidence negating an essential element of the Committee's claim? *876 Has Arlington demonstrated that the Committee's evidence is insufficient to establish an essential element of its claim? Has Arlington satisfied its ultimate burden of persuasion? The answers to these questions are close ones. The Committee, in response to Arlington's motion, did not point to any additional evidence to counter the evidence put forth by Arlington. However, the Committee by challenging the inferences drawn by Arlington did demonstrate that a genuine issue exists as to the existence of fair consideration. At this point, the burden of production arguably reverted to Arlington, or, it arguably required the Committee to go one step further and quantify the considerationto point to evidence in the record that was ignored or overlooked by Arlington that would support its claims.
The Court finds that in the last analysis that Arlington has failed to meet its ultimate burden of persuasion, although it has gone a long way toward showing that there is an absence of evidence to support the Committee's case and that the Committee may be unable to prove an essential element of its claim. However, considering the facts presented there remain substantial questions as to the amount and fairness of the consideration. The Court is required to resolve doubts in favor of the nonmoving party, Ismert and Associates v. New England Mutual Life Insurance Co., 801 F.2d 536, 537 (1st Cir.1986). It is particularly appropriate to do so in this instance where the rule enunciated by the Supreme Court is difficult to apply. Although the Court appreciates Arlington's position and the considerable time and effort put into its motion and supporting documents, fairness requires that the parties be able to put on their respective cases.
In spite of this ruling, the Court has reservations about the Committee's ability to prove its case. At trial, there will be no question that the Committee will have the burden of quantifying the consideration. See Rubin, 661 F.2d at 994. Assuming the Committee proceeds at trial as it has in response to Arlington's motion and Arlington advances the same position in response as it has herein, then this Court will be in substantially the same position as the district court in Rubin prior to its judgment being vacated and the matter being remanded by the Court of Appeals for further fact finding. According to the Second Circuit, in such a situation, additional facts are necessary to enable the trial court to "measure the economic benefit, if any that accrued to each bankrupt as a result of the third person's indebtedness, and [to] determine whether that benefit was `disproportionately small' when compared to the size of the security that the bankrupt gave and the obligations that it incurred." Id. at 993. Clearly, it will be up to the Committee to supply the additional facts that will enable the Court to measure the economic benefit accruing to Harriman and Packaging.
In view of the foregoing and the memorandum and arguments of counsel, the Court hereby enters summary judgment in favor of Arlington on Count One and denies Arlington's motion with respect to Counts Two and Five.
NOTES
[1] He added "Lawrence Packaging, one must recall, existed largely to absorb Lawrence Paperboard's excesses and protect it from the need to sell these into the open market at much reduced prices; also to even out production. Hence, Packaging Loss [sic] was largely Lawrence Paperboard's."
[2] "Guaranties by affiliated corporations may be classified according to three categories: 1. A downstream guaranty, where the parent guarantees its subsidiary's obligation; 2. a cross-stream guaranty, where one subsidiary guarantees another subsidiary's obligations; and 3. an upstream guaranty, where a subsidiary guarantees its parent's obligation." Carl, Fraudulent Transfer Attacks on Guaranties in Bankruptcy, 60 Am. Bankr.L.J. 109, 115 (1986).
[3] The Committee objects to the DeLuca affidavit to the extent that he does not have first hand knowledge of the Debtors' accounts prior to November 1983.
[4] Section 67(d)(1)(e) of the Bankruptcy Act contains a substantially identical definition. For an analysis of both the Bankruptcy Act and the UFCA with respect to intercorporate guaranties, see Rosenberg, "Intercorporate Guaranties and the Law of Fraudulent Conveyances: Lender Beware," U.PA.L.Rev. 235 (1976). The language of section 548 of the Bankruptcy Code, "reasonably equivalent value," is broad enough to include the language of the Bankruptcy Act, "fair consideration," although the statutes are different in other respects. See 4 L. King Collier on Bankruptcy ¶ 548.01[2] (15th ed. 1987).
[5] A finding of good faith is required by section 3 of the UFCA. The Creditors' Committee in Count Five, on information and belief, has alleged that the payment, transfers and obligations incurred by the Debtors pursuant to the guaranties were made with actual intent to hinder or defraud creditors but has not addressed the good faith issue in response to Arlington's motion. The Court will presume that, like insolvency, it is not an issue that warrants consideration for purposes of this motion.
[6] Arlington states that "the only issue in dispute . . . is whether each guarantor received `fair consideration' in exchange for its guaranty." The Committee states that "[t]he sole issue in dispute . . . is whether certain intercorporate quaranties executed by the debtors were for `fair consideration' within the meaning of the Massachusetts fraudulent conveyance statute. . . ."
[7] The Court notes that a guarantor's equitable rights such as contingent subrogation and contribution rights may have value and may be considered in deciding whether the guarantor received fair consideration. Compare In re Alexander Dispos-Haul Systems, Inc., 36 B.R. 612 (Bankr.D.Or.1983); Matter of Emerald Hills Country Club, Inc., 32 B.R. 408 (Bankr.S.D.Fla. 1983) with Rubin v. Manufacturers Hanover Trust Co., 661 F.2d 979 (2nd Cir.1981). Obviously, these rights are valueless in the instant case and have not even been mentioned by the parties. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1279087/ | 682 P.2d 748 (1984)
MIDLAND MORTGAGE COMPANY, an Oklahoma corporation, Appellant,
v.
SANDERS ENGLAND INVESTMENTS, an Oklahoma General Partnership, et al., Defendants, and
Hammond Engineering Company, an Oklahoma corporation, Appellee.
No. 58629.
Supreme Court of Oklahoma.
March 20, 1984.
Rehearing Denied June 18, 1984.
Blackstock, Joyce, Pollard, Blackstock & Montgomery by Edward F. Montgomery, and William F. Smith, Tulsa, for appellant.
Sublett, McCormick, Andrew & Keefer by Joseph A. McCormick and Lynn Swander, Tulsa, for appellee.
*749 HODGES, Justice.
The dispositive issues on certiorari are whether surveying by an engineering firm prior to the recordation of a mortgage is a superior lien to that of the mortgage lien; and if Hammond Engineering Company, appellee, is estopped from asserting its mechanic's and materialman's lien.
Hammond Engineering Company orally agreed to perform all engineering work in conjunction with development of realty owned by Sanders England Investments (landowner). Between May 14, 1971, and April 28, 1975, Hammond surveyed the realty, set permanent iron pins and marked the boundaries of the property. On December 31, 1973, Sanders England executed a promissory note in the amount of $1,250,000 to Midland Mortgage Co. (mortgagee) to secure financing for the development project. Before Midland filed its mortgage of record, it requested a pre-mortgage site inspection from Hammond. On January 15, 1974, Hammond reported that: selected tree removal had occurred, grass strippings were being removed from the top soil and stockpiled on the property; no building materials were present on the site and no construction had been started. Midland filed its mortgage on the same day. On May 1, 1975, Sanders England defaulted on its note to Midland which brought foreclosure proceedings and joined Hammond. A verified mechanic's and materialman's lien was filed by Hammond on August 22, 1975. Hammond cross-claimed and sought to have its lien declared superior to the mortgage. The trial court found that Hammond's lien was superior to the mortgage. Midland appealed: the Court of Appeals reversed the trial court, held the mortgage to be superior, and extinguished the lien.
I, II
Hammond contends that the Court of Appeals erred when it determined that the engineering services could not be impressed as a mechanic's and materialman's lien pursuant to 42 Ohio St. 1981 § 141,[1] because they were neither continuous, the beginning of construction, nor the improvement of realty; and that it further erred when it overruled the factual findings of the trial court even though the findings were not against the weight of the evidence.
The mechanic's and materialman's lien statute does not require that the labor performed for the erection of any building be part of the permanent construction of the building, or that it be continuous or visible. It provides that any person who, under oral or written contract performs labor or material for the improvement of land, has a lien which takes preference over all other liens which may attach upon the land after the date of the performance of the first labor on the land. Whether surveying by an engineering firm entitles it to a lien pursuant to 42 Ohio St. 1981 § 141 is a question of first impression. However, this Court has defined the improvement of land described in § 141 as including any and every character of improvement *750 on realty.[2] We find that the services performed by Hammond constituted an improvement of the realty. Because these services were lienable, Hammond's lien has priority of the mortgage because the first work done on the land preceded the filing of the mortgage.
Whether the work performed under the statute is lienable is a question for the trier of the facts. The trial court's findings and judgment will not be disturbed unless they are clearly against the weight of the evidence.[3] We find that the findings and judgment of the trial court are neither contrary to 42 Ohio St. 1981 § 141, nor against the clear weight of the evidence.
III
Hammond also asserts that it was not estopped from asserting its lien. We agree. Before Hammond can be estopped from claiming that its lien is superior to the mortgage, the following elements of estoppel must be present:[4]
"1. There must exist a false representation or concealment of material facts.
"2. It must have been made with knowledge, actual or constructive, of the facts.
"3. The party to whom it was made must have been without knowledge of the facts.
"4. It must have been made with the intention that it should be acted upon.
"5. The party to whom it was made must have relied on, or acted upon it, to his prejudice."
The requisites of estoppel are not present because: Midland knew Hammond had performed engineering service and had placed permanent pins on the property; and the parties stipulated that Hammond was the engineer for the project, and that Midland had required surveys of the property to be made and submitted prior to the granting of the loan.
CERTIORARI GRANTED. OPINION OF THE COURT OF APPEALS VACATED. JUDGMENT OF THE TRIAL COURT AFFIRMED.
BARNES, C.J., SIMMS, V.C.J., and LAVENDER, HARGRAVE, OPALA and WILSON, JJ., concur.
NOTES
[1] Title 42 Ohio St. 1981 § 141 provides in pertinent part:
"Any person who shall, under oral or written contract with the owner of any tract or piece of land, perform labor, furnish material or lease or rent equipment used on said land for the erection, alteration or repair of any building, improvement or structure thereon or perform labor in putting up any fixtures, machinery in, or attachment to, any such building, structure or improvements; or who shall plant any tree, vines, plants or hedge in or upon such land; or who shall build, alter, repair or furnish labor, material or lease or rent equipment used on said land for buildings, altering, or repairing any fence or footwalk in or upon said land, or any sidewalk in any street abutting such land, shall have a lien upon the whole of said tract or piece of land, the buildings and appurtenances ... ."
[2] See Green v. Reese, 261 P.2d 596, 598 (Okla. 1953); Peaceable Creek Coal Co. v. Jackson, 26 Okl. 1, 108 P. 409, 411 (1910). See also, Annot., "Surveyor's Work As Giving Rise To Mechanic's Lien," 35 A.L.R.3d 1391-93 (1971).
[3] Hughey v. Cadenhead, 389 P.2d 973 (Okla. 1964).
[4] See Mager Mtg. Co. v. Ferguson, 208 Okl. 304, 255 P.2d 938, 940 (1953). | 01-03-2023 | 10-30-2013 |
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