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4,639,118 | 2020-12-03 07:15:37.620156+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=10853&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa08%5cOpinion | §
VIRGINIA RUTH PHILLIPS A.K.A.
No. 08-19-00167-CR
VIRGINIA RUTH GREENE,
§
Appeal from the
Appellant,
§
35th District Court
v.
§
of Brown County, Texas
THE STATE OF TEXAS,
§
(TC# CR25990)
Appellee.
§
OPINION
Appellant, Virginia Ruth Phillips, A.K.A. Virginia Ruth Greene, after a bench trial, appeals
the trial court’s finding of guilt of possession of a controlled substance—methamphetamine less
than one gram—in a drug free zone; TEXAS HEALTH & SAFETY CODE ANN. § 481.115. Appellant
argues the evidence is legally insufficient to support she (1) voluntarily possessed
methamphetamine in a drug free zone, and (2) entered the drug free zone knowingly or
intentionally. We disagree. 1
BACKGROUND
Factual Background
Officer Smoot of the Early Police Department observed a Dodge Neon speeding on the
1200 block of Early Boulevard. Smoot conducted a traffic stop of the vehicle. The vehicle stopped
within—the designated area where the school buses are parked at the Early High School, which is
1
This appeal was transferred from the Eleventh Court of Appeals, and we apply the precedent of that Court to the
extent required by TEX.R.APP.P. 41.3.
located approximately 300 feet away from the actual school building. Steve Darnell was the driver
of the vehicle and Appellant was the front passenger. When Smoot made contact with Darnell, he
seemed nervous, Smoot then learned Darnell was on parole for a drug-related offense. Darnell had
just left the residence of an individual who is known to have connections with narcotics, so Smoot
asked for consent to search the vehicle. Darnell declined and Smoot requested a canine unit to
search the vehicle.
While waiting on the canine unit, Smoot asked Appellant whether marijuana or
methamphetamine was present in the vehicle; Appellant denied any drugs were in the vehicle.
Smoot testified he suspected deception when Appellant looked down towards the floorboard as
she denied possessing any drugs. Officer Sheedy arrived and requested Appellant to exit the
vehicle to conduct a pat-down search for weapons. A pocketknife was found on Appellant and
secured by the officers. Sheedy separated Appellant from the vehicle’s other occupants and
remained with Appellant throughout the search of the vehicle.
Once the canine unit arrived, a positive alert was made to the presence of drugs in the
vehicle and the vehicle was then searched. A zippered pouch in the console cup holder of the
vehicle was found, containing what officers believed to be methamphetamine. All the occupants
of the vehicle were arrested. Lieutenant Bastardo, who was also present at the scene, transported
Appellant separately to the Brown County jail. Upon arrival, Bastardo warned Appellant she could
face additional charges if she brought any contraband into the jail. Bastardo then observed
Appellant reach into the front of her pants and retrieve a pouch, which she surrendered to him. A
lab test confirmed the pouch contained less than one gram of methamphetamine.
Procedural Background
Appellant was indicted for the offense of Possession of a Controlled Substance—
2
methamphetamine less than one gram—in a drug free zone. After a bench trial, the court found
Appellant guilty. Appellant pled true to the allegations in the Notice of the State’s Intent to
Enhance Punishment Range and the trial court sentenced Appellant accordingly—ten years’
confinement.
DISCUSSION
In two issues, Appellant challenges the sufficiency of the evidence to support her
conviction. In Issue One, Appellant contends the evidence is legally insufficient to support she
voluntarily possessed methamphetamine within the drug free zone because as a passenger, she did
not have control over her presence in a drug free zone. In Issue Two, Appellant challenges the
drug free zone enhancement of the offense, claiming the evidence is insufficient to support she
knowingly or intentionally entered the drug free zone.
Standard of Review and Applicable Law
We review claims of insufficiency of the evidence by viewing all the evidence in the light
most favorable to the prosecution to determine whether any rational trier of fact could have found
the essential elements of the offense beyond a reasonable doubt. See Jackson v. Virginia,
443 U.S. 307
, 318 (1979); Jenkins v. State,
493 S.W.3d 583
, 597 (Tex.Crim.App. 2016); Wise v. State,
364 S.W.3d 900
, 903 (Tex.Crim.App. 2012). A trial judge conducting a bench trial is the fact finder
who exclusively weighs the credibility of witnesses and their respective testimony. Tatro v. State,
580 S.W.3d 740
, 743 (Tex.App.—Houston [14th Dist.] 2019, no pet.)(citing Adelman v. State,
828 S.W.2d 418
, 421 (Tex.Crim.App. 1992)); see also TEX.CODE CRIM.PROC.ANN art. 38.04.
Reviewing courts may not re-evaluate the weight and credibility of the evidence and may not
substitute the fact finder’s judgment for their own. Williams v. State, No. 02-19-00190-CR,
2020 WL 6326150
, *2 (Tex.App.—Fort Worth Oct. 29, 2020, no pet.)(mem. op., not designated for
3
publication)(citing Queeman v. State,
520 S.W.3d 616
, 622 (Tex.Crim.App. 2017). Rather, “we
determine whether the necessary inferences are reasonable based on the evidence's cumulative
force when viewed in the light most favorable to the verdict.” Williams,
2020 WL 6326150
, at *2;
see Villa v. State,
514 S.W.3d 227
, 232 (Tex.Crim.App. 2017). When the record supports
conflicting inferences, a reviewing court must “presume that the factfinder resolved the conflicts
in favor of the prosecution” and defer to that determination. [Internal quotations omitted]. Wise,
364 S.W.3d at 903
.
Possession of a controlled substance requires showing a person did so knowingly or
intentionally. TEX.HEALTH & SAFETY CODE ANN. § 481.115(a). It is immaterial whether the
evidence establishing the defendant’s affirmative link to the illegal drugs in his possession is direct
or circumstantial; the accused's connection with possessing the contraband must merely be "more
than just fortuitous." Brown v. State,
911 S.W.2d 744
, 747 (Tex.Crim.App. 1995). To support a
conviction, the State was required to show Appellant (1) exercised actual care, custody, control,
and management over the contraband; and (2) was conscious of her connection with the contraband
and knew the substance was contraband.
Id.
To enhance the offense from a state jail felony to a
third-degree felony, the State was required to prove Appellant possessed the illegal substance
within 1,000 feet of a school. TEX.HEALTH & SAFETY CODE ANN. § 481.134(d)(1). Reasonable
inferences fused from the defendant’s words, acts, and conduct suffice to prove intent and
knowledge. Patrick v. State,
906 S.W.2d 481
, 487 (Tex.Crim.App. 1995); see also TEX.PENAL
CODE ANN § 6.03(a).
Analysis
In Issue One, Appellant contends the evidence is legally insufficient to support she
voluntarily possessed methamphetamine within a drug free zone. According to Appellant, her
4
absence of free will to physically drive the vehicle above the speed limit and subsequently stop
within a drug free zone amounted to "external factors,” rendering her conduct involuntary.
As a general rule, a person commits an offense only if she voluntarily engages in the
conduct proscribed by law. TEX.PENAL CODE ANN. § 6.01(a)(“A person commits an offense only
if he voluntarily engages in conduct including an act, an omission, or possession.”). Involuntary
conduct is a defense to prosecution. Trujillo v. State,
227 S.W.3d 164
, 169 (Tex.App.—Houston
[1st Dist.] 2006, pet. ref’d). When a person claims the involuntary act defense, she is conceding
her own body made the motion, but is denying responsibility for it. Rogers v. State,
105 S.W.3d 630
, 639 n.30 (Tex.Crim.App. 2003). “Voluntariness, within the meaning of section 6.01(a), refers
only to one's own physical body movements.” [Internal quotations omitted].
Id. at 638
. However,
the movement is not voluntary when those physical movements are the “nonvolitional result of
someone else's act, are set in motion by some independent non-human force, are caused by a
physical reflex or convulsion, or are the product of unconsciousness, hypnosis or other
nonvolitional impetus[.]”
Id.
The voluntariness of one’s conduct or bodily movements is separate from the issue of one’s
mental state. Adanandus v. State,
866 S.W.2d 210
, 230 (Tex.Crim.App. 1993), cert. denied,
510 U.S. 1215
(1994); see also Avila v. State,
954 S.W.2d 830
, 838-39 (Tex.App.—El Paso 1997, pet.
ref’d)(a voluntary act need not be the product of one’s free will). The unintended results derived
from one’s voluntary act suffices to assign criminal responsibility. Rogers,
105 S.W.3d at 638
(emphasizing that the “‘voluntary act requirement does not necessarily go to the ultimate act (e.g.,
pulling the trigger), but only that criminal responsibility for the harm must include an act that is
voluntary (e.g., pulling the gun, pointing the gun, or cocking the hammer.”)[Internal quotations
omitted].
5
In the instant case, although Appellant attemps to avoid criminal responsibility by relying
on a combination of "external factors" as the cause of the traffic stop and her ultimate arrest, her
choice to ride in the vehicle while possessing methamphetamine suffices to support voluntariness.
During the search, Officer Sheedy monitored Appellant until she was separately transported to the
jail. It was only until Appellant arrived at the jail, and after Lieutenant Bastardo admonished her
about contraband in the jail, that Appellant gave him the methamphetamine secreted on her person.
Appellant has failed to assert any claim of involuntary bodily movements or any nonvolitional
impetus in possessing the methamphetamine. There is no indication that Appellant was coerced to
possess the methamphetamine, or that some non-human factor set in motion her exercise and
control over the contraband. Appellant voluntarily rode as a passenger in the vehicle that was
stopped by law enforcement while she voluntarily possessed methamphetamine on her person. We
find the evidence is legally sufficient to support that a reasonable fact finder could have found
Appellant voluntarily possessed methamphetamine in a drug free zone beyond a reasonable doubt.
Issue One is overruled.
In Issue Two, Appellant argues the evidence is legally insufficient to support her conviction
because the State failed to show she knowingly was in a drug free zone. Though precedent
established in White v. State,
480 S.W.3d 824
(Tex.App.—Texarkana 2015), aff'd,
509 S.W.3d 307
(Tex.Crim.App. 2017) confirms otherwise, Appellant contends the recent United States
Supreme Court decision Rehaif v. United States,
139 S.Ct. 2191
, 2192 (2019) controls, in which
the Court applied a mental culpable state requirement into a statute without a mens rea element.
Enhancing the offense of possession of a controlled substance of less than one gram from
a state jail felony to at third-degree felony only requires the State to show possession took place
within 1,000 feet of a school:
6
An offense otherwise punishable under Section . . . 481.115(b) . . . is a felony of
the third degree if it is shown on the trial of the offense that the offense was
committed:
(1) in, on, or within 1,000 feet of any real property that is owned, rented, or leased
to a school or school board . . . .
TEX.HEALTH & SAFETY CODE ANN. § 481.134(d). We rely on the Court’s holding in White, which
expressly states, the "State need not prove a culpable mental state with respect to the location of
the offense.” White, 480 S.W.3d at 827. However, determining whether White applies hinges on
whether Rehaif controls.
In Rehaif, the defendant secured a nonimmigrant student visa, but the government later
revoked his nonimmigrant status.
139 S.Ct. at 2194
. The defendant was later prosecuted after he
shot two firearms at a firing range under a federal statute that made it “unlawful for any person . .
. , being an alien . . . illegally or unlawfully in the United States, [to] possess . . . any firearm or
ammunition.”
Id. at 2195
. The defendant argued knowledge of one’s status is not required for a
conviction because the statute fails to expressly require the element of knowledge of one’s status
while possessing a firearm.
Id. at 2194
. The Court ultimately incorporated a mens rea requirement
into the statute and required the government to prove the defendant knew his illegal status barred
him from possessing a firearm.
Id. at 2200
. However, the Court's reasoning rested on the
lawfulness of the underlying offense, emphasizing:
Scienter requirements advance [Blackstone’s principle of ‘a vicious will’] by
helping to separate wrongful from innocent acts. That is the case here. Possessing
a gun can be entirely innocent. It is the defendant's status, not his conduct alone,
that makes the difference. Without knowledge of that status, a defendant may lack
the intent needed to make his behavior wrongful. [Emphasis in orig.].
Rehaif,
139 S.Ct. at 2192
, (Syllabus at 2195-97).
In the present case, Rehaif is distinguishable because unlike possessing firearms,
possessing methamphetamine in any amount is unlawful. The Court in Rehaif reasoned that
7
“[a]pplying the word ‘knowingly’ to the defendant's status in [the statute] helps advance the
purpose of scienter, for it helps to separate wrongful from innocent acts. Assuming compliance
with ordinary licensing requirements, the possession of a gun can be entirely innocent.”
Id. at 2197
.
As the Court in Rehaif demonstrated, there are circumstances in which someone can possess a
firearm lawfully; however, that is not the circumstance in the present case—possessing
methamphetamine is always unlawful and applying a knowledge requirement to the statute would
not advance the purpose of scienter. Accordingly, Appellant’s argument that Rehaif controls is
unpersuasive.
Given that Rehaif is inapplicable, we apply White. The State was not required to show
Appellant knowingly or intentionally entered a drug free zone; the State was only required to show
Appellant was within 1,000 feet of real property owned, leased, or rented by a school to support
the enhancement of the offense. See TEX.HEALTH & SAFETY CODE ANN. § 481.134(d).
The traffic stop occurred within a school bus parking facility owned by the Early High
School, which was located 300 feet away from the school—well within 1,000 feet as statutorily
required. During the traffic stop, Appellant underwent a pat-down search and was subsequently
separated from the other occupants of the vehicle—Officer Sheedy remained with Appellant
throughout the search of the vehicle. Lieutenant Bastardo then transported Appellant separately to
the Brown County jail where Appellant surrendered a pouch she possessed on her person, which
a lab test later confirmed contained methamphetamine. Because the State was only required to
show Appellant possessed methamphetamine within a drug free zone, we find a reasonable fact
finder could have found Appellant possessed methamphetamine while she was within 1,000 feet
of a school. The evidence is legally sufficient to support the enhancement from a state jail felony
to a third-degree felony for possessing a controlled substance less than one gram in a drug free
8
zone. Issue Two is overruled.
CONCLUSION
For these reasons, we affirm.
November 30, 2020
YVONNE T. RODRIGUEZ, Justice
Before Alley, C.J., Rodriguez, and Palafox, JJ.
(Do Not Publish)
9 |
4,513,406 | 2020-03-06 10:10:49.232973+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=96694&Index=%5c%5coca%2dpsql12%2ecourts%2estate%2etx%2eus%5cTamesIndexes%5ccoa03%5cOpinion | TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-19-00909-CR
The State of Texas, Appellant
v.
David Uhrich, Appellee
FROM THE 21ST DISTRICT COURT OF BASTROP COUNTY
NO. 16732, THE HONORABLE CARSON TALMADGE CAMPBELL, JUDGE PRESIDING
ORDER AND MEMORANDUM OPINION
PER CURIAM
David Uhrich was charged with the offense of possession of a controlled substance,
namely methamphetamine, with the intent to deliver, “in an amount of four grams or more but less
than 200 grams.” See Tex. Health & Safety Code § 481.112(d). Uhrich filed a pre-trial motion to
suppress certain evidence, which the trial court granted. The State has appealed the trial court’s
ruling, see Tex. Code Crim. Proc. 44.01(a)(5), and in that appeal, has filed a motion asking this
Court to abate the appeal and remand the cause to the trial court for entry of findings of fact and
conclusions of law.
The Texas Court of Criminal Appeals has held that “upon the request of the losing
party on a motion to suppress evidence, the trial court shall state its essential findings,” which the
court explained were “findings of fact and conclusions of law adequate to provide an appellate court
with a basis upon which to review the trial court’s application of the law to the facts.” State v.
Cullen,
195 S.W.3d 696
, 699 (Tex. Crim. App. 2006). Those findings must be “adequate and
complete, covering every potentially dispositive issue that might reasonably be said to have risen in
the court of the suppression proceedings,” State v. Elias,
339 S.W.3d 667
, 676 (Tex. Crim. App.
2011), including “explicit credibility determination[s]” regarding the witnesses who testified at the
suppression hearing, State v.Mendoza,
365 S.W.3d 666
, 673 (Tex. Crim. App. 2012). Findings of
fact and conclusions of law “ensure that reviewing courts need not presume, assume, or guess at
what historical facts a trial judge actually found when making a ruling in a motion to suppress
hearing.”
Id. at 671.
Therefore, if a trial court fails to make findings of fact and conclusions of law,
appellate courts are authorized to abate the appeal and remand the cause to the trial court for entry
of “essential findings.” See
Cullen, 195 S.W.3d at 698
(citing Tex. R. App. P. 44.1).
Although the State requested findings of fact and conclusions of law in connection
with the trial court’s ruling on Uhrich’s motion to suppress, the record in this case does not contain
findings of fact and conclusions of law. Accordingly, we grant the State’s motion, abate the appeal,
and remand the cause to the trial court so that it may make findings of fact and conclusions of
law. The district court clerk is instructed to forward to this Court a supplemental clerk’s record
containing those findings and conclusions no later than April 6, 2020. This appeal will be reinstated
once the supplemental clerk’s record is filed.
It is ordered on March 5, 2020.
Before Justices Goodwin, Kelly, and Smith
Abated and Remanded
Filed: March 5, 2020
Do Not Publish
2 |
4,489,797 | 2020-01-17 22:02:02.176961+00 | Love | null | *588OPINION.
Love:
Upon hearing, the respondent concedes that the income of the company should be reduced by $3,225, representing depreciation upon its warehouse and equipment, as claimed by the petitioner. *589The respondent further concedes that a deduction should be allowed for the loss of 1,200 tobacco baskets and he computes the said deduction as $960, representing the value of 1,200 baskets at 80 cents per basket. The evidence is that the baskets cost from $1 or $1.25 to $1.50 each, and that the cost of replacing the 1,200 baskets lost was $1,666.70, which amount is the deduction claimed herein. The replacement cost indicates a cost of approximately $1.40 per basket. We believe that, as contended by petitioner, the net income of the company for the period involved should be reduced by $1,666.70, representing the loss mentioned. See American 3 Way Luxfer Prism Co., 9 B. T. A. 571.
The questions now remaining relate to the claim that the company was a personal service corporation and to the petitioner’s various attacks upon the proposed assessment of the tax against him as a transferee.
We have repeatedly held that to be entitled to personal service classification, it must be shown that the income of a corporation is primarily attributable to the activities of its principal stockholders, who are themselves regularly engaged in the active conduct of the business, and in which capital is not a material income-producing factor. The limitations and requirements set forth must all exist and the failure of any one defeats the claim for such classification. Cliver-Wright-Rainey Co., 2 B. T. A. 561; Home Insurance Agency, 5. B. T. A. 1020; Metropolitan Business College, 5 B. T. A. 10.
We think the evidence in this proceeding fails, in at least one particular, to satisfy the requirements above detailed. W& do not believe that the income of a corporation is “ primarily ” ascribable to the stockholders simply because they obtain its business by solicitation, when it appears that the corporation renders to its customers expert service necessary to' the marketing of the customers’ product and which service is not shown to have been rendered by stockholders.
It appears that the company had the service of about 25 tobacco graders who are experts in the classification of tobacco into grades for sale. It would be unreasonable to assume that the service of these graders was not a factor influencing the farmers in bringing their crops to the company for sale. Furthermore, the petitioner sold by auction and the identity of its auctioneers is not shown.
With the exception of the petitioner, Charles McMakin, Eugene U. Wiggerton, and Kenneth Fry, it does not appear that the stockholders rendered any service to the company beyond their solicitations and their presence on sale days.
In Patterson-Andress Co., 6 B. T. A. 392, 399, in speaking of the requirement that the income of a personal service corporation must *590be primarily attributable to the activities of the principal stockholders, we said:
* * * In our opinion this clause means more than that the stockholders shall obtain the clients and supervise the work, or that clients shall look to their experience; it means, among other things, that the corporation may not rely upon nonstockholders to do a substantial amount of the work which produces the income whether such work be detailed or supervisory. * * *
We think also that capital was a material income-joroducing factor. The company had a valuable plant which was an important factor in the production of income and without which it could not have successfully carried on its operations. .
Upon the record we hold that petitioner has failed to establish that the income of the company was primarily ascribable to the activities of its principal stockholders. We are therefore unable to declare that the company was a personal service corporation during the taxable period involved.
Petitioner’s various denials of liability as a transferee may be considered in three groups. The first of these is the contention that all liability against either the company or himself as a transferee was barred by expiration of the period of limitation when the respective assessments were made or proposed. The second contention is that he is not a transferee. As will appear further, this position is predicated upon the theory that section 280 is not retroactive and therefore has no application to the transfer of assets of a taxpayer prior to its effective date, nor to cases in which assessment against the taxpayer was made before such date. The third group may be considered as attacks upon the constitutionality of section 280. We will discuss these groups in order mentioned.
The petition alleges that the company’s return for the period involved was filed about January 14,1921.’’ The respondent’s answer neither admits nor denies this allegation except by a general denial, and there is no proof. Assuming, however, that the date mentioned is correct, the statutory period for assessment against it of taxes for the period involved did not expire until January 14, 1926 (section 250 (d) Revenue Act of 1918, and section 277 (a), Revenue Act of 1924). The additional tax of $3,384.54 asserted against the company for the period mentioned was assessed November 19, 1925, a date within the five-year period allowed by the statute for assessment. The provisions of section 280 (b) (1) of the Revenue Act of 1926, enacted February 26, 1926, extended the period of limitation for assessment of any liability of the petitioner, as a transferee, for unpaid taxes of the company, to one year after the expiration of the period of limitation for assessment against the taxpayer, or to January 14, *5911927. The deficiency notice was mailed to the petitioner on August 4, 1926, a date prior to the expiration of the statutory period for assessment against him. The petition instituting this proceeding was filed September 22, 1926. Section 280 (d) of the Revenue Act of 1926 suspends the running of the period for assessment against a transferee until the decision of the Board becomes final, and for 60 days thereafter.
Section 278 (d) of the Revenue Act of 1926 reads, in part, as follows:
Where the assessment of any income, excess-profits or war-profits tax imposed by this title or by prior Act of Congress has been' made (whether before or after the enactment of this Act) within the statutory period of limitation properly applicable thereto, such tax may be collected by distraint or by a proceeding in court (begun before or after the enactment of this Act), hut only if begun (1) within six years after the assessment of the tax * * *.
In Louis Costanzo et al., 16 B. T. A. 1294, 1297, the Board stated:
This section of the Act is retroactive to taxes payable under the Revenue Act of 1918, and applies to the transferees. United States v. Updike, 32 Fed. (2d) 1. It follows that the period within which collection may be made from the transferees has not expired.
The last question for consideration involves the petitioner’s various attacks upon the constitutionality of section 280 of the Revenue Act of 1926. In Henry Cappellini et al., 14 B. T. A. 1296, we held that when a transferee has invoked the provisions of section 280 by appealing to the Board, lie may not in such a proceeding question the validity of that section. On brief, the petitioner’s counsel attacks that decision at great length and with considerable vigor. Regardless of whether or not the holding of the Board in the Gappel-lini case, on the question of estoppel, be sound, it is now a well-established doctrine that a transferee of the assets of a corporation, in liquidation, is liable for income taxes clue by the corporation at-óate of dissolution to an amount not to exceed the amount be received in such distribution. It is true that several defenses might be urged in reduction of such amount, but no such defense appears in this record. Hence, we hold that petitioner is liable for the full amount of tbe deficiency to be recomputed in accordance with this opinion.
Judgment will be entered under Bule 50. |
4,489,798 | 2020-01-17 22:02:02.210184+00 | Love | null | *596OPINION.
Love:
On brief, the respondent moves the Board to dismiss the petition of Bonnie M. Busch so far as it relates to the year 1923, for lack of jurisdiction. The respondent has determined an over-assessment for that year. It appears that the motion is well founded and accordingly it is granted. Cornelius Cotton Mills, 4 B. T. A. 255; Byrd Printing Co., 15 B. T. A. 55.
We are satisfied that the instruments of July 20, 1921, created a trust estate. Wilson Syndicate Trust, 14 B. T. A. 508, 521.
*597The petitioners were beneficiaries of a trust estate which sustained net losses for its fiscal years ended March 31, 1922, March 31, 1923, and March 31, 1924. The petitioners’ returns were filed on a calendar year basis. For the years 1922 and 1923 they claimed deductions upon their individual returns of amounts equal.to the proportionate ’ shares of the net losses of the trust estate allocable to their respective beneficial interests. For the year 1924 they claimed deductions of such portions of the net loss of the trust estate for its fiscal year ended March 31, 1924, as are allocable proportionately to the nine months of that fiscal year which fell within the calendar year 1923, and upon the basis of the portion of such loss allocable to their respective beneficial interests.
In support of their contention the petitioners rely upon certain sections of the Revenue Act of 1921, viz:
Sec. 214. (a) Tliat in computing net income tliere shall bo allowed as deductions:
***$*%,*
(4) Losses sustained during tile taxable year and not compensated for by insurance or otherwise, if incurred in trade or business;
(5) Losses sustained during the taxable year and not compensated' for by insurance or otherwise, if incurred in auy transaction entered into for profit. * * ⅜.
Section 204 of the Revenue Act of 1921 prescribes the manner in which taxpayers may claim net losses arising in one year as deductions from income of the next or next two succeeding taxable years. Subdivision (c) provides:
(c) The benefit of this section shall be allowed to the members of a partnership and the beneficiaries of an estate or trust, and to insurance companies * * * under regulations prescribed by the Commissioner with the approval of the Secretary. (Italics ours.)
The Revenue Act of 1924, in section 206 (h) which corresponds to section 204 (c), supra, provides that the benefits of the section shall be allowed to “ an estate or trust ” instead of the “ beneficiaries of an estate or trust.” Section 206 (g) of that Act provides, however, for an adjustment of net loss deduction claims so that when the period for which the loss occurs falls partly in two calendar years, as to which the laws applicable differ, the deduction shall be determined proportionately in accordance with the laws in effect during such years. The petitioners accordingly claim that in their .individual returns for 1924 they should be allowed deductions of such portions of the net loss of the trust for its fiscal year ended March 31,1924, as are assignable to the nine months of that fiscal year falling within the calendar year 1923 and allocable to their interests in the trust.
*598In George M. Studebaker, 2 B. T. A. 1020, we considered an analogous contention under section 204 (c) of the Revenue Act of 1918, which is similar to section 204 (c) of the 1921 Act. After quoting subdivision (c), we said:
It is argued that the refusal to permit deductions by beneficiaries on their individual returns on account of net losses suffered by the trust will nullify the provision quoted above. How this conclusion was reached does not appear, for it seems quite clear that this provision permits the application of a net loss suffered by a trust in one year to be applied against the net income of the trust in another year for the purpose of determining the shares of income which are to be distributed to beneficiaries. Since under section 204 (a) the “term ‘net loss’ refers only to net losses resulting from * * * (1) the operation of any business regularly carried on by the taxpayer, * * ⅝ ” and a trust which distributes all of its income periodically is not taxable, subdivision (c) was added in order that the beneficiaries might, in determining their distributive shares, apply against the net income of one year the net loss of the other. Furthermore, section 204 does not add other losses to those for which deductions are allowed under section 214 (a), hut merely extends the scope for applying the losses which are allowed under that section. It does not appear, therefore, that this provision is subject to the interpretation ashed by the taxpayers.
The petitioners herein seek to differentiate that decision because the beneficiaries therein were such under a trust created for their benefit by another person and under which they were not the re-maindermen. In support of this the petitioners rely upon our decision in Julia N. De Forest, 4 B. T. A. 1059. In the Be Forest appeal, the petitioner had received as an absolute gift from her husband certain shares of stock of a corporation then in the process of dissolution. On June 21, 1920, the corporate assets were assigned in dissolution of the corporation to the stockholders, including the petitioner. On the same date the stockholders assigned their undivided interests in certain patents and license agreements to a trustee for the purpose of enforcing all rights under the patents and for the collection of royalties. The patents then had 4 years and 12 days to run and a value of $1,600,000. In his information return for 1920 the trustee reduced the royalties received by expenses and by $227,066.56 for exhaustion of the patents. He indicated that the distributable share of Mrs. De Forest, after such deductions, was $8,787.47, and she reported that sum as income from the trust. The Commissioner restored to her income an amount representing the proportion of the exhaustion deduction allocable to her interest in the trust. We held that the petitioner was entitled to the exhaustion deduction claimed.
It should be noted that in the Be Forest proceeding there was no claim for a net loss deduction. The petitioner was there claiming a deduction for exhaustion of a patent and under the circumstances *599her claim was the only way in which the benefit of a deduction provided by statute might be secured, since such deduction must be claimed in the year in which the exhaustion occurs. The statute on the other hand makes specific provision for allowance of a “ net loss ” sustained by a trust, and this provision is that it may be deducted by the trust from income of certain succeeding taxable years. The beneficiaries then derive the benefit of the statute.
The petitioner, Clarence M. Busch, further alleges that he is entitled to a deduction of $29,000 for the year 1923 as a bad debt. It appears that to avert a tax sale of certain of the lands which he then held as trustee, this petitioner on May 31, 1923, advanced to the trust the sum of $29,000. The trust, not having at that time, nor at the close of the year 1923, liquid assets sufficient to repay the advancement, the petitioner personally claimed the deduction of the said advancement as taxes paid in his income-tax return for 1923. The respondent denied the deduction. The petitioner now asserts that he is entitled to a deduction of the said advancement for the year 1923 as a bad debt. Through fortuitous circumstances the trust was able to dispose of certain bonds during 1924, and the petitioner repaid himself the advancement out of the funds so secured and reported the repayment as income during 1924.
Upon the state of facts presented, we can not accept the petitioner’s contention that the amount of his voluntary advancement to the trust was a bad debt at the close of the year 1923. The record rather indicates that the trust then possessed extensive properties, which while they could not readily be realized upon, were by no means worthless. See Akron Auto Garage Co., 1 B. T. A. 1066; H. L. Gueydan, 4 B. T. A. 1250; Alemite Die Casting & Manufacturing Co., 1 B. T. A. 548.
We approve the respondent’s determination in all particulars.
Judgment will be entered for the respondent. |
4,489,799 | 2020-01-17 22:02:02.241734+00 | Murdock | null | *603OPINION.
Murdock :
The charge-off in question in this case is really a partial write-off of a single account rather than an addition to a reserve for bad debts and if the deduction is to be allowed it must be as a debt recoverable only in part and charged off in part. The Kevenue Act of 1921, which applies here, was the first revenue act containing a provision for the deduction of a partial charge-off. In section 234 (a) (5) it provided for the deduction of:
Debts ascertained to be worthless and charged off within the taxable year (or in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts) ; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged oft in part.
The petitioner claims that the $50,000 was properly deducted because a debt was recoverable only in part and was charged off in part. We agree with this contention. The Chipman Chemical Engineering Co. had borrowed $421,031.22 from the petitioner at the close of 1921. This fact was clearly shown by the evidence, which included pages from the books of the two companies. In addition, the Chipman Chemical Engineering Co. owed some money to others, the total amount of money which it thus owred was about $573,000, leaving out of consideration its liability to its stockholders as such. Its total assets at the time were not worth $573,000, and in our opinion were not worth more than $500,000, if indeed they were worth that much. One important reason for this insolvent condition was that the arsenic mine property carried on the books at about $450,000 was in reality worth only about $10,000. Vain efforts had been made to sell it for more. Other assets were worth considerably less than the amount at which they were carried on the books of the company. If the company had been allowed to discontinue business, much of its equipment would have been even less valuable. The officers of the petitioner, hoping to salvage some part of their company’s investment in the Chipman Chemical Engineering Co., continued to advance it money even after the taxable year. But at the close of 1921 they believed that they would have a loss of at least $50,000 on the money they had already advanced. We believe they were justified in this belief and that their debt was recoverable only in part. Holmes Ives, 5 B. T. A. 934; Lamb Lumber & Implement Co., 6 B. T. A. *604429. The deficiency should be recomputed allowing the deduction of $50,000.
The Commissioner in his brief claims that, of the money advanced, much went as consideration for stock. We think, however, that the cost, if any, of the petitioner’s stock in the Chemical Co. must be computed without including any part of the money advanced by the petitioner as loans to the Chemical Co. We have here no question of gain or loss on the stock and we need not further consider that phase of the case.
The petitioner, however, contends that it should have charged off and is now entitled to charge off more than $50,000, to wit, $144,000, either on account of a debt recoverable only in part or as a reasonable addition to a reserve. Neither the facts nor the law would, in our opinion, justify or permit a larger deduction than $50,000.
Judgment will he entered under Rule 50. |
4,489,801 | 2020-01-17 22:02:02.303082+00 | Muedock | null | *606OPINION.
Muedock:
The petitioner claims he sustained a loss of $3,274.63 upon the sale by him of the Iowa Central and the Minneapolis & St. Louis bonds for the Auxiliary Realty Co. The Commissioner, in his deficiency notice, does not refer to this loss, but merely states that the report of an internal revenue agent has been reviewed and approved. In this report an alleged loss of $3,195 was disallowed. It related to the bonds and the transactions now in question. • The report contained a statement that the transaction appeared to be colorable, for the reason that the company was owned entirely by the taxpayer, was used by him for a convenience, and was not authorized to deal or speculate in stocks or bonds. Counsel for the respondent made no statement before the taking of testimony, but from his statements during the course of the trial and his argument and brief thereafter, it appears that his principal reason for objecting to the allowance of the alleged loss deduction is that the transaction was colorable, due to the petitioner’s ownership of stock in the corporation and his control of the corporation. The petitioner offered proof of the fact that the corporation was authorized to buy and sell bonds, that it was a corporation, and that the petitioner owned 51 per cent of its stock in his own name and held the remainder as trustee for beneficiaries whose identity is not disclosed by the record. He admitted that he had used the Auxiliary Realty Co. for his own convenience and for the convenience of his business, and stated that that was the reason he had had it incorporated many years ago. Neither the respondent nor any of those acting under him have ever contended that the *607price received by the petitioner was other than the fair market value of the bonds at the time this transaction took place. The petitioner offered no proof on this point and, under the circumstances, we will not question the genuineness of the transaction merely because we do know how the amount of $1,515 compared with the fair market value of these bonds on November 30, 1923.
Ordinarily, where an individual sells securities to a corporation at less than the cost of the securities, the sale establishes the amount of the individual’s loss for income-tax purposes. It has been shown in this case that the petitioner sold his securities to a corporation for less than those securities cost him. Why then should he not have a deduction for a loss ? The respondent says he should not have it because the transaction was colorable, but what was there about the transaction to indicate that it was not genuine? The petitioner was the only witness and he testified quite frankly in regard to all matters about which opposing counsel questioned him. He stated that he owned 51 per cent of the stock of the corporation in his own name and that he owned the remainder of the stock as trustee, but neither counsel inquired as to who the beneficiaries of the trust were. The petitioner admitted that he did what he did in order to take a loss on his income-tax return, but of course it is not reprehensible to take lawful steps which will entitle one to a loss on one’s income-tax return. It may well be that the petitioner was in a position, due to his control of the corporation, to commit a fraud on the Government in order to take an unsustained loss on securities, but there is no evidence to indicate that any of his acts lack genuineness. We therefore hold that the Commissioner erred in disallowing a loss in the amount of $3,195.
On the second issue, our judgment is for the respondent who determined that the petitioner sold the first two lots of Market Street Railway bonds which he bought. The profit on these bonds should be computed as follows:
[[Image here]]
The petitioner contends that he did not sell the first two lots of these bonds but, on the contrary, sold the last lot purchased by him and one of the other two lots. However, he failed to prove that such was the case. As a matter of fact, we do not know7 what particular bonds he sold and perhaps no one knows, since the petitioner never had possession of any particular bonds and there is nothing to show what bonds the broker held or what bonds the broker sold. *608In the case of sales of stock which are not identified, we have approved the Commissioner’s determination that it will be deemed that the vendor first sells or disposes of those shares which he first acquired. George W. Megeath, 5 B. T. A. 1274. This same rule has been laid down bj^ the District Court for the Southern District of New York in Towne v. McElligot, 274 Fed. 960, and more recently by the United States District Court for the District of Connecticut in Executors of Skinner v. Eaton, 34 Fed. (2d) 576. We think that for the sake of uniformity and for lack of a better rule, the same rule should apply here in regard to the sale of unidentified bonds.
Judgment will be entered under Rule 50. |
4,654,813 | 2021-01-27 01:00:40.562432+00 | null | http://www.ca5.uscourts.gov/opinions/unpub/20/20-20080.0.pdf | Case: 20-20080 Document: 00515721095 Page: 1 Date Filed: 01/26/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 26, 2021
No. 20-20080
Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Jacob Nash,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CR-652
Before Owen, Chief Judge, and Graves and Ho, Circuit Judges.
Per Curiam:*
Jacob Nash pleaded guilty to possession of a firearm by a felon and was
sentenced to 42 months’ imprisonment and three years of supervised release.
On appeal, he challenges two conditions of his supervised release. He
complains that the court’s verbal articulation of one of the conditions during
his sentencing hearing differed from what appeared in the court’s written
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-20080 Document: 00515721095 Page: 2 Date Filed: 01/26/2021
No. 20-20080
judgment. He further complains that another condition was not spelled out
by the judge in person during sentencing at all and appeared only in the
written judgment. We affirm on the ground that the district court verbally
adopted both conditions by reference to the written appendix of his
presentence investigation report, and that such verbal adoption was sufficient
under our precedents.
I.
Nash pleaded guilty without a plea agreement to being a felon in
possession of a firearm in violation of 18 U.S.C. §§ 922(g)(1) and 924(a)(2).
In addition to the mandatory and standard conditions of supervised release,
his presentence investigation report (“PSR”) recommended several special
conditions of supervised release relating to “Substance Abuse Treatment,
Testing, and Abstinence” and “Mental Health Treatment.” These
recommendations appear in the PSR’s appendix and were included in the
district court’s written judgment. With respect to the “Mental Health
Treatment” category, the district court directed Nash to “participate in a
mental health treatment program and follow the rules and regulations of that
program” and to “pay the cost of the program, if financially able.” In
addition, Nash was required to “take all mental-health medications that are
prescribed by [his] treating physician” and to “pay the costs of the
medication, if financially able.”
At sentencing, Nash acknowledged that he had reviewed the PSR with
his counsel and had no objections to any of the conditions of supervised
release found in the appendix. 1 The district court subsequently “adopt[ed]
1
Nash’s counsel objected to only one paragraph of the PSR describing the
circumstances of Nash’s apprehension for the underlying offense, but the district court
noted—and Nash’s counsel agreed—that neither the objection nor any ruling on it would
affect the judge’s sentencing decision.
2
Case: 20-20080 Document: 00515721095 Page: 3 Date Filed: 01/26/2021
No. 20-20080
the factual findings and guideline applications in the presentence
investigation report” and sentenced Nash to a 42-month term of
imprisonment, followed by a three-year term of supervised release. In his
oral pronouncement, the judge also enumerated the special conditions found
in the appendix. However, he added that the required mental health
treatment program would have “an emphasis on gambling”—an emphasis
that was not expressed in the PSR or the written judgment—and did not
expressly announce the requirement that Nash take the mental health
medications his physician prescribed.
Nash timely appealed, contending that the mental health treatment
and medication conditions found in the written judgment conflict with those
pronounced orally at sentencing and must therefore be stricken from the
written judgment.
II.
Under the Due Process Clause of the Fifth Amendment, a defendant
has the right to be present at sentencing. United States v. Diggles,
957 F.3d 551
, 557 (5th Cir. 2020) (en banc), cert. denied,
2020 WL 6551832
(U.S. Nov.
9, 2020) (No. 20-5836). To satisfy this right, the district court must orally
pronounce a defendant’s sentence.
Id. at 556–57
(citing United States v.
Martinez,
250 F.3d 941
, 942 (5th Cir. 2001) (per curiam)). As a result,
“[i]ncluding a sentence in the written judgment that the judge never
mentioned when the defendant was in the courtroom is ‘tantamount to
sentencing the defendant in absentia.’”
Id. at 557
(quoting United States v.
Weathers,
631 F.3d 560
, 562 (D.C. Cir. 2011)). Therefore, if the oral
pronouncement at sentencing conflicts with the written judgment, the oral
pronouncement must control. United States v. Grogan,
977 F.3d 348
, 352 (5th
Cir. 2020). Nash contends that two conditions in his written judgment
conflict with his orally pronounced sentence.
3
Case: 20-20080 Document: 00515721095 Page: 4 Date Filed: 01/26/2021
No. 20-20080
We must first determine the appropriate standard that governs
Nash’s claims. For a defendant’s objection to a condition of supervised
release raised for the first time on appeal, the governing standard depends on
whether the defendant had the opportunity to object before the district court.
Id. (citing Diggles, 957
F.3d at 559–60). If the defendant had the opportunity
at sentencing and failed to do so, we review only for plain error, and thus
require the defendant “to show an obvious error that impacted his substantial
rights and seriously affected the fairness, integrity, or reputation of judicial
proceedings.”
Diggles, 957 F.3d at 559
. If the defendant had no opportunity
to object, we review for abuse of discretion.
Id. (citing United States
v.
Bigelow,
462 F.3d 378
, 381 (5th Cir. 2006)); United States v. Rivas-Estrada,
906 F.3d 346
, 348 (5th Cir. 2018).
Nash argues that we must review for abuse of discretion because the
district court did not orally pronounce the challenged special conditions that
appear in the written judgment. He further contends that, because the oral
pronouncement must control when it diverges from the written judgment,
we must vacate and remand. The Government maintains that plain error
review applies because the district court adopted the PSR, including the
appendix, at the sentencing hearing, and therefore Nash had an opportunity
to object. The government further contends that the mental health treatment
program requirement included in the appendix does not conflict with the oral
pronouncement, and that the appendix included the prescribed mental health
medication requirement. Nash would therefore fail at the first prong of plain
error review because there would be no error at all, let alone a clear and
obvious one. See
Diggles, 957 F.3d at 560
.
Under Diggles, we must decide whether the special conditions are
“required or discretionary under the supervised release statute.”
Id. at 559.
That is because a sentencing court must orally pronounce discretionary
conditions of supervised release.
Id. at 563.
The government concedes that
4
Case: 20-20080 Document: 00515721095 Page: 5 Date Filed: 01/26/2021
No. 20-20080
the special conditions at issue here are discretionary and had to be
pronounced at sentencing.
We next examine the district court’s pronouncement of the special
conditions. The oral pronouncement requirement does not demand a
“word-for-word recitation of each condition.”
Id. at 562.
Instead, the
conditions can be enumerated in the PSR, “the centerpiece of sentencing,”
and the sentencing court can pronounce the special conditions by orally
adopting in full the PSR in which they are listed.
Grogan, 977 F.3d at 352
(citing
Diggles, 957 F.3d at 560
). In fact, this method of adopting written
recommendations works to the defendant’s advantage as it “affords earlier
notice than when a defendant hears conditions for the first time when the
judge announces them.”
Diggles, 957 F.3d at 561
(citing United States v.
Lewis,
823 F.3d 1075
, 1082 (7th Cir. 2016) (asserting that “[t]here were no
surprises in the sentencing hearing related to supervised release” when the
court adopted the conditions recommended in the PSR)).
In Grogan, for example, the defendant received the PSR before
sentencing, reviewed it with his attorney, and made no objection when it was
adopted “in
full.” 977 F.3d at 351
–53. We held that Diggles was satisfied
because this method gave the defendant notice of the recommended
conditions and an opportunity to object.
Id. at 352
–53.
See also United States
v. Harris,
960 F.3d 689
, 696 (5th Cir. 2020) (holding that the district court’s
adoption of the PSR in full provided notice to the defendant).
Grogan does not turn on the fact that the district court verbally
adopted the PSR “in full.” It was sufficient that the defendant there had
“notice of the recommended conditions and an opportunity to object”
because the special conditions in the PSR were set out “exactly as they
appear[ed] in the judgment”; the defendant received the PSR six weeks
before the sentencing hearing and had the opportunity to review it with his
5
Case: 20-20080 Document: 00515721095 Page: 6 Date Filed: 01/26/2021
No. 20-20080
attorney; and the defendant did not object to the recommended special
conditions in the PSR at sentencing.
Id. at 352
(citing
Diggles, 957 F.3d at 560
(“When the defendant confirms review of the PSR and sentencing goes
forward, a court’s oral adoption of PSR-recommended conditions gives the
defendant an opportunity to object.”)).
The sentencing court here “adopt[ed] the factual findings and
guideline applications in the presentence investigation report.” As in
Grogan, the special conditions Nash challenges are set out in the PSR exactly
as they appear in the written judgment. The PSR, including its appendix, was
made available to Nash and his counsel on January 10, 2020, nearly six weeks
before his sentencing hearing on February 18, 2020. Nash then confirmed
that he reviewed the PSR with his attorney, and he did not object to any of
the sentencing conditions at the sentencing hearing.
We have previously found similar language as that used by the judge
here sufficient to satisfy Diggles. United States v. Medel-Guadalupe,
979 F.3d 1019
, 1025 n.6 (5th Cir. 2020) (finding that notice of special conditions listed
in the PSR appendix was sufficient because “the district court expressly
adopted the factual findings and guideline applications of the PSR which
contained the appendix”). The district court here satisfied the oral
pronouncement requirement when the judge orally adopted at Nash’s
sentencing hearing the “factual findings and guideline applications in the
presentence investigation report.”
Because Nash did not object when the district court orally adopted the
PSR’s special conditions, despite having notice and the opportunity to do so,
plain error review applies.
We find no error, plain or otherwise, because there is no disparity
between the oral pronouncement and the written judgment. The challenged
conditions were included in the appendix, Nash reviewed the special
6
Case: 20-20080 Document: 00515721095 Page: 7 Date Filed: 01/26/2021
No. 20-20080
conditions with his attorney and failed to object to them before and during
the sentencing hearing, and the district court orally adopted the PSR’s
special conditions.
Nash contends that the written treatment condition differs from the
one orally pronounced at sentencing because the oral pronouncement was
limited to mental health treatment for a gambling problem and the written
condition lacked this limitation. This argument also fails. The oral
pronouncement indicated that the required mental health treatment program
would have “an emphasis on gambling,” but the record does not support the
contention that treatment was to be limited solely to Nash’s gambling
problem. The record reflects the court’s general concern for Nash’s mental
health, including his history with “drugs, . . . gambling, . . . or . . . any of the
other things [Nash] ha[s] had problems with”; Nash “bluntly asked for any
type [of] assistance . . . that would allow him to get his life back on track”;
and he reported emotional trauma stemming from his mother’s murder.
Thus, the written treatment condition was not more burdensome or
expansive than the oral condition, which the judge did not limit strictly to
gambling. Finally, as we have explained, the treatment condition without any
reference to gambling was included in the PSR appendix, which the district
court orally adopted and to which Nash failed to object.
Accordingly, we affirm.
7 |
4,654,815 | 2021-01-27 01:00:41.224483+00 | null | http://www.ca5.uscourts.gov/opinions/unpub/19/19-40678.0.pdf | Case: 19-40678 Document: 00515720370 Page: 1 Date Filed: 01/26/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 26, 2021
No. 19-40678 Lyle W. Cayce
Clerk
Sheron Gabriel Terrell,
Petitioner—Appellant,
versus
Bobby Lumpkin, Director, Texas Department of Criminal Justice,
Correctional Institutions Division,
Respondent—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 3:16-CV-179
Before Stewart, Graves, and Higginson, Circuit Judges.
Per Curiam:*
Sheron Gabriel Terrell, Texas prisoner # 1779108, has applied for a
certificate of appealability (COA) for an appeal from the denial of his
application for a writ of habeas corpus challenging his 2012 conviction of
possession of more than one gram and less than four grams of cocaine.
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 19-40678 Document: 00515720370 Page: 2 Date Filed: 01/26/2021
No. 19-40678
Terrell must make “a substantial showing of the denial of a constitutional
right” by demonstrating “that reasonable jurists would find the district
court’s assessment of the constitutional claims debatable or wrong.” 28
U.S.C. § 2253(c)(2); see Slack v. McDaniel,
529 U.S. 473
, 483-84 (2000).
First, Terrell asserts that his rights under the Fourth Amendment
were violated. The district court held that these claims are barred under the
rule in Stone v. Powell,
428 U.S. 465
, 494 (1976). Terrell has not shown that
reasonable jurists would find that the district court’s application of Stone was
debatable or wrong. See
Slack, 529 U.S. at 484
.
Next, Terrell contends that his trial counsel rendered ineffective
assistance by failing to litigate his Fourth Amendment claims adequately; by
failing to investigate and interview certain witnesses; by failing to impeach
the testimony of the arresting officer; and by failing to request a continuance.
Terrell complains that appellate counsel failed to raise any meritorious
issues. Terrell has not shown that reasonable jurists would find that the
district court’s deference to the state court’s rejection of these ineffective-
assistance claims was debatable or wrong. See
id. Finally, Terrell complains
that the State suppressed the identity of an
officer who was at the crime scene and that it presented the false testimony
of the arresting officer, in violation of his rights to due process and
compulsory process. He has not shown that reasonable jurists would find
that the district court’s deference to the state court’s rejection of these
constitutional claims was debatable or wrong. See
Slack, 529 U.S. at 484
; see
also Miller-El v. Cockrell,
537 U.S. 322
, 336 (2003).
As Terrell fails to make the required showing for a COA on his
constitutional claims, we do not reach the question of whether the district
court erred by failing to convene an evidentiary hearing. See United States v.
2
Case: 19-40678 Document: 00515720370 Page: 3 Date Filed: 01/26/2021
No. 19-40678
Davis,
971 F.3d 524
, 534-35 (5th Cir. 2020). The request for a COA is
DENIED.
3 |
4,654,812 | 2021-01-27 01:00:40.198185+00 | null | http://www.ca5.uscourts.gov/opinions/unpub/20/20-20017.0.pdf | Case: 20-20017 Document: 00515720740 Page: 1 Date Filed: 01/26/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 26, 2021
No. 20-20017
Lyle W. Cayce
Summary Calendar
Clerk
United States of America,
Plaintiff—Appellee,
versus
Ivan Dario Obregon,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:18-CR-533-2
Before Clement, Higginson, and Engelhardt, Circuit Judges.
Per Curiam:*
Ivan Dario Obregon pleaded guilty to possessing with the intent to
distribute 100 grams or more of heroin, an offense punishable by between five
and 40 years of imprisonment. 21 U.S.C. § 841(a)(1), (b)(1)(B)(i). Finding
that Obregon was eligible to benefit from 18 U.S.C. § 3553(f)(1)’s safety valve
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-20017 Document: 00515720740 Page: 2 Date Filed: 01/26/2021
No. 20-20017
provision as amended by the First Step Act, the district court varied
downward from the applicable guidelines imprisonment range and sentenced
Obregon below the statutory minimum to a 54-month prison term.
On appeal, Obregon raises claims of procedural error relating to the
district court’s calculation of his guidelines sentencing range. The
Government argues that Obregon’s claims are barred by the appeal waiver
provision in his plea agreement.
We review de novo whether an appeal waiver bars an appeal. United
States v. Jacobs,
635 F.3d 778
, 780-81 (5th Cir. 2011). The record reflects that
Obregon’s appeal waiver was knowing and voluntary, see United States
v. McKinney,
406 F.3d 744
, 746 (5th Cir. 2005), and Obregon concedes as
much. In addition, the language of the appeal waiver applies to Obregon’s
appellate arguments. See
Jacobs, 635 F.3d at 781
. Accordingly, the appeal is
DISMISSED.
2 |
4,639,141 | 2020-12-03 15:01:48.861524+00 | null | http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CR%2020-0299%20PRPC.pdf | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
STATE OF ARIZONA, Respondent,
v.
REYNALDO GRANADO, Petitioner.
No. 1 CA-CR 20-0299 PRPC
FILED 12-3-2020
Petition for Review from the Superior Court in Maricopa County
No. CR2017-005574-001
The Honorable Dewain D. Fox, Judge
REVIEW GRANTED; RELIEF DENIED
COUNSEL
Maricopa County Attorney’s Office, Phoenix
By Shelby Nicole Fuller
Counsel for Respondent
Reynaldo Granado, Florence
Petitioner
STATE v. GRANADO
Decision of the Court
MEMORANDUM DECISION
Judge Kent E. Cattani delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge Cynthia J. Bailey joined.
C A T T A N I, Judge:
¶1 Reynaldo Granado petitions for review from the superior
court’s dismissal of his petition for post-conviction relief. For reasons that
follow, we grant review but deny relief.
¶2 In 2018, Granado pleaded guilty to sexual exploitation of a
minor, a class 2 felony, and attempted sexual exploitation of a minor, a class
3 felony, both dangerous crimes against children. Consistent with the plea
agreement, the superior court sentenced Granado to a less-than-
presumptive term of 14 years’ imprisonment, followed by lifetime
probation.
¶3 Representing himself, Granado timely filed a notice of post-
conviction relief. He argued that (1) the search warrant underlying the
evidence against him was defective (which, he asserted, undermined other
aspects of the case that relied on such evidence, including the indictment,
the superior court’s authority, and the sentence imposed) and (2) because a
plea agreement is a contract, and thus civil in nature, his criminal defense
attorney was not qualified to provide advice related to the plea, resulting
in ineffective assistance of counsel. The superior court summarily
dismissed the petition.
¶4 Granado petitioned for review, asserting grounds for relief
based on ineffective assistance of counsel. We review the superior court’s
ruling on a petition for post-conviction relief for an abuse of discretion.
State v. Bennett,
213 Ariz. 562
, 566, ¶ 17 (2006). To state a colorable claim of
ineffective assistance of counsel, a defendant must show that counsel’s
performance fell below objectively reasonable standards and that the
deficient performance prejudiced the defendant. Strickland v. Washington,
466 U.S. 668
, 687–88 (1984). To show deficient performance relating to plea
negotiations, the defendant must provide specific factual allegations, not
just conclusory assertions, to show that counsel “(1) gave erroneous advice
or (2) failed to give information necessary to allow the petitioner to make
2
STATE v. GRANADO
Decision of the Court
an informed decision whether to accept the plea.” State v. Donald,
198 Ariz. 406
, 413, ¶¶ 16–17 (App. 2000).
¶5 Here, Granado failed to state a colorable claim of ineffective
assistance of counsel. Although he argues that he should have been advised
by an attorney who practices civil law, he failed to cite any authority—and
we are aware of none—for the proposition that criminal defense attorneys
are not authorized or not qualified to advise clients with regard to plea
agreements. Nor did Granado provide any factual allegations relating to
counsel’s advice or any allegation of resulting prejudice. And to the extent
Granado argues that counsel’s area of practice rendered his plea
involuntary, the superior court questioned Granado in accordance with
Boykin v. Alabama,
395 U.S. 238
(1969), and his responses to those questions
support the finding that he entered into the plea knowingly and
voluntarily. State v. Hamilton,
142 Ariz. 91
, 93 (1984).
¶6 Granado also asserts that his counsel was ineffective for
failing to challenge the search warrant, causing fundamental error. But by
pleading guilty, Granado waived any challenge to the validity of the search
warrant or to counsel’s decision not to contest the warrant’s validity. See
State v. Banda,
232 Ariz. 582
, 585, ¶ 12 (App. 2013); see also Tollett v.
Henderson,
411 U.S. 258
, 267 (1973); State v. Smith,
184 Ariz. 456
, 459 (1996).
¶7 Accordingly, we grant review but deny relief.
AMY M. WOOD • Clerk of the Court
FILED: AA
3 |
4,599,119 | 2020-11-20 19:22:42.564498+00 | null | null | Ramon Corporation v. Commissioner.
Ramon Corp. v. Commissioner
Docket No. 9288.
United States Tax Court
1947 Tax Ct. Memo LEXIS 163; 6 T.C.M. (CCH) 732; T.C.M. (RIA) 47179;
June 26, 1947
*163 Held, petitioner corporation realized no gain by the distribution in kind of certain of its assets in partial liquidation.
Alexander B. Siegel, Esq., 25 Broad St., New York, N. Y., for the petitioner. Albert H. Monacelli, Esq., for the respondent.
ARUNDELL
Memorandum Findings of Fact and Opinion
Respondent determined a deficiency of $21,210.25 in petitioner's income tax for 1943. The question is whether petitioner realized any gain as a result of the distribution of certain of its assets to its stockholder in exchange for shares of its own stock which were promptly cancelled and retired.
Findings of Fact
Petitioner is a corporation organized under the laws of Delaware with principal office at Ridgewood, New Jersey. Its*164 tax return for the year involved was filed with the collector for the fifth district of New Jersey. Petitioner is a personal holding company.
Petitioner's authorized capital stock, as indicated by its certificate of incorporation filed with the Secretary of State, Delaware, on March 10, 1925, consisted of 5,000 shares of Class A common stock and 30,000 shares Class B common stock, all of the par value of $100 a share a total of $3,500,000. The only difference between the A and B stock was that the A stock had voting rights and the B stock did not.
On December 13, 1943, all of petitioner's outstanding stock, consisting of 1,346.40 shares of Class A and 8,077.85 shares of Class B, was owned by Carl H. Pforzheimer.
On December 8, 1943, Pforzheimer signed a formal consent to the reduction of capital of Ramon Corporation. The instrument provided that Pforzheimer -
"hereby consents in writing to the reduction of capital of this Corporation from Nine Hundred Forty-Two Thousand Four Hundred Twenty-Five Dollars ($942,425), composed of One Thousand Three Hundred Forty-Six and 40/100 (1,346.40) shares of Class A Stock of the par value of One Hundred Dollars ( $100) each and Eight Thousand*165 Seventy-Seven and 85/100 (8.077.85) shares of Class B Stock of the par value of One Hundred Dollars ( $100) each to Eight Hundred Twenty-Four Thousand Six Hundred Twenty-Two Dollars ($824,622), to be composed of One Thousand Three Hundred Forty-Six and 40/100 (1,346.40) shares of Class A stock of the par value of One Hundred Dollars ( $100) each and Six Thousand Eight Hundred Ninety-Nine and 82/100 (6,899.82) shares of Class B Stock of the par value of One Hundred Dollars ( $100) each, and further consents that such reduction of the capital of the Corporation may be effected through the retirement by purchase at private sale of One Thousand One Hundred Seventy-Eight and 3/100 (1,178.03) shares of Class B Stock of the par value of One Hundred Dollars ( $100) each at a price or prices payable chiefly in securities owned by the Corporation to be delivered in kind, the value of which shall not exceed the ratable share of the assets of the Corporation which would be applicable to said shares of stock in the event of its immediate dissolution and in any event shall not exceed the par value thereof and by the charge against the capital of the Corporation of the par value thereof."
On December 9, 1943, a*166 certificate of reduction of petitioner's capital, containing provisions practically identical with those of the formal consent set out above, was duly executed by petitioner's officers and filed in the office of the Secretary of State of Delaware on December 10, 1943. The certificate was published in the Wilmington Morning News on December 13, 20, and 27, 1943.
On December 13, 1943, a special meeting of the petitioner's board of directors was held at which, in addition to the transaction of certain other business, it was decided to deliver to Pforzheimer certain of petitioner's assets consisting of 500 shares of American and Foreign Power Second Preferred, 500 shares of American and Foreign Power $7 Preferred, 300 shares of J. I. Case, and 1,200 shares of Creole Petroleum Corporation, upon the surrender by him for cancellation of 1,178.03 of his Class B stock in petitioner, the par value of the shares to be charged against the capital of petitioner. It was further decided that an amendment should be filed to petitioner's certificate of incorporation reducing its authorized capital stock from $3,500,000 to $839,900, consisting of 1,399 shares of Class A stock and 7,000 shares of Class*167 B stock, all of $100 par.
On the same day, a stockholders' meeting of the petitioner was held, at which the amendment to the certificate of incorporation recommended by the board of directors was approved. Thereupon, a "Certificate of Amendment of Certificate of Incorporation" of the petitioner was executed and filed in the office of the Secretary of State, Delaware, on December, 14, 1943.
On or about December 13, 1943, petitioner delivered to Pforzheimer the 500 shares of American and Foreign Power Second Preferred, 500 shares of American and Foreign Power $7 Preferred, 300 shares [of] J. I. Case, 1,200 shares of Creole Petroleum Corporation, together with a written instrument reciting that petitioner -
"in consideration of the surrender to it in complete cancellation by CARL H. PFORZHEIMER, holder of record thereof, of One Thousand One Hundred Seventy-Eight and 03/100 (1,178.03) shares of the Class B Stock of Ramon Corporation, hereby assigns, transfers and delivers and distributes to said Carl H. Pforzheimer in partial liquidation and in exchange for the cancellation of said One Thousand One Hundred Seventy-Eight and 03/100 (1,178.03) shares of Class B Stock of Ramon Corporation*168 all those certain securities owned by it, said Ramon Corporation, and listed and enumerated on the annexed Schedule A, plus the sum of Three Hundred Twenty-Eight Dollars ( $328) in cash, hereby acknowledging the surrender by Carl H. Pforzheimer and the complete cancellation of the aforesaid One Thousand One Hundred Seventy-Eight and 03/100 (1,178.03) shares of Class B Stock."
On the same day, Pforzheimer delivered to petitioner his certificate for 1,178.03 shares of petitioner's Class B stock, and petitioner promptly cancelled and retired the stock, making appropriate charges therefor to its capital account.
The securities transferred by petitioner to Pforzheimer were acquired by petitioner in the period from January 1931 to June 1940 at an aggregate cost of $23,700, and on December 13, 1943, had an aggregate fair market value of $117,475.
In his return for 1943 Pforzheimer reported his gain on the partial liquidation. Some time after receiving these securities, on a split-up of the 300 shares of J. I. Case, Pforzheimer received 1,200 shares. Both classes of American and Foreign Power stock and the J. I. Case stock were sold by Pforzheimer in October, November and December 1944. *169 He sold 100 shares of Creole stock in May 1945 and the remaining 1,100 shares of that stock in 1946.
Respondent determined that petitioner realized a gain on the transaction in question, measured by the difference between petitioner's cost and the fair market value of the securities on the date distributed to Pforzheimer.
Opinion
ARUNDELL, Judge: Both in form and in substance the transaction here in question was a distribution in partial liquidation within the meaning of sections 115 (c) and (i) of the Internal Revenue Code. It is settled that a corporation realizes no gain upon the distribution of its assets in kind as an ordinary dividend. General Utilities & Operating Co. v. Helvering, 296 U.S. 200">296 U.S. 200, First State Bank of Stratford, 8 T.C. 831">8 T.C. 831 (No. 92). We see no reason, and none has been suggested, why the result should be any different in the case of a liquidating dividend. Indeed, the Commissioner's Regulations (111, sec. 29.22 (a)-20) provide that -
"No gain or loss is realized by a corporation from the mere distribution of its assets in kind in partial or complete liquidation, however they may have appreciated or depreciated in value since their*170 acquisition."
We agree with the petitioner that Lencard Corporation, 47 B.T.A., is practically on all fours with the instant case. Although the respondent acquiesced in that decision, 2 C.B. 12">1942-2 C.B. 12, on brief, he has not even mentioned the case or made any attempt to distinguish it. The arguments which he makes here, however, to the effect that the transaction was a sale of assets by the petitioner, were much the same as the arguments which he made in that case and which we rejected. Likewise, he is here relying on many of the same cases which he cited there and which we distinguished. On the authority of that case, therefore, we hold that the petitioner realized no gain from the transaction in question.
Decision will be entered for the petitioner. |
4,654,814 | 2021-01-27 01:00:40.900172+00 | null | http://www.ca5.uscourts.gov/opinions/unpub/20/20-20054.0.pdf | Case: 20-20054 Document: 00515721030 Page: 1 Date Filed: 01/26/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 26, 2021
No. 20-20054
Lyle W. Cayce
Conference Calendar Clerk
United States of America,
Plaintiff—Appellee,
versus
Frank Chaney,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:18-CR-672-3
Before Davis, Elrod, and Oldham, Circuit Judges.
Per Curiam:*
The attorney appointed to represent Frank Chaney has moved for
leave to withdraw and has filed a brief in accordance with Anders v. California,
386 U.S. 738
(1967), and United States v. Flores,
632 F.3d 229
(5th Cir. 2011).
Chaney has filed a response. To the extent Chaney raises a claim of
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-20054 Document: 00515721030 Page: 2 Date Filed: 01/26/2021
No. 20-20054
ineffective assistance of counsel, the record is not sufficiently developed to
allow us to make a fair evaluation of the claim; we therefore decline to
consider it without prejudice to collateral review. See United States v. Isgar,
739 F.3d 829
, 841 (5th Cir. 2014).
We have reviewed counsel’s brief and the relevant portions of the
record reflected therein, as well as Chaney’s response. We concur with
counsel’s assessment that the appeal presents no nonfrivolous issue for
appellate review. Accordingly, counsel’s motion for leave to withdraw is
GRANTED, counsel is excused from further responsibilities herein, and
the appeal is DISMISSED. See 5th Cir. R. 42.2. To the extent Chaney
moves for the appointment of substitute counsel, the motion is DENIED.
See United States v. Wagner,
158 F.3d 901
, 902-03 (5th Cir. 1998).
2 |
4,639,121 | 2020-12-03 07:15:38.51429+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=10848&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa08%5cOpinion | COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
MARY LOU NAVA, as next friend of §
ANGELA NAVA, a person with total No. 08-20-00049-CV
mental incapacity, §
Appeal from the
Appellant, §
41st District Court
v. §
of El Paso County, Texas
REVERSE MORTGAGE SOLUTIONS, INC. §
(TC# 2019-DCV-0910)
Appellee. §
MEMORANDUM OPINION
Appellant Mary Lou Nava, as Next Friend of Angela Nava (Nava”) brought this action for
declaratory judgment and damages under the Texas Deceptive Trade Practices Act against
Appellee Reverse Mortgage Solutions, Inc. (“RMS”).1 RMS filed a no-evidence and traditional
motion for summary judgment below which the trial court granted and which Nava now challenges
on appeal. Finding that the trial court properly dismissed the case, we affirm the judgment below.
I. BACKGROUND
A. Factual Background
On February 20, 2014, Angela Nava executed a promissory note in the amount of $157,500
1
Nava also brought a claim to set aside what was claimed to be an arbitration clause but did not raise that claim on
appeal.
1
payable to Cherry Creek Mortgage Co., Inc.2 She secured payment of the note with a deed of trust
on property located at Montecito Road in El Paso. Under the terms of that deed of trust, the note
became payable in full if Nava ceased to occupy that property for a period of more than twelve
consecutive months without the written consent of the lender. On February 25, 2014, RMS began
to service the note.
Nava defaulted on the note by failing to occupy the premises for over a year without the
lender’s prior consent. RMS instituted foreclosure proceedings under TEX.R.CIV.P. 736. On
March 13, 2019, Nava instituted this action, seeking a declaratory judgment and monetary
damages.
On May 23, 2019, RMS served discovery upon Nava, including requests for admissions.
Nava failed to answer the requested admissions on a timely basis, nor did she move to set aside
the deemed admissions. Therefore, Nava admitted: (1) that she signed the note and the deed of
trust; (2) that she ceased to occupy the property for a period of longer than 12 months without prior
approval from the lender, which thereby caused the note to become due; and (3) that RMS has
funded $52,000 under the note and the balance due on the note is $57,354.59.
RMS moved for both traditional and no-evidence summary judgment. Nava replied to
these motions but offered no evidence in support of the response. On November 19, 2019, the trial
court granted both motions Nava filed a motion for reconsideration and motion for new trial, but
again offered no evidence in support of that motion. On January 13, 2020, the trial court entered
a final summary judgment and an order denying the motion for new trial.
2
For purposes of this appeal, we will refer to Mary Lou Nava and Angela Nava collectively as Nava since the action
is brought in the capacity of a next friend.
2
II. STANDARD OF REVIEW
We review a summary judgment under the de novo standard of review. Ortiz v. State Farm
Lloyds,
589 S.W.3d 127
, 131 (Tex. 2019); Murray v. Nabors Well Service, No. 08-18-00187-CV,
2020 WL 401837
, at *3 (Tex.App.--El Paso Jan. 24, 2020, no pet.). The court examines the
evidence in the light most favorable to the nonmovant and indulges all reasonable inferences
against the motion. Scripps NP Operating, LLC v. Carter,
573 S.W.3d 781
, 790 (Tex. 2019);
Herrera v. Resignato, No. 08-17-00254-CV,
2020 WL 2186467
, at *3 (Tex.App.--El Paso May 6,
2020, no pet.).
When we review a hybrid motion for summary judgment (combining the no-evidence
motion with a traditional motion), as we do here, we first consider the no-evidence motion before
the traditional motion. Community Health Systems Professional Services Corp. v. Hansen,
525 S.W.3d 671
, 680 (Tex. 2017); Harrison v. Rosetta Resources Operating LP,
564 S.W.3d 68
, 72
(Tex.App.--El Paso 2018, no pet). The de novo standard of review applies to both no-evidence
and traditional motions.
Id.
III. DISCUSSION
At trial, Nava raised two claims for relief: (1) she sought a judicial declaration that the
contracts she entered were void because of her lack of capacity; and (2) she brought claims under
the Texas Deceptive Trade Practices Act. Nava raises a single issue on appeal: whether the trial
court erred in resolving the issue of her mental status in granting the traditional and no-evidence
summary judgment motions. Below, we examine the two motions to resolve this claim.
3
A. The No-Evidence Summary Judgment Motion
In its no-evidence motion, RMS sought summary judgment on the basis that there was no
evidence of Nava’s incapacity to sign the note or deed of trust and no evidence of a DTPA
violation. Once a party moves for summary judgment under TEX.R.CIV.P. 166(a)(i), the burden
shifts to the nonmovant to present competent evidence raising a material issue of fact regarding
the challenged issue. Painter v. Amerimex Drilling I, Ltd.,
561 S.W.3d 125
, 130 (Tex. 2018);
Merriman v. XTO Energy, Inc.,
407 S.W.3d 244
, 248 (Tex. 2013); Fred Loya Insurance Agency,
Inc. v. Cohen,
446 S.W.3d 913
, 918 (Tex.App.--El Paso 2014, pet. denied).
In response to the motion, Nava filed no evidence whatsoever of her incompetence. While
she pled that she suffered from Alzheimer’s Disease and repeated the allegation in her response
to the summary judgment, she failed to offer any competent evidence of her incapacity. Texas law
presumes that a person who signs a contractual agreement has read and understood the agreement.
In re Longoria,
470 S.W.3d 616
, 632 (Tex.App.--Houston [14th Dist.] 2015, no pet.); see In re
International Profit Associates., Inc.,
286 S.W.3d 921
, 923 (Tex. 2009); Ridge Natural Resources,
L.L.C. v. Double Eagle Royalty, L.P.,
564 S.W.3d 105
, 118 (Tex.App.--El Paso, 2018, no pet.).
“Absent proof and determination of mental incapacity, a person who executes a document is
presumed to have read and understood it.” Turner v. Hendon,
269 S.W.3d 243
, 247-48 (Tex.App.-
-El Paso 2008, pet. denied), quoting Dubree v. Blackwell,
67 S.W.3d 286
, 289 (Tex.App.--
Amarillo 2001, no pet.).
Even if we were to assume that Nava suffered from Alzheimer’s or dementia at the time of
the loan (a fact not borne out by the evidence), this record contains nothing to suggest the disease
had progressed to the point where she lacked capacity to contract. As Nava concedes, “[t]he
summary judgment record is devoid of actual medical evidence on the mental status of Nava on
4
February 20, 2014.” In response to a no-evidence motion, Nava carried the burden of producing
such evidence. In the absence of competent evidence overcoming the presumption of her
incapacity at the time she signed the note and deed of trust, Texas law assumes that Nava was
competent.3 She offered none, and we find no error in the court’s judgment.
RMS also moved for summary judgment on the claims under the Texas Deceptive Trade
Practices Act (“DTPA”). In order to recover under the DTPA, a plaintiff must establish standing
as a “consumer.” Riverside National Bank v. Lewis,
603 S.W.2d 169
, 173 (Tex. 1980); Figueroa
v. West,
902 S.W.2d 701
, 707 (Tex.App.--El Paso 1995, no writ). Under the statute, a “consumer”
must seek or acquire goods or services through a purchase or lease. TEX.BUS.& COM.CODE ANN.
§ 17.45(4). The extension of credit does not constitute a good or a service. Lewis, 603 S.W.2d at
173-75; Thomas C. Cook, Inc. v. Rowhanian,
774 S.W.2d 679
, 681 (Tex.App.--El Paso 1989, writ
denied). In the no-evidence motion, RMS challenged Nava’s status as a consumer, and Nava
offered no evidence to support her claim of such standing. We find no error in the trial court’s
ruling.
Finally, RMS moved for summary judgment on the basis that no evidence supported the
conclusion that it caused Nava’s damages. Again, Nava failed to offer any evidence in response
to the motion, and the trial court did not err in granting the motion.
3
Nava attempts to rely on her own interrogatory answers, filed by RMS in conjunction with its traditional motion. In
those answers she states: “Angela was not I [sic] the full mental state capacity to know or understand what she was
signing.” She undercuts this evidence, however, noting she cannot testify as to her mother’s condition on the day the
documents were signed: “I don’t know. I was not there.” In any event, we consider the no-evidence motion first, and
she filed no evidence in response to that motion. Secondly, a party cannot rely upon their own interrogatory answers
to defeat a summary judgment motion. TEX.R.CIV.P. 197.3. Yates v. Fisher,
988 S.W.2d 730
(Tex. 1998) (construing
former rule 168(2)); Zarzosa v. Flynn,
266 S.W.3d 614
, 621 (Tex.App.--El Paso, 2008, no pet.).
5
B. The Traditional Motion
RMS also filed a traditional motion for summary judgment challenging the absence of
consumer standing. We have dealt with that issue above; however, we affirm that ruling on the
traditional motion as well.
RMS further sought summary judgment, claiming Nava’s DTPA suit was barred by the
statute of limitations. The statute contains a two-year limitations period. TEX.BUS.& COM.CODE
ANN. § 17.565. That period begins to run on the date of the deceptive act or practice, or within
two years of the time the deceptive act or practice could have been discovered with reasonable
diligence. Nava’s claims allegedly arise from the origination of the loan, which the summary
judgment evidence established was February 20, 2014. Nava did not file this suit until March 13,
2019, more than five years after the alleged deceptive acts. She neither pled nor proved any basis
for the application of the discovery rule. The summary judgment based upon the statute of
limitations was therefore proper.
IV. CONCLUSION
For the reasons noted, we affirm the judgment.
JEFF ALLEY, Chief Justice
November 30, 2020
Before Alley, C.J., Rodriguez, and Palafox, JJ.
6 |
4,639,123 | 2020-12-03 07:15:39.062418+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=10851&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa08%5cOpinion | §
DANBILL PARTNERS, L.P.,
No. 08-19-00139-CV
§
Appellant,
Appeal from the
§
v.
448th District Court
§
SAUL SANDOVAL AND VERONICA
of El Paso County, Texas
SANDOVAL,
§
(TC# 2019DCV0377)
Appellees.
§
OPINION
Appellant, Danbill Partners, L.P., brings this appeal after the trial court enjoined them from
foreclosing on a property whose rightful ownership is disputed. Appellees, Saul and Veronica
Sandoval, brought a trespass to try title claim on the property, their primary home, they named
Vanessa Maese, from whom they purchased the property, and Appellant, as a lienholder of the
property. Appellant subsequently initiated foreclosure proceedings against Maese, to whom it sold
the property some years earlier and who allegedly still owed money under a previous note, which
was secured by the property. Following a hearing, the trial court granted a temporary injunction in
Appellees’ favor, which prohibited Appellant from foreclosing pending the outcome of a trial on
the merits. This appeal followed.
BACKGROUND
Factual Background
Appellees’ property is in Fabens, Texas, in El Paso County (the Property). The Appellees
contracted with Vanessa Maese to purchase the Property on November 4, 2013. The Appellees
believed they were purchasing the Property in fee simple. The Appellees were subsequently
informed Maese owed money on the Property under a note to Appellant. Accordingly, Appellees
made payments on their note with Maese directly to Appellant.
On August 2, 2018, Appellees requested a payoff amount from Maese to refinance any
amounts still owed to Appellant. The payoff Maese provided to Appellees included a ten percent
prepayment penalty. Then Appellees requested a payoff directly from Appellant who refused to
provide it. As a result, Appellees filed the instant lawsuit seeking to quiet title on the Property, and
other claims related to their contract with Maese.
In their petition, Appellees allege a claim for trespass to try title against Maese and
Appellant, arguing they performed their obligations under their contract with Maese. They also
seek declaratory relief under the Texas Uniform Declaratory Judgment Act, asking the trial court
to declare the contract between the Appellees and Maese valid and enforceable and request title to
the Property to be transferred to them from Maese. They also assert breach of contract, quantum
meruit, estoppel, and constructive trust claims related to their contract with Maese.
Foreclosure and Application for Temporary Injunction
Following receipt of service of the Appellees’ lawsuit, Appellant filed a notice of
foreclosure and scheduled a sale of the Property on May 7, 2019. In response, Appellees filed an
application for temporary restraining order, temporary injunction, and permanent injunction on
April 23, 2019. In support, Appellees argued they never missed a payment under the terms of their
agreement with Maese and were actively trying to negotiate a payoff of the amount Maese owed
to Appellant. Appellees claimed if the foreclosure sale was not enjoined, they would be wrongfully
deprived of their homestead property, on which they had improved the value and been led to
believe was theirs in fee simple. They further argued there was no adequate remedy at law which
2
could compensate them for loss of the property through a foreclosure sale. Their application sought
preservation of the status quo until their trespass to try title suit was finalized. Appellees attached
affidavits to their application verifying the facts alleged and the harm they would suffer if the sale
was not enjoined.
In its response to Appellees’ application, Appellant alleged it was legally allowed to
foreclose on the Property because of Maese’s default on her loan with them. It argued Appellees
had an adequate remedy against Maese under the contractual claims against her, which could still
be pursued if Appellant could foreclose on the Property. Appellant argued Appellees would not be
irreparably harmed because their claims could be adequately compensated with monetary
damages. Finally, Appellant argued only a bond of $15,544.45—comprised of principal and
interest due under Maese’s note, plus attorney fees—would adequately protect Appellant if a
temporary injunction was granted.
Hearing on Application for Temporary Injunction
The hearing on both the application for temporary restraining order and temporary
injunction was held on May 1, 2019. Appellees did not attend the hearing. The trial court ruled
the application for temporary restraining order would be granted. Bond, payable by the Appellees,
was set at $500. The trial court then proceeded with the hearing on the temporary injunction.
Appellant’s first witness was Randy Bills. Bills is the manager of a company called
Allimat, which is Appellant’s general partner. Appellant manages loans on approximately seventy-
two properties. Bills testified regarding the $20,000 promissory note between Appellant and Maese
and confirmed the note contained a prepayment penalty. He testified there was no loan or other
agreement between Appellant and Appellees, and Appellant’s note for the Property was only
between Appellant and Maese. Bills testified the note retained a vendor’s lien on the Property.
3
Further, the note provided Appellant could declare the loan immediately due and payable if the
Property was transferred or sold without obtaining Appellant’s prior written consent. Bills
confirmed Appellant was unaware and did not consent to Maese’s transfer of the loan to Appellees.
However, he stated it was not uncommon for a “client” to rent out a property and instruct the renter
to pay Appellant directly.
Appellant’s Exhibit 4 contained a list of the payments received on Maese’s loan. Payments
fell behind in late 2017; the January 2018 payment was applied to the amount due for October
2017. At that point, Maese was three months past due on her loan with Appellant.
In January 2019, Appellant sent Maese a Notice of Default and Intent to Accelerate letter,
informing her that she would owe $1,421.62 in late payments and other fees by February 20, 2019.
Appellant informed Maese they would not accept partial payments of the total amount due.
Appellant testified on April 12, 2019, the property was posted for foreclosure and a notice of
acceleration was sent to both Maese and Appellees.
On cross-examination, Bills averred he was unable to monitor whether Appellant’s clients
were selling its properties to third parties while the notes owed to Appellant remained outstanding.
Bills prepares all of Appellant’s loan documents. Appellant limits the number of loans it writes
each year to comply with the Truth in Lending Act to avoid having to be licensed.
Bills, further, acknowledged Maese’s notice of acceleration was sent to the wrong address,
and accordingly, she may not have been aware of the loan acceleration. Bills also acknowledged
the tax appraisal district listed Appellees as the title owners of the Property. Bills confirmed when
Maese and Appellees executed the sale of the Property, which was then properly filed, Appellant
was put on notice of the transfer of Maese’s interest. However, Appellant did not accelerate
Maese’s note until Appellees requested a payoff amount of Maese’s loan.
4
Maese testified in 2003 she signed a loan agreement for $20,000.00 with Appellant for the
Property. She stated she did not remember whether the agreement allowed her to sell the Property,
but confirmed she never sought Appellant’s permission. When her husband died and she could not
pay the loan, she sold the Property to Appellees. Maese was “about to lose the property” and
wanted to sell it to avoid foreclosure.
Maese never received, nor had she seen, the notice of default Appellant sent for the
Property. However, she was aware the loan payments were late. She received the notice regarding
the foreclosure sale Appellant’s counsel sent her in April of 2019. Maese was aware she was still
obligated to Appellant on the note and had another loan outstanding with Appellant. Maese spoke
to Appellees regarding the late payments and paying the past due amounts. At that point, Appellees
retained an attorney to obtain the payoff amount directly from Appellant.
Maese believed Appellant knew another individual was paying on her note since Appellant
was receiving payments by someone other than Maese. Maese stated she did not give Appellant
notice of the sale of the Property.
DISCUSSION
Appellant presents two issues on appeal: 1) Did the trial court abused its discretion in
granting the temporary injunction; and 2) is the temporary injunction order defective in form and
therefore void.
Standard of Review
A trial court has broad discretion in whether to grant or deny an application for temporary
injunction. Butnaru v. Ford Motor Co.,
84 S.W.3d 198
, 204 (Tex. 2002). An order granting
injunctive relief should be reversed only where the trial court abuses its discretion.
Id.,
(citing
Walling v. Metcalfe,
863 S.W.2d 56
, 58 (Tex. 1993)). A reviewing court’s own judgment must not
5
be substituted for the judgment of the trial court except where the latter’s action was “so arbitrary
that it exceeded the bounds of reasonable discretion.”
Id.,
(citing Johnson v. Fourth Ct. of Appeals,
700 S.W.2d 916
, 918 (Tex. 1985); Davis v. Huey,
571 S.W.2d 859
, 861-62 (Tex. 1978)); see also
Tri-Star Petroleum Co. v. Tipperary Corp.,
101 S.W.3d 583
, 587 (Tex.App.--El Paso 2003, pet.
denied). Similarly, we must not resolve the merits of the underlying case. Tri-Star Petroleum Co.,
101 S.W.3d at 587
, (citing Davis v. Huey,
571 S.W.2d 859
, 861-62 (Tex.1978)). We likewise may
not reverse the trial court’s judgment where conflicting evidence was presented to the trial court
but there is sufficient evidence in the record supporting the trial court’s decision. Tri-Star
Petroleum Co.,
101 S.W.3d at 587
.
Issue One: Did the trial court abuse its discretion in granting the temporary injunction?
As the Texas Supreme Court reiterated in Butnaru, the purpose of a temporary injunction
is preservation of the status quo and is an extraordinary remedy. Butnaru, 84 S.W.3d at 204.
Obtaining a temporary injunction requires pleading and proving (1) a cause of action against the
defendant; (2) a probable right to the relief sought; and (3) irreparable injury that is both probable
and imminent if the relief is not granted. Id.
Appellant argues the trial court abused its discretion in four ways by granting the temporary
injunction which mandates reversal: (a) the Appellees failed to meet their burden of proof, in part
because they failed to put on adequate evidence; (b) Appellees failed to allege a valid cause of
action against Appellant and failed to show a probable right to relief; (c) Appellees failed to
demonstrate irreparable injury because they can seek monetary relief from Maese and have other
adequate remedies at law; and (d) the temporary injunction bond of $500 does not adequately
protect Appellant’s interests.
We find the trial court did not abuse its discretion in granting the temporary injunction.
6
(a) Does Appellees’ alleged failure to adduce further testimony or evidence
render the evidence insufficient?
Appellant correctly points out a temporary injunction may typically not issue on sworn
pleadings or affidavits alone. See, e.g., Millwrights Local Union No. 2484 v. Rust Eng'g Co.,
433 S.W.2d 683
, 686-87 (Tex. 1968). In Millwrights, the Texas Supreme Court determined the
necessity of holding a hearing on whether an injunction should be granted necessarily means the
trial court must consider, and the applying party must provide, evidence in support of its position.
Id. at 687. However, where affidavits have been offered in support of an application for temporary
injunction and the party opposing the injunction fails to object to reliance upon them, the party
may not first raise the complaint on appeal. See Burkholder v. Wilkins,
504 S.W.3d 485
, 491
(Tex.App.--Corpus Christi 2016, no pet.)(citing Ahmed v. Shimi Ventures, LP,
99 S.W.3d 682
, 684
n.2 (Tex.App.--Houston [1st Dist.] 2003, no pet.)); see also Tigua Gen. Hosp., Inc. v. Feuerberg,
645 S.W.2d 575
, 576 (Tex. App.--El Paso 1982, writ dism'd). We find it was proper for the trial
court to rely on Appellees’ affidavits attached to their temporary injunction application.
Appellant claims Appellees’ failure to testify in their own behalf at the hearing and/or offer
other witness testimony or documents beyond their contract with Maese is clear evidence they
have not satisfied their burden of proof vis à vis a temporary injunction. However, Appellant’s
argument ignores Bills’ and Maese testimony, direct and cross; numerous documents offered by
Appellants; Appellees’ affidavits and their contract with Maese.
We are not persuaded Appellees’ absence from the hearing; the lack of their testimony or
their alleged failure to offer additional witness testimony or more documents necessarily shows
they failed to carry their burden of proof. The trial court was entitled to rely on the testimony of
Bills and Maese, Appellees’ affidavits, Appellees’ contract and the additional documents included
in the record. To the extent Appellant asserts the trial court lacked any evidence to grant the
7
temporary injunction, we disagree.
Next, turning to the question of whether the Appellees carried their burden of proof, we
examine each of the three elements necessary to grant a temporary injunction.
(b) Did Appellees allege a legitimate claim against Appellant and demonstrates a
probable right to relief?
Appellant’s argument on this sub-issue is Appellant is not in privity of contract with
Appellees, and the contract claims alleged by Appellees only implicate their contract with Maese.
However, Appellant’s argument fails to address Appellees’ primary claim, their trespass to try title
against Maese and Appellant. To demonstrate a probable right to relief, a party does not have to
prove it will ultimately succeed at trial on the issue in question. See Savering v. City of Mansfield,
505 S.W.3d 33
, 39 (Tex.App.--Fort Worth 2016, pet. denied)(citing Oil Field Haulers Ass’n v.
R.R. Comm’n,
381 S.W.2d 183
, 196 (Tex. 1964)). Instead, an applicant shows its probable right to
recovery “by alleging a cause of action and presenting evidence tending to sustain it.”
Id.,
(citing
Frequent Flyer Depot., Inc. v. Am. Airlines, Inc.,
281 S.W.3d 215
, 220 (Tex.App.--Fort Worth
2009, pet. denied), cert. denied,
559 U.S. 1036
(2010)).
A trespass to try title claim is the exclusive cause of action which may be brought to
determine disputed issues of title on a piece of property. See TEX.PROP.CODE ANN. § 22.001. At
trial, to succeed on their trespass to try title claim, Appellees will have to prove, “(1) a regular
chain of title of conveyances from the sovereign to the plaintiff; (2) a superior title to that of the
defendant out of a common source; (3) title by limitations; or (4) prior possession which has not
been abandoned.” Vernon v. Perrien,
390 S.W.3d 47
, 54-55 (Tex.App.--El Paso 2012, pet. denied).
At the temporary injunction hearing, Bills testified the tax appraisal district listed Appellees
as the record owners of the Property. Maese believed the Property was hers to sell, after Appellant
had sold it to her. Maese asserted because Appellees had paid Appellant directly; Appellant was
8
aware someone other than Maese was residing on the Property. Appellant accepted Appellees’
payments without objection. Further, the contracts between Appellant and Maese, and Maese and
the Appellees, which were entered as evidence, document the chain of title of the Property.
Appellees’ affidavits averred they understood their purchase of the Property was made in fee
simple. We find the evidence is sufficient to support the trial court’s conclusion Appellees’
possessed a probable right to relief on their trespass to try title claim.
Did Appellees adequately demonstrate an irreparable injury?
Next, Appellant alleges Appellees failed to demonstrate an irreparable injury because
Appellees have adequate legal remedies against Maese and failed to present evidence supporting
their claims of irreparable injury. Appellees counter the loss of their family home, including the
improvements they have made to the home, constitute adequate evidence of damages which cannot
be adequately quantified by monetary damages.
Irreparable injury is an injury whereby an injured party cannot receive adequate
compensation in damages, or where the damage that is likely to result cannot be measured by a
typical pecuniary standard. Butnaru, 84 S.W.3d at 204; see also Gulf Oil Corp. v. Walton,
317 S.W.2d 260
, 263 (Tex.Civ.App.--El Paso 1958, no writ). Money damages may not adequately
compensate a party for loss of property if the property is “legally unique or irreplaceable.” [Internal
quotations omitted]. Burkholder v. Wilkins,
504 S.W.3d 485
, 491 (Tex.App.--Corpus Christi 2016,
no pet.). “Every piece of real estate is unique, and foreclosure can be an irreparable injury for
which there is no adequate remedy at law.”
Id.
Accordingly, it may be proper for a trial court to
grant equitable relief when real property is at the heart of the dispute. Butnaru, 84 S.W.3d at 211.
In Burkholder, the Corpus Christi Court of Appeals considered the applicant’s affidavit, in
conjunction with other evidence provided at the hearing, in determining whether the trial court had
an adequate basis on which to exercise its discretion to grant a temporary injunction halting
9
foreclosure on a piece of property. Burkholder, 504 S.W.3d at 492. The affidavit in Burkholder
gave background on a property owner’s dispute with his condominium association and
summarized his dealings with them and their attempts to foreclose on his condo. Id. It also
discussed the other evidence attached to his application. Id. The Corpus Christi court found,
Taking the affidavit together with Wilkins’s other record evidence, we conclude
that Wilkins provided the trial court with a sufficient basis upon which to exercise
its discretion. … Wilkins produced competent evidence that in the absence of an
injunction, he faced the threat of foreclosure, through which he could irrevocably
lose ownership of the bay-front real estate at issue. … It follows that by
demonstrating the likely loss of unique property, Wilkins made the requisite
showing that he faced irreparable injury for which there would be no adequate
remedy at law[.] Id. [Citations omitted].
Burholder, 504 S.W.3d at 492.
Appellant claims Appellees fail to offer any evidence regarding the property’s uniqueness
or how monetary damages would not adequately compensate Appellees for any wrongdoing
committed by Maese. However, Appellant ignores Appellees’ affidavits, which we already
determined were properly considered by the trial court in arriving at its decision to grant the
temporary injunction. In Saul Sandoval’s affidavit, he testifies regarding the impact of losing his
family’s home, describing the Property’s sentimental value to him and his family. Likewise,
Veronica Sandoval expresses a similar sentient about losing their home involuntarily.
Additionally, and like the appellee in Burkholder, both affidavits contained testimony from
Appellees, consistent with Bills’ testimony, Appellant intended to foreclose regardless of
Appellees’ willingness and ability to pay Maese’s outstanding indebtedness. Appellees’ affidavits
recounted of how they purchased the Property from Maese and their belief the purchase was made
in fee simple. We find the circumstances of the instant case analogous to those in Burkholder and
conclude Appellees have made the requisite showing that they faced an irreparable injury for which
there would be no adequate remedy at law.
10
In its reply brief, Appellant cites to In re Stark from the Beaumont Court of Appeals in
support of its contention inadequate evidence was offered by Appellees to show irreparable harm.
See In re Stark,
126 S.W.3d 635
, 640 (Tex.App.--Beaumont 2004, orig. mandamus). There, the
Beaumont Court stated the inherent uniqueness of real estate, by itself, is not enough to prove
monetary damages are inadequate compensation for the loss of a property. The Stark Court found
the realtor had not provided any evidence of the sentimental value of the disputed property and
absent that showing it was not unreasonable for the trial court to find he had an adequate remedy
at law.
Id.
Here, the uniqueness of the real property is bolstered by the uncontradicted Appellees’
sentimental value evidence of their Property. We find adequate evidence was presented to the trial
court and supports its discretion in finding Appellees had no adequate remedy at law.
Did Appellant properly preserve error on the adequacy of the $500 bond?
Appellant maintains the trial court abused its discretion in setting a $500 bond. Appellant
asserts their interests will not be adequately protected since over $11,000 is still owed under their
note with Maese, in addition to late fees and attorney fees, which continue to accrue. Appellant
contends the trial court erroneously set the bond at $500 under the faulty premise Appellees were
indigent and the Property was their homestead. In support, it cites to DeSantis v. Wackenhut Corp.,
793 S.W.2d 670
, 685-86 (Tex. 1990), which discusses a cause of action for wrongful injunction.
In bringing such a claim, a claimant must establish the injunction was issued wrongfully and it
seeks to recover on the bond set by the trial court.
Id.
“The purpose of the bond is to protect the
defendant from the harm he may sustain as a result of temporary relief granted upon the reduced
showing required of the injunction plaintiff, pending full consideration of all issues.” Id. at 686.
Appellant states because the bond is insufficient, the temporary injunction should be “reversed.”
An inadequate bond in a temporary injunction is reviewed on a case-by-case basis for an
abuse of discretion. See Khaledi v. H.K. Global Trading, Ltd.,
126 S.W.3d 273
, 286 (Tex.App.--
11
San Antonio 2003, no pet.). However, complaints regarding the sufficiency of the bond set in an
injunction cannot be raised for the first time on appeal. See
id.,
(citing Ex parte Coffee,
328 S.W.2d 283
, 292 (Tex. 1959); Matagorda County Hosp. Dist. v. City of Palacios,
47 S.W.3d 96
, 104
(Tex.App.--Corpus Christi 2001, no pet.); Speedman Oil Co. v. Duval County Ranch Co.,
504 S.W.2d 923
, 931 (Tex.Civ.App.--San Antonio 1973, writ ref'd n.r.e.); TEX.R.APP.P. 33.1). Our
review of the record before us indicates Appellant never objected to the $500 bond set by the trial
court in its verbal ruling at the hearing on the temporary injunction, or later when the order was
issued. In addition, Appellant’s brief does not cite to their objection in the trial court. Accordingly,
we find this issue has not been preserved for appeal. See Khaledi,
126 S.W.3d at 286
.
Having considered each subpart of Appellant’s first issue, we overrule its first issue and
proceed to our analysis of its second issue.
Issue Two: Is Temporary Injunction Void for Defects in Form?
Appellant’s second issue requires analysis of Rule 683 of the Texas Rules of Civil
Procedure, involving the form and scope of an injunction or restraining order. See TEX.R.CIV.P.
683. It states,
Every order granting an injunction and every restraining order shall set forth the
reasons for its issuance; shall be specific in terms; shall describe in reasonable detail
and not by reference to the complaint or other document, the act or acts sought to
be restrained; and is binding only upon the parties to the action, their officers,
agents, servants, employees, and attorneys, and upon those persons in active concert
or participation with them who receive actual notice of the order by personal service
or otherwise.
Every order granting a temporary injunction shall include an order setting the cause
for trial on the merits with respect to the ultimate relief sought. The appeal of a
temporary injunction shall constitute no cause for delay of the trial.
TEX.R.CIV.P. 683.
In its second issue, Appellant claims the temporary injunction is void for defects in form,
12
for two reasons. Appellant first contend the temporary injunction order fails to specifically state
what irreparable harm Appellees will face if the injunction was not granted; and second, the trial
court’s vacating of the trial date after the instant appeal was filed voids the injunction order because
it violates Rule 683. Appellees disagree, relying on the language in the order discussing the
imminent foreclosure on the Property as an adequate description of the imminent harm if the
injunction was not granted.
Does the temporary injunction order adequately state the irreparable harm Appellees
would suffer?
First, we address whether the temporary injunction adequately states the irreparable harm
Appellees would suffer if the temporary injunction was not granted.
The requirements set forth in Rule 683 regarding the form and contents of an order issuing
a temporary injunction are mandatory and must be followed by the trial court. Interfirst Bank San
Felipe, N.A. v. Paz Const Co..,
715 S.W.2d 640
, 641 (Tex.1986). In a temporary injunction order,
the trial court “must state in the injunction the reasons why the court deems it proper to issue the
injunction, including the reasons why the applicant will suffer injury if the injunction is not
issued.” Fasken v. Darby,
901 S.W.2d 591
, 593 (Tex.App.--El Paso 1995, no writ)(citing
Tex.R.Civ.P. 97(d)); see also State v Cook United, Inc.,
464 S.W.2d 105
, 106 (Tex. 1971). An
injunction lacking the requisite injury description is void and must be dissolved. Fasken, 901
S.W.2d at 593, (citing Moreno v. Baker Tools,
808 S.W.2d 208
, 210 (Tex.App.--Houston [1st
Dist.] 1991, no writ)).
Our sister court in Fort Worth offered the following examples where Texas courts found
the language in an injunction order satisfied the description of irreparable harm to meet the
requirements of Rule 683:
[A]n order has been held sufficient to comply with rule 683 if it states that an act is
being enjoined because the conduct ‘would alter the status quo and tend to make a
13
final judgment in favor of appellees impossible or difficult to enforce;’ and, unless
the conduct is deterred, the moving party ‘would be without adequate remedy at
law and ... the proposed construction, once completed and sold ... would materially
affect the use and enjoyment by the [moving parties] of their property ...’, … or that
the injunction preventing the conduct was necessary to protect ‘goodwill and
business’ and that the moving party ‘would be harmed unless the temporary
injunction were issued, as the status quo could not be maintained without the
injunction’, … or that the moving party ‘will probably sustain irreparable injury
and damage to its business’ if the conduct continues[.] [Emphasis added and
internal citations omitted].
Byrd Ranch, Inc. v. Interwest Sav. Ass’n,
717 S.W.2d 452
, 454-455 (Tex.App.--Fort Worth 1986,
no writ.).
Here, the injunction order includes the following language:
1. [Appellant] intends to foreclose on the Property located at 1264 Twig Street,
Fabens, Texas 79838;
2. unless this restraint is ordered immediately, [the Appellees] will suffer
irreparable injury immediately, because no other legal remedy can be obtained
and effected before the injury occurs;
. . .
4. if [Appellant’s] threatened conduct as described above is not enjoined during
the pendency of this suit, [the Appellees] will be injured because: it will disrupt
the status quo and likely render the [Appellees’] claim moot;
. . .
It is therefore ORDERED that a temporary injunction issue, operative until
judgment is entered in this cause, enjoining [Appellant] from foreclosing on the
Property[.]
The order in this case adequately states why the trial court found it proper to grant the
injunction and why Appellees will suffer injury if an injunction is not ordered; namely,
because Appellant intended to foreclose on the Property, which would disrupt the status
quo and render Appellees’ claim against Appellant moot. We find this language complies
with the strict requirements of Rule 683 and consistent with other cases which have found
the same. See Byrd Ranch, Inc., 717 S.W.2d at 454-455, (citing Fairfield v. Stonehenge
14
Ass’n Co.,
678 S.W.2d 608
, 611 (Tex.App.--Houston [14th Dist.] 1984, no writ); Martin
v. Linen Systems for Hospitals, Inc.,
671 S.W.2d 706
, 710 (Tex.App.--Houston [1st Dist.]
1984, no writ); Gillen v. Diadrill, Inc.,
624 S.W.2d 259
, 264 (Tex.App.--Corpus Christi
1981, writ dism’d)(opinion on reh’g)).
Did vacating the trial date pending appeal render the injunction order void?
Finally, Appellant argues that because the trial court vacated the trial date pending this
appeal, the order is void. In support, it cites Rule 683, which states in pertinent part, “Every order
granting a temporary injunction shall include an order setting the cause for trial on the merits with
respect to the ultimate relief sought. The appeal of a temporary injunction shall constitute no cause
for delay of the trial.” TEX.R.CIV.P. 683. Because the trial date set by the trial court in the order
was subsequently vacated, Appellant claims the temporary injunction order is void.
On May 20, 2019, when notice of this appeal was filed, the temporary injunction order
issued on May 6, 2019 contained a trial date of February 4, 2020. However, on June 12, 2019,
while this appeal was pending, the trial court entered an order vacating the trial setting “until the
decision from the Court of Appeals is rendered.” [Emphasis in orig.].
As noted above, Rule 683 states: “The appeal of a temporary injunction shall constitute no
cause for delay of the trial.” [Emphasis added]. TEX.R.CIV.P. 683. Texas case law is settled that
temporary injunctions which do not include a trial setting are void. See Qwest Communications
Corp. v. AT&T Corp.,
24 S.W.3d 334
, 337 (Tex. 2000). Therefore, Appellant argues the order is
void because the trial court abated the trial setting indefinitely pending their appeal in
contravention of Rule 683.
Our analysis begins by determining whether we have jurisdiction to review the trial court’s
order resetting the trial date until the appeal is decided and did that order modify the temporary
15
injunction. For guidance, we look to Ahmed, while the case was on appeal, the trial court entered
an order modifying the temporary injunction that was the subject of the appeal. Ahmed v. Shimi
Ventures, L.P.,
99 S.W.3d 682
, 687 (Tex.App.--Houston [1st Dist.] 2003, no pet.). There, like here,
neither party raised questions regarding the appellate jurisdiction to decide issues regarding the
modification of the temporary injunction while the case was on appeal. However, as a threshold
issue, we must address our jurisdiction to consider the trial court’s order vacating the trial date
after the temporary injunction order was rendered and likewise, the trial court’s jurisdiction to
enter an order modifying the injunction order pending appeal.
Id. at 688
, (citing Brown v. Herman,
852 S.W.2d 91
, 93 (Tex.App.--Austin 1993, orig. proceeding)).
Ahmed provides a detailed analysis of appellate jurisdiction to review modified temporary
injunction orders with which we agree. See Ahmed,
99 S.W.3d at 688-689
. Appellate jurisdiction
to review interlocutory orders is extremely limited, and Section 51.014, from which we derive our
jurisdiction, must be strictly construed.
Id. at 688
; see TEX.CIV.PRAC.&REM.CODE ANN.
§ 51.014(a)(4). Section 51.014 allows interlocutory appeals of orders “grant[ing] or refus[ing] a
temporary injunction or grant[ing] or overrul[ing] a motion to dissolve a temporary injunction as
provided by Chapter 65 [of the Texas Civil Practices and Remedies Code].” Id. As Ahmed
discusses, an order modifying a temporary injunction is not precisely either of those orders
discussed by the Legislature in Section 51.014(a)(4). Id. However, the First District construed
Section 51.014(a)(4) as granting interlocutory review of orders modifying temporary injunctions
because they are like the types of orders explicitly listed in Section 51.014(a)(4). See id. at 689,
(citing Toby Martin Oilfield Trucking, Inc. v. Martin,
640 S.W.2d 352
, 354-55 (Tex.App.--
Houston [1st Dist.] 1982, no writ). We find we have jurisdiction to review the trial court’s order
16
modifying the trial date of the temporary injunction. 1 Further, the trial court’s June 12, 2019 order
vacating the trial date indefinitely is a modification of the May 6, 2019 temporary injunction order.
Next, we turn to whether the trial court can enter an order modifying the trial date of the
temporary injunction order. “[The] modified order is valid if the trial court had jurisdiction to enter
it during the interlocutory appeal.” Ahmed,
99 S.W.3d at 689
. While an interlocutory appeal is
pending, a trial court has continuing jurisdiction to “make further orders, including one dissolving
the order complained of on appeal[,]” and, “[i]f permitted by law … may proceed with a trial on
the merits[;]” but may not make any order “interfer[ing] with or impair[ing]” the appellate court’s
jurisdiction or the “effectiveness of any relief sought or that may be granted on appeal.”
TEX.R.APP.P. 29.5(b). We have already determined we have jurisdiction to review the modified
injunction order which incorporates the order continuing the trial date until the appeal is resolved.
Accordingly, the sole remaining jurisdictional question is whether the order modifying the
temporary injunction by continuing the trial date interfered with or impaired the effectiveness of
the relief sought on or that may be granted in this appeal.
Appellant asks for two types of relief on appeal: to find the trial court abused its discretion
in issuing the injunction at all; or, to find the injunction void for defects in form under Rule 683.
The modification removing the trial date from the injunction order has no bearing on the merits of
granting or denying the injunction in the first instance because it does not involve whether the
injunction applicant pleaded and proved (1) a cause of action against the defendant; (2) a probable
right to the relief sought; or (3) irreparable injury that is both probable and imminent if the relief
is not granted. See Butnaru, 84 S.W.3d at 204. Additionally, the injunction order as modified does
1
We acknowledge this issue is not settled among the intermediate courts of appeals. However, with no prior precedent
out of this Court, we follow the analysis set forth out of the Houston and Dallas courts, among others. See Ahmed,
99 S.W.3d at 688-89
; Currie v. Int'l Telecharge, Inc.,
722 S.W.2d 471
, 472-73 (Tex.App.--Dallas 1986, no writ).
17
not interfere with or impair the effectiveness of Appellant’s sought remedy - finding the injunction
void for form defects. Accordingly, we find the trial court had jurisdiction to enter its order
continuing the trial date.
The issue of error-preservation inevitably comes to mind in this scenario. The record does
not indicate the complained-of error, the continuation of the trial date to a future uncertain date,
was raised in the trial court. Does Appellant have a duty to raise this form defect issue with the
trial court first before bringing this error? The answer is no. Our precedent binds us to decide the
complained-of error regardless whether it was objected to or not. See Fasken, 901 S.W.2d at 593
(“[Rule 683] operates to invalidate an injunction even when the complaining party fails to bring
the error to the trial court's attention.”). However, we note the inefficiency this rule creates for all
parties concerned when what could often be solved by a simple motion made to the trial court
instead serves as an ace in the hole for an appellant to raise for the first time on appeal. See Hoist
Liftruck Mfg., Inc. v. Carruth-Doggett, Inc.,
485 S.W.3d 120
, 123-27 (Tex.App.—Houston [14th
Dist.] 2016, no pet.)(Frost, C.J., concurring). Although the Texas Supreme Court has not explicitly
adopted the error-preservation exception for Rule 683 defects, this Court and most of the other
intermediate courts of appeals in Texas have adopted a bright line rule that Rule 683 defects render
an injunction void ab initio, regardless of whether it is raised at the trial court level.
Id. at 125-26
. 2
Here, the trial court’s decision to modify the temporary injunction order by vacating the
trial date indefinitely pending the resolution of this appeal, unfortunately, has the effect of
2
We note, however, the Texas Supreme Court has held Rule 683 defects make an injunction order “subject to” being
declared void ab initio, but has not gone so far as the intermediate courts of appeal to find such defects result in
automatic dissolution. See Hoist Liftruck Mfg., Inc.,
485 S.W.3d 125
-136,. (citing InterFirst Bank San Felipe, N.A. v.
Paz Const. Co.,
715 S.W.2d 640
, 641 (Tex. 1986) and see Qwest Communications Corp. v. AT&T Corp.,
24 S.W.3d 334
, 337 (Tex. 2000)). On the contrary, InterFirst and Qwest categorize Rule 683 defects as procedural defects, which
our high court has routinely held must be preserved at the trial court level to be considered on appeal. Hoist Liftruck
Mfg., Inc.,
485 S.W.3d at 125-26
.
18
removing the trial setting from the injunction order. Absence of a date setting trial is a fatal defect
for a temporary injunction order rendering the injunction order void. See Fasken, 901 S.W.2d at
593; see also Qwest Communications Corp., 24 S.W.3d at 337. Therefore, the trial court’s decision
to vacate the trial setting indefinitely pending appeal transformed an otherwise valid temporary
injunction order on May 6, 2019, and rendered it void because of the subsequent modification on
June 12, 2019. Had the trial court merely continued the trial and set another trial date, the injunction
order would be valid. The error was continuing the case indefinitely in contravention of Rule 683.
Likewise, if the trial court sets a new trial setting, thereby modifying the injunction order once
again, ostensibly, the temporary injunction order would assume its validity under Rule 683.
Therefore, based on the record before us, we sustain Appellant’s issue that the order continuing
the trial date rendered the temporary injunction order void.
CONCLUSION
We find the trial court did not abuse its discretion in granting the temporary injunction.
However, the trial court’s subsequent modification of the injunction order resetting the trial date
until the appeal had been resolved caused the temporary injunction order to fall out of compliance
with Rule 683 and rendered it void.
Having sustained Appellant’s second issue, we vacate the order issuing the injunction,
dissolve said injunction, and remand this cause for trial on the merits.
November 30, 2020
YVONNE T. RODRIGUEZ, Justice
Before Alley, C.J., Rodriguez, and Palafox, JJ.
19 |
4,654,816 | 2021-01-27 01:00:41.538842+00 | null | http://www.ca5.uscourts.gov/opinions/unpub/19/19-60627.0.pdf | Case: 19-60627 Document: 00515720835 Page: 1 Date Filed: 01/26/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 26, 2021
No. 19-60627 Lyle W. Cayce
Summary Calendar Clerk
Shafiqul Islam,
Petitioner,
versus
Robert M. Wilkinson, Acting U.S. Attorney General,
Respondent.
Petition for Review of an Order of the
Board of Immigration Appeals
BIA No. A201 526 104
Before King, Smith, and Wilson, Circuit Judges.
Per Curiam:*
Shafiqul Islam, a native and citizen of Bangladesh, petitions for review
of the decision of the Board of Immigration Appeals (BIA) dismissing his
appeal of the decision and order of the immigration judge (IJ) denying his
application for asylum, withholding of removal, and Convention Against
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 19-60627 Document: 00515720835 Page: 2 Date Filed: 01/26/2021
No. 19-60627
Torture (CAT) relief. Because Islam does not substantively challenge the
BIA’s dismissal of either his CAT claim or his claim that the IJ violated his
due process rights, he has abandoned those claims. See Soadjede v. Ashcroft,
324 F.3d 830
, 833 (5th Cir. 2003).
Although Islam argues that the IJ lacked sufficient justification to
require that he provide reasonably available evidence in support of his
application and, alternatively, that the IJ erroneously determined that such
evidence was reasonably available, he did not raise these arguments before
the BIA, and we lack jurisdiction to consider them. See Yang v. Holder,
664 F.3d 580
, 588 (5th Cir. 2011); 8 U.S.C. § 1252(d)(1). Islam fails to show that
the denial of asylum was unsupported by substantial evidence. See Zhang v.
Gonzales,
432 F.3d 339
, 344 (5th Cir. 2005). He, therefore, necessarily also
fails to show that he was entitled to withholding of removal. See
Yang, 664 F.3d at 588-89
.
The petition for review is DENIED in part and DISMISSED in
part for lack of jurisdiction.
2 |
4,539,353 | 2020-06-05 14:08:46.357084+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_03123.htm | Matter of Alexander Y. (Christopher P.) (2020 NY Slip Op 03123)
Matter of Alexander Y. (Christopher P.)
2020 NY Slip Op 03123
Decided on June 3, 2020
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
MARK C. DILLON, J.P.
JOSEPH J. MALTESE
BETSY BARROS
FRANCESCA E. CONNOLLY, JJ.
2019-03007
(Docket No. N-30285-15)
[*1]In the Matter of Alexander Y. (Anonymous). Administration for Children's Services, petitioner- respondent; Christopher P. (Anonymous), appellant, et al., respondent.
Cheryl Charles-Duval, Brooklyn, NY, for appellant.
James E. Johnson, Corporation Counsel, New York, NY (Aaron M. Bloom and Jamison Davies of counsel), for petitioner-respondent.
Janet E. Sabel, New York, NY (Dawne A. Mitchell and Diane Pazar of counsel), attorney for the child.
DECISION & ORDER
In a proceeding pursuant to Family Court Act article 10, Christopher P. appeals from an order of the Family Court, Kings County (Ilana Gruebel, J.), dated February 22, 2019. The order denied Christopher P.'s motion pursuant to Family Court Act § 1061 to vacate so much of an order of fact-finding and disposition of the same court dated May 3, 2018, as, upon his consent to the entry of an order of fact-finding without admission pursuant to Family Court Act § 1051(a), found that he neglected the subject child.
ORDERED that the order dated February 22, 2019, is affirmed, without costs or disbursements.
In December 2015, the Administration for Children's Services (hereinafter ACS) filed a petition alleging that Christopher P., a person legally responsible for the subject child, neglected the child by inflicting excessive corporal punishment on him.
In an order of fact-finding and disposition dated May 3, 2018, issued upon Christopher P.'s consent without admission pursuant to Family Court Act § 1051(a), the Family Court found that Christopher P. neglected the child as alleged in the petition. The court suspended judgment without the promise of an automatic vacatur of the finding of neglect. The child was released to the custody of his biological father under ACS supervision for a period of six months, and Christopher P. was directed to, inter alia, abide by an order of protection.
In November 2018, Christopher P. moved pursuant to Family Court Act § 1061 to vacate the finding of neglect. ACS and the attorney for the child opposed the motion. In an order dated February 22, 2019, the Family Court denied Christopher P.'s motion. Christopher P. appeals.
Pursuant to Family Court Act § 1061, the Family Court may set aside, modify, or [*2]vacate any order issued in the course of a child protective proceeding "[f]or good cause shown." " The statute expresses the strong Legislative policy in favor of continuing Family Court jurisdiction over the child and family so that the court can do what is necessary in the furtherance of the child's welfare'" (Matter of Aaliyah B. [Althea R.], 170 AD3d 712, quoting Matter of Boston G. [Jennifer G.], 157 AD3d 675, 677). As a general rule, compliance with the terms and conditions of a suspended judgment does not eradicate the prior neglect finding (see Matter of Anoushka G. [Cyntra M.], 132 AD3d 867, 868).
Here, the record demonstrates that Christopher P. failed to establish good cause to vacate the prior finding of neglect (see Family Ct Act § 1061; Matter of Inocencia W. [Yasha W.], 147 AD3d 865, 866). Accordingly, we agree with the determination of the Family Court to deny his motion.
DILLON, J.P., MALTESE, BARROS and CONNOLLY, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court |
4,539,354 | 2020-06-05 14:08:46.671983+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_03101.htm | Jayne v Smith (2020 NY Slip Op 03101)
Jayne v Smith
2020 NY Slip Op 03101
Decided on June 3, 2020
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
RUTH C. BALKIN, J.P.
LEONARD B. AUSTIN
HECTOR D. LASALLE
ANGELA G. IANNACCI, JJ.
2018-10572
(Index No. 604101/15)
[*1]Millard C. Jayne, appellant,
v
Letty Chandra Smith, etc., et al., respondents.
Cartier, Bernstein, Auerbach & Steinberg, P.C., Patchogue, NY (Kenneth Auerbach and Robert Steinberg of counsel), for appellant.
Kaufman, Borgeest & Ryan LLP, Garden City, NY (Eldar Mayouhas and Jacqueline Mandell of counsel), for respondents.
DECISION & ORDER
In a consolidated action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Paul J. Baisely, Jr., J.), dated August 8, 2018. The order, insofar as appealed from, denied those branches of the plaintiff's motion which were pursuant to CPLR 3124 to compel the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp to appear for depositions and to answer questions seeking nonprivileged information regarding their nonparty patient and granted that branch of the defendants' cross motion which was pursuant to CPLR 3103(a) for a protective order precluding such questioning of the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp.
ORDERED that on the Court's own motion, the notice of appeal from so much of the order as denied that branch of the plaintiff's motion which was pursuant to CPLR 3124 to compel the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp to answer questions seeking nonprivileged information regarding their nonparty patient and granted that branch of the defendants' cross motion which was pursuant to CPLR 3103(a) for a protective order precluding such questioning of the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp is deemed to be an application for leave to appeal from those portions of the order, and leave to appeal is granted (see CPLR 5701[c]); and it is further,
ORDERED that the order is reversed insofar as appealed from, on the law and in the exercise of discretion, with costs, those branches of the plaintiff's motion which were pursuant to CPLR 3124 to compel the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp to appear for depositions and to answer questions seeking nonprivileged information regarding their nonparty patient is granted, and that branch of the defendants' cross motion which was pursuant to CPLR 3103(a) for a protective order precluding such questioning of the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp is denied.
The plaintiff, a nurse, was seriously injured when he was assaulted by a patient at a psychiatric facility in Suffolk County. The plaintiff thereafter commenced this consolidated action [*2]to recover damages for personal injuries against, among others, the defendants Letty Chandra Smith, Daniel Robert Klages, and Douglas Kent Hoverkamp (hereinafter collectively the individual defendants), who were the patient's treating psychiatrists. After the individual defendants indicated at a compliance conference that they would not answer any questions at their depositions regarding the patient, the plaintiff moved, inter alia, pursuant to CPLR 3124 to compel them to appear for depositions and to answer questions seeking nonprivileged information regarding the patient. The defendants cross-moved, inter alia, pursuant to CPLR 3103(a) for a protective order precluding such questioning. The Supreme Court, inter alia, denied those branches of the plaintiff's motion and granted that branch of the defendants' cross motion. The plaintiff appeals.
Generally, "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof, by . . . a party" (CPLR 3101[a][1]). However, even relevant discovery is subject to preclusion if the requested information is privileged (see CPLR 3101[b]; Dillenbeck v Hess, 73 NY2d 278, 287; see also 22 NYCRR 221.2[a]).
Information relating to the nature of medical treatment and the diagnoses made, including "information communicated by the patient while the physician attends the patient in a professional capacity, as well as information obtained from observation of the patient's appearance and symptoms," is privileged and may not be disclosed (Mullen v Wishner, 172 AD3d 1386, 1388; see CPLR 4504; Mental Hygiene Law § 33.13[c][1]; Bellamy v State of New York, 136 AD3d 1247). However, "[t]he physician-patient privilege generally does not extend to information obtained outside the realms of medical diagnosis and treatment" (Matter of Grand Jury Investigation in N.Y. County, 98 NY2d 525, 530). Thus, the privilege is generally limited to "information acquired by the medical professional through application of professional skill or knowledge'" (id. at 530, quoting Dillenbeck v Hess, 73 NY2d at 284 n 4).
Here, the patient has not waived the physician-patient privilege (see Mullen v Wishner, 172 AD3d at 1389), and the plaintiff has not demonstrated "that the interests of justice significantly outweigh the need for confidentiality" (Mental Hygiene Law § 33.13[c][1]). Thus, the plaintiff was not entitled to any privileged information regarding the patient, such as information regarding the treatment rendered to him by the individual defendants or information they collected in their professional capacity so as to render a diagnosis or treatment plan. Nevertheless, the plaintiff is entitled to inquire into any nonprivileged information regarding the patient (see Mullen v Wishner, 172 AD3d at 1389; Bellamy v State of New York, 136 AD3d at 1248; J.Z. v South Oaks Hosp., 67 AD3d 645, 646; Sohan v Long Is. Coll. Hosp., 282 AD2d 597; Lee v New York City Tr. Auth., 257 AD2d 611). Thus, it was an improvident exercise of discretion to deny those branches of the plaintiff's motion which were to compel the individual defendants' depositions on the limited basis sought by the plaintiff, and to grant the defendants a protective order preventing the plaintiff from questioning the individual defendants regarding any nonprivileged information about the patient. We note that the particular content of the information sought by the plaintiff is not before us, since the plaintiff and the defendants made their motions before the individual defendants' depositions were conducted. Thus, we do not determine on this appeal whether any specific information about the patient was or was not privileged.
We further note that the prospect that a witness may be asked questions at a deposition as to which an objection based on privilege may be asserted is not a proper reason for declining to appear for a deposition. Rather, the proper procedure is for the witness to appear and for counsel to interpose objections to particular questions which call for the disclosure of privileged information (see 22 NYCRR 221.2). Here, the defendants should not have predetermined that there were no relevant nonprivileged questions that could be asked of the individual defendants.
BALKIN, J.P., AUSTIN, LASALLE and IANNACCI, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court |
4,539,355 | 2020-06-05 14:08:46.986541+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_03100.htm | Heid v Renwood Assoc., Inc. (2020 NY Slip Op 03100)
Heid v Renwood Assoc., Inc.
2020 NY Slip Op 03100
Decided on June 3, 2020
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
WILLIAM F. MASTRO, J.P.
ROBERT J. MILLER
JOSEPH J. MALTESE
VALERIE BRATHWAITE NELSON, JJ.
2017-05957
(Index No. 606973/16)
[*1]Blaise Heid, et al., appellants,
v
Renwood Associates, Inc., et al., respondents.
Rosenberg, Feldman & Smith, LLP, New York, NY (Richard Feldman of counsel), for appellants.
Berkman, Henoch, Peterson, Peddy & Fenchel, Garden City, NY (Peter Sullivan of counsel), for respondents Renwood Associates, Inc., Richard Mohring, and 44 Sea Cliff Avenue, LLC.
Shanker Law Group, Mineola, NY (Neil A. Bloom of counsel), for respondents HRY, LLC, and Harry Bienenfeld.
DECISION & ORDER
In an action, inter alia, to set aside a fraudulent conveyance, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Anthony L. Parga, J.), entered May 25, 2017. The order, insofar as appealed from, (1) granted those branches of the separate motions of the defendants Renwood Associates, Inc., Richard Mohring, and 44 Sea Cliff Avenue, LLC, and the defendants HRY, LLC, and Harry Bienenfeld, which were pursuant to CPLR 3211(a) to dismiss the fourth cause of action insofar as asserted against each of them, for summary judgment dismissing the first through third causes of action insofar as asserted against each of them, and to strike the plaintiff's notice of pendency, and (2) denied, as academic, the plaintiffs' cross motion pursuant to CPLR 602 to consolidate the action with an action entitled Heid v HRY LLC, pending in the same court under Index No. 601914/15.
ORDERED that the order is affirmed insofar as appealed from, with one bill of costs to the defendants appearing separately and filing separate briefs.
In May 2014, the plaintiffs purchased a parcel of real property (hereinafter Lot 417) from the defendant HRY, LLC (hereinafter HRY). Thereafter, in March 2015, the plaintiffs commenced an action (hereinafter the March 2015 action) against, among others, HRY. In the March 2015 action, the plaintiffs asserted claims based on fraud, rescission, and the breach of the covenant of good faith and fair dealing arising from the plaintiffs' purchase of Lot 417.
In May 2015, HRY, which owned a parcel of real property (hereinafter Lot 416) adjacent to the plaintiffs' Lot 417, transferred title to Lot 416 to the defendant Renwood Associates, Inc. (hereinafter Renwood). Thereafter, in September 2016, the plaintiffs commenced the instant action against HRY, its managing member Harry Bienenfeld, 44 Sea Cliff Avenue, LLC, of which Bienenfeld was a member, Richard Mohring, who was also a member of 44 Sea Cliff Avenue, LLC, and Renwood, alleging that the defendants "orchestrated the transfer of Lot 416 from defendant HRY [*2]to defendant Renwood for the purpose of frustrating [the] [p]laintiff[s'] ability to collect a judgment in the [March 2015 action]." The complaint asserted, among other things, four causes of action to set aside the allegedly fraudulent conveyance of Lot 416 pursuant to Debtor and Creditor Law §§ 273, 273-a, 275, and 276. The plaintiffs also filed a notice of pendency.
Renwood, Mohring, and 44 Sea Cliff Avenue, LLC, moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against them, for summary judgment dismissing the complaint insofar as asserted against them, and to strike the plaintiffs' notice of pendency. HRY and Bienenfeld separately moved for the same relief as to them. The plaintiffs cross-moved pursuant to CPLR 602 to consolidate this action with the March 2015 action. The Supreme Court granted those branches of the defendants' separate motions which were pursuant to CPLR 3211(a)(7) to dismiss the fourth cause of action, for summary judgment dismissing the first through third causes of action, and to strike the notice of pendency, and denied the plaintiffs' cross motion as academic.
The plaintiffs appeal. On appeal, the plaintiffs contend that the Supreme Court erred in granting dismissal of the first four causes of action insofar as asserted against each of the defendants and to strike the notice of pendency. The plaintiffs further contend that the court erred in denying their cross motion to consolidate this action with the March 2015 action. We affirm the order insofar as appealed from.
We agree with the Supreme Court's determination to grant those branches of the defendants' separate motions which were for summary judgment dismissing the first through third causes of action, which sound in fraudulent conveyance under Debtor and Creditor Law §§ 273, 273-a, and 275. In order to prevail on causes of action under those sections of the Debtor and Creditor Law, the plaintiffs were required to establish that the conveyance was made "without a fair consideration" (Debtor and Creditor Law §§ 273, 273-a, 275). Here, in support of their separate motions, the defendants submitted evidence which demonstrated, prima facie, that HRY sold Lot 416 to Renwood for the sum of $725,000, and that this price constituted fair consideration based on the condition of the property at the time of the sale. In opposition, the plaintiffs failed to raise a triable issue of fact.
We also agree with the Supreme Court's determination to grant those branches of the defendants' separate motions which were pursuant to CPLR 3211(a)(7) to dismiss the cause of action alleging a violation of Debtor and Creditor Law § 276 insofar as asserted against each of them (see generally Lamberti v Plaza Equities, LLC, 161 AD3d 837, 839). A cause of action under Debtor and Creditor Law § 276 must be pleaded with sufficient particularity pursuant to CPLR 3016(b) (see Swartz v Swartz, 145 AD3d 818, 826; Gaetano Dev. Corp. v Lee, 121 AD3d 838, 840). Contrary to the plaintiffs' contention, the cause of action alleging a violation of Debtor and Creditor Law § 276 was not pleaded with sufficient particularity (see CPLR 3016[b]; NTL Capital, LLC v Right Track Rec., LLC, 73 AD3d 410, 412).
Accordingly, under the circumstances, the Supreme Court also properly denied, as academic, the plaintiffs' cross motion pursuant to CPLR 602 to consolidate this action with the March 2015 action.
MASTRO, J.P., MILLER, MALTESE and BRATHWAITE NELSON, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court |
4,539,358 | 2020-06-05 14:08:47.770868+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_03097.htm | Deutsche Bank Natl. Trust Co. v Gatti (2020 NY Slip Op 03097)
Deutsche Bank Natl. Trust Co. v Gatti
2020 NY Slip Op 03097
Decided on June 3, 2020
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
ALAN D. SCHEINKMAN, P.J.
SYLVIA O. HINDS-RADIX
BETSY BARROS
PAUL WOOTEN, JJ.
2018-09287
(Index No. 18764/12)
[*1]Deutsche Bank National Trust Company, etc., respondent,
v
Gary Gatti, etc., appellant, et al., defendants.
Scott Lockwood, Deer Park, NY, for appellant.
McGlinchey Stafford, New York, NY (Kristen D. Romano and Brian S. McGrath of counsel), for respondent.
DECISION & ORDER
In an action to foreclose a mortgage, the defendant Gary Gatti appeals from an order of the Supreme Court, Suffolk County (Thomas F. Whelan, J.), dated July 25, 2018. The order denied that defendant's motion pursuant to CPLR 5015(a)(3) to vacate so much of a prior order of the same court dated March 9, 2017, as granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendant Gary Gatti, to strike that defendant's answer, and for an order of reference, and denied that branch of that defendant's cross motion which was for summary judgment dismissing the complaint insofar as asserted against him for lack of standing.
ORDERED that the order dated July 25, 2018, is affirmed, with costs.
Contrary to the determination of the Supreme Court, the defendant Gary Gatti (hereinafter the defendant) did not unreasonably delay in moving pursuant to CPLR 5015(a)(3) to vacate the prior order dated March 9, 2017, which, inter alia, granted the plaintiff's motion for summary judgment on the complaint insofar as asserted against the defendant in this mortgage foreclosure action (cf. Empire State Conglomerates v Mahbur, 105 AD3d 898, 899). However, we also conclude that the defendant failed to demonstrate, by clear and convincing evidence, that the signature on the endorsement of the note was a forgery. The differences between the signature on the endorsement and the signatures on the exemplars submitted by the defendant are insufficient, standing alone, to demonstrate that the signature at issue is not authentic (see generally Banco Popular N. Am. v Victory Taxi Mgt., 1 NY3d 381, 384). Thus, the defendant failed to establish that the prior order was procured by fraud, misrepresentation, or other misconduct (see Kondaur Capital Corp. v Stewart, 166 AD3d 748, 750; HSBC Bank USA, N.A. v Miller, 121 AD3d 1044, 1046).
Accordingly, we affirm the Supreme Court's order denying the defendant's motion pursuant to CPLR 5015(a)(3) to vacate so much of the prior order.
SCHEINKMAN, P.J., HINDS-RADIX, BARROS and WOOTEN, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court |
4,639,142 | 2020-12-03 15:01:49.758872+00 | null | http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/1%20CA-CV%2019-0779%20FC%20-%20Potter.pdf | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
In re the Matter of:
BETSY JO POTTER, Petitioner/Appellee,
v.
PHILLIP TERRY POTTER, Respondent/Appellant.
No. 1 CA-CV 19-0779 FC
FILED 12-3-2020
Appeal from the Superior Court in Maricopa County
No. FC2015-050659
The Honorable John Christian Rea, Judge
The Honorable Roy C. Whitehead, Judge
AFFIRMED IN PART; VACATED IN PART, AND REMANDED
COUNSEL
Joseph M. Huey, PLC, Scottsdale
By Joseph M. Huey
Counsel for Petitioner/Appellee
Phillip Terry Potter, Scottsdale
Respondent/Appellant
POTTER v. POTTER
Decision of the Court
MEMORANDUM DECISION
Acting Presiding Judge Lawrence F. Winthrop delivered the decision of the
Court, in which Chief Judge Peter B. Swann and Judge Maurice Portley1
joined.
W I N T H R O P, Judge:
¶1 Phillip Terry Potter (“Father”) appeals a superior court
judgment that “terminally disposed of”: (1) Father’s July 31, 2018 “Petition
to Modify Child Support ‘Simplified Process’ Pursuant to ARFLP Rule
91(B)(2)(b), A.R.S. § 25-320, and the Arizona Child Support Guidelines”
(hereinafter, “Petition to Modify Child Support” or “Petition”); (2) Father’s
subsequent “Motion for Leave to Amend Petition for Child Support
Modification” (hereinafter, “Motion to Amend”); (3) the superior court’s
July 23, 2018 “Order Regarding Special Master,” appointing a special
master to oversee matters regarding the parties’ child’s health insurance;
and (4) a “Motion for New Trial or Amended Judgment Pursuant to Rule
83(A)(2) and (6), ARFLP” (hereinafter, “Motion for New Trial”) filed by
Betsy Jo Potter (“Mother”).2
¶2 The record below is chaotic. Delegation of judicial duties, a
calendar rotation, plus indiscriminate filings by the parties below and on
appeal, have created what can only be characterized as a confusing record.
It appears that the superior court issued a final judgment declaring various
issues “terminally disposed of” without any indication in the record that
the underlying merits of certain of those issues, including Father’s Petition
to Modify Child Support and his subsequent Motion to Amend, were ever
addressed. We therefore vacate the termination or dismissal of Father’s
Petition to Modify Child Support and remand that Petition and Father’s
Motion to Amend for consideration on the merits. Because she did not
cross-appeal, we affirm the effective denial of Mother’s Motion for New
1 The Honorable Maurice Portley, Retired Judge of the Court of
Appeals, Division One, has been authorized to sit in this matter pursuant
to Article 6, Section 3, of the Arizona Constitution.
2 The superior court’s use of the term “terminally disposed of” is
confusing at best. We presume the court intended by such phrase to signify
dismissal of the pending petition or denial of the motion, as appropriate.
2
POTTER v. POTTER
Decision of the Court
Trial. Finally, we vacate the portion of the superior court’s judgment that
terminated or vacated the July 23, 2018 Order Regarding Special Master
because the record does not reflect this Order was ever set aside.
FACTS AND PROCEDURAL HISTORY
¶3 The parties married in October 2005 and have one minor
child. In February 2015, Mother petitioned for dissolution of the marriage.
¶4 In January 2017, the parties entered a consent decree of
dissolution that, among other things, obligated Father to pay child support
and health insurance for the child. The decree also provided that disputes
regarding the child’s health insurance “will immediately be submitted to a
Special Master for binding arbitration.”
¶5 On July 23, 2018, at Father’s request and pursuant to the terms
of the consent decree, the superior court issued the Order Regarding Special
Master, ordering the appointment of a special master to oversee health
insurance disputes, and assessing costs associated with the special master
to Mother. Mother subsequently filed her Motion for New Trial, contesting
in part the court’s order that she pay costs associated with the special
master.
¶6 Meanwhile, on July 31, 2018, Father filed his Petition to
Modify Child Support, alleging that a substantial change in the parties’
incomes and an increase in health insurance costs justified modification of
his existing child support obligation. Mother requested a hearing on that
petition, and the parties received notice that a conference and evidentiary
hearing before Commissioner Richard F. Albrecht had been scheduled for
November 15, 2018.
¶7 During a September 10, 2018 status conference, the superior
court (Judge Roy C. Whitehead) affirmed the November 15, 2018 conference
and evidentiary hearing regarding the Petition to Modify Child Support.
The court also scheduled a separate evidentiary hearing regarding Mother’s
Motion for New Trial for January 31, 2019.
¶8 In a minute entry filed November 13, 2018, however,
Commissioner Albrecht vacated the scheduled November 15, 2018
proceedings and referred the Petition to Modify Child Support to Judge
Whitehead for consideration and a ruling.3 In that same minute entry,
3 In referring the Petition to Modify Child Support to Judge
Whitehead, Commissioner Albrecht noted “that there are multiple issues
3
POTTER v. POTTER
Decision of the Court
Commissioner Albrecht separately affirmed the January 31, 2019
evidentiary hearing on Mother’s Motion for New Trial before Judge
Whitehead.
¶9 On January 24, 2019, the superior court (Judge Whitehead)
vacated the Motion for New Trial evidentiary hearing and placed the matter
on the inactive calendar, set to expire on March 29, 2019.4
¶10 On March 31, 2019, Father filed a Motion to Amend the
pending Petition to Modify Child Support, citing changed circumstances
due to the birth of his second child. Commissioner Albrecht referred the
Motion to Amend to Judge Whitehead for consideration and a ruling.
¶11 On May 15, 2019, while awaiting a ruling from Judge
Whitehead on both the Petition to Modify Child Support and the Motion to
Amend, Father moved for a hearing on the Petition. After briefing by the
parties, which included Mother’s incorrect representation5 that the Petition
to Modify Child Support should “be denied as this matter was placed on
this Court’s Inactive Calendar March 29, 2019 for dismissal,” the superior
court (Judge Whitehead) summarily denied Father’s request that a hearing
be scheduled on his Petition to Modify Child Support, making no comment
as to the merits of Father’s underlying Petition nor as to the pending Motion
to Amend.
¶12 After a judicial rotation, Judge Rea assumed responsibility for
the parties’ case. At a July 16, 2019 status conference, Judge Rea notified
pending at this time, therefore this case is no longer appropriate for the
Specialty Court Calendar.”
4 The court’s action was apparently taken under the authority of Rule
46(b)(2)(B), Arizona Rules of Family Law Procedure, which then triggers an
obligation on the part of the affected party to file a motion to set or request
a hearing or conference.
5 The record refutes and we reject Mother’s argument that Father’s
Petition to Modify Child Support was also placed on the inactive calendar
for dismissal on or after March 29, 2019. Judge Whitehead’s January 24,
2019 minute entry clearly vacated the January 31, 2019 evidentiary hearing
and placed only the issues scheduled for that date—the Motion for New
Trial and a dispute regarding the terms to be included in a court order
incorporating a Rule 69 Agreement reached between the parties at a
settlement conference—on the inactive calendar.
4
POTTER v. POTTER
Decision of the Court
the parties he would “review the file and issue a minute entry with tentative
conclusions as to what mat[t]ers remain pending and why.”
¶13 Judge Rea tentatively concluded6 that Judge Whitehead’s
refusal to schedule a hearing eliminated the need to consider the merits of
Father’s Petition to Modify Child Support and his Motion to Amend, and
that Mother’s Motion for New Trial was effectively dismissed when it was
placed on the inactive calendar and no additional action was taken:
[A]s of September 10, 2018, the only pending matters were the
child support modification and the matter of a special master.
. . . Based on the arguments in the memoranda, this
court finds the court’s denial of hearing [acted] to terminate
the petition to modify child support, filed July 2018. Nothing
remains pending on that petition.
The evidentiary hearing on the special master issue
and the related motion for new trial was vacated in the minute
entry of January 23, 2019, and “the matter” was placed on the
inactive calendar for dismissal on March 29, 2019. No further
action was taken. The court considers the special master issue
terminated.
¶14 In a signed minute entry dated October 21, 2019, Judge Rea
affirmed his previous tentative conclusions. Later, in February 2020, Judge
Rea issued a final judgment declaring that the October 21, 2019 entry
“disposed of” both Father’s Petition to Modify Child Support and all claims
and issues related to appointment of the special master regarding the
child’s health insurance (including Mother’s Motion for New Trial).
¶15 Father timely appealed the February 2020 judgment, and we
have jurisdiction pursuant to Arizona Revised Statutes (“A.R.S.”) sections
6 Judge Rea first observed—and we completely agree—that “[i]t is
almost impossible to review this file and come to a confident conclusion on
what may be pending.” Since the consent decree was filed in January 2017
as docket item 81, the file in this case has increased enormously. As such,
it is not surprising that Judge Rea was led astray by Mother’s representation
that prior rulings by Judge Whitehead and Commissioner Albrecht
disposed of Father’s pending issues. Currently, the case file contains more
than 550 docket items.
5
POTTER v. POTTER
Decision of the Court
12-120.21(A)(1) and 12-2101(A)(1). Mother did not cross-appeal the
denial/dismissal of her Motion for New Trial.
ANALYSIS
I. The Court’s Ruling Terminating Father’s Petition
¶16 Father argues the superior court abused its discretion in
denying his request to set a hearing on the Motion to Amend and
underlying Petition to Modify Child Support and in interpreting that denial
as a dismissal on the merits of the Petition.
¶17 In general, either party is entitled to request a modification of
child support upon a showing of substantial and continuing changed
circumstances. A.R.S. §§ 25-320(24), -327(A). If the modification is
contested, any party may timely request a hearing and “the court shall
conduct such hearing.” A.R.S. § 25-320(24)(B). Where no hearing is timely
requested, “the court will review the request and enter an appropriate order
or set the matter for hearing.”
Id. ¶18
Here, Father was deprived of a meaningful opportunity to be
heard, see generally Heidbreder v. Heidbreder,
230 Ariz. 377
, 381, ¶ 13 (App.
2012), because the court denied his request for a hearing and never reached
the merits of the Petition to Modify Child Support. The superior court set
an evidentiary hearing on the Petition, which was later vacated and the
issue referred to Judge Whitehead for consideration and an ultimate ruling.
The record, however, does not reflect that Judge Whitehead either reset the
matter for an evidentiary hearing or made any ruling on the merits of the
Petition. Further, while that Petition was pending, Father filed the Motion
to Amend, which Commissioner Albrecht also referred to Judge Whitehead
for consideration and a ruling. Thereafter, Father renewed the request
previously made by Mother for an evidentiary hearing on the child support
issues, which Judge Whitehead inexplicably denied.
¶19 Judge Whitehead’s summary denial addressed neither
Father’s Motion to Amend nor the merits of the underlying Petition to
Modify Child Support.7 Absent something more, the superior court’s
interpretation of Judge Whitehead’s denial as a decision on the substantive
merits of Father’s claims was error. Father was entitled to a definitive
7 Moreover, the summary denial of Father’s request for an evidentiary
hearing did not explain why an evidentiary hearing previously granted was
no longer necessary, especially given Father’s allegation of changed
circumstances made in the Motion to Amend the underlying Petition.
6
POTTER v. POTTER
Decision of the Court
resolution of the merits of his Motion to Amend and the underlying Petition
to Modify Child Support. Accordingly, we vacate that portion of the
superior court’s February 2020 judgment concluding that Father’s Petition
to Modify Child Support has been “terminally disposed of,” and we
remand for consideration of both Father’s Motion to Amend and his
Petition to Modify Child Support.
II. The Court’s Ruling Terminating All Claims and Issues Related to
Appointment of the Special Master, Including Mother’s Motion
¶20 Father also argues the superior court erred when it “disposed
of all claims and issues” related to the appointment of the special master,
and included in the dismissal order the court’s prior July 23, 2018 Order
Regarding Special Master and Mother’s pending Motion for New Trial.
¶21 Following the court’s issuance of the July 23, 2018 order
appointing a special master to resolve the health insurance disputes and
assigning the cost of same, Mother filed a Motion for New Trial challenging
the ruling. The court set an evidentiary hearing on that motion for January
31, 2019. Before the evidentiary hearing could be held, however, Judge
Whitehead placed Mother’s Motion for New Trial on the inactive calendar
with that issue to be summarily dismissed if Mother did not request a
hearing or conference on the matter by March 29, 2019. Mother did not,
however, renew her request for a hearing. Mother also did not cross-appeal
the court’s “terminal disposition” of her Motion for New Trial; accordingly,
we affirm that dismissal. See Bills v. Ariz. State Bd. of Educ.,
169 Ariz. 366
,
369-70 (App. 1991) (recognizing that a party may waive substantive issues
by failing to file a cross-appeal).
¶22 However, the dismissal of Mother’s Motion for New Trial did
not alter the finality of the court’s previous Order Regarding Special
Master. Between the time the court issued its order appointing a special
master in July 2018 and the time the court issued the February 2020
judgment allegedly “disposing of” the special master issues, there is
nothing in the record that indicates the superior court vacated, revised,
terminated, disposed of, or otherwise suspended the operation of the July
23, 2018 order. Cf. Ariz. R. Fam. Law P. 46(d) (“The entry of an order
dismissing a case serves to dismiss all pending, unresolved petitions and
issues, but the order does not dismiss, vacate, or set aside any final decree,
judgment or order previously entered in the case, unless the order specifies
otherwise.”).
7
POTTER v. POTTER
Decision of the Court
¶23 In short, there is nothing in the record to support the superior
court’s conclusion that Father’s “Motion to Appoint Special Master on
Insurance, filed June 8, 2018, had been terminally disposed of in prior
orders.” We therefore vacate the portion of the February 2020 judgment
that purported to “dispose of” the Order Regarding Special Master.
CONCLUSION
¶24 For the foregoing reasons, we vacate the superior court’s
unsupported terminal disposition of Father’s July 31, 2018 Petition to
Modify Child Support and remand for the court to consider Father’s Motion
to Amend and the merits of Father’s underlying Petition.8 We affirm the
superior court’s dismissal of Mother’s Motion for New Trial. Finally, we
vacate the apparent sua sponte vacating of the court’s July 23, 2018 Order
appointing a special master to resolve pending and future insurance
coverage disputes, and assessing the cost of same to Mother.
¶25 Both sides request an award of attorneys’ fees and costs on
appeal. Father is self-represented and thus is not entitled to attorneys’ fees.
Also, neither side has provided this court updated information on which to
consider the parties’ financial resources. See A.R.S. § 25-324(A). More
importantly here, much of the confusion in this case resulted from Mother’s
incorrect representations to the superior court and the unreasonableness of
her continued reliance on those representations on appeal; accordingly, we
deny her request for attorneys’ fees as well, while reminding Mother’s
counsel of his duty of candor to the court. See Ariz. R. Sup. Ct. 42, ER
3.3(a)(1). As the prevailing party on appeal, Father is entitled to
reimbursement of his taxable costs upon compliance with Rule 21, ARCAP.
AMY M. WOOD • Clerk of the Court
FILED: AA
8 We make no comment on the merits of Father’s Motion to Amend or
the underlying Petition.
8 |
4,639,143 | 2020-12-03 15:02:26.264496+00 | null | https://www.dccourts.gov/sites/default/files/2020-12/Young%20v.%20DOES%2019-AA-1111.pdf | Notice: This opinion is subject to formal revision before publication in the
Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the
Court of any formal errors so that corrections may be made before the bound
volumes go to press.
DISTRICT OF COLUMBIA COURT OF APPEALS
No. 19-AA-1111
DAVID YOUNG,
PETITIONER,
V.
DISTRICT OF COLUMBIA DEPARTMENT OF EMPLOYMENT SERVICES,
RESPONDENT,
and
INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIP
and
TRAVELERS INDEMNITY COMPANY,
INTERVENORS.
On Petition for Review of a Decision and Order of the District of Columbia
Department of Employment Services Compensation Review Board
(CRB No. 93-19)
(Argued October 1, 2020 Decided December 3, 2020)
Benjamin T. Boscolo, for petitioner.
Karl A. Racine, Attorney General for the District of Columbia, Loren L.
AliKhan, Solicitor General, and Caroline S. Van Zile, Principal Deputy Solicitor
General, filed a statement in lieu of brief for respondent.
Scott E. Snyder, for intervenors.
Before GLICKMAN and EASTERLY, Associate Judges, and RUIZ, Senior Judge.
2
GLICKMAN, Associate Judge: Petitioner David Young, who has been
quadriplegic since a work-related accident in 2006, filed a disability claim with the
Adjudication and Hearings Division (AHD) of the Department of Employment
Services (DOES) for modification of his residence to enable him to use specialized
physical therapy equipment recommended by his physician. Travelers Indemnity
Company, the workers’ compensation insurer of Mr. Young’s employer, agreed to
pay for the equipment and the necessary home modifications. Mr. Young and
Travelers are at loggerheads, however, over the choice of contractor to do the home
remodeling. After a hearing, an Administrative Law Judge (ALJ) ruled that the AHD
is without jurisdiction under the District of Columbia Workers’ Compensation Act
of 1979 1 (WCA) to resolve the dispute over contractor selection because, the ALJ
concluded, the dispute did not “pertain to the character and sufficiency of a medical
aid.” The Compensation Review Board (CRB) upheld that interpretation of the
WCA. For the following reasons, we reverse and remand for a determination of Mr.
Young’s claim on its merits.
1
D.C. Code § 32-1505 et seq. (2019 Repl.).
3
I.
On March 26, 2006, while working abroad for the Institute for Public-Private
Partnership (IPPP), Mr. Young was in a car crash that left him with severe cervical
spinal cord injuries. In 2016, Mr. Young’s physician recommended that he use a
rehabilitative machine manufactured by Hocoma AG called an “Erigo Pro” to
improve his muscular, circulatory, and cardiovascular functioning. The Erigo Pro is
a large robotic device designed, per its manufacturer, to enable the safe mobilization
of bed-ridden patients “in order to counteract the negative effects of immobility and
accelerate the recovery process with intensive sensorimotor stimulation.” The
device measures 89’’ x 34’’ x 95,’’ weighs approximately 661 pounds, and requires
an estimated 169 square feet of space in which to operate. Enlargement and other
structural modifications of Mr. Young’s residence, which is in Florida, are necessary
to accommodate the Erigo Pro.
IPPP and Travelers do not dispute Mr. Young’s need for the Erigo Pro, and
Travelers agreed to pay the considerable cost of acquiring it and modifying Mr.
Young’s home to enable its installation there. There also appears to be no material
dispute as to what structural modifications should be made. What is in dispute is
which home improvement contractor should be selected to carry out the work. Mr.
4
Young objects to the contractor selected by Travelers, based on his dissatisfaction
with the quality of its previous work on his home and flaws he perceives in its plans
for the Erigo Pro-related renovations. Travelers, however, rejects the alternative
contractor selected by Mr. Young because it declined to assure Travelers that its
subcontractors would have workers’ compensation coverage for their employees.
Travelers’s stated concern (which Mr. Young disputes) is that hiring an “uninsured”
contractor to do the work could result in a violation of Florida law and subject
Travelers to additional liabilities and costs. 2
Thus, the contested issue before the ALJ was whether to issue a compensation
order requiring Travelers to pay for the modification of Mr. Young’s residence by
his chosen contractor. The ALJ declined to resolve this issue on its merits, however.
Saying “there is no provision [in the WCA] related to home modification to
construe,” and finding that the parties’ contractors had proposed identical structural
changes to accommodate the Erigo Pro, the ALJ concluded that the dispute over the
choice of contractor “does not pertain to the character and sufficiency of a medical
2
The CEO of the contractor selected by Travelers testified in the proceeding
below that Travelers requires its contractors to have workers’ compensation
insurance and to require its subcontractors to have it as well.
5
aid” and was therefore “beyond this administrative court’s purview.” The ALJ
therefore denied Mr. Young’s claim for relief for lack of jurisdiction.
The CRB agreed with the ALJ’s rationale and affirmed. Stating without
further analysis that AHD’s statutory “authority to hear and determine all questions
in respect of any claim [does not] include everything a Claimant could possibly
associate with his work-related injury,” and finding no “statutory authority”
explicitly supporting Mr. Young’s position, the CRB ruled that the WCA does not
authorize AHD to “decide a dispute related to the selection of a subcontractor with
regard to a home renovation.”
Mr. Young contends that the CRB’s ruling is erroneous and does not flow
rationally from a reasonable interpretation of the WCA. He argues that even though
the WCA does not mention home renovations specifically, it provides that AHD (as
the Mayor’s agent) has “full power and authority to hear and determine all questions
in respect of any claim,” 3 and that it must resolve this dispute because the proposed
home modifications are “part and parcel” of his medical care.
3
D.C. Code § 32-1520(a). “Under our Act, a ‘claim’ means nothing more
than a simple request for compensation which triggers the process of claim
adjudication.” Ferreira v. District of Columbia Dep’t of Emp’t Servs.,
531 A.2d 651
, 659–60 (D.C. 1987).
6
II.
Under D.C. Code § 2-510(a)(3) (2016 Repl.), we will affirm the CRB’s
decision “unless it is arbitrary, capricious, or otherwise an abuse of discretion and
not in accordance with the law.” 4 This appeal presents a pure question of law:
whether the WCA authorizes AHD, in adjudicating a claimant’s request for a
compensation order approving home modifications necessary to aid the employee’s
rehabilitation, to resolve a dispute over the contractor chosen by the employee to
perform the modifications. “We review this issue de novo, ‘recognizing that this
court is the final authority on issues of statutory construction.’” 5
4
Clark Constr. Grp. Inc. v. District of Columbia Dep’t of Emp’t Servs.,
123 A.3d 199
, 202 (D.C. 2015) (internal quotation marks omitted).
5 N.M. (J.) v
. District of Columbia Dep’t of Emp’t Servs.,
111 A.3d 9
, 10 (D.C.
2015) (quoting Fluellyn v. District of Columbia Dep’t of Emp’t Servs.,
54 A.3d 1156
,
1160 (D.C. 2012)); see also, e.g., Wash. Metro. Area Transit Auth. v. District of
Columbia Dep’t of Emp’t Servs.,
683 A.2d 470
, 472 (D.C. 1996) (“Where questions
of law are concerned, this court reviews the agency’s rulings de novo; we are
presumed to have the greater expertise when the agency’s decision rests on a
question of law, and we therefore remain the final authority on issues of statutory
construction.” (internal quotation marks omitted)).
7
Normally, in construing the WCA, if “the plain meaning of the statutory
language is unambiguous,” our “inquiry need go no further.” 6 If there is ambiguity
in the operative statutory language, we ordinarily will accord “great weight” to the
CRB’s considered interpretation, provided that it is reasonable and not inconsistent
with the language and purpose of the WCA. 7 “However, the degree of deference to
be accorded to such agency interpretation is a function of the process by which that
interpretative ruling has been arrived at and the degree to which the agency’s
administrative experience and expertise have contributed to the process. For
example, ‘[w]hen it appears that the agency (or, in this case, the [CRB]) did not
conduct any analysis of the language, structure, or purpose of the statutory provision,
it would be incongruous to accord substantial weight to [the] agency’s
determination.’ . . . Likewise, ‘if the agency’s decision is based upon a material
misconception of the law, this court will reject it.’” 8
6
Clark, 123 A.3d at 203
(internal quotation marks and footnote omitted).
7
E.g.,
Johnson, 111 A.3d at 11
(quoting
Fluellyn, 54 A.3d at 1160
);
Georgetown Univ. v. District of Columbia Dep’t of Emp’t Servs.,
862 A.2d 387
, 391
(D.C. 2004).
8
Genstar Stone Prods. Co. v. District of Columbia Dep’t of Emp’t Servs.,
777 A.2d 270
, 273 (D.C. 2001) (quoting Proctor v. District of Columbia Dep’t of Emp’t
Servs.,
737 A.2d 534
, 538 (D.C. 1999), and Jerome Mgmt., Inc. v. District of
Columbia Rental Hous. Comm’n,
682 A.2d 178
, 182 (D.C. 1996)); see also, e.g.,
Wash. Hosp. Ctr. v. District of Columbia Dep’t of Emp’t Servs.,
789 A.2d 1261
,
1264 (D.C. 2002) (reiterating that, to receive deference from this court, “agency
8
Finally, we “recognize that workers’ compensation statutes are to be liberally
construed for the benefit of the employee, and that, accordingly, ambiguous
provisions are to be construed with reference to the statute’s manifest purpose.” 9
III.
The statutory provisions in question here are found in D.C. Code §§ 32-1507
(“Medical services, supplies, and insurance”) and 32-1520 (“Procedure in respect of
claims”).
In pertinent part, § 32-1507(a) provides that:
The employer shall furnish such medical, surgical,
vocational rehabilitation services, including necessary
travel expenses and other attendance or treatment, nurse
and hospital service, medicine, crutches, false teeth or the
repair thereof, eye glasses or the repair thereof, artificial
interpretations must reflect the careful legal and policy analysis required in making
choices among several competing statutory interpretations, each of which has
substantial support and the record must provide evidence that the agency considered
the language, structure, or purpose of the statute when selecting an interpretation”
(internal quotation marks and citations omitted)).
9
Clark, 123 A.3d at 203
(emphasis in the original; internal punctuation and
citations omitted).
9
or any prosthetic appliance for such period as the nature of
the injury or the process of recovery may require.
Section 32-1507(b) adds that “[t]he Mayor . . . shall have the authority to determine
the necessity, character, and sufficiency of any medical aid furnished or to be
furnished,” 10 and that “[d]isputes . . . on the issue of necessity, character, or
sufficiency of the medical care or service furnished . . . shall be resolved by the
Mayor upon application for a hearing[.]” 11 Section 32-1520(a) underscores that “the
Mayor shall have full power and authority to hear and determine all questions in
respect of any [compensation] claim.” 12
The CRB endorsed the ALJ’s conclusion that the dispute over Mr. Young’s
choice of contractor did not pertain to the “character” or “sufficiency” of medical
aid within the meaning of § 32-1507. The only explanation they provided for this
interpretation of the statute was that the WCA contains no provision expressly
10
§ 32-1507(b)(4).
11
Id. at
(b)(6)(D).
12
The Mayor has delegated its authority under §§ 32-1507 and -1520 to the
Department of Employment Services. See Lee v. District of Columbia Dep’t of
Emp’t Servs.,
509 A.2d 100
, 102 n.1 (D.C. 1986).
10
pertaining to home modifications, and that the modifications proposed by each
party’s contractor were identical. 13
We agree with Mr. Young that this cursory explanation is unsatisfactory, and
that the CRB has adopted an unreasonable interpretation of the WCA to which we
owe no deference. The conclusion simply does not follow from the scant reasons
given for it, and it is inconsistent with both the plain statutory language and the
purpose and history of the provisions at issue.
There is no dispute that the proposed structural modification of Mr. Young’s
residence to accommodate the Erigo Pro device constitutes an essential component
of what § 32-1507 refers to as the “medical care or service”—the “medical aid”—to
be furnished to Mr. Young. Subsection (a) states the employer “shall furnish such
medical . . . services, including . . . artificial and prosthetic appliance[s] for such
period as the nature of the injury or the process of recovery may require,” and Mr.
Young requires the modification of his home to be able to use the Erigo Pro
13
The CRB also declined to read § 32-1520(a) as expanding the scope of the
hearing authority in this area beyond that set forth in § 32-1507, i.e., beyond disputes
concerning the “necessity, character, or sufficiency” of the aid to be furnished. Our
resolution of this petition for review renders it unnecessary to address the correctness
of the CRB’s interpretation of § 32-1520(a).
11
(certainly an “artificial appliance”) to ameliorate his injuries and recover some of
his functioning. That, of course, is why Travelers has agreed to pay for the
modification.
That home modification is not mentioned specifically among the ancillary
services listed in § 32-1507(a) does not mean it is excluded from the general category
of medical “aid” or “services.” The listing of some particular services that the
employer shall furnish clearly is not meant to be exhaustive—as the use of the word
“including” signifies. 14 Nor do needed ancillary services have to be medical in
themselves to fall within the category of medical aid or services; this is shown by
the inclusion of “necessary travel expenses” in § 32-1507(a) among the costs that
the employer must cover. The purpose of the statute to ensure that injured employees
receive the therapy they need, and the concomitant requirement that we liberally
construe the statute for the employee’s benefit to achieve that goal, compel the
conclusion that needed home modifications are within the scope of § 32-1507.
14
In statutes, as elsewhere, “[t]he participle including typically indicates a
partial list[.]” Include, BLACK’S LAW DICTIONARY (10th ed. 2014); see also, e.g., the
definition of “include” in the AMERICAN HERITAGE DICTIONARY OF THE ENGLISH
LANGUAGE (3rd ed. 1992) (“include . . . more often implies an incomplete listing”).
12
This conclusion is buttressed by precedent under similar statutes elsewhere.
Notably, the Department of Labor’s Benefits Review Board (BRB), which is the
federal counterpart of the CRB, 15 has considered the interpretation of virtually
identical provisions of the Longshore and Harbor Workers’ Compensation Act
(LHWCA). 16 The LHWCA was the precursor to the WCA, and we have recognized
that interpretations of its provisions are helpful in construing our own statute. 17
15
Congress created the BRB to “issue decisions on appeals of worker’s
compensation claims arising under the Longshore and Harbor Worker’s
Compensation Act.” Benefits Review Board, U.S. DEPARTMENT OF LABOR,
https://www.dol.gov/agencies/brb/welcome https://perma.cc/ZM78-GWRJ. The
BRB “reviews the decisions of administrative law judges in order to determine
whether the findings are supported by substantial evidence and are in accordance
with law.” Benefits Review Board: Mission Statement, U.S. DEPARTMENT OF
LABOR, https://www.dol.gov/agencies/brb/mission https://perma.cc/K9SG-UXJS.
16
33 U.S.C. § 901 et seq.
17
See Pannell-Pringle v. District of Columbia Dep’t of Emp’t Servs.,
806 A.2d 209
, 211–12 (D.C. 2002) (“Before 1980, persons employed in the District of
Columbia were covered by workers’ compensation under the Longshoremen’s and
Harbor Workers’ Compensation Act. In 1980, however, the Council of the District
of Columbia enacted the District of Columbia Workers’ Compensation Act . . . ,
which borrowed heavily from the LHWCA.”) (internal citations omitted); see also
Goba v. District of Columbia Dep’t of Emp’t Servs.,
960 A.2d 591
, 595 (D.C. 2008)
(relying on federal court’s construction of 33 USC § 928(a) to interpret the WCA’s
fee-shifting provision).
13
Section 32-1507 is based on 33 U.S.C. § 907, which similarly states that “[t]he
employer shall furnish such medical, surgical, and other attendance or treatment,
nurse and hospital service, medicine, crutches, and apparatus, for such period as the
nature of the injury or the process of recovery may require,” 18 and that “[t]he
Secretary shall . . . have authority to determine the necessity, character, and
sufficiency of any medical aid furnished or to be furnished.” 19 In Dupre v. Cape
Romain Contractors, Inc., the BRB affirmed an ALJ’s decision that modifications
to the home of a paraplegic claimant “which were necessitated by his disability, i.e.,
ramps, widened doorways, handicapped-accessible plumbing fixtures, and other
changes” constituted medical aid within the meaning of § 907. 20 The BRB explained
that:
it would be unconscionable for a claimant to have to foot
the bill for such basic necessities resulting from his work-
related injury, and interpreting the medical benefits
section of the Act to exclude these items from coverage
would not promote the purposes of the Act . . . as they are
18
33 U.S.C. § 907(a).
19
33 U.S.C. § 907(b).
20
23 B.R.B.S. 86 (1989).
14
necessary for [claimant] to utilize the bathroom or even
move about his home. 21
Other jurisdictions have reasoned similarly when interpreting comparable
language in their workers’ compensation statutes. For example, in R & T Constr.
Co. v. Judge, the Court of Appeals of Maryland held that modifications to the home
of a paraplegic employee constituted medical treatment or services under that state’s
workers’ compensation statute. 22 The Court of Appeals rejected the argument that
home modifications were not “in the same class as . . . ‘medicines, crutches,
apparatus, artificial hands, arms, feet and legs and other prosthetic appliances,’” 23
citing the employee’s inability to use his wheelchair without the renovations. 24
21
Id. The BRB relied
on several prior decisions, including one holding that
§ 907 covered “the cost of a van with an automatic lift for a quadriplegic claimant
. . . as a reasonable means to provide necessary transportation for medical purposes.”
Id. (citing Day v.
Ship Shape Maintenance Co., 16 B.R.B.S. 38 (1983)).
22
594 A.2d 99
, 105–07 (Md. 1991) (noting also that the majority of courts
addressing the issue had reached similar conclusions under other state workers’
compensation statutes that did not specifically list home modifications among the
medical aid to be made available to injured employees).
23
Id. at
107.
24
Id. See also, e.g.,
Quaker Oats v. Ciha,
552 N.W.2d 143
, 154–56 (Iowa
1996) (home modifications including “widened doorways, a ramp into the home, a
special shower, an elevator, and other items necessitated by [employee’s]
wheelchair-bound status” were covered by workers’ compensation statute); Miller
v. E.M.C. Ins. Cos.,
610 N.W.2d 398
, 411–12 (Neb. 2000) (employer was liable
under workers’ compensation statute for modifications that would make employee’s
15
The legal conclusion is inescapable: home modifications can constitute
“medical aid” under § 32-1507, and the ALJ in this case therefore had the statutory
authority and responsibility under subsection (b) to resolve any dispute between Mr.
Young and Travelers concerning the “necessity, character, or sufficiency” of the
home modification he sought to enable him to benefit from the Erigo Pro device.
We so hold; we see no need to remand this issue to the CRB for further exegesis of
the statute. 25
home handicap-accessible); Squeo v. Comfort Control Corp.,
494 A.2d 313
, 318–23
(N.J. 1985) (ordering employer to pay for wheelchair-bound employee’s accessible
apartment, despite absence of statutory language addressing home modifications);
Peace River Elec. Corp. v. Choate,
417 So. 2d 831
, 832 (Fla. Dist. Ct. App. 1982)
(upholding award of wheelchair accessible modular home to paraplegic employee
under workers’ compensation act); Zephyr, Inc. v. Indus. Comm’n,
576 N.E.2d 1
, 6
(Ill. App. Ct. 1991) (holding that “despite the lack of explicit statutory language . . .
referring to home modifications, a fair reading of the statute does not preclude such
compensation, nor is the result contrary to the statute's general purpose of fully
compensating employees for work-related injuries.”); Hall v. Fru Con Const. Corp.,
46 S.W.3d 30
, 34 (Mo. Ct. App. 2001) (“Given that wheelchairs fall under the
[workers’ compensation] statute, it would logically follow that modifications to
employee’s home should be covered under the act to allow him to use his
wheelchair.”); Rieger v. Workmen’s Comp. Appeal Bd.,
521 A.2d 84
, 86 (Pa.
Commw. Ct. 1987) (remodeling of employee’s home so that he could utilize his
wheelchair was covered by workers’ compensation act).
25
Often, because “we acknowledge the CRB’s expertise and . . . responsibility
for administering the Workers’ Compensation Act,” we remand so that the agency
can make a second attempt to “supply a reasoned analysis.” Hensley v. District of
Columbia Dep’t of Emp’t Servs.,
49 A.3d 1195
, 1205 (D.C. 2012) (internal quotation
marks and citations omitted). Remand is not warranted, however, when this court
has already articulated “the only correct interpretation” of the statute as a matter of
law. Reyes v. District of Columbia Dep’t of Emp’t Servs.,
150 A.3d 1277
, 1280
16
The remaining question is whether the dispute over the choice of contractor is
one that concerns the “character” or “sufficiency” of Mr. Young’s requested home
modification. (Its “necessity” is conceded and hence is not in dispute.) The terms
“character” and “sufficiency” are words of broad scope. “Character” in this context
refers to “[t]he combination of qualities or features that distinguishes one . . . thing
from another.” 26 “Sufficiency” is essentially a synonym for “adequacy,” i.e., what
would be adequate to fulfilling “the needs or requirements” of a situation. 27 Contrary
to the apparent view of the ALJ and the CRB, the mere fact that each party’s
preferred contractor proposes to perform the same structural modification does not
mean there is no “character” or “sufficiency” issue raised by the choice of contractor.
The dispute is over the suitability and qualifications of the contractor engaged to do
(D.C. 2016). See also District of Columbia Pub. Schs. v. District of Columbia Dep’t
of Emp’t Servs.,
95 A.3d 1284
, 1289 (D.C. 2014) (remand on the merits alone where
the CRB’s statutory interpretation was “erroneous as a matter of law”); Apartment
and Office Bldg. Ass’n of Metro. Wash. v. Pub. Serv. Comm’n of the District of
Columbia,
129 A.3d 925
, 930 (D.C. 2016) (“remand is not required in cases where
the agency would doubtless reach the same result . . . or [where] it is clear what the
agency’s decision has to be.”) (internal quotation marks and citations omitted).
Because home modifications can constitute medical aid under these circumstances,
the fact that the WCA fails to expressly mention them does not create any real
ambiguity deserving of CRB analysis.
26
Character, AMERICAN HERITAGE DICTIONARY, supra note 14.
27
Id. (definitions of “suffice”
and its adjectival and noun variants).
17
the job—in other words, how the proffered contractor would carry out the plans,
whether the contractor is capable, whether it would do so adequately so as to fulfill
the parties’ legitimate needs and requirements. Such a dispute is integral to both the
“character” and the “sufficiency” of the home modification for which Mr. Young
seeks authorization. 28
Accordingly, we hold that the ALJ and the CRB erred as a matter of law in
ruling that the AHD lacked authority under the WCA to resolve Mr. Young’s dispute
with Travelers over the selection of the contractor to carry out the structural
modification of his home. We reverse and remand for a hearing to be held to resolve
that dispute. In view of the length of time this dispute has been pending, we trust
that a hearing will be held expeditiously on remand and resolution of the dispute will
not be delayed.
So ordered.
28
Cf. Potter v. Elec. Boat Corp., 41 B.R.B.S. 69 (2007) (holding that a dispute
between claimants and employer regarding the choice of a mail-order provider for
prescription medication “concern[s] the character and sufficiency of any medical
care furnished.”) (internal quotation marks omitted); Jones v. Huntington Ingalls,
Inc., 51 B.R.B.S. 29 (2017) (holding that the choice of an audiologist, who is not a
physician under the LHWCA, falls within the “character and sufficiency of a
medical service.”) (internal quotation marks omitted). |
4,639,144 | 2020-12-03 15:02:32.629815+00 | null | http://courts.delaware.gov/Opinions/Download.aspx?id=313760 | IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
STATE OF DELAWARE, )
)
v. ) ID No. 1901005067
)
JOHN P. SINGLETON, )
Defendant. )
Submitted: September 11, 2020
Decided: December 3, 2020
ORDER DENYING MOTION TO REDUCE SENTENCE
This 3rd day of December, 2020, upon consideration of the Defendant
John P. Singleton’s Motion for Sentence Reduction (D.I. 30), its supporting
documentation (D.I. 31), and the record in this matter, it appears to the Court
that:
(1) On the day of his final case review, John P. Singleton pleaded
guilty to one count of robbery first degree and six counts of robbery second
degree (each as a lesser offense of the first degree robbery charged in each
corresponding count).1 He did so in exchange for the downgrading of the bulk
(six of seven) of his robbery charges, the State’s withholding of a habitual
criminal petition, and the State’s capping of its sentencing recommendation
1
Plea Agreement and TIS Guilty Plea Form, State v. John P. Singleton, ID No.
1901005067 (Del. Super. Ct. Nov. 18, 2019) (D.I. 15).
to a request for ten years of unsuspended imprisonment. 2 These offenses arose
from a month-long spree of retail robberies that occurred in the winter of
2018-2019.3
(2) Mr. Singleton’s sentencing occurred on July 10, 2020, after a
comprehensive presentence investigative report was prepared. He was
sentenced: (a) for Robbery First Degree (N19-01-1293)—25 years at Level
V suspended after serving five years at Level V to be served under the
provisions of
11 Del. C
. § 4204(k) for 20 years at Level IV (DOC Discretion),
suspended after serving six months at Level IV, for two years at Level III; and
(b) for each Robbery Second Degree (N19-01-1294, 1295, 1296, 1297, 1298,
and 1299)—Five years at Level V suspended after serving six months at Level
2
Id. at
1
(“State will cap its recommendation for unsuspended level five time at ten (10)
years. State agrees to waive habitual offender sentencing.”). Because Mr. Singleton had
been previously convicted of armed robbery on at least two prior occasions in Maryland,
he faced a sentence of at least 25 years per first degree robbery under Delaware’s Habitual
Criminal Act. See DEL. CODE ANN. tit. 11, § 4214(d) (2018) (providing now that one, like
Mr. Singleton, who may be a habitual offender under that provision of the Habitual
Criminal Act and who is convicted of a Title 11 violent felony can be declared a habitual
criminal; such a habitual criminal must receive a minimum sentence of not less than the
statutory maximum penalty otherwise provided for each triggering Title 11 violent felony
that forms the basis of the State’s habitual criminal petition);
id. at
§§ 832(a) and 4205(b)(2)
(maximum sentence for robbery first degree is 25 years at Level V).
3
Indictment, State v. John P. Singleton, ID No. 1901005067 (Del. Super. Ct. May 16,
2019) (D.I. 3).
-2-
V, again with each of these six terms to be served under the provisions of
11 Del. C
. § 4204(k).4
(3) The sentencing order provides that Mr. Singleton’s sentence is
effective January 9, 2019, that the terms of confinement are to run
consecutively, and that he is to be held at Level V until space is available at
Level IV. 5 The Court exercised its sentencing discretion when ordering that
Mr. Singleton’s seven separate terms of unsuspended incarceration for his
seven separate robberies were to be served consecutively, 6 and when it
ordered application of
11 Del. C
. § 4204(k) to each those terms. 7
(4) In sum, Mr. Singleton’s cumulative eight-year period of
unsuspended imprisonment is comprised of the five-year minimum term of
incarceration that must be imposed under Delaware’s first degree robbery
statute and cannot be suspended, 8 and the cumulation of the six six-year terms
4
Sentence Order, State v. John P. Singleton, ID No. 1901005067 (Del. Super. Ct. July
10, 2019) (D.I. 29).
5
Id. 6
Id. at
§ 3901(d).
7
Id. at
§ 4204(k) (“[T]he court may direct as a condition to a sentence of imprisonment
to be served at Level V or otherwise that all or a specified portion of said sentence shall be
served without benefit of any form of early release, good time, furlough, work release,
supervised custody or any other form of reduction or diminution of sentence.) (emphasis
added).
8
As Mr. Singleton acknowledged in his plea, due to his prior conviction for armed
robbery in Maryland, he was subject to an enhanced five-year minimum here in Delaware.
-3-
imposed for the remaining robberies. And all eight of those years are to be
served “without benefit of any form of early release, good time, furlough,
work release, supervised custody or any other form of reduction or diminution
of sentence.”9
(5) Mr. Singleton filed no direct appeal of his convictions or
sentences. Instead, he docketed the present motion under Superior Court
Criminal Rule 35(b) requesting reduction of his cumulative eight-year Level
V term. 10 Mr. Singleton asks this be done by excising the § 4204(k) condition
placed on each of his robbery sentences.11
(6) The Court may consider Mr. Singleton’s motion “without
presentation, hearing or argument.” 12 The Court will decide his motion on the
papers filed and the complete sentencing record in this case.
See Plea Agreement, at 1 (“Defendant agrees that he is subject to a five (5) year minimum
mandatory level 5 sentence on the Robbery 1st Degree conviction pursuant to
11 Del. C
.
832(b)(2) due to the following conviction: Robbery With a Deadly Weapon (MD 2001,
Case No. 202008019 Baltimore City Circuit Court).”). DEL. CODE ANN. tit. 11, § 832(b)(2)
(2018).
9
DEL. CODE ANN. tit. 11, § 4204(k)(2018)
10
Super. Ct. Crim. R. 35(b) (providing that, under certain conditions, the court may
reduce a sentence of imprisonment on an inmate’s motion); Jones v. State,
2003 WL 21210348
, at *1 (Del. May 22, 2003) (“There is no separate procedure, other than that
which is provided under Superior Court Criminal Rule 35, to reduce or modify a
sentence.”).
11
Def.’s Rule 35(b) Mot., at 2-3.
12
Super. Ct. Crim. R. 35(b).
-4-
(7) When considering motions for sentence reduction or
modification, “this Court addresses any applicable procedural bars before
turning to the merits.” 13 As Mr. Singleton’s motion is his first and is timely
filed, the Court finds there are no procedural bars to the consideration of his
request under Rule 35(b).
(8) The purpose of Superior Court Criminal Rule 35(b) historically
has been to provide a reasonable period for the Court to consider alteration of
its sentencing judgments.14 Where a motion for reduction of sentence of
imprisonment is filed within 90 days of sentencing, the Court has broad
discretion to decide if it should alter its judgment.15 “The reason for such a
rule is to give a sentencing judge a second chance to consider whether the
initial sentence is appropriate.”16
13
State v. Redden,
111 A.3d 602
, 606 (Del. Super. Ct. 2015).
14 N.M. (J.) v
. State,
234 A.2d 447
, 448 (Del. 1967) (per curiam).
15
Hewett v. State,
2014 WL 5020251
, at *1 (Del. Oct. 7, 2014) (“When, as here, a motion
for reduction of sentence is filed within ninety days of sentencing, the Superior Court has
broad discretion to decide whether to alter its judgment.”).
16
State v. Remedio,
108 A.3d 326
, 331 (Del. Super. Ct. 2014) (internal citations and
quotations omitted) (Observing that such a request is essentially a plea for leniency: an
appeal to the sentencing court to reconsider and show mercy.). See also State v. Tinsley,
928 P.2d 1220
, 1223 (Alaska Ct. App. 1996) (Explaining under Alaska’s then-extant 120-
day rule, that a court’s “authority can be exercised even when there is no reason to reduce
the sentence other than the judge’s decision to reconsider and show mercy.”).
-5-
(9) The Court has examined Mr. Singleton’s claim—i.e., his request
that the Court reconsider and decide if, on further reflection, its sentence now
seems unduly harsh—on the merits. Under every iteration of Delaware’s
criminal rules governing motions to reduce sentences, such entreaties are
addressed to the sound discretion of this Court.17
(10) Mr. Singleton cites three reasons that the Court should reduce his
sentence by removing the § 4204(k) condition:18 (a) he would “like to be able
to work and receive some new skills or trade to take back to society once
[he’s] released;” (b) he feels he would “not [be able] to work [him]self back
into society with not being able to receive good credits;” and (c) he “take[s]
full responsibility for [his] actions [as] far as all charges.”19
17
Hewett,
2014 WL 5020251
, at *1. See also Shy v. State,
246 A.2d 926
(Del. 1968);
Lewis v. State,
1997 WL 123585
, at *1 (Del. Mar. 5, 1997).
18
And make no mistake, removal of this condition alone would be a reduction in
sentence. Good time consists of two types of credits: behavior credits and merit credits.
Johnson v. Phelps,
2009 WL 587625
, at *2 (Del. Super. Ct. Feb. 20, 2009). Were the
§ 4204(k) condition removed, Mr. Singleton’s behavior credits would be calculated and
deducted from his total sentence now to determine his “short-term release date”—the date
on which Singleton must be released from incarceration, unless he subsequently commits
a disciplinary infraction that causes all or a part of those behavior credits to be forfeited.
See Snyder v. Andrews,
708 A.2d 237
, 243 (Del. 1998) (explaining DOC’s sentence
calculation method); see also Crosby v. State,
824 A.2d 894
, 899 (Del. 2003) (explaining
significance of a short-term release date).
19
Def.’s Rule 35(b) Mot., at 2.
-6-
(11) Of course, there is nothing about the § 4204(k) condition itself
that prohibits Mr. Singleton from fully engaging in any substance abuse,
mental health, work, educational or other program aimed toward
rehabilitation. That is, the DOC doesn’t exclude a § 4204(k) inmate from any
rehabilitative program or effort; he just doesn’t earn sentence diminution—
i.e., merit credits—for such participation. And it is clear that it’s not a lack of
rehabilitative opportunity Mr. Singleton bemoans, it’s lack of incentivization
via sentence reduction. 20 That’s sad.
(12) One might think that a career criminal now in his mid-50s, who
has spent most of his adulthood behind bars, who ducked habitual criminal
status and a certain life sentence on this occasion, and who is serving a
cumulative sentence at the lowest end of the SENTAC guidelines, would be
wholly motivated to take advantage of any and all available rehabilitative
opportunities solely to better himself and attain the best possible position to
take advantage of the favor granted him. But Mr. Singleton wants more.
(13) The Court has fully reviewed Mr. Singleton’s application, the
record of his case, his prior supervision history, and all sentencing information
available. The Court carefully weighed the applicable aggravators and
20
Def.’s Rule 35(b) Mot., at 3 (“I’m working toward changing my behaviors, and
becom[ing] a productive member of society. Without [the] ab[ility] to earn no credits, it[’]s
hard for me to focus on doing what I need to do to change my life.”).
-7-
mitigators before imposing its sentence.21 The Court finds that when those
and all other sentencing factors in his case are considered, Mr. Singleton’s
statement of his aspirations may be commendable, but they do not compel a
sentence reduction here. Instead, after thorough review of the merits of
Mr. Singleton’s request, the Court finds its original sentencing judgment is
appropriate for the reasons stated at the time it was rendered.
(14) Accordingly, the Court will exercise its discretion under Rule
35(b)22 and DENY Mr. Singleton’s request to reduce his term of
imprisonment.
SO ORDERED this 3rd day of December, 2020.
/s/ Paul R. Wallace
Paul R. Wallace, Judge
Original to Prothonotary
cc: Ross A. Flockerzie, Esquire,
William L. Raisis, Deputy Attorney General
Investigative Services Office
21
See Sentencing Order, at 6 (noting the aggravating factors and mitigating factors found
by the Court).
22
Rondon v. State,
2008 WL 187964
, at *1 (Del. Jan. 15, 2008) (“The merit of a sentence
modification under Rule 35(b) is directed to the sound discretion of the Superior Court.”).
-8- |
4,639,145 | 2020-12-03 15:03:12.935565+00 | null | http://www.illinoiscourts.gov/Opinions/SupremeCourt/2020/125441.pdf |
2020 IL 125441
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 125441)
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant,
v. KENT ELMORE et al., Appellees.
Opinion filed December 3, 2020.
JUSTICE MICHAEL J. BURKE delivered the judgment of the court, with
opinion.
Chief Justice Anne M. Burke and Justices Garman, Karmeier, Theis, and
Neville concurred in the judgment and opinion.
Justice Kilbride took no part in the decision.
OPINION
¶1 At issue is the enforceability of a “mechanical device” exclusion in an
automobile policy issued by plaintiff, State Farm Mutual Automobile Insurance
Company (State Farm). The appellate court held that the exclusion was ambiguous
and therefore construed it against State Farm and in favor of coverage. 2019 IL App
(5th) 180038, ¶ 28. For the reasons that follow, we reverse.
¶2 BACKGROUND
¶3 Defendant, Kent Elmore, was injured while unloading grain from a truck owned
by his father, defendant Ardith Sheldon Elmore (Sheldon). Sheldon possessed or
leased farm property in Effingham County. On October 16, 2013, Kent was
assisting Sheldon in his grain farming operation. Kent backed up a grain truck to
an auger that was being used to move grain from the grain truck to a transport truck.
A tractor powered the auger by means of a power take-off (PTO) shaft. The auger
had a hopper that received grain from the grain truck. The hopper was located
beneath the grain truck’s dumping chute. As the auger turned, it moved grain up
and dumped it into the transport truck. Kent was attempting to open the grain
truck’s gate to let grain into the auger. He wanted to get extra leverage, so he
stepped onto the auger. Because the auger’s protective shield had been removed,
Kent’s foot was exposed to the turning shaft. In the accident, Kent lost his right leg
below the knee. Surgery was later required to amputate the leg just above the knee.
¶4 Kent filed a negligence action against Sheldon. He eventually settled the
lawsuit. In exchange for releasing all claims against Sheldon, Kent received $1.9
million from Bishop Mutual Insurance Company, Grinnell Mutual, and State Farm
Fire and Casualty. Kent reserved his right to pursue additional coverage under the
auto policy that covered the grain truck.
¶5 The truck, a 2002 Ford International 4900, was covered by an auto policy in
which Sheldon was a named insured. State Farm filed a complaint for declaratory
judgment asking the court to determine and adjudicate the parties’ rights and
liabilities under the policy. In its original complaint, State Farm argued that no
coverage was provided because the injury was caused by an auger and because an
auger is neither a “car” nor a “trailer,” as those terms are defined in the policy. State
Farm later filed an amended complaint arguing that the auger was a mechanical
device and therefore coverage was precluded under the policy’s “mechanical
device” exclusion.
-2-
¶6 State Farm attached a copy of the policy to the complaint. The policy’s
declarations page lists the insured vehicle as a 2002 International Model 4900 truck.
The policy provided bodily injury liability limits of $250,000 per person and
$500,000 per accident. The policy sets forth its liability coverage as follows:
“LIABILITY COVERAGE
***
Additional Definition
Insured means:
1. you and resident relatives for:
a. the ownership, maintenance, or use of:
(1) your car;
***
3. any other person for his or her use of:
a. your car:
***
Such vehicle must be used within the scope of your consent;
***
Insuring Agreement
1. We will pay:
a. damages an insured becomes legally liable to pay because of:
(1) bodily injury to others; and
(2) damage to property
-3-
caused by an accident that involves a vehicle for which that
insured is provided Liability Coverage by this policy[.]”
(Emphases in original.)
¶7 The policy contains a Commercial Vehicle endorsement. The “mechanical
device” exclusion is contained in this endorsement. This exclusion provides as
follows:
“LIABILITY COVERAGE
***
b. Exclusions
***
(4) THERE IS NO COVERAGE FOR AN INSURED FOR
DAMAGES RESULTING FROM:
***
(c) THE MOVEMENT OF PROPERTY BY MEANS OF A
MECHANICAL DEVICE, OTHER THAN A HAND TRUCK,
THAT IS NOT ATTACHED TO THE VEHICLE DESCRIBED
IN (a) ABOVE.” (Emphasis in original.)
¶8 State Farm moved for summary judgment. In the motion, State Farm argued
that the grain auger was a “mechanical device” as that term is used in the policy
and that therefore the policy provided no liability coverage to Sheldon for Kent’s
claims. In a memorandum attached to the motion, State Farm argued that the
“mechanical device” exclusion precluded coverage because Kent was injured when
he stepped into the turning auger. State Farm contended that the exclusion clearly
applied because the auger was a mechanical device other than a hand truck, it was
not attached to the vehicle, and it was being used to move grain. State Farm noted
that, although no Illinois case had construed the exclusion, courts in other states
had found the exclusion valid and enforceable.
-4-
¶9 Kent later filed his own motion for summary judgment. Kent cited section 7-
317(b)(2) of the Illinois Vehicle Code, which provides that an owner’s policy of
liability insurance “[s]hall insure the person named therein and any other person
using or responsible for the use of such motor vehicle or vehicles with the express
or implied permission of the insured.” 625 ILCS 5/7-317(b)(2) (West 2012). Kent
argued that Sheldon both used and was responsible for the use of the insured vehicle
at the time of the accident because “use” includes the loading, unloading, and
transferring of corn from the field to the grain elevator. Kent noted that Illinois
courts have adopted the “completed operations doctrine,” which provides that
coverage extends to the insured for all acts that occur before the loading and
unloading process has been completed. In a memorandum of law attached to the
motion, Kent argued that several other states had held the “mechanical device”
exclusion void as against public policy when it conflicted with a mandatory
omnibus coverage statute.
¶ 10 Following a hearing, the circuit court granted State Farm’s motion for summary
judgment and denied Kent’s motion. In a written order, the circuit court explained
that it agreed with Kent that the vehicle was being used at the time of the accident,
that the use bore a causal connection to the injury, and that the unloading of grain
was completing a task. The court agreed with State Farm, however, that the auger
was a mechanical device and that it was not a hand truck. The court found the
exclusion unambiguous and applicable to Kent’s injury. The court considered the
out-of-state cases cited by Kent that had held the exclusion void as against public
policy. However, the court found these cases inapplicable because the rule in
Illinois is that insurers may have reasonable exclusions in a policy if the exclusions
do not differentiate between the named insured and permissive users. See
Progressive Universal Insurance Co. of Illinois v. Liberty Mutual Fire Insurance
Co.,
215 Ill. 2d 121
(2005). The court found that the “mechanical device” exclusion
did not differentiate between the insured and permissive users and therefore did not
run afoul of Progressive. Finding the exclusion unambiguous and not against public
policy, the court denied Kent’s motion for summary judgment and entered
summary judgment for State Farm.
¶ 11 Kent appealed, and the Appellate Court, Fifth District, reversed. 2019 IL App
(5th) 180038. Kent raised two issues on appeal. Kent argued that the “mechanical
device” exclusion was (1) ambiguous and therefore had to be construed in favor of
-5-
coverage and (2) contrary to the public policy underlying this state’s mandatory
insurance laws.
Id. ¶ 16.
The appellate court agreed with his first point and
accordingly did not address the public policy argument.
¶ 12 The appellate court acknowledged that other states had construed the
“mechanical device” exclusion and found it unambiguous and enforceable.
Id. ¶ 22
(citing Continental Insurance Co. v. American Motorist Insurance Co.,
542 S.E.2d 607
(Ga. Ct. App. 2000) (applying exclusion when injury was caused by a pallet
jack with a hydraulic pumping mechanism), Elk Run Coal Co. v. Canopius U.S.
Insurance, Inc.,
775 S.E.2d 65
(W. Va. 2015) (front end loader was a “mechanical
device”), and Dauthier v. Pointe Coupee Wood Treating, Inc.,
560 So. 2d 556
(La.
Ct. App. 1990) (forklift was a “mechanical device”)). The three courts reached their
conclusions in different ways. In Continental, the court noted that the exclusion
applies to the movement of property by a mechanical device other than a hand truck.
Continental, 542 S.E.2d at 609-10
. The court focused its analysis on whether a
pallet jack was a hand truck. The court concluded that it was not, and therefore the
exclusion applied.
Id. at 611.
In Elk Run, the court determined that a front-end
loader was a mechanical device by looking to other cases that had described front-
end loaders that way. See Elk
Run, 775 S.E.2d at 74
. In Dauthier, the court
determined that a forklift was a mechanical device by looking at the dictionary
definitions of “mechanical” and “device.”
Dauthier, 560 So. 2d at 558
. Dauthier
determined that a mechanical device is “an invention or contrivance having to do
with machinery or tools.”
Id. State Farm asked
the appellate court to adopt
Dauthier’s definition of “mechanical device.”
2019 IL App (5th) 180038
, ¶ 22.
¶ 13 The appellate court distinguished the cases State Farm relied upon by noting
that they involved “self-powered or motorized machines used in commercial
settings.”
Id. ¶ 24.
By contrast, the auger was neither motorized nor self-powered
but was simply “a large cylindrical structure with metal helical blades.”
Id. It could not
move grain unless it was hooked up to an external power source.
Id. The court was
concerned that, under State Farm’s “expansive definition” of “ ‘mechanical
device,’ ” coverage would be provided “only for injuries arising when grain is
unloaded from the insured truck by hand or by a hand truck.”
Id. ¶ 25.
The court
noted that Webster’s defined a “hand truck” as “ ‘a small hand-propelled truck or
wheelbarrow.’ ”
Id. (quoting Webster’s Third
International Dictionary 1028
(1978)).
-6-
¶ 14 The appellate court next explained that, in determining whether ambiguity
exists, courts may consider “the subject matter of the contract, the facts surrounding
its execution, the situation of the parties, and the predominate purpose of the
contract.”
Id. ¶ 26.
Here, the insured truck was to be used for farming purposes.
The court believed that State Farm’s interpretation of the exclusion would produce
an absurd result because it would mean that coverage was provided only for the
unloading of grain with a hand truck.
Id. The court did
not believe that this would
be a reasonably effective or feasible way to unload grain from a grain truck.
Id. The court noted
that the dispute was not one between insurance companies, and the
court did not believe that a purchaser of auto insurance such as Sheldon would have
known of the exclusion.
Id. The court believed
that the policy language had to be
viewed from the standpoint of “an average lay person who is untrained in
complexities of the commercial insurance industry.”
Id. The court was
also
concerned that State Farm’s definition would allow the insurer to decide after an
accident occurred whether a particular device was a mechanical device.
Id. ¶ 27
.
Accordingly, the court held that the exclusion had not been set forth in clear,
unambiguous language but rather was overly broad and vague, leaving an insured
unable to discern which devices would be covered by the exclusion.
Id. ¶ 28.
The
court thus held that the exclusion had to be construed against the insurer and in
favor of coverage.
Id. ¶ 15
Presiding Justice Overstreet dissented. Applying the plain meaning of the terms
“mechanical” and “device,” the dissent concluded that an auger is a mechanical
device.
Id. ¶ 33
(Overstreet, P.J., dissenting). The dissent noted other cases that had
described an auger as a mechanical device and rejected the majority’s conclusion
that only motorized or self-powered devices are mechanical.
Id. The dissent also
disagreed with the majority’s conclusion that the exclusion was overly broad and
vague. The dissent argued that the exclusion’s applicability in other factual
circumstances did not mean that it was ambiguous as to whether a grain auger is a
mechanical device.
Id. ¶ 34.
Finally, the dissent concluded that the majority’s
interpretation had unduly restricted the parties’ freedom to “make their own
contracts and exclude certain risks from liability coverage.”
Id. ¶ 35.
According to
the dissent, the majority’s interpretation was contrary to this court’s decision in
Progressive, which allows parties to an insurance contract to exclude certain risks
from coverage, as long as the exclusion does not distinguish between insureds and
permissive users.
Id. -7- ¶ 16
This court allowed State Farm’s petition for leave to appeal. Ill. S. Ct. R. 315
(eff. Oct. 1, 2019).
¶ 17 ANALYSIS
¶ 18 State Farm argues that the mechanical device exclusion is unambiguous and
precludes coverage. State Farm further contends that the appellate court’s refusal
to enforce the exclusion restricts freedom of contract. Kent counters that the
exclusion is vague and ambiguous and therefore the appellate court properly
construed it against the insurer. Alternatively, Kent argues that the exclusion is void
as against public policy because it excludes coverage for damages for bodily injury
suffered by a permissive user.
¶ 19 When the parties file cross-motions for summary judgment, they agree that only
questions of law are involved and invite the court to decide the issues based on the
record. Bremer v. City of Rockford,
2016 IL 119889
, ¶ 20. Construction of an
insurance policy and whether the policy comports with statutory requirements are
questions of law appropriate for summary judgment. Schultz v. Illinois Farmers
Insurance Co.,
237 Ill. 2d 391
, 399 (2010). We review summary judgment orders
de novo.
Id. at 399-400. ¶ 20 1.
Ambiguity
¶ 21 We first consider State Farm’s argument that the appellate court erred in finding
the exclusion ambiguous. The rules applicable to contract interpretation govern the
interpretation of an insurance policy. Founders Insurance Co. v. Munoz,
237 Ill. 2d 424
, 433 (2010). Our primary objective is to ascertain and give effect to the parties’
intentions as expressed in the agreement.
Schultz, 237 Ill. 2d at 400
. Policy terms
that are clear and unambiguous will be enforced as written unless doing so would
violate public policy.
Id. The rule that
policy provisions limiting an insurer’s
liability will be construed liberally in favor of coverage applies only if a provision
is ambiguous. Rich v. Principal Life Insurance Co.,
226 Ill. 2d 359
, 372 (2007).
Ambiguity exists only where the policy language is susceptible to more than one
reasonable interpretation.
Founders, 237 Ill. 2d at 433
. This court will not strain to
find ambiguity where none exists, nor will it adopt an interpretation that “rests on
-8-
‘gossamer distinctions’ that the average person, for whom the policy is written,
cannot be expected to understand.”
Id. (quoting Canadian Radium
& Uranium
Corp. v. Indemnity Insurance Co. of North America,
411 Ill. 325
, 334 (1952)). A
policy term is not ambiguous because the term is not defined within the policy or
because the parties can suggest creative possibilities for its meaning. Lapham-
Hickey Steel Corp. v. Protection Mutual Insurance Co.,
166 Ill. 2d 520
, 529 (1995).
A court may not read an ambiguity into a policy just to find in favor of the insured.
Id. at 530.
If the words of a policy can reasonably be given their plain, ordinary,
and popular meaning, the provisions should be applied as written, and the parties
should be bound to the agreement they made. Western Casualty & Surety Co. v.
Brochu,
105 Ill. 2d 486
, 495 (1985).
¶ 22 We agree with State Farm that the appellate court erred in finding the
mechanical device exclusion ambiguous. Again, the exclusion provides that there
is no coverage for damages resulting from “the movement of property by means of
a mechanical device, other than a hand truck, that is not attached to the [insured]
vehicle.” Giving the terms of the policy their plain, ordinary, and popular meaning
shows that the exclusion is capable of only one reasonable interpretation. Moreover,
the exclusion is capable of being understood by the average insured. “Mechanical”
is defined as “of, relating to, or concerned with machinery or tools” or “produced
or operated by a machine or tool.” Webster’s Third New International Dictionary
1400-01 (1993). A “device” is “a piece of equipment or a mechanism designed to
serve a special purpose or perform a special function.”
Id. at 618.
A “hand truck”
is a “small hand-propelled truck or wheelbarrow.”
Id. at 1028.
Here, not only was
the grain auger clearly a machine or tool designed to move grain from one place to
another, it was also a device that was “operated by a machine or tool” (a tractor).
Moreover, the auger was not a small hand-propelled truck or wheelbarrow, and it
was not attached to the insured vehicle. Thus, the exclusion clearly applied and
precluded coverage for Kent’s injury.
¶ 23 The appellate court erred in finding the exclusion ambiguous on the basis that
the three out-of-state cases cited by State Farm applied the exclusion to devices that
were either self-powered or motorized.
2019 IL App (5th) 180038
, ¶ 24. There are
several problems with this part of the court’s analysis. First, the courts in these three
cases did not rely on the fact the devices were motorized or self-powered to
conclude that they were mechanical devices. See
Continental, 542 S.E.2d at 609
-
-9-
11; Elk
Run, 775 S.E.2d at 74
;
Dauthier, 560 So. 2d at 558
. Second, it is settled
that, in construing insurance contracts, “courts can have no other function but to
ascertain and enforce the intention of the parties, and must not inject terms and
conditions different from those agreed upon by the parties.” Lentin v. Continental
Assurance Co.,
412 Ill. 158
, 162-63 (1952); see Chatham Corp. v. Dann Insurance,
351 Ill. App. 3d 353
, 359 (2004). The court erred in reading in a requirement that a
mechanical device must be self-powered or motorized. Third, the court mistakenly
focused not on the plain meaning of the terms in the exclusion but rather on the
facts of other cases that had applied the exclusion. The fact that the devices at issue
in those cases happened to be motorized or self-powered says nothing about
whether an auger fits the plain meaning of “mechanical device.” The appellate
court’s analysis is akin to a court finding an exclusion applicable to “watercraft”
ambiguous as to whether a sailboat is a watercraft because the court discovered
three out-of-state cases applying the exclusion to motorboats. Finally, the plain
language of the exclusion shows that a “mechanical device” does not have to be
self-powered or motorized. The exclusion refers to “a mechanical device, other
than a hand truck.” (Emphasis added.) In other words, the policy itself considers a
hand truck to be a mechanical device. If a small hand-propelled truck or
wheelbarrow is a mechanical device, then clearly the policy itself does not require
a device to be self-powered or motorized to be considered a mechanical device.
¶ 24 Alternatively, Kent argues that, even if a grain auger could be considered a
“mechanical device,” the exclusion is still ambiguous because it is susceptible to
more than one interpretation, one of which would not apply to Kent’s use of the
truck. Kent argues that the exclusion must be read in context with the two
exclusions above it. This section of the policy reads:
“(4) THERE IS NO COVERAGE FOR AN INSURED FOR DAMAGES
RESULTING FROM:
(a) THE HANDLING OF PROPERTY BEFORE IT IS MOVED
FROM THE PLACE WHERE IT IS ACCEPTED BY THE INSURED FOR
MOVEMENT INTO OR ONTO A VEHICLE FOR WHICH THE
INSURED IS PROVIDED LIABILITY COVERAGE BY THIS POLICY;
- 10 -
(b) THE HANDLING OF PROPERTY AFTER IT IS MOVED FROM
THE VEHICLE DESCRIBED IN (a) ABOVE TO THE PLACE WHERE
IT IS FINALLY DELIVERD BY THE INSURED; OR
(c) THE MOVEMENT OF PROPERTY BY MEANS OF A
MECHNICAL DEVICE, OTHER THAN A HAND TRUCK, THAT IS
NOT ATTACHED TO THE VEHICLE DESCRIBED IN (a) ABOVE.”
(Emphases in original.)
Kent notes that the mechanical device exclusion refers to “the vehicle described in
(a) above.” Kent argues that the vehicle described in subsection (a) is “an insured
vehicle which is receiving property into or onto it.” Thus, according to Kent, the
mechanical device exclusion would apply only when property is being moved onto
an insured truck. Because Kent’s injury occurred when property was being moved
off the truck, a reasonable interpretation of the policy is that the mechanical device
exclusion does not apply. We disagree.
¶ 25 In referring to the “vehicle described in (a) above,” subsection (c) is clearly
referring to subsection (a)’s description of the vehicle. Subsection (a) describes the
vehicle as “a vehicle for which the insured is provided liability coverage by this
policy.” Rather than repeat that description, subsections (b) and (c) simply refer to
the “vehicle described in (a) above.” It is not reasonable to interpret the language
“the vehicle described in (a) above” as referring to the entirety of subsection (a), as
the other portion of subsection (a) does not describe the vehicle but rather describes
what type of handling of property is excluded from coverage. Such an interpretation
would render subsection (b) nonsensical, as it applies to the handling of property at
a completely different time than subsection (a). These are three separate and
independent exclusions, separated by the word “or.” The first excludes coverage
for the handling of property before the insured moves it from the place of
acceptance; the second excludes coverage for the handling of property after it is
delivered by the insured; and the third excludes coverage for the movement of
property by mechanical devices, other than hand trucks, when those devices are not
attached to the insured vehicle. We do not agree with Kent that it is reasonable to
interpret the mechanical device exclusion as applying only to the loading of
property onto the insured vehicle.
- 11 -
¶ 26 Finally, the appellate court agreed with Kent that the “mechanical device”
exclusion is ambiguous when considered in light of the entire policy and the risks
it was intended to cover. Relying on the policy’s declarations page, the appellate
court noted that the insured vehicle was intended to be used for farming purposes.
2019 IL App (5th) 180038
, ¶ 26. The court did not believe that the parties would
have contemplated that using a wheelbarrow would have been a “reasonably
feasible or effective method for unloading grain from the large grain truck
identified on the declarations page.”
Id. ¶ 27
We note, however, that, although the parties have referred to the insured vehicle
as a “grain truck,” it is not identified as such in the policy. The declarations page
does state at the bottom of the page “USE-FARMING.” Nevertheless, the policy
on the truck is an automobile policy, not a comprehensive general liability policy
or a farm liability policy. The exclusion makes perfect sense when viewed in this
context. The policy clearly considers the unloading of property by hand or with a
small hand truck or wheelbarrow a covered use of the vehicle. But the nature of the
activity and the risk involved changes when heavy machinery or farm implements
are being used to move property. See Hanover Insurance Co. v. Canal Insurance
Co., No. Civ.A.05 1591 SDW,
2007 WL 1413413
, *3 (D.N.J. Apr. 3, 2007) (“The
activity of unloading the Tractor using a mechanical device represents a separate
risk against which Canal has expressly elected not to insure and for which it has not
received a premium.”). As State Farm notes, nothing in the automobile policy
indicates that it was meant to cover injuries arising from the use of farm
implements. Indeed, the policy contains a “Farm Truck” endorsement, and this
endorsement adds an exclusion to the liability, medical payments, uninsured, and
underinsured coverages that states: “THERE IS NO COVERAGE FOR AN
INSURED FOR BODILY INJURY OR DAMAGE TO PROPERTY ARISING OUT
OF THE OPERATION OF ANY FARM IMPLEMENT.” 1 (Emphases in original.)
We agree with State Farm that insuring the risk of such devices was not the
intention of the auto policy.
1
State Farm did not rely on this exclusion in the trial court. In this court, State Farm mentions
it in support of its argument that this automobile policy clearly was not intended to insure the risk
of injury arising from the operation of farm implements.
- 12 -
¶ 28 2. Public Policy
¶ 29 Kent also argues that the mechanical device exclusion is void as against public
policy. Kent cites cases from other jurisdictions that have found the mechanical
device exclusion void because it conflicted with mandatory insurance statutes. See
Gulf Underwriters Insurance Co. v. Great West Casualty Co., 278 Fed. App’x 454,
459 (5th Cir. 2008); Parkway Iron & Metal Co. v. New Jersey Manufacturers
Insurance Co.,
629 A.2d 1352
, 1354 (N.J. Super. Ct. App. Div. 1993); Truck
Insurance Exchange v. Home Insurance Co.,
841 P.2d 354
, 358 (Colo. App. 1992).
Nevertheless, Kent concedes that this court held in Progressive that this state’s
mandatory insurance laws do not preclude parties from excluding certain risks from
liability coverage. See
Progressive, 215 Ill. 2d at 136
. Rather, exclusions are
permissible so long as they do not differentiate between named insureds and
permissive users.
Id. at 137-38.
In Progressive, this court upheld a food delivery
exclusion because it did not differentiate between insureds and permissive users.
Id. at 134. ¶ 30
Kent argues, however, that the mechanical device exclusion runs afoul of the
rule established in Progressive because it differentiates between insureds and
permissive users. Kent contends that “it is reasonable to conclude that the import
of the ‘mechanical device’ exclusion is to actually prohibit liability coverage for
injuries sustained by a permissive user in the loading or unloading process of an
insured vehicle.” Kent appears to concede that the exclusion does not on its face
differentiate between insureds and permissive users but argues that the “goal” of
the exclusion is to deny coverage to permissive users.
¶ 31 It is difficult to follow Kent’s reasoning here. On its face, the exclusion does
not discriminate between insureds and permissive users. When asked at oral
argument to clarify his position on this, Kent’s counsel replied, “I think that’s really
more of a side, collateral issue, not necessarily on point with regard to whether or
not this policy exclusion is clear or not.” He then conceded that the distinction
between insureds and permissive users is not “right on point with regard to this
case” but argued that it highlights the care that courts take in ensuring that
policyholders receive the benefit of what they bargained for. We disagree. The
exclusion simply does not discriminate between insureds and permissive users.
Accordingly, we reject Kent’s argument that the exclusion is void as against public
- 13 -
policy.
¶ 32 CONCLUSION
¶ 33 For all the above reasons, we disagree with the appellate court’s conclusion that
the “mechanical device” exclusion is ambiguous. We further reject Kent’s
alternative argument that the exclusion is void as against public policy. We
therefore reverse the appellate court’s decision, which reversed the summary
judgment for State Farm and entered summary judgment for defendants. We affirm
the circuit court’s entry of summary judgment for State Farm.
¶ 34 Appellate court judgment reversed.
¶ 35 Circuit court judgment affirmed.
¶ 36 JUSTICE KILBRIDE took no part in the consideration or decision of this case.
- 14 - |
4,639,146 | 2020-12-03 15:03:13.734089+00 | null | http://www.illinoiscourts.gov/Opinions/SupremeCourt/2020/124940.pdf |
2020 IL 124940
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 124940)
THE PEOPLE OF THE STATE OF ILLINOIS, Appellee, v.
DEMARIO D. REED, Appellant.
Opinion filed December 3, 2020.
JUSTICE KARMEIER delivered the judgment of the court, with opinion.
Chief Justice Anne M. Burke and Justices Kilbride, Garman, Theis, and Neville
concurred in the judgment and opinion.
Justice Michael J. Burke specially concurred, with opinion.
OPINION
¶1 This case presents the issue of whether a guilty plea prevents a defendant from
asserting an actual innocence claim under the Post-Conviction Hearing Act (Act)
(725 ILCS 5/122-1 et seq. (West 2016)). The Appellate Court, Fourth District,
answered in the affirmative and affirmed the denial of defendant’s petition on this
basis. See
2019 IL App (4th) 170090
. For the reasons below, we reject the appellate
court’s conclusion that a guilty plea forecloses a claim of actual innocence under
the Act but nevertheless affirm the denial of defendant’s claim on the merits.
¶2 BACKGROUND
¶3 On September 29, 2014, defendant was charged by information with a count of
armed violence (720 ILCS 5/33A-2(a) (West 2014)) in that, while armed with a
shotgun, defendant possessed less than 15 grams of cocaine. Defendant was also
charged with unlawful possession of a weapon by a felon (id. § 24-1.1(a)), unlawful
possession of a controlled substance with intent to deliver (720 ILCS 570/401(c)(2)
(West 2014)), and unlawful possession of a controlled substance (id. § 402(c)).
¶4 The charges were supported by an officer’s sworn testimony to the following.
While patrolling in a marked patrol car, the officer observed several subjects sitting
on the front porch of a residence located in an area that was viewed as a high-crime
area and where large amounts of narcotics were sold. Upon seeing an officer exiting
the car to make voluntary contact with the subjects, defendant jumped up and ran
inside the house. The owner of the residence later informed the officer that
defendant did not have permission to enter the residence.
¶5 The officer further observed that, as defendant jumped up, he grabbed the right
side of his right leg just above the knee and continued to do so as he ran into the
residence. The police report described defendant’s leg as stiff and not bending
normally.
¶6 Soon after defendant ran inside, the second subject, Davie Callaway, fled from
the couch into the dining room. The third subject stayed seated on the couch with
his hands in the air. After the other subjects were secured, the officer located
defendant lying facedown on a bed in a bedroom located on the southwest corner
of the house.
¶7 The officers then searched defendant’s flight path, which was described by two
witnesses inside the residence. By the bed in the northwest bedroom, officers
recovered a cellophane wrapper for a cigarette pack that contained 0.4 grams of
crack cocaine. Under the bed, the officers discovered a sawed-off shotgun that was
-2-
situated in a manner that indicated it had been thrown underneath the bed. The
police report noted moisture in the area of the barrels, which indicated that the
shotgun had not been underneath the bed for very long and most likely had been
left outside for a period of time. The officer further explained in the police report
that “firearms are often concealed outside in a location that is quickly and easily
accessible by the offender, but not actually possessed by the offender should the
Police arrive.”
¶8 Upon a search incident to arrest, officers further found approximately 1.5 grams
of suspected crack cocaine on Davie Callaway and a digital scale on defendant.
¶9 After defendant’s unsuccessful motion to dismiss the charges, the parties
presented to the court a plea agreement under which defendant would plead guilty
to one count of armed violence in exchange for a sentence of 15 years’
imprisonment. As its factual basis to support the plea, the State averred that “Officer
Daniels would testify that he observed” “the defendant flee upon sight of him. The
defendant was running oddly. When he entered the house, he located a shotgun and
cocaine. The defendant was located in a bedroom, and the shotgun had the
defendant’s DNA on it.” The court then properly admonished defendant pursuant
to Illinois Supreme Court Rule 402 (eff. July 1, 2012). After confirming the plea
was made knowingly and voluntarily, the court accepted the plea and found
defendant guilty of armed violence (720 ILCS 5/33A-2(a) (West 2014)). On April
13, 2015, defendant was sentenced to 15 years’ imprisonment. The court then
granted the State’s motion to dismiss and strike the remaining counts against
defendant.
¶ 10 Defendant’s initial post-conviction petition under the Act (725 ILCS 5/122-1
et seq. (West 2016)) asserted an actual innocence claim and an ineffective
assistance of counsel claim but was summarily dismissed as frivolous.
Subsequently, on January 20, 2016, defendant filed a motion for leave to file a
successive post-conviction petition asserting actual innocence. 1 Defendant
specifically alleges that it is undisputed that he did not reside at the residence in
which the gun and drugs were found and that he has “absolutely zero knowledge of
what is within that residence.” Also, no DNA links defendant to the drugs. He
1
Defendant also asserted an ineffective assistance of counsel claim. However, this claim is not
an issue before this court.
-3-
further noted that the gun was found not on his person but under the bed in a
different room from where he was apprehended.
¶ 11 Unlike his initial petition, defendant attached the affidavit of Davie Callaway
to support his claim of innocence, which was dated October 15, 2015. Callaway
averred that he was the sole owner of the cocaine found in the residence and that
defendant had zero knowledge of the presence of cocaine in that residence.
Callaway’s testimony lacked any reference to the shotgun.
¶ 12 The circuit court allowed leave to file the petition. The State filed a motion to
dismiss, arguing, inter alia, that defendant could not assert a freestanding claim of
innocence. It relied on People v. Barnslater,
373 Ill. App. 3d 512
, 527 (2007), rev’d
on other grounds, People v. Robinson,
2020 IL 123849
, ¶ 55, which stated in dicta
that “defendant’s postconviction claim of actual innocence cannot be deemed to
deprive him of his due process rights in the face of the fact that the defendant
previously confessed to the commission of the crime in his plea.”
¶ 13 Defendant’s petition proceeded to a third stage evidentiary hearing, where
Callaway testified in accordance with his affidavit. On cross-examination,
Callaway admitted he did not write the affidavit until he was imprisoned with
defendant. He further acknowledged speaking with defendant about his intention to
provide the affidavit while imprisoned together but claimed that defendant never
requested him to write it. Callaway explained that he felt bad that defendant was
charged with possession because of him.
¶ 14 On January 20, 2017, the circuit court denied defendant’s petition. It found
Callaway’s testimony was new but not credible, specifically noting that he did not
come forward until after he pled guilty and was in the same prison as defendant. It
also found that Callaway’s affidavit was not of such conclusive character that it
would probably change the result on retrial because, at the time of defendant’s plea,
defendant knew pointing the fault at codefendants for possessing the drugs was a
viable defense. Defendant appealed.
¶ 15 The appellate court affirmed but on different grounds. It found that a valid
guilty plea forecloses a post-conviction claim of actual innocence. See 2019 IL App
(4th) 170090. In support of its holding, the appellate court relied upon People v.
Cannon,
46 Ill. 2d 319
, 321 (1970), wherein this court stated: “ ‘Before his plea of
-4-
guilty was accepted, the defendant, represented by appointed counsel, was fully and
carefully admonished by the trial judge, and in the light of that admonition, the
defendant’s present [innocence] claim cannot be entertained.’ ”
2019 IL App (4th) 170090
, ¶ 19 (quoting
Cannon, 46 Ill. 2d at 321
). Although it acknowledged this
statement was obiter dicta, without an explicit decision from this court to the
contrary, it found it was bound to follow Cannon. Therefore, in agreement with the
First District in Barnslater, it found defendant’s innocence claim cannot be
entertained because he knowingly and voluntarily pled guilty to the charge of which
he now claims to be innocent.
Id. ¶ 17.
Furthermore, the appellate court found that
to allow defendant to knowingly and voluntarily plead guilty and then turn around
to complain to a reviewing court that the trial court found him guilty is “paradoxical
if not duplicitous.”
Id. ¶ 26.
If there is any error, it is an error that defendant invited
himself by pleading guilty to armed violence.
Id. ¶ 16
We granted defendant’s petition for leave to appeal pursuant to Illinois Supreme
Court Rule 315 (eff. July 1, 2018).
¶ 17 ANALYSIS
¶ 18 This appeal arises from defendant’s post-conviction petition under the Act,
which provides a statutory remedy to defendants who claim substantial violations
of their rights occurred in the proceedings that resulted in their conviction. People
v. English,
2013 IL 112890
, ¶ 21. A post-conviction petition is not a substitute for
appeal but, rather, is a collateral attack.
Id. Accordingly, issues that
were raised and
decided on direct appeal are barred by res judicata, and issues that could have been
raised on direct appeal, but were not, are forfeited.
Id. ¶ 22
.
Defendant bears the
burden of proving that a substantial violation occurred.
Id. ¶ 21. ¶ 19
Over 20 years ago, in People v. Washington,
171 Ill. 2d 475
, 489 (1996), this
court found a freestanding claim of actual innocence is cognizable under the Act.
We reasoned that the “[i]mprisonment of the innocent would also be so conscience
shocking as to trigger operation of substantive due process.”
Id. at 487-88.
Also, to
ignore such a claim would be fundamentally unfair in terms of procedural due
process.
Id. at 487. -5- ¶ 20
This case presents the issue of whether a guilty plea prevents a defendant from
asserting an actual innocence claim under the Act. This issue involves questions of
law that are subject to de novo review. Brunton v. Kruger,
2015 IL 117663
, ¶ 72.
¶ 21 The appellate court relied on Cannon, which considered claims in defendant’s
petition that were not argued on appeal after determining the issue before the court
lacked merit.
Cannon, 46 Ill. 2d at 321
. The Cannon court found the unargued
claims “amount basically to an unsupported assertion that the accusation against
him was false and that his daughter and two of his sons were coerced by threats
from their mother, the defendant’s wife.”
Id. The court further
noted: “Before his
plea of guilty was accepted, the defendant, represented by appointed counsel, was
fully and carefully admonished by the trial judge, and in the light of that
admonition, the defendant’s present claim cannot be entertained.”
Id. ¶ 22
However, not all Illinois decisions agree that Cannon controls this issue. In
People v. Shaw,
2019 IL App (1st) 152994
, ¶ 54, the First District disagreed with
the appellate court decision here and found that a guilty-plea defendant may bring
an actual innocence claim without challenging the validity of the plea. It first
determined that Washington made no distinction between defendants whose
convictions arise out of a trial or out of a guilty plea in holding that “no person
convicted of a crime should be deprived of life or liberty given compelling evidence
of actual innocence” and that it believed the tenet should apply equally in either
circumstance. (Emphasis omitted.)
Id. ¶ 45.
In explaining its departure from Reed,
2019 IL App (4th) 170090
, the Shaw court found that the statement in Cannon was
not only dicta but too imprecise to express this court’s explicit intention to create
such a significant rule. Shaw,
2019 IL App (1st) 152994
, ¶ 52. It also noted that
Reed is only the third case to cite Cannon for any purpose and that no other case
has read Cannon to create “a categorical bar.”
Id. ¶ 49.
Therefore, in light of this
court’s more recent statements in Washington, Cannon’s dicta cannot be read to
prohibit actual innocence claims following guilty pleas in all circumstances.
Id. ¶ 52. ¶ 23
The issue of actual innocence was not briefed nor argued before the court and
was not essential to the disposition in Cannon. As acknowledged by the Fourth and
First Districts, Cannon’s statements are therefore dicta, which is not binding on this
court. Lebron v. Gottlieb Memorial Hospital,
237 Ill. 2d 217
, 236 (2010). This
-6-
statement was made in the context of an unsupported claim and before this court
recognized that a freestanding claim of innocence was cognizable under the Act as
a matter of due process.
Washington, 171 Ill. 2d at 487-88
. We therefore find the
scant analysis and resulting obiter dicta of Cannon does not control this case.
¶ 24 Consequently, the issue of whether defendants who plead guilty waive any
claim of actual innocence under the Act is one of first impression. To determine
whether there is waiver, we must consider the motives behind and consequences of
a plea in light of the precise challenge asserted by an actual innocence claim. People
v. Phipps,
238 Ill. 2d 54
, 62 (2010). Issues of waiver are construed liberally in favor
of the defendant.
Id. ¶ 25
Negotiated guilty pleas are the result of an agreement between the State and
defendant, in which both parties benefit and make concessions. People v. Eckhardt,
127 Ill. 2d 146
, 151-52 (1989). The State benefits from the prompt and largely final
disposition of most criminal cases, which preserves prosecutorial and judicial
resources for cases in which there are substantial issues of proof. People v. Boyt,
109 Ill. 2d 403
, 416 (1985); Brady v. United States,
397 U.S. 742
, 752 (1970). These
benefits motivate the State to make certain concessions, including sacrificing the
opportunity to present the entirety of the evidence, dismissal of certain charges, and
ceasing further investigation that may result in additional charges.
¶ 26 Defendants also incur substantial benefits and burdens as the result of a plea
agreement. To defendants’ benefit, they can obtain a favorable sentence and
dismissal of other charges. Talarico v. Dunlap,
177 Ill. 2d 185
, 195 (1997); People
v. Jones,
144 Ill. 2d 242
, 269-70 (1991). They also avoid the agony and cost of trial.
Talarico, 177 Ill. 2d at 195
;
Brady, 397 U.S. at 752
.
¶ 27 The consequences of a plea for a defendant, however, are severe. People v.
Evans,
174 Ill. 2d 320
, 326 (1996). A guilty plea is an admission of guilt and a
conviction in and of itself. People v. White,
2011 IL 109616
, ¶ 17 (“The plea
obviates the prosecution’s burden of proof. It supplies both evidence and verdict,
ending controversy.” (Internal quotation marks omitted.)). It is specifically
designed to waive the right to a jury trial, relieving the State of its burden to prove
defendant guilty beyond a reasonable doubt. People v. Townsell,
209 Ill. 2d 543
,
547 (2004) (citing Hill v. Cowan,
202 Ill. 2d 151
, 154 (2002)). As such, by pleading,
a defendant “waives all nonjurisdictional defenses or defects,” including
-7-
constitutional ones. People v. Burton,
184 Ill. 2d 1
, 27 (1998);
Townsell, 209 Ill. 2d at 545
.
¶ 28 Because a plea entails significant consequences for both parties, the State
argues that defendant cannot now assert a claim of innocence. Specifically, the
State highlights the defendant’s waiver of his right to a jury trial, to present
defenses, and to proof beyond a reasonable doubt. It also contends that allowing a
claim of innocence would dissuade it from entering plea negotiations where the
benefit of finality and certainty that motivates it to make concessions may be
collaterally attacked. We disagree.
¶ 29 In Washington, this court held that our constitution affords additional due
process when newly discovered evidence shows that a convicted person is actually
innocent on the basis that “[n]o person shall be deprived of life, liberty or property
without due process of law nor be denied the equal protection of the laws.” Ill.
Const. 1970, art. I, § 2;
Washington, 171 Ill. 2d at 487-89
. We clarified that the
claim does not depend on—and is separate from—a challenge to the sufficiency of
the evidence or an allegation of error in the court below.
Washington, 171 Ill. 2d at 487
.
¶ 30 In addressing the federal precedent on the matter, we explicitly rejected the
notion that a defendant must be viewed as guilty absent a constitutional error in the
underlying proceedings.
Id. at 488.
This is so because a strong claim of innocence
undermines the legal construct that precludes a substantive due process analysis
and dictates defendant be viewed as guilty.
Id. At the point
where the evidence
undermines the court’s confidence in this legal construct, the additional due process
afforded by our constitution is triggered.
Id. ¶ 31
Upon a closer examination of Washington and the precise contentions of an
actual innocence claim, the State’s arguments are unconvincing. Because the claim
does not assert a challenge to the sufficiency of the evidence or any error in the
proceedings that led to the conviction (id.), defendant’s waiver of his right to
challenge the State’s proof of guilt beyond a reasonable doubt at trial should not
impact his actual innocence claim. Significantly, the State and appellate court
overlooked that a “ ‘truly persuasive demonstration of innocence’ ” breaks the
barriers established by the legal construct that precludes a substantive due process
-8-
analysis and dictates that the defendant be viewed as guilty.
Id. We find this
rationale applies with no less force in the context of guilty pleas.
¶ 32 The purpose of our criminal justice system is to seek justice. United States v.
Nobles,
422 U.S. 225
, 230 (1975) (citing Berger v. United States,
295 U.S. 78
, 88
(1935));
Washington, 171 Ill. 2d at 493
(McMorrow, J., specially concurring).
Justice means not only punishing the guilty but also ensuring the innocent do not
suffer.
Nobles, 422 U.S. at 230
(citing
Berger, 295 U.S. at 88
). We note that, as a
part of the criminal justice system, the prosecution has the same duty and interest
in seeking the truth and justice. People v. Beaman,
229 Ill. 2d 56
, 73 (2008) (“The
prosecutor’s interest in a criminal prosecution is not that it shall win a case, but that
justice shall be done.” (Internal quotation marks omitted.)).
¶ 33 Plea agreements, while vital to our criminal justice system
(Evans, 174 Ill. 2d at 325
), are not structured to “weed out the innocent” or guarantee the factual
validity of the conviction (Schmidt v. State,
909 N.W.2d 778
, 788 (Iowa 2018)).
See Missouri v. Frye,
566 U.S. 134
, 144 (2012) (“ ‘To a large extent . . . horse
trading [between prosecutor and defense counsel] determines who goes to jail and
for how long. That is what plea bargaining is.’ ” (quoting Robert E. Scott & William
J. Stuntz, Plea Bargaining as Contract, 101 Yale L.J. 1909, 1912 (1992)));
Brady, 397 U.S. at 757-58
(“This is not to say that guilty plea convictions hold no hazards
for the innocent or that the methods of taking guilty pleas presently employed in
this country are necessarily valid in all respects. This mode of conviction is no more
foolproof than full trials to the court or to the jury.”). The plea system encourages
defendants to engage in a cost-benefit assessment where, after evaluating the
State’s evidence of guilt compared to the evidence available for his defense, a
defendant may choose to plead guilty in hopes of a more lenient punishment than
that imposed upon a defendant who disputes the overwhelming evidence of guilt at
trial. See
Jones, 144 Ill. 2d at 269
;
Brady, 397 U.S. at 756
. As such, it is well
accepted that the decision to plead guilty may be based on factors that have nothing
to do with defendant’s guilt. See
Brady, 397 U.S. at 757-58
;
Talarico, 177 Ill. 2d at 195
. Empirical data related to exonerations further prove that innocent people
plead guilty, as 18% of all exonerees and 11% of those exonerated through DNA
pled guilty. Peter A. Joy & Kevin C. McMunigal, Post-Conviction Relief After a
Guilty Plea? 35 Crim. Just. 53, 55 (Summer 2020).
-9-
¶ 34 Importantly, our rules allow the court to accept a plea of guilty even where
defendant asserts his innocence, as long as a sufficient factual basis exists and the
court satisfies the other requirements delineated in Illinois Supreme Court Rule 402
(eff. July 1, 2012). People v. Gaines,
2020 IL 125165
, ¶ 36. Unlike a conviction
after trial, where the State’s evidence is scrutinized and must meet the beyond a
reasonable doubt standard, the factual basis to support the plea is held to a less
stringent level of proof, requiring only a basis from which the court could
reasonably conclude that defendant actually committed the acts constituting the
offense to which defendant is pleading guilty. People v. Barker,
83 Ill. 2d 319
, 327-
28 (1980).
¶ 35 Accordingly, pleas are no more foolproof than trials.
Brady, 397 U.S. at 758
.
When met with a truly persuasive demonstration of innocence, a conviction based
on a voluntary and knowing plea is reduced to a legal fiction. Washington,
171 Ill. 2d
at 488. At that point, the additional due process afforded by the Illinois due
process clause is triggered despite the legal construct—the entire plea proceedings
including defendant’s waiver of all nonjurisdictional defects—that precludes a
guilty-plea defendant’s claim.
Id. ¶ 36
Moreover, we emphasize this court’s long-established preference for life and
liberty over holding defendant to his plea. People v. King,
1 Ill. 2d 496
, 500 (1953)
(per curiam); People v. McKirdie,
45 Ill. 2d 300
, 302 (1970). Recently, in Gaines,
2020 IL 125165
, ¶¶ 43-44, we reaffirmed that courts may allow defendants to
withdraw their pleas based on claims of innocence or where the court doubts the
truth of the pleas, even where the court already accepted the plea. In People v.
Belcher,
199 Ill. 2d 378
, 383 (2002), we also allowed a defendant to file a motion
to withdraw his plea based upon a misunderstanding of law regarding his insanity
defense for the first time on appeal. While the issue of waiver by plea was not raised
in the above cases, they support the conclusion that sometimes a manifest injustice
outweighs the consequences of defendant’s voluntary plea.
¶ 37 In light of these considerations, we find the defendant’s waiver of his right to
challenge the State’s proof of guilt beyond a reasonable doubt at trial in the
proceedings that led to his conviction does not prevent him from asserting his right
to not be deprived of life and liberty given compelling evidence of actual innocence
under the Act.
- 10 -
¶ 38 For the same reasons, we also reject the State’s contention that the record of the
plea proceedings positively rebuts any claim of actual innocence. An admission of
guilt—while often sufficient to support the acceptance of the plea and a
conviction—is not guilt in fact. Gaines,
2020 IL 125165
, ¶ 32 (trial judge decides
whether to accept the plea and “legally deem the defendant guilty of the relevant
charge”); see
Talarico, 177 Ill. 2d at 195
(It is not always reasonable to presume
that defendant’s admission of guilt pursuant to his negotiated plea establishes a fact
that cannot be relitigated.).
¶ 39 The State’s application of the invited error doctrine is equally unpersuasive.
The invited error doctrine is akin to equitable estoppel in that a party “may not
request to proceed in one manner and then later contend *** that the course of
action was in error.” People v. Carter,
208 Ill. 2d 309
, 319 (2003). Under this
doctrine, the State claims defendants cannot voluntarily and knowingly plead guilty
to the trial court then turn around and complain to a reviewing court that the trial
court found them guilty.
¶ 40 As explained above, a claim of innocence is not based on the defendant’s
misapprehension of the quality of the State’s case nor an error of the court in finding
defendant guilty. Rather, it is a request for the additional due process that is
triggered by new and compelling evidence demonstrating defendant’s innocence.
Washington, 171 Ill. 2d at 487
. Defendant did not invite the deprivation of his
liberty despite compelling evidence of his innocence when he lacked knowledge of
and could not reasonably discover such evidence at the time of his plea.
¶ 41 This court refuses to turn a blind eye to the manifest injustice and failure of our
criminal justice system that would result from the continued incarceration of a
demonstrably innocent person, even where a defendant pleads guilty. See
id. at 489;
id. at 493
(McMorrow, J., specially concurring). Accordingly, we find defendants
who plead guilty may assert an actual innocence claim under the Act. Shaw,
2019 IL App (1st) 152994
, ¶ 54; People v. Knight,
405 Ill. App. 3d 461
, 472 (2010).
¶ 42 Despite the State’s contentions, we do not believe our decision will diminish its
motivation to engage in plea negotiations, nor does it ignore the interests of finality
and certainty involving guilty pleas. An actual innocence claim is not unrestrained
and still must be proven. This hurdle has proven to be difficult for defendants, and
a successful claim of innocence is rare. See People v. Coleman,
2013 IL 113307
,
- 11 -
¶ 94. As such, we find the State’s interests and policy concerns are more
appropriately accounted for and protected by the standard applicable to actual
innocence claims involving defendants who plead guilty.
¶ 43 Defendant argues that this court should apply the standard expounded by
Washington, which requires “supporting evidence be new, material, noncumulative
and, most importantly, of such conclusive character as would probably change the
result on retrial.” (Internal quotation marks omitted.) Washington,
171 Ill. 2d
at
489. While defendant contends Washington can be expanded to apply to defendants
who plead guilty, he fails to specify such standard and only notes that the court
should compare the new evidence against that in the plea proceedings below.
¶ 44 The State asserts that guilty-plea defendants are incapable of meeting the
Washington standard because the court cannot determine whether the new evidence
would probably change the result on retrial where there was no trial. Instead, this
court should adopt a standard of reliability similar to that in federal courts, Schlup
v. Delo,
513 U.S. 298
(1995), particularly, that guilty-plea defendants must provide
new forensic evidence.
¶ 45 While defendant’s plea does not prevent him from asserting an actual innocence
claim under the Act, it necessarily places the court in a different position than in
Washington. Defendant’s waiver of a trial prevented the State from admitting the
entirety of its evidence against defendant into the record, leaving only defendant’s
admission of guilt and stipulation of the factual basis of the plea. Without the
developed record produced by a trial, a court cannot determine whether the new
evidence sufficiently undermines the evidence presented at trial such that it would
probably change the result on retrial. The strict application of Washington is
therefore impractical in cases where defendants plead guilty.
¶ 46 Moreover, unlike a trial where reviewing courts often lack the insight on how
the jury weighed the evidence in making its determination, the guilt of defendants
who plead guilty is entirely dependent upon their admission of guilt and stipulation
of the factual basis. Consequently, the court is left to weigh the new evidence
against voluntary and knowing admission of guilt.
¶ 47 A plea of guilty is a grave act that is not reversible at the defendant’s whim.
Evans, 174 Ill. 2d at 326
. Leave to withdraw a plea of guilty should not be granted
- 12 -
because defendant is now dissatisfied with the deal but “as required to correct a
manifest injustice.”
Id. ¶ 48
Upon these considerations, the standard for actual innocence claims for guilty-
plea defendants requires a more stringent standard than in Washington. See People
v. Schneider,
25 P.3d 755
, 761 (Colo. 2001) (en banc). Yet, the standard must be
less than redeciding the defendant’s guilt, as that is not the determination the court
must make. See People v. Molstad,
101 Ill. 2d 128
, 136 (1984) (“this does not mean
that [the defendant] is innocent, merely that all of the facts and surrounding
circumstances *** should be scrutinized more closely to determine [his] guilt or
innocence”); Coleman,
2013 IL 113307
, ¶ 97. “If it were, the remedy would be an
acquittal, not a new trial.” Coleman,
2013 IL 113307
, ¶ 97.
¶ 49 We therefore find a successful actual innocence claim requires a defendant who
pleads guilty to provide new, material, noncumulative evidence that clearly and
convincingly demonstrates that a trial would probably result in acquittal. New
means the evidence was discovered after the court accepted the plea and could not
have been discovered earlier through the exercise of due diligence.
Id. ¶ 96.
This is
a comprehensive approach where the court must determine whether the new
evidence places the evidence presented in the underlying proceedings in a different
light and “undercuts the court’s confidence in the factual correctness” of the
conviction.
Id. ¶ 97. ¶ 50
This higher standard strikes an equitable balance between the defendant’s
constitutional liberty interest in remaining free of undeserved punishment and the
State’s interest in maintaining the finality and certainty of plea agreements, while
vindicating the purpose of the criminal justice system to punish only the guilty.
Because the evidence must be clear and convincing, the standard inherently
requires the court to consider the evidence to be reliable. 2 We therefore see no
reason to further limit defendants who plead guilty by requiring them to support
their petition with forensic evidence.
2
We note that, while post-conviction relief requires the court to consider the new evidence to
be reliable, such determination should be made at a third-stage evidentiary hearing, as all well-pled
facts must be taken as true at the motion to dismiss stage. People v. Sanders,
2016 IL 118123
, ¶ 42.
- 13 -
¶ 51 Having found that a defendant who pleads guilty may assert an actual innocence
claim and having clarified the applicable standard, we must address the merits of
defendant’s claim. In this case, defendant’s petition was denied after a third-stage
evidentiary hearing. 725 ILCS 5/122-6 (West 2016). At this stage, the trial court
acts as a fact-finder, making credibility determinations and weighing the evidence.
English,
2013 IL 112890
, ¶ 23. Accordingly, we review the court’s decision to deny
relief for manifest error. Coleman,
2013 IL 113307
, ¶ 98. Manifest error is
“ ‘clearly evident, plain, and indisputable.’ ”
Id. (quoting People v.
Morgan,
212 Ill. 2d 148
, 155 (2004)).
¶ 52 Although the circuit court lacked the guidance of this opinion regarding the
applicable standard, it nevertheless found defendant did not meet the less stringent
Washington standard. Defendant contends the trial court’s denial was manifestly
erroneous because it based its credibility determination regarding Callaway on a
mistake of law. He explains that, absent inconsistences or obfuscations, the court
should follow Callaway’s undisputed testimony that he came forward based on his
guilty conscience rather than question Callaway’s credibility based on the fact that
Callaway and defendant were in prison together, because they had no control over
where they were imprisoned.
¶ 53 Based on our examination of the record, we cannot say that the trial judge’s
decision to reject Callaway’s testimony was manifestly erroneous. Defendant’s
innocent explanations for the trial court’s concerns regarding Callaway’s credibility
are plausible, but plausibility is not the test on review.
Morgan, 212 Ill. 2d at 161
.
We addressed only whether the new evidence was sufficiently compelling that a
decision by the trial court to reject that evidence was manifestly erroneous.
Id. ¶ 54
We cannot say it was unreasonable for the court to question the truthfulness of
Callaway, where he came forward only after being imprisoned and discussing the
case with defendant. The trial court is in the best position to make this
determination, as it had the benefit of observing Callaway’s demeanor during
examination and assessing his testimony against the other evidence.
Id. at 162.
There is nothing in the record to undermine its judgment in this case.
¶ 55 We therefore affirm the denial of defendant’s petition.
- 14 -
¶ 56 CONCLUSION
¶ 57 In light of the rationale underlying Washington’s determination that an actual
innocence claim asserts a violation of due process, a defendant whose conviction is
the result of a guilty plea may assert an actual innocence claim under the Act. To
obtain relief under such claim, a guilty-plea defendant must provide new, material,
noncumulative evidence that clearly and convincingly demonstrates that a trial
would probably result in acquittal. Because the record provides no reason to depart
from the trial court’s determination that defendant’s new evidence was not credible,
we affirm the dismissal of defendant’s petition.
¶ 58 Affirmed.
¶ 59 JUSTICE MICHAEL J. BURKE, specially concurring:
¶ 60 I agree with my colleagues that defendants who plead guilty should not be
completely foreclosed from bringing actual innocence claims. I further agree that
defendant’s petition was properly denied on the merits. I write separately because
I believe that the standard for such claims should be higher than the one adopted by
the majority. I would also give trial judges more leeway to dispose of such cases at
the leave-to-file stage.
¶ 61 The State correctly notes that there are compelling reasons why defendants who
plead guilty should not be able to bring postconviction actual innocence claims.
First, by pleading guilty, a defendant relinquishes the constitutional protections
intended to prevent the conviction of innocent people (see Boykin v. Alabama,
395 U.S. 238
, 242-43 (1969)), including the right to hold the State to its burden of proof
beyond a reasonable doubt (Hill v. Cowan,
202 Ill. 2d 151
, 154 (2002)). Second,
the State offers significant concessions to defendants who plead guilty. The State
is motivated to do so because of (1) the efficiency of forgoing a full criminal trial
and (2) the certainty and finality of a guilty plea. Third, by entering into a plea
agreement, the State loses its opportunity to present its full case and instead
provides only a summary of the evidence sufficient to establish a factual basis for
the pleas. See People v. Barker,
83 Ill. 2d 319
, 327-28 (1980) (“the quantum of
proof necessary to establish a factual basis for the plea is less than that necessary to
- 15 -
sustain a conviction after a full trial. [Citations.] All that is required to appear on
the record is a basis from which the judge could reasonably reach the conclusion
that the defendant actually committed the acts with the intent (if any) required to
constitute the offense to which the defendant is pleading guilty.”). When a
defendant returns to court years later claiming innocence, the State is forced to
muster evidence that has potentially grown stale. As the Supreme Court of Colorado
noted in People v. Schneider,
25 P.3d 755
, 761 (Colo. 2001) (en banc), when a
defendant pleads guilty, a trial court considering a postconviction claim of actual
innocence is hampered in its assessment of defendant’s new evidence against what
the State would have presented at the previous trial.
¶ 62 Still, because we recognized in Washington that the “[i]mprisonment of the
innocent would *** be so conscience shocking as to trigger operation of substantive
due process” (People v. Washington,
171 Ill. 2d 475
, 487-88 (1996)) and that
ignoring such claims would be fundamentally unfair as a matter of procedural due
process (id. at 487), I would not completely foreclose guilty plea defendants from
bringing postconviction claims of actual innocence. For all the policy reasons set
forth above, however, the standard for doing so should be higher than that for
defendants convicted after a trial. I agree with the Schneider court that “there must
be some consequence attached to the decision to plead guilty.”
Schneider, 25 P.3d at 761
.
¶ 63 The standard that the majority settles on is that a defendant who pleads guilty
must provide “new, material, noncumulative evidence that clearly and convincingly
demonstrates that a trial would probably result in acquittal.” (Emphasis added.)
Supra ¶ 49. Other states have adopted a clear and convincing evidence standard for
actual innocence claims by guilty plea defendants but have worded it differently.
For instance, both Iowa and Texas require that the defendant show by clear and
convincing evidence that no reasonable factfinder could find the defendant guilty.
See Schmidt v. State,
909 N.W.2d 778
, 797 (Iowa 2018) (“the applicant must show
by clear and convincing evidence that, despite the evidence of guilt supporting the
conviction, no reasonable fact finder could convict the applicant of the crimes for
which the sentencing court found the applicant guilty in light of all the evidence,
including the newly discovered evidence”); Ex parte Tuley,
109 S.W.3d 388
, 392
(Tex. Crim. App. 2002) (standard for freestanding innocence claims, whether after
trial or guilty plea is that the applicant must show “by clear and convincing
- 16 -
evidence that, despite the evidence of guilt that supports the conviction, no
reasonable juror could have found the applicant guilty in light of the new
evidence”). The majority’s “probably result in acquittal” language was also used
by the Supreme Court of Colorado in Schneider. In that case, the court held that the
defendant must show that the newly discovered evidence “would probably bring
about a verdict of acquittal in a trial.”
Schneider, 25 P.3d at 762
. However, that is
not all that Colorado requires. Schneider also requires that a guilty plea defendant
show that “the charge(s) to which the defendant pleaded guilty were actually false
or unfounded.”
Id. The majority does
not adopt this part of the test. If we are going
to adopt the clear and convincing standard, I prefer the wording adopted by Iowa
and Texas. Instead of merely requiring a defendant to show by clear and convincing
evidence that the newly discovered evidence would probably result in an acquittal,
I would require a showing by clear and convincing evidence that no reasonable
factfinder could have convicted the defendant.
¶ 64 Although the burden should be very high for a defendant who pleaded guilty, I
do not agree with the State’s suggestion that the door should be left open only for
those defendants who obtain forensic evidence pursuant to section 116-3 of Code
of Criminal Procedure of 1963 (725 ILCS 5/116-3 (West 2018)). Pursuant to this
section, defendants who plead guilty or are convicted after a trial may move for
fingerprint, Integrated Ballistic Identification System, or forensic DNA testing,
under certain circumstances. I would not limit actual innocence claims to only those
defendants who obtain evidence under this statute, because it is possible that a
defendant could obtain other types of reliable evidence that are just as conclusive
as to innocence. For instance, assume that a defendant obtains security camera
footage that was not previously known to exist and that it shows someone else
committing the crime for which he pleaded guilty. It would make no sense to
foreclose an actual innocence claim for such a defendant simply because this
powerful, conclusive evidence of innocence was not of the type listed in section
116-3.
¶ 65 I would, however, give trial courts the ability to deny leave to file successive
petitions when defendants such as the present one have failed to set forth a colorable
claim of actual innocence. The majority adopts the clear and convincing standard
but never sets forth what standard a petitioner must meet at each stage of the
proceedings. When a postconviction petitioner raises a freestanding claim of actual
- 17 -
innocence after being convicted in a trial, there are three distinct stages with
different standards. At the leave-to-file stage, the standard is “whether the new
evidence, if believed and not positively rebutted by the record, could lead to
acquittal on retrial.” People v. Robinson,
2020 IL 123849
, ¶ 60. At the second stage,
where the State may move to dismiss the petition, the petitioner must make a
substantial showing that it is more likely than not that no reasonable juror would
have convicted the petitioner in light of the new evidence. People v. Sanders,
2016 IL 118123
¶¶ 24, 37. If a petitioner obtains an evidentiary hearing, then he must
establish his actual innocence claim by a preponderance of the evidence. People v.
Coleman,
2013 IL 113307
, ¶ 92. The majority opinion raises the burden from
preponderance of the evidence to clear and convincing evidence at the third stage
but says nothing about the burden a petitioner must meet at the first two stages. If
the majority means to adopt the watered-down Robinson standard for the leave-to-
file stage, I cannot agree with that decision. As I argued in my dissent in Robinson,
that standard has no foundation in this court’s case law, and it is so vague as to be
virtually meaningless. See Robinson,
2020 IL 123849
, ¶¶ 114-18 (Burke, J.,
dissenting, joined by Garman and Karmeier, JJ.). The last thing we should do is
further expand that decision by applying its standard to defendants who pleaded
guilty, as they should be held to a much higher burden.
¶ 66 At the leave-to-file stage, I would use a standard similar to the one this court
originally adopted for the leave-to-file stage when a petitioner raised a freestanding
claim of actual innocence. In People v. Edwards,
2012 IL 111711
, this court
adopted a “no reasonable juror” standard for the leave-to-file stage of successive
postconviction proceedings involving actual innocence claims. This court held that
leave to file should be granted only “when the petitioner’s supporting
documentation raises the probability that ‘it is more likely than not that no
reasonable juror would have convicted him in the light of the new evidence.’ ”
Id. ¶ 24
(quoting Schlup v. Delo,
513 U.S. 298
, 327 (1995)). 3 Where it was clear that
a petitioner had provided an affidavit that failed to meet this standard, courts were
free to deny leave to file. See
id. ¶¶ 39-40.
The affidavit that defendant filed here
3
In Robinson,
2020 IL 123849
, this court simply ignored the fact that Edwards settled the
standard for the leave-to-file stage of postconviction proceedings in which a petitioner alleges actual
innocence. Overruling Edwards sub silentio, a majority of this court held that the standard is instead
“whether the new evidence, if believed and not positively rebutted by the record, could lead to
acquittal on retrial.”
Id. ¶ 60. - 18 -
was not sufficient to raise a probability that petitioner could establish by clear and
convincing evidence that no reasonable factfinder would have convicted him, and
therefore defendant never should have been granted leave to file. Defendant
pleaded guilty to armed violence. The factual basis for the plea showed that a
sawed-off shotgun and a Baggie of crack cocaine were found under a bed in a room
witnesses saw the defendant enter after he fled from the police. The shotgun had
defendant’s DNA on it, and defendant had a digital scale in his pocket. Thus, the
prison affidavit defendant obtained from Callaway, who claimed that the drugs
were his and that defendant was unaware of them, was not conclusive evidence of
defendant’s innocence and certainly could not have established by clear and
convincing evidence that no reasonable factfinder would have convicted defendant
in light of that evidence. Thus, defendant never should have been granted leave to
file his petition.
¶ 67 The majority explains that reliability determinations are to be made at a third-
stage evidentiary hearing. Supra ¶ 50 n.2. That said, defendant’s petition could have
been dismissed without the court making a reliability determination. Prior to this
court’s decision in Robinson, it was clear that a trial court could dismiss a petition
when the supporting affidavits were not conclusive evidence of innocence but
merely would have given the factfinder conflicting evidence to consider. See
Sanders,
2016 IL 118123
. In Sanders, this court acknowledged that reliability
determinations can only be made at a third-stage evidentiary hearing and that at the
previous stages all well-pleaded allegations not positively rebutted by the record
must be taken as true.
Id. ¶¶ 41-42.
Nevertheless, this court affirmed the dismissal
of the petition without an evidentiary hearing when the petitioner’s affidavits would
have merely added conflicting evidence for the jury to consider.
Id. ¶¶ 52-53. ¶ 68
As I explained in my dissent in Robinson, the only way that Sanders makes
sense is that if what is meant by “taking the affidavits as true” is that we assume
that, had the affiants been called to testify, they would have testified under oath
consistently with their affidavits. See Robinson,
2020 IL 123849
, ¶ 110 (Burke, J.,
dissenting, joined by Garman and Karmeier, JJ.). If this court had been forced to
assume in Sanders that the factfinder would have believed the statements in the
affidavits, then this court would have had no choice but to reverse the lower courts
and remand for an evidentiary hearing.
Id. But this is
not what the court did. The
Sanders court affirmed the dismissal of the petition on the basis that the testimony
- 19 -
of the affiants would have merely given the jury conflicting evidence to consider.
Sanders,
2016 IL 118123
, ¶¶ 52-53. As the appellate court correctly explained in
People v. Simms,
2020 IL App (1st) 161067
, ¶ 42: 4
“In Sanders, the codefendant stated he was alone when he committed the
offense and that his prior testimony identifying the petitioner as participating in
the crime was not true. [Sanders,
2016 IL 118123
,] ¶ 16. A witness who
provided an affidavit in support of the successive postconviction petition
averred that the codefendant acted alone at all times when she was observing
the commission of part of the offense (aggravated kidnapping).
Id. ¶ 15.
If all
that were required was to take the recantation and averment as true and would
be believed by a reasonable juror and ask if the defendant could still be
convicted, then the result of the petitioner’s trial in Sanders would have to have
been different: based on that “true” evidence Sanders did not commit
aggravated kidnapping and did not participate in the murder. The only
explanation for our supreme court’s holding is that more is required of courts
considering claims of actual innocence.” Simms,
2020 IL App (1st) 161067
,
¶ 42.
See also People v. Jones,
2020 IL App (1st) 171760-U
, ¶ 64 (“Following Sanders,
we must determine whether the proposed new evidence would merely add
conflicting or contrary evidence to the evidence heard at trial, even where, as in
Sanders, the postconviction evidence includes statements that the defendant was
not involved in the crime.” (Emphasis added.)); People v. Vargas, 2020 IL App
(1st) 172568-U, ¶ 43 (same). 5
¶ 69 As I pointed out in my Robinson dissent, in certain circumstances this court has
indeed used “taken as true” to mean that we presume that the affiant would have
testified in a matter consistent with their affidavits. See Robinson,
2020 IL 123849
,
¶ 110 (Burke, J., dissenting, joined by Garman and Karmeier, JJ.) (taking affidavits
4
After deciding Robinson, this court denied leave to appeal in Simms but vacated the decision
and remanded for reconsideration in light of Robinson. People v. Simms, No. 126080 (Ill. Sept. 30,
2020).
5
I cite these two Rule 23 orders not as precedent but merely to show that multiple panels of the
appellate court have read Sanders the same way with respect to what it means to take an affidavit
as true.
- 20 -
as true means that “ ‘we will presume that had defense counsel called these
witnesses, they would have testified in a manner consistent with their affidavits’ ”
(emphasis omitted) (quoting People v. Coleman,
183 Ill. 2d 366
, 403 (1998))).
Despite being confronted with this citation, the Robinson majority persisted in
making the incorrect statement that this court had “never held, or even suggested,”
that the taken-as-true requirement means that an “affiant would testify consistently
with the content of the affidavit.”
Id. ¶ 59
n.2 (majority opinion). Thus, not only
has the court said precisely what the Robinson majority said it had not, Sanders
only makes sense if the court were using that definition of “taken as true.”
¶ 70 The Robinson majority’s wholly unconvincing explanation of how its result was
consistent with Sanders is that Sanders was decided in a “significantly different
procedural context” because it was a second stage case and the petitioner faces a
heavier burden at the second stage.
Id. ¶ 59
. But, as I pointed out in my dissent, this
is a distinction without a difference because the “taken as true” requirement applies
equally at the leave-to-file and second stages. See
id. at 106
(Burke, J., dissenting,
joined by Garman and Karmeier, JJ.); see also People v. Brown,
2017 IL App (1st) 150132
, ¶ 61 n.2, vacated on other grounds and appeal dismissed, No. 123252 (Ill.
Jan. 24, 2019) (“Although we recognize that Sanders arose from a slightly different
procedural posture than this case, in that it was an appeal from a second-stage
dismissal of a successive postconviction petition ***, the requirement that all well-
pleaded factual allegations are taken as true applies equally in this case as in
Sanders, and it is thus helpful to our analysis of this issue.”).
¶ 71 The Robinson majority failed to explain how raising a petitioner’s burden from
a “probability” to a “substantial showing” changes the meaning of what it means to
take an affidavit as true. And the reason that explanation was lacking is obvious:
there is no explanation. Nevertheless, Robinson left Sanders in place and therefore
the state of Illinois law is that, at the leave-to-file stage of postconviction
proceedings, a court must presume that a reasonable juror would believe the
testimony set forth in the new affidavits (Robinson), but at the second stage a court
does not have to presume that a reasonable juror would believe the evidence and
may dismiss the petition if the new affidavits are not conclusive and would merely
add conflicting evidence to what the jury heard (Sanders).
- 21 -
¶ 72 Because we have held that a defendant who pleads guilty must be held to a
higher burden when bringing a postconviction claim of actual innocence, I would
apply the Edwards/Sanders framework at the leave-to-file stage of such cases and
limit the Robinson standard to actual innocence claims brought by defendants who
were convicted after a trial. Here, the affidavit defendant obtained from Callaway
did not raise a probability that defendant could establish by clear and convincing
evidence that no reasonable fact finder would have found him guilty. The affidavit
was far from conclusive and would have merely given a reasonable fact finder
conflicting evidence to consider. This is not a case in which identity was an issue.
Callaway claimed that defendant had no knowledge of the drugs, but a reasonable
factfinder could easily conclude otherwise when the drugs were found in a room
where defendant was spotted entering upon fleeing from the police, the drugs were
under a bed right next to a sawed-off shotgun that had defendant’s DNA on it, and
defendant had a digital scale in his pocket. Given the factual basis of defendant’s
plea, it is difficult to imagine any evidence that defendant could muster that would
establish an actual innocence claim. I agree with my colleagues that the trial court’s
denial of this petition was the correct decision, but I also do not believe that this
petition should have advanced beyond the leave-to-file stage.
- 22 - |
4,605,750 | 2020-11-20 19:37:01.300755+00 | null | null | PSB HOLDINGS, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
PSB Holdings, Inc. v. Comm'r
No. 14724-05
United States Tax Court
November 1, 2007, Filed
*35
P is the holding company of an affiliated group of corporations that files consolidated Federal income tax returns. The other members are P's wholly owned bank (B) and B's wholly owned investment company (IC). Both B and IC own tax-exempt obligations. Only B incurs interest expenses. IC's tax-exempt obligations were either purchased by IC or received from B before the subject years as contributions to capital. R determined that B must include all of IC's tax-exempt obligations in the calculation of B's average adjusted bases of tax-exempt obligations under secs. 265(b)(2)(A) and 291(e)(1)(B)(ii)(I), I.R.C. On the consolidated income tax returns for the subject years, B included IC's obligations in the calculation only to the extent that B had purchased the obligations and transferred them to IC; in other words, B omitted from the calculation those obligations that IC purchased.
Held: The calculation of B's average adjusted bases of tax-exempt obligations does not include the tax-exempt obligations purchased by IC.
Debra Sadow Koenig, for petitioner.
Lawrence C. Letkewicz, Christa A. Gruber, and Sharon S. Galm, for respondent.
Laro, David
DAVID LARO
*132 OPINION
LARO, Judge: This case was submitted *36 to the Court under Rule 122 for decision without trial. 1 Petitioner petitioned the Court to redetermine respondent's determination of deficiencies of $ 33,622, $ 38,571, $ 41,654, and $ 31,868 in the 1999, 2000, 2001, and 2002 Federal income taxes, respectively, of its affiliated group. For those years, the group filed consolidated Federal corporate income tax returns. The group included petitioner, petitioner's wholly owned subsidiary Peoples State Bank (Peoples), and Peoples' wholly owned investment subsidiary PSB Investments, Inc. (Investments).
We decide whether Peoples must include the tax-exempt obligations purchased and owned by Investments in the calculation of Peoples' average adjusted bases of tax-exempt obligations under sections 265(b)(2)(A) and 291(e)(1)(B)(ii)(I). We hold that the calculation does not include those obligations.
BACKGROUND
All facts were stipulated or contained in the exhibits submitted with the stipulations. The stipulated facts and exhibits are incorporated herein by this reference. *37 When the petition was filed, petitioner's mailing address and principal place of business were in Wausau, Wisconsin.
Petitioner is a holding company and the common parent of an affiliated group of corporations that file consolidated Federal income tax returns. Petitioner's common stock is held by approximately 1,000 shareholders. The other members of the affiliated group are petitioner's wholly owned subsidiary (Peoples) and Peoples' wholly owned subsidiary (Investments). For financial and regulatory accounting purposes, Investments and Peoples consolidate their assets, liabilities, income, and expenses.
Peoples was organized in 1962 as a State bank under Wisconsin law. Peoples' main office is located in Wausau, Wisconsin, and it has several branch offices in Wisconsin communities near Wausau. Peoples is petitioner's sole subsidiary. Peoples' sole subsidiary is Investments.
*133 On or about April 23, 1992, Peoples organized Investments in Nevada. Investments does business exclusively in Nevada, with offices in Las Vegas, Nevada, and offsite record storage at a third-party facility in Las Vegas. Investments has no depository or lending powers, and, as relevant here, does not qualify as either *38 a "bank" or a "financial institution" for Federal income tax purposes. For other purposes, Investments is considered to be a financial institution subject to Federal and State supervision.
Peoples organized Investments to consolidate and improve the efficiency of managing, safekeeping, and operating the securities investment portfolio then held by Peoples and to reduce Peoples' State tax liability. Nevada has neither a corporate income tax nor a corporate franchise tax. Wisconsin has a corporate franchise tax of 7.9 percent of a corporation's net income. For purposes of the Wisconsin tax, Wisconsin considers "income" to include interest income from federally tax-exempt obligations. A wholly owned subsidiary of a Wisconsin corporation with no nexus to the State is not subject to Wisconsin's corporate franchise tax. Investments was organized without a nexus to Wisconsin so as not to be subject to Wisconsin's corporate franchise tax.
From on or about April 23, 1992, through December 1, 2002, Peoples transferred to Investments cash, tax-exempt obligations, taxable securities, and loan participations (fractional interests in loans originated by Peoples), including substantially all of Peoples' *39 long-term investments. The cash totaled $ 18,460 and was transferred to Investments upon its organization in exchange for all of its common stock. The tax-exempt obligations and taxable securities totaled $ 38,141,487, and the loan participations totaled $ 27,710,909; these three categories of assets were transferred to Investments as paid-in capital. No security or tax-exempt obligation of any kind was transferred by Peoples to Investments during the subject years. Of the taxable securities and tax-exempt obligations that Peoples transferred to Investments, 17 percent were federally tax-exempt municipal securities, 41 percent were federally taxable securities (issued primarily by Government agencies), and 42 percent were loan participation interests. At the time of the transfers, no liabilities encumbered the transferred securities or obligations, and Investments did not assume any liability of Peoples. Investments *134 did not sell any tax-exempt obligation or taxable security before maturity, and all such obligations and securities received from Investments matured by the end of the subject years. Investments' income for the subject years was attributable to holding federally taxable *40 securities, federally tax-exempt obligations, and loan participations. Investments did not own any other asset, and it did not provide services to unrelated third parties.
Investments' total assets during the subject years represented about 20 percent of the total assets of Investments and Peoples combined. During each of those years, Peoples incurred approximately $ 8 million to $ 12 million of interest expenses; Investments incurred no interest expense. During 1999 and 2000, Investments owned almost $ 14 million in tax-exempt obligations; Peoples owned virtually none. During 2001 and 2002, Investments owned over $ 17 million in tax-exempt obligations, which represented more than 80 percent of the tax-exempt obligations owned by Investments and Peoples combined.
The Internal Revenue Code provides (as further discussed below) that the amount of a financial institution's interest expense allocated to tax-exempt interest, and thus rendered nondeductible, is computed by multiplying the otherwise allowable interest expense by a fraction prescribed in the statutes. The fraction's numerator (numerator) equals "the taxpayer's average adjusted [bases] * * * of [tax-exempt] obligations". See secs. 265(b)(2)(A), *41 291(e)(1)(B)(ii)(I). The fraction's denominator (denominator) equals the "average adjusted [bases] for all assets of the taxpayer". See secs. 265(b)(2)(B), 291(e)(1)(B)(ii)(II). On the consolidated returns filed by petitioner's affiliated group for the subject years, Peoples included its adjusted basis in its Investments' stock in Peoples' calculation of the denominator. Peoples' basis in its Investments' stock equaled Investments' basis in Investments' assets. For each subject year, Peoples included all of the tax-exempt obligations that were purchased by Peoples and that were outstanding as of the end of the year in Peoples' calculation of the numerator. Some of those obligations were owned by Investments during the year, having been earlier transferred by Peoples to the capital of Investments.
The notice of deficiency states as follows:
*135 It has been determined that you transferred tax-exempt securities from your bank to investment subsidiaries. By this transfer, you managed to separate tax-exempt investments from their interest expense which resulted in a reduction of your exposure to the TEFRA interest expense disallowance rules under Internal Revenue Code sections 291 and 265(b).
It *42 has further been determined that the investment subsidiaries do not carry on any real business operations on their own. Rather, they are merely an incorporated "Shell" whose only real purpose is to avoid taxation. In actuality, their business is conducted by or through their parent banks.
It has further been determined that the investment subsidiaries' assets and liabilities are those of their parent banks, since for all other reporting purposes, both financial and regulatory, reporting is required to be done on a consolidated basis. The assets and liabilities are considered those of their parent banks. Therefore, it is determined that for purposes of computing your income tax liabilities, you must include the assets and tax-exempt securities of the subsidiaries in your computation of unallowable interest expense under the TEFRA provisions.
The recalculation of non deductible interest expense, under Sections 291 and 265(b) of the Internal Revenue Code, based on the inclusion of the assets and tax-exempt balances of Peoples State Bank and/or PSB Investments, Inc. with that of the assets and tax-exempt balances of their respective parent banks increases your taxable incomes by: $ 98,890 *43 for the year ended 12-31-1999; $ 113,445 for the year ended 12-31-2000; $ 122,513 for the year ended 12-31-2001 and; $ 93,731 for the year ended 12-31-2002. Refer to Exhibit A through Exhibit D for further explanation.
Respondent has since conceded the determination stated in the second paragraph quoted above.
Respondent also concedes that Investments was created to reduce State taxes and is a separate business entity that is not a sham.
DISCUSSION
We decide the narrow issue of whether Peoples must include the tax-exempt obligations purchased and owned by Investments in the calculation of Peoples' average adjusted bases of tax-exempt obligations under sections 265(b)(2)(A) and 291(e)(1)(B)(ii)(I). 2 Petitioner argues that the relevant text in those sections provides that Peoples calculate the *136 numerator without regard to those obligations. 3*45 Respondent disagrees. As respondent sees it, the relevant text when read in the light of the statutes' legislative intent allows respondent for purposes of the numerator to treat Investments' assets as owned by Peoples. We agree with petitioner that the relevant text does not include in the numerator the tax-exempt obligations purchased and owned by *44 Investments.
Section 265(a)(2) provides that no deduction shall be allowed for interest on indebtedness incurred or continued to purchase or carry obligations the interest on which is wholly exempt from Federal income tax. For purposes of that provision, whether a taxpayer's indebtedness was incurred or continued to purchase or carry tax-exempt obligations generally depends on the taxpayer's purpose in incurring the indebtedness. See Wisconsin Cheeseman, Inc. v. United States, 388 F.2d 420">388 F.2d 420, 422 (7th Cir. 1968). In other words, a disallowance of interest expenses under section 265(a)(2) requires a finding of a sufficiently direct relationship between a borrowing and a tax-exempt investment. See id.
Congress enacted section 291(a)(3) and (e)(1)(B) in 1982. See Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 204(a), 96 Stat. 423">96 Stat. 423. As enacted, those provisions provided a 15-percent cutback in a corporate tax preference item affecting certain financial institutions. *46 4 The cutback applied to the deduction otherwise allowable for "the amount of interest on indebtedness incurred or continued to purchase or carry [tax-exempt] obligations acquired after December 31, 1982". The amount of the cutback was calculated by applying to the otherwise allowable interest expense a fraction that is virtually the same as in the current version of the statutes. The report of the Senate Finance Committee, the committee in which TEFRA section 204(a) originated, sets forth the following rationale with respect to the cutback and similar provisions:
*137 Numerous corporate tax preferences have been enacted over the years in order to stimulate business investment and advance other worthwhile purposes. For several reasons, some of these tax preferences should be scaled back. First, the federal budget faces large deficits, which will require large reductions in direct Federal spending. In addressing these deficits, tax preferences should also be subject to careful scrutiny. Second, in 1981 Congress enacted the Accelerated Cost Recovery System, which provides very generous incentives for investment in plant and equipment. ACRS makes some corporate tax preferences less necessary. *47 Third, there is increasing concern about the equity of the tax system, and cutting back corporate tax preferences is a valid response to that concern.
For these reasons, the committee bill contains a 15-percent across-the-board cutback in a series of corporate tax preferences. [S. Rept. 97-494 (Vol. 1), at 118-119 (1982).]
Four years later, in 1986, Congress enacted section 265(b). See Tax Reform Act of 1986, Pub. L. 99-514, sec. 902(a), 100 Stat. 2380">100 Stat. 2380. According to the report of the House Ways and Means Committee, Congress enacted section 265(b) for two reasons. First, the report states, financial institutions had been allowed to deduct interest payments regardless of their tax-exempt holdings, a result, the committee concluded, that discriminated in favor of financial institutions at the expense of other taxpayers. *48 See H. Rept. 99-426, at 588-589 (1985), 1986-3 C.B. (Vol. 2) 1, 588-589. Second, the report states, financial institutions had been allowed to reduce their tax liability drastically by investing in tax-exempt obligations. Id. The report explains that
To correct these problems, the committee bill denies financial institutions an interest deduction in direct proportion to their tax-exempt holdings. The committee believes that this proportional disallowance rule is appropriate because of the difficulty of tracing funds within a financial institution, and the near impossibility of assessing a financial institution's "purpose" in accepting particular deposits. The committee believes that the proportional disallowance rule will place financial institutions on approximately an equal footing with other taxpayers. [Id.]
The report explains that the amount of interest allocable to tax-exempt obligations for purposes of section 265(b) is determined under rules similar to those that apply under section 291(a)(3) and (e)(1)(B). Id.
As enacted, sections 265(b) and 291(a)(3) and (e)(1)(B) reduce the interest expense deductions of financial institutions without requiring evidence of a direct relationship *49 between borrowing and tax-exempt investment. Specifically, *138 those sections disallow a deduction with respect to the portion of a financial institution's interest expense that is allocable, on a pro rata basis, to its holdings in tax-exempt obligations. While section 265(b) disallows a deduction for the entire amount of that portion of a financial institution's interest expense allocable to tax-exempt obligations, section 291(a)(3) and (e)(1)(B) disallows only 20 percent of the interest expense allocable to those obligations.
The 20-percent rule of section 291(a)(3) and (e)(1)(B) applies with respect to tax-exempt obligations acquired from January 1, 1983, through August 7, 1986. The 100-percent rule of section 265(b) generally applies to those tax-exempt obligations acquired after August 7, 1986. In the latter case, however, section 265(b)(3) provides a special rule for a "qualified tax-exempt obligation", defined in section 265(b)(3)(B) as a certain tax-exempt obligation issued by small issuers. Under section 265(b)(3)(A), a "qualified tax-exempt obligation" acquired after August 7, 1986, is treated for purposes of sections 265(b)(2) and 291(e)(1)(B) as if it were acquired on August *50 7, 1986; thus, qualified tax-exempt obligations reduce interest expense deductions under section 291(a)(3) and (e)(1)(B), rather than under section 265(b). The parties agree that the tax-exempt obligations owned by Investments are "qualified tax-exempt obligations".
In calculating the amount of the denominator for Peoples, the parties agree that the denominator includes Peoples' adjusted basis in its Investments stock. The parties lock horns on whether the tax-exempt obligations purchased and owned by Investments must be included in the numerator. On the consolidated returns, Peoples omitted those obligations from the numerator. Respondent determined that those obligations are included in the numerator. As respondent sees it, because the basis of Peoples' Investments stock is included in the denominator, the portion of that basis attributable to the bases of Investments' tax-exempt obligations is included in the numerator.
We begin our analysis with the relevant text. We interpret the text with reference to the legislative history primarily to learn the purpose of the statutes and to resolve any ambiguity in the text. See United States v. Am. Trucking Associations, Inc., 310 U.S. 534">310 U.S. 534, 543-544, 60 S. Ct. 1059">60 S. Ct. 1059, 84 L. Ed. 1345">84 L. Ed. 1345 (1940). *51 We apply the text as written unless we find that a word's meaning is "'inescapably *139 ambiguous'" or that such an application "'would thwart the purpose of the overall statutory scheme or lead to an absurd or futile result.'" Booth v. Commissioner, 108 T.C. 524">108 T.C. 524, 568, 569 (1997) (quoting Garcia v. United States, 469 U.S. 70">469 U.S. 70, 76 n.3, 105 S. Ct. 479">105 S. Ct. 479, 83 L. Ed. 2d 472">83 L. Ed. 2d 472 (1984), and Albertson's, Inc. v. Commissioner, 42 F.3d 537">42 F.3d 537, 545 (9th Cir. 1994), affg. 95 T.C. 415">95 T.C. 415 (1990)); see United States v. Am. Trucking Associations, Inc., supra at 543; see also United States v. Shriver, 989 F.2d 898">989 F.2d 898, 901 (7th Cir. 1992); Allen v. Commissioner, 118 T.C. 1">118 T.C. 1 (2002).
The applicable text refers to "the taxpayer's average adjusted [bases] * * * of [tax-exempt] obligations" and the "average adjusted bases for all assets of the taxpayer". We read that text to refer to the tax-exempt obligations and assets owned by Peoples alone or, in other words, by the "taxpayer" for whom the subject calculation is performed. We do not read that text to provide that a taxpayer such as Peoples must include in its tax-exempt obligations any tax-exempt obligation purchased and owned by another taxpayer, whether the taxpayers be related or not. Cf. First Chicago NBD Corp. v. Commissioner, 135 F.3d 457">135 F.3d 457 (7th Cir. 1998)*52 (holding that section 902 did not allow aggregation where the statute referred literally to "a" corporation rather than to a group of affiliated corporations), affg. 96 T.C. 421">96 T.C. 421 (1991). We understand Congress to have enacted the text as a means for raising revenue and bolstering equity in our tax system. We understand Congress to have intended for the statutes to deny some or all of a financial institution's otherwise allowable interest expense deduction to the extent that the interest is allocable to the tax-exempt obligations it owns. We do not understand Congress to have specifically spoken through the statutes to the situation here, where tax-exempt obligations are purchased and owned by a subsidiary of a financial institution.
Respondent asserts that the adjusted bases of Peoples' assets in the denominator include the adjusted basis of Peoples' stock in Investments which, in turn, reflects the assets owned by Investments. Respondent concludes that Investments' assets are therefore considered assets of Peoples for purposes of calculating the numerator. We disagree. The numerator consists of the "taxpayer's average adjusted bases * * * of tax-exempt obligations", but Peoples has *53 no adjusted bases in any of the tax-exempt obligations purchased and *140 owned by Investments. Moreover, the statutes use the term "taxpayer" in the singular, and well-established law treats Peoples and Investments as separate taxpayers notwithstanding the fact that they join in the filing of a consolidated return. See, e.g., Wegman's Props., Inc. v. Commissioner, 78 T.C. 786">78 T.C. 786, 789 (1982) (citing, inter alia, Natl. Carbide Corp. v. Commissioner, 336 U.S. 422">336 U.S. 422, 69 S. Ct. 726">69 S. Ct. 726, 93 L. Ed. 779">93 L. Ed. 779, 1 C.B. 165">1949-1 C.B. 165 (1949), Interstate Transit Lines v. Commissioner, 319 U.S. 590">319 U.S. 590, 63 S. Ct. 1279">63 S. Ct. 1279, 87 L. Ed. 1607">87 L. Ed. 1607, 1 C.B. 1016">1943-1 C.B. 1016 (1943), and Woolford Realty Co. v. Rose, 286 U.S. 319">286 U.S. 319, 52 S. Ct. 568">52 S. Ct. 568, 76 L. Ed. 1128">76 L. Ed. 1128, 1932 C.B. 154">1932 C.B. 154, 1 C.B. 154">1932-1 C.B. 154 (1932)); cf. Gottesman & Co. v. Commissioner, 77 T.C. 1149">77 T.C. 1149, 1156 (1981) ("to the extent the consolidated return regulations do not mandate different treatment, corporations filing consolidated returns are to be treated as separate entities when applying other provisions of the Code"). Nor do the consolidated return regulations, as applicable here, change this result. Those regulations require that Peoples calculate its net income separately from Investments' net income. See sec. 1.1502-11(a)(1), Income Tax Regs. (stating that taxable income is calculated for an affiliated group by taking into account the separate taxable *54 income of each member of the group). Respondent has not identified, nor are we aware of, any provision in the consolidated return regulations that would require the tax-exempt obligations purchased and owned by Investments to be taken into account in the calculation of Peoples' interest expense deduction. Nothing that we read in the statutes or in the consolidated return regulations directs us to ignore the separate existence of Investments and Peoples or otherwise to treat Investments' self-purchased tax-exempt obligations as owned by Peoples for purposes of calculating the numerator as to Peoples.
Congress knew how to require a taxpayer to take into account the assets of another taxpayer had Congress intended to include respondent's "look-through" approach in the applicable statutes. See, e.g., sec. 265(b)(3)(E). Congress, however, did not in those statutes provide any aggregation or indirect ownership rule that would apply to the numerator. Instead, Congress referred simply to the obligations of the "taxpayer" for purposes of making that calculation. "'[W]hereCongress includes particular language in one section of a statute but omits it in another section of the same Act, it is *55 generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.'" Russello v. *141 United States, 464 U.S. 16">464 U.S. 16, 23, 104 S. Ct. 296">104 S. Ct. 296, 78 L. Ed. 2d 17">78 L. Ed. 2d 17 (1983) (quoting United States v. Wong Kim Bo, 472 F.2d 720">472 F.2d 720, 722 (5th Cir. 1972)).
Respondent argues that not reading the relevant text as providing for Peoples' indirect ownership of the subject tax-exempt obligations leads to an "absurd" result. We disagree. As discussed above, Congress apparently did not specifically intend through the applicable statutes to address the gap left open in the setting at hand. We apply the law as written by Congress and leave it to Congress or to the Department of the Treasury, the latter through and to the extent of its regulatory authority or by other permissible means, to address any gaps in the statutes as written. See Lamie v. United States, 540 U.S. 526">540 U.S. 526, 538, 124 S. Ct. 1023">124 S. Ct. 1023, 157 L. Ed. 2d 1024">157 L. Ed. 2d 1024 (2004). To be sure, agencies such as the Internal Revenue Service have a great amount of authority to issue regulations to fill gaps in a statute. See, e.g., Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837">467 U.S. 837, 842-844, 104 S. Ct. 2778">104 S. Ct. 2778, 81 L. Ed. 2d 694">81 L. Ed. 2d 694 (1984). In addition, as applicable to taxpayers who file consolidated returns, such as here, the Commissioner *56 has vast authority to prescribe regulations to curtail or otherwise address any perceived abuse. See United Dominion Indus., Inc. v. United States, 532 U.S. 822">532 U.S. 822, 836-837, 121 S. Ct. 1934">121 S. Ct. 1934, 150 L. Ed. 2d 45">150 L. Ed. 2d 45 (2001).
Respondent also argues for a contrary reading, noting that Peoples and Investments consolidated their assets, liabilities, income, and expenses for financial and regulatory accounting purposes.5 We are unpersuaded by this argument. Neither financial nor regulatory accounting controls the manner in which a taxpayer must report its operations for Federal income tax purposes. See Thor Power Tool Co. v. Commissioner, 439 U.S. 522">439 U.S. 522, 542-543, 99 S. Ct. 773">99 S. Ct. 773, 58 L. Ed. 2d 785">58 L. Ed. 2d 785 (1979); Signet Banking Corp. v. Commissioner, 106 T.C. 117">106 T.C. 117, 130-131 (1996), affd. 118 F.3d 239">118 F.3d 239 (4th Cir. 1997). In fact, we note another major difference from the manner in which Investments is treated for Federal income tax purposes; to wit, that Investments is considered to be a financial institution for Federal and State oversight purposes but is not considered to be a bank or financial institution for Federal income tax purposes. We also note that respondent has not argued, nor do we find, that he *142 exercised any discretion afforded to him by section 446(b) or 482. Instead, *57 as discussed above, the linchpin of respondent's arguments is that the statutes on their face require that the basis of Peoples' Investments stock be included in the denominator and that the portion of that basis attributable to the bases of Investments' tax-exempt obligations is therefore also included in the numerator.
Lastly, respondent observes, the Commissioner has issued Rev. Rul. 90-44, 1 C.B. 54">1990-1 C.B. 54, interpreting the applicable statutes to provide that the tax-exempt obligations of a subsidiary may be taken into account in calculating the numerator for a parent bank. Respondent asserts that the Commissioner issued this ruling under the same formal procedures that he would have been required to follow had he prescribed regulations on the subject. Respondent argues that the revenue ruling is entitled to "judicial respect" as "persuasive precedent that should be followed unless unreasonable".
While *58 we believe that the Commissioner's interpretation as set forth in Rev. Rul. 90-44, supra, is entitled to consideration by this Court, we decline respondent's invitation to equate the authority of the ruling with that of a regulation or otherwise to give the ruling the degree of deference that is typically afforded to regulations under Chevron U.S.A. Inc. v. NRDC, supra, and its progeny. As explained below, we evaluate the revenue ruling under the less deferential standard enunciated in Skidmore v. Swift & Co., 323 U.S. 134">323 U.S. 134, 65 S. Ct. 161">65 S. Ct. 161, 89 L. Ed. 124">89 L. Ed. 124 (1944), according the ruling respect proportional to its "power to persuade". See United States v. Mead Corp., 533 U.S. 218">533 U.S. 218, 234-235, 237, 121 S. Ct. 2164">121 S. Ct. 2164, 150 L. Ed. 2d 292">150 L. Ed. 2d 292 (2001).
Rev. Rul. 90-44, 1990-1 C.B. at 57, states in relevant part:
If one or more financial institutions are members of an affiliated group of corporations (as defined in section 1504 of the Code), then, even if the group files a consolidated return, each such institution must make a separate determination of interest expense allocable to tax-exempt interest, rather than a combined determination with the other members of the group.
However, in situations involving taxpayers which are under common control *59 and one or more of which is a financial institution, in order to fulfill the congressional purpose underlying section 265(b) of the Code, the District Director may require another determination of interest expense allocable to tax-exempt interest to clearly reflect the income of the financial institution or to prevent the evasion or avoidance of taxes.
*143 The first quoted paragraph parallels the text of the statutes, stating that the subject calculation "must" be made separately for each member of the affiliated group. The second quoted paragraph departs from that text, creating an exception that "may" apply to taxpayers under common control when one or more of the taxpayers is a financial institution. The ruling sets forth no reasoning or authority for the exception, other than stating that the exception was prescribed "in order to fulfill the congressional purpose underlying section 265(b)" and may be invoked "to clearly reflect the income of the financial institution and to prevent the evasion or avoidance of taxes".
At the outset, we note that the notice of deficiency makes no mention of Rev. Rul. 90-44, supra. Thus, while the ruling states that the District Director may require a determination *60 of interest expense under a rule that is different from that stated in the statutes, we find no basis in the record from which to find (or to conclude) that the District Director has in fact exercised the authority purportedly given to him by the statutes. To the contrary, we read the notice of deficiency to indicate that respondent observed that Peoples had transferred tax-exempt obligations to Investments so that Peoples afterwards had interest expenses but little to no tax-exempt interest income and determined that the transfer was ineffective for Federal income tax purposes because: (1) Investments was not a legitimate business entity with independent business operations but was a sham created solely to avoid taxes, and (2) Investments' assets and liabilities are viewed as those of Peoples because Peoples and Investments reported their operations for financial and regulatory reporting purposes on a consolidated basis.
All the same, we are not bound by an interpretation in a revenue ruling. See Rauenhorst v. Commissioner, 119 T.C. 157">119 T.C. 157, 173 (2002); see also Johnson v. Commissioner, 115 T.C. 210">115 T.C. 210, 224 (2000). The Court of Appeals for the Seventh Circuit has held similarly, stating that *61 revenue rulings are entitled to limited deference. See Bankers Life & Cas. Co. v. United States, 142 F.3d 973">142 F.3d 973, 978 (7th Cir. 1998); First Chicago NBD Corp. v. Commissioner, 135 F.3d 457">135 F.3d 457 (7th Cir. 1998); see also United States Freightways Corp. v. Commissioner, 270 F.3d 1137">270 F.3d 1137, 1141 (7th Cir. 2001) (discussing the level of deference owed to agency interpretations after United States v. Mead Corp., *144 supra), revg. 113 T.C. 329">113 T.C. 329 (1999). The Commissioner also recognizes the limited strength of a revenue ruling, explaining in his procedural rules that "The conclusions expressed in Revenue Rulings will be directly responsive to and limited in scope by the pivotal facts stated in the revenue ruling", sec. 601.601(d)(2)(v)(a), Statement of Procedural Rules, and "Revenue Rulings published in the Bulletin do not have the force and effect of Treasury Department Regulations", *145 sec. 601.601(d)(2)(v)(d), Statement of Procedural Rules.
In United States v. Mead Corp., supra, the Supreme Court considered the degree of judicial deference afforded to a ruling by the U.S. Customs Service as to a tariff classification. The Court stated: "We agree that a tariff classification has no claim to judicial deference under Chevron, *62 there being no indication that Congress intended such a ruling to carry the force of law, but we hold that under Skidmore v. Swift & Co., 323 U.S. 134">323 U.S. 134, 65 S. Ct. 161">65 S. Ct. 161, 89 L. Ed. 124">89 L. Ed. 124 (1944), the ruling is eligible to claim respect according to its persuasiveness." Id. at 221. In Skidmore v. Swift & Co., supra at 140, the Court stated:
We consider that the rulings, interpretations and opinions * * * while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.
See also Christensen v. Harris County, 529 U.S. 576">529 U.S. 576, 587, 120 S. Ct. 1655">120 S. Ct. 1655, 146 L. Ed. 2d 621">146 L. Ed. 2d 621 (2000) (an agency's interpretation reached without formal notice and comment rulemaking is entitled to respect only when it has the "power to persuade"); cf. Kort v. Diversified Collection Servs., Inc., 394 F.3d 530">394 F.3d 530, 539 (7th Cir. 2005).
We conclude that we must evaluate the revenue ruling at hand under *63 the "power to persuade" standard set forth in Skidmore. While respondent invites the Court to afford the ruling greater judicial deference by asserting that the ruling was issued in the same manner as regulations on the subject would have been, we decline that invitation. Cf. Ind. Fam. & Soc. Servs. Admin. v. Thompson, 286 F.3d 476">286 F.3d 476, 480 (7th Cir. 2002). In addition to the fact that the Commissioner's procedural rules state specifically that revenue rulings "do not have the force and effect of Treasury Department Regulations", sec. 601.601(d)(2)(v)(d), Statement of Procedural Rules, we consider most significant the fact that the revenue ruling, unlike most Treasury Department regulations, did not undergo any public review or comment before its issuance.
In accordance with the analysis under United States v. Mead Corp., 533 U.S. 218">533 U.S. 218, 121 S. Ct. 2164">121 S. Ct. 2164, 150 L. Ed. 2d 292">150 L. Ed. 2d 292 (2001), we decline to adopt the exception set forth in Rev. Rul. 90-44, supra. First, as we have discussed, the exception does not properly interpret the text of the statutes as written. See Commissioner v. Schleier, 515 U.S. 323">515 U.S. 323, 336 n.8, 115 S. Ct. 2159">115 S. Ct. 2159, 132 L. Ed. 2d 294">132 L. Ed. 2d 294 (1995). Second, we find in the ruling neither adequate "thoroughness evident in its consideration" nor adequate "reasoning" *64 as to the presence of the exception in the statutes. See Skidmore v. Swift & Co., supra at 140. The ruling simply states that the exception was included in the revenue ruling "in order to fulfill the congressional purpose underlying section 265(b)" and may be invoked "to clearly reflect the income of the financial institution and to prevent the evasion or avoidance of taxes". Rev. Rul. 90-44, 1990-1 C.B. at 57. Third, the revenue ruling was issued many years after the enactment of the relevant statutes, approximately 8 years after the enactment of section 291(a)(3) and (e)(1)(B) and 4 years after the enactment of section 265(b).
We hold that the numerator does not include the tax-exempt obligations purchased and owned by Investments and sustain petitioner's reporting position. We have considered all of the parties' arguments and have rejected those arguments not discussed herein as irrelevant or without merit.
Decision will be entered under Rule 155.
APPENDIX
SEC. 265(b). Pro rata Allocation of Interest Expense of Financial Institutions to Tax-Exempt Interest. --
(1) In general. -- In the case of a financial institution, no deduction shall be allowed for that portion of the taxpayer's interest *65 expense which is allocable to tax-exempt interest.
(2) Allocation. -- For purposes of paragraph (1), the portion of the taxpayer's interest expense which is allocable to tax-exempt interest is an amount which bears the same ratio to such interest expense as --
*146 (A) the taxpayer's average adjusted bases (within the meaning of section 1016) of tax-exempt obligations acquired after August 7, 1986, bears to
(B) such average adjusted bases for all assets of the taxpayer.
SEC. 291(e). Definitions. -- For purposes of this section --
(1) Financial institution preference item. -- The term "financial institution preference item" includes the following:
* * * * * * *
(B) Interest on debt to carry tax-exempt obligations acquired after December 31, 1982, and before August 8, 1986. --
(i) In general. -- In the case of a financial institution which is a bank (as defined in section 585(a)(2)), the amount of interest on indebtedness incurred or continued to purchase or carry obligations acquired after December 31, 1982, and before August 8, 1986, the interest on which is exempt from taxes for the taxable year, to the extent that a deduction would (but for this paragraph or section 265(b)) be allowable with *66 respect to such interest for such taxable year.
(ii) Determination of interest allocable to indebtedness on tax-exempt obligations. -- Unless the taxpayer (under regulations prescribed by the Secretary) establishes otherwise, the amount determined under clause (i) shall be an amount which bears the same ratio to the aggregate amount allowable (determined without regard to this section and section 265(b)) to the taxpayer as a deduction for interest for the taxable year as --
(I) the taxpayer's average adjusted basis (within the meaning of section 1016) of obligations described in clause (i), bears to
(II) such average adjusted basis for all assets of the taxpayer.
Footnotes |
4,639,124 | 2020-12-03 07:15:39.339707+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=10844&Index=%5c%5c10%2e20%2e4%2e7%5cTamesIndexes%5ccoa08%5cOpinion | §
DANBILL PARTNERS, L.P.,
No. 08-19-00139-CV
§
Appellant,
Appeal from the
§
v.
448th District Court
§
SAUL SANDOVAL AND VERONICA
of El Paso County, Texas
SANDOVAL,
§
(TC# 2019DCV0377)
Appellees.
§
JUDGMENT
The Court has considered this cause on the record and concludes there was error in the
judgment. We therefore vacate the order issuing the injunction, dissolve said injunction, and
remand this cause for trial on the merits. We further order that Appellant recover from Appellees
all costs, for which let execution issue. This decision shall be certified below for observance.
IT IS SO ORDERED THIS 30TH DAY OF NOVEMBER, 2020.
YVONNE T. RODRIGUEZ, Justice
Before Alley, C.J., Rodriguez, and Palafox, JJ. |
4,639,125 | 2020-12-03 13:00:22.904311+00 | null | http://media.ca11.uscourts.gov/opinions/unpub/files/201912386.pdf | USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 1 of 18
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 19-12386
Non-Argument Calendar
________________________
D.C. Docket No. 1:14-cv-21803-KMW
CHEYLLA SILVA, JOHN PAUL JEBIAN,
Plaintiffs - Appellants,
versus
BAPTIST HEALTH SOUTH FLORIDA, INC.,
BAPTIST HOSPITAL OF MIAMI, INC.,
SOUTH MIAMI HOSPITAL, INC.,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(December 3, 2020)
Before JORDAN, ROSENBAUM, and GRANT, Circuit Judges.
PER CURIAM:
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 2 of 18
Cheylla Silva and John Paul Jebian (collectively, “Plaintiffs”) sued two
hospitals, Baptist Hospital of Miami, Inc., and South Miami Hospital, Inc., and their
parent organization, Baptist Health South Florida, Inc. (collectively, “Baptist”), for
monetary damages and injunctive and declaratory relief under the Rehabilitation Act
(“RA”),
29 U.S.C. § 794
, and the Americans with Disabilities Act (“ADA”),
42 U.S.C. § 12182
. Plaintiffs, who are deaf, alleged that Baptist discriminated against
them on the basis of disability by failing to provide appropriate auxiliary aids
necessary to ensure effective communication with hospital staff. The district court
granted summary judgment to Baptist on Plaintiffs’ claims for monetary relief,
concluding that they could not prove the necessary element of deliberate
indifference. Then, after a bench trial, the court found that Plaintiffs lacked Article
III standing to obtain injunctive or declaratory relief because, in light of new policies
implemented by Baptist, they could not show a likelihood of future injury at
Baptist’s hospitals. After careful review, we affirm the district court’s standing
ruling, but we vacate the grant of summary judgment on the claims for monetary
relief and remand for further proceedings.
I. BACKGROUND
Plaintiffs Silva and Jebian are deaf and communicate primarily in American
Sign Language (“ASL”). In May 2014, they sued Baptist for violating their rights
under the RA and ADA by failing to provide appropriate auxiliary aids necessary to
2
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 3 of 18
ensure effective communication with hospital staff. They sought monetary damages
and declaratory and injunctive relief.
Plaintiffs alleged that they visited Baptist’s hospitals on numerous occasions
from 2009 to 2014 as patients or as a patient companion. While they requested live
on-site ASL interpreters for most visits, the hospital relied primarily on an
alternative communication method called Video Remote Interpreting (“VRI”). With
this internet-connected machine, a live ASL interpreter is located remotely and
communicates with the doctor and patient through a portable screen located in the
hospital. Plaintiffs alleged that the VRI machines routinely did not work, and
hospital staff would instead rely on family-member companions for interpretive
assistance or exchange hand-written notes. Sometimes, after a VRI breakdown, an
ASL interpreter would be called to assist with communication in person.
The district court granted summary judgment to Baptist. The court found that
Plaintiffs lacked Article III standing for injunctive relief and that they had not shown
a genuine dispute as to any material fact regarding a violation of the RA and ADA.
The court concluded that the denial of the requested auxiliary aids did not result in
any adverse medical consequences or inhibit their communication of the “chief
medical complaint” or “instructions under the treatment plan.”
Plaintiffs appealed, and we vacated and remanded for further proceedings.
Silva v. Baptist Health S. Fla., Inc.,
856 F.3d 824
, 831 (11th Cir. 2017). First, we
3
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held that the court “erroneously denied prospective injunctive relief on the basis of
Article III standing, concluding in error that Plaintiffs did not show they were likely
enough to return to the hospitals in the future or otherwise to suffer discrimination
again at those facilities.”
Id.
“[G]iven Plaintiffs’ numerous visits to Defendants’
facilities and the wealth of evidence showing repeated VRI malfunctions,” we
reasoned that there was “good reason to believe” that the VRI malfunctions “will
continue to happen at Defendants’ facilities when Plaintiffs do return,” which was
enough to establish standing for injunctive relief.
Id.
at 832–33.
Second, we found that the district court applied an incorrect standard for
Plaintiffs’ effective-communication claims.
Id.
at 833–35. We explained that
Plaintiffs did not need to establish an adverse consequence resulting from an
inability to communicate effectively.
Id.
Rather, the focus is on “the equal
opportunity to participate in obtaining and utilizing services.”
Id. at 834
(emphasis
in original). Therefore, the proper inquiry is “whether the hospital provided the kind
of auxiliary aid necessary to ensure that a deaf patient was not impaired in
exchanging medically relevant information with hospital staff.”
Id. at 835
.
Ineffective communication occurs, we stated, “if the patient experiences a real
hindrance, because of her disability, which affects her ability to exchange material
medical information with her health care providers.”
Id.
4
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We noted, however, that this standard “does not mean that deaf patients are
entitled to an on-site interpreter every time they ask for it.”
Id.
“If effective
communication under the circumstances is achievable with something less than an
on-site interpreter, then the hospital is well within its ADA and RA obligations to
rely on other alternatives.”
Id. at 836
. We stated that this inquiry is “inherently fact-
intensive” and, as a result, “an effective-communication claim often presents
questions of fact precluding summary judgment.”
Id.
Applying the proper standard, we concluded that a reasonable jury could find
that Baptist’s failure to offer appropriate auxiliary aids impaired Plaintiffs’ ability to
exchange medically relevant information with hospital staff.
Id.
at 836–40. But we
did not go further and address whether Plaintiffs had proved Baptist’s deliberate
indifference, which was necessary to win monetary relief, because the district court
had not addressed that issue.
Id. at 841
.
On remand, the parties filed supplemental summary-judgment briefing
regarding the issue of deliberate indifference. After holding a hearing, the district
court entered an order granting summary judgment on that issue to Baptist. The
court found no evidence that Baptist was “actually aware of any instance in which
[hospital staff] communicated ineffectively with Plaintiffs.” The court noted that
hospital staff attempted to provide alternative aids when they did not obtain a live
interpreter or working VRI machine, that there was no evidence that Plaintiffs “ever
5
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 6 of 18
complained to or informed Defendants that they were not receiving proper
assistance” at the time of treatment, and that the mere fact that the VRI machines
malfunctioned on occasion was not sufficient to establish deliberate indifference.
Thus, the court entered partial summary judgment on Plaintiffs’ claims for monetary
damages.
The district court then held a bench trial in November 2018 on Plaintiffs’
claims for declaratory and injunctive relief. At trial, Baptist presented evidence that
beginning in 2014 or 2015, it revised its policies to require the provision of live in-
person interpreters upon request by a patient or guest, to provide VRI while waiting
for a live interpreter, and to schedule live interpreters for scheduled appointments.
Baptist’s witnesses testified that these policies had been consistently implemented
since they were adopted. Based on this new evidence, the district court concluded
that, at the time of trial in November 2018, Plaintiffs lacked Article III standing for
injunctive or declaratory relief because there was no evidence that they would suffer
future discrimination if they returned to Baptist’s hospitals. So the court dismissed
their claims for injunctive or declaratory relief for lack of standing, and Plaintiffs
timely appealed.
II. STANDARDS OF REVIEW
We review a district court’s grant of summary judgment de novo, viewing the
evidence and drawing all reasonable inferences in favor of the non-moving party.
6
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 7 of 18
Crane v. Lifemark Hosps., Inc.,
898 F.3d 1130
, 1133–34 (11th Cir. 2018). Summary
judgment is appropriate if “the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). When a district court dismisses a claim for lack of standing, we review
the court’s legal conclusions de novo and its factual findings for clear error.
McCullum v. Orlando Reg’l Healthcare Sys., Inc.,
768 F.3d 1135
, 1141 (11th Cir.
2014); Houston v. Marod Supermarkets, Inc.,
733 F.3d 1323
, 1328 (11th Cir. 2013)
(“[W]e review the district court’s legal conclusions de novo, including the court’s
conclusion concerning standing.”).
III. DISCUSSION
Claims under the RA and ADA are “governed by the same substantive
standard of liability.” Silva, 856 F.3d at 830. “To prevail, a disabled person must
prove that he or she was excluded from participation in or denied the benefits of the
hospital’s services, programs, or activities, or otherwise was discriminated against
on account of her disability.” Id. at 831; see
42 U.S.C. § 12182
(a);
29 U.S.C. § 794
(a). Under this standard, a hospital violates the RA and ADA when it “fails to
provide ‘appropriate auxiliary aids and services’ to a deaf patient, or a patient’s deaf
companion, ‘where necessary to ensure effective communication.’” Silva, 856 F.3d
at 831 (quoting
28 C.F.R. § 36.303
(c)(1)).
7
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 8 of 18
Deaf patients are not “entitled to an on-site interpreter every time they ask for
it,” however.
Id. at 835
. “If effective communication under the circumstances is
achievable with something less than an on-site interpreter, then the hospital is well
within its ADA and RA obligations to rely on other alternatives.”
Id. at 836
.
Whether a particular aid is effective “largely depends on context, including,
principally, the nature, significance, and complexity of treatment.” Liese v. Indian
River Cty. Hosp. Dist.,
701 F.3d 334
, 343 (11th Cir. 2012).
A deaf plaintiff may be entitled to injunctive relief upon a showing that the
hospital failed to provide a means of effective communication. Silva, 856 F.3d at
831. But “[t]o recover monetary damages, a disabled person must further show that
the hospital was deliberately indifferent to her federally protected rights.” Id.
We have already concluded that a reasonable jury could find that Baptist’s
failure to offer appropriate auxiliary aids impaired Plaintiffs’ ability to exchange
medically relevant information with hospital staff. Id. at 836–40. The questions
before us now are (1) whether that past failure was the result of “deliberate
indifference,” such that Plaintiffs can recover monetary damages, and (2) whether
Plaintiffs are likely to experience ineffective communication in future visits.
A. Deliberate Indifference
We begin with the issue of deliberate indifference. In this context, deliberate
indifference occurs “when the defendant knew that harm to a federally protected
8
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 9 of 18
right was substantially likely and . . . failed to act on that likelihood.” Liese, 701
F.3d at 344 (quotation marks omitted). “[D]eliberate indifference requires that the
indifference be a deliberate choice, which is an exacting standard.” Id. (citation and
quotation marks omitted). Negligence alone is not enough. Id. In other words, the
plaintiff “must show ineffective communication done with knowledge that it was
substantially likely to occur.” Crane, 898 F.3d at 1135.
Here, we find that there is sufficient evidence for a reasonable jury to conclude
that Baptist was deliberately indifferent to Plaintiffs’ federal rights.1 Plaintiffs
requested an in-person interpreter during most of their visits to Baptist’s hospitals,
putting hospital staff on notice that they required an interpretive aid. Despite these
requests, the hospitals relied primarily on VRI; ordinarily a live, in-person
interpreter would be called to help only when VRI proved ineffective or inadequate.
While the choice to rely primarily on VRI instead of in-person interpreters
alone does not establish deliberate indifference, Liese, 701 F.3d at 343 (“[T]he
simple failure to provide an interpreter on request is not necessarily deliberately
indifferent to an individual’s rights under the RA.”), the plaintiffs presented
substantial evidence that the VRI machines routinely failed to facilitate effective
1
We review the district court’s grant of summary judgment on the issue of deliberate
indifference based on the summary-judgment record as it existed at the time of the district court’s
decision. We do not consider the evidence subsequently produced at the bench trial on Plaintiffs’
claims of injunctive relief.
9
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 10 of 18
communication. See Silva, 856 F.3d at 836–40. Sometimes the VRI picture would
be choppy, unclear, or would cut out, and sometimes the VRI machine failed to
operate at all. See id. In Silva, we described how the malfunctioning of the VRI
machines “could generate a reasonable inference of an impaired informational
exchange” that was likely to occur each time Plaintiffs visited Baptist’s hospitals.
Id. at 837, 832.
Given that Plaintiffs “routinely” experienced these VRI malfunctions at
Baptist’s hospitals over a period of several years, a jury could reasonably infer that
hospital staff knew that the continued reliance on VRI as an interpretive aid, without
correcting its deficiencies, was “substantially likely” to result in the impaired
informational exchange experienced by Plaintiffs. See Crane, 898 F.3d at 1135;
Silva, 856 F.3d at 840 (noting that Jebian, in tending to decline the use of VRI at
Baptist’s hospitals, “acted reasonably in anticipating that the VRI would not
facilitate effective communication”). A jury could thus conclude that Plaintiffs
experienced instances of ineffective communication as a result of a “deliberate
choice” by Baptist officials, rather than mere negligence. See Liese, 701 F.3d at 344.
B. Standing
Next, we consider whether Plaintiffs Silva and Jebian have standing to obtain
prospective injunctive relief. “To satisfy the injury-in-fact requirement for
constitutional standing, a plaintiff seeking injunctive relief in relation to future
10
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 11 of 18
conduct must show a sufficient likelihood that he will be affected by the allegedly
unlawful conduct in the future.” Silva, 856 F.3d at 832 (quotation marks omitted).
The threat of future injury must be real and immediate, not merely conjectural or
hypothetical. Id. “To establish such a threat, each patient must show that (1) there
is a real and immediate likelihood that he or she will return to the facility and (2) he
or she will likely experience a denial of benefits or discrimination upon their return.”
Id. (quotation marks omitted). The district court found that the first element was
met but the second was not.
Plaintiffs make two main arguments in support of their contention that the
district court erred in dismissing their injunctive relief claims for lack of standing.
First, they contend that the district court violated the mandate rule and the doctrine
of law of the case in finding that they lacked standing. Second, they assert that the
court was required to determine whether Baptist’s policies rendered their claims
moot, not whether the policies deprived them of standing.2
1. The doctrine of law of the case does not apply
Plaintiffs first argue that our holding in Silva that the plaintiffs “have Article
III standing to proceed with their claims for injunctive relief,” Silva, 856 F.3d at 833,
2
The plaintiffs also assert that a court “must first determine whether there has been a
violation of the statute[s]” before assessing whether injunctive relief is appropriate. But standing
under Article III is a “threshold matter required for a claim to be considered by the federal courts.”
Via Mat Int’l S. Am. Ltd. v. United States,
446 F.3d 1258
, 1262 (11th Cir. 2006).
11
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 12 of 18
is binding in this appeal under the doctrine of law of the case and that the district
court violated our mandate by concluding otherwise. We disagree.
“The mandate rule is a specific application of the ‘law of the case’ doctrine[,]
which provides that subsequent courts are bound by any findings of fact or
conclusions of law made by the court of appeals in a prior appeal of the same case.”
Friedman v. Market St. Mortg. Corp.,
520 F.3d 1289
, 1294 (11th Cir. 2008)
(quotation marks omitted). A trial court may not alter, amend, or act contrary to the
mandate of an appellate court regarding issues that were “decided expressly or by
necessary implication.”
Id.
(quotation marks omitted). However, “the law of the
case doctrine does not apply to bar reconsideration of an issue when (1) a subsequent
trial produces substantially different evidence, (2) controlling authority has since
made a contrary decision of law applicable to that issue, or (3) the prior decision was
clearly erroneous and would work manifest injustice.” Wheeler v. City of Pleasant
Grove,
746 F.2d 1437
, 1440 (11th Cir. 1984) (quotation marks omitted).
Here, the first exception to the law-of-the-case doctrine applies. The district
court was required to assess Plaintiffs’ standing at the time of trial in November
2018. See United States v. Amodeo,
916 F.3d 967
, 971 (11th Cir.), cert. denied,
140 S. Ct. 526
(2019) (“To have a case or controversy, a litigant must establish that he
has standing, which must exist throughout all stages of litigation.” (quotation marks
omitted)). And at trial, Baptist presented new evidence regarding its hospitals’
12
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 13 of 18
policies beginning in 2014 or 2015. This evidence was not part of the summary-
judgment record when we decided Silva in May 2017, and it showed that Baptist
implemented policies mandating live in-person ASL interpreters upon request. So
at the time of trial, there was new evidence that Baptist offered live in-person ASL
interpreters upon request, which Plaintiffs’ counsel admitted was more generous
than what federal law demanded.
Law of the case does not apply in this situation because the district court based
its standing decision on a different record than did this Court when addressing the
propriety of summary judgment. See Davis v. Town of Lake Park, Fla.,
245 F.3d 1232
, 1237 n.1 (11th Cir. 2001) (“Law of the case does not apply in this situation
because [the later district judge] based his post-trial order on a different record than
did [the earlier district judge] when addressing summary judgment.”). “The first
exception to the doctrine recognizes that the law of the case is the law made on a
given set of facts, not law yet to be made on different facts.” Jackson v. State of Ala.
State Tenure Comm’n,
405 F.3d 1276
, 1283 (11th Cir. 2005). Our decision in Silva
said nothing, either expressly or by necessary implication, about whether Plaintiffs
established standing based on the trial record, which was substantially different than
the summary-judgment record we considered in Silva. So, neither law of the case
nor the mandate rule applies. See Wheeler,
746 F.2d at 1440
.
13
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To the extent Plaintiffs suggest it was inappropriate for the district court to
rely on Baptist’s new evidence, we disagree. “The request for declaratory and
injunctive relief ha[d] to be assessed in light of the revised [Baptist] policies that
were in place at the time of trial.” J.W. ex rel. Tammy Williams v. Birmingham Bd.
of Educ.,
904 F.3d 1248
, 1267 (11th Cir. 2018). While Plaintiffs hint at improper
motives behind Baptist’s failure to produce this evidence earlier, they fail to provide
any legal reason why the court could not have relied on it.
2. The district court did not err by failing to address mootness
Plaintiffs maintain that, because Baptist adopted new policies after the
allegedly discriminatory actions, the district court was required to determine whether
such policies rendered their claims moot. And they contend that this case is not moot
for a variety of reasons. But their arguments miss the mark.
The Supreme Court has often remarked that “the doctrine of mootness can be
described as the doctrine of standing set in a time frame: The requisite personal
interest that must exist at the commencement of the litigation (standing) must
continue throughout its existence (mootness).” Friends of the Earth, Inc. v. Laidlaw
Envtl. Servs. (TOC), Inc.,
528 U.S. 167
, 189 (2000) (quotation marks omitted). But
this description “is not comprehensive.”
Id.
Standing and mootness, though they
both arise from Article III’s case-or-controversy requirement, are “distinct doctrines
that must not be confused.” Sheely v. MRI Radiology Network, P.A.,
505 F.3d 1173
,
14
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1189 n.16 (11th Cir. 2007). And there will be “circumstances in which the prospect
that a defendant will engage in (or resume) harmful conduct may be too speculative
to support standing, but not too speculative to overcome mootness.” Friends of the
Earth,
528 U.S. at 190
; see Sheely,
505 F.3d at
1182 n.10 (“Even though a case is
not moot, that does not mean that injunctive relief follows automatically;
undoubtedly, injunctive relief requires something more than the mere possibility
which serves to keep the case alive.” (quotation marks omitted)).
Here, the district court did not err by failing to consider mootness. Plaintiffs
were required to establish their standing to seek prospective injunctive relief based
on “evidence adduced at trial.” Lujan v. Defs. of Wildlife,
504 U.S. 555
, 562 (1992)
(quotation marks omitted); see Amodeo, 916 F.3d at 971 (“To have a case or
controversy, a litigant must establish that he has standing, which must exist
throughout all stages of litigation.”). Baptist’s revised policies, which were in place
at the time of trial, were relevant to the inquiry. Therefore, the likelihood of future
injury to Plaintiffs—specifically the likelihood they will experience a denial of
benefits or discrimination upon their return to Baptist’s hospitals—“ha[d] to be
assessed in light of the revised [Baptist] policies that were in place at the time of
trial.” J.W., 904 F.3d at 1267; see id. at 1267–69 (holding that, in light of revised
policies that were adopted before trial, the plaintiffs failed to establish a likelihood
of future injury sufficient to provide standing to obtain declaratory and injunctive
15
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 16 of 18
relief). Because standing and mootness are distinct doctrines, and even assuming
Baptist’s revised policies did not moot the case, the district court was permitted to
conclude that Plaintiffs did not have standing to obtain prospective injunctive relief.
See Friends of the Earth,
528 U.S. at 190
; Sheely,
505 F.3d at
1182 n.10.
3. The district court properly concluded that Plaintiffs lacked standing
Plaintiffs do not directly challenge the district court’s findings of fact and
conclusions of law regarding their standing to obtain declaratory or injunctive relief.
As a result, apart from the arguments we have discussed and rejected above,
Plaintiffs have abandoned any challenge to the grounds offered by the district court
for its standing determination. See Sapuppo v. Allstate Floridian Ins. Co.,
739 F.3d 678
, 680–81 (11th Cir. 2014) (explaining that issues not plainly and prominently
raised on appeal are deemed abandoned). “[I]t follows that the judgment is due to
be affirmed.”
Id.
In any event, the district court did not err in finding that Plaintiffs failed to
prove a real and immediate, as opposed to merely conjectural or hypothetical, threat
of future injury at Baptist’s hospitals. See Silva, 856 F.3d at 832. Even assuming
Plaintiffs established that there was a real and immediate likelihood that they will
return to Baptist’s hospitals, the court’s finding that they will not “likely experience
a denial of benefits or discrimination upon their return” is well supported by the trial
record. Id. (quotation marks omitted).
16
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 17 of 18
In particular, the district court did not clearly err in finding that, at least since
2015, Baptist had implemented policies at its hospitals that mandated providing live,
in-person ASL interpreters upon a patient’s or a guest’s request. See McCullum, 768
F.3d at 1141. In making that finding, the court credited the testimony of multiple
witnesses for Baptist, who described these policies during a November 2018 bench
trial. According to these witnesses, hospital staff did not have discretion to deny
such a request, the hospitals would arrange for an interpreter to be present for
scheduled appointments at the time of the appointment, and hospital staff would no
longer rely on friends or family for interpretation purposes. In addition, the court
found that Plaintiffs had not offered any evidence to contradict Baptist’s witnesses
on these points, such as evidence of ineffective communication during their visits
since the implementation of the new policies in 2014 and 2015. Likewise on appeal,
Plaintiffs do not identify any evidence to contradict the district court’s findings.
Based on the district court’s well-supported findings, it is not likely that
Plaintiffs will “experience a denial of benefits or discrimination upon their return”
to Baptist’s hospitals. Silva, 856 F.3d at 832 (quotation marks omitted). So they
have not established a real and immediate threat of future injury. Id. The court
therefore properly dismissed their claims for injunctive relief for lack of standing.
IV. CONCLUSION
17
USCA11 Case: 19-12386 Date Filed: 12/03/2020 Page: 18 of 18
In sum, we vacate the district court’s grant of summary judgment on
Plaintiffs’ claims for monetary relief, concluding that they have presented sufficient
evidence of deliberate indifference. We affirm the court’s dismissal for lack of
standing on their claims for prospective declaratory and injunctive relief.
AFFIRMED IN PART; VACATED AND REMANDED IN PART.
18 |
4,639,126 | 2020-12-03 14:19:12.878244+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2020/2020-Ohio-5483.pdf | [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State
ex rel. Fiser v. Kolesar, Slip Opinion No.
2020-Ohio-5483
.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO.
2020-OHIO-5483
THE STATE EX REL. FISER, JUDGE, v. KOLESAR, JUDGE.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as State ex rel. Fiser v. Kolesar, Slip Opinion No.
2020-Ohio-5483
.]
Prohibition—Writ sought by county-court judge to prevent administrative judge of
same court from enforcing entry vacating pay raises awarded by county-
court judge—Administrative judge of county court patently and
unambiguously lacked jurisdiction to issue entry vacating pay raises—Writ
granted.
(No. 2020-0320—Submitted October 27, 2020—Decided December 3, 2020.)
IN PROHIBITION.
__________________
Per Curiam.
{¶ 1} This original action involves a dispute between two judges who sit on
the Sandusky County Court. Relator, Judge Mary Elizabeth Fiser, issued judgment
entries granting pay raises to certain court personnel. Shortly after, respondent,
Judge John Kolesar, who serves as the court’s administrative judge, issued a
SUPREME COURT OF OHIO
judgment entry vacating Judge Fiser’s entries and forbidding pay raises and the
expenditure of court resources that did not have his approval. To compel obedience
to his entry, Judge Kolesar stated in the entry that anyone who violated it risked
being held in contempt.
{¶ 2} The parties now request competing writs of prohibition from this
court. Judge Fiser seeks a writ to prevent Judge Kolesar from enforcing his entry;
Judge Kolesar seeks a writ to prohibit Judge Fiser from entering future entries that
infringe on his powers as administrative judge. Both judges have filed motions for
judgment on the pleadings.
{¶ 3} For the reasons that follow, we deny Judge Kolesar’s motion for
judgment on the pleadings, grant a peremptory writ of prohibition that vacates
Judge Kolesar’s vacating entry, grant Judge Fiser’s motion for judgment on the
pleadings, and dismiss Judge Kolesar’s counterclaim.
I. FACTUAL BACKGROUND
{¶ 4} Judge Fiser sits on the Sandusky County Court and serves in the
Woodville courthouse at the county’s western end. In January 2020, she issued
judgment entries ordering that a full-time probation officer receive a raise of one
dollar an hour and that a part-time probation officer receive a raise of 50 cents an
hour (collectively, the “pay-raise entries”). The pay raises were to be paid out of
the court’s special-projects fund.
{¶ 5} Judge Kolesar is the administrative judge of the Sandusky County
Court and serves in the Clyde courthouse at the county’s eastern end. In February
2020, he issued a judgment entry (the “vacating entry”) ordering that Judge Fiser’s
pay-raise entries be “stricken and vacated as without authority.” Judge Kolesar
explained in his vacating entry that Judge Fiser’s entries “were not presented to me
and do not have my signature or my approval as Administrative judge.” He
reasoned that because Judge Fiser was not the administrative judge, she “lack[ed]
the power to make any administrative orders which includes hiring or employment
2
January Term, 2020
decisions.” He further announced that “[a]ny violation of [the vacating entry] may
be enforced through the court’s power of contempt.” As support for his order,
Judge Kolesar cited Sup.R. 4.01 and Montgomery Cty. Bd. of Commrs. v. Hensley,
2d Dist. Montgomery No. 19754,
2003-Ohio-5730
.
{¶ 6} In March 2020, Judge Fiser filed a complaint in prohibition with this
court to stop Judge Kolesar from enforcing his vacating entry and to “correct[] the
results flowing from the issuance of that” entry. In response, Judge Kolesar filed a
motion for judgment on the pleadings, an answer, and a counterclaim requesting
that this court issue a writ of prohibition restraining Judge Fiser from issuing “future
unilateral orders” that “infring[e] on the powers specifically granted by the Rules
of Superintendence to the Administrative Judge.” Judge Fiser filed a motion for
judgment on the pleadings in response to Judge Kolesar’s counterclaim.
II. STANDARD OF REVIEW
{¶ 7} To demonstrate entitlement to a writ of prohibition, each judge must
establish that “(1) [his or her adversary] is about to or has exercised judicial or
quasi-judicial power, (2) the exercise of that power is unauthorized by law, and (3)
denying the writ would result in injury for which no other adequate remedy exists
in the ordinary course of law.” State ex rel. Balas-Bratton v. Husted,
138 Ohio St.3d 527
,
2014-Ohio-1406
,
8 N.E.3d 933
, ¶ 15. “The second and third elements
may be satisfied by a showing that the lack of jurisdiction is ‘patent and
unambiguous.’ ” State ex rel. Lorain Cty. Bd. of Commrs. v. Lorain Cty. Court of
Common Pleas,
143 Ohio St.3d 522
,
2015-Ohio-3704
,
39 N.E.3d 1245
, ¶ 16,
quoting Chesapeake Exploration, L.L.C. v. Oil & Gas Comm.,
135 Ohio St.3d 204
,
2013-Ohio-224
,
985 N.E.2d 480
, ¶ 11.
{¶ 8} A motion for judgment on the pleadings “permits consideration of the
complaint and answer.” State ex rel. Midwest Pride IV, Inc. v. Pontious,
75 Ohio St.3d 565
, 569,
664 N.E.2d 931
(1996). A court should grant the motion and
dismiss the complaint when it determines that “no material factual issues exist and
3
SUPREME COURT OF OHIO
* * * the movant is entitled to judgment as a matter of law.” Id. at 570. The
questions presented in this case are purely legal—no material factual issues exist.
III. ANALYSIS
A. Judge Fiser’s request for a writ of prohibition to prevent Judge Kolesar
from enforcing his vacating entry and Judge Kolesar’s motion for judgment
on the pleadings
1. Whether Judge Kolesar exercised judicial power
{¶ 9} Judge Fiser argues that Judge Kolesar exercised judicial power by
attempting to resolve an informal dispute and by threatening to hold violators of his
vacating entry in contempt. Judge Kolesar counters that his vacating entry did not
arise from the exercise of judicial power because, he says, the entry addressed a
matter internal to the court rather than resolving a dispute between litigants before
the court.
{¶ 10} Both judges rely on Lorain Cty. Bd. of Commrs.,
143 Ohio St.3d 522
,
2015-Ohio-3704
,
39 N.E.3d 1245
, to support their arguments. In that case, the
county sheriff communicated with the county commissioners about the costs of
implementing certain security measures; however, the sheriff apparently never
requested that the county commissioners appropriate the funds. Shortly after the
communication, a common-pleas-court judge issued an order mandating that the
county commissioners make the appropriation. Id. at ¶ 5-7. After that judge was
replaced by another judge as the administrative judge of the court, the second judge
issued an order giving the commissioners the option to appropriate the funds to the
court, which the court would then give to the sheriff for the same purpose. Id. at
¶ 9-10. The commissioners sought a writ of prohibition preventing enforcement of
the orders.
{¶ 11} We examined two factors in determining whether the judges had
exercised judicial rather than administrative power. First, we considered whether
the orders facilitated the administration of the court’s “own business.” Id. at ¶ 18.
4
January Term, 2020
An order of that character “is not made in the context of a dispute but is in the nature
of an administrative order.” Id. Second, we considered whether the appropriation
was “to be made of the court’s funds.” Id. at ¶ 19. We determined that both factors
weighed against a conclusion that the judges had exercised administrative power.
The orders were not made for the administration of the court’s business; rather, they
were attempts to resolve an informal dispute among the sheriff, the county
commissioners, and the court. Id. at ¶ 20. And the appropriation was not one that
would have come from the court’s funds. Id. at ¶ 19.
{¶ 12} We do not regard Lorain Cty. Bd. of Commrs. as dispositive here.
True, the bounds of this dispute are confined to the administration of the court’s
business and concern court funds, which would tend to stamp Judge Kolesar’s entry
with an administrative character. But his entry was not in the nature of a funding
order, as was the case in Lorain Cty. Bd. of Commrs.; instead, it was unquestionably
an effort to resolve a dispute between himself and Judge Fiser, which would tend
to stamp his entry with a judicial character. Something more, then, must be
considered in order to characterize the vacating entry.
{¶ 13} Two additional factors, which we did not have occasion to consider
in Lorain Cty. Bd. of Commrs., bear on the analysis and favor a conclusion that
Judge Kolesar’s entry arose from the exercise of judicial power. First, Judge
Kolesar exercised judicial review of Judge Fiser’s pay-raise entries, declaring that
she lacked the authority to issue them after applying his view of the controlling law
to the material facts. That type of act closely resembles the exercise of a core
judicial power. See Fairview v. Giffee,
73 Ohio St. 183
, 190,
76 N.E. 865
(1905)
(“It is indisputable that it is a judicial function to hear and determine a controversy
between adverse parties, to ascertain the facts, and, applying the law to the facts, to
render a final judgment”).
{¶ 14} Second, Judge Kolesar threatened to hold anyone who violated his
vacating entry in contempt. See R.C. 1907.18(B) (“County court judges may
5
SUPREME COURT OF OHIO
punish contempts”). “[A] judge who decides to issue an order finding a person in
contempt is exercising judicial power.” State ex rel. Gilligan v. Hoddinott,
36 Ohio St.2d 127
, 130,
304 N.E.2d 382
(1973). We recognize that there has been no
contempt finding in this case, meaning that the statement in Gilligan does not
directly apply. Nevertheless, we cannot ignore the fact that Judge Kolesar issued
his threat in an attempt “to compel obedience to a court order,” which is a feature
of a civil-contempt sanction, State ex rel. Corn v. Russo,
90 Ohio St.3d 551
, 555,
740 N.E.2d 265
(2001). Nor can we ignore the threat’s attempt “to vindicate the
authority of the court”—in particular, the authority of the administrative judge—
which is a feature of a criminal-contempt sanction.
Id.
{¶ 15} Relying on Lorain Cty. Bd. of Commrs., Judge Kolesar argues that
his contempt threat should not matter for purposes of this court’s prohibition
analysis. But he does not explain how he did anything other than engage in the
exercise of judicial power when he applied the law to the facts of his dispute with
Judge Fiser, which culminated in his vacatur of Judge Fiser’s pay-raise entries. See
Fairview at 190.
{¶ 16} In any event, Judge Kolesar’s reliance on Lorain Cty. Bd. of
Commrs.,
143 Ohio St.3d 522
,
2015-Ohio-3704
,
39 N.E.3d 1245
, is misplaced. In
that case, we observed that if an order directed a board of county commissioners to
release funds to a court for the court’s own business, it would be “in the nature of
an administrative order” enforceable through contempt. Id. at ¶ 18. But here, Judge
Kolesar did not issue a funding order. And even assuming that he did, this court
did not say in Lorain Cty. Bd. of Commrs. that a funding order retains its
administrative character when it includes the threat of contempt for the purpose of
compelling obedience to its terms.
{¶ 17} In summary, we conclude that Judge Kolesar’s entry arose from his
exercise of judicial power.
6
January Term, 2020
2. Whether Judge Kolesar patently and unambiguously lacked jurisdiction to
vacate Judge Fiser’s pay-raise entries
{¶ 18} We next consider whether Judge Kolesar patently and
unambiguously lacked jurisdiction to issue his vacating entry.
{¶ 19} “If an inferior tribunal patently and unambiguously lacks
jurisdiction, prohibition will lie to prevent any future unauthorized exercise of
jurisdiction and to correct the results of prior jurisdictionally unauthorized actions.”
State ex rel. Baker v. State Personnel Bd. of Rev.,
85 Ohio St.3d 640
, 642,
710 N.E.2d 706
(1999). A court’s “basic statutory jurisdiction to proceed in the case”
will generally defeat a claim that the court patently and unambiguously lacks
jurisdiction. State ex rel. Adams v. Gusweiler,
30 Ohio St.2d 326
, 329,
285 N.E.2d 22
(1972). “Typically, a court will deny relief in prohibition when a respondent
judge has general subject-matter jurisdiction and will deem any error by the judge
to be an error in the exercise of jurisdiction.” State ex rel. Sponaugle v. Hein,
153 Ohio St.3d 560
,
2018-Ohio-3155
,
108 N.E.3d 1089
, ¶ 24.
{¶ 20} When a prohibition claim targets a statutorily created tribunal, the
analysis must consider whether the General Assembly empowered the tribunal to
proceed. State ex rel. Natalina Food Co. v. Ohio Civ. Rights Comm.,
55 Ohio St.3d 98
, 100,
562 N.E.2d 1383
(1990). As a county court, the Sandusky County Court
is a statutory creation with “only limited jurisdiction, and may exercise only such
powers as are directly conferred by legislative action.” State ex rel. Johnson v.
Perry Cty. Court,
25 Ohio St.3d 53
, 54,
495 N.E.2d 16
(1986). This feature
distinguishes a county court from “this court, the courts of appeals, and the courts
of common pleas, all of which originate” from Article IV, Section 1 of the Ohio
Constitution. Johnson at 54.
{¶ 21} A county court has statutory jurisdiction over, among other things,
violations of township resolutions, R.C. 1907.012; misdemeanors and certain
aspects of felony proceedings, R.C. 1907.02(A)(1); certain parking and traffic
7
SUPREME COURT OF OHIO
offenses, R.C. 1907.02(B) and (C); civil actions in which the sum sought for
recovery does not exceed amounts prescribed by law, R.C. 1907.03(A); and
contempts, R.C. 1907.18(B). See also R.C. 1907.031 (further specifying the scope
of a county court’s jurisdiction).
{¶ 22} Despite these provisions, Judge Kolesar cites no statutory
authority—and we have found none—that confers jurisdiction on a county-court
judge to exercise judicial review of another county-court judge’s order and declare
it ultra vires. What Judge Kolesar does cite is a list of provisions from the Rules of
Superintendence for the Courts of Ohio, namely, those describing the powers of an
administrative judge. The problem with this argument, however, is that those rules
do not derive from a legislative enactment. See Johnson at 54. Rather, the rules
were adopted by this court as an exercise of its powers of “general superintendence
over all courts in the state.” Ohio Constitution, Article IV, Section 5(A)(1); Sup.R.
1(B).
{¶ 23} In summary, we conclude that Judge Kolesar patently and
unambiguously lacked jurisdiction to issue his vacating entry. This conclusion,
coupled with our earlier conclusion that Judge Kolesar’s vacating entry arose from
the exercise of judicial power, compels us to deny his motion for judgment on the
pleadings.
3. Whether Judge Fiser is entitled to a peremptory writ of prohibition
{¶ 24} At this juncture, we must either “dismiss the case; issue an
alternative or a peremptory writ, if a writ has not already been issued; or deny the
request for the writ.” S.Ct.Prac.R. 12.04(C). This case does not depend on the
resolution of factual disputes and further briefing would not materially aid our
disposition of Judge Fiser’s complaint. Under these circumstances, if “it appears
beyond doubt” that Judge Fiser is entitled to a writ of prohibition, a peremptory
writ should issue. State ex rel. Sapp v. Franklin Cty. Court of Appeals,
118 Ohio St.3d 368
,
2008-Ohio-2637
,
889 N.E.2d 500
, ¶ 14; see State ex rel. Richland Cty.
8
January Term, 2020
Children Servs. v. Richland Cty. Court of Common Pleas,
152 Ohio St.3d 421
,
2017-Ohio-9160
,
97 N.E.3d 429
, ¶ 20-21.
{¶ 25} Applying this standard, we grant a peremptory writ of prohibition
that vacates Judge Kolesar’s vacating entry because, as we have explained, Judge
Kolesar’s vacating entry arose from an exercise of judicial power that he patently
and unambiguously lacked jurisdiction to exercise.
B. Judge Kolesar’s counterclaim for a writ of prohibition to prevent Judge
Fiser from entering future entries that infringe on his powers as
administrative judge and Judge Fiser’s motion for judgment on the
pleadings
{¶ 26} Judge Kolesar’s counterclaim1 requests a writ of prohibition
restraining Judge Fiser from entering
future unilateral orders infringing on the powers specifically granted
by the Rules of Superintendence to the Administrative Judge,
including but not limited to all future unilateral orders purporting (1)
to create or fill personnel positions, or (2) to change the job
descriptions of those positions, or (3) to change the fees charged to
probationers or litigants in her court, or (4) to order, without prior
approval and authorization by the Administrative Judge, any
improvements in or in relation to the court’s facilities.
(Emphasis added.)
{¶ 27} The key problem with Judge Kolesar’s request is that he does not
allege that Judge Fiser is “about to exercise judicial or quasi-judicial power.”
1. Judge Fiser argues in her motion for judgment on the pleadings that counterclaims are not
permitted under this court’s rules of practice. We do not reach this question because Judge Kolesar’s
counterclaim otherwise fails to meet the requirements for a writ of prohibition.
9
SUPREME COURT OF OHIO
Balas-Bratton,
138 Ohio St.3d 527
,
2014-Ohio-1406
,
8 N.E.3d 933
, at ¶ 19.
Indeed, he does not allege that Judge Fiser is about to take any action at all, let
alone an action that Judge Kolesar seeks to prohibit. See State ex rel. Stark v.
Cuyahoga Cty. Court of Common Pleas,
32 Ohio St.3d 440
,
513 N.E.2d 1347
(1987) (writ of prohibition denied because trial court was not about to exercise
unauthorized judicial power). Accordingly, his counterclaim fails to meet the first
requirement for a writ of prohibition.
{¶ 28} Even if Judge Kolesar had alleged that Judge Fiser was poised to
issue the orders that he seeks to restrain,2 Judge Kolesar would still have to show
that the orders would arise from the exercise of judicial power. But Judge Kolesar
concedes that he is seeking to restrain Judge Fiser from issuing administrative
rather than judicial orders. And he does not explain how the issuance of a purely
administrative order (as opposed to one, like his vacating entry, that overrules
another judge’s order and threatens contempt) could arise from the exercise of
judicial power. It follows that because Judge Kolesar has not alleged the exercise
of judicial power, he cannot prevail on his counterclaim.
{¶ 29} In summary, we grant Judge Fiser’s motion for judgment on the
pleadings and dismiss Judge Kolesar’s counterclaim.
IV. CONCLUSION
{¶ 30} For the foregoing reasons, we deny Judge Kolesar’s motion for
judgment on the pleadings, grant a peremptory writ of prohibition that vacates
Judge Kolesar’s vacating entry, grant Judge Fiser’s motion for judgment on the
pleadings, and dismiss Judge Kolesar’s counterclaim.
Judgment accordingly.
2. In his memorandum in opposition to Judge Fiser’s motion for judgment on the pleadings, Judge
Kolesar attempts to expand the scope of his counterclaim to include Judge Fiser’s pay-raise entries.
We conclude that Judge Kolesar has forfeited this claim by failing to raise it earlier. See State ex
rel. R.W. Sidley, Inc. v. Crawford,
100 Ohio St.3d 113
,
2003-Ohio-5101
,
796 N.E.2d 929
, ¶ 32.
10
January Term, 2020
O’CONNOR, C.J., and KENNEDY, FISCHER, DEWINE, and STEWART, JJ.,
concur.
FRENCH, J., concurs in part and dissents in part and would grant both
motions for judgment on the pleadings and would dismiss both Judge Fiser’s claim
and Judge Kolesar’s counterclaim.
DONNELLY, J., dissents, with an opinion.
_________________
DONNELLY, J., dissenting.
{¶ 31} The reason multijudge courts have administrative judges is to avoid
chaos. If all judges have authority to issue judicial orders related to administrative
matters, such as salary increases for staff, which this court appears to sanction
today, then we should prepare for an avalanche of cases.
{¶ 32} The parties had other options available to resolve this dispute than
litigating it publicly in this court. Given the current impasse, the judges should
establish a formal process that enables judicial colleagues to communicate and
approve written administrative requests in a manner that promotes efficiency and
transparency. In addition, the court could consider establishing a power-sharing
scheme, for instance, alternating on an annual basis which judge is the
administrative judge. In the meantime, in order to maintain public confidence, the
judges need to resolve this dispute—that’s what judges do. The public trusts judges
to competently resolve disputes between parties; those same judges should, at a
minimum, demonstrate the ability to resolve disputes between themselves.
{¶ 33} I served in Cuyahoga County, as one of 34 trial-court judges sitting
on the court of common pleas, general division. We delegated administrative
authority to one judge for a two-year term to promote continuity, collegiality, and
compromise and to minimize confusion. Based on my experience, administrative
judges (however they are appointed—by election, seniority, or some other process)
11
SUPREME COURT OF OHIO
have the authority to address a court’s administrative issues. Other judges do not
and should not. Accordingly, I dissent.
_________________
Mayle, L.L.C., Andrew R. Mayle, and Ronald J. Mayle, for relator.
Julia R. Bates, Lucas County Prosecuting Attorney, and Evy M. Jarrett,
John A. Borell, and Kevin A. Pituch, Special Assistant Prosecuting Attorneys, for
respondent.
_________________
12 |
4,489,828 | 2020-01-17 22:02:03.229805+00 | Trammell | null | *736OPINION.
Trammell :
The single issue presented for decision here is whether the petitioner suffered a net loss in 1922, which is deductible from his *737net income for 1923, under the provisions of section 204 of the Eevenue Act of 1921, which reads in pertinent part as follows:
Sec. 204. (a) That as used in this section the term “net loss” means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer * * *.
(b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; « * *
Thus, the issue here is resolved into the question whether the loss sustained by the petitioner in 1922 resulted from the operation of any trade or business regularly carried on by him.
In order to constitute a “ net loss ” within the meaning of the statute, it is not necessary that the taxpayer should sustain the loss in his principal business or vocation. The word “ business ” is qualified by the word “ any.” The taxpayer is entitled to this benefit where the loss is incurred in “ any trade or business regularly carried on ” by him. Oscar K. Eysenbach, 10 B. T. A. 716. And the term “ business ” is comprehensive. “ Business ” is anything “ which occupies the time, attention, and labor of men for the purpose of a livelihood or profit.” Flint v. Stone-Tracey Co., 220 U. S. 107; Von Baumback v. Sargent Land Co., 242 U. S. 503; Edwards v. Chile Copper Co., 270 U. S. 452.
It seems clear from the facts which we have found hereinabove that, for more than 10 years prior to the taxable year, the petitioner had been engaged in the business, among other things, of organizing and/or promoting corporations, and that, as an incident of said business, he was required to help finance such corporations with his personal funds. The loss here in question resulted from the lending or advancing of money by the petitioner to the Consolidated Utilities Corporation, which was a corporation organized and promoted by the petitioner. The amount so advanced by the petitioner was to be repaid to him out of funds from the sale of the corporation’s stock to the public, but the stock was not sold, the corporation went into bankruptcy, and the petitioner lost the amount of his loans. This loss, in our opinion, resulted from the operation of a trade or business regularly carried on by the petitioner, and is to be considered in computing a net loss within the meaning of the statute above quoted. Charles H. Van Etten, 8 B. T. A. 611; Oscar E. Eysenbach, supra.
Beviewed by the Board.
Judgment will be entered under Rule 50.
Smith dissents. |
4,489,829 | 2020-01-17 22:02:03.269758+00 | Marquette | null | *743OPINION.
MaRquette:
The first question by which we are confronted in this proceeding, is what is the proper basis for computing the allowances to which Ostenberg and Eeinbold were entitled for depletion of their respective interests in the mineral claim known as Jesse Lake? The respondent concedes that Jesse Lake had a total recoverable tonnage of 106,110 tons of dry salts on March 20, 1915, and the evidence shows that it had a recoverable tonnage of 78,119 tons on August 15, 1917. Also, it appears to be not disputed that Ostenberg and Eeinbold each owned a one-ninth interest in Jesse Lake. It is contended on behalf of Ostenberg and Eeinbold that they acquired their interest on August 15, 1917, upon the dissolution of the Potash Products Co. and that the entire claim had a fair market value of at least $5,000,000 on that date, while the respondent contends that they acquired their interest in 1915 for $3,333.33, each, and that their allowances for depletion should be computed on the basis of that cost.
We are unable to find from the record any ground for holding that Ostenberg and Eeinbold acquired any interest in the mineral claim in question in the year 1915. They acquired nothing at that time as far as we can find except stock in the Potash Products Co. *744It seems clear that if they ever acquired any interest in the claim, they did so in 1917 when the Potash Products Co. was dissolved. But the respondent urges that no conveyance was ever made to the Potash Products Co. by the eight locators and therefore the company never held title thereto. In the light of the evidence we are of opinion that the respondent’s position is untenable. The evidence shows that the eight locators, on the one hand, and Ostenberg, Rein-bold, and Redick on the other, entered into an agreement that a corporation would be formed, to which Ostenberg, Reinbold, and Redick would advance from $10,000 to $30,000; that the eight locators would convey their mineral claim to the corporation and that the corporation’s stock would be divided, two-thirds to the eight locators and one-third to Ostenberg, Reinbold, and Redick. Ostenberg, Reinbold, and Redick performed their part of the contract and the Potash Products Co. was formed and one-third of the stock thereof was issued to Ostenberg, Reinbold, and Redick according to the agreement. The minutes of the corporation show that on March 20, 1915, a resolution was adopted authorizing the purchase of said mineral claim from said locators in consideration of the issuance to them of two-thirds of the corporation’s stock. The stock was issued according to the resolution and the corporation entered into possession of and operated the claim. It would seem that under the circumstances, the corporation having paid for the claim and hav.ing been put in possession thereof, a court of equity would decree conveyance of the legal title if it were necessary.
However, under the law as we interpret it, a written conveyance was not necessary. In Manuel v. Wulff, 152 U. S 505, it is stated that “ mining claims are property in the fullest sense of the word, and may be sold, transferred, mortgaged and inherited without infringing the title of the United States, and when a location is perfected, it has the effect of a grant by the United States of the right of present and exclusive possession.” See, also, Forbes v. Gracey, 94 U. S. 762; Belk v. Meagher, 14 U. S. 279; Noyes v. Mantle, 127 U. S. 348. And in Mining Company v. Taylor, 100 U. S. 37, it was held that a written conveyance is not necessary to the transfer of a mining claim. In that case Mr. Justice Strong, delivering the opinion of the court, said:
The ownership of Wood in 1862 was an ultimate fact, and even if Taylor had no other right to the possession than that which he derived from Wood, by conveyance, it was not necessary to set forth the chain of conveyance by which Wood became the owner. A transfer of possession is sufficient. They would have been but evidence of Wood’s ownership. Besides, a written conveyance is not necessary to the transfer of a mining claim. Table Mountain Tunnel Co. v. Stranahan, 20 Cal. 198.
*745We are of opinion that the Potash Products Co. became the owner of the Jesse Lake mineral claim in 1915 and that upon the dissolution of that company in 1917 the claim, together with the other assets, passed to the stockholders of the company in proportion to their respective stockholdings. It follows that Ostenberg and Eeinbold each acquired a one-ninth interest in the claim in August, 1917.
Having decided that Ostenberg and Eeinbold acquired their interest in Jesse Lake on August 15, 1917, we must next ascertain the fair market value of the claim at that time. On this point we do not deem an extended discussion of the testimony necessary. It is sufficient to say that the testimony shows that in August, 1917, Jesse Lake was one of the principal sources of potash within the United States; that the importation of potash into the United States from Europe was at that time cut off by the World War, and that due to these conditions Jesse Lake had a fair market value of at least $5,000,000. It is true that conditions in August, 1917, were abnormal, but we must determine the value of the property under the conditions as they then existed, not at some other date. The allowances of Ostenberg and Eeinbold for depletion of their respective one-ninth interests in Jesse Lake will be computed on the basis of $5,000,000 for the entire claim on August 15, 1917, and a total recoverable tonnage of 78,119 tons of dry salts.
The petitioner, Ostenberg, claims that he did not receive payment on the dividend check of December 31, 1919, until some time in 1920 and did nofc receive payment on the dividend check of December 31, 1920, until the year 1921, and that the amount of the check of December 31, 1919, should be included in income for 1920 and^the amount, of the check of December 31, 1920, included in income for 1921. On this point the evidence shows that the checks in question were drawn on December 31, 1919, and December 31, 1920, respectively, but it fails to show that they were not delivered to Ostenberg on those dates, or that they could not have been cashed at that time if presented for payment. Ostenberg’s testimony as to the transactions, is, “At that time the larger stockholders, like Mr. Stevens, Judge Eedick, Frank Woods, Ed. Bauman of West Point, and myself, held our checks for the simple reason that the Definite Company was close run owing to a lawsuit that had started against it, and we held ours over until we made some collections later on and cashed in.” In the absence of any showing that the checks were not received or could not have been cashed by the petitioner Ostenberg in the years in which they were drawn, we are of opinion that the amount of the check of December 31, 1919, must be considered income for the year 1919, and the amount of the check of December 31, 1920, income for the year 1920.
*746The next question is whether or not the petitioner, Ostenberg, in computing his net income for 1923, is entitled to the benefits of section 204 (a) and (b) of the Revenue Act of 1921, which provides as follows:
Sec. 204. (a) That as used in this section the term “net loss” means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer (including losses sustained from the same or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business) ; and when so resulting means the excess of the deductions allowed by section 214 or 234, as the case may be, over the sum of the following: (1) the gross income of the taxpayer for the taxable year; (2) the amount by which the interest received free from taxation under this title exceeds so much of the interest paid or accrued with the taxable year on indebtedness as is not permitted to be deducted by paragraph (2) of subdivision (a) of section 214 or by paragraph (2) of subdivision (a) of section 234; (3) the amount by which the deductible losses not sustained in such trade or business exceed the taxable gains or profits not derived from such trade or business; (4) amounts received as dividends and allowed as a deduction under paragraph (0) of subdivision (a) of section 234, and (5) so much of the depletion deduction allowed with respect to any mine, oil or gas well as is based upon discovery value in lieu of cost.
(b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in ajl cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary.
It appears from tbe evidence that Ostenberg was a capitalist and an investor on a large scale. He invested in stocks and bonds and in various enterprises which showed a prospect of profit. Such investing and connections with the various enterprises in which he was interested constituted the only business he had, the source of his income, and his means of livelihood. In E. M. Elliott, 15 B. T. A. 494, this Board said:
What constitutes a business has previously been considered in a number of rases. In Oscar K. Eysenbach, 10 B. T. A. 716, we approved definitions of “ business ” which we will repeat here:
“ ‘ Business ’ is a very comprehensive term and embraces everything about which a person can be employed, Black’s Law Diet, citing People ex rel Hoyt v. Tax Comrs. 23 N. Y. 242, 244. That which occupies the time, attention and labor of men for the purpose of a livelihood or profit. 1 Bouvier’s Law Dict. p. 273. Approved in Flint v. Stone & Tracy, 220 U. S. 107; Von Baumbach v. Sargent Land, Co. 242 D. S. 503.”
There is no dispute between the parties as to the amount of loss to be taken, if any amount is to be used as a net loss.
*747We are of opinion that during the years 1921 to 1923, inclusive. Ostenberg was regularly engaged in carrying on a trade or business, within the meaning of section 204 (a) of the Bevenue Act of 1921, and that in computing his net income for 1923 he is entitled to the benefits of section 204 (b) of that Act.
The petitioner in the case of the estate of Herman Beinbold alleges that the respondent erred in denying to Beinbold deductions for losses claimed to have been sustained upon the abandonment of certain mining claims in 1919 and 1920. No competent evidence was produced in support of this allegation, and on this point the respondent’s determination is approved.
The respondent determined an overassessment in the case of Bein-bold in the amount of $764.94 for the year 1921, and the petition alleges that the tax for that year is in controversy. The record does not show that the overassessment arises from the disallowance in whole or in part of any claim for abatement, and we therefore have no jurisdiction over the case of Beinbold in so far as it relates to the year 1921 (Cornelius Cotton Mills, 4 B. T. A. 255), and counsel for the petitioners so conceded at the hearing.
Beviewed by the Board.
Judgment will he entered under Rule 50. |
4,639,127 | 2020-12-03 14:19:13.38267+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2020/2020-Ohio-5486.pdf | [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State
ex rel. Delta Lookout, L.L.C. v. Cincinnati, Slip Opinion No.
2020-Ohio-5486
.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO.
2020-OHIO-5486
THE STATE EX REL. DELTA LOOKOUT, L.L.C., APPELLANT, v. THE CITY OF
CINCINNATI ET AL., APPELLEES.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as State ex rel. Delta Lookout, L.L.C. v. Cincinnati, Slip Opinion
No.
2020-Ohio-5486
.]
Mandamus—Platting Commission Act created a method of achieving a statutory
dedication—Two streets near appellant’s office building were subject of a
statutory dedication as of 1876 under terms of Platting Commission Act—
Court of appeals’ judgment denying writ reversed and cause remanded for
that court to determine whether appellant satisfied all requirements of
mandamus standard.
(No. 2020-0205—Submitted August 18, 2020—Decided December 3, 2020.)
APPEAL from the Court of Appeals for Hamilton County,
No. C-170107,
2019-Ohio-5353
.
_________________
Per Curiam.
SUPREME COURT OF OHIO
{¶ 1} Appellant, Delta Lookout, L.L.C., appeals a judgment of the First
District Court of Appeals denying its request for a writ of mandamus ordering
appellees, the city of Cincinnati, Cincinnati Mayor John Cranley, former Cincinnati
City Manager Harry Black, and former Cincinnati Director of Transportation and
Engineering Michael Moore (collectively, “the city”), to repair and maintain two
streets located within Cincinnati’s boundaries.1 In denying the writ, the court of
appeals determined that the streets were never subject to a statutory or common-
law dedication, leading it to conclude that the streets are private rather than public.
On appeal, Delta Lookout argues that the streets were the subject of a statutory
dedication as of 1876 under the terms of the Platting Commission Act. We agree.
Accordingly, for the reasons that follow, we reverse the judgment of the court of
appeals and remand the case for further proceedings.
I. FACTUAL BACKGROUND
{¶ 2} The two streets at issue are Willbarre Terrace (formerly, Hillside
Street) and Close Court, which are located in the Mt. Lookout neighborhood of
Cincinnati. Willbarre Terrace runs northeast to southwest and is intersected by
Close Court, which runs mostly east to west. Cincinnati has never passed an
ordinance accepting the streets as public. And the parties do not identify in whose
name the streets are titled.
{¶ 3} Delta Lookout owns an office building that abuts Willbarre Terrace
and, in March 2017, filed a complaint in the court of appeals seeking a writ of
mandamus to compel the city to repair and maintain the streets. Delta Lookout
alleged that the city’s neglect of the streets had resulted in unsafe conditions caused
by inadequate water drainage. After the parties filed cross-motions for summary
judgment, the court of appeals denied the writ, concluding that the streets had never
1. The current interim city manager, Paula Boggs Muething, and the current director of
transportation and engineering, John Brazina, are automatically substituted as appellees. See
S.Ct.Prac.R. 4.06(B).
2
January Term, 2020
become public through either a statutory or common-law dedication.2 Delta
Lookout then appealed to this court as of right.
II. STANDARD OF REVIEW
{¶ 4} “In order to grant a writ of mandamus, a court must find that the
relator has a clear legal right to the relief prayed for, that the respondent is under a
clear legal duty to perform the requested act, and that the relator has no plain and
adequate remedy at law.” State ex rel. Hodges v. Taft,
64 Ohio St.3d 1
, 3,
591 N.E.2d 1186
(1992). Our review of a grant of summary judgment is de novo. Esber
Beverage Co. v. Labatt USA Operating Co., L.L.C.,
138 Ohio St.3d 71
, 2013-Ohio-
4544,
3 N.E.3d 1173
, ¶ 9.
III. ANALYSIS
{¶ 5} Delta Lookout asserts one proposition of law for us to
consider:
The Platting Commission Act of 1871, as amended,
authorized an alternative form of statutory dedication separate and
distinct from that codified in current Section 723.03 of the Ohio
Revised Code, and not requiring the passage of an ordinance
specially accepting such dedication.
For the reasons that follow, we adopt the proposition of law and further conclude
that the streets at issue were the subject of a statutory dedication.
A. Statutory dedication
{¶ 6} The Revised Code does not define the term “statutory dedication,” but
long ago, we explained that the term means compliance with the statutory
2. Although the court of appeals’ opinion and judgment entry do not explicitly state that it granted
the city’s motion for summary judgment, that is the only plausible basis for the court’s disposition.
3
SUPREME COURT OF OHIO
requirements for achieving a dedication of a public street. See Lessee of Fulton v.
Mehrenfeld,
8 Ohio St. 440
, 444-445 (1858).
{¶ 7} Generally, this process contemplates (1) a landowner’s dedication of
land for street purposes to a public authority and (2) a public authority’s acceptance
of that land for street purposes. As an example, a current method of statutory
dedication provides for a “proprietor[’s]” dedication of a street or alley for public
use together with a “municipal corporation[’s]” acceptance of the street or alley as
confirmed by an ordinance. R.C. 723.03; but see Eggert v. Puleo,
67 Ohio St.3d 78
, 84,
616 N.E.2d 195
(1993) (observing that the method prescribed by R.C.
723.03 is not exclusive). An older procedure, as described by a court of appeals,
required proof “that the land was conveyed to the public for road or street purposes
by deed or plat duly recorded and accepted by the proper authorities * * *.”
Oberhelman v. Allen,
29 Ohio C.D. 596
, 598 (1st Dist.1915). The term “common-
law dedication” bears a similar meaning. See Mehrenfeld at 446 (“To constitute a
binding dedication of ground to public uses at common law, there must have been
an intention to dedicate, and an actual dedication, on the part of the owner, and an
acceptance on the part of the public, which may be proved by the circumstances of
the case”).
B. The Platting Commission Act
{¶ 8} The question we must decide here is whether the Platting Commission
Act furnishes a means of achieving a statutory dedication. Passed in 1871, the act
empowers the council of a municipal corporation to “appoint a commission” to
create a plat “showing the location of the streets and alleys already dedicated and
those proposed * * *.” Section 1, 68 Ohio Laws 36. Upon completing the plat, the
commission is required to submit it to the office of the city civil engineer to allow
interested persons to object to it.
Id.
After the time for objections has expired, and
after the commission has made any needed alterations to the plat, the commission
is required to submit it in finalized form to the offices of the county recorder and
4
January Term, 2020
city civil engineer. Id. at 37. The submitted plat constitutes “the regularly adopted
plan for streets and alleys * * * and no streets or alleys, except those laid down on
such plan, shall subsequently be in any way accepted as public streets or alleys by
the municipal corporation * * *.” Id.
{¶ 9} Section 2 of the act, much of which is now codified at R.C. 735.24,
provides that “owners of any portion of the ground so platted may at any time”
accept the plan insofar “as it concerns their property” by declaring and recording
their intention to accept in the county recorder’s office. 68 Ohio Laws at 37.
“[S]uch acceptance, or the selling of lots referring to the plan or the streets and
alleys therein laid out, shall be a statutory dedication of the streets and alleys in the
property described in the acceptance, or of the streets or alleys [associated with] the
lots so sold * * *.” Id.
{¶ 10} In 1876, the legislature vested the duties of the platting commission
in a board of public works. 73 Ohio Laws 43, 43-44. For simplicity, we refer to
the board of public works as the platting commission.
C. The Platting Commission Act furnishes a means of achieving a statutory
dedication
{¶ 11} Although Delta Lookout’s argument does not focus on the text of the
Platting Commission Act, Section 2 of the act is key to resolving the interpretive
dispute in this case. See In re Application of Duke Energy Ohio, Inc.,
150 Ohio St.3d 437
,
2017-Ohio-5536
,
82 N.E.3d 1148
, ¶ 19 (observing that “with any
question involving statutory construction, we begin our analysis with the statutory
language”).
{¶ 12} Section 2 expressly provides that an owner of ground covered by the
platting commission’s “regularly adopted plan for streets and alleys” may achieve
a “statutory dedication” by following the steps prescribed by the act. Although the
phrase “statutory dedication” is undefined, Mehrenfeld (a pre-act decision) explains
that the phrase means to comply with a statute’s requirements for achieving a
5
SUPREME COURT OF OHIO
dedication of a public street. 8 Ohio St. at 444-446. We thus presume that the
phrase “statutory dedication,” as it is used in the act, bears the meaning that we
assigned to it in Mehrenfeld. See R.C. 1.42 (when a phrase has “acquired a
technical or particular meaning,” it should be construed according to that meaning);
Karabin v. State Auto. Mut. Ins. Co.,
10 Ohio St.3d 163
, 166,
462 N.E.2d 403
(1984), quoting Tax Comm. of Ohio v. Sec. Savs. Bank & Trust Co. of Toledo,
117 Ohio St. 443
, 450,
159 N.E. 570
(1927) (the General Assembly presumably knows
this court’s caselaw “ ‘and, where it uses words or phrases that have been defined
or construed by this court, it is presumed to have used them in the sense that they
have been so defined or construed’ ”).
{¶ 13} It follows, then, that the phrase “statutory dedication” in Section 2
means compliance with the act’s provisions for the purpose of achieving a
dedication of a public street. And when such compliance is shown—that is, by the
commission’s finalizing the plan and the owner’s accepting the plan—a street will
be deemed public.
{¶ 14} This interpretation is supported by decisions cited by Delta Lookout
in support of its proposition of law. For example, Boyce v. Cincinnati, 9 Ohio
Dec.Rep. 763 (Super.Ct.1886)—which appears to be the first decision to have
addressed the act—tracks this interpretation. In that case, the plaintiffs sought to
enjoin the city of Cincinnati from improving a part of a street on the ground that
the street had never been dedicated to public use. Cincinnati countered with a deed
in which the grantor had referred to the street in question as laid out by the platting
commission and, in describing the lot, called for the street as the commission had
laid it out. The grantor’s recognition in the deed of the commission’s work,
Cincinnati argued, meant that the grantor had dedicated the street.
{¶ 15} The court agreed, explaining that the act “reverses the order” of the
common-law method of dedication. Id. at 764. Under the act, “[t]he acceptance of
the city is indicated in advance, that is, the wish of the public authorities that there
6
January Term, 2020
shall be a street in a particular place is first officially indicated, and after that the
only point remaining is to show the acceptance or consent by the owner,” which
takes the form of a “declaration acknowledged and recorded” or a “deed calling for
the plan or for the streets and alleys shown on it.” Id. at 764-765. From those
principles, the court reasoned that the grantor, whose deed followed “the adoption,
publication and recording of the [commission’s] plan,” had achieved “a dedication
to public use.” Id. at 765.
{¶ 16} Under this reasoning, compliance with the act constitutes a valid
method of achieving a statutory dedication. The city would have us distinguish
Boyce on the ground that whereas the public authority in that case had taken steps
to improve the street, nothing similar has occurred here. We disagree, for the court
in Boyce did not assign significance to the city’s attempted improvements in
discussing the meaning of the act.
{¶ 17} The First District Court of Appeals’ decision in Hermann v.
Spitzmiller,
34 Ohio C.D. 453
(1st Dist.1914), reflects the reasoning of Boyce, for
it too explains that the actions of a platting commission do suffice to constitute
acceptance of a public street. See Hermann at 455. And contrary to the city’s
argument, our decision in Wisby v. Bonte,
19 Ohio St. 238
(1869), does not
undermine Hermann, for the simple reason that we decided Wisby more than a year
before the act became law.
{¶ 18} Here, the court of appeals found Winslow v. Cincinnati,
9 Ohio Dec. 89
(Super.Ct.1899), dispositive of the question presented. In Winslow, the court
compared the act to an Ohio statute—R.S. 2650, 66 Ohio Laws 222, a precursor to
R.C. 723.03—that created a method of achieving a statutory dedication through the
passage of an ordinance. The court in Winslow wrote, “We can not think that the
‘acceptance’ referred to in the platting commission statute is anything other than a
statutory acceptance by the municipal corporation which imposes upon it a liability
to repair, and that in this respect the purpose of the act is no different from” R.S.
7
SUPREME COURT OF OHIO
2650’s. Id. at 96. The court went on to declare that the power vested in the platting
commission by the act “is exclusively that of acceptance.” Id.
{¶ 19} The court of appeals understood Winslow as “h[o]ld[ing] that the
1871 Act’s reference to subsequent acceptance by a municipality following the
work of the platting commission rebutted the contention that the 1871 Act
empowered the platting commission with the authority to dedicate streets as
public.”
2019-Ohio-5353
,
150 N.E.3d 556
, ¶ 12. Based on this understanding of
Winslow, the court of appeals concluded that “the 1871 Act does not implicitly
accept streets as public simply because the platting commission included the streets
on a plat map.”
Id.
{¶ 20} We disagree. Winslow expressly states that the act vests the platting
commission with the power of acceptance, yet the court of appeals concluded here
that the act does not deem a street as accepted when it appears on the commission’s
map. The court of appeals’ analysis raises the question of what else the act requires
to achieve an acceptance of a street. The answer cannot be the passage of an
ordinance, because although Winslow compares the purpose of the act to a statute
requiring the passage of an ordinance, the court in Winslow did not hold that the act
requires the passage of an ordinance. And although the court of appeals did not
cite Boyce, that decision explains that the plan itself constitutes the municipality’s
acceptance.
{¶ 21} In summary, the text of the act and the caselaw construing it both
confirm that the act creates a method of achieving a statutory dedication.
D. The streets at issue were the subject of a statutory dedication as of 1876
{¶ 22} Having concluded that the act creates a method of achieving a
statutory dedication, we next consider whether the two streets at issue were the
subject of a statutory dedication.
{¶ 23} Delta Lookout’s most compelling evidence that the streets were
statutorily dedicated is a document entitled “Map of Cincinnati Compiled Under
8
January Term, 2020
the Direction of the Platting Commission 1876.” A reference key denotes
“dedicated streets” with solid lines, “proposed streets adopted by the platting
commission” with dashed lines, and so on. The map identifies the disputed streets
with a solid line.
{¶ 24} We conclude that the map shows that the streets were the subject of
a statutory dedication. First, in accord with the presumption of regularity, which is
unrebutted here, we presume that the platting commission meant what it said on the
map and that the steps necessary to achieve a statutory dedication were followed
here. See Gaston v. Medina Cty. Bd. of Revision,
133 Ohio St.3d 18
, 2012-Ohio-
3872,
975 N.E.2d 941
, ¶ 16. Second, the city offers very little to dissuade us from
crediting the map as accurately depicting the streets as statutorily dedicated. It
appears to contend that the map is unreliable because the parties’ joint stipulation
of facts does not include a stipulation that the streets were ever dedicated. But a
stipulation of facts need not resolve every contested issue in a case. See Kestner v.
Kestner,
173 Ohio App.3d 632
,
2007-Ohio-6222
,
879 N.E.2d 849
, ¶ 29 (7th Dist.)
(“A stipulation is a voluntary agreement entered into between opposing parties
concerning the disposition of some relevant point in order to eliminate the need for
proof on an issue or to narrow the range of issues to be litigated”).
{¶ 25} Accordingly, we conclude that the two streets at issue were the
subject of a statutory dedication as of 1876.
IV. CONCLUSION
{¶ 26} Although we adopt Delta Lookout’s proposition of law and
determine that the streets were the subject of a statutory dedication as of 1876, our
decision today does not mean that Delta Lookout is now entitled to a writ of
mandamus. That is because Delta Lookout still must show that it has a clear legal
9
SUPREME COURT OF OHIO
right to the relief requested and that the city has a clear legal duty to perform the
requested acts.3
{¶ 27} It is true that in a proper case, we may exercise “discretionary,
plenary authority to fully address the merits of an extraordinary action as if it were
originally filed in this court, without the necessity of remand.” State ex rel. Natl.
Lime & Stone Co. v. Marion Cty. Bd. of Commrs.,
152 Ohio St.3d 393
, 2017-Ohio-
8348,
97 N.E.3d 404
, ¶ 27. But we decline to exercise that authority here, because
the parties have not adequately briefed the clear-legal-right and clear-legal-duty
requirements of the mandamus standard—understandable omissions in light of the
court of appeals’ analysis, which, given its conclusion that the act did not furnish a
method of achieving a statutory dedication, eschewed a comprehensive mandamus
discussion. On remand, the court of appeals will need to fully apply the mandamus
standard and determine whether Delta Lookout has satisfied all its requirements.
Judgment reversed
and cause remanded.
O’CONNOR, C.J., and KENNEDY, FRENCH, FISCHER, DEWINE, DONNELLY,
and STEWART, JJ., concur.
_________________
Delev & Associates, L.L.C., Gregory D. Delev, and Donald W. Harper II,
for appellant.
Paula Boggs Muething, Cincinnati City Solicitor, and Shuva J. Paul,
Assistant City Solicitor, for appellees.
_________________
3. Because the court of appeals’ determination that Delta Lookout lacks an adequate remedy at law
is undisputed, we do not disturb it. See
2019-Ohio-5353
,
150 N.E.3d 556
, at ¶ 5-8.
10 |
4,639,128 | 2020-12-03 14:19:14.008183+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2020/2020-Ohio-5484.pdf | [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Reister v. Gardner, Slip Opinion No.
2020-Ohio-5484
.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO.
2020-OHIO-5484
REISTER, RECEIVER, APPELLANT, v. GARDNER ET AL, APPELLEES;
CLARKWESTERN DIETRICH BUILDING SYSTEMS, L.L.C., D.B.A.
CLARKDIETRICH, APPELLANT.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Reister v. Gardner, Slip Opinion No.
2020-Ohio-5484
.]
Corporations—Directors—Breach-of-fiduciary-duty claims—The business-
judgment rule and the litigation privilege are separate concepts—Motions
for judgment on the pleadings—Complaint was sufficient to state actionable
claims that should not have been dismissed.
(No. 2019-1815—Submitted August 5, 2020—Decided December 3, 2020.)
APPEAL from the Court of Appeals for Butler County, Nos. CA2019-01-010,
CA2019-01-011, and CA2019-01-020,
2019-Ohio-4720
.
__________________
FISCHER, J.
{¶ 1} The law is a large and sometimes complicated field. It is made less
complicated by the fact that litigants, lawyers, and judges alike may look to
SUPREME COURT OF OHIO
precedent for guidance. The Federalist No. 78 at 471 (Alexander Hamilton)
(Clinton Rossiter Ed.1961). From time to time, however, discrete concepts are
nonetheless confused, and the clarity provided by prior decisions gets muddied.
This case involves one such instance of confusion. Because the Twelfth District
Court of Appeals conflated the litigation privilege with the business-judgment rule
in its decision affirming the trial court’s decision to grant judgment on the
pleadings, we clarify the separate nature of these rules, and we reverse the Twelfth
District’s judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
{¶ 2} Appellant, ClarkWestern Dietrich Building Systems, L.L.C., d.b.a.
ClarkDietrich, previously sued the Certified Steel Stud Association, Inc. (“the
association”), a Delaware corporation, and its member companies. That lawsuit
primarily alleged that the association made defamatory statements about the quality
of ClarkDietrich’s products in a trade publication that the association published and
disseminated. Appellees, William Gardner and Edward Slish, were members of the
association’s board of directors at that time.
{¶ 3} As relevant here, ClarkDietrich’s defamation case proceeded to a
lengthy jury trial. During that trial, ClarkDietrich settled its claims against each of
the association’s member companies and offered to dismiss its remaining claims
against the association with prejudice. The association’s board, however, voted to
reject that offer, apparently in part due to concerns about related litigation that were
not addressed by the offer. ClarkDietrich, satisfied that it had been vindicated by
the settlements it had already reached, then filed a motion with the trial court to
dismiss the case with prejudice. The association opposed this request and asked
the trial court to deny the motion. The trial court granted the association’s request,
denying ClarkDietrich’s motion and allowing the case to proceed. Eventually, in
what can only be described as a “be careful what you wish for” turn of events, the
jury returned a unanimous verdict in favor of ClarkDietrich along with a $49.5
2
January Term, 2020
million judgment. The association was ultimately responsible for $43 million of
that amount.
{¶ 4} After the judgment was subsequently affirmed on appeal,
Clarkwestern Dietrich Bldg. Sys., L.L.C. v. Certified Steel Stud Assn., Inc., 12th
Dist. Butler No. CA2016-06-113,
2017-Ohio-2713
, ClarkDietrich moved the trial
court to appoint a receiver on behalf of the association so that the association could
pursue potential breach-of-fiduciary-duty claims against the directors and could
obtain the funds it needed, in whole or in part, to satisfy the considerable judgment.
The trial court granted the motion and appellant, John J. Reister, was appointed as
the receiver.
{¶ 5} After his appointment as receiver, Reister filed this action against the
association’s four directors, including Gardner and Slish, and designated
ClarkDietrich as an interested party. The complaint alleged that the directors
breached their fiduciary duties by mishandling the ClarkDietrich litigation and
rejecting multiple opportunities to resolve the case at no cost to the association.
Arguing that their actions were protected by the litigation privilege, Gardner and
Slish each moved for judgment on the pleadings. The trial court agreed with
Gardner and Slish and granted those motions.
{¶ 6} On appeal, the Twelfth District Court of Appeals affirmed the trial
court’s judgment. According to the Twelfth District, “[t]he actions taken and
statements made by Gardner and Slish in the underlying matter [were] protected
and provided immunity under the litigation privilege rule.”
2019-Ohio-4720
,
149 N.E.3d 112
, ¶ 27. Like the trial court, the Twelfth District determined that the
litigation privilege is broad and immunizes “ ‘actions’ as opposed to merely
‘statements.’ ” Id. at ¶ 25. The Twelfth District accordingly reasoned that the rule
is applicable to a corporate board of directors’ decision to forgo settling a case. Id.
at ¶ 26. Judge Stephen Powell dissented and observed that the litigation privilege
3
SUPREME COURT OF OHIO
is narrower in scope than either the trial court or the majority had acknowledged.
Id. at ¶ 37-42 (Powell, J., dissenting).
{¶ 7} Following the Twelfth District’s split decision, Reister and
ClarkDietrich separately appealed here and we accepted their appeals. See
158 Ohio St.3d 1434
,
2020-Ohio-877
,
141 N.E.3d 242
.
II. ANALYSIS
{¶ 8} The central issue in this appeal is the proper scope of the litigation
privilege in Ohio. The litigation privilege provides absolute immunity to parties,
witnesses, lawyers, and judges from future lawsuits for statements made during and
relevant to judicial proceedings. Erie Cty. Farmers’ Ins. Co. v. Crecelius,
122 Ohio St. 210
,
171 N.E. 97
(1930), syllabus; Willitzer v. McCloud,
6 Ohio St.3d 447
, 448-
449,
453 N.E.2d 693
(1983); Surace v. Wuliger,
25 Ohio St.3d 229
,
495 N.E.2d 939
(1986), syllabus; Hecht v. Levin,
66 Ohio St.3d 458
, 460,
613 N.E.2d 585
(1993). To be clear, it still does that.
{¶ 9} Contrary to 90 years of precedent, however, the court of appeals
applied the litigation privilege to actions rather than statements when it held that
the litigation privilege shielded the business decisions of the corporate directors in
this case. The court justified this departure from our precedent by looking to
Florida law, see Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, P.A. v.
United States Fire Ins. Co.,
639 So.2d 606
, 608 (Fla.1994), and importing concepts
borrowed from the business-judgment rule. Specifically, the Twelfth District stated
that it was “contrary to the purposes of the litigation privilege rule to second-guess
the litigation strategy employed by the directors and the Association’s counsel” and
that “[c]onsistent with the purposes of the litigation privilege rule, directors Slish
and Gardner should be free to use their best judgment in defending the underlying
lawsuit without fear of having to defend their action in a subsequent civil action for
those decision[s].”
2019-Ohio-4720
,
149 N.E.3d 112
, at ¶ 29.
4
January Term, 2020
{¶ 10} We respectfully reject the determination by the court of appeals and
clarify that in this case, Ohio law, not Florida law, controls and defines the contours
of the litigation privilege. In doing so, we reaffirm our long-established rule that
the litigation privilege provides absolute immunity from civil suits for defamatory
statements made during and relevant to judicial proceedings. Willitzer at 448-449;
Crecelius at syllabus. We further clarify that the business-judgment rule and the
litigation privilege are, in fact, discrete concepts.
{¶ 11} Because this case involves a Delaware corporation and litigation that
took place in Ohio, we apply Ohio law to define the litigation privilege and we look
to Delaware law to define the directors’ fiduciary duties and the business-judgment
rule, see Gries Sports Ents., Inc. v. Cleveland Browns Football Co., Inc.,
26 Ohio St.3d 15
, 20,
496 N.E.2d 959
(1986). Reviewing the pleadings in this case under
the guiding principles established by the applicable law, we hold that judgment on
the pleadings was improper.
A. Distinguishing Between the Litigation Privilege
and the Business-Judgment Rule
{¶ 12} The business-judgment rule is “a presumption that in making a
business decision the directors of a corporation acted on an informed basis, in good
faith and in the honest belief that the action taken was in the best interests of the
company.” Aronson v. Lewis,
473 A.2d 805
, 812 (Del.1984), overruled on other
grounds, Brehm v. Eisner,
746 A.2d 244
, 254 (Del.2000). It is a recognition that
judges, with the benefit of hindsight, should not second-guess the numerous and
difficult real-time choices that corporate officers and directors are faced with,
Sinclair Oil Corp. v. Levien,
280 A.2d 717
, 720 (Del.1971), unless, of course, the
presumption that the officers and directors acted in accordance with their fiduciary
duties is rebutted, Aronson at 812.
{¶ 13} The business-judgment rule is not unique to specific transactions and
applies to any decision made pursuant to the directors’ authority under Delaware
5
SUPREME COURT OF OHIO
law. Zapata Corp. v. Moldanado,
430 A.2d 779
, 782 (Del.1981). Accordingly, the
business-judgment rule may apply to the decisions that directors make in
connection with litigation involving the corporation they serve.
Id.
(“managerial
decision making power * * * encompasses decisions whether to initiate, or refrain
from entering, litigation”). This necessarily means that the business-judgment rule
may apply to decisions regarding the settlement of a lawsuit. See, e.g., White v.
Panic,
783 A.2d 543
, 552 (Del.2001) (“The decision to approve the settlement of a
suit against the corporation is entitled to the same presumption of good faith as
other business decisions taken by a disinterested, independent board”).
{¶ 14} The litigation privilege, by contrast, is designed to protect “the
integrity of the judicial process” by affording participants in litigation with
immunity from future lawsuits over relevant statements made during judicial
proceedings. Willitzer, 6 Ohio St.3d at 449,
453 N.E.2d 693
. By removing the fear
of future consequences, the litigation privilege facilitates the disclosure of
“pertinent information” and helps to “ascertain the truth.”
Id.
The litigation
privilege is therefore applicable to statements that bear “some reasonable relation
to the judicial proceeding in which” they appear. Surace,
25 Ohio St.3d 229
,
495 N.E.2d 939
, at syllabus. It is not applicable, however, to conduct that is simply
connected in some way to litigation. Willitzer at 449-450 (concluding that the
litigation privilege shielded a physician from liability arising from his testimony in
judicial proceedings but not from claims arising from the manner in which he
conducted examinations). Consequently, the litigation privilege has nothing to do
with the decisions that corporate directors make during litigation.
{¶ 15} So, while the business-judgment rule may apply to the decisions that
directors make during the course of litigation involving the corporation they serve
(and there may even be additional statutory protections for those directors when
their decisions are informed by the advice of counsel, see Del.Code Ann., Title 8,
141(e)), the litigation privilege is entirely distinct. Again, the litigation privilege
6
January Term, 2020
protects participants in litigation from future suits over statements made during the
litigation. The business-judgment rule, on the other hand, is a standard of review
that affords deference to the decisions that informed and conflict-free directors
make while managing the affairs of a corporation, including decisions regarding
litigation.
B. Judgment on the Pleadings Was Improper
{¶ 16} Having clarified that the litigation privilege protects statements, not
actions, and is a concept separate from the business-judgment rule, we turn to the
pleadings in this case and consider whether the decision to grant judgment on the
pleadings was proper.
{¶ 17} Our review of a judgment on the pleadings is de novo. New Riegel
Local School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng., Inc.,
157 Ohio St.3d 164
,
2019-Ohio-2851
,
133 N.E.3d 482
, ¶ 8. Dismissal is appropriate
under Civ.R. 12(C) when (1) the court construes as true, and in favor of the
nonmoving party, the material allegations in the complaint and all reasonable
inferences to be drawn from those allegations and (2) it appears beyond doubt that
the plaintiff can prove no set of facts that would entitle him or her to relief. State
ex rel. Midwest Pride IV, Inc. v. Pontious,
75 Ohio St.3d 565
, 570,
664 N.E.2d 931
(1996).
{¶ 18} The complaint in this case alleges that the directors owed the
association certain fiduciary duties, that the directors breached those duties as a
result of their handling of the litigation involving the association, and that the
alleged breach of those duties damaged the association. The complaint specifically
alleges that the directors were conflicted due to their positions as employees of
other corporations that were competitors of ClarkDietrich and that the decisions
that the directors made here were, as a result, irrational and not in the best interest
of the association. In light of those alleged facts and others, the complaint goes on
to allege that these decisions were not a valid exercise of business judgment.
7
SUPREME COURT OF OHIO
{¶ 19} Considering the applicable standard of review and the fact that a
litigant need only include “a short and plain statement of the claim showing that the
party is entitled to relief,” Civ.R. 8(A), the complaint here was sufficient to state
actionable claims against Gardner and Slish that should not have been dismissed.
The litigation privilege does not change this, and, based on the pleadings, it is
premature to say whether the business-judgment rule will apply here. Accordingly,
judgment on the pleadings was inappropriate.
C. Remand
{¶ 20} Given our resolution of the issues presented here, remand to the trial
court is necessary. In light of the confusion below, we note that our decision is
specific only to this stage of the proceedings. While we have clarified that the
litigation privilege and the business-judgment rule are separate concepts and that
judgment on the pleadings was improper at the time it was entered, nothing in our
decision should be construed as passing judgment on the merits of this case or on
whether the business-judgment rule will apply at later stages of these proceedings.
That issue, the application of the business-judgment rule at those later stages, and
the outcome of this case should be decided on remand.
III. Conclusion
{¶ 21} For the reasons stated above, we reverse the judgment of the court
of appeals and remand this cause to the trial court for further proceedings consistent
with this opinion.
Judgment reversed
and cause remanded.
O’CONNOR, C.J., and KENNEDY, FRENCH, DEWINE, and DONNELLY, JJ.,
concur.
STEWART, J., concurs in judgment only.
_________________
8
January Term, 2020
Helmer, Martins, Rice & Popham Co., L.P.A., James B. Helmer Jr., Robert
M. Rice, Jennifer L. Lambert, and B. Nathaniel Garret; and Millikin & Fitton Law
Firm, Steven A. Tooman, and Heather Sanderson Lewis, for appellant John J.
Reister.
Frost Brown Todd, L.L.C., and Mathew C. Blickensderfer; and Cohen &
Grigsby, P.C., Anthony M. Cillo, and Fridrikh V. Shrayber, for appellant
ClarkWestern Dietrich Building Systems, L.L.C.
Dinsmore & Shohl, L.L.P., Brian S. Sullivan, Peter J. Georgiton, and Justin
M. Burns; and Chamberlain, Hrdlicka, White, Williams & Aughtry, Scott M.
Ratchick, and John C. Guin, for appellee Edward R. Slish.
Taft, Stettinius & Hollister, L.L.P., Daniel R. Warncke, and Aaron M.
Herzig; and Fox Rothschild, L.L.P., Jeffrey M. Pollock, and Robert J. Rohrberger,
for appellee William A. Gardner.
Squire Patton Boggs, L.L.P, Lauren S. Kuley, and Benjamin Beaton; and
Kevin D. Shrimp, urging affirmance for amicus curiae, Ohio Chamber of
Commerce.
_________________
9 |
4,639,129 | 2020-12-03 14:19:15.499359+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2020/2020-Ohio-5485.pdf | [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as In
re M.H., Slip Opinion No.
2020-Ohio-5485
.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO.
2020-OHIO-5485
IN RE M.H.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as In re M.H., Slip Opinion No.
2020-Ohio-5485
.]
Fifth Amendment—Due process—Suspect’s questioning by child-abuse
investigator did not violate Miranda v. Arizona or suspect’s federal due-
process rights, because investigator was neither a law-enforcement officer
nor acting under direction or control of police and confession obtained was
not causally related to any conduct of police—Court of appeals’ reversal of
trial court’s suppression of statement to investigator affirmed.
(No. 2019-0621—Submitted April 29, 2020—Decided December 3, 2020.)
APPEAL from the Court of Appeals for Cuyahoga County,
No. 105742,
2018-Ohio-4848
.
_______________________
KENNEDY, J.
{¶ 1} In this discretionary appeal from the Eighth District Court of Appeals,
we are asked whether a child-abuse investigator employed by a county children-
SUPREME COURT OF OHIO
services agency must give the warnings required by the Supreme Court of the
United States in Miranda v. Arizona,
384 U.S. 436
, 444,
86 S.Ct. 1602
,
16 L.Ed.2d 694
(1966), before questioning a child suspected of committing child abuse. We
are also asked whether the admission at trial of an incriminating statement obtained
from a child suspect by a county child-abuse investigator violates the due-process
protections of the Fourteenth Amendment.
{¶ 2} Binding precedent answers both questions. We held in State v.
Jackson that a child-abuse investigator employed by a county children-services
agency is not required to provide the Miranda warnings before questioning a
suspect in a child-abuse investigation when the investigator is neither a law-
enforcement officer nor an agent of law enforcement acting under the direction or
control of the police.
154 Ohio St.3d 542
,
2018-Ohio-2169
,
116 N.E.3d 1240
,
¶ 15, 30. And in Colorado v. Connelly, the Supreme Court of the United States
explained that “[a]bsent police conduct causally related to the confession, there is
simply no basis for concluding that any state actor has deprived a criminal
defendant of due process of law.” (Emphasis added.)
479 U.S. 157
, 164,
107 S.Ct. 515
,
93 L.Ed.2d 473
(1986).
{¶ 3} The evidence demonstrates that at the time the child-abuse
investigator interviewed the suspect in this case, the investigator was neither a law-
enforcement officer nor acting under the direction or control of the police. Further,
the confession obtained was not causally related to any conduct of the police. The
questioning in this case therefore violated neither Miranda nor the suspect’s federal
due-process rights, and the court of appeals correctly concluded that the confession
resulting from it was admissible at trial.
{¶ 4} Accordingly, we affirm the judgment of the Eighth District Court of
Appeals.
2
January Term, 2020
Facts and Procedural History
{¶ 5} The Cuyahoga County Department of Children and Family Services
(“CCDCFS”) received a referral reporting that 13-year-old M.H. had engaged in
sexual activity with J.M., the 12-year-old daughter of M.H.’s mother’s boyfriend.
Esther Bradley, a child-protection specialist in CCDCFS’s Sex Abuse Intake Unit,
interviewed J.M. and told her mother to submit a police report.
{¶ 6} Bradley opened a sex-abuse investigation and left at M.H.’s residence
for M.H.’s mother a letter specifying a time and place for Bradley to interview M.H.
According to M.H.’s mother, neither the letter nor Bradley in a subsequent
telephone call informed her that M.H. was a suspect in an investigation, but M.H.’s
mother was aware of allegations that M.H. had touched J.M. while she was asleep.
M.H.’s mother did not know that she could decline the interview, and she brought
M.H. to CCDCFS to be questioned. Bradley had told M.H.’s mother that it would
be a private interview and that she would not be permitted to accompany M.H.
Bradley took M.H. to a room and closed the door, leaving his mother in the waiting
room. Bradley did not advise M.H. of his Miranda rights prior to the interview,
and M.H. admitted during the interview that he had engaged in sexual activity with
J.M. Bradley prepared a report for the police.
{¶ 7} The Cleveland police department assigned the case to Detective
Christina Cottom, and on August 24, 2016, she filed a juvenile-delinquency
complaint alleging that M.H. committed two counts of rape and two counts of gross
sexual imposition. The state moved in limine to admit M.H.’s incriminating
statement, and M.H. moved to suppress it, asserting that his statement was
involuntary, that he had not been advised of or validly waived his Miranda rights,
and that his statement’s probative value did not outweigh its prejudice to his
defense.
{¶ 8} At the suppression hearing, Bradley testified that she had a dual
purpose in interviewing M.H. The first was to determine whether any type of
3
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inappropriate sexual activity had occurred between M.H. and J.M., “and if anything
criminal happened, then [Bradley would] pass that on to law enforcement.” The
second purpose was to ensure J.M.’s safety and make sure that nothing
inappropriate occurred while the investigation was ongoing. Bradley admitted that
CCDFCS has a relationship with law enforcement, that she regularly shares
information with the police, and that she knew that a detective had been assigned
to the case. She also admitted that she had previously been employed as a police
detective in Atlanta, Georgia, and was aware of the Miranda warnings. But she
explained that in her work for CCDFCS, she was “not law enforcement” and did
not have arrest powers; rather, her role was to make sure that families and children
receive the services they need. Bradley could not remember whether she had been
contacted by the police before she interviewed M.H., but she “[did not] think so.”
{¶ 9} Detective Cottom testified that she normally coordinates with
CCDFCS to interview the alleged victim jointly but that in this case, Bradley had
interviewed both J.M. and M.H. before Detective Cottom was able to contact her.
For this reason, the detective never interviewed M.H., and she testified that she did
not direct Bradley to interview M.H. on behalf of the police or tell Bradley what
questions to ask him. Detective Cottom explained that she did not even know that
the interview had occurred until after she received Bradley’s report approximately
two months later.
{¶ 10} The trial court granted the motion to suppress, finding that “the
relationship between [CCDCFS and] the State [is] a little close for comfort.” The
court concluded that M.H.’s statement had been obtained in violation of his due-
process rights and that it was inadmissible under Evid.R. 403(A). It also denied the
state’s motion in limine.
{¶ 11} The Eighth District Court of Appeals reversed and remanded. The
lead opinion recognized that a social worker may have a duty to give a suspect the
Miranda warnings when the social worker acts under the direction or control of law
4
January Term, 2020
enforcement.
2018-Ohio-4848
, ¶ 22. But here, the lead opinion concluded, “there
is no evidence that [Bradley] was acting under the direction or control of law
enforcement when she interviewed M.H., despite her cooperation with law
enforcement.” Id. at ¶ 35. It also concluded that M.H. was not in custody during
the interview and that Bradley had not compelled him to incriminate himself in
violation of his due-process rights. Id. at ¶ 35, 39-40. The lead opinion noted that
M.H. was not under arrest, his mother had brought him to the interview, he had not
been ordered to appear at a police station, he was not restrained, the door to the
interview room was closed but not locked, the interview lasted approximately 40
minutes, and he was free to leave the building after the interview. It also explained
that “[t]here is no evidence—or allegations—of any threats, coercion, suggestions,
restraints, or physical deprivation or harm to M.H.” Id. at ¶ 40. Lastly, the lead
opinion determined that Evid.R. 403(A) would not preclude admission of M.H.’s
statement because the record did not demonstrate that admitting the statement
would be unfairly prejudicial. Id. at ¶ 41-42.
{¶ 12} We accepted M.H.’s discretionary appeal on the following three
propositions of law:
(1) The statement of a child to a government social worker
may be involuntary and violate due process even when the
government social worker was not required to give Miranda
warnings.
(2) A child does not feel free to leave when a [sic] he is
driven to [a] government agency for questioning by a parent and
separated from that parent and interrogated in a private interrogation
room without being told he is free to leave and free to not cooperate.
(3) A child-suspect must be provided Miranda warnings
when that child is interrogated by a social worker who is exercising
5
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her statutory duty to investigate child abuse allegations and does so
cooperatively with the police on a regular and institutional basis.
See
156 Ohio St.3d 1452
,
2019-Ohio-2780
,
125 N.E.3d 947
.
Positions of the Parties
{¶ 13} M.H. maintains that in determining whether a child has given a
voluntary confession or perceived himself or herself to be in custody, courts must
account for the cognitive differences and disparities in social and emotional
functioning that separate juveniles from adults. He asserts that children as young
as M.H. should be presumed as a class to be unable to give a voluntary statement,
because cognitive and behavioral science suggest that they are developmentally at
risk of providing an involuntary or false confession. Further, he contends that his
statement was made under highly coercive circumstances: his mother had taken him
to the interview, and she and Bradley were both authority figures; Bradley was a
former homicide detective who was trained in coercive interrogation techniques;
and M.H. had been separated from his mother at a government building staffed by
armed guards. Also, M.H. argues that children are in a state of perpetual custody
of parents, teachers, and others and that a child would not feel free to walk away
from an interview with a government worker; therefore, M.H. says, he was
subjected to a custodial interrogation.
{¶ 14} Additionally, M.H. claims that Bradley was acting as an agent of law
enforcement when she interrogated him. He notes that Bradley was a state actor
who was required by Ohio law to investigate allegations of child abuse and to report
the results of the investigation to law enforcement, and he asserts that she knew that
M.H.’s unwarned statements would be used in the police investigation and
subsequent prosecution. “[T]here is no legitimate purpose for the social worker’s
interview of [M.H.],” he contends, “other than to directly assist the investigation of
law enforcement.”
6
January Term, 2020
{¶ 15} The state responds that there is no evidence in the record showing
that M.H. was ignorant of his rights, that Bradley coerced him into giving a
statement, or that the interview was an inherently coercive interrogation. It
contends that the law does not recognize a presumption that a child’s statement is
involuntary, and it says that M.H. wrongly conflates the fact that Bradley was an
agent of the government as a child-protection specialist with her being an agent of
law enforcement. The state opposes M.H.’s proposed per se rule that juveniles are
perpetually in custody, arguing that the proper inquiry is whether the specific
circumstances present a serious danger of coercion and that a child’s age is only
one factor in that inquiry. The state relies on this court’s caselaw holding that an
interview is not a custodial interrogation unless it is conducted by the police or
under their direction or control, and, the state argues, there is no evidence that
Bradley had authority to enforce laws and make arrests or that she was an agent of
law enforcement.
{¶ 16} Accordingly, this case presents two related questions: First, is a
child-abuse investigator employed by a county children-services agency required
to provide the Miranda warnings before questioning a child suspected of
committing child abuse? And second, does the Due Process Clause of the
Fourteenth Amendment to the United States Constitution restrict the admission at
trial of an incriminating statement made by a child suspect to a county child-abuse
investigator during questioning?
Law and Analysis
The Protection against Self-Incrimination
{¶ 17} The Fifth Amendment to the United States Constitution provides that
“[n]o person * * * shall be compelled in any criminal case to be a witness against
himself.” This right applies to state action through the Due Process Clause of the
Fourteenth Amendment. Malloy v. Hogan,
378 U.S. 1
, 6,
84 S.Ct. 1489
,
12 L.Ed.2d 653
(1964). Moreover, “the constitutional privilege against self-incrimination is
7
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applicable in the case of juveniles as it is with respect to adults.” In re Gault,
387 U.S. 1
, 55,
87 S.Ct. 1428
,
18 L.Ed.2d 527
(1967); accord In re C.S.,
115 Ohio St.3d 267
,
2007-Ohio-4919
,
874 N.E.2d 1177
, ¶ 72.
{¶ 18} The United States Supreme Court has “adopted a set of prophylactic
measures designed to safeguard the constitutional guarantee against self-
incrimination.” J.D.B. v. North Carolina,
564 U.S. 261
, 269,
131 S.Ct. 2394
,
180 L.Ed.2d 310
(2011). In Miranda, the court held that prior to questioning, a suspect
“must be warned that he has a right to remain silent, that any statement he does
make may be used as evidence against him, and that he has a right to the presence
of an attorney, either retained or appointed.”
384 U.S. at 444
,
86 S.Ct. 1602
,
16 L.Ed.2d 694
. If these Miranda warnings are not given prior to a custodial
interrogation, the prosecution may not use the statements obtained from the suspect
at trial.
Id.
The court clarified, however, that by “custodial interrogation” it meant
“questioning initiated by law enforcement officers after a person has been taken
into custody or otherwise deprived of his freedom of action in any significant way.”
Id.
{¶ 19} This court has consistently held that the Miranda warnings are
required only when the custodial interrogation is conducted by a law-enforcement
officer or an agent of law enforcement. E.g., Jackson,
154 Ohio St.3d 542
, 2018-
Ohio-2169,
116 N.E.3d 1240
, at ¶ 15; State v. Ferrette,
18 Ohio St.3d 106
, 108-
109,
480 N.E.2d 399
(1985); State v. Bolan,
27 Ohio St.2d 15
, 18,
271 N.E.2d 839
(1971). We have noted that the term “law-enforcement officer” includes an officer
who has “a statutory duty to enforce laws and authority to arrest violators.” Jackson
at ¶ 27, citing R.C. 2901.01(A)(11) (defining “law enforcement officer”). And
agents of law enforcement, we have explained, are “ ‘those acting for * * * law
enforcement agencies by direction of the agencies” and do “not include private
citizens not directed or controlled by a law enforcement agency, even though their
8
January Term, 2020
efforts might aid in law enforcement.’ ” (Emphasis deleted.) Id. at ¶ 15, quoting
Bolan at 18.
{¶ 20} In Jackson, we considered whether a social worker employed by a
children-services agency (as in this case, CCDFCS) was either a law-enforcement
officer or an agent of law enforcement when interviewing an alleged perpetrator.
Id. at ¶ 1. We rejected the proposition that a social worker’s statutory duty to
cooperate with and provide information to law enforcement regarding child-abuse
investigations converts the social worker into an agent of law enforcement. Id. at
¶ 21-22. We explained that the CCDFCS social worker was not a law-enforcement
officer, because she lacked the power to arrest, id. at ¶ 27, and that she was not an
agent of law enforcement because she had not interviewed the suspect at the
direction or control of the police, id. at ¶ 23. Therefore, we concluded, she was not
required to give the Miranda warnings prior to interviewing the suspect in her child-
abuse investigation. Id. at ¶ 28.
{¶ 21} Similarly here, Bradley was neither a law-enforcement officer nor
an agent of law enforcement. As Jackson explains, her duties to investigate child
abuse, to report her findings to police, and to cooperate in the criminal investigation
did not make her an agent of law enforcement. She testified that she was not a law-
enforcement officer and that she lacked the power to arrest. And although she
admitted having a relationship with police, the evidence in this record shows that
she did not operate under the direction or control of law enforcement: Detective
Cottom testified that she had not directed Bradley to conduct the interview and did
not even know that it had occurred until approximately two months later.
{¶ 22} Bradley’s status as a former police officer is irrelevant. Because she
was not a law-enforcement officer or an agent of law enforcement at the time of the
interview, she was not required to advise M.H. of his Miranda rights. It is therefore
unnecessary to decide whether M.H. was in custody at the time Bradley questioned
him.
9
SUPREME COURT OF OHIO
The Federal Due-Process Protection against Coerced Confessions
{¶ 23} In cases decided before and after the Fifth Amendment protection
against self-incrimination was first applied to the states, the United States Supreme
Court has analyzed the admissibility of a confession under the rubric of due process.
See Connelly,
479 U.S. at 163-164
,
107 S.Ct. 515
,
93 L.Ed.2d 473
. We have
therefore explained that “[c]onstitutional principles of due process preclude the use
of coerced confessions as fundamentally unfair, regardless of whether the
confession is true or false.” State v. Barker,
149 Ohio St.3d 1
,
2016-Ohio-2708
,
73 N.E.3d 365
, ¶ 31.
{¶ 24} However, in defining the protections due process affords against
coerced confessions, the Supreme Court has held that “coercive police activity is a
necessary predicate to the finding that a confession is not ‘voluntary’ within the
meaning of the Due Process Clause of the Fourteenth Amendment.” Connelly at
167; State v. Myers,
154 Ohio St.3d 405
,
2018-Ohio-1903
,
114 N.E.3d 1138
, ¶ 77;
accord Barker at ¶ 31. “Absent police conduct causally related to the confession,
there is simply no basis for concluding that any state actor has deprived a criminal
defendant of due process of law.” Connelly at 164.
{¶ 25} In this case, obtaining M.H.’s confession was not causally related to
police conduct. As explained above, Bradley was not a law-enforcement officer
nor did she act under the direction or control of the police. Her status as a former
police officer is irrelevant. Further, the evidence shows that neither Detective
Cottom nor any other police officer was involved in Bradley’s interview of M.H.
And under the Supreme Court’s holding in Connelly, which we are obligated to
follow, the lack of a causal connection between police conduct and M.H.’s
confession is fatal to his claim that his confession was coerced in violation of his
federal due-process rights.
{¶ 26} The dissenting opinion maintains that “[n]othing in the Supreme
Court’s decision [in Connelly] suggests that the court intended its holding to
10
January Term, 2020
establish a per se rule that police coercion is the only type of state action that can
violate a suspect’s due-process rights in the confession context.” (Emphasis sic.)
Dissenting opinion at ¶ 53. The dissent asserts that the Supreme Court’s reference
in Connelly to “police activity” “could reflect the specific facts of that case.” Id. at
¶ 54.
{¶ 27} However, we ought not assume that the court chose its words so
carelessly. Moreover, dissenting in Connelly, Justice Brennan understood the
majority to mean what it had said: “Today’s decision restricts the application of the
term ‘involuntary’ to those confessions obtained by police coercion. Confessions
by mentally ill individuals or by persons coerced by parties other than police
officers are now considered ‘voluntary.’ ” (Emphasis added.) Connelly,
479 U.S. at 176
,
107 S.Ct. 515
,
93 L.Ed.2d 473
(Brennan, J., dissenting).
{¶ 28} Nor is our plain reading of the court’s holding in Connelly
inconsistent with Estelle v. Smith,
451 U.S. 454
, 466-469,
101 S.Ct. 1866
,
68 L.Ed.2d 359
(1981), or United States v. Mathis,
391 U.S. 1
,
88 S.Ct. 1503
,
20 L.Ed.2d 381
(1968). Neither of those decisions discuss the due-process protection
against coerced confessions. Rather, both of those cases involved the privilege
against self-incrimination, and the court decided in both cases that incriminating
statements were inadmissible because the interrogator had failed to obtain a waiver
of the accused’s Miranda rights.
{¶ 29} Moreover, the court in Estelle noted that the psychiatrist had acted
as an agent of law enforcement, Estelle at 467, whereas in Mathis, “the court ‘was
not called upon to decide whether the IRS employee was a “law enforcement
agent,” as the government apparently ceded that point.’ (Emphasis sic.),” Jackson,
154 Ohio St.3d 542
,
2018-Ohio-2169
,
116 N.E.3d 1240
, at ¶ 25, quoting State v.
Bernard,
31 So.3d 1025
, 1030 (La.2010).
{¶ 30} But even if there were some inconsistency between Connelly and
these decisions, the Supreme Court has explained that when precedent appears to
11
SUPREME COURT OF OHIO
be in conflict, lower courts “should follow the case which directly controls, leaving
to [the Supreme] Court the prerogative of overruling its own decisions.” Rodriguez
de Quijas v. Shearson/Am. Express, Inc.,
490 U.S. 477
, 484,
109 S.Ct. 1917
,
104 L.Ed.2d 526
(1989). Connelly, not Estelle or Mathis, directly controls here.
{¶ 31} In any case, it is not obvious that the Supreme Court intended the
due-process protection against coerced confessions to apply to state employees who
are not law-enforcement authorities.
{¶ 32} The Due Process Clause precludes the admission of coerced
statements “not because such confessions are unlikely to be true but because the
methods used to extract them offend an underlying principle in the enforcement of
our criminal law: that ours is an accusatorial and not an inquisitorial system.”
Rogers v. Richmond,
365 U.S. 534
, 540-541,
81 S.Ct. 735
,
5 L.Ed.2d 760
(1961).
“It also turns on the deep-rooted feeling that the police must obey the law while
enforcing the law; that in the end life and liberty can be as much endangered from
illegal methods used to convict those thought to be criminals as from the actual
criminals themselves.” Spano v. New York,
360 U.S. 315
, 320-321,
79 S.Ct. 1202
,
3 L.Ed.2d 1265
(1959).
{¶ 33} It was “the advent of modern custodial police interrogation” that
brought “an increased concern about confessions obtained by coercion.” Dickerson
v. United States,
530 U.S. 428
, 434-435,
120 S.Ct. 2326
,
147 L.Ed.2d 405
(2000).
The Supreme Court adopted the suppression remedy to deter law enforcement from
violating the due-process rights of criminal suspects by making confessions
obtained from them through the use of coercive investigatory techniques
inadmissible at trial. See id.; Sanchez-Llamas v. Oregon,
548 U.S. 331
, 349,
126 S.Ct. 2669
,
165 L.Ed.2d 557
(2006). Application of the exclusionary rule depends
on whether “[t]he line between proper and permissible police conduct and
techniques and methods offensive to due process” has been crossed. Haynes v.
Washington,
373 U.S. 503
, 515,
83 S.Ct. 1336
,
10 L.Ed.2d 513
(1963). M.H. does
12
January Term, 2020
not point to a single case in which the United States Supreme Court held that a
confession obtained by a public employee who was not a member of law
enforcement must be suppressed as violative of due process.
{¶ 34} The Supreme Court has never repudiated or limited its holding in
Connelly, nor is that holding an outlier. In discussing the test for whether a
confession has been coerced in violation of a suspect’s due-process rights, the court
has pointed to “the crucial element of police coercion.” Withrow v. Williams,
507 U.S. 680
, 693,
113 S.Ct. 1745
,
123 L.Ed.2d 407
(1993), see also State v. Perez,
124 Ohio St.3d 122
,
2009-Ohio-6179
,
920 N.E.2d 104
, ¶ 71 (“the use of an inherently
coercive tactic by police is a prerequisite to a finding of involuntariness”).
{¶ 35} And in Perry v. New Hampshire, the court held that “the Due Process
Clause does not require a preliminary judicial inquiry into the reliability of an
eyewitness identification when the identification was not procured under
unnecessarily suggestive circumstances arranged by law enforcement.” (Emphasis
added.)
565 U.S. 228
, 248,
132 S.Ct. 716
,
181 L.Ed.2d 694
(2012). Justice
Ginsburg, writing for the court, explained that the aim of this rule was “to deter
police from rigging identification procedures,” so that “[w]hen no improper law
enforcement activity is involved,” the reliability of the identification may be
challenged through the rights and opportunities made available to the accused, such
as the right to counsel, cross-examination, and a verdict supported proof of guilt
beyond a reasonable doubt.
Id. at 233
.
{¶ 36} Applying the plain language of the Supreme Court’s holding in
Connelly, we conclude that in this case, there was no “coercive police activity,”
which “is a necessary predicate to the finding that a confession is not ‘voluntary,’
”
479 U.S. at 167
,
107 S.Ct. 515
,
93 L.Ed.2d 473
.
M.H.’s Statement Was Not Coerced
{¶ 37} Assuming for the sake of argument that Bradley’s position as a
county employee triggered due-process protections when she interviewed M.H., the
13
SUPREME COURT OF OHIO
incriminating statements he made would not be involuntary in the constitutional
sense.
{¶ 38} The Supreme Court has applied the Due Process Clause of the
Fourteenth Amendment to examine “the circumstances of interrogation to
determine whether the processes were so unfair or unreasonable as to render a
subsequent confession involuntary.” Michigan v. Tucker,
417 U.S. 433
, 441,
94 S.Ct. 2357
,
41 L.Ed.2d 182
(1974). The court established a procedural safeguard
to ensure that “tactics for eliciting inculpatory statements * * * fall within the broad
constitutional boundaries imposed by the Fourteenth Amendment’s guarantee of
fundamental fairness.” Miller v. Fenton,
474 U.S. 104
, 110,
106 S.Ct. 445
,
88 L.Ed.2d 405
(1985). Confessions obtained using interrogatory techniques that
offend the standards of fundamental fairness under the Due Process Clause may not
be used in court against the accused. Tucker at 441.
{¶ 39} An interrogator’s use of “ ‘an inherently coercive tactic (e.g.,
physical abuse, threats, deprivation of food, medical treatment, or sleep)’ ” triggers
the due-process analysis of the totality of the circumstances. State v. Osie,
140 Ohio St.3d 131
,
2014-Ohio-2966
,
16 N.E.3d 588
, ¶ 93, quoting State v. Clark,
38 Ohio St.3d 252
, 261,
527 N.E.2d 844
(1988). Those circumstances include “the
age, mentality, and prior criminal experience of the accused; the length, intensity,
and frequency of interrogation; the existence of physical deprivation or
mistreatment; and the existence of threat or inducement.” State v. Myers,
154 Ohio St.3d 405
,
2018-Ohio-1903
,
114 N.E.3d 1138
, ¶ 77.
{¶ 40} The record in this case reveals that M.H.’s mother brought him to
CCDCFS to be questioned and that Bradley separated him from his mother, took
him to a room, and closed the door. Neither M.H. nor his mother objected. Bradley
did not inform M.H. of his right to stay silent or to end the interview, and she asked
M.H. questions that he answered. On cross-examination of Bradley at the
suppression hearing, M.H. did not elicit any testimony from Bradley that there were
14
January Term, 2020
any improper threats, inducements, deprivations, mistreatment, or restraints, and
the “interrogation” involved a single session lasting approximately 40 minutes.
Further, M.H. did not take the stand to present evidence that his incriminating
statement was coerced.
{¶ 41} M.H. fails to demonstrate that this interview offends notions of
fundamental fairness, and instead, he seeks a per se rule that any questioning of a
13-year-old child is presumptively coercive based on a child’s degree of cognitive
and behavioral development. However, that claim is no different from the
argument rejected in Connelly that the accused’s mental illness rendered his
confession to police involuntary as a matter of psychological fact. Without any
overreaching by Bradley, M.H. cannot establish that his confession was involuntary
for purposes of due process.
Conclusion
{¶ 42} Absent evidence that a child-abuse investigator employed by a
county children-services agency is a law-enforcement officer or an agent of law
enforcement acting under the direction or control of the police, an interrogation is
not subject to the strictures of the Supreme Court’s decision in Miranda,
384 U.S. at 444
,
86 S.Ct. 1602
,
16 L.Ed.2d 694
, nor does federal due process restrict the
admission at trial of an incriminating statement made to the investigator during that
questioning.
{¶ 43} Because the child-abuse investigator in this case was neither a law-
enforcement officer nor acting under the direction or control of the police, she was
not required to provide M.H. with the Miranda warnings and his confession was
not obtained in violation of his due-process rights. The court of appeals correctly
determined that the trial court erred in suppressing his statement to the investigator.
{¶ 44} We therefore affirm the judgment of the Eighth District Court of
Appeals.
Judgment affirmed.
15
SUPREME COURT OF OHIO
FISCHER and DEWINE, JJ., concur.
FRENCH, J., concurs in judgment only.
STEWART, J., dissents, with an opinion joined by O’CONNOR, C.J., and
DONNELLY, J.
___________________
STEWART, J., dissenting.
{¶ 45} I agree with the majority that the child-abuse investigator, Esther
Bradley, did not have to give Miranda warnings to appellant, M.H., prior to
interrogating him in this case. The requirement under Miranda v. Arizona that the
police inform criminal suspects of their rights, including their right to remain silent,
is borne out of a recognition that custodial police interrogations are inherently
coercive.
384 U.S. 436
, 467,
86 S.Ct. 1602
,
16 L.Ed.2d 694
(1966). The warnings
are designed both to combat the coercive nature of custodial police interrogations
and to give suspects an awareness of the Fifth Amendment privilege against self-
incrimination so they have a full opportunity to exercise it. Dickerson v. United
States,
530 U.S. 428
, 440,
120 S.Ct. 2326
,
147 L.Ed.2d 405
(2000), citing Miranda
at 467. Miranda’s requirements generally do not apply if either the suspect is not
in custody or the interrogator is not an agent of law enforcement. Oregon v.
Mathiason,
429 U.S. 492
, 494-495,
97 S.Ct. 711
,
50 L.Ed.2d 714
(1977) (law
enforcement not required to administer Miranda warnings when suspect is not in
custody); State v. Watson,
28 Ohio St.2d 15
,
275 N.E.2d 153
(1971), paragraph five
of the syllabus (“Miranda requirements do not apply to admissions made to persons
who are not officers of the law or their agents”). But see Estelle v. Smith,
451 U.S. 454
, 467,
101 S.Ct. 1866
,
68 L.Ed.2d 359
(1981) (holding that Miranda warnings
were required to be given by a psychiatrist before conducting a court-ordered
psychiatric exam of a defendant being held in county jail because “[t]he
considerations calling for the accused to be warned prior to custodial interrogation
apply with no less force to the pretrial psychiatric examination at issue here”).
16
January Term, 2020
Because precedent of this court establishes that Bradley was not a law-enforcement
officer or acting at the direction of law enforcement when she interrogated M.H.
pursuant to her statutory duty to investigate, see State v. Jackson,
154 Ohio St.3d 542
,
2018-Ohio-2169
,
116 N.E.3d 1240
, ¶ 30, I agree with the majority’s
determination that Bradley was not required to administer Miranda warnings to
M.H.
{¶ 46} I nonetheless disagree with the lead opinion’s conclusion that the
lack of police involvement in this case is fatal to M.H.’s due-process claim. The
Due Process Clause of the Fourteenth Amendment to the United States Constitution
protects a defendant from coercive state action that results in an involuntary
confession. It is not limited to coercive actions taken by police. Because Bradley
is unquestionably a state actor and because I believe that the evidence shows she
acted coercively to obtain involuntary statements from M.H., I would reverse the
judgment of the Eighth District Court of Appeals and would reinstate the trial
court’s suppression order on the grounds that the use of M.H.’s involuntary
statements at trial would violate his due-process rights.
I. Federal Due-Process Protections Apply Because Bradley Is a State Actor
who Purposefully Sought Incriminating Information from M.H.
{¶ 47} I disagree with the lead opinion’s determination that the United
States Supreme Court’s holding in Colorado v. Connelly,
479 U.S. 157
,
107 S.Ct. 515
,
93 L.Ed.2d 473
(1986), restricts Fourteenth Amendment due-process
protections to cases involving involuntary statements procured through coercive
police conduct.
A. The lead opinion misreads Connelly
{¶ 48} The question before the court in Connelly was whether the
prosecution’s use of a defendant’s random, unsolicited murder confession to a
police officer violated the defendant’s due-process rights. When Connelly
confessed, he was not a suspect in the case and had not been contacted by police.
17
SUPREME COURT OF OHIO
Rather, Connelly had devised a plan to confess to police after a schizophrenia-
induced voice, which he believed was the “voice of God,” told him to confess.
Id. at 161
.
{¶ 49} To carry out the confession, Connelly flew from his home in Boston
to Denver, where the murder had taken place nine months earlier. Once there,
Connelly approached a uniformed police officer who was working in an off-duty
capacity in downtown Denver. Without any prompting, Connelly told the officer
that he had murdered someone and wanted to confess. The officer immediately
advised Connelly that he had the right to remain silent, that anything he said could
be used against him in court, and that he had the right to an attorney prior to any
questioning by police. Connelly stated that he understood his rights but still wanted
to talk to the officer about the murder because his conscience had been weighing
on him.
{¶ 50} After being informed of his rights a second time, Connelly was taken
to police headquarters. Once there, he proceeded to give a more detailed confession
to the murder. Officers fact-checked his confession and determined that the body
of an unidentified woman had been discovered four months earlier. Connelly
continued to provide details of the murder and even agreed to take officers to the
scene of the crime. Based on Connelly’s behavior throughout the course of his
interactions with the police, the police did not believe that he was suffering from
any kind of mental illness. It was not until the next day, during an interview by the
public defender’s office, that Connelly explained that “voices” had told him to
confess.
Id.
{¶ 51} In reviewing these facts, the Supreme Court of Colorado held that
Connelly’s confession was involuntary because, given his mental illness, it was not
the product of rational thought and free will. Importantly, the Supreme Court of
Colorado determined that the state-action requirement of the Fourteenth
18
January Term, 2020
Amendment was satisfied by virtue of the admission of the confession as evidence
of Connelly’s guilt at trial.
479 U.S. at 162
,
107 S.Ct. 515
,
93 L.Ed.2d 473
.
{¶ 52} The Supreme Court of the United States reversed the Colorado high
court’s decision after recognizing that the off-duty police officer in the case had
done absolutely nothing to provoke, coerce, or even solicit Connelly’s confession—
even if, given Connelly’s schizophrenia, the confession was not a product of his
freely exercised will. Specifically, the court stated:
Our “involuntary confession” jurisprudence is entirely
consistent with the settled law requiring some sort of “state action”
to support a claim of violation of the Due Process Clause of the
Fourteenth Amendment. * * *
The difficulty with the approach of the Supreme Court of
Colorado is that it fails to recognize the essential link between
coercive activity of the State, on the one hand, and a resulting
confession by a defendant, on the other.
Id. at 165
. The court in Connelly made clear that the state’s role in the admission
of a confession at trial is not enough to satisfy the Fourteenth Amendment’s state-
action requirement. Rather, due-process scrutiny is required only when the state
action in procuring the confession is coercive. See
id. at 166-167
.
{¶ 53} Given that the overall context of Connelly discusses the need for
coercive “state action” that results in an involuntary statement, it is imprudent for
the lead opinion to conclude that due-process scrutiny applies only to state action
by the police. Nothing in the Supreme Court’s decision suggests that the court
intended its holding to establish a per se rule that police coercion is the only type
of state action that can violate a suspect’s due-process rights in the confession
context. Besides, such a narrow reading of the court’s holding in Connelly would
19
SUPREME COURT OF OHIO
undermine the purpose of the due-process protection in the first place—namely, to
protect us from the government’s use of “constitutionally impermissible methods”
to obtain a confession, Rogers v. Richmond,
365 U.S. 534
, 541,
81 S.Ct. 735
,
5 L.Ed.2d 760
(1961). As the Supreme Court stated in the first case in which it
applied that due-process protection to the states, “[t]he due process clause requires
‘that state action, whether through one agency or another, shall be consistent with
the fundamental principles of liberty and justice which lie at the base of all our civil
and political institutions.’ ” (Emphasis added.) Brown v. Mississippi,
297 U.S. 278
, 286,
56 S.Ct. 461
,
80 L.Ed. 682
(1936), quoting Hebert v. Louisiana,
272 U.S. 312
, 316,
47 S.Ct. 103
,
71 L.Ed. 270
(1926); see Malloy v. Hogan,
378 U.S. 1
, 6,
84 S.Ct. 1489
,
12 L.Ed.2d 653
(1964). Moreover, both the Supreme Court and this
court have previously suppressed confessions extracted by nonpolice state actors
when the circumstances surrounding the confessions showed they were compelled
and therefore involuntary. See Estelle,
451 U.S. at 466-469
,
101 S.Ct. 1688
,
68 L.Ed.2d 359
(holding that admission at trial of confession obtained by court-
appointed psychiatrist violated defendant’s right not to incriminate himself); United
States v. Mathis,
391 U.S. 1
,
88 S.Ct. 1503
,
20 L.Ed.2d 381
(1968) (holding that
incriminating statements extracted by Internal Revenue Service agent should have
been suppressed);1 Spano v. New York,
360 U.S. 315
, 319,
79 S.Ct. 1202
,
3 L.Ed.2d 1
. The lead opinion’s efforts to distinguish Estelle and Mathis are unpersuasive. It does not matter
that both cases were decided on grounds concerning the Fifth Amendment privilege against
compulsory self-incrimination, because it is the privilege against self-incrimination that animates
the due-process protection. See Davis v. North Carolina,
384 U.S. 737
, 740,
86 S.Ct. 1761
,
16 L.Ed.2d 895
(1966) (“The standard of voluntariness which has evolved in state cases under the Due
Process Clause of the Fourteenth Amendment is the same general standard which applied in federal
prosecutions—a standard grounded in the policies of the privilege against self-incrimination”). Nor
is it true that the court in Estelle found the psychiatrist to be an agent of law enforcement. What the
court said was that the psychiatrist was acting as “an agent of the State” when recounting unwarned
statements made to him during a court-ordered competency investigation. Estelle,
451 U.S. at 467
,
101 S.Ct. 1866
,
68 L.Ed.2d 359
.
Moreover, despite this court’s reliance in Jackson,
154 Ohio St.3d 542
,
2018-Ohio-2169
,
116 N.E.3d 1240
, on certain statements made by the Supreme Court of Louisiana regarding Mathis,
20
January Term, 2020
1265 (1959) (reversing conviction based on involuntary confession extracted by
assistant district attorney); State v. Roberts,
32 Ohio St.3d 225
,
513 N.E.2d 720
(1987), syllabus (affirming reversal of conviction following admission of
incriminating statements extracted by probation officer).
{¶ 54} Given the Supreme Court’s prior decisions in the involuntary-
confession context, I find that the court’s reference in Connelly to “police activity”
has a meaning different from the one the lead opinion gives it. For instance, the
court’s reference to “police activity” could reflect the specific facts of that case—
that the state actor and passive recipient of Connelly’s confession happened to be a
police officer. See State v. Evans,
144 Ohio App.3d 539
, 561-562,
760 N.E.2d 909
(1st Dist.2001) (reaching this conclusion). Had the passive recipient of Connelly’s
confession been the city’s mayor or the district attorney or some other government
employee, the court’s analysis would not have been any different. That is because
the court’s judgment reversing the judgment of the Colorado Supreme Court was
based on the absence of government coercion and not the title or designation of the
state actor involved.
there is no indication in the decision that the government conceded that the IRS civil investigator
who extracted the incriminating statements was an agent of law enforcement. In fact, whether the
IRS civil investigator was an agent of law enforcement seems to have been of little consequence to
the court given that the agent was nevertheless a government actor questioning a person in state
custody about facts that had the potential to lead to a criminal prosecution. See
id.
The Louisiana
Supreme Court’s assertion that the government “apparently ceded the point” that the IRS civil
investigator was an agent of law enforcement seems to have rested on the premise that Miranda’s
requirements apply only to law enforcement, see State v. Bernard,
31 So.3d 1025
, 1030 (La.2010),
but in light of Estelle, that is not always true.
And lastly, this dissenting opinion does not state that Estelle and Mathis are controlling in
this matter. These decisions are offered to refute the lead opinion’s assertion—based on little more
than a statement in Connelly taken out of context—that only police coercion can count in the
involuntary-confession context. At the very least, Estelle and Mathis call this position into serious
question, and they would be inconsistent with Connelly—and Connelly would control—only if one
assumes what the lead opinion has not shown—that Connelly established a per se rule that due-
process protections apply to limit only the coercive conduct of state actors who are police. Indeed,
the lead opinion tacitly acknowledges its shortcomings in this regard because even after all the
arguments it makes against the application of due-process scrutiny, the lead opinion reluctantly—
albeit in an overly simplified fashion—conducts a totality-of-the-circumstances analysis anyway.
21
SUPREME COURT OF OHIO
{¶ 55} A better explanation is that “police activity” means something
broader than the actions taken by those who are actually police officers or their
agents. Indeed, this interpretation of Connelly is not unique. Several federal and
state courts have agreed that the due-process voluntariness inquiry is not limited to
cases involving confessions made to the police. See, e.g., United States v. D.F.,
63 F.3d 671
, 680 (7th Cir.1995), vacated and remanded on other grounds,
517 U.S. 1231
,
116 S.Ct. 1872
,
135 L.Ed.2d 169
(1996); Luna v. Massachusetts,
354 F.3d 108
, 111 (1st Cir.2004); Running v. United States, D.S.D. No. 3:13-CV-03007-
RAL,
2016 U.S. Dist. LEXIS 70541
, *16-17 (May 31, 2016); United State v.
Codrington, E.D.N.Y. No.
07 MJ 118
,
2008 U.S. Dist. LEXIS 35859
, *29-30 (May
1, 2008); In re Timothy C.,
194 Ariz. 159
,
978 P.2d 644
, ¶ 14 (Ariz.App.1998);
State v. Bright,
683 A.2d 1055
, 1060 (Del.Sup.Ct.1996). Instead, these courts and
others have taken the position that for due-process protections to apply, the
interrogation “must be at the hands of a government actor whose questioning is of
a nature that reasonably contemplates criminal prosecution.” United States v. D.F.,
115 F.3d 413
, 420 (7th Cir.1997). In other words, “the state actor’s questioning of
the defendant must have as one of its purposes, definitive or contingent, the use of
the statement in a criminal prosecution.” (Footnote omitted.) D.F.,
63 F.3d at 684
.
Usually, the “state actor[ ] questioning * * * the defendant” with the purpose of
“us[ing] * * * the statement in a criminal prosecution” will be a police officer. But
not always—and not here.
B. Bradley, although not a police officer, is clearly a state actor within the
meaning of Connelly (as properly understood)
{¶ 56} In this case, Bradley, a child-abuse investigator, was acting in her
official capacity as an agent of Cuyahoga County in the Sex Abuse Intake Unit of
the Cuyahoga County Department of Children and Family Services (“CCDCFS”)
when she questioned M.H. In this capacity, Bradley had a statutory duty to
22
January Term, 2020
investigate reports of child abuse and to report her findings to law enforcement.
See R.C. 2151.421(G)(1).
{¶ 57} At the suppression hearing, Bradley acknowledged that at her first
meeting with the alleged victim and her mother in late September 2015, she advised
the alleged victim’s mother to file a police report. Bradley also admitted that at the
time she questioned M.H. in early December 2015, she knew that a police report
had been filed, that a detective had been assigned to the case, and that criminal
charges were, as she put it, a “strong possibility.” In fact, Bradley testified that one
of her primary purposes for questioning M.H. was to find out whether he had
engaged in any criminal sexual activity with the alleged victim and, if so, to pass
that information on to law enforcement.
{¶ 58} The record further shows that although Cleveland Police Detective
Christina Cottom had been assigned to the case since mid-October 2015, she never
conducted her own interview of the alleged victim or M.H. Instead, Detective
Cottom’s investigation relied on the interviews Bradley had conducted. And
although Detective Cottom testified that she had neither directed nor controlled
Bradley’s interviews, she also testified that the arrangement between police and
CCDCFS was such that she knew that she would be provided with Bradley’s write-
up of her investigation and that it would be used in furtherance of the criminal
investigation. These facts demonstrate that Bradley’s questioning of M.H. was
designed in large part to assist the state in its investigation and prosecution of M.H.
Accordingly, I would conclude that the Due Process Clause of the Fourteenth
Amendment, which protects us from the admission of involuntary statements as
evidence at trial, see Rogers,
365 U.S. at 540
,
81 S.Ct. 735
,
5 L.Ed.2d 760
, is
implicated here.2
2. The lead opinion places undue emphasis on the fact that the United States Supreme Court’s
involuntary-confession jurisprudence has focused almost exclusively on police action. I do not
23
SUPREME COURT OF OHIO
II. M.H.’s Statements to Bradley Were Involuntary
{¶ 59} When a defendant challenges the voluntariness of a confession, the
prosecution has the burden of establishing that the confession was voluntarily
made, in view of the totality of the circumstances. State v. Ford,
158 Ohio St.3d 139
,
2019-Ohio-4539
,
140 N.E.3d 616
, ¶ 194. Among other relevant factors, courts
must consider “ ‘the age, mentality, and prior criminal experience of the accused;
the length, intensity, and frequency of [the] interrogation; the existence of physical
deprivation or mistreatment; and the existence of [a] threat or inducement.’ ”
Id.,
quoting State v. Edwards,
49 Ohio St.2d 31
,
358 N.E.2d 1051
(1976), paragraph
two of the syllabus, sentence vacated on other grounds,
438 U.S. 911
,
98 S.Ct. 3147
,
57 L.Ed.2d 1155
(1978). Moreover, when a confession is extracted from a
juvenile without the benefit of counsel, “the greatest care must be taken to assure
that the admission was voluntary, in the sense not only that it was not coerced or
suggested, but also that it was not the product of ignorance of rights or of adolescent
dispute this, nor is this surprising. It is the duty of law-enforcement officials to detect and investigate
crimes. It would be highly unusual for a state actor of a different sort to randomly pick up a mantle
specifically reserved for law enforcement, unless required to do so—which is precisely the situation
we have before us. In Ohio, R.C. 2151.421(G)(1) does not merely authorize children-services agents
to conduct investigations related to allegations of child abuse; the statute requires them to do so—
and then requires them to report those findings to law enforcement. In this limited way, the Ohio
General Assembly requires children-services agents to act in ways that mirror the investigative
actions typically reserved for law enforcement.
If a certain state actor is authorized to act in a way that mirrors law enforcement and that
person wrings a confession out of the mouth of a suspect so that it may later be used against the
suspect at trial, that action should be subject to constitutional scrutiny. The lead opinion offers no
clear doctrinal explanation for rejecting that conclusion, because there is none.
Imagine that Bradley had beaten M.H. until he finally relented and confessed to the crime,
like the police did in Brown,
297 U.S. 278
,
56 S.Ct. 461
,
80 L.Ed. 682
, the first case in which the
United States Supreme Court found a confession to be involuntary under the Due Process Clause of
the Fourteenth Amendment. Or imagine that she had explicitly threatened to have M.H. removed
from his mother’s home if he did not confess—conduct similar to the actions taken by police in
Lynumn v. Illinois,
372 U.S. 528
,
83 S.Ct. 917
,
9 L.Ed.2d 922
(1963), another case in which the
United States Supreme Court found a due-process violation. What the lead opinion says today is
that even if Bradley had engaged in such conduct, the state could still use M.H.’s confession against
him at trial without violating his due-process rights—not because M.H.’s statements were actually
voluntary but because Bradley is not a police officer or an agent of law enforcement. Such an
analysis completely parts ways with logic.
24
January Term, 2020
fantasy, fright or despair.” (Emphasis added.) In re Gault,
387 U.S. 1
, 55,
87 S.Ct. 1428
,
18 L.Ed.2d 527
(1967). In light of the totality of the circumstances
surrounding Bradley’s interrogation of M.H., it strains credulity to say that M.H.’s
statements to her were voluntary. See Dickerson,
530 U.S. at 434
,
120 S.Ct. 2326
,
147 L.Ed.2d 405
, quoting Stein v. New York,
346 U.S. 156
, 185,
73 S.Ct. 1077
,
97 L.Ed. 1522
(1953) (the voluntariness determination “ ‘depends upon a weighing of
the circumstances of pressure against the power of resistance of the person
confessing’ ”).
A. M.H. was never advised of his rights, and the record does not show that he
understood them
{¶ 60} The record is devoid of any evidence showing that Bradley, or
anyone else for that matter, made sure that the juvenile M.H. knew that he had
rights—much less that he understood them. Nor did Bradley ever directly
communicate with M.H. prior to the questioning, and she never informed him of
the serious allegations against him—a violation of the same statute that authorized
Bradley’s investigation. R.C. 2151.421(G)(1) (“A representative of the public
children services agency shall, at the time of initial contact with the person subject
to the investigation, inform the person of the specific complaints or allegations
made against the person”). In fact, at no point during the questioning did Bradley
even explain to M.H. why he was in the interrogation room with her. Along the
same lines, Bradley testified that she did not administer Miranda warnings to M.H.
or otherwise attempt to explain to him in more basic terms that he had the right not
to speak to her. According to Bradley, it was her understanding that she did not
have to inform M.H. of his rights because she was not a member of law
enforcement.
{¶ 61} It appears that before the interrogation, Bradley did, to some extent,
inform M.H.’s mother that sexual-assault allegations had been levied against her
son. Nevertheless, the testimony given at the suppression hearing reveals that
25
SUPREME COURT OF OHIO
Bradley failed to candidly inform M.H.’s mother about the nature of the questioning
she intended to conduct. Bradley initiated contact with M.H.’s mother by leaving
a letter at her residence when she was not home. This letter was cryptic and vague,
stating merely that M.H. had been named in an open sex-abuse investigation with
CCDCFS and that Bradley needed to speak with him about the allegations. The
letter also contained a specific date and time for M.H.’s mother to bring M.H. in
for questioning.
{¶ 62} It is clear from M.H.’s mother’s testimony that she did not view the
already scheduled questioning as something that was optional for her and her son.
When M.H.’s mother called Bradley to discuss the letter, Bradley told M.H.’s
mother that her questioning of M.H. would be “private,” without ever disclosing
that she was duty-bound to report M.H.’s answers to law enforcement. M.H.’s
mother testified that had she known “private” meant that she would not be allowed
in the room with her child during the questioning, she would not have allowed the
questioning to proceed without first getting her child an attorney. Furthermore,
M.H.’s mother testified that she did not become aware of CCDCFS’s standard
practice of not allowing parents in the interrogation room until she arrived at the
county building with her son, at which point she felt that she could not stop the
questioning from proceeding because her son was already there.
{¶ 63} I agree with the conclusion reached in the concurring opinion in the
court of appeals that the record shows that M.H.’s mother understood Bradley’s
statement regarding the “private” nature of the questioning to be an assurance that
Bradley would not be sharing the information that she obtained from the
questioning with anyone else—least of all law enforcement. See
2018-Ohio-4848
,
¶ 46 (Keough, J., concurring). Accordingly, even if M.H.’s mother relayed to him
what little information Bradley had provided to her, it is doubtful that this
information by itself would have made M.H. aware of the seriousness of the
26
January Term, 2020
allegations against him or the fact that anything he said to Bradley could be used
against him in a delinquency proceeding.
{¶ 64} Rather than point to affirmative evidence in the record establishing
that M.H. knew his rights and freely chose to waive them, the state takes the
position that nothing in the record shows that M.H. was in fact ignorant of his rights.
This position is both legally and factually unsound. To start with, it is the state that
has the burden of establishing the voluntariness of an inculpatory statement if it
wishes to use the statement at trial. Missouri v. Seibert,
542 U.S. 600
, 608,
124 S.Ct. 2601
,
159 L.Ed.2d 643
(2004) (lead opinion), fn. 1, citing Lego v. Twomey,
404 U.S. 477
, 489,
92 S.Ct. 619
,
30 L.Ed.2d 618
(1972). An alleged lack of
evidence as to whether a suspect knew and understood his rights is not proof of
voluntariness. Furthermore, that M.H. was never informed of his rights prior to the
questioning and was only 13 years old at the time of the questioning is evidence
that M.H. did not know or understand the rights he was giving up by answering
Bradley’s questions. This evidence, in turn, weighs against voluntariness. See
Escobedo v. Illinois,
378 U.S. 478
, 499,
84 S.Ct. 1758
,
12 L.Ed.2d 977
(1964)
(White, J., dissenting) (“The failure to inform an accused that he need not answer
and that his answers may be used against him is very relevant indeed to whether
the disclosures are compelled”). And although the state takes the position that any
ignorance on the part of M.H.’s mother regarding her son’s rights should not be
imputed to him, the fact that M.H.’s mother—an adult who was better informed—
lacked a sufficient understanding of M.H.’s rights also weighs against determining
that he knew and understood his rights at the time of the interrogation. Based on
this evidence, I would conclude that M.H.’s statements were not voluntarily made
with knowledge of the rights he was forfeiting by talking to Bradley.
B. The setting was highly coercive
{¶ 65} I would also conclude that the setting of the interrogation and the
circumstances leading up to it produced what would be an inherently coercive
27
SUPREME COURT OF OHIO
environment to a 13-year-old child—one where M.H. would not have felt free to
ignore Bradley’s questions and/or leave the interrogation room. The interrogation
took place in a government building in which police officers were present. M.H.
had no prior contact with Bradley before arriving at the building, and soon after
arriving, he was taken away from his mother and escorted to a secluded room to be
questioned behind closed doors by a total stranger. His mother was not permitted
to be in the room during the interrogation, and there was no adult present to
represent M.H.’s interests or act as an intermediary between him and his
interrogator.
{¶ 66} Additionally, Bradley was not merely an ordinary case worker. She
was a case worker who had been professionally trained in law enforcement. As her
testimony at the suppression hearing revealed, Bradley had spent more than ten
years working for the Atlanta police department prior to joining CCDCFS. She
spent three of those years working as a general investigator and the last one and a
half years in the homicide unit. Her testimony also revealed that in general, she
would begin her questioning with “rapport building questions” and that in this case,
she asked M.H. about his birthday, his school, and some of his favorite things.
Thereafter, her questioning of M.H. became more direct, moving on to the purpose
of the interrogation.
{¶ 67} In this case, Bradley proceeded to ask M.H. several direct questions
about his prior sexual activity. It must be noted that although Bradley’s job title at
CCDCFS was child-protection specialist and she was not an employee of a law-
enforcement agency, both the interrogation atmosphere and Bradley’s structuring
of her questions are strikingly similar to the type of police interrogation practices
that the Supreme Court found inherently coercive in Miranda. See 384 U.S. at 449-
452, 86 S.Ct 1602,
16 L.Ed.2d 694
, and fn. 9 (citing police manuals directing
officers to isolate the suspect by conducting the interrogation in a location
unfamiliar to the suspect and away from the suspect’s family and friends, then to
28
January Term, 2020
begin with more sympathetic relationship-building questions before moving on to
more hostile questioning). Under these circumstances, a 13-year-old child would
not have felt he had any choice but to remain in the closed room and answer
Bradley’s questions. In fact, the record reveals that once Bradley returned M.H. to
his mother following the interrogation, M.H. appeared quiet and nervous—
suggesting that his admissions were not voluntary.
C. Bradley coercively co-opted M.H.’s mother in her plan
{¶ 68} Furthermore, the way that Bradley went about scheduling the
interrogation suggests that she intentionally took advantage of M.H.’s mother’s
parental authority to obtain M.H.’s cooperation. Bradley chose to communicate
only with M.H.’s mother without verifying that M.H. was willing to speak with her.
In other words, it was M.H.’s mother, not M.H., who agreed to the questioning, and
it was she, not he, who agreed to go to the county building for the questioning.
Bradley allowed M.H.’s mother to make these arrangements for her son, while
choosing not to notify M.H.’s mother that a police report had been filed, that she
had a duty to report the results of her investigation to the police, or that there was
no requirement that M.H. ever speak with her in the first place. Under these
circumstances, I cannot agree with the state’s position that M.H. had the agency to
make a free and voluntary statement to Bradley, when he never had a choice
whether to attend the interrogation.
III. Conclusion
{¶ 69} For the foregoing reasons, I would conclude that this case implicates
the Due Process Clause’s protection against coercive state action because Bradley
is a state actor who purposefully sought incriminating information from M.H. I
would further conclude that under the totality of the circumstances—which include
M.H.’s age, his lack of understanding of his rights, and Bradley’s failure to candidly
inform M.H.’s mother of the nature of the questioning—the statements that M.H.
made during the course of the interrogation were involuntary. Accordingly, I would
29
SUPREME COURT OF OHIO
reverse the judgment of the Eighth District Court of Appeals and would reinstate
the trial court’s suppression order on the grounds that the admission of M.H.’s
involuntary statements at trial would violate his due-process rights.
O’CONNOR, C.J., and DONNELLY, J., concur in the foregoing opinion.
___________________
Michael C. O’Malley, Cuyahoga County Prosecuting Attorney, and
Jennifer M. Meyer and Anthony T. Miranda, Assistant Prosecuting Attorneys, for
appellee.
Mark A. Stanton, Cuyahoga County Public Defender, and Paul A. Kuzmins,
Assistant Public Defender, for appellant.
Dave Yost, Attorney General, Benjamin M. Flowers, State Solicitor, and
Samuel C. Peterson, Deputy Solicitor, urging affirmance for amicus curiae
Attorney General Dave Yost.
Juvenile Law Center and Marsha L. Levick; and Ballard Spahr, L.L.P., and
Lisa B. Swaminathan, urging reversal for amicus curiae Juvenile Law Center.
___________________
30 |
4,489,831 | 2020-01-17 22:02:03.315186+00 | Marquette | null | *78OPINION.
Marquette:
Petitioner complains of the respondent’s action in disallowing as a deduction for 1918 an alleged loss of $2,708, representing the difference between the cost to petitioner of the Second and Third Liberty Loan bonds distributed to stockholders in payment of the February 25 and July 22 dividends, and the estimated fair market value thereof at the dates of distribution. The dividend of February 25, at the rate of 12½ per cent, and that of July 22, at the rate of 7 per cent, amounted to $50,000 and $28,000, respectively. Following the dividend declarations of February 25, and of July 22, and on the due dates for the payment of the dividends, the petitioner became indebted to its stockholders in the sums of $50,000 and $28,000, respectively. Both of these obligations were liquidated and settled in accordance with the terms of the declaratory resolutions, the first, by distributing to the stockholders Second Libery Loan bonds of a par value of $48,750, and cash of $1,250, and the second, by distributing to the stockholders Third Liberty Loan bonds of a par value of $26,500, and cash of $1,500. The bonds so distributed to the stockholders had been acquired by the petitioner at a price equivalent to their par value. Thus the petitioner acquired and disposed of the bonds at the same price and, under those circumstances, it suffered no loss. What the prevailing market prices may have been on stock and bond exchanges, at the dates of disposition, is not material. One may dispose of property for more or less than its fair market value. The decisive factor in the determination of whether one derives a gain or sustains a loss in a particular transaction, is the consideration received for parting with the subject matter. Here, in exchange for bonds for which it had paid a *79price equivalent to par, the petitioner received a cancellation of its indebtedness to stockholders equivalent, in amount, to the par value of the bonds. The case of Callanan Road Improvement Co., 12 B. T. A. 1109, upon which the petitioner relies, is not in point. In that case, Liberty bonds were distributed to stockholders in payment of a dividend, at their fair market value, which was less than cost. The two cases are not analagous. We find no error in the respondent’s action of which the petitioner complains.
Petitioner alleges that respondent erred in disallowing the deduction as an ordinary and necessary expense, for 1918, of the cost, $11,210.88, of the alterations and changes made in the factory building in that year. Upon the record before us we entertain no doubt that the expenditures incident to making such alterations and changes are of a capital nature, and that the respondent correctly disallowed the item in question as a deduction from gross income. Various reasons are suggested by the petitioner as the basis for the allowance of the disputed item, none of which appeal to us as proper grounds for the action sought to be taken. It is contended that the making of the alterations was an involuntary act, done upon orders of engineers of the Army; that neither the efficiency, productivity, nor the value of the plant has been increased by virtue of the alterations; and that the petitioner has been placed at a decided disadvantage in making the alterations, by reason of having to provide additional storage space and of the cramped and congested operating conditions existing in the building because of the removal of all of the machinery to one floor. Assuming all such conditions and circumstances to be true, and we do not decide that they are, we still adhere to the conclusion already announced. It is undenied in the record that the general purpose for which these alterations and changes were made, the general improvement of lighting conditions in the building, has been accomplished, although, perhaps, not to the degree expected or hoped for. Furthermore, all such alterations and changes have been continued in use throughout all of the taxable years on appeal, and the record contains no hint of any subsequent abandonment. We find no error in the action of the respondent in disallowing the cost of the alterations and changes as a deduction from gross income for 1918.
In 1918 the engine in petitioner’s bar mill “ blew up ” or “ smashed through itself,” carrying to destruction much of the coupling pinions and gears, due to strains of war work and forced production in excess of rated or safety capacity. The petitioner expended the sum of $9,354.59 in cleaning up the wreckage in the bar mill, and in tearing down an engine in the sheet mill and installing it in the bar mill. This item, with that of $11,210.88 disposed of in the preceding paragraph, is represented in the sum of $20,565.47 referred to in the *80second assignment of error. In óur opinion this item of $9,854.59 constitutes an ordinary and necessary expense of the business, and the respondent erred in disallowing it as a deduction from gross income of 1918.
At the hearing the third assignment of error, relating to the deduction for 1918 of amortization of war facilities, was abandoned, and the petitioner substituted therefor a claim for a loss deduction of $4,570.45, representing the cost of certain items of plant equipment acquired in 1918 and alleged to have been abandoned in the same year. The amount claimed as a deduction is made up of the following expenditures: For special equipment for painting and drying sheets, $2,940.24; for special stovepipe machinery, $537.78; for one set of bending rolls, $800; for installation of flood lights on premises, $286.43. All of this equipment, except flood lights, was acquired and installed for the prosecution of work under Government war contracts. Shortly after the Armistice, these contracts were canceled and this special equipment, unsuitable to the normal peace-time operations of petitioner’s business, was abandoned and scrapped — “ thrown in the graveyard,” as the witness stated. Petitioner is clearly entitled to a loss deduction for 1918 of $4,284.02, representing the cost of special equipment for painting and drying sheets, of special stovepipe machinery, and of one set of bending rolls, all of which equipment was abandoned and scrapped in that year. As to the flood lights, seven in number, installed on the premises for the purpose of protection against unauthorized trespassers, it appears that five have been occasionally used subsequent to 1918. Therefore, no loss deduction seems proper in respect of these lights on the ground of abandonment. Circumstances would indicate that this facility is within the statutory provisions relating to the amortization of war facilities; but the petitioner abandoned all claim to amortization of war facilities, and that action was taken after proof was placed in the record that it had not made claim for amortization within the time prescribed by statute.
In determining, for invested capital purposes, the amount of earnings available for distribution at the dividend dates of March 31 and July 31, 1918, the respondent deducted a tentative tax of $69,092.05. This action of the respondent is contrary to the decision of this Board in L. S. Ayers & Co., 1 B. T. A. 1135, and is in error. See, also, Commissioner v. Pittsburgh Knife & Forge Co., 30 Fed. (2d) 522; Blair v. Ragley Lumber Co., 30 Fed. (2d) 683.
Proper adjustments of invested capital for 1920, on account of income and profits taxes for 1918 and 1919, will be made under Eule 50, when the correct tax liability for each of those years has been redetermined in accordance with this decision.
*81Respondent’s motion to dismiss as to 1919, on the ground that no deficiency has been determined for that year, is granted upon the authority of Cornelius Cotton Mills, 4 B. T. A. 255.
Jtodgment will be entered under Bule 50. |
4,539,360 | 2020-06-05 14:08:48.248541+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_03094.htm | BAC Home Loans Servicing, L.P. v Kirnon (2020 NY Slip Op 03094)
BAC Home Loans Servicing, L.P. v Kirnon
2020 NY Slip Op 03094
Decided on June 3, 2020
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on June 3, 2020 SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
WILLIAM F. MASTRO, J.P.
JEFFREY A. COHEN
LINDA CHRISTOPHER
PAUL WOOTEN, JJ.
2018-02296
(Index No. 4505/08)
[*1]BAC Home Loans Servicing, L.P., etc., plaintiff,
v
Kevin Kirnon, defendant, Teresa Williams, appellant; PMT NPL Financing 2014-1, nonparty-respondent.
Petroff Amshen LLP, Brooklyn, NY (Serge F. Petroff, James Tierney, and Steven Amshen of counsel), for appellant.
Davidson Fink LLP, Rochester, NY (Larry T. Powell of counsel), for nonparty-respondent.
DECISION & ORDER
In a consolidated action to foreclose a mortgage, the defendant Teresa Williams appeals from a judgment of foreclosure and sale of the Supreme Court, Nassau County (Thomas A. Adams, J.), entered December 6, 2017. The judgment of foreclosure and sale, upon an order of the same court, also entered December 6, 2017, inter alia, granting that branch of the plaintiff's motion which was for a judgment of foreclosure and sale, and denying the cross motion of the defendant Teresa Williams pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her as abandoned, inter alia, directed the sale of the subject property.
ORDERED that the judgment of foreclosure and sale is reversed, on the law, with costs, that branch of the plaintiff's motion which was for a judgment of foreclosure and sale is denied, the cross motion of the defendant Teresa Williams pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her as abandoned is granted, and the order entered December 6, 2017, is modified accordingly.
The plaintiff commenced an action in March 2008, under Index No. 4505/08, against Teresa Williams (hereinafter the defendant), among others, to foreclose a mortgage (hereinafter the 2008 action). An order of reference was issued in July 2008, and a judgment of foreclosure and sale was subsequently entered on November 7, 2008 (hereinafter the 2008 judgment). Following a motion by the defendant, inter alia, for a framed-issue hearing with respect to the validity of service
of process, the hearing court determined that the defendant was "not properly served." In an order entered September 22, 2009, the Supreme Court vacated so much of the 2008 judgment as was against the defendant, and directed dismissal of the complaint in the 2008 action insofar as asserted against the defendant.
The plaintiff commenced a second action in November 2009, under Index No. 23430/09, against the defendant, among others, to foreclose the same mortgage (hereinafter the 2009 action). The defendant did not appear or answer the complaint.
In May 2017, the plaintiff moved for, among other things, a judgment of foreclosure and sale. The defendant opposed the motion and cross-moved pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her as abandoned. The Supreme Court, upon granting the motion and denying the cross motion, entered a judgment of foreclosure and sale, inter alia, directing the sale of the subject property. The defendant appeals.
The Supreme Court should have denied that branch of the plaintiff's motion which was for a judgment of foreclosure and sale and granted the defendant's cross motion pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her as abandoned. CPLR 3215(c) provides that "[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after [a] default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed." In order to show sufficient cause, a plaintiff is required to " demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action'" (HSBC Bank USA, N.A. v Jean, 165 AD3d 632, 634, quoting Aurora Loan Servs., LLC v Hiyo, 130 AD3d 763, 764).
Here, the plaintiff failed to take steps to initiate proceedings for the entry of a default judgment against the defendant within one year after her default in the 2009 action, and has set forth no reasonable excuse for said failure (see Chase Home Fin., LLC v Fernandez, 175 AD3d 1381, 1382; Deutsche Bank Natl. Trust Co. v Booker, 173 AD3d 683, 685).
We reject the contention of the nonparty-respondent that the defendant failed to assemble a sufficient record for this Court to reach an informed decision on the merits and provide meaningful appellate review of the judgment appealed from (see US Bank, N.A. v Morrison, 160 AD3d 679, 680).
Accordingly, the Supreme Court should have denied that branch of the plaintiff's motion which was for a judgment of foreclosure and sale and should have granted the defendant's cross motion pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her.
In view of the foregoing, we need not reach the remaining contentions of the defendant, and the remaining contention of the nonparty-respondent is without merit.
MASTRO, J.P., COHEN, CHRISTOPHER and WOOTEN, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court |
4,639,130 | 2020-12-03 14:21:44.327368+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/1671CD19_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Michael A. Kadar-Kallen and :
Kimberlee Kadar-Kallen :
: No. 1671 C.D. 2019
v. :
: Argued: September 17, 2020
Old Iron Estates Homeowners :
Association, :
Appellant :
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE J. ANDREW CROMPTON, Judge
HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge
OPINION BY
JUDGE McCULLOUGH FILED: December 3, 2020
Old Iron Estates Homeowners Association (Association)1 appeals from
the October 17, 2019 order of the Dauphin County Court of Common Pleas granting
summary judgment in favor of Plaintiffs Michael and Kimberlee Kadar-Kallen (the
Kadar-Kallens), and denying the Association’s cross-motion for summary judgment.
The trial court concluded that the Kadar-Kallens’ property is not subject to the
Association’s restrictions, covenants, and conditions, that the Kadar-Kallens are not
members of the Association, and that they are not obligated to pay fees to the
Association. We affirm in part, reverse in part, and remand for further proceedings.
1
The Association is organized as a nonprofit corporation under the Nonprofit Corporation
Law of 1988, 15 Pa.C.S. §§ 5101-6162. This Court thus has jurisdiction over the Association’s appeal
pursuant to 42 Pa.C.S. §762(a)(5).
Background
Michael Kevin Ricker (Ricker) sought to develop the land that would
come to be known as Old Iron Estates in four phases. On April 14, 2003, Ricker
recorded the Phase I Final Subdivision Plan for Old Iron Estates (Phase I Plan) with
the Dauphin County Recorder of Deeds. (Kadar-Kallens’ Motion for Summary
Judgment, Exhibit B; Association’s Br. at Tab A; Reproduced Record (R.R.) at 47a-
51a (Phase I Plan).) The Phase I Plan is recorded at Plan Book O, Volume 8, Pages
22-26. The Phase I Plan refers to a “Total Tract Area” of 91.027 acres, but details only
the “Phase I Area,” which is composed of 29.0781 acres, and states that the “Total
Number of Proposed Lots” would be 31. (Phase I Plan at 1.) The ensuing pages of the
Phase I Plan provide detailed images of the boundaries of each lot that would be
included within Phase I, but provide neither an illustration nor legal description of any
property that would be included within subsequent phases of the development. The
Phase I Plan did not purport to create a planned community or to establish a
homeowners’ association, but the general notes on its first page state that “Lot 58 shall
be owned and maintained by a Homeowners’ Association” and similarly provide that
“[t]he proposed medians shall be maintained by a Homeowners’ Association.” Id. The
Phase I Plan does not include any additional information about the Association.
Intending to establish a planned community that would be governed by a
homeowners’ association, on May 12, 2003, Ricker recorded the Old Iron Estates, A
Planned Community, Restrictions, Covenants and Conditions. (Kadar-Kallens’
Motion for Summary Judgment, Exhibit C; Association’s Br. at Tab A; R.R. at 53a-
61a (Phase I Covenants).) On its face, this document applies to “P/O Parcels 35-066-
008 & 35-066-013,” and provides as follows:
NOW, THEREFORE, KNOW ALL MEN BY THESE
PRESENTS that Michael Kevin Ricker (the “Declarant”)
2
does hereby covenant and declare that it shall hold and stand
seized and shall convey the lands composing the Planned
Community subject to the following Restrictions, Covenants
and Conditions which shall run with the land composing the
Planned Community and shall be binding upon Declarant, its
successors and assigns and upon all land included within the
Planned Community as described on the Final Subdivision
Plan for Old Iron Estates, Lower Paxton Township, Dauphin
County, dated March 20, 2002, revised February 18, 2003
and recorded with the Office of the Recorder of Deeds of
Dauphin County in Plan Book “O”, Volume 8, Pages 22-26,
inclusive, for Phase I, which Restrictions, Covenants and
Conditions are hereby imposed for equal benefit of each
owner of each and every Unit . . . situate in the Planned
Community.
Phase I Covenants at 1.
Ricker recorded Final Subdivision Plans for Phase IV, Phase III, and
Phase II on May 4, 2004, August 6, 2004, and June 17, 2008, respectively. (Trial Court
Opinion, 10/21/2019 (Tr. Ct. Op.), at 3.) He later recorded additional restrictions,
covenants, and conditions for each phase, which are materially similar to the Phase I
Covenants, but facially apply to their respective phases of the development. Relevant
here, Ricker recorded the Old Iron Estates, A Planned Community, Restrictions,
Covenants and Conditions Phase III (Phase III Covenants) on January 31, 2012. Id. at
4. The Phase III Covenants provide a list of parcels to which they apply, including
Parcel No. 35-066-317.
Parcel No. 35-066-317 is described as Lot 41 in Phase III of the
development, and is numbered as 6439 McCormick Lane, Harrisburg (Property). The
central difficulty in this dispute arises from the fact that Ricker did not own the Property
at the time that he recorded the Phase III Covenants. Ricker had deeded his entire
interest in the Property to John Fox on October 27, 2005. (Tr. Ct. Op. at 3.) Fox then
deeded his entire interest in the Property to the Kadar-Kallens on February 28, 2007.
3
Id. Neither deed references the Association nor suggests that the Property is subject to
the Association’s covenants. Additionally, neither deed expressly conveys a right to
the owner of the Property to use common areas in the development.
The Kadar-Kallens initiated the instant litigation on December 21, 2017,
by filing a complaint seeking a declaratory judgment that they are not members of the
Association and that the Property is not subject to the Association’s covenants.
Following discovery, both parties moved for summary judgment. The Kadar-Kallens
contended that Ricker’s various filings failed to satisfy the requirements of the Uniform
Planned Community Act2 (UPCA) with respect to the Property, and that Ricker had no
authority to bind the Property to the Phase III Covenants in 2012 when he no longer
held its title.3 The Association, by contrast, asserted that Ricker created a planned
community under the UPCA via the Phase I Covenants, that the Phase I Covenants
apply to all four phases of the development, and that the Kadar-Kallens had both actual
and constructive notice of the Association’s existence when they purchased the
Property. In support of its assertion of notice, the Association highlighted the Kadar-
Kallens’ payment of an initiation fee and dues to the Association when they purchased
the Property, the inclusion of a notice in their agreement of sale that the Property is part
of a planned community, their completion of a Planned United Development (PUD)
rider when they obtained their mortgage and another PUD rider when they refinanced
that mortgage, and a reference to the Association in their title insurance commitment
and policy. The Association further contended that the Phase III Covenants were a
2
68 Pa.C.S. §§5101-5414.
3
The Kadar-Kallens further argued that, even if they are deemed to be members of the
Association, they do not owe annual assessments under the UPCA for any year in which the
Association did not adopt an annual budget. Having granted summary judgment in favor of the
Kadar-Kallens on their primary contentions, the trial court did not reach this question.
4
mere amendment to the Phase I Covenants, rather than an attempt to impose new
obligations upon property that Ricker no longer owned.
After hearing oral argument on April 15, 2019, the trial court granted
summary judgment in favor of the Kadar-Kallens based upon the undisputed timeline
of the pertinent factual events. The trial court emphasized that, under the UPCA, a
“planned community may be created . . . only by recording a declaration executed in
the same manner as a deed by all persons whose interests in the real estate will be
conveyed.” (Tr. Ct. Op. at 5 (quoting 68 Pa.C.S. §5201).) The court further
emphasized the portions of the Uniform Law Comment accompanying the UPCA,
which state that “[a] planned community is created . . . only by recording a declaration”
and “[u]ntil the recordation of the document . . . the planned community has not been
created.” Id. (quoting 68 Pa.C.S. §5201 cmt. 1 & cmt. 2). When the Kadar-Kallens
purchased the Property from Fox in 2007, only the Phase I Covenants appeared of
record, but the Property is located in Phase III. Id. at 5-6. Ricker did not record the
Phase III Covenants until 2012—five years after the Kadar-Kallens purchased the
Property. Because only an individual holding a present interest in real estate can
convey that real estate to a planned community under the UPCA, the trial court
concluded that Ricker had no authority to encumber the Property when he recorded the
Phase III Covenants.
The trial court rejected the Association’s argument that the Phase III
Covenants were merely an amendment to the Phase I Covenants, noting that the UPCA
provides a procedure for amendment of declarations, and that there was no evidence
suggesting compliance with that provision. Id. at 6 (citing 68 Pa.C.S. §5219(d)). The
court declined to excuse the asserted procedural defects in light of the Kadar-Kallens’
notice of the existence of a planned community when they purchased the Property.
5
Citing Deep Meadows Civic Association v. Trusello,
140 A.3d 60
(Pa. Cmwlth. 2016),
the trial court opined that it would not impute notice where the Kadar-Kallens’ deed
does not reference the existence of a homeowners’ association or any obligation to pay
assessments. (Tr. Ct. Op. at 6.)4 Accordingly, the trial court granted the Kadar-
Kallens’ motion for summary judgment and entered an order stating that the Property
is subject to neither the Phase III Covenants nor any of the other restrictions, covenants,
or conditions for any phase within the development.
The Association filed a motion for reconsideration limited to the issue of
fees. The Association noted that, in denying it summary judgment, the trial court did
not address the Association’s argument that, notwithstanding the enforceability of any
restrictive covenants, the Kadar-Kallens remain liable for the fees that the Association
assesses for the management and maintenance of common areas in the development.
The Kadar-Kallens opposed the Association’s motion, contending that their deed grants
them no right to use common areas and, thus, that they are not obligated to pay for any
share of the maintenance costs for those areas. The trial court denied the Association’s
motion for reconsideration.
The Association appealed the trial court’s order to this Court.5 The
Association presents three interrelated issues, asserting that the trial court erred in
4
The trial court additionally rejected the Association’s suggestion that the Kadar-Kallens’
action was barred by the doctrine of laches because the Kadar-Kallens did not initiate this action until
2017. (Tr. Ct. Op. at 7.) The Association mentions the trial court’s rejection of its laches argument
in a footnote at the end of its brief to this Court, but it did not pursue a laches theory in its statement
of the questions presented.
5
“This Court’s standard of review of a grant of summary judgment is de novo, and our scope
of review is plenary. We apply the same standard for summary judgment as the trial court.” Gior
G.P., Inc. v. Waterfront Square Reef, LLC,
202 A.3d 845
, 852 n.10 (Pa. Cmwlth. 2019) (citing
Cochrane v. Kopko,
975 A.2d 1203
, 1205 (Pa. Cmwlth. 2009)). “A grant of summary judgment is
only appropriate where the record clearly shows that there are no genuine issues of material fact and
(Footnote continued on next page…)
6
concluding that the Property is not subject to the Phase I Covenants recorded in 2003,
that the court similarly erred in finding that the Kadar-Kallens are consequently not
members of the Association and are not obligated to pay the Association’s annual fees,
and that, based upon the undisputed facts of record, the Association is entitled to
judgment as a matter of law without a remand to the trial court.
Discussion
A. The Parties’ Arguments
The Association contends that Old Iron Estates is a “planned community”
under the UPCA, formed when Ricker recorded the Phase I Covenants in 2003.
(Association’s Br. at 22.) Notwithstanding the Property’s location in Phase III of the
development, the Association contends that the Property is subject to the Phase I
Covenants. It emphasizes the portions of the Phase I Covenants which state that its
provisions are “binding upon all land” and apply to “each and every unit,” thereby
expressing Ricker’s intent that they should apply to all property encompassed within
Old Iron Estates. Id. at 22, 27-28. The Association acknowledges that the Phase I
Covenants refer to the Phase I Plan, but it asserts that, although the Phase I Plan details
“the 29-acre portion of the planned community the declarant planned to develop during
Phase I,” it also “identifies the extent of Old Iron Estates consisting of 90+ total acres.”
Id. at 25.6
that the moving party is entitled to judgment as a matter of law.” Id. (citing Farabaugh v.
Pennsylvania Turnpike Commission,
911 A.2d 1264
, 1267 n.3 (Pa. 2006)).
6
The Association also includes a document entitled “Phasing Plan” in its brief, which contains
an illustration of the boundaries of all four phases of the development. (Association’s Br. at Tab A.)
The Association asks this Court to take judicial notice of this document. The Kadar-Kallens challenge
this request, noting that the Phasing Plan was not recorded with the Recorder of Deeds, was not part
(Footnote continued on next page…)
7
The Association argues that Ricker’s filings should be construed in the
same manner as a contract and, thus, that we must seek to ascertain Ricker’s intent. Id.
at 26. Ricker’s intent, the Association maintains, was to create a single planned
community and one association to govern it, notwithstanding the phased
implementation of the development plans. Apart from its invocation of Ricker’s
presumed intent, however, the Association argues that the Phase I Covenants are “clear
and unambiguous” in their application to all real estate within Old Iron Estates,
including the Kadar-Kallens’ Property. Id. at 28. The Association reiterates that the
Phase I Covenants state that they apply to the “lands composing the Planned
Community,” that they “shall run with the land composing the Planned Community,”
and that they are “imposed for equal benefit of each owner of each and every
unit . . . situate in the Planned Community.” Id. at 28-29. The Association further
contends that, independent of the UPCA, the Phase I Covenants would be sufficient to
bind all properties in the development as a matter of common law. Id. at 30-33.
As before the trial court, the Association further relies upon evidence
suggesting that the Kadar-Kallens had both actual and constructive knowledge of the
existence of the Association when they purchased the Property. The Kadar-Kallens’
agreement of sale provided a notice that the Property is part of a planned community,
and the phrase “100 yr. fee” was handwritten underneath, along with the Kadar-
of the record before the trial court, and was not included in the original record or the reproduced
record on appeal. (Kadar-Kallens’ Br. at 10.) The Phasing Plan merely provides an illustration of
the entirety of the Old Iron Estates development. The plans for each phase are separately recorded
with the Dauphin County Recorder of Deeds and are included in the original record as exhibits to the
Kadar-Kallens’ motion for summary judgment. Thus, we find the Phasing Plan to be a useful
reference, having compiled certain information found elsewhere in the record. However, to the extent
that the Association asks us to utilize the Phasing Plan to interpret the Phase I Plan or Phase I
Covenants, we decline to do so. We will construe the relevant documents based upon their contents,
not by reference to an extra-record illustration.
8
Kallens’ initials. Id. at 35. The Kadar-Kallens signed a PUD alongside their mortgage,
and a second PUD when they refinanced in 2009, both of which also state that the
Property is part of a planned community. Id. at 35-36. Further, the Kadar-Kallens paid
an initiation fee to the Association when they purchased the Property. Finally, the
documents produced by the Kadar-Kallens’ title insurer refer to the Phase I Covenants.
Id. at 36-37. In light of these documents, the Association contends that the Kadar-
Kallens possessed both actual and constructive knowledge that the Property was
subject to the Association and to its covenants.
The Association appears to concede that Ricker lacked authority to dictate
terms and conditions governing the Property in 2012, having sold it to Fox in 2005.
Nonetheless, because the Association maintains that the Phase I Covenants were
sufficient to bind the Property, it argues that the Phase III Covenants were “irrelevant”
as a matter of law. Id. at 46. Ricker’s “only transgression,” the Association suggests,
was that “he over-recorded in an abundance of caution.” Id. at 47 (emphasis in
original).
Even if not bound by the Phase I Covenants or the Phase III Covenants,
the Association argues that, due to their knowledge of the Association when they
purchased the Property, the Kadar-Kallens are obligated to pay annual assessments to
the Association so as to cover their share of the ownership and maintenance of common
areas. Id. at 43-44. The Association cites Hess v. Barton Glen Club, Inc.,
718 A.2d 908
(Pa. Cmwlth. 1998), and Wag-Myr Woodlands Homeowners Association v.
Guiswite,
197 A.3d 1243
(Pa. Super. 2018), for the proposition that homeowners in a
planned community have an obligation to share in the costs to maintain common areas.
(Association’s Br. at 43-44.) This must be so, the Association reasons, because all
property owners in the community benefit from such common areas, and it would be
9
unfair to require other property owners to subsidize the share of those who do not
contribute.
Id.
at 44 (citing Spinnler Point Colony Association, Inc. v. Nash,
689 A.2d 1026
(Pa. Cmwlth. 1997); Fogarty v. Hemlock Farms Community Association, Inc.,
685 A.2d 241
(Pa. Cmwlth. 1996); Meadow Run and Mountain Lake Park Association
v. Berkel,
598 A.2d 1024
(Pa. Super. 1991)).
The Association further takes issue with the trial court’s reliance upon and
application of Deep Meadows. Although this Court in Deep Meadows held that a
homeowner was not liable to a homeowners’ association for fees where his deed neither
referenced the association nor granted him the right to use common areas, Deep
Meadows, 140 A.3d at 68-69, the Association observes that the homeowner in Deep
Meadows had no notice whatsoever that his property was subject to a homeowners’
association. Here, by contrast, the Association relies upon the evidence of the Kadar-
Kallens’ actual and constructive knowledge of the existence of the Association to
distinguish Deep Meadows. (Association’s Br. at 49.)
Finally, the Association asserts that the trial court’s order contravenes the
purpose of a planned community and deprives other property owners in the
development of the benefit of uniform application of the covenants. Based upon
Ricker’s “possible technical foul of over-recording identical covenants at different
times,” the Association asserts, “the trial court absolved the Kadar-Kallens from
compliance obligations such that they may violate the [c]ovenants with impunity and
thereby directly affect all other unit owners.” Id. at 51. The Association further
cautions that the trial court’s reasoning possibly could apply to other similarly situated
property owners in Old Iron Estates, and it thus forecasts a “logistical nightmare” in
attempting to determine which properties are governed by the Association and which
are bound by covenants. Id. at 52.
10
The Kadar-Kallens view the Phase I Covenants very differently. They
note that the Phase I Covenants facially apply to “P/O” or “parts of” tax parcel numbers
35-066-008 and 35-066-013, and refer only to Phase I Plan, not to any other phase of
the development. (Kadar-Kallens’ Br. at 4.) Where the Association stresses the
portions of the Phase I Covenants that indicate their applicability to “all land” and “each
and every unit” within Old Iron Estates, the Kadar-Kallens emphasize the remainder
of the language. They highlight that the Phase I Covenants apply to “all land included
within the Planned Community as described on the Final Subdivision Plan for Old Iron
Estates . . . dated March 20, 2002, revised February 18, 2003 and recorded with the
Office of the Recorder of Deeds of Dauphin County in Plan Book “O”, Volume 8,
Pages 22-26 . . . .” Id. (Kadar-Kallens’ emphasis). The use of the conjunctive (“and”),
in the Kadar-Kallens’ view, suggests that the Phase I Covenants apply only to the
properties described in the plans that were recorded at the designated book, volume,
and page numbers. The Phase I Plan is the only document recorded in Plan Book “O”,
Volume 8, Pages 22-26, and no other plans for any other phase were recorded
elsewhere at that time. Id. The Kadar-Kallens further dispute the Association’s
assertion that the Phase I Plan describes the entirety of the future development. Rather,
the Phase I Plan states that it covers 26 building lots, which represents only part of the
approximately 90 acres that ultimately would be included in the development. Id. at 5.
The Kadar-Kallens further note that the Phase I Covenants contain no additional
description of real estate that would be included in future phases and, thus, there is no
indication that they apply to any property located outside of the Phase I Plan. Id.
The Kadar-Kallens assert that the Phase I Covenants not only failed to
establish a planned community with respect to properties located in Phase III, but that
they were also defective in general and, thus, void ab initio. They note that, under the
11
UPCA, a declaration establishing a planned community must contain 17 enumerated
items. Id. at 6-8 (quoting 68 Pa.C.S. §5205). The UPCA also sets forth a total of 18
requirements for the plats and plans that describe the planned community and requires
a certification on the first page stating that all of the required information is included.
Id. at 8 (citing 68 Pa.C.S. §5210). The Kadar-Kallens assert that the Phase I Plan and
Phase I Covenants do not contain all of the information required under Sections 5205
and 5210 and, thus, that they failed to establish a planned community as a matter of
law. Id. at 9.7
The Kadar-Kallens dispute the Association’s invocation of contract
principles and its reliance upon Ricker’s presumed intent, and they focus instead upon
the UPCA’s requirements for creating a planned community, which they assert were
not satisfied in this case. They further challenge the Association’s reliance upon
common law principles, and stress that the UPCA allows for the application of common
law only to the extent that it is consistent with the UPCA’s mandates. Id. at 11-12
(citing 68 Pa.C.S. §6108 (providing that common law principles “supplement the
provisions of [the UPCA], except to the extent inconsistent with [the UPCA]”)).
7
In reply, the Association challenges the Kadar-Kallens’ view that compliance with Sections
5205 and 5210 is a prerequisite to the establishment of a planned community. Rather, the Association
quotes the Uniform Law Comment to Section 5201, which states that “[a] planned community has
not been lawfully created unless the requirements of this section have been complied with.”
(Association’s Reply Br. at 5 (quoting 68 Pa.C.S. §5201 cmt. 3) (Association’s emphasis).) Section
5201, the Association contends, requires only a declaration executed by all persons with an interest
in the subject property and recording of the declaration in the proper county or counties. Id. (citing
68 Pa.C.S. §5201). The Association thus contends that the Kadar-Kallens conflate the requirements
for the creation of a planned community with the necessary contents of the declaration. Id. at 4.
Thus, in the Association’s view, even if the Phase I Covenants failed to include all of the information
required by statute, this omission should not result in a finding that a planned community was never
created. As discussed below, because we are here concerned only with the subject Property, we find
it unnecessary to address the question of whether the Phase I Covenants were sufficient to create a
planned community with respect to any other real estate in the development.
12
Because the Kadar-Kallens assert that the Phase I Plan and Phase I Covenants failed to
comply with the UPCA, they argue that the Association can find no safe harbor under
common law.
With regard to the Phase III Covenants recorded in 2012, the Kadar-
Kallens first argue that they could not establish a planned community with respect to
the Property because Ricker had no ownership interest in the Property at that time. Id.
at 12. In any event, the Kadar-Kallens assert that the Phase III Covenants were
defective for the same reasons that the Phase I Covenants were defective, in that they
failed to include all the information required by statute. Id. at 13-14. Further, in the
Kadar-Kallens’ view, Ricker’s recording of the Phase III Covenants in 2012 belies the
Association’s position that the Property is subject to the Phase I Covenants, for if that
was the case, then there was no need for Ricker to record a separate document
pertaining to Phase III. Id. at 15. To the extent that the Association below
characterized the Phase III Covenants as a mere amendment to the Phase I Covenants,
the Kadar-Kallens echo the trial court’s observation that there is no evidence
suggesting that the Association followed the UPCA’s procedure for amending a
declaration. Id. at 15-16 (citing 68 Pa.C.S. §5219 (relating to amendment of
declarations)).
The Kadar-Kallens do not dispute the Association’s evidence suggesting
their notice that a homeowners’ association existed when they purchased the Property.8
Rather, they essentially contend that such notice was irrelevant because the
Association’s “argument presupposes that a planned community validly existed, of
8
The Kadar-Kallens do challenge the Association’s characterization of their title report. The
Association emphasizes that the title report identified the Phase I Covenants, but the Kadar-Kallens
point out that the report also states that title insurance company “did not find any restrictions for Phase
III.” (Kadar-Kallens’ Br. at 17, 20; Association’s Cross-Motion for Summary Judgment, Exhibit 6;
R.R. at 242a.)
13
which the Property was part, as of 2007 when the Kadar-Kallens purchased the
Property.” Id. at 20. Regardless, the Kadar-Kallens stress that their chain of title
contained no mention of the Association or its covenants, as there is no such reference
in their deed or in their predecessors’ deeds. Id. at 19. The Kadar-Kallens argue that
their situation is therefore analogous to the circumstance at issue in Deep Meadows,
which, in their view, the trial court correctly applied to conclude that they are not bound
by the Phase I or Phase III Covenants. For similar reasons, the Kadar-Kallens contend
that they are not obligated to pay annual fees to the Association. Like the homeowner
in Deep Meadows, they note that their deed conveys no right to use common areas in
the development and, accordingly, they are not liable for a share of the maintenance
costs for such common areas.
Finally, rebutting the Association’s reliance upon public policy
considerations relating to the purpose of planned communities, the Kadar-Kallens
invoke countervailing policy considerations. They note that the law disfavors
restrictive covenants that interfere with property owners’ free use and enjoyment of
their properties. Id. at 25 (citing Mishkin v. Temple Beth El of Lancaster,
239 A.2d 800
, 803 (Pa. 1968)). Moreover, granting the Association’s requested relief, the Kadar-
Kallens warn, “would amount to giving developers the unfettered right to bind
unsuspecting homeowners to onerous covenants years after the homeowner purchases
the property.”
Id.
In response to the Association’s concerns for the uncertain status of
other properties in the development, the Kadar-Kallens suggest that nothing in the trial
court’s decision precludes homeowners from voluntarily contributing to the upkeep of
common areas or from agreeing to maintain their properties in a certain way. Id. at 26.
14
B. Analysis
At the outset, the parties no longer appear to differ as to whether the Phase
III Covenants sufficed to bind the Property to their terms or to establish a planned
community that includes the Property. The UPCA provides that “a planned community
may be created . . . only by recording a declaration executed in the same manner as a
deed by all persons whose interests in the real estate will be conveyed to unit
owners . . . .” 68 Pa.C.S. §5201 (emphasis added). Because Ricker sold the Property
in 2005, he had no ownership interest in the Property in 2012. Thus, at the time that
he recorded the Phase III Covenants, the Property was not Ricker’s to encumber.
Accordingly, the question becomes whether the Phase I Plan and Phase I
Covenants were sufficient to achieve the result that the Association seeks. To answer
this question, we must consider both the provisions of the UPCA and our previous
decisions addressing similar factual scenarios.
The UPCA defines a “planned community,” in relevant part, as:
Real estate with respect to which a person, by virtue of
ownership of an interest in any portion of the real estate, is
or may become obligated by covenant, easement or
agreement imposed on the owner’s interest to pay any
amount for real property taxes, insurance, maintenance,
repair, improvement, management, administration or
regulation of any part of the real estate other than the portion
or interest owned solely by the person.
68 Pa.C.S. §5103. “In simpler terms,” our Supreme Court has explained, “a planned
community is an area of land consisting of homes that are individually owned as well
as common areas that are owned or leased by an association consisting of all of the
homeowners in the community.” Saw Creek Community Association, Inc. v. County
of Pike,
866 A.2d 260
, 263 (Pa. 2005).
15
A “declaration” is “[a]ny instrument, however denominated, that creates
a planned community and any amendment to that instrument.” 68 Pa.C.S. §5103. As
noted above, a planned community is created “only by recording a declaration executed
in the same manner as a deed by all persons whose interests in the real estate will be
conveyed to unit owners,” and such declaration “must be recorded in every county in
which any portion of the planned community is located, must be indexed in the same
records as are notarized for the recording of a deed and shall identify each declarant as
the grantor and the name of the planned community as grantee.” Id. §5201.
Old Iron Estates is located in Dauphin County, and the Phase I Covenants
were recorded with the Dauphin County Recorder of Deeds. The Phase I Covenants
contain provisions relating to the maintenance and upkeep of common facilities, state
that such is the responsibility of the Association, and require unit owners to contribute
to the Association’s expenses via an initial payment of $200 and an annual fee of $100.9
The Phase I Covenants, thus, impose an obligation upon unit owners, “by virtue of
ownership of an interest in any portion of the real estate,” to “pay [an] amount for real
property taxes, insurance, maintenance, repair, improvement, management,
administration or regulation” of a “part of the real estate other than the portion or
interest owned solely by the person.” 68 Pa.C.S. §5103.
As the Kadar-Kallens emphasize, Sections 5205 and 5210 set forth
numerous items to be included in the declaration and the plats and plans. 68 Pa.C.S.
§§ 5205, 5210. We appreciate the purpose of the Kadar-Kallens’ argument that the
Phase I Plan and Phase I Covenants were defective under the UPCA, having failed to
9
The Phase I Covenants provide that: “[c]are, maintenance and upkeep of the Controlled and
Common Facilities . . . shall be the responsibility of the [Association]. A $200 fee at the purchase of
lot will be charged. A $100 per year fee or part thereof will be charged. This $100 per year fee may
be raised or lowered to pay expenses of [the Association].” (Phase I Covenants at Section III(B).)
16
include certain pieces of information required by these sections. Nonetheless, we find
it unnecessary to consider whether the Phase I Covenants thereby failed to establish a
planned community in the first place, as the Kadar-Kallens contend. Here, we are
concerned only with the fate of the Property that is the subject of this litigation. The
validity or effectiveness of the Phase I Covenants as they apply to any other real estate
in the development, or to any other phase thereof, is beyond the scope of this decision.
For purposes of this decision, we conclude that the Phase I Covenants constitute a
“declaration” under the UPCA.
Notably, however, the UPCA provides a procedure for phased
implementation of a development, as Ricker sought to do here, via the creation of a
“flexible planned community.” This term is defined in the UPCA as “[a] planned
community containing withdrawable or convertible real estate or a planned community
to which additional real estate may be added or a combination thereof.” 68 Pa.C.S.
§5103. “Additional real estate,” in turn, is defined as “[r]eal estate that may be added
to a planned community.” Id. A declarant has the ability to add real estate to the
planned community through the reservation of “development rights,” which are
defined, in relevant part, as “[a]ny right or combination of rights reserved by a declarant
in the declaration . . . to add real estate to a planned community.” Id. The Uniform
Law Comment to the latter definition provides that “development rights” include
techniques that “relate to the phased (or incremental) development of planned
communities which the declarant hopes, but cannot be sure, will be successful enough
to grow to include more had than he is initially willing to commit to the planned
community.” Id., cmt. 7. The creation of such a community requires that the
declaration include “[a]n explicit reservation of any options to create units, limited
17
common elements or both within convertible real estate or to add additional real estate
to or withdraw withdrawable real estate from the planned community.” Id. §5206(1).
Turning to the Phase I Covenants themselves, we find that the language
unambiguously refers only to Phase I of the development. The Association selectively
quotes portions of the introductory language stating that the Phase I Covenants apply
to “all land included within the Planned Community” and to “each and every” unit
therein, but the Association disregards a clear limitation upon their scope. The Phase
I Covenants plainly state that they are binding “upon all land included within the
Planned Community as described on the Final Subdivision Plan for Old Iron Estates,
Lower Paxton Township, Dauphin County, dated March 20, 2002, revised February
18, 2003 and recorded with the Office of the Recorder of Deeds of Dauphin County in
Plan Book “O”, Volume 8, Pages 22-26, inclusive, for Phase I . . . .” (Phase I
Covenants at 1 (emphasis added).) The referenced plan is the Phase I Plan. The Phase
I Plan does include a single reference to a broader tract of land than is described, but it
details only the 31 lots that are included within Phase I. Quite simply, the Phase I Plan
is the plan for Phase I, not for Phase II, Phase III, or Phase IV. The plans for the latter
phases were separately recorded after Ricker’s execution of the Phase I Covenants.
Significantly, in the Phase I Covenants, Ricker did not reserve any “development right”
to “add additional real estate to . . . the planned community.” 68 Pa.C.S. §5206.
The Property is described as Lot 41 in Phase III of the development. There
is no indication in the Phase I Plan that the Property is included therein. The Phase I
Covenants do not state that they apply to Phase III, but rather only to Phase I.
Moreover, the Phase I Covenants include no reservation of the right to add the Property
to the planned community that they created. Accordingly, we conclude that pursuant
to the plain language of the Phase I Covenants, the Property is not bound thereby. This
18
conclusion is bolstered by the very fact that Ricker later elected to record the Phase III
Covenants. If a reasonable reading of the Phase I Covenants allowed for the Property’s
inclusion therein, then there would be no basis to later record separate covenants
pertaining to the Property. Although the Association characterizes Ricker’s recording
of the Phase III Covenants as merely a “possible technical foul” done for the sake of
“an abundance of caution,” it evidences the fact that not even Ricker believed that the
Phase I Covenants were alone sufficient to bind the Property. (Association’s Br. at 47,
51.) If there was a technical foul, it was Ricker’s failure to observe the UPCA’s
procedures for the phased implementation of a planned community through the
reservation of a development right to add additional real estate thereto. See 68 Pa.C.S.
§§5103, 5206.
Although we conclude that the Property is not bound by the language of
the Phase I Covenants or the Phase III Covenants, this does not end our inquiry. The
parties stress numerous facts and circumstances that bear a resemblance to previous
decisions addressing similar issues, particularly as they relate to the Association’s
contention that, regardless of whether the Kadar-Kallens are bound by restrictive
covenants upon the Property, they nonetheless remain obligated to pay the
Association’s fees for the maintenance of common areas in the development. Both the
parties and the trial court relied upon our decision in Deep Meadows, and each party
presently contends that Deep Meadows supports its respective position. Deep
Meadows itself, however, was guided by a series of previous decisions addressing “the
ability of homeowners’ associations to impose fees in the absence of express authority
to do so.” Deep Meadows, 140 A.3d at 64. In order to place both Deep Meadows and
the instant case in proper context, we must review those same precedents.
19
In Meadow Run, property owners sought review of a trial court decision
holding that a homeowners’ association had authority to impose fees for the
maintenance of roads, dams and other common facilities. Although the property
owners previously had contributed to the association voluntarily, they objected when
the association sought to impose a mandatory assessment of $300 per year, contending
that no such obligation appeared in their deeds. The Superior Court noted that
homeowners’ associations are “analogous to mini-governments” and that they are
“dependent on the collection of assessments to maintain and provide essential and
recreational facilities.” Meadow Run,
598 A.2d at 1026
. “When ownership of property
within a residential community allows the owners to utilize roads and other common
areas of the development, there is an impl[i]ed agreement to accept the proportionate
costs for maintaining and repairing these facilities.”
Id.
(citing Sea Gate Association
v. Fleischer,
211 N.Y.S.2d 767
(N.Y. Sup. Ct. 1960)).
The Meadow Run Court acknowledged that the property owners’ deed did
“not explicitly spell out the exact obligation of the lot owners with regard to payment
of dues for maintenance and repairs,” but it found that “the deed is not wholly silent as
to the matter either.”
Id.
A deed covenant provided:
In the event of the formation or incorporation of an
association of the lot owners on above mentioned plot of
Mountain and Meadow Run Lakes, the occupants of the
above described premises shall be bound by such rules and
regulations concerning the use of Mountain and Meadow
Run Lakes as to boating, bathing, ice skating and fishing, as
may be duly formulated and adopted by such association or
incorporation.
Id.
Because the property owners’ deed granted them a right to use the common
facilities and placed them on notice that they would be subject to the association’s rules
20
concerning those facilities, the Meadow Run Court concluded that the association was
authorized to assess fees for the cost of maintaining them. The Court held that:
[A]bsent an express agreement prohibiting assessments,
when an association of property owners in a private
development is referred to in the chain of title and has the
authority to regulate each property owner’s use of common
facilities, inherent in that authority is the ability to impose
reasonable assessments on the property owners to fund the
maintenance of those facilities.
Id. at 1027.
In Fogarty, property owners challenged a community association’s
authority to impose special assessments for the construction of three capital
improvements that were not expressly authorized by deed covenants or the community
association’s bylaws. The property owners’ deed, however, required them to be
members of the association and “to pay annual dues and fees, as well as assessments
for control, maintenance and repair of streets, roads and recreational facilities.”
Fogarty,
685 A.2d at 242
. This Court noted that all property owners would benefit
from the improvements and that, although their deed did not mention any assessment
for such improvements, it also did not impose restrictions upon the association’s
authority to construct them.
Id. at 244
. Relying upon Meadow Run, the Fogarty Court
held that, “absent language in the deed covenant prohibiting [the association] from
levying special assessments for capital improvements,” the property owners “may be
assessed their proportionate costs to construct the new improvements.”
Id.
We addressed another challenge to the authority of a homeowners’
association to impose assessments in Spinnler Point. There, unlike in Meadow Run
and Fogarty, the property owners’ deed contained no reference to a homeowners’
association. Spinnler Point,
689 A.2d at 1028
. However, their deed did afford them
21
the right to use the development’s roads and to access a lake within the community.
Again invoking Meadow Run, this Court held that “a property owner who purchases
property in a private residential development who has the right to travel the
development roads and to access the waters of a lake is obligated to pay a proportionate
share for repair, upkeep and maintenance of the development’s roads, facilities and
amenities.”
Id. at 1029
.
In Hess, several property owners challenged a homeowners’ association’s
assessments. The association owned and maintained various amenities, including a
lake and a park. With the exception of one property owner, Lee Crowell, all of the
property owners’ deeds referenced a homeowners’ association, granted them rights to
access the lake and the park, and mandated their payment of $30 per year for such
rights. Crowell’s deed was silent as to these matters. The property owners did not
challenge the $30 annual assessment, but objected to an additional $200 annual
assessment that the association imposed to cover the costs of maintenance of other
common areas in the community. Citing Meadow Run, Fogarty, and Spinnler Point,
this Court found the additional $200 assessment permissible because, notwithstanding
the specific provision in the deeds relating to the lake and the park, “the [a]ssociation
may nonetheless assess the [o]wners a proportionate share of the costs of maintaining
all the common areas” in the development. Hess,
718 A.2d at 913
. Even Crowell,
whose chain of title did not reference the association, was liable for a proportionate
share of the maintenance costs of the common facilities. We found Crowell’s
circumstance analogous to Spinnler Point, in which the property owners’ entitlement
to use common facilities triggered an obligation to contribute to the costs to maintain
them, notwithstanding the absence of a reference to a homeowners’ association in the
property owners’ chain of title.
Id.
22
The property owners in Hess further argued that membership in the
association was optional and, therefore, that they had no absolute right to use the
community’s common facilities, and no corresponding obligation to contribute to their
maintenance. Rejecting this position, the Hess Court noted that the property owners
previously had entered into a settlement with the association that expressly granted
them an easement for “the use, liberty and privilege of, and passage in and to the roads,
amenities and common facilities” that belonged to the association.
Id. at 914
.
Notwithstanding the absence of the settlement from the property owners’ chains of
title, we found that “any owner may nevertheless demand access to all the common
areas on the ground that each owner has an easement for use of the commons as
evidenced in the settlement agreement.”
Id.
Huddleson v. Lake Watawga Property Owners Association,
76 A.3d 68
(Pa. Cmwlth. 2013), implicated a similar issue. The issue in Huddleson involved a
homeowner’s challenge to a homeowners’ association’s amendments to its constitution
and bylaws, which made membership mandatory and pursuant to which the association
sought to collect dues and late fees from the homeowner. The homeowner asserted
that the amendments were invalid because she did not consent to be bound by them. In
concluding that the homeowner was not liable for the association’s assessments, this
Court distinguished the above-discussed precedents as follows:
There is no dispute that [the homeowner] did not give her
consent, so the only issue is whether she has an interest that
obligated her to pay dues or assessments to the [a]ssociation.
In Spinnler Point,
689 A.2d at 1029
, we held that “a property
owner who purchases property in a private residential
development who has the right to travel the development
roads and to access the waters of a lake is obligated to pay a
proportionate share for repair, upkeep and maintenance of
the development’s roads, facilities and amenities.” Further,
we have held that “[e]ven if an owner’s chain of title makes
23
no reference to a homeowners’ association, we have held that
the owner is nonetheless obligated to pay a share of the costs
of maintaining common areas managed by a homeowners’
association . . . .” Hess,
718 A.2d at 912
.
Unlike in Spinnler Point and Hess, [the homeowner] has no
interest in the development roads requiring her to pay for
common improvements. There is nothing in her deed that
imposes any obligation upon her to maintain any property
that the [a]ssociation maintains. She is not obligated to
maintain the private road because she does not abut it and has
no legal right to use it, her access being from a public road.
While she does have Lake access, the Pocono Association is
the owner of the Lake, not the [a]ssociation, and any
contributions by the [a]ssociation to the Pocono Association
are voluntary. Moreover, there is nothing in the Nonprofit
Corporation Law that gives it the right to bind non-members
or make membership mandatory absent a shared obligation.
Id. at 73 (citations modified).
As the parties to the instant case recognize, the facts here bear a significant
resemblance to those at issue in Deep Meadows. In that case, a homeowners’
association brought an action against a homeowner, Edward Trusello, for nonpayment
of fees. The association asserted that the fees were meant to cover the costs of
insurance and lawn care for a parcel of open area in the community, as well as to cover
the post office box and business costs. Deep Meadows, 140 A.3d at 62. Trusello’s
deed contained no reference to a homeowners’ association, provided no right to use the
open area, and included no obligation upon Trusello to pay fees for the benefit of that
use. Id. Trusello’s property, moreover, was located on the outer edge of the
development, and he accessed it through public roads, not the development’s roads. Id.
Accordingly, in order to access the open area, “Trusello would either have to walk
across his neighbor’s property, or travel from his [p]roperty on a public road, turn onto
another public road, enter the [d]evelopment’s entrance and walk across an unmarked
24
path between two private homes.” Id. Moreover, Trusello argued that he was not liable
to the association because the association’s bylaws were not recorded or made available
in the public record until over 13 years after he purchased his property, and because he
never agreed to them. Id. Trusello further asserted that he had no notice of the
association’s existence when he purchased his property, that he never agreed to be a
member, and that he received no benefit from the association. Id.
The recorded plan for the development did not establish a homeowners’
association. Id. However, the plan depicted the open area and included a notation that
the “open area [is] to be dedicated to Deep Meadows Civic Association.” Id. at 63
(capitalization modified). The recorded plan, however, did “not include any additional
information concerning the [a]ssociation’s existence, its purpose, the content or
location of its bylaws, or information regarding its membership requirements.” Id.
The trial court ruled for Trusello, finding that he was not liable for the
association’s annual fees. After a thorough review of Meadow Run, Fogarty, Spinnler
Point, Hess, and Huddleson, this Court agreed with the trial court. Unlike the
homeowners in Meadow Run and Fogarty, Trusello’s deed contained no reference to a
homeowners’ association, and he had no notice at the time he purchased his property
that it was or may become subject to such an association. Id. at 68. Although the
homeowner’s deed in Spinnler Point also contained no such reference, it afforded the
homeowner there an express right to use common property. Trusello’s deed, by
contrast, “afforded him no right to use any common property.” Id. Hess was similarly
distinguishable due to the settlement agreement that expressly conveyed to the property
owners a right to use common areas. Id. We found the circumstance most similar to
Huddleson:
Here, as in Huddleson, “there is nothing in [the d]eed that
imposes any obligation upon [Trusello] to maintain any
25
property that the association maintains[,]” and there is
nothing in the deed conveying to Trusello the right to use the
common areas. Huddleson, 76 A.3d at 73. Nor is there any
indication in the deed that the property would be subject to a
homeowners’ association. In fact, the only reference to
“Deep Meadows” in the deed is a reference to the subject lot
on the Plan. Although the Plan identifies the open area as
“Open Area to be Dedicated to Deep Meadows Civic
Association,” it does not provide any indication of the
proposed use for the open area, or provide any information
regarding the purpose or function of the association. Further,
information about the association was not publicly[]
accessible since it did not register its bylaws until more than
13 years after Trusello purchased the property. Given these
considerations, along with the property’s location on the
outer edge of the development, accessible from public roads
and inaccessible from the development’s roads, the trial court
properly found that Trusello had neither actual nor
constructive notice that the [p]roperty was subject to a
homeowner’s association. See Rybarchyk v. Pocono Summit
Lake Property Owners Association, Inc.,
49 A.3d 31
(Pa.
Cmwlth. 2012).
Id. at 68-69
(citations and capitalization modified; record citation and footnotes
omitted).
Finally, we rejected the association’s argument that Trusello should be
obligated to pay fees for the upkeep of the open area due to the benefits that he derived
therefrom. The trial court had specifically rejected the association’s contention that
Trusello enjoyed the lack of noise generated by the open area, and no other evidence
that Trusello benefitted from the open area appeared in the record. Given the trial
court’s rejection of that asserted benefit, coupled with Trusello’s apparent lack of
access to the open area, we concluded that Trusello did not benefit from the open area,
so as to trigger an obligation to contribute to its maintenance.
Id. at 69
. Accordingly,
we held that Trusello was not liable to the association for its annual fees.
Id.
26
Returning to the instant case, here the Kadar-Kallens’ deed, like
Trusello’s, contains neither a reference to a homeowners’ association nor any right to
use common areas in Old Iron Estates. (Kadar-Kallens’ Motion for Summary
Judgment, Exhibit K; R.R. at 102a-04a.) The deed through which Ricker conveyed the
Property to the Kadar-Kallens’ predecessor, Fox, also includes no such provisions.
(Kadar-Kallens’ Motion for Summary Judgment, Exhibit J; R.R. at 98a-100a.)
Accordingly, the instant case is distinguishable from Meadow Run, Fogarty, Spinnler
Point, and Hess, all of which involved either a deed’s express reference to a
homeowners’ association or an express grant of the right to use common facilities in
the community. The absence of such provisions here resembles the circumstances in
Huddleson and Deep Meadows.
The Phase I Plan contains a reference to a homeowners’ association, and
states that it would be responsible for maintaining Lot 58 and the medians described in
the Phase I Plan. Like the dedication of the open area to the association in Deep
Meadows, this is not dispositive, particularly where the Phase I Plan does “not include
any additional information concerning the Association’s existence, its purpose, the
content or location of its bylaws, or information regarding its membership
requirements.” Deep Meadows, 140 A.3d at 63. Moreover, like the association’s
bylaws in Deep Meadows, which were enacted over 13 years after Trusello purchased
his property, id. at 62, the Association here states that it adopted its bylaws at its first
annual meeting on November 15, 2016, over 9 years after the Kadar-Kallens purchased
the Property. (Association’s Br. at 16; see also Association’s Cross-Motion for
Summary Judgment, Exhibit 7 (Association’s Amended Bylaws dated June 14, 2017);
R.R. at 245a-73a.)
27
All of these circumstances weigh in favor of the Kadar-Kallens. The
principal complication and potential distinguishing feature of this case is that, in Deep
Meadows, we concluded that Trusello had “had neither actual nor constructive notice
that the [p]roperty was subject to a homeowner’s association.” Deep Meadows, 140
A.3d at 68-69. As the Association stresses, in this case there was ample evidence
demonstrating the Kadar-Kallens’ notice that there was a homeowners’ association in
Old Iron Estates. Their actual notice of the Association, however, was premised upon
the belief that the Property is subject to the Phase I Covenants. As discussed above,
the plain language of the Phase I Covenants reveals that they do not apply to the
Property, and the Phase III Covenants did not exist at the time. As such, in 2007 when
the Kadar-Kallens purchased the Property, it was not “subject to a homeowners’
association.” Id. The Kadar-Kallens had notice of an entity that, for purposes of their
Property, did not exist. Had Ricker complied with the UPCA’s procedure for
establishing a flexible planned community and reserved the right to add the Property
thereto, the result may have been very different. But none of the documents that the
Kadar-Kallens executed when they purchased the Property were capable of altering the
language of the Phase I Covenants.
A final relevant consideration is whether a homeowner derives any benefit
from the homeowners’ association or its common facilities, so as to trigger an
obligation to contribute to the costs of their maintenance regardless of the homeowner’s
membership in the association or any express deed provision relating thereto. Deep
Meadows, for instance, included a fact-intensive analysis of whether Trusello enjoyed
any of the benefits provided by the community’s open area, and we concluded that he
did not. Deep Meadows, 140 A.3d at 69. Our Superior Court’s decision in Wag-Myr
Woodlands is also instructive on this point.
28
In that case, a homeowners’ association brought an action against non-
member property owners to recover fees for the maintenance of a road by which they
accessed their properties, based upon language in their deeds granting them an
easement across the road. Wag-Myr Woodlands, 197 A.3d at 1247. The property
owners’ deeds did not refer to the existence or future establishment of a homeowners’
association. Id.10 After the association took ownership of the road from the developer
and assumed responsibility for its maintenance, it sought to collect fees from all of the
property owners, who objected on the basis that the association formed after they
purchased their properties, and they were not required to become members thereof.
The property owners conceded that they were obligated to maintain the portion of the
road that directly abutted their respective properties, but challenged the imposition of
a fee by the association. Id. at 1251-52. The property owners relied upon Deep
Meadows, but the Superior Court distinguished Deep Meadows based upon the express
easement granted by the property owners’ deeds, which was lacking in Deep Meadows.
Id. at 1254. The Court held that the easement “alone obligates the [property owners]
to pay a ‘proportionate share’ of the maintenance costs” of the road. Id. (citing Spinnler
Point,
689 A.2d at 1029
). This was the case notwithstanding the fact that the property
owners were not members of the homeowners’ association. To the extent that the
property owners challenged their obligation to pay fees to the particular association
because it did not exist when they purchased their properties, the Superior Court noted
that the association was the successor in interest to the original developer, which had
granted the easement to the property owners. Id. at 1255. Thus, the association was
10
One property owner’s deed in Wag-Myr Woodlands referred to the future establishment of
a homeowners’ association, and the Superior Court analyzed that party’s obligations separately. Wag-
Myr Woodlands, 197 A.3d at 1247, 1255-56. The remaining property owners’ deeds were silent as
to the existence of a homeowners’ association. Because the Kadar-Kallens’ deed is likewise silent
on the matter, we will not discuss the analysis that was unique to the former property owner.
29
“the servient owner to which [the property owners] are required to pay their
‘proportionate share’ for the maintenance” of the road. Id.
We find that the record in the instant case is not sufficiently developed to
determine whether the Kadar-Kallens may be obligated to pay a “proportionate share,”
id. at 1254, of the maintenance costs for any portion of Old Iron Estates. The parties
appear to differ as to whether the Kadar-Kallens benefit from the Association’s
maintenance of common areas in the development. In both its cross-motion for
summary judgment and its motion for reconsideration, the Association asserted that,
regardless of their membership in the Association, the Kadar-Kallens are obligated to
pay fees due to the benefits that they receive from the Association’s maintenance of
common areas. (Association’s Cross-Motion for Summary Judgment ¶22 (averring
that the Kadar-Kallens benefit from the Association’s “maintenance of common
elements and other activity”); Association’s Motion for Reconsideration ¶12 (arguing
that Kadar-Kallens remain obligated to pay Association’s fees for “common area
management and maintenance”); R.R. at 218a, 339a.) The Association’s averments
are rather nonspecific. It has not established that the Kadar-Kallens actually use any
particular common areas, and it does not detail any specific benefit that they might
derive from them. The Kadar-Kallens, for their part, assert that they are not obligated
to pay any fees to the Association because they have no right to use any common
facilities, inasmuch as their deed provides no such right. (Kadar-Kallens’ Answer to
Motion for Reconsideration ¶7; R.R. at 345a.)11 We note, however, that the Kadar-
11
To the extent that the Kadar-Kallens maintain that the UPCA does not require them to pay
annual assessments to the Association for any year in which the Association did not adopt an annual
budget, Kadar-Kallens’ Br. at 23 (citing 68 Pa.C.S. §5314(a)), we note that this consideration was not
deemed dispositive in any of the above-discussed precedents concerning the obligation of
homeowners to contribute to a homeowners’ association’s costs to maintain common areas, even
those decided well after the enactment of the UPCA, such as Deep Meadows and Wag-Myr
(Footnote continued on next page…)
30
Kallens have paid fees to the Association in the past, as evidenced by the check that
the Association produced in support of its cross-motion for summary judgment,
demonstrating the Kadar-Kallens’ payment of a $200 fee to the Association on
February 28, 2007. (Association’s Cross-Motion for Summary Judgment, Exhibit 2;
R.R. at 225a.)
In granting summary judgment in favor of the Kadar-Kallens, and
simultaneously denying the Association’s cross-motion for summary judgment, the
trial court did not address certain fact-specific considerations that may affect the
analysis. Rather, the trial court appeared to conclude that, because the Phase I
Covenants do not apply to the Property, because they thus are not members of the
Association, and because the Kadar-Kallens’ deed does not reference an obligation to
pay assessments to the Association, the Kadar-Kallens could not be required to pay any
amount to the Association for the maintenance of common areas. However, the
homeowners in Wag-Myr Woodlands were not members of the association, yet the
Superior Court held that they nonetheless were obligated to pay their “proportionate
share” of the association’s costs to maintain the road by which they accessed their
properties. Wag-Myr Woodlands, 197 A.3d at 1254. In Deep Meadows, Trusello’s
deed did not contain any reference to a homeowners’ association and did not obligate
him to pay fees thereto, yet this Court also engaged in a fact-intensive analysis of
whether the common area at issue was accessible to Trusello and whether the record
established any benefit that he derived from it. Deep Meadows, 140 A.3d at 69.
Woodlands. Moreover, in Wag-Myr Woodlands, the Superior Court did not require the homeowners
to pay the exact sum assessed by the association for its annual fee, but rather, remanded for a
calculation of each homeowner’s “proportionate share” of the costs to maintain the road. Wag-Myr
Woodlands, 197 A.3d at 1255. This determination was not based upon the existence or nonexistence
of an annual budget, but upon the equitable consideration that “beneficial users of the common areas
of [a] development[] are responsible for the costs of maintenance of such facilities.” Id. at 1253
(quoting Meadow Run,
598 A.2d at 1027
) (bracketed material in original).
31
Accordingly, the trial court’s conclusions were not alone sufficient to dispose of this
issue as a matter of law, because there are other facts that bear upon the question of
whether the Kadar-Kallens may be obligated to contribute to the Association’s costs to
maintain common areas in Old Iron Estates.
The Kadar-Kallens are correct that their deed does not grant them any
express right to use any common areas in Old Iron Estates. However, on the record
before us, we cannot determine whether they actually use such areas, or whether they
have used such areas in the past. Indeed, given the generality of the averments, we do
not know which particular common areas are even at issue, where they are located
within the development, or what benefits the Kadar-Kallens may or may not derive
from them. Cf. Deep Meadows, 140 A.3d at 69 (rejecting association’s argument that
Trusello could access the open area and that he benefitted from the quiet that it created).
Moreover, apart from any use of an open lot or common facility, a benefit potentially
could derive from, for example, the Kadar-Kallens’ use of roads to access the Property.
This was a significant consideration in cases such as Huddleson and Wag-Myr
Woodlands. However, the parties here have produced no evidence concerning the
maintenance of the development’s roads.12
Rule 1035.2 of the Pennsylvania Rules of Civil Procedure provides, in
relevant part, that summary judgment is appropriate “whenever there is no genuine
issue of any material fact as to a necessary element of the cause of action or defense
which could be established by additional discovery or expert report.” Pa.R.C.P. No.
12
We note that the Phase I Plan contains a certification signed by Ricker stating that “all roads
or streets shown hereon, if not previously dedicated, are hereby offered for public use.” (Phase I Plan
at 1.) We can locate no indication in the record as to whether any such roads were previously
dedicated, or whether and to what extent the Association incurs costs to maintain them. The Phase I
Covenants contain no express provisions relating to road maintenance. Thus, we can only speculate
as to the identity of the individuals who maintain the roads’ surfaces, or who perform services such
as street cleaning, leaf and snow removal, etc.
32
1035.2(1). As it concerns the question of fees, we conclude that the record before us
reveals an absence of facts material to the necessary analysis, which could be
established by additional discovery. Accordingly, on this narrow issue, there is not a
sufficient basis upon which to conclude that either party is entitled to summary
judgment as a matter of law.
Thus, we affirm the portion of the trial court’s order granting summary
judgment in favor of the Kadar-Kallens to the extent that it concluded that the Property
is not bound by the terms of the Phase I or Phase III Covenants. We vacate the trial
court’s order to the extent that the trial court concluded that the Kadar-Kallens are not
obligated to pay any amount to the Association for the maintenance and upkeep of
common facilities, and we remand for further development of this issue.
________________________________
PATRICIA A. McCULLOUGH, Judge
33
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Michael A. Kadar-Kallen and :
Kimberlee Kadar-Kallen :
: No. 1671 C.D. 2019
v. :
:
Old Iron Estates Homeowners :
Association, :
Appellant :
ORDER
AND NOW, this 3rd day of December, 2020, the order of the Court of
Common Pleas of Dauphin County is AFFIRMED in part and VACATED in part.
The matter is REMANDED for further proceedings consistent with this Opinion.
Jurisdiction relinquished.
________________________________
PATRICIA A. McCULLOUGH, Judge |
4,639,131 | 2020-12-03 14:21:44.584306+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/391MD19_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
L.S., :
Petitioner :
:
v. : No. 391 M.D. 2019
: Submitted: August 14, 2020
Pennsylvania State Police, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY PRESIDENT JUDGE LEAVITT FILED: December 3, 2020
L.S., pro se, has filed a petition for review to challenge the
constitutionality of subchapter I of the Sexual Offender Registration and Notification
Act (SORNA II), 42 Pa. C.S. §§9799.10-9799.75. L.S. requests a declaratory
judgment that SORNA II cannot constitutionally be applied to him and an injunction
to stop the Pennsylvania State Police (State Police) from requiring him to register as
a sex offender. Asserting there are no material facts in dispute, L.S. has filed a
motion for summary relief1 in his favor.
We begin with a review of Pennsylvania’s sex offender registration
laws. Beginning in 1995, the General Assembly enacted a series of statutes requiring
convicted sex offenders living within the Commonwealth to register with the State
1
L.S. titled his motion a “Motion for Summary Judgment.” Consistent with Chapter 15 of the
Pennsylvania Rules of Appellate Procedure, the Court shall treat the motion as a motion for
summary relief under PA. R.A.P. 1532(b). Pennsylvania Manufacturers’ Insurance Association
Company v. Johnson Mathey, Inc.,
160 A.3d 285
, 287 n.1 (Pa. Cmwlth. 2017). “The standards
that we apply to a motion for summary relief are, as is discussed below, the same as for a motion
for summary judgment.”
Id.
Police for varying periods of time. The first of these statutes was commonly known
as Megan’s Law, former 42 Pa. C.S. §§9791-9799.6, which became effective on
April 22, 1996. In 2000, the General Assembly enacted what is commonly referred
to as Megan’s Law II, former 42 Pa. C.S. §§9791-9799.7. In 2004, Megan’s Law II
was succeeded by Megan’s Law III, former 42 Pa. C.S. §§9791-9799.75, which
remained in effect until 2012. The Sexual Offender Registration and Notification
Act (SORNA I), 42 Pa. C.S. §§9799.10-9799.41, replaced Megan’s Law III.2
SORNA I was enacted, inter alia, to “protect the safety and general
welfare of the citizens of this Commonwealth by providing for increased regulation
of sexual offenders, specifically as that regulation relates to registration of sexual
offenders and community notification about sexual offenders.” Taylor v.
Pennsylvania State Police,
132 A.3d 590
, 595 (Pa. Cmwlth. 2016) (quoting former
42 Pa. C.S. §9799.11). SORNA I established, for the first time, a three-tier
classification system for sexual offenders. The sexual “offender’s tier status [wa]s
determined by the offense committed and impact[ed] the length of time an offender
[wa]s required to register and the severity of punishment should an offender fail to
register or provide false registration information.” Taylor, 132 A.3d at 595 (citing
former 42 Pa. C.S. §9799.15).
SORNA I increased the length of registration for many offenders;
required quarterly in-person reporting; and placed personal information about the
registrant, such as his home address and place of employment, on the internet. In
2
In 2013, the Pennsylvania Supreme Court struck down Megan’s Law III for violating the single
subject rule of Article III, Section 3 of the Pennsylvania Constitution, PA. CONST. art. III, §3.
Commonwealth v. Neiman,
84 A.3d 603
, 616 (Pa. 2013). By the time Megan’s Law III was struck
down, it had been replaced by SORNA I.
2
Commonwealth v. Muniz,
164 A.3d 1189
(Pa. 2017),3 our Supreme Court held
SORNA I to be unconstitutional because these provisions violated the prohibition
against ex post facto laws.4
Following the Supreme Court’s decision in Muniz, the General
Assembly enacted SORNA II, which has two subchapters. As our Supreme Court
has explained,
Subchapter H is based on the original SORNA [I] statute and is
applicable to offenders … who committed their offenses after the
December 20, 2012[,] effective date of SORNA [I]; Subchapter
I is applicable to offenders who committed their offenses prior to
the effective date of SORNA [I] and to whom the Muniz decision
directly applied.[5]
3
In Muniz, the petitioner had been convicted of two counts of indecent assault against a minor less
than 13 years of age. At the time of his conviction, Megan’s Law III required registration with the
State Police for 10 years following the petitioner’s release from incarceration. Muniz, 164 A.3d at
1193 (citing former 42 Pa. C.S. §9795.1). However, the petitioner absconded before sentencing.
By the time he was apprehended and sentenced, SORNA I was in effect. Under SORNA I’s new
classification system, the petitioner was subject to lifetime registration. The petitioner challenged
SORNA I as unconstitutional because it retroactively increased the length of his registration and
notification requirements. The Pennsylvania Supreme Court held that the retroactive application
of SORNA I’s new tier system was an unconstitutional ex post facto law, to the extent that it
imposed a lifetime registration requirement that was not applicable when the petitioner committed
his crimes.
4
The United States Constitution provides, in pertinent part, that “[n]o … ex post facto Law shall
be passed.” U.S. CONST. art. I, §9. The Pennsylvania Constitution likewise provides, in pertinent
part, “[n]o ex post facto law … shall be passed.” PA. CONST. art. I, §17. “[T]he ex post facto
clauses of both constitutions are virtually identical, and the standards applied to determine an ex
post facto violation are comparable.” Evans v. Pennsylvania Board of Probation and Parole,
820 A.2d 904
, 909 (Pa. Cmwlth. 2003) (citing Commonwealth v. Young,
637 A.2d 1313
, 1317 n.7 (Pa.
1993)).
5
Subchapter I applies to individuals who are:
(1) convicted of a sexually violent offense committed on or after April 22, 1996, but
before December 20, 2012, whose period of registration with the Pennsylvania
State Police, as described in section 9799.55 (relating to registration), has not
expired; or
3
Commonwealth v. Butler,
226 A.3d 972
, 981 n.11 (Pa. 2020). Subchapter I requires
offenders, upon their release from incarceration, to provide the State Police with
information about their current or intended residences, employment, and enrollment
as a student. 42 Pa. C.S. §9799.56(a)(1). In addition, offenders must notify the State
Police “within three business days of” any changes in residence, employment or
employment location, or enrollment status in an educational institution. 42 Pa. C.S.
§9799.56(a)(2). Offenders must “appear within 10 days before each annual
anniversary date of [their] initial registration ... at an approved registration site to
complete a verification form and to be photographed.” 42 Pa. C.S. §9799.60(b).
Offenders who fail to comply with the registration and verification provisions “may
be subject to prosecution under [Section 4915.2 of the Crimes Code,] 18 Pa. C.S.
§4915.2 (relating to failure to comply with 42 Pa. C.S. Ch. 97 Subch. I registration
requirements).” 42 Pa. C.S. §§9799.56(d), 9799.60(e).
L.S.’s petition for declaratory and injunctive relief asserts that
subchapter I of SORNA II cannot be applied to him because to do so would violate
the constitutional proscription against ex post facto laws. The petition states that on
December 19, 1994, L.S. was arrested on charges of rape, aggravated assault, and
aggravated indecent assault. Petition at 2, ¶1. On December 27, 1995, he was
sentenced to an aggregate term of 42 to 84 months of incarceration.6 At the time of
his offense, Pennsylvania did not have a law requiring convicted sex offenders to
(2) required to register with the Pennsylvania State Police under a former sexual
offender registration law of this Commonwealth on or after April 22, 1996, but
before December 20, 2012, whose period of registration has not expired.
42 Pa. C.S. §9799.52 (emphasis added).
6
In the petition, L.S. averred that he was convicted on November 13, 1995. Petition at 2, ¶2. In
the amended motion for summary relief, L.S. stated that he was sentenced on December 27, 1995.
Amended Motion at 1, ¶3. Therefore, for purposes of this opinion, we will use December 27,
1995, as his date of sentencing.
4
register with the State Police. Id., ¶¶4-5. The petition further states that, on May 8,
2004, L.S. was informed that he was required to register with the State Police as a
sex offender for his lifetime. Id., ¶3.7 The answer of the State Police does not contest
these allegations.
L.S. filed a motion for summary relief.8 Subchapter I of SORNA II will
require L.S. to register for his lifetime. 42 Pa. C.S. §9799.55(b)(2). Accordingly,
he will be required to report his residence and place of employment, including any
changes thereto, to the State Police. 42 Pa. C.S. §9799.56(a)(1)-(2). This
information, together with a current photograph, will appear online. L.S. must
appear annually before the State Police to verify his residence and to be
photographed. 42 Pa. C.S. §9799.60(b). L.S. asserts that these registration
requirements are punitive and violate the ex post facto clauses of the United States
and Pennsylvania Constitutions.
The State Police responds that “Megan’s Law I was in place when
[L.S.] was convicted on December 27, 1995[,] and required his registration for ten
years.” State Police Amended Brief at 7-8. Megan’s Law II required L.S. to register
for his lifetime because he was “incarcerated … on or after the effective date of this
7
At that time, Megan’s Law II was in effect, and it imposed a lifetime registration requirement
upon L.S.
8
Summary relief, akin to a motion for summary judgment, is properly granted where “the
pleadings, depositions, answers to interrogatories, and admissions on file, together with any
affidavits, 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.” Pennsylvania Medical Society v. Foster,
624 A.2d 274
,
276 (Pa. Cmwlth. 1993). Because there are no material facts in dispute, we examine whether
L.S.’s right to judgment is clear as a matter of law.
Initially, in his motion for summary relief, L.S. contended that, pursuant to the
Pennsylvania Supreme Court’s decision in Muniz, the application of SORNA I’s registration
requirements to him violates the ex post facto clause. Subsequently, L.S. filed an amended motion
for summary relief to address the applicability of the registration requirements in SORNA II.
5
act.” Id. at 8. The State Police argues that L.S. was a lifetime registrant in
Pennsylvania when SORNA II was enacted; therefore, it did not extend his period
of registration. As such, the State Police contends that L.S.’s application must fail.
We conclude that L.S. is entitled to relief under this Court’s en banc
decision in T.S. v. Pennsylvania State Police,
231 A.3d 103
(Pa. Cmwlth. 2020),
notice of appeal filed (Pa., No. 34 MAP 2020, filed June 10, 2020). In T.S., this
Court held that subchapter I of SORNA II was punitive and could not be applied to
the petitioner, because he committed his sexual offenses before Pennsylvania had
enacted its first sex offender registration scheme. T.S. is binding here because L.S.
committed his offense in 1994, before there was a sexual offender registration law.
We reject the contention of the State Police that because his conviction took place
after the enactment of Megan’s Law I, it applies to L.S.
The petitioner in T.S. committed his sexual offense in 1990, before the
1995 enactment of Megan’s Law I. Upon his release from incarceration in 2002,
T.S. was subject to a lifetime registration requirement in Megan’s Law II.
Subchapter I of SORNA II continued that registration requirement. Before this
Court, T.S. argued subchapter I of SORNA II violated the prohibition against ex post
facto laws, given the Supreme Court’s holding in Muniz,
164 A.3d 1189
. We agreed.
In reaching this conclusion, this Court applied the analysis set forth by
the United States Supreme Court in Kennedy v. Mendoza-Martinez,
372 U.S. 144
(1963), to determine whether subchapter I was punitive in effect.9 T.S., 231 A.3d at
119. Accordingly, this Court considered the following seven factors:
[1] whether the sanction involves an affirmative disability or
restraint, [2] whether it has historically been regarded as
9
The General Assembly stated in SORNA II that the purpose of the new registration statute was
not to impose punishment. The legislature’s stated intention is not dispositive.
6
punishment, [3] whether it comes into play only on a finding of
scienter, [4] whether its operation will promote the traditional
aims of punishment – retribution and deterrence, [5] whether the
behavior to which it applies is already a crime, [6] whether an
alternative purpose to which it may rationally be connected is
assignable for it, and [7] whether it appears excessive in relation
to the alternative purpose assigned.
Id. (quoting Mendoza-Martinez,
372 U.S. at 168-69
). This Court concluded that the
majority of the factors weighed in favor of finding subchapter I of SORNA II to be
punitive as to T.S., particularly with regard to the annual in-person appearances at
approved registration sites,10 updates with the State Police of any changes in
registration information,11 and publication online of a registrant’s personal
information.12 Thus, we held as follows:
While some form of retroactive registration requirements may be
constitutional, see Smith[ v. Doe], 538 U.S. [84,] 105 [(2003)],
applying the analysis in Muniz, we must find the cumulative
effect of the registration requirements of subchapter I of
[SORNA II] on [the p]etitioner goes beyond imposing mere
registration and is punishment. [The p]etitioner, who committed
the crimes giving rise to his present obligation to register in 1990,
could not “have fair warning” of the applicable law that now
mandates his registration and the terms thereof…. His right to
relief on these ex post facto claims is not premised in a “right to
less punishment, but the lack of fair notice and governmental
restraint” that occurred when the General Assembly “increase[d]
punishment beyond what was prescribed when the crime was
consummated.” ... Accordingly, we determine that the Mendoza-
Martinez factors weigh in favor of finding subchapter I of
[SORNA II] to be punitive as applied to [the p]etitioner under
the Ex Post Facto clause of the United States Constitution.
10
42 Pa. C.S. §9799.60(b).
11
42 Pa. C.S. §9799.56(a)(2).
12
42 Pa. C.S. §9799.63(c)(1).
7
T.S., 231 A.3d at 136-37 (quotations omitted) (footnotes omitted).
Likewise, in B.W. v. Pennsylvania State Police (Pa. Cmwlth., No. 433
M.D. 2018, filed July 6, 2020) (unreported),13 the petitioner challenged the
constitutionality of subchapter I of SORNA II, as applied to him. The petitioner was
convicted in 1995 of rape, aggravated indecent assault, and indecent assault and
sentenced to 3½ to 10 years’ imprisonment. Because the petitioner committed his
crimes prior to the enactment of a sexual offender registration scheme, he did not
have fair warning of the extensive reporting requirements that would be imposed on
him. Although the petitioner was convicted of his crimes in December 1995, after
Megan’s Law I was enacted, we concluded that “the date of the offense is central to
an ex post facto analysis.” B.W., slip op. at 14 (quoting T.S., 231 A.3d at 119)
(emphasis added). Accordingly, we held that subchapter I of SORNA II was an
unconstitutional ex post facto law as applied to him. B.W., slip op. at 14.
Recently, the Supreme Court issued a decision in the consolidated
appeals of Commonwealth v. Lacombe and Commonwealth v. Witmayer,
234 A.3d 602
(Pa. 2020) (collectively, Lacombe). It held that subchapter I of SORNA II did
not violate the constitutional prohibition against ex post facto laws, at least with
regard to the appellees in that case, who committed their offenses after Pennsylvania
had enacted a sexual offender registration statute. Indeed, the Supreme Court stated
that its ex post facto analysis of subchapter I applied “to those convicted of a sexually
violent offense after April 22, 1996, but before December 20, 2012.” Lacombe, 234
A.3d at 615 (emphasis added). The holding in Lacombe is limited to its facts. It
13
An unreported panel decision of this Court, “issued after January 15, 2008,” may be cited “for
its persuasive value[.]” Section 414(a) of the Commonwealth Court’s Internal Operating
Procedures,
210 Pa. Code §69.414
(a). The State Police filed an appeal in B.W. on July 29, 2020,
which is docketed at 44 MAP 2020. B.W.’s cross-appeal, filed on August 13, 2020, is docketed
at 47 MAP 2020.
8
does not undertake an ex post facto analysis of subchapter I as applied to individuals
who committed their offenses before Pennsylvania’s first sexual offender
registration scheme became effective on April 22, 1996.
The holdings in T.S. and B.W. are dispositive here. As in those cases,
L.S. committed his offense before Pennsylvania had a statutory sex offender
registration system. The lifetime registration requirement imposed on L.S. under
subchapter I of SORNA II derives solely from his conviction for a crime that was
committed in 1994. At the time he committed this crime, L.S. did not “‘have fair
warning’ of the applicable law that now mandates his registration and the terms
thereof.” T.S., 231 A.3d at 118 (quoting Peugh v. United States,
569 U.S. 530
, 544
(2013)). As in T.S. and B.W., the application of SORNA II’s lifetime registration
and reporting requirements imposes greater punishment on L.S. than did the law in
effect at the time that he committed his crimes. Thus, subchapter I of SORNA II is
an unconstitutional ex post facto law as applied to L.S.
Accordingly, we grant L.S.’s amended motion for summary relief and
declare that L.S. is not subject to subchapter I of SORNA II’s registration and
reporting requirements, which will result in his removal from the sexual offender
registry.
_____________________________________
MARY HANNAH LEAVITT, President Judge
9
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
L.S., :
Petitioner :
:
v. : No. 391 M.D. 2019
:
Pennsylvania State Police, :
Respondent :
ORDER
AND NOW, this 3rd day of December, 2020, L.S.’s Amended Motion
for Summary Relief is GRANTED. Judgment is entered in favor of L.S., declaring
the application of subchapter I of the Act of February 21, 2018, P.L. 27, 42 Pa. C.S.
§§9799.10-9799.75, as amended by the Act of June 12, 2018, P.L. 140 (collectively,
SORNA II) to L.S. is a violation of the ex post facto clauses of the United States and
Pennsylvania Constitutions. Therefore, the Pennsylvania State Police is ORDERED
not to apply subchapter I of SORNA II to L.S., which will result in his removal from
the sexual offender registry.
_____________________________________
MARY HANNAH LEAVITT, President Judge |
4,639,132 | 2020-12-03 14:21:44.879114+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/775CD19_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Indiana University of Pennsylvania, :
Appellant :
:
v. :
:
Jefferson County Board of :
Assessment Appeals :
:
v. : No. 775 C.D. 2019
: Argued: May 14, 2020
Punxsutawney Area School District :
and Borough of Punxsutawney :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE J. ANDREW CROMPTON, Judge
OPINION
BY PRESIDENT JUDGE LEAVITT FILED: December 3, 2020
The Indiana University of Pennsylvania (University) appeals an order
of the Court of Common Pleas of Jefferson County (trial court) holding that those
portions of University buildings leased to commercial tenants are subject to local
real estate taxes. The trial court held that the University is not immune from local
taxation and is not entitled to a tax exemption. On appeal, the University argues
that the Pennsylvania State System of Higher Education is immune from local
taxation, as is every Commonwealth agency, except where the legislature has
expressly authorized the local taxing authority to levy tax. Because no such
statutory authorization exists here, the University contends that the trial court
erred.
Background
At issue are properties located in the Borough of Punxsutawney,
Jefferson County, which were acquired by the University in August 2018. The
first property, known as the Fairman Centre, is located at 101 West Mahoning
Street and was occupied on the first floor by an insurance agency at the time of
acquisition. The second property, known as the Agape and Miller Buildings, is
located at 105 and 115-121 West Mahoning Street. At the time of the acquisition,
the Agape Building was vacant, and the Miller Building had three commercial
tenants.
By letter dated August 31, 2018, the University notified the Jefferson
County Assessment Office that the properties should be removed from the
County’s tax rolls because they were not subject to local taxation. Accompanying
the letter was an application for exemption stating that each parcel is “owned by an
instrumentality of the Commonwealth of Pennsylvania and [] immune from
taxation.” Reproduced Record at 32a, 34a (R.R.___).1 The Jefferson County
Board of Assessment Appeals (Board) conducted a hearing. It denied the
University’s application with respect to the Agape and Miller Buildings, but it
exempted that part of the Fairman Centre used for the University’s Culinary
Institute. The University appealed, and the trial court held a de novo hearing on
May 3, 2019.
1
The University noted in its August 31, 2018, letter that it was applying for a tax exemption
because “some systems used by assessment offices do not have the capability to mark parcels as
‘immune’, only as exempt.” R.R. 31a.
2
Before the trial court, the University, the Board and the Punxsutawney
Area School District (School District) agreed that the county had the burden of
proof on its authority to tax. Nevertheless, the University proceeded first with its
case.2
The University presented the testimony of Susanna Sink, Interim Vice
President for Administration and Finance, who is responsible for University
facilities. She testified that the University purchased the properties for the
Culinary Institute and has “future plans to renovate these buildings” beginning in
March 2021. Notes of Testimony (N.T.), 5/3/2019, at 24; R.R. 90a. The
renovations will allow the University “to expand the culinary program, upgrade the
facility, and promote the culinary certificate and the baking certificate as well as
offer potential associate degrees.” Id. The Fairman Centre, which was recently
renovated, will remain as is, but the Agape and Miller Buildings will be razed.
Shortly before the hearing, the University had “put out bidding for architectural
designs” but had not yet applied for building permits. Id.
Sink described the commercial leases that were in place when the
University acquired the properties. The insurance agency had entered a three-year
lease on May 31, 2016, for the first floor of the Fairman Centre. The lease in the
Miller Building for a chiropractor office was scheduled to end on April 30, 2020.
A restaurant at the Miller Building was on a month-to-month lease. The beauty
salon that occupied part of the Miller Building moved out in October 2018. Sink
2
In immunity cases, the local taxing body bears the burden of demonstrating taxability, and all
doubts are to be resolved in favor of the taxpayer. Lehigh-Northampton Airport Authority v.
Lehigh County Board of Assessment Appeals,
889 A.2d 1168
, 1175-76 (Pa. 2005). The trial
court, however, allowed the University to present its case first.
3
testified that the University permitted the existing tenants to stay in their respective
locations until they found new locations.
At the time of the hearing, the University was using the second floor
of the Fairman Centre for its culinary classes and the first floor (not occupied by
the insurance agency) “for the baking program.” N.T. 25; R.R. 91a. Sink
estimated that approximately 125 students were taking culinary classes in the
Fairman Centre. The University intends to convert the third floor for classrooms
and faculty offices. The unleased portion of the Miller Building and the entire
Agape Building are vacant.
Sink explained that the University’s primary mission under the Public
School Code of 19493 is to provide “instruction for undergraduate and graduate
students to and beyond the master’s degree in the liberal arts and sciences and in
applied fields including the teaching profession.” N.T. 16; R.R. 82a. She
conceded that the commercial leases do not directly advance the University’s
educational mission. Sink stated that the vacant portions of the buildings advance
the University’s statutory purpose because they are slated “for future
development.” N.T. 28; R.R. 94a.
Neither the School District nor the Board presented evidence.
Trial Court Decision
In an opinion and order filed May 24, 2019, the trial court partially
granted the University’s appeal. It concluded that the University was immune
from paying local property tax on the land underlying the buildings and the vacant
3
Act of March 10, 1949, P.L. 30, as amended, 24 P.S. §§1-101 – 27-2702. The University is
one of 14 universities in the Pennsylvania State System of Higher Education. Section 2002-
A(a)(7) of the Public School Code of 1949, 24 P.S. §20-2002-A(a)(7). Sections 2002-A, 2004-
A, 2006-A, and 2008-A were added by the Act of November 12, 1982, P.L. 660, No. 188.
Section 2018-A was added by the Act of July 11, 1990, P.L. 424, No. 103.
4
space in each building, but it was subject to taxation on the portions of the
buildings encumbered by commercial leases. The trial court recognized that the
Public School Code of 1949 authorizes the University to lease property to
commercial third parties, but it concluded that the University’s primary mission of
educational instruction is “in no way furthered by its maintenance of the
commercial leases here at issue.” Trial Court Decision, 5/24/2019, at 3; R.R. 310a.
The trial court concluded that “[w]here the leases are concerned, [the University] is
no longer immune from paying local property taxes.” Id.
In granting the University’s appeal with respect to the vacant building
space, the trial court explained as follows:
When [the University] acquired the property, [] it did so for the
specific purpose of expanding the Culinary Academy and has
developed a detailed master plan to achieve that goal. See
[Exhibit] B. To that end, it intends to raze and completely
replace at least two of the buildings and is currently putting out
bids for various phases of the project, which is scheduled to
commence next year. Although the bulk of the property is
vacant, [the University’s] active engagement in the
transformational process outlined in Exhibit B means, for all
practical purposes, that it is currently using that space in
conformity with the purpose for which it was created.
Id. The trial court further noted that the School District did not present any
evidence that the University’s “failure to immediately utilize the vacant space for
educational activities was tantamount to using it for commercial endeavors
unrelated to its mission.” Id. The University’s appeal to this Court followed.
5
Appeal
On appeal,4 the University contends that the trial court erred in
holding that any portion of its properties could be subjected to local taxation. It
asserts that real property owned by the Commonwealth, which includes the
University, is immune from taxation, regardless of how it is used, unless the local
taxing authority has been granted explicit statutory authority by the General
Assembly to tax the property. Here, the local taxing authorities have not been
granted express statutory authority to tax University property. The University
further argues that the Pennsylvania Supreme Court’s decision in Southeastern
Pennsylvania Transportation Authority (SEPTA) v. Board of Revision of Taxes,
833 A.2d 710
(Pa. 2003) (SEPTA), on which the trial court relied, is inapposite to
the question of whether the University is immune from taxation.
In response, the School District5 argues that the University is not
immune from local tax if its property is used in a way that does not advance its
statutory purpose to provide education. At the time the University applied for tax
immunity, only part of one building, the Fairman Centre, was in active use for
educational purposes. The School District asserts that the University’s leases do
not coincide with the University’s statutory purpose, i.e., to provide education.
4
This Court’s review determines whether the trial court abused its discretion, committed an error
of law, or rendered a decision unsupported by substantial evidence. Walnut-Twelve Associates v.
Board of Revision of Taxes of City of Philadelphia,
570 A.2d 619
, 622 (Pa. Cmwlth. 1990). The
trial court, as fact finder, has discretion over evidentiary weight and credibility determinations.
1198 Butler Street Associates v. Board of Assessment Appeals, County of Northampton,
946 A.2d 1131
, 1138 n.7 (Pa. Cmwlth. 2008).
5
The Board joins the School District’s brief on this matter.
6
Analysis
We begin with the legal standards for determining whether
government property can be subjected to local tax. The power “to determine what
property shall be subject to taxation and what shall be immune is traditionally
within the province of the General Assembly.” Commonwealth v. Dauphin
County,
6 A.2d 870
, 871 (Pa. 1939). “An arm, agency, subdivision, or
municipality of the Commonwealth enjoys sovereign immunity from local real
estate taxation…. Property owned by the Commonwealth and its agencies and
instrumentalities is presumed to be immune, with the burden on the local taxing
body to demonstrate taxability.” City of Philadelphia v. Cumberland County
Board of Assessment Appeals,
81 A.3d 24
, 50 (Pa. 2013). The local taxing body
may tax real property of the Commonwealth only where it has express statutory
authorization to do so. Dauphin County, 6 A.2d at 872 (“The legislators did not
intend to upset the orderly processes of government by allowing the sovereign
power to be burdened by being subjected to municipal taxes.”).
A tax exemption differs from a tax immunity. An exemption “carves
out specified property from taxation that the taxing body otherwise has the
authority to tax.” SEPTA, 833 A.2d at 713. Article VIII, Section 2 of the
Pennsylvania Constitution authorizes the General Assembly to exempt certain
classes of property from taxation, including the portion of property “which is
actually and regularly used for public purposes.” PA. CONST. art. VIII, §2.
However, “the distinction between tax immunity and tax exemption is unnecessary
in the context of government-owned property.” Norwegian Township v. Schuylkill
County Board of Assessment Appeals,
74 A.3d 1124
, 1131 (Pa. Cmwlth. 2013).
See also Dauphin County, 6 A.2d at 873 (where property is owned outright by the
7
Commonwealth, “the revenues therefrom could only be devoted to public purposes
under the Constitution”); East Stroudsburg University Foundation v. Office of
Open Records,
995 A.2d 496
, 504 (Pa. Cmwlth. 2010) (“the government always
acts as the government”).
The Supreme Court has explained that with regard to tax immunity,
the “pivotal factor” should be “whether the institution’s real property is so
thoroughly under the control of the Commonwealth that, effectively, the
institution’s property functions as Commonwealth property.” Pennsylvania State
University v. Derry Township School District,
731 A.2d 1272
, 1276 (Pa. 1999)
(Penn State II). A factor in this inquiry is whether the Commonwealth has
majority control of the board of governors or board of trustees.6
Id. at 1275-76
.
Here, the University is a member of the State System of Higher
Education (System). Section 2002-A(a) of the Public School Code of 1949
provides, in relevant part, as follows:
(a) Subject to the regulatory powers conferred by law upon the
State Board of Education, there is hereby established a body
corporate and politic constituting a public corporation and
government instrumentality to be known as the State System of
Higher Education, independent of the Department of
Education, hereinafter referred to as the system, which is
granted sovereign immunity and official immunity pursuant to 1
Pa.C.S. §2310 (relating to sovereign immunity reaffirmed;
specific waiver) and which shall consist of the following
institutions and such other institutions, presently existing or
6
In Penn State II, the Court found that Penn State’s real property was controlled by a board of
trustees. Of the 32 trustees, only ten represented “government” seats held or appointed by the
Governor. The remaining 22 members include Penn State’s president, nine members elected by
alumni and 12 members elected by various agricultural and industrial societies. The Court
concluded that because the Commonwealth did not have either functional or legal control over
Penn State’s real property, there was no basis upon which the university-owned property could
be deemed immune from local taxation.
8
until changed as provided under subsections (a.1), (a.2), (a.3),
(a.4), (a.5), (a.6) and (a.7):
***
(7) Indiana University of Pennsylvania[.]
24 P.S. §20-2002-A(a)(7) (emphasis added). The System is governed by the Board
of Governors, which consists of 20 members including the Governor; the Secretary
of Education; a Senator appointed by the President pro tempore of the Senate; a
Senator appointed by the Minority Leader of the Senate; a Representative
appointed by the House Speaker; and a Representative appointed by the House
Minority Leader.7 Section 2004-A of the Public School Code, 24 P.S. §20-2004-
A. Each institution has a council of trustees that consists of 11 members “who,
except for student members, shall be nominated and appointed by the Governor
with the advice and consent of the Senate.” Section 2008-A(a) of the Public
School Code, 24 P.S. §20-2008-A(a).
In general, the Board of Governors is responsible for the development
and operation of the System and its member universities. Section 2006-A(a) of the
Public School Code, 24 P.S. §20-2006-A(a). This responsibility includes
7
With respect to the rest of the Board of Governors, Section 2004-A(a)(7), (8) provides:
(7) Eleven (11) members shall be appointed by the Governor with the advice and
consent of the Senate, of which six (6) members shall be selected from the
residents of this Commonwealth and five (5) members shall be selected from
trustees of constituent institutions, except that no more than one trustee may
represent a constituent institution.
(8) Three (3) of the members shall be students appointed by the board under
section 2006-A(a)(17). The student members shall be selected with the advice and
consent of institution presidents. A student’s term shall expire upon graduation,
separation or failure to maintain good academic standing at the institution in
which the student is enrolled.
24 P.S. §20-2004-A(a)(7), (8).
9
overseeing the University’s dealings in real estate to fulfill its statutory mission.8
The University is tasked with providing “appropriate educational facilities” as
deemed necessary by the Board of Governors. Section 2003-A(a) of the Public
School Code, 24 P.S. §20-2003-A(a). The Board of Governors evaluates when
new facilities are needed to advance the University’s mission, 24 P.S. §20-2003-
A(b)(3), and must report all real property decisions to the Secretary of the Budget.
24 P.S. §20-2006-A(a)(9). If the System “deems that it is necessary or desirable to
sell, transfer or dispose of real property acquired by and titled to it, it shall request
authorization from the General Assembly to sell, transfer or dispose of said real
property[.]” Section 2018-A(a) of the Public School Code, 24 P.S. §20-2018-A(a)
(emphasis added).
The above provisions demonstrate the Commonwealth’s control of the
University’s acquisition and development of real property. Notably, the University
cannot sell or transfer any of its property without legislative approval. We
conclude that the University’s properties are “so thoroughly under the control of
the Commonwealth that, effectively, the institution’s property functions as
Commonwealth property.” Penn State II, 731 A.2d at 1274. Thus, the
8
The University’s primary mission, as a member university in the System, is to provide
education “for undergraduate and graduate students to and beyond the master’s degree in the
liberal arts and sciences and in applied fields[.]” Section 2003-A(a) of the Public School Code,
24 P.S. §20-2003-A(a). As to academia, Section 2003-A(a) also provides that “[p]rograms of
research and service may be provided which are approved by the Board of Governors, and which
are consistent with the primary mission of the system.” Id. at §20-2003-A(a). The Board of
Governors establishes “broad fiscal, personnel and educational policies under which the
institutions of the [System] shall operate” and approves “new undergraduate and graduate degree
programs.” Section 2006-A(a)(4), (5) of the Public School Code, 24 P.S. §20-2006-A(a)(4), (5).
It also has the power to “do and perform generally all of those things necessary and required to
accomplish the role and objectives of the system[.]” Id. §20-2006-A(a)(15).
10
University’s properties are immune from taxation. See also Bucks County
Community College v. Bucks County Board of Assessment Appeals,
608 A.2d 622
,
624 (Pa. Cmwlth. 1992) (observing that the state-owned universities encompassed
in the System are agencies of the Commonwealth entitled to tax immunity).
With the presumption of tax immunity established, the burden shifted
to the local taxing entity to demonstrate express legislative authorization to levy a
property tax on the real estate in question. Dauphin County, 6 A.2d at 872. Here,
the School District did not offer any evidence or relevant statutory authority to
support its position.
Instead, the School District relied upon SEPTA,
833 A.2d 710
. The
School District argues that the facts in SEPTA “mirror the case at issue” and that
the Supreme Court’s decision in that case “remains determinative and fatal to the
University’s immunity claim.” School District Brief at 4, 7.
SEPTA involved a building in downtown Philadelphia used by
SEPTA as its headquarters. It leased unused portions of the building to
commercial, non-profit and government organizations. SEPTA applied to have the
building declared immune and exempt from taxation. The board of revision of
taxes granted a partial tax exemption for the portions of property used by SEPTA
and leased to other government and non-profit entities. The trial court reversed
this decision, finding that the entire building was exempt from taxation. On
appeal, this Court reversed. We concluded that SEPTA was not immune from
taxation on property it leased to commercial tenants, and it was not entitled to a tax
exemption because a commercial real estate business is not a governmental
function.
11
On review, the Supreme Court applied what is commonly referred to
as the “government use” test, under which a reviewing court considers (1) whether
the agency’s actions with respect to the property at issue are within its authorized
purposes and powers; and (2) whether the property was acquired or used for a
purpose that is within the operation of the agency. SEPTA, 833 A.2d at 716. The
Supreme Court held that SEPTA was authorized to acquire and dispose of
property, including the lease of property to third parties to raise revenue and reduce
expenses. However, the test’s second prong proved problematic. The Supreme
Court stated “clearly the leasing of real estate, solely to raise revenue, is not an
activity connected to SEPTA’s purpose.” Id. at 717. It reasoned:
[SEPTA’s enabling legislation] does not provide a basis for
concluding that in becoming a commercial landlord, SEPTA is
absolved or exempted from its responsibility for paying real
estate tax on the portion of the property that is utilized for such
a commercial venture. In that respect, SEPTA is like any other
commercial landlord with which it competes as a landlord.
Id. Accordingly, the Supreme Court concluded that the portion of SEPTA’s
property leased to commercial entities was not immune from taxation.9
9
Justice Nigro dissented, arguing that:
The majority claims to reach its conclusion that SEPTA is not immune by
clarifying, then applying, the legal standards governing tax immunity. Instead of
clarifying these standards, however, the majority materially alters them,
improperly blending those standards with the separate and distinct standards
applicable in the tax exemption context.
SEPTA, 833 A.2d at 718 (Nigro, J., dissenting). Justice Nigro wrote that Delaware County Solid
Waste Authority v. Berks County Board of Assessment Appeals,
626 A.2d 528
(Pa. 1993), did not
require a determination of whether SEPTA’s leasing activities were related to its purpose as a
metropolitan transportation authority. He further explained that because the General Assembly
empowered SEPTA to lease real estate for the authorized governmental purpose of raising
revenue and reducing expenses, he would have held that SEPTA’s leased property was immune
from taxation.
12
SEPTA is distinguishable. SEPTA and the University are different
entities, and they are governed by very different enabling statutes.
SEPTA was established by the Metropolitan Transportation
Authorities Act of 1963.10 SEPTA is governed by a transportation board that
“shall not involve itself in the day-to-day administration of the authority’s
business.” Section 1712(b) of the Public Transportation Law, 74 Pa. C.S.
§1712(b). The transportation board is made up of residents of the service area, and
members appointed by the Governor, by legislative leaders and by the County of
Philadelphia.11 The transportation board has powers over “the authority’s
operating and capital budgets, the authority’s standard of services, utilization of
10
Act of August 14, 1963, P.L. 984, No. 450, repealed by the Act of July 10, 1980, P.L. 427, No.
1010. It was replaced by the current Metropolitan Transportation Authorities Act, 74 Pa. C.S.
§§1701-1785, which is part of the Public Transportation Law, 74 Pa. C.S. §§1101-2107. All
transportation authorities are deemed to have been created under the current act. 74 Pa. C.S.
§1711(c)(1).
11
Section 1713(a) of the Public Transportation Law explains the appointment of transportation
board members:
(1) The Governor may appoint as a member of the board one person, who may be
an ex officio appointee from among the various officials in this Commonwealth
and whose term as a board member shall run concurrently with that of his
Commonwealth position, if any, or the term of the appointing Governor,
whichever is shorter.
(2) The Majority Leader and the Minority Leader of the Senate and the Majority
Leader and the Minority Leader of the House of Representatives may each
appoint one person to serve as a board member, whose term shall be concurrent
with the term and who shall serve at the pleasure of the appointing legislative
leader.
(3) The county commissioners or the county council in each county and, in any
county of the first class containing a city of the first class, the mayor, with the
approval of the city council, may appoint two persons from each county to serve
as board members.
74 Pa. C.S. §1713(a). All members of the transportation board, except for the appointee of the
Governor, must be residents of the metropolitan area. 74 Pa. C.S. §1712(b).
13
technology, the organizational structure and, subject to the provisions of this
chapter, the selection of and the establishment of salaries for personnel.” 74 Pa.
C.S. §1712(b).
SEPTA is authorized to engage in real estate activities under Section
1741(a)(12) of the Public Transportation Law, 74 Pa. C.S. §1741(a)(12). SEPTA
has the power to acquire property, 74 Pa. C.S. §1742, and can sell or lease real
property at its discretion. 74 Pa. C.S. §1750. However, neither the General
Assembly nor the Secretary of the Budget has any role to play in SEPTA’s real
estate transactions.
By contrast, a Commonwealth agency, including the State System of
Higher Education, cannot transfer its real property without the approval of the
General Assembly. Section 2018-A of the Public School Code provides, in part, as
follows:
(a) Whenever the system deems that it is necessary or desirable
to sell, transfer or dispose of real property acquired by and titled
to it, it shall request authorization from the General Assembly
to sell, transfer or dispose of said real property; and from time
to time, as necessary, the system shall submit to the Chief Clerk
of the House of Representatives and the Secretary of the Senate
requests to sell, transfer or dispose of real property acquired by
and titled to the system for consideration by the General
Assembly.
(b) Each request for authorization to sell, transfer or dispose of
real property transmitted to the General Assembly shall be
proposed as a resolution, and shall be placed on the calendar of
each house for the next legislative day following its receipt, and
shall be considered by each house within thirty (30) calendar
days of continuous session of the General Assembly.
(c) Each request for authorization to sell, transfer or dispose of
real property shall take effect if it is approved by a majority
14
vote of the duly elected membership of each house during such
thirty-day period or may be disapproved by either house during
that period by a majority vote of the duly elected membership
of each house.
24 P.S. §20-2018-A.
SEPTA is also distinguishable on its facts. The University purchased
the buildings for the purpose of turning them into University facilities. It inherited
commercial leases but had no intention to continue them for the long haul. Rather,
it acted like a responsible landlord by allowing the tenants to stay until they found
new space. By contrast, SEPTA acquired its building with the intention to use at
least part of the building as an ongoing commercial real estate business.
The University is not a municipal authority. Rather, it was created by
the General Assembly to carry out one of the central missions of the
Commonwealth, i.e., education. To allow local taxation of University property for
that part leased to private parties has implications for all Commonwealth property.
It would allow, for example, the City of Harrisburg to tax that part of the State
Capitol leased for the operation of a cafeteria.
Conclusion
Because the University-owned real estate at issue in this case is
effectively under the control of the Commonwealth government, it is
presumptively immune from local taxation.12 The School District did not
12
The School District refers us to this Court’s unpublished decisions in The Pennsylvania State
System of Higher Education v. Indiana Area School District (Pa. Cmwlth., No. 184 M.D. 2011,
filed April 5, 2012), aff’d per curiam,
69 A.3d 236
(Pa. 2013), and Indiana University of
Pennsylvania v. Indiana County Board of Assessment Appeals (Pa. Cmwlth., No. 1923 C.D.
2014, filed September 17, 2015), appeal denied,
140 A.3d 14
(Pa. 2016). These cases involved
the University-owned Robertshaw Property, which was used to operate the Indiana County Small
Business Incubator and for administrative offices and classrooms. The Incubator is part of the
University’s College of Business and provides assistance to start-up or developing companies in
15
demonstrate that it has legislative authority to levy property taxes on the University
properties. Accordingly, we affirm the trial court’s order insofar as it held the
University is immune from paying tax on the land and vacant building space. The
order of the trial court is reversed insofar as it imposed local real estate tax on the
buildings encumbered by commercial leases.
_____________________________________
MARY HANNAH LEAVITT, President Judge
Indiana County. The property was originally tax exempt under the Keystone Opportunity
Enterprise Zone, which expired in 2011. In both appeals to this Court, we determined that the
property was not immune or exempt from local property tax because the commercial leases to
third parties did not further the University’s purpose of educating undergraduate and graduate
students.
To the extent that these cases contain language that is inconsistent with today’s decision,
they are overruled. We acknowledge that our Supreme Court affirmed this Court’s decision in
the first Incubator case cited above. The Court did so by per curiam order, however, and did not
explain its rationale or provide any guidance on the legal issues.
16
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Indiana University of Pennsylvania, :
Appellant :
:
v. :
:
Jefferson County Board of :
Assessment Appeals :
:
v. : No. 775 C.D. 2019
:
Punxsutawney Area School District :
and Borough of Punxsutawney :
ORDER
AND NOW, this 3rd day of December, 2020, the order of the Court of
Common Pleas of Jefferson County dated May 23, 2019, is AFFIRMED in part
and REVERSED in part in accordance with the foregoing opinion.
_____________________________________
MARY HANNAH LEAVITT, President Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Indiana University of Pennsylvania, :
Appellant :
:
v. :
:
Jefferson County Board of Assessment :
Appeals :
:
v. : No. 775 C.D. 2019
: Argued: May 14, 2020
Punxsutawney Area School District :
and Borough of Punxsutawney :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE J. ANDREW CROMPTON, Judge
DISSENTING OPINION
BY JUDGE BROBSON FILED: December 3, 2020
Notwithstanding appealing aspects of the majority opinion, I respectfully
cannot join. The Court of Common Pleas of Jefferson County did not err in its
application of the Pennsylvania Supreme Court’s binding precedent in Southeastern
Pennsylvania Transportation Authority (SEPTA) v. Board of Revision of
Taxes,
833 A.2d 710
(Pa. 2003), to the facts of this case. Moreover, I respectfully
disagree with the majority’s decision to overrule this Court’s prior unreported
decisions in Pennsylvania State System of Higher Education v. Indiana Area School
District (Pa. Cmwlth., No. 184 M.D. 2011, filed April 5, 2012), aff’d per curiam,
69 A.3d 236
(Pa. 2013), and Indiana University of Pennsylvania v. Indiana County
Board of Assessment Appeals (Pa. Cmwlth., No. 1923 C.D. 2014, filed
September 17, 2015), appeal denied,
140 A.3d 14
(Pa. 2016).
I, therefore, respectfully dissent.
P. KEVIN BROBSON, Judge
Judge Covey joins in this Dissenting Opinion.
PKB-2 |
4,639,133 | 2020-12-03 14:21:45.097486+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/163CD20_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Highlands School District :
: No. 163 C.D. 2020
v. :
: Argued: October 15, 2020
Brian Rittmeyer and Tribune-Review, :
:
Appellants :
BEFORE: HONORABLE P. KEVIN BROBSON, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
OPINION BY
JUDGE McCULLOUGH FILED: December 3, 2020
Brian Rittmeyer and the Tribune-Review appeal from the January 6, 2020
order of the Honorable W. Terrence O’Brien of the Court of Common Pleas of
Allegheny County (trial court), which reversed the final determination of the Office of
Open Records (OOR) and denied Rittmeyer’s Right-to-Know Law (RTKL)1 request
for the names of two employees of the Highlands School District (Highlands) who had
been placed on unpaid leave.
Background
Rittmeyer is a staff writer for the Tribune-Review (collectively,
Rittmeyer). Rittmeyer learned that, at a public school board meeting, Highlands had
placed an employee on unpaid disciplinary leave. In order to protect the employee’s
1
Act of February 14, 2008, P.L. 6, 65 P.S. §§67.101-67.3104.
identity, Highlands referred to the employee as “employee #5381.” (Trial Court
Opinion, 4/27/2020 (Tr. Ct. Op.), at 1.) On February 18, 2019, Rittmeyer submitted a
RTKL request seeking information about this employee, specifically the employee’s
name, job title, length of employment, salary, and a statement of the charges that
resulted in the disciplinary action. Highlands provided Rittmeyer with the employee’s
job title, length of employment, and salary, but denied him access to the employee’s
name and the statement of the charges. Rittmeyer appealed to the OOR, contending
that Highlands was obligated to disclose the employee’s name. On April 30, 2019, the
OOR granted Rittmeyer’s appeal and ordered Highlands to provide Rittmeyer with the
employee’s name.
On April 16, 2019, Rittmeyer filed a similar request for information
concerning another employee who also was placed on unpaid leave. This employee
was identified as “employee #4367.” Id. at 2. Highlands again refused to disclose the
name of this employee, and Rittmeyer appealed to the OOR.2 In a decision issued on
June 13, 2019, which was nearly identical to that concerning employee #5381, the OOR
ordered Highlands to provide Rittmeyer with the name of employee #4367.
Before the OOR, Highlands argued that the names of the employees were
protected from disclosure under section 708(b)(7)(viii) of the RTKL, which excludes,
in relevant part, “records relating to an agency employee,” including “[i]nformation
regarding discipline, demotion or discharge contained in a personnel file.” 65 P.S.
§67.708(b)(7)(viii). This exemption, however, “shall not apply to the final action of
an agency that results in demotion or discharge.” Id. The OOR concluded that section
708(b)(7)(viii) was inapplicable because Rittmeyer merely sought the names of the
employees, not any record contained in their personnel files. Reasoning that the names
2
Rittmeyer’s appeals did not concern the statement of charges against either employee. Thus,
only the employees’ names are at issue in this appeal.
2
of public employees are generally considered public information, and further noting
that Highlands lists the names of its employees on its website, the OOR concluded that
Highlands failed to show that the names of the specific employees were exempt from
disclosure under section 708(b)(7)(viii) of the RTKL. (Reproduced Record (R.R.) at
86a-87a; 126a-27a.)
Highlands appealed the OOR’s orders concerning both employees to the
trial court, and the matters were consolidated. The trial court reversed the OOR’s
determinations on January 6, 2020. In its supporting opinion, the trial court disagreed
with the OOR concerning the applicability of the exception set forth at section
708(b)(7)(viii) of the RTKL. The trial court noted that the exception precludes
disclosure of “[i]nformation regarding discipline, demotion or discharge contained in
a personnel file,” 65 P.S. §67.708(b)(7)(viii), and observed that, “[o]bviously, an
employee’s name is contained in the personnel file.” (Tr. Ct. Op. at 4.) While the OOR
relied upon the generally public nature of the names of public employees, the trial court
opined that here, “it is not a random name that is requested, but the name of an
employee in connection with disciplinary action.” Id. To disclose the names of
employees subject to discipline, the trial court opined, “would thwart the purpose of
confidentiality.” Id. The trial court concluded that an absurd result would occur if
section 708(b)(7)(viii) of the RTKL was interpreted as exempting the statement of
charges against the employees, but requiring disclosure of those employees’ names.
Id. The trial court reasoned that the “demotion or discharge” provision did not apply,
inasmuch as Highlands’ decision to place the employees on unpaid leave was not a
“final action” resulting in their demotion or discharge. Id. Thus, in the trial court’s
view, section 708(b)(7)(viii) of the RTKL applied and protected the employees’ names
from disclosure.
3
The trial court further rejected Rittmeyer’s suggestion that the RTKL was
superseded by a provision of the Public School Code of 1949 (School Code). 3
Rittmeyer invoked section 1127 of the School Code, which provides:
Before any professional employe having attained a status of
permanent tenure is dismissed by the board of school
directors, such board of school directors shall furnish such
professional employe with a detailed written statement of the
charges upon which his or her proposed dismissal is based
and shall conduct a hearing. A written notice signed by the
president and attested by the secretary of the board of school
directors shall be forwarded by registered mail to the
professional employe setting forth the time and place when
and where such professional employe will be given an
opportunity to be heard either in person or by counsel, or
both, before the board of school directors and setting forth a
detailed statement of the charges. Such hearing shall not be
sooner than ten (10) days nor later than fifteen (15) days after
such written notice . . . .
Id. at 5 (quoting 24 P.S. §11-1127).
The trial court observed that this section of the School Code requires a
school board to issue a pre-termination resolution and to provide an employee with a
statement of charges prior to a hearing on the matter. This did not conflict with the
relevant provision of the RTKL, the trial court reasoned, because the contemplated
action is not the “final action” to which section 708(b)(7)(viii) refers. Here, the court
noted that Rittmeyer requested the records relating to the employees after the school
board issued a pre-termination resolution authorizing disciplinary action and the
issuance of a statement of charges to the employees, but before the board took any
“final action” with respect to the employees’ discipline. (Tr. Ct. Op. at 5.) Moreover,
contrary to Rittmeyer’s argument, the trial court observed that there is no statutory
requirement that the pre-charge determination be made public. Id. at 6. The trial court
3
Act of March 10, 1949, P.L. 30, as amended, 24 P.S. §§1-101—27-2702.
4
further commented that, even if the pre-charge determination must be made public, the
name of the employee would not be relevant because “it is the employee’s conduct that
is considered, not his or her identity.” Id. Because it found the cited provision of the
School Code inapplicable, and because the “RTKL keeps matters involving the
discipline of employees confidential, unless there is a final action that results in
demotion or discharge,” the trial court concluded that Rittmeyer was not entitled to the
the names of employee #5381 or employee #4367.
Rittmeyer appealed the trial court’s order to this Court.4 Rittmeyer
presents a single question for review: whether the requested names are exempt from
disclosure under the RTKL.
Discussion
A. The Parties’ Arguments
Rittmeyer places little focus upon the RTKL itself, and instead contends
that public disclosure of the employees’ names is mandated not by the RTKL, but by
the School Code. Rittmeyer emphasizes that, as discussed in Reese v. Pennsylvanians
for Union Reform,
173 A.3d 1143
, 1149-50 (Pa. 2017), the RTKL expressly states that,
in the event of a conflict with another law concerning records access, the RTKL shall
not apply. (Rittmeyer’s Br. at 10.) Specifically, the RTKL states that, if its “provisions
. . . regarding access to records conflict with any other Federal or State law, the
provisions of [the RTKL] shall not apply.” Section 3101.1 of the RTKL, 65 P.S.
4
Our review of a trial court’s order in a RTKL dispute is “limited to determining whether
findings of fact are supported by competent evidence or whether the trial court committed an error of
law, or an abuse of discretion in reaching its decision.” Borough of Pottstown v. Suber-Aponte,
202 A.3d 173
, 178 n.8 (Pa. Cmwlth. 2019) (quoting Butler Area School District. v. Pennsylvanians for
Union Reform,
172 A.3d 1173
, 1178 n.7 (Pa. Cmwlth. 2017)). “The scope of review for a question
of law under the [RTKL] is plenary.”
Id.
(quoting SWB Yankees LLC v. Wintermantel,
999 A.2d 672
,
674 n.2 (Pa. Cmwlth. 2010), aff’d,
45 A.3d 1029
(Pa. 2012)).
5
§67.3101.1; see also section 305(a)(3), (b)(3) of the RTKL, 65 P.S. §67.305(a)(3),
(b)(3) (records in possession of a Commonwealth, local, legislative, or judicial agency
shall be presumed to be public unless “the record is exempt from disclosure under any
other Federal or State law or regulation or judicial order or decree”). Because
Rittmeyer interprets section 1127 of the School Code, supra, to require the disclosure
of a professional employee’s identity in order to initiate the disciplinary process,
Rittmeyer contends that this provision of the School Code conflicts with section
708(b)(7)(viii) of the RTKL. Therefore, according to Rittmeyer, the School Code must
prevail.
Rittmeyer adds that “to keep the employee’s name anonymous would
make the whole public requirement of a resolution an exercise in futility.” (Rittmeyer’s
Br. at 10.) If the school board may pass a public resolution authorizing the initiation
of a disciplinary process without identifying the employee subject to discipline,
Rittmeyer asserts, then the members of the public attending the school board meeting
would be “mere potted plants.” Id. at 11. That is, without knowing the identity of the
employee at issue, the public would be unable to offer any meaningful comment on the
matter. Id.
Where the trial court observed that nothing in section 1127 of the School
Code requires a “public” resolution, Rittmeyer invokes the Sunshine Act5 to suggest
the contrary. Rittmeyer acknowledges that section 708 of the Sunshine Act permits an
agency to discuss employment matters in a private executive session rather than an
open meeting, but stresses that “official action” on such matters must be taken at an
open meeting. (Rittmeyer’s Br. at 11 (citing 65 Pa.C.S. §708(c)). Rittmeyer further
questions the trial court’s suggestion that it is not the employee’s name that is relevant
5
65 Pa.C.S. §§701-716.
6
to the initiation of disciplinary proceedings, but rather the employee’s conduct.
Rittmeyer suggests that there is no reason to draw a distinction between the employee’s
name and the employee’s conduct, and states that “[b]oth facts would be statements in
the employee[’]s ‘personnel file’” and are therefore “subject to non-disclosure under
[section 708(b)(7)(viii)] of the RTKL.” Id. at 13.
Highlands, by contrast, contends that the requested names fall within the
RTKL’s exception for “[i]nformation regarding discipline, demotion or discharge
contained in a personnel file.” (Highlands’ Br. at 7 (quoting 65 P.S.
§67.708(b)(7)(viii).) Highlands suggests that the purpose of this exception is to protect
an employee’s information until the conclusion of the disciplinary process, thereby
ensuring that the employee receives due process before demotion or discharge.6
Highlands further stresses that the employees at issue have not been subject to any final
action resulting in their demotion or discharge, but rather, were placed on unpaid leave
while the disciplinary process was pending. Id. at 8. Thus, in Highlands’ view, the
employees are entitled to continued confidentiality until there is a “final action” that
“results in demotion or discharge.” Id. (citing 65 P.S. §67.708(b)(7)(viii)). At this
stage, the school board merely issued a resolution authorizing the initiation of the
disciplinary process and the provision of a statement of charges to each employee,
which is necessary to ensure that the employee receives due process, but does not
guarantee that the employee ultimately will be demoted or discharged. Id. at 8-9.
Highlands cautions that, if “a school is forced to reveal the names of employees placed
6
Although the claim before us sounds in statutory construction and does not directly implicate
constitutional due process jurisprudence, Highlands correctly notes that a tenured public employee is
entitled to due process protections arising out of his property interest in the position. These procedural
protections include “oral or written notice of the charges against him, an explanation of the
employer’s evidence, and an opportunity to present his side of the story.” Cleveland Board of
Education v. Loudermill,
470 U.S. 532
, 546 (1985); see also Burger v. School Board of McGuffey
School District,
923 A.2d 1155
, 1157 n.2 (Pa. 2007).
7
on unpaid leave, such employees who retain their jobs will do so with the public’s
knowledge that they were the subject of potential discipline.” Id. at 9.
Highlands argues that it fully complied with the steps outlined in the
School Code, as discussed in this Court’s decision in School District of Philadelphia
v. Jones,
139 A.3d 358
(Pa. Cmwlth. 2016) (en banc). Jones made clear that section
1127 of the School Code requires a school board “to resolve to demote the employee
and to furnish him with a written statement of the charges prior to the hearing.” Id. at
368 (quoting Patchel v. Wilkinsburg School District,
400 A.2d 229
, 232 (Pa. Cmwlth.
1979)) (emphasis omitted). Citing section 708 of the Sunshine Act, Highlands
observes that the underlying discussions concerning the initiation of disciplinary
proceedings may be held in a private executive session, but the school board’s vote
upon the resolution must take place in public. (Highlands’ Br. at 11 (citing 65 Pa.C.S.
§708(a), (c).) “Thus,” Highlands summarizes, “what is now referred to as a Jones
resolution is the public board action that authorizes the initiation of disciplinary
proceedings against a school employee.” Id. However, if that initial resolution was to
require the disclosure of the employee’s name, then the public would have access to
“information regarding discipline or discharge contained in a personnel file prior to a
final action of termination,” which is information that remains confidential under the
RTKL. Id. (citing 65 P.S. §67.708(b)(7)(viii)) (emphasis in original). This information
must be protected at the initial resolution stage, Highlands suggests, because even if
the employee then prevails later in the disciplinary process, the employee’s reputation
already would have been tarnished without due process. Id.
Highlands observes that the Sunshine Act requires official actions and
deliberations of an agency to take place at a meeting open to the public, unless the
purpose of the meeting is “[t]o discuss any matter involving the employment,
8
appointment, termination of employment, terms and conditions of employment,
evaluation of performance, promotion, or disciplining [sic] of any specific . . . current
public officer or employee employed or appointed by the agency . . . .” Id. at 12
(quoting 65 Pa.C.S. §708(a)(1)) (emphasis in original). Such matters may be discussed
in an executive session that excludes the public. In Highlands’ view, it is thus clear
that matters involving the disciplinary process for employees—including the name of
the employee to be disciplined—need not be disclosed to the public. Id. at 13. The
duty to maintain the employee’s confidentiality only ends, Highlands argues, upon a
“final action” that “results in demotion or discharge.” Id. (quoting 65 P.S.
§67.708(b)(7)(viii)).
Disputing Rittmeyer’s primary argument, Highlands contends that there
is no requirement in section 1127 of the School Code, nor in any other provision of the
School Code, that information concerning employee discipline be provided to the
public. Section 1127 of the School Code, as discussed in Jones, merely requires school
boards to “pass a resolution that has sufficient evidence to carry out due process
procedures leading to discipline, demotion, or discharge of professional employees,”
but does not require the board to “publicly deliberate the merits of passing such a
resolution.” (Highlands’ Br. at 14.) To do so, Highlands argues, would be contrary to
the Sunshine Act, which permits such deliberations to be held in an executive session.
Id. Highlands thus suggests that Rittmeyer’s objection to the lack of public
participation in the issuance of the resolution amounts to a disagreement with the plain
language of the Sunshine Act, not with Highlands’ application of the RTKL. Id.
Intervening in this matter is the Highlands Education Association,
PSEA/NEA (Association), the exclusive collective bargaining unit for Highlands’
professional employees, including the two employees whose names are presently at
9
issue. The Association agrees with Highlands’ position concerning the statutory
requirements. However, should we agree with Rittmeyer’s statutory analysis, the
Association urges us to affirm the trial court’s order nonetheless, invoking the
constitutional balancing test that our Supreme Court articulated in Pennsylvania State
Education Association v. Department of Community and Economic Development,
148 A.3d 142
(Pa. 2016) (holding that the right to informational privacy under PA. CONST.
art. I, §1, may not be violated unless outweighed by a public interest favoring
disclosure). (Association’s Br. at 17-23.) In light of our analysis and disposition
below, we need not address this argument.
B. Analysis
“The RTKL is remedial in nature and ‘is designed to promote access to
official government information in order to prohibit secrets, scrutinize the actions of
public officials, and make public officials accountable for their actions.’” Office of the
Governor v. Davis,
122 A.3d 1185
, 1191 (Pa. Cmwlth. 2015) (en banc) (quoting
Pennsylvania State Police v. McGill,
83 A.3d 476
, 479 (Pa. Cmwlth. 2014) (en banc)).
Consistent with the RTKL’s goal of promoting government transparency, “the
exceptions to disclosure of public records must be narrowly construed.”
Id.
As a local agency, Highlands is subject to the disclosure requirements of
the RTKL. See Butler Area School District v. Pennsylvanians for Union Reform,
172 A.3d 1173
, 1179 (Pa. Cmwlth. 2017) (“As a local agency, the [s]chool [d]istrict has a
statutory duty to “provide public records in accordance with [the RTKL].”) (quoting
section 302 of the RTKL, 65 P.S. §67.302). Thus, records in Highlands’ possession
are presumed to be public records, unless they are (1) exempt from disclosure under
section 708 of the RTKL; (2) protected by a privilege; or (3) exempt from disclosure
10
under any other federal or state law or judicial order or decree. Section 605(a) of the
RTKL, 65 P.S. §67.605(a). As noted above, the exception at issue here is one set forth
in section 708 of the RTKL, which provides, in relevant part:
(b) Exceptions.--Except as provided in subsections (c) and
(d), the following are exempt from access by a requester
under this act:
***
(7) The following records relating to an agency
employee:
***
(viii) Information regarding discipline,
demotion or discharge contained in a personnel
file. This subparagraph shall not apply to the
final action of an agency that results in
demotion or discharge.
65 P.S. §67.708(b)(7)(viii).
Rittmeyer appears to acknowledge that the requested employees’ names
fall within the ambit of section 708(b)(7)(viii) of the RTKL. Indeed, in challenging the
trial court’s conclusion that it is the employees’ conduct, rather than their identities,
that is relevant to the initiation of disciplinary proceedings, Rittmeyer concedes that
both a description of the conduct and the employees’ identities “would be statements
in the employees[’] ‘personnel file’ — subject to non-disclosure under [section
708(b)(7)(viii)] of the RTKL.” (Rittmeyers’ Br. at 12-13.) Rather than the applicable
RTKL provision, Rittmeyer bases the argument for disclosure upon the School Code
and the Sunshine Act, and relies upon the RTKL primarily for its limitation relating to
other statutes. Section 3101.1 of the RTKL provides that, “[i]f the provisions of [the
11
RTKL] regarding access to records conflict with any other Federal or State law, the
provisions of [the RTKL] shall not apply.” 65 P.S. §67.3101.1.
Accordingly, our task is one of statutory interpretation, as we must
determine whether the School Code or the Sunshine Act pose any conflict with the
RTKL “regarding access to records.” Id. The relevant section of the School Code,
section 1127, sets forth the procedure that a school board must follow prior to
dismissing a professional employee. Given its centrality to the parties’ arguments, we
reproduce this section in its entirety:
Before any professional employe having attained a status of
permanent tenure is dismissed by the board of school
directors, such board of school directors shall furnish such
professional employe with a detailed written statement of the
charges upon which his or her proposed dismissal is based
and shall conduct a hearing. A written notice signed by the
president and attested by the secretary of the board of school
directors shall be forwarded by registered mail to the
professional employe setting forth the time and place when
and where such professional employe will be given an
opportunity to be heard either in person or by counsel, or
both, before the board of school directors and setting forth a
detailed statement of the charges. Such hearing shall not be
sooner than ten (10) days nor later than fifteen (15) days after
such written notice. At such hearing all testimony offered,
including that of complainants and their witnesses, as well as
that of the accused professional employe and his or her
witnesses, shall be recorded by a competent disinterested
public stenographer whose services shall be furnished by the
school district at its expense. Any such hearing may be
postponed, continued or adjourned.
24 P.S. §11-1127.
Interpreting this section, this Court has held that a school board must
“resolve to demote the employee and to furnish him with a written statement of the
charges prior to the hearing.” Jones, 139 A.3d at 368 (quoting Patchel, 400 A.2d at
12
232) (emphasis omitted). However, section 1127 plainly contains no provision relating
to public access to records. Section 1127 implicates the right of the employee to receive
adequate process, and does not pertain to any right of the public to access information
about that employee. Indeed, section 1127 contains no language whatsoever mandating
public disclosure of the identity of the employee subject to the initiation of the
disciplinary process. Accordingly, no conflict between section 1127 of the School
Code and section 708(b)(7)(viii) of the RTKL is apparent.
We further find no conflict between the Sunshine Act and the relevant
provision of the RTKL. Section 704 of the Sunshine Act provides that “[o]fficial
action[7] and deliberations by a quorum of the members of an agency shall take place
at a meeting open to the public unless closed under section 707 (relating to exceptions
to open meetings), [or] 708 (relating to executive sessions) . . . .” 65 Pa.C.S. §704
(emphasis added). Section 708(a)(1) of the Sunshine Act, in turn, provides that an
agency may hold executive sessions closed to the public for several reasons, including
“[t]o discuss any matter involving the employment, appointment, termination of
employment, terms and conditions of employment, evaluation of performance,
promotion or disciplining [sic] of any . . . employee employed or appointed by the
agency.” Id. §708(a)(1). This is wholly consistent with the RTKL’s exemption for
7
The Sunshine Act defines “official action” as:
(1) Recommendations made by an agency pursuant to statute,
ordinance or executive order.
(2) The establishment of policy by an agency.
(3) The decisions on agency business made by an agency.
(4) The vote taken by any agency on any motion, proposal, resolution,
rule, regulation, ordinance, report or order.
65 Pa.C.S. §703.
13
“[i]nformation regarding discipline, demotion or discharge contained in a personnel
file.” 65 P.S. §67.708(b)(7)(viii).
Section 708 of the Sunshine Act further provides that “[o]fficial action on
discussions held pursuant to subsection (a) shall be taken at an open meeting.” 65
Pa.C.S. §708(c). “Official action” includes a vote taken by an agency on a resolution.
Id. §703; see supra n.7. Accordingly, although the discussions concerning an
employee’s discipline may be conducted in an executive session that excludes the
public, the school board’s resolution initiating the disciplinary process must be voted
upon at a public meeting. However, no provision of the Sunshine Act mandates that
such a resolution must entail public disclosure of the name of the employee subject to
discipline.
That is not to say, of course, that the identity of the employee subject to
discipline must remain confidential in perpetuity. The caveat in section 708(b)(7)(viii)
of the RTKL states that the exemption from public access “shall not apply to the final
action of an agency that results in demotion or discharge.” 65 P.S. §67.708(b)(7)(viii).
Accordingly, should the disciplinary process in this matter ultimately result in the
demotion or discharge of the employees at issue, then records relating to that discipline
will no longer be exempt from disclosure under the RTKL. However, no provision of
either the School Code or the Sunshine Act mandates disclosure of the employees’
identities prior to such “final action.”
Thus, we find no provision of the School Code or the Sunshine Act that
conflicts “with the provisions of [the RTKL] regarding access to records,” 65 P.S.
§67.3101.1, such that the exemption set forth in section 708(b)(7)(viii) of the RTKL
must give way to an overriding provision that mandates disclosure of records to the
14
public. We accordingly find no basis to disturb the trial court’s order holding that the
requested records are exempt from disclosure under the RTKL.
The order of the trial court is affirmed.
_______________________________
PATRICIA A. McCULLOUGH, Judge
15
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Highlands School District :
: No. 163 C.D. 2020
v. :
:
Brian Rittmeyer and Tribune-Review, :
:
Appellants :
ORDER
AND NOW, this 3rd day of December, 2020, the January 6, 2020 order
of the Court of Common Pleas of Allegheny County is AFFIRMED.
________________________________
PATRICIA A. McCULLOUGH, Judge |
4,639,134 | 2020-12-03 14:21:45.432672+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/4LIN17_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Franjo Vernic DBA SF Rehabitat, :
Objector :
:
v. : No. 4 LIN 2017
: Argued: September 17, 2020
Lincoln General Insurance Company, :
In Liquidation, :
Respondent :
:
(Ancillary matter to In Re: Lincoln :
General Insurance Company In :
Liquidation No. 1 LIN 2015) :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION BY
JUDGE COHN JUBELIRER FILED: December 3, 2020
Presently before the Court is the question of what priority level should be
assigned to the claim of Franjo Vernic, d/b/a SF Rehabitat or San Francisco
Rehabitat (Vernic), arising out of proceedings surrounding the Notice of
Determination (NOD) issued by the Insurance Commissioner in her capacity as
Liquidator of Lincoln General Insurance Company (Lincoln). The Court granted
reargument at the Liquidator’s request on this specific issue following a single-
judge opinion sustaining Vernic’s exceptions to the Referee’s Report and
Recommendation (Report) on Vernic’s objections to the NOD.1 Vernic v. Lincoln
Gen. Ins. Co. (Pa. Cmwlth., No. 4 LIN 2017, filed Dec. 5, 2019) (Vernic I).
1
The Liquidator had sought reargument on other issues, which the Court denied.
Therein, the Court sustained Vernic’s exceptions on the basis that he did not
irrevocably assign his claim against Lincoln and his claim should be valued at the
total amount of the judgment against Vernic and the attorney’s fees he incurred as
a result of Lincoln’s breach of its duty to defend in California. The Court had also
affirmed the Referee’s decision assigning the claim to class (b) under the order of
distribution provision found in Section 544 of The Insurance Department Act of
19212 (Act), as the Liquidator had initially found. The Liquidator subsequently
asked to assign Vernic’s claim to class (e) as a general creditor claim. Under
California law, the Liquidator asserts that recovery of a judgment resulting from a
wrongful failure to defend is the equivalent to recovery resulting from a bad faith
tort claim, and bad faith tort claims are entitled to no more than class (e) priority.
Vernic first argues the Liquidator waived the ability to challenge the priority level
by failing to file exceptions like he did to the Report. Assuming the issue was
preserved, Vernic argues that the claim should be assigned to class (b) as a
“claim[] under policies for losses wherever incurred,” 40 P.S. § 221.44(b), as the
Liquidator originally found, and the Referee held.
I. FACTUAL BACKGROUND
A. The Policy and Underlying California Litigation
The relevant facts were previously set forth by this Court in Vernic I, as
follows:
Lincoln issued a commercial general liability policy to Vernic, a
general contractor in California, effective from February 15, 2008[,]
to February 15, 2009 (Policy). The Policy stated in pertinent part:
2
Act of May 17, 1921, P.L. 789, as amended, 40 P.S. § 221.44. Section 544 was added
by Section 2 of the Act of December 14, 1977, P.L. 280.
2
We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury”
or “property damage” to which this insurance applies.
We will have the right and duty to defend the insured
against any “suit” seeking those damages.
(Policy at 1.) The Policy also contained a subcontractor exclusion,
which permitted Lincoln to disclaim coverage for damages caused by
a subcontractor [that] failed to satisfy four specific conditions as set
forth in the Policy.
During the Policy’s coverage period, Vernic entered into a contract
with Edwin A. Hardy (Hardy) to complete remodeling work,
including architectural services, at Hardy’s single-family residence
(Property). Vernic then entered into a contract with Gerald J.
Veverka, d/b/a Veverka Architects[] (Veverka), wherein Veverka
agreed to provide architectural services at the Property. The contract
between Vernic and Veverka included an indemnification provision
requiring Vernic to indemnify Veverka for any and all claims arising
out of Veverka’s architectural services. While Vernic was performing
work at the Property and while the Policy was in effect, the Property
sustained significant damage due to water infiltration. On November
2, 2011, Hardy filed a civil complaint against Vernic in the San
Francisco County Superior Court (trial court), docketed at Edwin A.
Hardy v. Franjo Vernic dba San Francisco Rehabitat, No. CGC-11-
515611, asserting several causes of action arising from Vernic’s
allegedly defective work and the resulting damages to Hardy’s
residence.
It is undisputed that both before and after the complaint was filed,
Vernic and Hardy each notified Lincoln of the claims of damage
allegedly caused by Vernic. On June 14, 2011, Lincoln commenced
an investigation into the claims through an independent adjusting
company, Sams & Associates (Sams). While Sams authored three
reports, the last of which was dated September 29, 2011, its adjuster
admitted to being unable to reach a conclusion regarding whether
Drummond Masonry, a subcontractor whose defective stone work was
believed to be the cause of all or some of the damage to the Property,
was hired by Vernic or Hardy. The last report indicated that Sams
was unable to complete its claim analysis at that time and would
follow up with Vernic to review requested documents from his sub-
contractors.
3
Despite these facts and the questionable applicability of the Policy’s
subcontractor exclusion, Lincoln formally denied coverage in letters
to Vernic dated October 21, 2011[,] and December 14, 2011. . . .
Because Lincoln denied Vernic representation and Vernic could not
afford to hire a private attorney at that time, Vernic filed a pro se
response to Hardy’s complaint.
On or about February 28, 2013, Hardy filed an amended complaint
adding Veverka as a defendant.[] Veverka tendered the defense of the
amended complaint to Vernic and Lincoln, and Lincoln denied the
tender and refused to defend Veverka. Thereafter, Veverka served a
cross-complaint on Vernic for express indemnity. Vernic claims he
was financially unable to file a response to either Hardy’s amended
complaint or Veverka’s cross-complaint. While Vernic did have
private counsel for a period of time during the parties’ subsequent
mediation, he was unable to afford trial counsel, and the case
proceeded to an uncontested bench trial. The trial court subsequently
entered judgment in favor of Hardy and against Vernic in the amount
of $846,779.09 . . . , and entered judgment in favor of Veverka and
against Vernic in the amount of $180,178 . . . , for a total judgment of
$1,026,957.09[,] (California judgment).
Vernic I, slip op. at 2-4 (footnotes omitted).
While the litigation was pending, the parties also entered into various
“agreements.” The first was a “Stipulation re Consent to Judgment and
Uncontested Trial” (Stipulation), which was not signed by any of the parties, but
indicated that Vernic could not afford counsel to defend against the claims and,
therefore, he agreed not to contest the claims and assigned Hardy and Veverka all
rights, claims, interest, and title in relevant insurance policies. Id. at 4-5. The
parties also entered into a Settlement Agreement and Mutual Release (Agreement)
signed by the relevant parties, which provided in relevant part that Vernic would
stipulate to a judgment and covenant not to execute against him or Lincoln and
Vernic would “seek recovery from his liability insurer . . . [with] any recovery
4
from Lincoln . . . apportioned as between [Hardy], [] Veverka, and Mr. Vernic.”
Id. at 6 (alterations in original) (emphasis omitted).
B. Liquidation Proceedings
In 2015, “upon the petition for review in the nature of a complaint for order
of liquidation of Lincoln filed by the Insurance Commissioner, . . . this Court
ordered that Lincoln be liquidated pursuant to Article V of the [Act],” the
Liquidator was appointed, and claims against Lincoln were ordered to be filed. Id.
at 7. “Vernic filed a timely proof of claim on June 13, 2016, demanding
$1,092,250.09 under the Policy . . . .” Id. The Liquidator issued the NOD,
assigning a priority level (b) classification and valuing Vernic’s proof of claim at
zero dollars, explaining that Vernic assigned any and all claims he had against
Lincoln to Hardy and Veverka. (NOD at 1.)
Following issuance of the NOD,
Vernic filed timely objections to the NOD arguing that (1) he did not
effectively assign his claims against Lincoln to other parties,
(2) payment of the judgment against him is not a prerequisite to the
allowance of a claim under the law, and (3) Lincoln improperly
denied him indemnification and a legal defense. The Liquidator filed
a response denying the material allegations in Vernic’s objections, and
asserting that (1) its denial of coverage was justified by the terms of
the Policy, (2) Vernic assigned his rights against Lincoln to Hardy and
Veverka, neither of whom filed a proof of claim, and (3) the
California judgment is unenforceable against Lincoln’s estate because
it was obtained through collusion.
Vernic I, slip op. at 8. At the parties’ request, this Court appointed a Referee, and
the parties agreed to use a summary judgment procedure before the Referee.
Before the Referee, the Liquidator asserted in response to Vernic’s claims that,
5
even if Vernic had not assigned his claim, his claim should be assigned class (e)
priority. Based upon the parties’ submissions, the Referee then issued his Report.
Specifically, the Referee recommended that the NOD be affirmed
with respect to the priority level (b) classification of Vernic’s claim,
but reversed as to the value of the claim. The Referee concluded that
Lincoln had a duty to defend Vernic in the California litigation
because Hardy’s complaint and amended complaint contained
allegations of property damage “actually or potentially within the
coverage of the [P]olicy.” (Report at 9 (emphasis in original).)
However, relying on the Stipulation rather than the Agreement, the
Referee concluded that “Vernic assigned any and all rights to recover
indemnity benefits from Lincoln to Hardy and Veverka[] . . . .” (Id. at
11.) Therefore, Vernic could not recover on the California litigation.
The Referee went on to conclude that Vernic did not and could not
assign his right to a defense, as that right is personal to the insured.
As such, the Referee recommended that Vernic’s claim be valued at
$44,131.69, the uncontested amount he personally paid for private
counsel as a result of Lincoln’s breach [of its duty] to defend. Given
his decision, the Referee also determined that challenges to the
procedure by which Hardy obtained the California judgment, which
would include the Liquidator’s allegation of collusion, were moot.
On February 8, 2019, Vernic filed . . . exceptions to the Report
claiming as follows:
1. The Referee erred in determining that the sole
damages flowing from the breach of the duty to defend
were defense fees and costs, as the judgment entered
against Vernic also flows directly from the failure to
defend; and
2. The Referee erred in determining that Vernic lacks
standing to pursue indemnity claims, because this finding
is based upon an erroneous determination that Vernic
irrevocably assigned his claims against Lincoln, a finding
which is not supported by, and is contravened by, the
great weight of the evidence.
Vernic I, slip op. at 8-9 (alterations in original).
6
Vernic contended that although the Referee was correct that Lincoln
breached its duty to defend Vernic, the Referee incorrectly concluded that the only
damages recoverable were legal fees and costs because California law provides
that an insurance company is liable for the entire judgment entered against the
insured when the insurer breaches the duty to defend or wrongfully denies
coverage. Vernic further asserted that he had standing because the evidence did
not support a determination that he irrevocably assigned his right to recover
damages from Lincoln. (See Vernic’s Memorandum of Law in Support of
Exceptions to the Referee’s Report at 4.) Vernic argued that the Stipulation was
not a final agreement but contemplated an assignment of rights that would be
effective upon the date such an assignment was executed; however, no such
assignment was ever executed. The Liquidator disputed both of these points and,
with respect to the value of the claim, asserted that under California law, refusal to
defend is a breach of the duty of good faith and fair dealing for which the measure
of damages is the insured’s legal fees. (See Memorandum of Law in Support of
Response of Lincoln at 12.) Vernic filed a response, emphasizing that the damages
resulting from Lincoln’s failure to defend include both defense costs and the
amount of the California judgment and maintaining no assignment of Vernic’s
claim. The Liquidator responded in a sur-reply memorandum of law, arguing that
given the Referee’s correct conclusion that Vernic assigned his claim for the
amount of the judgment, only the unassignable legal fees were recoverable.
Moreover, the Liquidator asserted that the Referee never addressed the issue of
whether the value of the California judgment would carry a different priority level
because it flowed from a bad faith refusal to defend. Therefore, if the Referee was
reversed with regard to the question of the assignment of the claim, the Liquidator
7
requested that this Court remand for the Referee to decide the priority issue, which
was fully briefed but not addressed by the Referee. (See Sur-Reply Memorandum
of Law in Support of Lincoln at 4-5.)
C. Vernic I and the Application for Reargument
After argument, the Court sustained Vernic’s exceptions. With regard to the
question of standing, the Court disagreed with the Referee that the documentary
evidence and conduct of the parties demonstrated that Vernic intended to assign his
claims. To be effective, an assignment must manifest the intention “to transfer the
right, without further action. . . .” Vernic I, slip op. at 11 (emphasis omitted). The
Court found that the Stipulation did not meet that requirement, and referred to
another document, “the related assignment,” which was never executed. Id. at 12.
In contrast, the Agreement, which did not contain an assignment, “show[ed]
marked indicia of finality.” Id. The Court also found that the conduct of the
parties did not support the finding of an assignment. Noting that during the
extensive history of litigation in federal and state courts, the parties had “vacillated
on the issue of whether an assignment was made,” the Court concluded that “one
thing remains clear – Vernic is the only party who filed a proof of claim during
Lincoln’s liquidation,” even though Veverka and Hardy were notified of the claim
period as well. Id. at 13. In summary, given that “the entire transaction, the
language of the documents, and the conduct of the parties [did] not clearly show
that their intent was to assign Vernic’s right to recover from Lincoln,” the Court
sustained Vernic’s exception to the Referee’s conclusion that he irrevocably
assigned his claims against Lincoln and so lacked standing. Id.
With regard to damages, the Court reiterated that the Referee determined
Lincoln had a duty to defend Vernic, which it breached, and the Liquidator did not
8
dispute that determination or file an exception to the Report, but instead argued
that the Court should adopt the Referee’s conclusion that Vernic’s award did not
include the amount of the California judgment. Because the Court agreed with the
Referee that Hardy’s claims against Vernic included allegations of property
damage that may be within the Policy’s coverage, the Court reviewed what
damages Vernic could recover. The Referee’s determination that the only
recoverable damages were litigation costs or attorney’s fees was premised upon the
determination that Vernic assigned his right to recover under the Policy, with
which the Court disagreed; therefore, the Court reviewed California law governing
an insurer’s denial of coverage or refusal to defend, which the parties do not
dispute controls here. The Court explained that “when ‘a liability insurer
wrongfully denie[s] coverage or refuses to provide a defense, then the insured is
free to negotiate the best possible settlement consistent with his or her interests,
including a stipulated judgment accompanied by a covenant not to execute.’” Id. at
14 (quoting Pruyn v. Agric. Ins. Co.,
42 Cal. Rptr. 2d 295
, 299 (Cal. Ct. App.
1995)). This was what had occurred in the present case, the Court concluded, as
Vernic was unable to afford an attorney and, thus, had to appear pro se to
participate in mediation and negotiate a settlement to the best of his abilities.
Lincoln did not take the steps to seek declaratory judgment as to coverage under
the Policy or defend under a reservation of rights, and because it did not, the Court
determined, “[u]nder these circumstances, the verdict is a proximate result of
Lincoln’s breach of its duty to defend.” Vernic I, slip op. at 15 (citing Amato v.
Mercury Cas. Co.,
61 Cal. Rptr. 2d 909
, 913, 915 (Cal. Ct. App. 1997)
(Amato II)3).
3
Amato II was issued after the California Court of Appeals remanded the case for the
(Footnote continued on next page…)
9
An insurance company that fails to provide a defense “is bound by the
judgment against its insured as to all issues which were litigated in the action
against the insured,” regardless of whether it derives from a good faith settlement,
a default judgment, or a judgment without opposition, the Court explained. Vernic
I, slip op. at 15 (quoting Amato II, 61 Cal. Rptr. 2d at 917). Here, because Lincoln
was aware of facts bringing the claims within possible coverage of the Policy and
it still refused to defend, the Court concluded Lincoln could not “now challenge
the judgment by claiming it was the product of collusion or by demanding a trial
within a trial.” Id. Further, the Court found there was sufficient judicial oversight
of the trial court to mitigate the risk of a collusive or fraudulent settlement and no
remand was necessary to consider the Liquidator’s allegation of collusion. Id.
Accordingly, the Court sustained Vernic’s exceptions to the Report, valued
Vernic’s claim as the total amount of the California judgment, plus the attorney’s
fees he personally incurred as a result of Lincoln’s breach of its duty to defend, and
directed the Liquidator to amend the NOD accordingly. Id. at 15-16.
The Liquidator timely filed an Application for Reargument, asserting
various bases why the Court should exercise its discretion for reargument,
including that the Court should address Lincoln’s argument as to which priority
level applies to Vernic’s claim. Because the Court determined the judgment was
the proximate result of Lincoln’s breach of the duty to defend, the Liquidator
_____________________________
(continued…)
trial court to conduct further proceedings in Amato v. Mercury Casualty Company,
23 Cal. Rptr. 2d 73
(Cal. Ct. App. 1993) (Amato I). On appeal after remand, the California Court of Appeals
issued its decision in Amato v. Mercury Casualty Company,
58 Cal. Rptr. 2d 784
(Cal. Ct. App.
1996). The California Court of Appeals then granted reargument and issued Amato II, which
reiterated the conclusions of the 1996 opinion and addressed the new arguments raised for
reargument.
10
asserted that Vernic’s claim for the amount of the entire judgment was a tort
remedy for the failure to defend, rather than a contractual breach, which constitutes
a general creditor claim subject to priority (e) classification. The Court granted
reargument “limited solely to the issue of what priority level(s) should be assigned
to [Vernic’s] claim.”4 (January 6, 2020 Order.)
II. DISCUSSION
A. Waiver
1. Parties’ Arguments
Before reaching the merits of the priority argument, the Court first considers
a threshold issue raised by Vernic: whether the Liquidator waived the ability to
challenge the priority level. Specifically, Vernic argues that the Liquidator failed
to file exceptions to the Referee’s Report within 30 days, as required by
Pennsylvania Rule of Appellate Procedure 3781(f), Pa.R.A.P. 3781(f). As a result,
Vernic argues the Liquidator is now foreclosed from challenging the class (b)
priority level assigned by the Referee. Vernic also points out that the class (b)
priority level assigned by the Referee is the same priority that the Liquidator
initially assigned the claim.
The Liquidator responds that the Liquidator did not waive the priority issue;
rather, Vernic did by trying to “refashion” his claim.5,6 (Liquidator’s Brief (Br.) at
4
The Court first granted reargument by Order dated January 3, 2020, and denied the
Application for Reargument to the extent that it requested a remand to the Referee. By Order
dated January 6, 2020, this Court clarified its prior order granting reargument by limiting the
issue to solely that of the priority level.
5
The Liquidator’s arguments concerning waiver have been reordered for ease of
discussion.
6
The Liquidator contends Vernic violated the Court’s order granting reargument by
raising an issue for which reargument was not granted and asks the Court, if necessary, to strike
(Footnote continued on next page…)
11
16.) According to the Liquidator, Vernic requested extra-contractual relief in his
proof of claim and, in his objections to the NOD, he asserted that his claim
sounded in tort, but before this Court, Vernic asserts his claim is contractually
based upon the Policy. It was at this time that the Liquidator asserted, at the first
opportunity, that Vernic’s claim warranted class (e) priority, a position the
Liquidator has continually argued since. The Liquidator further argues that
because the Referee found Vernic assigned his claim, the Referee did not decide
the priority issue and, as a result, the Liquidator could not have filed an exception
to the Report challenging priority because the Liquidator was not aggrieved and,
therefore, lacked standing. Moreover, the Liquidator argues waiver, generally, is
“incompatible” with liquidation proceedings and the Liquidator’s statutory duty to
protect the interests of Lincoln’s insureds by seeking “‘equitable apportionment of
any unavoidable loss’ caused by [] [Lincoln’s] failure.” (Id. at 11 (quoting Section
501(c)(iv) of the Act, 40 P.S. § 221.1(c)(iv)).) Further, the Liquidator argues
nothing in the Act precludes the Liquidator from changing the initial priority
assignment “as the facts develop,” (id. at 12), and the Court has the “ultimate
power to decide the correct priority assignment for every claim,” (id. at 13 (citing
40 P.S. § 221.44)).
2. Analysis
Although the Liquidator did not file a formal exception to the Referee’s
Report challenging the priority level, the Liquidator has consistently raised the
_____________________________
(continued…)
the portion of Vernic’s brief related thereto. However, because Vernic argued the Liquidator
waived the priority issue in his answer to the request for reargument, we will consider it.
12
issue, at a minimum, as an alternative argument throughout the proceedings.
Specifically, before the Referee, the Liquidator contended that even if Vernic had
not assigned his claim and had a claim for failure to defend, that claim would
warrant no more than (e) priority level. (See Liquidator’s Response to Vernic’s
Motion for Summary Judgment at 8-12.) Before this Court, addressing Vernic’s
exceptions to the Referee’s Report, the Liquidator contended that, should the Court
determine that Vernic did not assign his claims, this matter should be remanded
because “if the entire judgment were recoverable at all by anyone, it would carry a
class [(e)] priority rather than a class [(b)] priority because it flowed from a bad
faith cause of action.” (Sur-Reply Memorandum of Law at 5.)
Before the Referee, the Liquidator prevailed on its argument that Vernic
assigned his claim. As a result, the Liquidator was not aggrieved by the Report.
Rule 3781(f) of the Pennsylvania Rules of Appellate Procedure, Pa.R.A.P. 3781(f),
governs the filing of exceptions to a referee’s recommended decision.7 It provides
in pertinent part:
(1) Time for filing. Any party may file with the Court exceptions to
the Referee’s recommended decision no later than thirty (30) days
after the filing date of the recommended decision. The exception shall
be served on any other party and the referee.
....
(6) Final order. Upon completion of its review of exceptions, the
Court will enter a final order sustaining or overruling exceptions in
whole or in part. . . .
7
The Liquidator cites Rule 501 of the Pennsylvania Rules of Appellate Procedure,
Pa.R.A.P. 501, which provides that “any party who is aggrieved by an appealable order . . . may
appeal therefrom,” in support of its argument, but Rule 3781 governs the entire claim procedure
in liquidation proceedings from the filing of a claim through to issuance of a final order.
13
(7) When no exceptions filed. Any party may apply to the Court for,
or the Court on its own initiative may issue, an order either adopting
the recommended decision or stating that in the absence of exceptions,
the referee’s proposed order is entered as the order of the Court.
....
(9) Waiver. Unless otherwise ordered by the Court, failure to file
timely exceptions to a referee’s recommended decision shall be
deemed a waiver of further appeal if the Court approves the
recommended decision without modification.
Pa.R.A.P. 3781(f)(1), (6), (7), (9).
Because this Court did not adopt the Referee’s Report “without
modification” but instead sustained Vernic’s exceptions, the waiver in Rule
3781(f)(9) resulting from “failure to file timely exceptions to a referee’s
recommended decision” would not be implicated. Pa.R.A.P. 3781(f)(9). The
Liquidator’s argument regarding priority level was not implicated until the Court
sustained Vernic’s exceptions in Vernic I. In summary, because the Liquidator
raised priority throughout the proceedings, the Referee found in the Liquidator’s
favor on the assignment issue and did not specifically address the arguments
regarding the priority level, and this Court did not adopt the Referee’s Report
without modification, the Liquidator did not waive the issue of which priority level
applies.8 Accordingly, we turn to what priority level is appropriate for Vernic’s
claim.
8
Because the Court finds the Liquidator did not waive its argument related to priority, it
is unnecessary to address the Liquidator’s policy arguments.
14
B. Priority Level
1. Parties’ Arguments
The Liquidator’s argument that Vernic’s claim belongs in a class (e) priority
rather than class (b) priority is twofold: (1) the judgment for defective construction
work was not covered under the Policy; and (2) even if Lincoln wrongly denied
Vernic a defense under the Policy, that claim is tort-based, which falls in class (e).
First, with regard to whether the judgment was covered under the Policy, the
Liquidator argues as follows. To be entitled to class (b) priority, Vernic must be
seeking to recover a benefit to which he was entitled under the Policy. Lincoln
issued Vernic the Policy, which covered bodily injury or property damage due to
Vernic’s accidental conduct, but the Policy did not cover damage to, or defects in,
Vernic’s own work. Hardy alleged in his complaint that he experienced water
damage in the new home Vernic built as a result of Vernic’s defective
construction. Therefore, this damage did not fall within the coverage of the Policy.
California law supports this conclusion; the District Court for the Northern District
of California (Northern District Court) recently concluded that “a policy virtually
identical to Lincoln’s did not apply to defective construction claims against a
general contractor and specialty contractor on a hotel project” because defective
workmanship is not property damage and, even if it was, there was no coverage
given the policy’s exclusions. (Liquidator’s Br. at 18-19 (citing Webcor Constr.,
LP v. Zurich Am. Ins. Co.,
372 F. Supp. 3d 1061
(N.D. Cal. 2019), aff’d, 801 F.
App’x 577 (9th Cir. 2020)).) The Policy in the present case “did not cover
Vernic’s contractual assumption of liability for [] Veverka,” nor did Veverka
allege property damage under the Policy, thereby “eliminating any coverage for
Veverka’s cross-claim.” (Id. at 20.) The Referee “did not apply either the
15
[P]olicy’s language or the California coverage principles . . .” but nonetheless
concluded there was an obligation to defend without addressing “whether Hardy’s
claimed damages even qualified as ‘property damage’” or whether other exclusions
apply. (Id. at 21.)
Second, regardless of whether the claim which Vernic seeks to recover is
covered under the Policy, the Liquidator argues the claim warrants only class (e)
priority “because it sounds in tort.” (Id.) In support thereof, the Liquidator argues
that the California Court of Appeals held in Amato II that “[b]reach of an insurer’s
duty to defend violates a contractual obligation and, where unreasonable, also
violates the covenant of good faith and fair dealing, for which tort remedies are
appropriate.” (Id. at 22 (alteration in original) (quoting Amato II, 61 Cal. Rptr. 2d
at 912).) “Vernic based his claim in the Lincoln estate on Amato [II],” arguing that
when he objected to the NOD, the insurer can be liable for the judgments resulting
from third-party litigation where the insurer tortiously does not tender a defense.
(Id. at 23.) Vernic now claims to be seeking only contractual recovery, but as set
forth in Amato II, typical contract damages are the costs of defense while tort
damages include reimbursement for the judgment, even if it is not covered by an
insurance policy. Therefore, even if this Court agrees that Vernic’s claim is purely
contractual and entitled to priority (b) assignment, Vernic can only recover the
amount of his contract damages, the costs of defense, which is $44,131.69 in
counsel fees. Although Vernic contends that insureds, such as he, have always
been able to recover extra-contractual judgments, the California Court of Appeals
would not have had “to resort to tort law” in Amato II to award the amount of the
judgment if that was the case. (Id. at 25.) Additionally, the cases upon which
Vernic rely preceded Amato II, were mostly “decided in materially different
16
circumstances,” and only reiterate the principle that an insurer’s breach of its duty
to defend may allow the insured to recover the amount of a settlement or judgment.
(Id.) These cases do not address under what theory, tort or contract, the insured
may recover. Finally, this Court is required to treat similar claims consistently,
and this Court has already assigned claims like Vernic’s to class (e) priority, such
as in Cohen v. Reliance Insurance Company (Pa. Cmwlth., No. 2 REL 2006, filed
January 7, 2013), and Ario v. Reliance Insurance Company (Pa. Cmwlth., No. 269
M.D. 2001, filed July 2, 2009). Accordingly, the Liquidator asks this Court to
assign Vernic’s claim a priority level (e).
Vernic asserts that the class (b) priority is the correct classification, arguing
as follows. His claim is “for recovery of losses payable under [the P]olicy,” as he
seeks to recover amounts awarded against him within the $1,000,000 Policy limit
and the defense costs allowed under the Policy. (Vernic’s Br. at 20.) This claim
for “amounts payable under [the Policy]” falls within priority (b) as do “all claims
under policies for losses wherever incurred.” (Id. at 21 (quoting 40 P.S. § 221.44)
(emphasis omitted).) Moreover, the Liquidator’s argument otherwise is contrary to
California law. Even if the facts surrounding Lincoln’s denial of benefits may
support a bad faith claim if asserted in a California court, there has been no claim
for insurance bad faith in the present case. Vernic seeks only the amounts payable
under the Policy. While California law may permit an award of tort damages, in
addition to benefits under the Policy where there is a finding of bad faith, Vernic’s
claim is only for amounts owed under the Policy. If this Court accepted the
Liquidator’s argument, “losses to the insured flowing from Lincoln’s breach of its
duty to defend would be assigned an unfavorable priority position simply because
the insurer’s conduct not only breached the contract but was in ‘bad faith.’” (Id.)
17
It would be “patently unfair” to follow such logic as it would reward insurers for
“engaging in bad faith conduct by potentially having policy-based claims
extinguished along with ‘bad faith’ claims assigned a lower priority.” (Id. at 21-
22.)
Vernic argues that his claim is payable under the Policy because, under
California law, “[w]rongful failure to provide coverage or defend a claim is a
breach of contract” that implicates liability under the Policy. (Id. at 22 (quoting
Isaacson v. Cal. Ins. Guarantee Ass’n,
750 P.2d 297
, 308 (Cal. 1988)). As the
California Supreme Court has held, where an insured makes a reasonable
settlement after an insurer denies coverage in violation of its contractual duty, the
insured may seek to recover the amount of that settlement against the insurer. In
this case, the judgment was entered following a bench trial and constitutes
presumptive evidence of Vernic’s liability and the amount of that liability. This
liability derives from Lincoln’s breach of its contractual duty to defend; therefore,
Vernic did not need to make a showing of tortious breach or bad faith. It is well
settled that where an entity is bound by agreement to protect another from liability
and does not defend that party despite notice and an opportunity to do so, the entity
is bound by the result of the litigation. Lincoln had notice of the action and the
opportunity to defend Vernic, but it repeatedly refused to do so. In this way,
Vernic’s case is like those in California where judgment was entered against the
insured which led to a contractual right of recovery, but where there was no claim
for insurance bad faith.
Vernic contends this Court agreed that his underlying claims in the
California litigation were covered under the Policy because Vernic appeared at the
bench trial pro se and judgment was entered against him for property damage and
18
litigation costs. As this Court noted in Vernic I, the judgment entered against an
insured, such as Vernic, where the insurer fails to defend is “the proximate result
of the refusal to defend.” (Id. at 25.) This longstanding rule established through
case law does not require a finding of bad faith. Therefore, the judgment entered
against Vernic following Lincoln’s failure to defend is recoverable under the
Policy and there is no requirement for an action in bad faith in order to recover
those losses under the Policy.
Vernic argues the Liquidator’s reliance upon Amato v. Mercury Casualty
Company,
23 Cal. Rptr. 2d 73
(Cal. Ct. App. 1993) (Amato I), and Amato II is
misplaced. The longstanding law is that “the wrongful refusal to defend entitles
the insured to recover all damages within the policy resulting from the breach and
binds the insurer to the judgment entered against the insured,” (Vernic’s Br. at 27),
and the decisions in Amato I and Amato II did not change this rule. Rather,
although Amato I and Amato II involved facts supporting a recovery in tort for the
amount of the judgment, the California Court of Appeals “did not hold that this
was the only avenue to recovery of judgments entered as a result of the failure to
defend.” (Vernic’s Br. at 28.) Moreover, these decisions by the California Court
of Appeals cannot alter the controlling rule of the California Supreme Court in
Isaacson that wrongful failure to provide coverage is a breach of contract. The
possibility for recovery under both theories of tort and contract “does not eliminate
the insured’s right to pursue recovery under a purely contractual theory,” and both
“types of recovery are [] not coextensive.” (Id.) Vernic seeks only contractual
damages limited to the claims under the Policy. Finally, although the Liquidator
cites in its Application for Reargument various Pennsylvania case law and asserts
that the priority determination in this case conflicts with that law, Vernic contends
19
that these cases are distinguishable. Vernic’s claim should “be evaluated under
California law, which holds that both defense costs and the resulting judgment
within the policy limit are contractual losses under the policy,” bringing Vernic’s
claim “squarely within the scope of [Section 544(b)].” (Vernic’s Br. at 31.)
Therefore, the classification of this claim as priority (b) should be affirmed.
2. Analysis
“[C]laim priority is important to all claimants in the liquidation,” where it is
anticipated that the insurer “will not have assets sufficient to pay all claims.” Ario
v. Reliance Ins. Co.,
980 A.2d 588
, 591 (Pa. 2009). “Recognizing the importance
of classifying claims, the General Assembly enacted the Act to ensure that
claimants entitled to more protection have prioritized claims.” Id. at 594. “Claim
priority . . . is governed by Section 544 of the Act, [40 P.S. § 221.44,] which sets
forth the order of distribution of an insolvent insurer’s assets.” Ario, 980 A.2d at
591. Section 544(b), (e) provides, in relevant part, as follows:
The order of distribution of claims from the insurer’s estate shall be in
accordance with the order in which each class of claims is herein set
forth. Every claim in each class shall be paid in full or adequate funds
retained for such payment before the members of the next class
receive any payment. No subclasses shall be established within any
class.
....
(b) All claims under policies for losses wherever incurred,
including third[-]party claims, and all claims against the insurer for
liability for bodily injury or for injury to or destruction of tangible
property which are not under policies, shall have the next priority. . . .
....
20
(e) Claims under nonassessable policies for unearned premium or
other premium refunds and claims of general creditors.
40 P.S. § 221.44(b), (e) (emphasis added). Claims classified under subsection (b)
have a higher priority than those classified under subsection (e), meaning claims
assigned to class (b) priority will be paid before those assigned to (e). See Ario,
980 A.2d at 591.
Here, the Liquidator, in the NOD, initially classified Vernic’s claim as
priority (b), which the Referee recommended affirming although finding that the
only claim Vernic had under the Policy was for his attorney’s fees because he had
assigned all other rights under the Policy. (Referee’s Report at 18-19.) The Court
concluded in Vernic I that Vernic had not assigned his rights under the Policy and,
therefore, was entitled to recover both attorney’s fees and the amount of the
California judgment under the Policy, but did not expressly address arguments
regarding the priority level. Vernic I, slip op. at 12-13, 15-16.
We begin with the Liquidator’s argument that Vernic’s claim is not one that
falls within the Policy’s coverage. This argument seeks to challenge the Referee’s
conclusion that Hardy’s Complaint “contain[ed] allegations of property damage
actually or potentially within the coverage of the [P]olicy,” which triggered
Lincoln’s duty to defend, which it did not do. (Referee’s Report at 9 (emphasis
omitted).) If the Liquidator disagreed with the Referee’s conclusion regarding
Lincoln’s breach of the duty to defend, the Liquidator could have filed exceptions
to the Referee’s Report pursuant to Rule 3781, but it did not. As the Court stated
in Vernic I, “[u]nder these circumstances,” where Lincoln knew of facts potentially
bringing the claim within its coverage and did not provide a defense, “the verdict is
a proximate result of Lincoln’s breach of its duty to defend.” Vernic I, slip op. at
15. Therefore, this Court will not consider the Liquidator’s arguments to the extent
21
the Liquidator now seeks to challenge the previous conclusive determination that
Lincoln was aware of facts potentially bringing Vernic’s claim under the coverage
of the Policy and, therefore, breached its duty to defend. Nor will this Court
evaluate whether the claims set forth in Hardy’s Complaint fall within the coverage
of the Policy.
To the extent the Liquidator argues such a determination is necessary to
determine whether the claim falls within priority class (b) as a “claim[] under [the
P]olic[y] for losses wherever incurred,” 40 P.S. § 221.44, we disagree. Under
Section 520(d) of Article V of the Act, “[u]pon issuance of the order [to liquidate],
the rights and liabilities of . . . [an] insurer and of its creditors, policyholders,
shareholders, members and all other persons interested in the estate shall become
fixed as of the date of the filing of the petition for liquidation.”9 40 P.S.
§ 221.20(d). Moreover, the “[Li]quidator steps into the shoes of the insurer’s
officers and directors in the conduct of that insurer’s affairs.” Koken v. Legion Ins.
Co.,
865 A.2d 945
, 958 (Pa. Cmwlth. 2004) (quotation omitted). Therefore, the
Liquidator cannot now assert a lack of coverage when Lincoln, although it asserted
various Policy exclusions, did not pursue an adjudication of that issue. In short,
the Liquidator is essentially stuck with the consequences of Lincoln’s decision not
to defend Vernic and, as discussed more fully below, the resulting verdict against
Vernic. If the Court was to permit the Liquidator to reopen the record to determine
whether policy exclusions applied, we would undermine Section 520(d)’s
requirement that the parties’ rights and obligations are fixed as of the date of the
filing of the petition for liquidation. We decline to do so.
9
Section 540(d) was added by Section 2 of the Act of December 14, 1977, P.L. 280.
22
Thus, we turn to the Liquidator’s contention that Vernic’s claim arises from
Lincoln’s breach of its duty to defend, which sounds in tort, and therefore warrants
an (e) priority as a claim of a general creditor. It is undisputed that California law
applies. As set forth in California law, “where one is bound either by law or
agreement to protect another from liability, he is bound by the result of a litigation
to which such other is a party, provided he had notice of the suit and an
opportunity to control and manage it.” Kershaw v. Md. Cas. Co.,
342 P.2d 72
, 77
(Cal. Ct. App. 1959). Accordingly, an insurer “bears a duty to defend its insured
whenever it ascertains facts which give rise to the potential of liability under the
policy.” Isaacson,
750 P.2d at 308
. Further, when “an insurer erroneously denies
coverage and/or improperly refuses to defend the insured in violation of its
contractual duties, the insured is entitled to make a reasonable settlement of the
claim in good faith and may then maintain an action against the insurer to recover
the amount of the settlement . . . .”
Id.
(internal quotations omitted).
The Liquidator relies upon the California Court of Appeals’ decisions in the
Amato cases to support its position that Vernic’s claim is one sounding in tort. In
the Amato cases, Mercury Casualty Company (Mercury) issued the insured a
policy for car insurance that provided, as relevant, coverage for bodily injury
sustained by the insured, including resident relatives of the insured. The insured
was driving his car with his mother-in-law as a passenger when he was involved in
an accident in which his mother-in-law sustained injuries. The mother-in-law sued
the insured, the insured requested Mercury to defend him, and Mercury declined
on the basis that the policy did not cover the claim because the insured’s mother-
in-law was not the insured’s resident relative. When the underlying case was
resolved, the insured and his mother-in-law filed suit for “bad faith breach of
23
insurance contract against [Mercury].” Amato I,
23 Cal. Rptr. 2d at 74
. The jury
concluded that the insured’s mother-in-law was residing with him at the time of the
accident, and the trial court determined that Mercury breached its duty to defend
and awarded an amount equal to the amount of judgment entered against the
insured in the underlying case, including costs and post-judgment interest. On
appeal, the California Court of Appeals, concluding that Mercury breached its duty
to defend, remanded to the trial court for the purpose of determining damages
because “where the issues upon which coverage depended were not raised in the
underlying action, the insurer [is] not liable for the entire judgment.”
Id.
at 79
(citing Hogan v. Midland Nat’l Ins. Co.,
91 Cal. Rptr. 153
(Cal. 1970)). In Amato
I, the “issues relevant to coverage were not decided in the underlying action” and
therefore the Court of Appeals determined “the proper measure of damages is that
amount which will compensate the insured for the harm or loss caused by the
breach of the duty to defend, i.e., the cost incurred in defense of the underlying
suit.”
Id.
Because it was not clear from the record before the court whether the
insured “mounted a defense in the underlying action,” or whether the judgment
was entered after default, the California Court of Appeals remanded for the trial
court to “ascertain the amount of damages, if any, properly awardable.”
Id.
On remand, the insured stipulated that the matter went by default and
therefore there was no cost of defense, and the trial court concluded, in light of
Amato I, that the insured could only recover damages for the cost of defending the
underlying suit, of which there were none. The insured appealed, and the
California Court of Appeals, “[i]n light of more recent authority and the
clarification of the record that the underlying judgment was by default,” held that
“where an insurer tortiously breaches the duty to defend and the insured suffers a
24
default judgment because the insured is unable to defend, the insurer is liable for
the default judgment, which is a proximate result of its wrongful refusal to
defend.” Amato II, 61 Cal. Rptr. 2d at 911. In reaching this conclusion, the
California Court of Appeals explained that “[b]reach of an insurer’s duty to defend
violates a contractual obligation and, where unreasonable, also violates the
covenant of good faith and fair dealing for which tort remedies are appropriate.”
Id. at 912. Further, “[w]here an insured mounts a defense at the insured’s own
expense following the insurer’s refusal to defend, the usual contract damages are
the costs of the defense.” Id. at 913. The trial court determined in its prior
judgment that “Mercury had no good cause to refuse to defend, and Mercury
therefore tortiously breached the covenant of good faith and fair dealing.” Id. Due
to Mercury’s wrongful refusal to defend and the insured’s financial inability to
mount a defense, the insured suffered a default judgment and it was not discovered
until the subsequent action that there was no coverage under the policy, the
California Court of Appeals stated. Therefore, the Court determined that “Mercury
is liable for the judgment, which is a proximate result of its wrongful refusal to
defend.” Id. The California Court of Appeals also emphasized that “the duty to
defend is of vital importance,” and Mercury was required to defend in lawsuits,
even where “liability under the policy ultimately fails to materialize.” Id.
Vernic has not asserted a separate claim of bad faith refusal to defend, as the
insured did in Amato II, but rather has asserted since he filed the proof of claim
that he was entitled to recover the judgment under the Policy and that Lincoln
breached its duty to defend. Vernic also persuasively argues that even if his claim
arises from Lincoln’s bad faith refusal to defend an action that may have been
25
covered under the Policy, it is counterintuitive to give a lower priority to claims for
judgments resulting from the insurer’s tortious breach of the duty to defend.
The present case is similar to Pruyn, upon which this Court relied in Vernic
I. In Pruyn, the plaintiff filed suit against her homeowners’ association, alleging
that it negligently constructed and maintained the roads and drainage, which
facilitated the water eroding the area around her home, resulting in a landslide and
home damage. The plaintiff served the association’s insurers with the complaint,
but the insurers refused to provide a defense. The association entered into
negotiations with the plaintiff and reached a settlement, assigning the insured’s
right to recover against the insurers in exchange for the plaintiff not executing
judgment on the association. The assignment included a right of action based upon
a breach of duty to defend and a breach of contract. The plaintiff filed to enforce
the judgment. The insurers argued that the judgment could not be enforced against
them as a matter of law, the trial court agreed, and the California Court of Appeals
reversed on appeal.
The California Court of Appeals explained that if the litigation settled
without trial and judgment, “the question whether the liability of the insured was
one which the contract of insurance covered is still open, as is also the question as
to the fact of liability and the extent thereof,” and these questions can be litigated
in a separate action for the purpose of recovering the amount paid in settlement.
Pruyn,
42 Cal. Rptr. 2d at 312
. The California Court of Appeals further stated that
“an insured who has been abandoned by . . . [an] insurer and elects to settle rather
than risk an adverse judgment is entitled to an evidentiary presumption in a
subsequent action against the insurer to enforce policy provisions, as to the
insured’s liability on the underlying claim, and the amount of [] liability.”
Id.
at
26
311-12 (emphasis added) (internal quotations omitted). Because of this, the
California Court of Appeals concluded that the trial court in that case had erred in
sustaining the demurrers to the plaintiff’s complaint on the basis that the plaintiff
could not recover as a matter of law because the allegations, if supported by
evidence, “would be sufficient to raise a presumption that the settlement reflected
the existence and amount of [the insured’s] liability . . . .”
Id. at 314
.
It does not appear on the record that Vernic has asserted that Lincoln’s
failure to defend was the result of bad faith, but has asserted it was a breach of the
duty to defend, resulting in a judgment against him that is a loss under the Policy.
Although the Liquidator contends that Vernic asserted in the objections to the
NOD that Lincoln’s failure to defend was in bad faith and now asserts that he seeks
only contractual damages, this is not supported by the record, as Vernic asserted in
those objections that Lincoln “fail[ed] to investigate the claim” and “breached its
duty to defend in this matter.” (Objection to NOD ¶ 61.) Vernic’s assertion that
he is entitled to the judgment under the Policy because Lincoln breached its duty to
defend is consistent with California case law, which provides that when “an insurer
erroneously denies coverage and/or improperly refuses to defend the insured in
violation of its contractual duties, the insured is entitled to make a reasonable
settlement of the claim in good faith and may then maintain an action against the
insurer to recover the amount of the settlement . . . .” Isaacson,
750 P.2d at 308
(internal quotations omitted).
Like the insured in Pruyn, it appears Vernic negotiated a settlement to the
best of his abilities after Lincoln refused to defend. Because the California
judgment results from Lincoln’s breach of the duty to defend, which creates a
presumption as to liability, Pruyn,
42 Cal. Rptr. 2d at 311-12
, and that liability
27
should have been covered under the Policy, Vernic’s claim is one “under policies
for losses wherever incurred,” 40 P.S. § 221.44(b), and should be assigned
priority (b) under the Act. The Policy expressly provided that Lincoln had “the
right and duty to defend” Vernic. (Supplemental Reproduced Record at 24b.)
Therefore, Vernic is entitled to the amount of the judgment against him, plus the
amount of attorney’s fees he has personally incurred as a result of Lincoln’s breach
of its duty to defend.
III. CONCLUSION
Contrary to Vernic’s assertions, the Liquidator has not waived its ability to
challenge the priority level assigned to Vernic’s claim. However, for the foregoing
reasons, we agree with Vernic’s argument that his claim should be assigned class
(b) priority.
_____________________________________
RENÉE COHN JUBELIRER, Judge
28
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Franjo Vernic DBA SF Rehabitat, :
Objector :
:
v. : No. 4 LIN 2017
:
Lincoln General Insurance Company, :
In Liquidation, :
Respondent :
:
(Ancillary matter to In Re: Lincoln :
General Insurance Company In :
Liquidation No. 1 LIN 2015) :
ORDER
NOW, December 3, 2020, upon reconsideration of what priority level
should be assigned to Franjo Vernic DBA SF Rehabitat’s (Vernic) claim, the
Notice of Determination shall reflect that Vernic’s claim is assigned to class (b)
priority.
_____________________________________
RENÉE COHN JUBELIRER, Judge |
4,639,135 | 2020-12-03 14:21:45.590812+00 | null | http://www.pacourts.us/assets/opinions/Commonwealth/out/42CD20_12-3-20.pdf | IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Donald M. Hopler and Joan Hopler :
:
v. : No. 42 C.D. 2020
: Argued: September 15, 2020
North Middleton Township Zoning :
Hearing Board, :
Appellant :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ELLEN CEISLER, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY PRESIDENT JUDGE LEAVITT FILED: December 3, 2020
The North Middleton Township Zoning Hearing Board (Zoning Board)
appeals an order of the Court of Common Pleas of Cumberland County (trial court)
that authorizes Donald M. Hopler and Joan Hopler (collectively, the Hoplers) to
open a winery on two adjoining lots in an agricultural district. In reversing the
Zoning Board’s decision to the contrary, the trial court held that the Hoplers’ wine
production and sale of wine onsite were permissible as uses accessory to the
principal agricultural use, i.e., viticulture. On appeal, the Zoning Board contends
that the trial court erred because the Hoplers’ proposed winery is not permitted in
the agricultural zoning district.
Background
The Hoplers own two adjacent parcels of land located at 920 and 940
Cranes Gap Road in North Middleton Township. The 10-acre property at 920
Cranes Gap Road is improved with the following: a house where the Hoplers reside;
a small shed used as a greenhouse; a barn used for storing tractors; approximately
1,000 grapevines; 210 hop rhizomes; and an apiary. The two-acre property at 940
Cranes Gap Road contains a multi-floor house, a detached garage, two storage
buildings, approximately 700 grapevines, and an apiary. The Hoplers raise chickens
and guinea fowl on the two adjoining lots.
The Hoplers’ property is located in the Rural Resource Zone of the
Township, which permits agriculture and “accessory structures and uses customarily
incidental” to an agriculture use. NORTH MIDDLETON TOWNSHIP ZONING
ORDINANCE OF 2013, Ordinance No. 2013-2 (Zoning Ordinance), §204.14;
Reproduced Record at 309a (R.R. __). On October 15, 2018, the Hoplers applied
for a zoning permit to create a winery using both parcels. More specifically, the
application explained that the Hoplers would produce wine from their harvested
grapes; convert the detached garage at 940 Cranes Gap Road into a production and
bottling center; and convert the multi-floor dwelling at 940 Cranes Gap Road to a
retail space, tasting room and private event space. The Hoplers sought a
determination that the proposed winery was a permissible agriculture use and that
the other proposed uses were permissible accessory uses. The Hoplers did not apply
to consolidate the two lots.
By letter dated October 29, 2018, the Township Zoning Officer denied
the zoning permit. The Zoning Officer stated that the Hoplers’ proposed winery met
the Zoning Ordinance’s definition of “agriculture” but the proposed private event
space use did not meet the definition of “agriculture” or “retail.” Therefore, the
private event space did not constitute a permissible accessory use.1
1
The Zoning Ordinance contains the following definitions:
AGRICULTURE – The principal use of land which shall include, but not be limited
to, the tilling of the soil, the raising of crops, horticulture, apiculture, floriculture,
viticulture and gardening. The production, keeping or maintenance, for sale, lease
or personal use, of plants and animals useful to man, including but not limited to:
2
The Hoplers appealed the decision to the Zoning Board, which held a
public hearing on February 12, 2019. At the hearing, counsel for the Hoplers stated
that they sought to consolidate the two parcels, explaining:
920 Cranes Gap Road is clearly an agricultural use right now.
By combining it with 940 Cranes Gap Road, that property will
become part of the agricultural use, and then the existing
buildings at 940 Cranes Gap Road will be used for accessory
structures.
Notes of Testimony, 2/12/2019, at 20 (N.T. __); R.R. 51a.
To produce wine, the Hoplers use their own grapes and grapes produced
elsewhere. Leftover grapes are sold to the Susquehanna Winemakers’ Guild.
Donald Hopler testified that he produces approximately 150 gallons of wine a year
but is permitted by the Pennsylvania Liquor Control Board to produce up to 100,000
gallons. The Hoplers also plan to expand their bee operation. They use the honey
… trees and forest products: fruits of all kinds, including grapes, nuts and berries;
vegetables; nursery, floral, ornamental and greenhouse products;…. This
definition also includes the processing and accessory retail sale of goods produced
and including one detached dwelling and other necessary structures and equipment
to support the agricultural activity.
***
RETAIL – Those businesses whose primary activities involve the display and sales
of goods and products to the general public ….
***
USE, ACCESSORY – A use customarily incidental and subordinate to the principal
use or the principal structure or building and located on the same lot with such
principal use or principal structure or building. If no principal use or principal
structure or building exists on a lot with a lawful accessory use, then such accessory
use shall only be considered a principal use, if the use would otherwise be allowed
as a permitted principal use in the zone, and which shall then be subject to
provisions in this chapter relating to principal uses. The accessory use cannot []
exceed 75% of the gross area square footage of the principal use on the property.
ZONING ORDINANCE, §204-12 (emphasis added); R.R. 263a, 297a, 303a.
3
they produce in their wine production, and they sell their honey to other wineries
and breweries. They also jar the honey for sale.
The Hoplers plan to convert the basement of the house at 940 Cranes
Gap Road into a retail space and tasting room for wine, honey, and other agricultural
products produced onsite. The top floor of the house would be converted to a private
event space. The property’s detached garage would be converted to a wine
production and bottling center. The Hoplers believe that there is enough room for
15 vehicles to park on a grassy area adjacent to that house that is reinforced with
mesh. Mr. Hopler testified that the winery will be open on weekends from 12:00
p.m. to 9:00 p.m. The event space could be rented on any day of the week.
Neighboring property owners testified that they were concerned about
a lack of parking; an increase in traffic, crime and noise; as well as a loss of privacy
and decline in property values. However, one neighbor testified that he believed
the Hoplers’ proposal would highly benefit the Carlisle area.
The Hoplers’ counsel summarized their position as follows: “What
we’re asking the [Zoning Board] to decide is that should [we] consolidate these two
properties, that the overall use is agriculture.” N.T. 120; R.R. 151a.
After closing the evidentiary record, the Zoning Board voted to deny
the Hoplers’ appeal. On March 26, 2019, the Zoning Board issued a written decision
to explain its vote. The Zoning Board reasoned that “[t]he making of wine involves
the conversion of grapes, by mechanical and chemical means and introduction of
additives, from a fruit into an alcoholic beverage.” Zoning Board Decision,
3/26/2019, at 10, Finding of Fact No. 20. It held that making wine “is not an
agriculture use, but is a manufacturing use and not a permitted use in the [Rural
Resource] Zone.” Id. at 11-12. It also held that the retail sale of wine is not an
4
agricultural use and, thus, not permitted. Finally, it held that using the property to
hold special events or private parties is neither accessory to an agriculture use nor a
permitted principal use.
The Zoning Board explained that even if “the proposed uses of the
Property (other than the growing of grapes) were accessory uses to an agriculture
use, [the Hoplers] would be required to satisfy setback[,] buffer, screening, parking
and other requirements and standards stated in Article III of the Zoning Ordinance
for the proposed uses, in addition to the applicable requirements for the agriculture
use (growing of grapes).” Id. at 12. However, the Hoplers did not demonstrate that
the proposed principal and accessory uses complied with the lot access, setback,
parking, buffer and screening standards. The Zoning Board further explained that
the proposed consolidation of the lots was governed by the Township’s Subdivision
and Land Development Ordinance (SALDO)2 and beyond its jurisdiction.
Therefore, “[c]onsideration by the [Zoning] Board of requirements and standards of
the Zoning Ordinance applicable to the Property following lot consolidation, such
as lot access, is premature.” Id. at 11. The Hoplers appealed the Zoning Board’s
decision to the trial court.
The trial court heard oral argument, and on December 6, 2019, reversed
the Zoning Board. It concluded that the Zoning Board abused its discretion in
holding that wine production constituted a “manufacturing use.” Trial Court
Opinion, 12/6/2019, at 4.
Instead, the trial court observed that the definition of “agriculture” in
the Zoning Ordinance includes the sale of goods produced. Id. at 5. The court
2
NORTH MIDDLETON TOWNSHIP SUBDIVISION AND LAND DEVELOPMENT ORDINANCE, Ordinance
No. 2013-2 (2013), available at http://www.nmiddleton.com/documents (last visited November
23, 2020).
5
reasoned that the sale of agricultural goods also includes the sale of items harvested
and modified for sale. The trial court noted that “‘production’ entails a ‘process,’
and fermentation is certainly that. Indeed, it is a process that has occurred for
[millennia], with and without additives.” Id. The trial court explained that the
definition of agriculture “is consistent with and subsumes [the Hoplers’] proposed
production of wine and accessory retail sale.” Id. at 5-6. The trial court remanded
the matter to the Zoning Board to address the setback and lot access issues as if the
lots were consolidated.
The Zoning Board appealed to this Court. In its statement of errors
complained of on appeal filed with the trial court, the Zoning Board raised two
issues. First, it asserted that a special event space is not a “retail” use that is
permitted in the Rural Resource Zone. Second, it asserted that because the two lots
were not yet consolidated, the Hoplers were improperly seeking an advisory opinion
from the Board on the requirements relating to lot access, setback,
screening/buffering and parking requirements.
In its Pennsylvania Rule of Appellate Procedure 1925(a) opinion, PA.
R.A.P. 1925(a), the trial court explained that allowing the Hoplers to make wine and
customers to taste the wine onsite “is part and parcel of agriculture.” Trial Court
1925(a) Opinion, 2/12/2020, at 1.
With respect to the Zoning Board’s first issue, the trial court noted that
the Zoning Ordinance defines “retail” as “businesses whose primary activities
involve the display and sale of goods and products to the general public.” Id. at 3
(quoting ZONING ORDINANCE, §204.12). The trial court concluded this definition
was ambiguous and, thus, must be resolved in favor of the Hoplers. The trial court
also concluded that an event space use “is entirely consistent with a ‘retail’
6
operation, and that it is accessory to the core agricultural use. We would find it odd
if such space were not contemplated as a natural and integral extension to the
operation.” Trial Court 1925(a) Opinion, 2/12/2020, at 4.
Next, the trial court addressed the Zoning Board’s contention that the
Hoplers sought an improper advisory opinion. The trial court rejected this argument,
stating that the Zoning Ordinance provisions on applications “plainly envision[] the
approval (or otherwise) of ‘proposed work, development, use or occupancy[.]’” Id.
at 5. The Zoning Board can therefore take into account future legal developments,
such as merger of lots, future physical developments and a new use for a property.
On February 18, 2020, this Court issued the following order:
[I]t appears that [the Zoning Board] seeks review of the [trial
court’s December 6, 2019, order] that “remanded [this matter] to
the [Zoning Board] to address the remaining unaddressed setback
and lot access issues” consistent with the trial court’s opinion and
order disposing of [the Hoplers’] land use appeal. Because the
December 6, 2019[,] order does not appear to be a final order that
disposes of all claims and all parties, the parties shall address the
appealability of the order in the principal briefs on the merits or
other appropriate motion. Pa. R.A.P. 311, 313, 341.
Order, 2/18/2020, at 1. On March 6, 2020, the Hoplers filed an application to quash
the Zoning Board’s appeal, arguing that the trial court’s order is not a final order.
Appeal
On appeal,3 the Zoning Board first argues that the trial court erred in
holding that the Hoplers’ proposed event space is permitted as a principal or
accessory agricultural use in the Rural Resource Zone. It next argues that the trial
3
Because the parties presented no additional evidence after the Zoning Board’s decision, this
Court’s review determines whether the Zoning Board committed an abuse of discretion or an error
of law. Taliaferro v. Darby Township Zoning Hearing Board,
873 A.2d 807
, 811 n.1 (Pa. Cmwlth.
2005).
7
court erred in permitting the Hoplers to seek an advisory opinion on setback and
access requirements because the two lots have not been consolidated.
Analysis
Application to Quash
We first address the Hoplers’ application to quash the Zoning Board’s
appeal, based on the contention that the trial court’s December 6, 2019, order was
not a final order because it remanded the matter to the Zoning Board. The Hoplers
also argue that the trial court’s order was not an appealable collateral order.
This Court’s jurisdiction to hear appeals is limited to final orders, unless
otherwise permitted by statute or rule. A final order, under Rule 341(b) of the
Pennsylvania Rules of Appellate Procedure, is one that (1) disposes of all claims and
of all parties; or (2) is entered as a final order pursuant to subsection (c) of Rule 341.
PA. R.A.P. 341(b). Under certain circumstances, an appellate court may entertain an
appeal from an interlocutory order taken as a matter of right. PA. R.A.P. 311.
Relevant to this matter, Rule 311(f) provides:
(f) Administrative remand.--An appeal may be taken as of right
from: (1) an order of a common pleas court or government unit
remanding a matter to an administrative agency or hearing
officer for execution of the adjudication of the reviewing tribunal
in a manner that does not require the exercise of administrative
discretion; or (2) an order of a common pleas court or
government unit remanding a matter to an administrative agency
or hearing officer that decides an issue that would ultimately
evade appellate review if an immediate appeal is not allowed.
PA. R.A.P. 311(f) (emphasis added).
Schultheis v. Board of Supervisors of Upper Bern Township, Berks
County,
727 A.2d 145
(Pa. Cmwlth. 1999), is instructive. There, a developer
appealed the denial of its preliminary subdivision plan. The trial court found that
8
the deficiencies in his plan were minor and that he should be able to correct them.
Accordingly, the trial court remanded the case to allow the developer an opportunity
to correct the deficiencies. The zoning board appealed to this Court, asserting that
the deficiencies were not minor but substantive. We allowed the appeal for the stated
reason that, otherwise, the zoning board’s conclusion that the preliminary plan was
incomplete would evade appellate review.
Similarly, here, the trial court has remanded this matter for the Zoning
Board to determine whether the Hoplers’ application met the lot access and setback
requirements. Before doing so, the trial court made a determination on the merits of
the appeal, i.e., that the proposed uses were permissible in the Rural Resource Zone.
It is that determination of the trial court that the Zoning Board challenges on appeal.
Stated otherwise, the issue of whether the Hoplers’ proposed winery is a permitted
use could evade appellate review if the appeal is quashed. Accordingly, we deny the
Hoplers’ application to quash.4
Merits of Appeal
We turn, then, to the merits of the Zoning Board’s appeal. The Zoning
Board asserts that the proposed event space is not a permissible principal or
accessory use in the Rural Resource Zone. The Zoning Board also asserts that the
Hoplers’ proposed event space did not meet the Zoning Ordinance’s definition of
“retail.”
Determining whether a proposed use is an accessory use is a question
of law based on the underlying facts.5 Philadelphia Suburban Development
4
We note that the Hoplers effectively withdrew their application to quash during oral argument
before this Court on September 15, 2020.
5
A leading treatise explains the issue of defining an accessory use as follows:
9
Corporation v. Scranton Zoning Hearing Board,
41 A.3d 630
, 633 (Pa. Cmwlth.
2012) (quoting Mitchell v. Zoning Hearing Board of the Borough of Mount Penn,
838 A.2d 819
, 826 (Pa. Cmwlth. 2003)). “An accessory use must be both
subordinate and customarily incidental, i.e., secondary to the permitted main use of
a premises and usually found with the principal use.” Philadelphia Suburban,
41 A.3d at 633
. A use is not considered accessory when it will be the principal use of
the building.
Id. at 633-34
.
The Hoplers’ proposed winery includes a retail space, tasting room and
wine production building on the lot at 940 Cranes Gap Road. It also includes event
space on the second floor of the house. Mr. Hopler testified that “[i]f somebody
wants to rent the second floor out for a spaghetti dinner to support Furry Friends, to
create a [fundraiser], they can use it as far as I’m concerned.” N.T. 77; R.R. 108a.
Otherwise, the second floor will be available “if somebody wants to buy a bottle [of]
wine and go sit and watch the sunset[.]” N.T. 91; R.R. 122a. The winery will be
open on Friday, Saturday and Sunday, but Mr. Hopler stated that the second floor
could also be rented out during the week. N.T. 72; R.R. 103a.
We agree with the trial court that the proposed event space is consistent
with, and incidental to, the Hoplers’ plan for a winery and the retail sale of their
agricultural products. The trial court correctly rejected the Zoning Board’s holding
Few cases involving definitions in a zoning ordinance are as fact-dependent as a
determination of whether one use is accessory to another. The usual ordinance
permits a use accessory to a permitted use if it is subordinate or secondary to the
principal use and customarily incidental to it. In most instances, the first is a
relatively straightforward, factual issue because the use clearly is secondary,
although the issues become more difficult at the margins. The second generally
involves the question of which particular secondary uses are appropriately
associated with the particular principal use in the factual situation involved.
ROBERT S. RYAN, PENNSYLVANIA ZONING LAW AND PRACTICE, §4.3 at 31 (2019).
10
that an event space is not a permissible principal or accessory use in the Rural
Resource Zone.
Next, the Zoning Board argues that the Hoplers’ zoning appeal sought
an advisory opinion. The Zoning Officer applied the standards to the uses of the lots
as they were configured at the time of the Hoplers’ application. It was inappropriate
to seek a determination on issues such as lot access and setback requirements for a
future consolidated lot.
The Township’s SALDO provides, in pertinent part, as follows:
Nothing contained in this chapter shall relieve the owner or
developer from complying with the applicable provisions of
Chapter 204, Zoning, of the Code of the Township of North
Middleton. It is the expressed intent that this chapter and Chapter
204, Zoning, be coenforceable and together foster the stated
planning goals and objectives of the Township. Subdivision and
land development plans, in addition to meeting the standards of
this chapter, shall conform in all respects to the lot size and land
use requirements of Chapter 204, Zoning.
SALDO, §180-8. The SALDO further provides that “[a]ll plans are to be prepared
in accordance with the provisions of this chapter, Chapter 204, Zoning, all other
plans as adopted and amended, and the applicable professional registration law.”
SALDO, §180-12. Notably, the applicable provisions here are silent on the timing
of zoning approval and approval of a subdivision plan under the SALDO. See
Rickert v. Latimore Township,
960 A.2d 912
, 920 (Pa. Cmwlth. 2008) (explaining
that the order of zoning and land development applications depends on the applicable
subdivision and land development plan ordinance).
The trial court noted that the Zoning Ordinance “plainly envisions the
approval (or otherwise) of ‘proposed work, development, use or occupancy[.]’”
Trial Court 1925(a) Opinion, 2/12/2020, at 5. It reasoned:
11
The alternative position, that an applicant may not inquire as to
the legality of a use until he actually embarks upon that
(potentially illegal) use, would appear to be absurd on its face.
Relevant case law on the topic of improper, advisory opinions by
zoning boards is addressed to situations in which no zoning
permit application had yet been rejected, such that there was as
of the time of adjudication no alleged wrong requiring a remedy,
which is not the case here….
As to the fact that the land in question is presently subdivided,
albeit with both tracts being owned by [the Hoplers], it is unclear
why that subdivision should be an obstacle to the rendering of a
decision as to [the Hoplers’] proposed use of those tracts.
Id. at 5-6 (internal citations omitted).
The Zoning Board erred in concluding that the Hoplers sought an
advisory opinion. As the trial court stated in its PA. R.A.P. 1925(a) opinion: “The
[Zoning Board] may take into account future legal developments, such as merger of
properties, as well as future physical developments, such as a new use for a
property.” Trial Court 1925(a) Opinion, 2/12/2020, at 6. We agree.
Conclusion
For these reasons, we deny the Hoplers’ application to quash and affirm
the trial court’s decision.
MARY HANNAH LEAVITT, President Judge
12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Donald M. Hopler and Joan Hopler :
:
v. : No. 42 C.D. 2020
:
North Middleton Township Zoning :
Hearing Board, :
Appellant :
ORDER
AND NOW, this 3rd day of December, 2020, the motion to quash filed
by Donald M. Hopler and Joan Hopler is DENIED. The order of the Court of
Common Pleas of Cumberland County dated December 6, 2019, in the
above-captioned matter is AFFIRMED.
MARY HANNAH LEAVITT, President Judge |
4,639,136 | 2020-12-03 14:24:33.107608+00 | null | http://www.courts.state.va.us/opinions/opnscvwp/1190643.pdf | PRESENT: All the Justices
ANDREA GAIL JONES
OPINION BY
v. Record No. 190643 JUSTICE D. ARTHUR KELSEY
DECEMBER 3, 2020
TERRY M. PHILLIPS, ET AL.
FROM THE CIRCUIT COURT OF POWHATAN COUNTY
Paul W. Cella, Judge
In this appeal, we address two questions of first impression in Virginia. The first is
whether an insurer’s payments on a fire insurance policy were immune from garnishment as
“proceeds of the sale or disposition” of property held in trust under former Code § 55-20.2(C),
recently recodified as Code § 55.1-136(C). 1 The second is whether the contractual right under
the insurance policy to receive fire-loss payments was intangible personal property held by the
named insured and his wife as a tenancy by the entirety. Reversing the circuit court, we answer
both questions in the negative.
I.
Terry and Cathy Phillips owned their marital residence as tenants by the entirety until
2010 when they retitled the property in the names of separate, revocable trusts as tenants in
common. Cathy Phillips’s trust owns a 99% undivided interest in the property, and Terry
Phillips’s trust owns a 1% undivided interest. In February 2018, the residence was severely
damaged by a fire. The residence was covered by an insurance policy issued by Chubb & Son,
Inc. (“Chubb”), which named “Terry M. Phillips” as the policyholder. See J.A. at 20-95. Cathy
Phillips was not specifically named in the policy. One provision in the policy defined “[y]ou” to
1
In October 2019, Code § 55-20.2 was amended, renumbered, and recodified as Code
§ 55.1-136, which contains near-identical language as former Code § 55-20.2. See 2019 Acts ch.
712, at 1339. We refer throughout this opinion to the current codification of statutes and have
noted any technical changes in the statutes when relevant.
include Terry Phillips and any “spouse who lives with [him],”
id. at
40,
and another provision
stated that “[i]n case of death” Chubb would “cover your spouse, your legal representative or any
person having proper temporary custody of your property until a legal representative is appointed
and qualified,” and “any member of your household who is a covered person at the time of
death.”
Id. at 83.
Seeking satisfaction of a civil judgment that she had obtained against Terry Phillips,
Andrea Jones filed this action to garnish insurance payments from Chubb arising out of the fire
damage to the home owned by the reciprocal trusts. Terry and Cathy Phillips filed a motion to
quash the garnishment, arguing that the insurance payments were immune from garnishment
under Code § 55.1-136(C). That statute protects “proceeds of the sale or disposition” of property
that was formerly held as a tenancy by the entirety and then conveyed to separate revocable or
irrevocable trusts. See Code § 55.1-136(C). Terry and Cathy Phillips further argued that
irrespective of any statutory immunity protecting the reciprocal trusts’ ownership of the property
subject to a “sale or disposition,”
id., the contractual right
to the insurance payments constituted
intangible personal property owned by Terry and Cathy Phillips as tenants by the entirety, and
thus, these payments could not be seized by a judgment creditor of only one of them.
Jones argued in response that the insurance payments were not statutorily immune from
garnishment as “proceeds of the sale or disposition” of trust property under Code § 55.1-136(C)
because no “sale” or “disposition” had ever occurred. Jones also contested the alternative
argument by Terry and Cathy Phillips that they had acquired as tenants by the entirety the
contractual right under the insurance policy to the fire-damage payments. 2
2
“[I]t is not uncommon for married couples,” Jones observed, “to designate investment
or other asset accounts as ‘tenants by the entirety.’” J.A. at 140. “Here, however, there is not
such [a] designation in the insurance contract between Mr. Phillips and Chubb.”
Id. Jones also 2
Accepting the primary argument by Terry and Cathy Phillips, the circuit court granted the
motion to quash and dismissed the garnishment proceeding on the ground that Code § 55.1-
136(C) protected the insurance payments from garnishment as “proceeds of the sale or
disposition” of property owned by the reciprocal trusts. The court did not address the alternative
argument asserted by Terry and Cathy Phillips.
II.
On appeal, Jones argues that the circuit court erroneously held that Code § 55.1-136(C)
immunized the insurance payments from garnishment on the ground that they were “proceeds of
the sale or disposition” of the property held in trust. For the following reasons, we agree.
A.
“In Virginia, garnishment is regarded . . . as an independent suit by the judgment-debtor
in the name of the judgment-creditor against the garnishee.” Butler v. Butler,
219 Va. 164
, 165-
66 (1978); see also Levine’s Loan Off. v. Starke,
140 Va. 712
, 714 (1924) (“Garnishment is a
statutory proceeding to enforce the lien of a writ of fieri facias on a liability of any other person
than the judgment debtor . . . .”). Garnishment is “substantially an action at law.” Lynch v.
Johnson,
196 Va. 516
, 521 (1954). While “[o]rdinarily, the only adjudicable issue is whether the
garnishee is liable to the judgment-debtor, and if so, the amount due,” an additional issue may be
whether the garnishee has immunity from garnishment. See
Butler, 219 Va. at 166
.
Absent an applicable common-law or statutory exemption, see, e.g., Code §§ 8.01-512.4
and 38.2-3339, insurance payments are not exempt from garnishment. “An insurance contract to
cover risks like liability or fire insurance builds no cash value and is payable only upon the
happening of the named contingency. If the insurance company’s obligation to distribute the
asserted that Cathy Phillips was not a “named insured,” and the insurance policy covered “many
relatives, spouses among them, as covered or insured individuals.” See
id. at
138.
3
proceeds becomes fixed and definite, then the company could be summoned as garnishee prior to
payment to the insured.” Doug Rendleman, Enforcement of Judgments and Liens in Virginia
§ 4.8[B], at 4-51 (3d ed. 2014); see also Kent Sinclair & Leigh B. Middleditch, Jr., Virginia Civil
Procedure § 15.7[C], at 1265 (6th ed. 2014) (observing that “insurance proceeds[] may be
garnished”).
B.
Under the common law, “where a tenancy by the entirety in the fee simple is once created
the property is completely immune from the claims of creditors against either husband or wife
alone.” Vasilion v. Vasilion,
192 Va. 735
, 740 (1951). In 2000, the General Assembly “broke
new ground” by authorizing “a husband and wife to convey certain tenancy by the entirety real
estate to ‘their joint revocable or irrevocable trust, or in equal shares to their separate revocable
or irrevocable trusts’ without losing its tenancy by the entirety status.” J. Rodney Johnson, Wills,
Trusts, and Estates, 34 U. Rich. L. Rev. 1069, 1076 (2000) (quoting Code § 55-20.1 (2000)). 3
Recently recodified as Code § 55.1-136(C), the statute extends that immunity to “any
proceeds of the sale or disposition” of tenancy-by-the-entirety property conveyed to trusts, thus
granting those proceeds immunity as if they were tenancy-by-the-entirety property. In this case,
the parties concede that the residence was not sold. The only remaining question is whether the
insurance payments were proceeds of a disposition of the residence.
In the vocabulary of law, a “disposition” is defined as “[t]he act of transferring
something to another’s care or possession” or “the relinquishing of property,” Black’s Law
3
This provision was originally codified in 2000 as Code § 55-20.1, but it was amended
and moved to Code § 55-20.2 in 2001. See 2001 Acts ch. 718, at 968-69. In 2019, former Code
§ 55-20.2 was recodified as Code § 55.1-136. See supra note 1.
4
Dictionary 592 (11th ed. 2019) (emphasis added), 4 and the “[a]ct of disposing; transferring to
the care or possession of another” or “[t]he parting with, alienation of, or giving up property,”
Black’s Law Dictionary 471 (6th ed. 1990) (emphasis added). 5 By including “disposition” in
Code § 55.1-136(C), the legislature expanded the immunity from creditors to all forms of
transferring property outside the context of a voluntary sale. Such dispositions could include
foreclosures, judicial sales, condemnations, and any other voluntary or involuntary transfers of
property.
Virginia law has never considered an insurance payment for property loss to be an
implied transfer of anything to the insurer. As we have said in other contexts, an insurance
policy is a “personal contract” that “inures to the benefit of the party with whom it is made, and
indemnifies him against loss; and . . . the amount paid by the company ‘is in no proper or just
sense the proceeds of the property.’” Thompson v. Gearheart,
137 Va. 427
, 434 (1923)
(emphasis added) (citation omitted); see also
Lynch, 196 Va. at 522
; Clements v. Clements,
167 Va. 223
, 233 (1936). We see no reason to take a different conceptual course in this case.
That said, we acknowledge that “disposition” is sometimes used in another sense — to
describe a person’s “temperament or character” or “personal makeup,” Black’s Law Dictionary
593 (11th ed. 2019). For example, one might say that an emotionally damaged man has a hot-
headed disposition. But we would hardly say that a fire-damaged house has a smoldering
disposition or, for that matter, any “disposition” at all. A house, in common vernacular, does not
4
See also Black’s Law Dictionary 572 (10th ed. 2014); Black’s Law Dictionary 539 (9th
ed. 2009); Black’s Law Dictionary 505 (8th ed. 2004); Black’s Law Dictionary 484 (7th ed.
1999).
5
See also Black’s Law Dictionary 423 (5th ed. 1979); Black’s Law Dictionary 558 (rev.
4th ed. 1968).
5
have a good or a bad disposition. Such an anthropomorphic understanding of “disposition”
cannot be fairly attributed to the carefully worded text of Code § 55.1-136(C).
Employing the established legal meaning of “disposition,” we conclude that the
garnishment immunity provided by Code § 55.1-136(C) does not apply to Chubb’s insurance
payments. The reciprocal trusts, as property owners, did not sell or otherwise dispose of the
property. Chubb did not acquire any ownership interest (or any legal or equitable interest at all)
in the fire-damaged house. No disposition of the house — according to the word’s most
common legal usage — ever occurred because the fire was not an “act of transferring” the
property to the insurer or to anyone else. See Black’s Law Dictionary 592 (11th ed. 2019).
C.
Our dissenting colleagues offer several procedural and substantive rejoinders that warrant
a brief response.
1.
The dissent’s procedural objections begin with the contention that Jones does not argue
the transfer definition that we embrace. See post at 29. We disagree. On appeal, Jones contends
that “insurance proceeds are not a disposition under § 55-20.2” because “the property has been
neither sold, nor devised, nor given away.” See Appellant’s Br. at 22 (altering capitalization).
These are all actions that involve a property transfer of some kind. Jones adds, “No disposition
occurred in the instant case; the Phillips[es] retain all the sticks in the [p]roperty’s bundle.”
Id. at 22.
Her reference to “sticks in the property’s bundle,” of course, refers to individual property
rights. See United States v. Craft,
535 U.S. 274
, 278 (2002) (noting that “bundle of sticks” is a
“common idiom describ[ing] property” and refers to “a collection of individual rights”); Cygnus
Newport-Phase 1B, LLC v. City of Portsmouth,
292 Va. 573
, 586 (2016) (referring to the
“property rights ‘bundle of sticks’” and stating that “no stick was taken out of that bundle”).
6
Equally clear, her reference to the Phillipses “retain[ing] all the sticks,” Appellant’s Br. at 22,
refers to the fact that Terry and Cathy Phillips did not transfer any of their property rights. There
is no basis, therefore, for the dissent’s view that Jones waived the argument that the proper
definition of “disposition” under Code § 55.1-136(C) involves some form of property transfer.
The dissent also contends that Jones “implicitly asserts” on brief “that the meaning of
disposition” is ambiguous. See post at 33. There is no such implication. Read most fairly,
Jones’s argument, see Appellant’s Br. at 16-18, suggests only that Code § 55.1-136 was an
explicit legislative response to an ambiguous public policy issue concerning how far, if at all, to
extend the reach of tenancy-by-the-entirety protections. Conspicuously absent from the explicit
statutory language, Jones points out, is any reference to the highly ambiguous question whether
those protections should apply to insurance proceeds. Counsel for Jones made the same
assertion in oral argument. See Oral Argument Audio at 2:05 to 2:18 (“As it properly did in the
Pitts decision, this Court should defer this question to the legislature to weigh the competing
public policy issues connected therewith and pass the law best suited to address those different
interests.”). We thus do not interpret Jones’s discussion of caselaw as a waiver of her arguments
that the legislature did not intend to protect insurance payments under Code § 55.1-136, as
evidenced “through the words used,” see Oral Argument Audio at 13:54 to 14:09, and that the
term “disposition” requires some type of transfer of “the sticks in the [p]roperty’s bundle,” see
Appellant’s Br. at 22.
2.
Turning to the merits of this dispute, the dissent rejects the act-of-transferring definition
as overly simplistic, see post at 28 (noting that things should be “as simple as possible, but not
simpler”), and criticizes our focus on the “vocabulary of law,” see post at 31-33, 40-41.
Apparently backing the analysis down from “simpler” to merely “simple” and then expanding
7
the linguistic search beyond the vocabulary of law, the dissent contends that the house fire
constituted a “disposition” defined as a “final settlement or determination.” See post at 31-32,
39. This particular usage of “disposition,” however, has a specific denotation unique to legal
terms, such as a “court’s disposition of the case,” a judicial “judgment or sentence,” or a
“termination of a case.” See Black’s Law Dictionary 592 (11th ed. 2019). This meaning of the
term can be found in dozens of Virginia statutes. Decisionmakers, most notably courts, 6 make
these kinds of “dispositions.” Burnt houses do not.
What the dissent appears to be saying is that the insurer settled an insurance claim after
determining that coverage existed and thus made a “final settlement or determination” — ergo, a
disposition. See post at 39. That interpretation, however, alters the syntax of Code § 55.1-
136(C), which refers to a “disposition of such property,” not a coverage disposition of an
insurance company. The insurer did not dispose “of such” fire-damaged house. Nor did anyone
else.
3.
In a single sentence, the dissent suggests that it is “worth considering” that an early
edition of Black’s Law Dictionary included “destruction of property” as an alternative definition
of “disposition.” See post at 32. That enticing understatement, however, relies upon the 4th
edition of Black’s Law Dictionary published in 1957. After repeating the traditional act-of-
transferring definition, the 4th edition added “destruction of property” as an alternative
definition. See Black’s Law Dictionary 558 (rev. 4th ed. 1968). The only basis identified in
Black’s Law Dictionary for this alternative definition, however, was Pioneer Cooperage Co. v.
Commissioner,
53 F.2d 43
(8th Cir. 1931), a tax case addressing whether insect damage to
6
See, e.g., Code §§ 16.1-69.58, 16.1-305.1, 17.1-403, 19.2-303.6, and 19.2-360.
8
timber qualified for a tax deduction. No court since 1931 has cited Pioneer Cooperage Co. as an
exemplar use of the term “disposition,” and it must be observed that few legal jurists or scholars
find the Byzantine use of English words in the Internal Revenue Code to be a reliable guide for
discovering their plain and ordinary meaning outside of that unique context.
The dissent’s implicit reliance upon Pioneer Cooperage Co., see post at 32 (quoting the
4th edition of Black’s Law Dictionary with the citation to Pioneer Cooperage Co. omitted),
suffers from a more serious weakness. The editors of the 5th, 6th, 7th, 8th, 9th, 10th, and 11th
editions of Black’s Law Dictionary removed the alternative definition of “destruction of
property” that had been included in the 4th edition. The fairest inference from this conspicuous
retraction is that for 40 years, linguistic experts entrusted with the most widely read legal
dictionary in American law have considered the traditional act-of-transferring definition to be the
plain meaning of disposition and the destruction-of-property definition to be a curious, narrow,
or strained meaning of that word. If so, we agree with them.
4.
The dissent places a guarded emphasis on our decision in Pitts v. United States,
242 Va. 254
(1991), in support of its interpretation of disposition in Code § 55.1-136(C). See post at 35-
38. Pitts, however, did not attempt to define disposition. Nor did Pitts mention Code § 55.1-
136(C), which had not yet been enacted. A single sentence in Pitts merely notes that “some
courts” outside of Virginia have applied tenancy-by-the-entirety protection to various
circumstances, including “payments of insurance claims,”
Pitts, 242 Va. at 262
. Pitts cites none
of these foreign cases. The only citation is to an American Law Reports annotation. See
id. (citing Michael A.
DiSabatino, Annotation, Proceeds or Derivatives of Real Property Held by
Entirety as Themselves Held by Entirety,
22 A.L.R. 4th 459
(1983)). That annotation includes
“some” cases going one way on the subject and “some” cases going the other way. Compare
9
DiSabatino, supra, § 14[a], at 518 (“§ 14[a] Insurance payments for injury to realty — Held to be
owned by entirety”), with
id. § 14[b], at
519 (“§ 14[b] Insurance payments for injury to realty —
Held not to be owned by entirety”). 7
The very next sentence in Pitts, moreover, expressly disclaims the some-courts dictum:
“We confine the reach of our decision to our answer to the question as certified, based upon the
facts detailed in the order of certification,”
Pitts, 242 Va. at 262
. The import of this statement is
unmistakable. The precedential “reach of our decision” in Pitts does not extend to any issue
other than the specific “answer to the question” posed by the federal court’s certification order in
that case and does not attempt to resolve future cases involving facts not “detailed” in that
certification order. See
id. Pitts addressed what
happens to a married couple’s real property held as a tenancy by the
entirety when they sell it to someone else. Under Virginia law, Pitts held, the answer was easy:
Whatever the buyer gives the married couple in return for the transfer of such property (whether
cash, a check, or a promissory note) retains its character as property held as a tenancy by the
entirety. See
id. at
261-62.
This holding deserves the protection of stare decisis. “[W]hen a
court of last resort has established a precedent, after full deliberation upon the issue by the court,
7
None of the out-of-state cases cited by the dissent address a statutory “sale or
disposition” provision similar to Code § 55.1-136(C). Nor do any of these courts mention, much
less hold, that a “disposition” of property (the sole issue before us on this point) includes
insurance payments. See post at 38 (citing Cooper v. Cooper,
284 S.W.2d 617
, 620 (Ark. 1955)
(applying a common law rule in Arkansas applicable to “derivatives of real property”); Regnante
v. Baldassare,
448 N.E.2d 775
, 777-78 (Mass. App. Ct. 1983) (applying a common law rule in
Massachusetts to proceeds arising from a “destruction” of property); Gaunt v. Shelter Mut. Ins.,
808 S.W.2d 401
, 404-05 (Mo. Ct. App. 1991) (applying a common law rule in Missouri to
proceeds arising out of “damage” to property)). The dissent also cites McDivitt v. Pymatuning
Mutual Fire Insurance,
449 A.2d 612
, 615-16 (Pa. Super. Ct. 1982), but that case undermines the
dissent’s position by holding that “the fact that the property owned by the [married couple] was
held by the entireties [is] of no real significance to the resolution of the issue whether [one
spouse] may be entitled to one-half of the proceeds from the fire insurance, payable as a result of
the destruction of the entireties’ property.”
10
the precedent will not be treated lightly or ignored, in the absence of flagrant error or mistake.”
Selected Risks Ins. v. Dean,
233 Va. 260
, 265 (1987) (emphasis added). The some-courts
dictum, however, is just that — a mere dictum undeserving of any stare decisis weight.
The dissent seeks to reinforce its use of the Pitts some-courts dictum by suggesting that
the General Assembly, by enacting the predecessor to Code § 55.1-136(C), “perhaps” codified
the dictum by “accepting this Court’s invitation to do so.” See post at 36. After all, we presume
that the legislature is “aware of this Court’s precedents” and writes laws “with knowledge of our
previous decisions in this area of the law.” See post at 38 (citation omitted). By taking this
view, the dissent seems to be applying the legislative-acquiescence doctrine without expressly
mentioning it by name. If so, it is being misapplied.
The legislative-acquiescence doctrine presumes that unless a newly enacted statute
suggests otherwise, the legislature intends the statute to be interpreted consistent with prior
binding precedent addressing the point being codified. Even when properly applied, however,
the presumption is weak. See United States v. Wells,
519 U.S. 482
, 495-96 (1997) (commenting
that “it is at best treacherous to find in congressional silence alone the adoption of a controlling
rule of law” (alteration and citation omitted)). And the doctrine provides no presumption at all
when improperly applied.
The legislative-acquiescence doctrine presumes acquiescence to judicial “precedents,”
Lambert v. Sea Oats Condo. Ass’n,
293 Va. 245
, 254 (2017), not obiter dicta. As noted earlier,
the some-courts dictum in Pitts is a single sentence citing an annotation that surveys the split of
authority on the issue of insurance proceeds. That non-precedential remark is immediately
followed by a disclaimer “confin[ing] the reach of [the Pitts] decision” to the specific question
presented, which had nothing to do with insurance payments. See
Pitts, 242 Va. at 262
.
Insisting that the legislature has silently agreed with the Pitts some-courts dictum and implicitly
11
codified it in Code § 55.1-136(C) “merely piles one interpretative inference upon another,”
Loudoun Cnty. v. Richardson,
298 Va. 528
, ___,
841 S.E.2d 629
, 641 (2020) (Kelsey, J.,
dissenting).
III.
Offering an alternative argument in support of the circuit court’s judgment, Terry and
Cathy Phillips contend that the contractual right under the insurance policy to the fire-damage
payments constitutes intangible personal property owned by them as tenants by the entirety.
Thus, even if Code § 55.1-136(C) provides no statutory “disposition” immunity from creditors,
the common-law doctrine of tenancy by the entirety (extended by statutes and caselaw to
personal property) protects the insurance payments from garnishment by a judgment creditor of
Terry Phillips. We disagree.
A.
The common law has recognized the tenancy by the entirety for centuries. See 2 William
Blackstone, Commentaries *182; 7 Michael Allan Wolf, Powell on Real Property § 52.01[1], at
52-3 (2020). 8 In a long line of cases, we have synthesized this estate’s five essential
characteristics and defined it as a property interest in which the co-owners hold (i) unity of title,
(ii) unity of estate, (iii) unity of time, (iv) unity of possession, and (v) unity of marriage. See
Evans v. Evans,
290 Va. 176
, 183 (2015); Rogers v. Rogers,
257 Va. 323
, 326 (1999);
Pitts, 242 Va. at 258-59
; Gant v. Gant,
237 Va. 588
, 591 (1989); Jones v. Conwell,
227 Va. 176
, 181
(1984). These unities reflect the unities of a joint tenancy “modified by the common law
8
See also 2 James Kent, Commentaries on American Law 132 (2d ed. 1832); 1 John
Tayloe Lomax, Digest of the Laws Respecting Real Property 616 (2d ed. 1855). See generally
John V. Orth, Tenancy by the Entirety: The Strange Career of the Common-Law Marital Estate,
1997 BYU L. Rev. 35, 35-40 (1997).
12
principle that husband and wife are but one person.” 1 Raleigh C. Minor & Frederick D.G.
Ribble, The Law of Real Property § 852, at 1096 (2d ed. 1928); see
Jones, 227 Va. at 181
.
The “grand incident” of a joint tenancy, which is also shared by a tenancy by the entirety,
is the right of survivorship. See 1 Minor & Ribble, supra, §§ 847, 855, at 1092, 1099. In the
context of a tenancy by the entirety, the right of survivorship means that “[u]pon the death of
either spouse, the whole of the estate by the entireties remains in the survivor.”
Vasilion, 192 Va. at 740
. The common law presumed that a conveyance to more than one grantee created a
joint tenancy, except for conveyances to a husband and wife, which created a tenancy by the
entirety if all of the required unities were present. See
id. at
739;
American Nat’l Bank of Wash.,
D.C. v. Taylor,
112 Va. 1
, 4 (1911); American Law of Property § 6.6, at 24 (A. James Casner
ed., 1952); 7 Wolf, supra, § 52.01[2], at 52-3; see also Charles Alfred Graves, Notes on the Law
of Real Property § 145, at 176 (1912); 4 Kent, supra note 8, at 361; Paul H. Melnick, Forms of
Holding Title, in 2 Real Estate Transactions in Virginia §§ 8.202, 8.3, at 1066, 1070 (Neil S.
Kessler & Paul H. Melnick eds., 5th ed. 2019); 1 Minor & Ribble, supra, § 838, at 1085-86.
Most scholars agree that the early common law required little, if any, express manifestation of
intent to create a tenancy by the entirety with the right of survivorship when the five unities were
present. 9
9
See Joseph L. Lyle, Jr., Virginia Extends Entireties Doctrine, 20 Wash. & Lee L. Rev.
260, 261-62 (1963) (“Thus it developed [at common law] that virtually any estate created
between husband and wife, where the four unities were present, resulted in a tenancy by the
entirety.”); Robert A. Ryland, Tenancy by the Entirety in Virginia,
24 Va. L
. Rev. 689, 689
(1938) (“At common law no expressed intention in a deed or will was necessary to create either
joint tenancy or tenancy by the entirety.”); Emerson G. Spies, Some Considerations in Conveying
to Husband and Wife,
34 Va. L
. Rev. 480, 482 (1948) (“At common law joint tenancies were
most favored by the courts and arose presumptively whenever the grantees were not husband and
wife and the four unities of time, title, interest, and possession were present . . . .”).
13
A long series of legislative enactments, however, have superseded the common law
presumption favoring the right of survivorship. “[B]y statute enacted as early as 1787,
survivorship between joint tenants was abolished.”
Vasilion, 192 Va. at 741
(citation omitted);
see
Pitts, 242 Va. at 259
; Allen v. Parkey,
154 Va. 739
, 744-45 (1929), adhered to on reh’g,
154 Va. 739
(1930). 10 This statute, however, did not “abolish survivorship between tenants by the
entirety,” Vasilion, 192 Va. At 741 (citation omitted), because a tenancy by the entirety “is
conceptually different from a joint tenancy,” Melnick, supra, § 8.3, at 1070. In a tenancy by the
entirety, the husband and wife own “a sole, and not a joint-tenancy. They have no moieties.
Each holds the entirety. They are one in law, and their estate one and indivisible.” Thornton v.
Thornton, 24 Va. (3 Rand.) 179, 183 (1825) (emphases in original). A “moiety” in common law
is a separate interest. See Black’s Law Dictionary 1024 (11th ed. 2019). The defining feature of
a tenancy by the entirety was that, as between husband and wife, there were no moieties. See
Thornton, 24 Va. at 183-87
. 11
In the mid to late 1800s, the General Assembly enacted several statutes specifically
addressing tenancies by the entirety. See
Pitts, 242 Va. at 259
;
Vasilion, 192 Va. at 741
-42;
10
With respect to joint tenancies, the abolition of survivorship was modified by a
statutory exception allowing the right of survivorship when the intent to create it was explicitly
stated. See Code 1849, ch. 116, § 19, at 502-03 (current version at Code § 55.1-134); see also 1
Minor & Ribble, supra, § 848, at 1093.
11
See also 2
Blackstone, supra, at *182
(“[F]or husband and wife being considered as
one person in law, they cannot take the estate by moieties, but both are seised of the entirety.”); 2
Kent, supra note 8, at 132 (“If an estate in land be given to the husband and wife, or a joint
purchase by them during coverture, they are not properly joint tenants, nor tenants in common,
for they are but one person in law, and cannot take by moieties.”); 1 Lomax, supra note 8, at 616
(“As there can be no moieties between husband and wife, they cannot be joint tenants; therefore,
where an estate is conveyed to a man and his wife, and their heirs, it is not a joint tenancy; for
joint tenants take by moieties, and are each seised of an undivided moiety of the whole.”).
14
Allen, 154 Va. at 744-45
; American Nat’l Bank of Wash.,
D.C., 112 Va. at 4
. 12 The statutes
applied to conveyances to a husband and wife “as to estates of inheritance in 1850, and as to all
estates, real or personal, by the Code of 1887.” 1 Minor & Ribble, supra, § 855, at 1100. 13
These statutes reversed the common-law presumption that a husband and wife took property as
one person without separate moieties, as stated in the Code of 1887: “[I]f hereafter any estate,
real or personal, be conveyed or devised to a husband and his wife, they shall take and hold the
same by moieties in like manner as if a distinct moiety had been given to each by a separate
conveyance,” unless “it manifestly appears from the tenor of the instrument that it was intended
the part of the one dying should then belong to the other[],” see Code 1887, ch. 107, §§ 2430-
2431, at 593.
At this point in the statutory evolution of these concepts, “tenancy by entireties [was]
itself abolished, except where the deed or will manifests an intent that it shall continue.”
Allen, 154 Va. at 745
(quoting Graves, supra, § 152, at 182). “That is, after 1888 a tenancy by the
entirety could not be created in any estate [real or personal] unless survivorship was expressly
provided for in the instrument of transfer.” Ritchie, supra note 12, at 615. The “practical effect
of the statute” was “to convert the tenancy by entireties into a tenancy in common, destroying
survivorship.” 1 Minor & Ribble, supra, § 857, at 1102 (emphases in original); see Allen, 154
12
See also Graves, supra, § 152, at 181-82; 1 Minor & Ribble, supra, § 855, at 1100;
John Ritchie 3d, Tenancies by the Entirety in Real Property with Particular Reference to the Law
of Virginia,
28 Va. L
. Rev. 608, 613-14 (1942); Spies, supra note 9, at 485-86.
13
Compare Code 1849, ch. 116, § 18, at 502 (“And if hereafter an estate of inheritance
be conveyed or devised to a husband and his wife, one moiety of such estate shall, on the death
of either, descend to his or her heirs, subject to debts, curtesy or dower, as the case may be.”
(emphasis added)), with Code 1887, ch. 107, § 2430, at 593 (“And if hereafter any estate, real or
personal, be conveyed or devised to a husband and his wife, they shall take and hold the same by
moieties in like manner as if a distinct moiety had been given to each by a separate conveyance.”
(emphasis
added)). 15 Va. at 745
. “In other words, [the statute] reversed the common law presumption that one
transferring an estate by deed or will to a husband and wife intended them to be tenants by the
entirety unless the language of the instrument clearly disclosed a contrary intent.” Ritchie, supra
note 12, at 615.
Later enactments have expanded, reorganized, and recodified these statutes. The
statutory presumption against the right of survivorship, however, remains securely intact. At the
time of the circuit court’s judgment in this case, former Code §§ 55-20 to 55-21 addressed these
issues. As noted earlier, see supra note 1, in 2019 the General Assembly amended, renumbered,
and recodified these provisions as Code §§ 55.1-134, -135, and -136. See 2019 Acts ch. 712, at
1339. The changes were intended, in relevant part, to “improve the structure and clarity of
statutes pertaining to real and personal property in the Commonwealth,” see Virginia Code
Commission, Report on the Revision of Title 55 of the Code of Virginia, S. Doc. No. 5, at v
(2018). With respect to the provisions at issue in this case, the Virginia Code Commission made
only “[t]echnical changes,” see
id. at
10-12,
for the purpose of making the language “clear,
consistent, and modern,” see
id. at
x-xi. No substantive changes were intended. For the purpose
of deciding the present case, therefore, we see no interpretative differences between the statutes
as they exist today and as they existed at the time the circuit court decided this case.
Under Code § 55.1-135, a joint tenancy in real or personal property, including “any
written memorial of a chose in action,” is presumed to be without the right of survivorship unless
“the expression ‘with survivorship,’ or any equivalent language, is employed in such titling.”
Unlike a tenancy by the entirety, however, a mere joint tenancy (even one with the right of
survivorship) does not protect the jointly held property from the creditors of one of the co-
owners. Any such separate interest can be attached, garnished, and partitioned. See
Jones, 227 Va. at 181
-82; 1 Minor & Ribble, supra, § 854, at 1097-98; see also Timothy H. Guare, Mapping
16
the Plan, in 1 Estate Planning in Virginia § 3.203, at 144 (Marie McKenney Tavernini ed., 5th
ed. 2016); Melnick, supra, § 8.203, at 1069.
The language regarding conveyances to a husband and wife, originally enacted in the
Code of 1887, is now found in Code § 55.1-135. The statutory presumption against the right of
survivorship still applies to property that is conveyed jointly in the names of both spouses:
If any real or personal property is conveyed or devised to spouses,
they shall take and hold such property by moieties in the same
manner as if a distinct moiety had been given to each spouse by a
separate conveyance, unless language as provided in this section or
in § 55.1-136 is used that designates the tenancy as a joint tenancy
or a tenancy by the entirety and all requirements for holding
property by such tenancy are met.
Code § 55.1-135. 14 The “language as provided . . . in § 55.1-136,”
id., which is deemed
sufficient to establish the right-of-survivorship prerequisite to a tenancy by the entirety, is stated
14
The Virginia Code Commission noted that this sentence was relocated to Code § 55.1-
135 “because it is more logically located with other provisions regarding joint ownership.” See
Virginia Code Commission, Report on the Revision of Title 55 of the Code of Virginia, S. Doc.
No. 5, at 11 (2018). Prior to its relocation in 2019, this provision was found in Code §§ 55-20
and -21. The first statute provided:
When any joint tenant dies, before or after the vesting of the estate,
whether the estate is real or personal, or whether partition could
have been compelled or not, his part shall descend to his heirs, or
pass by devise, or go to his personal representative, subject to
debts or distribution, as if he had been a tenant in common. And if
hereafter any estate, real or personal, is conveyed or devised to a
husband and his wife, they shall take and hold the same by
moieties in like manner as if a distinct moiety had been given to
each by a separate conveyance.
Code § 55-20 (2018) (emphases added). The second statute provided:
Section 55-20 [abolishing any presumption of survivorship] shall
not apply to any estate which joint tenants have as fiduciaries, nor
to any real or personal property transferred to persons in their own
right when it manifestly appears from the tenor of the instrument
transferring such property or memorializing the existence of a
chose in action, that it was intended the part of the one dying
17
in Code § 55.1-136(A): “An intent that the part of the one dying should belong to the other shall
be manifest from a designation of the spouses as ‘tenants by the entireties’ or ‘tenants by the
entirety.’”
When property is conveyed to spouses, therefore, Virginia law presumes against a
tenancy by the entirety unless all required common-law unities exist, and the instrument uses (i)
the language in Code § 55.1-136 designating the spouses as “tenants by the entireties” or
“tenants by the entirety” or (ii) the language in Code § 55.1-135, expressly stating “the
expression ‘with survivorship,’ or similar language” in the instrument. See Code § 55.1-135. No
tenancy by the entirety can be created by an instrument that does not manifestly identify the
property interest in this manner. See
Allen, 154 Va. at 745
(stating, in explanation of the
predecessor statute to Code § 55.1-136, that “tenancy by entireties is itself abolished, except
where the deed or will manifests an intent that it shall continue” (quoting Graves, supra, § 152,
at 182)). 15 See generally Nancy Newton Rogers, Transferring Assets Outside of Probate, in 2
Estate Planning in Virginia, supra, § 10.402, at 836 (“If no survivorship is specified, a tenancy in
common results.”).
The right of survivorship must be manifest because it dramatically changes the ordinary
succession of property upon an owner’s death. “Upon the death of either spouse the whole of the
estate by the entireties remains in the survivor,” and thus, “[t]he heirs of the deceased spouse
inherit no part of the property so held. The entire estate remains exclusively in the surviving
should then belong to the others.
Code § 55-21 (2018) (emphases added).
15
See also 9 Dale M. Cecka, Lawrence D. Diehl, & James R. Cottrell, Virginia Practice
Series: Family Law § 4.3, at 96 (2020 ed.) (“When property is acquired by a husband and wife, a
deed or other like instrument must specify that a tenancy by the entirety is intended, or otherwise
a tenancy in common will be established . . . .”).
18
spouse.”
Vasilion, 192 Va. at 740
(emphasis added); see Johnson v. McCarty,
202 Va. 49
, 55-56
(1960); Smith v. Smith,
200 Va. 77
, 81 (1958) (explaining that in a tenancy by the entirety, each
spouse is “seized with the entire estate, and upon the death of one the survivor takes the whole”);
Guare, supra, § 3.204, at 144; Melnick, supra, § 8.203, at 1068; 1 Minor & Ribble, supra,
§§ 847, 854, at 1092, 1098.
A tenancy by the entirety also has an impact on each spouse’s rights while both are alive.
Unlike a mere joint tenancy with a right of survivorship, a tenancy by the entirety “may be
severed only by mutual consent of the spouses or by divorce,” In re Bunker,
312 F.3d 145
, 151
(4th Cir. 2002). “Although husband and wife acting together may alienate or encumber the
entireties property, ‘neither spouse can convey [or encumber] any part of the property by his or
her sole act.’”
Id. (quoting Hausman v.
Hausman,
233 Va. 1
, 3 (1987)). And, most importantly
for the purposes of our case, this unique form of co-ownership provides each spouse with
protection against the judgment creditors of the other spouse. Under the common law, “property
held as tenants by the entireties is exempt from the claims of creditors who do not have joint
judgments against the husband and wife.”
Rogers, 257 Va. at 326
; see also
Evans, 290 Va. at 184
;
Jones, 227 Va. at 181
;
Vasilion, 192 Va. at 740
; In re
Bunker, 312 F.3d at 151-52
; Reid v.
Richardson,
304 F.2d 351
, 353 (4th Cir. 1962). 16
B.
Under the early common law, a tenancy by the entirety protected only real property. See
2 American Law of Property, supra, § 6.6, at 30. In Oliver v. Givens, as a matter of first
16
This case does not present an opportunity to address the efficacy of “an attempt to
convey property to spouses as joint tenants with the right of survivorship,” Melnick, supra, § 8.3,
at 1072-73 (suggesting that “[t]he interplay between section 55.1-134(B), allowing survivorship
estates, and the common law notion of the ‘oneness’ of a married couple would appear to convert
the tenancy automatically (in Virginia) to a tenancy by the entirety” and noting “[a]n old and
brief line of cases indicat[ing] this result”).
19
impression, we held that “personal property as well as realty may be held by a husband and wife
as tenants by the entireties.”
204 Va. 123
, 126 (1963). We applied this principle to “proceeds
derived from a voluntary sale of real estate held by the entireties,” holding that these proceeds
“are likewise held by the entireties.” See
id. at
126-27. We affirmed this holding in Pitts by
holding that a promissory note given in exchange for the sale of real property also retained the
tenancy-by-the-entirety status of the underlying property as proceeds of the sale.
See 242 Va. at 260-61
.
In 1999, the General Assembly enacted a statute confirming that personal property could
be held as a tenancy by the entirety. See J. Rodney Johnson, Wills, Trusts, and Estates, 33 U.
Rich. L. Rev 1075, 1081-82 (1999) (commenting on the enactment of former Code § 55-20.1).
Personal property can include tangible and intangible property. In Virginia, “[a] chose in action
is intangible personal property.” Huaman v. Aquino,
272 Va. 170
, 175 (2006); see also First
Nat’l Bank of Richmond v. Holland,
99 Va. 495
, 503 (1901). “Any right which has not been
reduced to possession is a chose in action.”
Holland, 99 Va. at 503
. A contractual right,
including a right to insurance payments, is a classic example of a chose in action. See 17 Samuel
Williston & Richard A. Lord, A Treatise on the Law of Contracts § 49:119, at 106-07 (4th ed.
2015) (“A contract of insurance is a chose in action. That is to say, it confers a right to bring a
legal action to recover a sum of money ex contractu, or from or out of the contract . . . .”). 17
17
Pitts held that former Code §§ 55-20 and -21 “were intended to apply to joint tenancies
and to tenancies by the entireties created by an ‘instrument’ of conveyance or devise” and not by
promissory notes, which are mere “memorials of a chose in action,” and consequently, “[t]he fact
that those notes and the deed of trust securing the debt they represent contain no language
evincing a survivorship intent is wholly immaterial to the question before us.”
Pitts, 242 Va. at 260
. In 2001, however, the General Assembly amended former Code § 55-21, clarifying that the
statute applied to “the instrument transferring such property or memorializing the existence of a
chose in action.” Code § 55-21 (2001); see J. Rodney Johnson, Wills, Trusts, & Estates, 35 U.
Rich. L. Rev. 845, 850-51 & n.26 (2001). The General Assembly similarly clarified former
20
C.
In this case, Terry and Cathy Phillips argue that the insurance policy confirms that they
collectively owned a contractual right to the insurance payments as tenants by the entirety with
the common-law right of survivorship. We disagree.
1.
In Virginia, the “‘named insured’ is the policyholder. An ‘insured’ is simply a party who
may be covered under the policy. Not all ‘insureds’ are ‘named insureds.’” Atkinson v. Penske
Logistics, LLC,
268 Va. 129
, 135 (2004); see also 7A Steven Plitt et al., Couch on Insurance 3d
§ 110:1, at 110-5 (2013 rev. ed.). We do not accept the simplistic assertion that “the term
‘named insured’ [should] be read as though the word ‘named’ is simply an adjective modifying
the noun ‘insured.’”
Atkinson, 268 Va. at 135
. In property- and casualty-insurance policies, only
the “present named insured” is the legally recognized “[p]olicyholder.” See Code § 38.2-602.
Terry Phillips was the sole policyholder on the Chubb policy and the only named insured.
On 21 separate occasions, the insurance policy and riders specifically identified him alone as the
named insured. See J.A. at 20-23, 26-28, 31-39, 91-95. The policy and riders nowhere
mentioned Cathy Phillips by name. 18 Cathy Phillips merely appeared, at best, to be an unnamed
insured “spouse” included in the definition of “[y]ou” in the general provisions of the policy.
See
id. at
40. While this provision no doubt gave Cathy Phillips a contractual interest in the
insurance payments, we are skeptical of her claim that this provision, standing alone, created the
Code § 55-20.1, current Code § 55.1-135, by adding the language “written memorial of a chose
in action.” See
Johnson, supra, at 850-51
& n.26 (2001). That language has survived in the
2019 recodifications of Code §§ 55.1-134 and -135.
18
This fact implicates a question that we need not resolve in this case: Can an instrument
create a tenancy by the entirety while wholly omitting the name of one of the spouses? See, e.g.,
W.W. Allen, Annotation, Estates by Entirety in Personal Property,
64 A.L.R. 2d 8
, § 27 (1959)
(discussing whether personal property held in one name only is sufficient to create a tenancy by
the entirety).
21
requisite common-law unities to form a tenancy by the entirety, which involves taking “one and
the same interest or estate, arising by one and the same conveyance, commencing at one and the
same time, and held by one and the same undivided possession.” 1 Minor & Ribble, supra,
§ 839, at 1086 (defining the four unities); see 41 C.J.S. Husband and Wife § 22 (2020) (stating
that tenants by the entirety take “identical interests simultaneously by the same instrument and
with the same right of possession”).
We need not answer that difficult and nuanced question, however, because a more
fundamental flaw defeats the tenancy by the entirety claimed in this case. A tenancy by the
entirety cannot exist unless the parties manifest some intent to create it. Disputing this premise,
Terry and Cathy Phillips argue that Oliver and Pitts stand for the proposition that a manifestation
of intent is not required for personal property to be held as a tenancy by the entirety. We
disagree. Oliver and Pitts addressed the sale of real property held as a tenancy by the entirety.
We merely held that the proceeds from the sale of that property retain the preexisting tenancy-
by-the-entirety status of the property sold. See
Pitts, 242 Va. at 261-62
;
Oliver, 204 Va. at 126
-
27. It did not matter to us in Pitts that the buyer’s promissory notes “contain[ed] no language
indicating a right of survivorship.”
Pitts, 242 Va. at 256
. The title to the property clearly did —
it had been conveyed to George and Ellen Pitts “as tenants by the entirety with the right of
survivorship as at common law.”
Id. at 257
(citation omitted). We have never held that right-of-
survivorship or tenancy-by-the-entirety language is unnecessary for personal property generally.
To be sure, doing so would violate the admonition in Pitts to “leave the choice between
competing public-policy interests to the General Assembly,”
id. at
262.
22
2.
Terry and Cathy Phillips contend that even if some manifestation of intent is required, the
Chubb insurance policy created a tenancy by the entirety by expressly providing for the right of
survivorship. We again disagree.
The right of survivorship is not simply the right of a surviving joint tenant to retain his or
her proportionate share after the death of the other tenant. That truism would be true of
“survivorship” in a mere tenancy in common. The “right of survivorship” of a tenancy by the
entirety means that “[u]pon the death of either spouse the whole of the estate by the entireties
remains in the survivor.”
Vasilion, 192 Va. at 740
; see supra at 18-19. “This is so not because
he or she is vested with any new interest therein, but because in the first instance he or she took
the entirety which, under the common law, was to remain in the survivor.”
Vasilion, 192 Va. at 740
. This powerful attribute of a tenancy by the entirety means that upon the death of one
spouse, the other spouse receives everything. See Guare, supra, § 3.204, at 144; Melnick, supra,
§ 8.203, at 1068. The decedent’s estate, his heirs, his children, his creditors — they receive
nothing because property held in a tenancy by the entirety is a non-probate asset. See 2 Frank O.
Brown, Virginia Practice Series: Probate Handbook §§ 1.1, 3.5, at 7, 96 (2019-2020 ed.); Rogers,
supra, § 10.402, at 835. “[T]he surviving spouse owns all of the property by operation of law
and nothing passes to the deceased spouse’s heirs, distributees, or beneficiaries.” Guare, supra,
§ 3.204, at 144.
No provision in the Chubb insurance policy used the expression “tenants by the
entireties” or “tenants by the entirety,” Code § 55.1-136(A); see Code § 55.1-135. Nor did any
provision state that Terry and Cathy Phillips hold whatever interest they may have with the
“right of survivorship” as at common law. See Code § 55.1-135. In other words, no provision of
this policy can be construed to say that upon the death of the policyholder, the entire insurance
23
payout would go not to the decedent’s estate but solely to his spouse, a mere additional insured.
The policy implied just the opposite. It stated:
In the event of your death, we cover your spouse, your legal
representative or any person having proper temporary custody of
your property until a legal representative is appointed and
qualified, but only with respect to your premises and other
property covered under the policy at the time of death. We will
also cover any member of your household who is a covered person
at the time of death.
J.A. at 83.
This event-of-death provision said nothing more than the insurer’s contractual coverage
obligations survive the death of one of the contracting parties. It “is a standard clause in many, if
not most, contractual instruments used in a host of transactions.” See Wood v. Martin, 299 Va.
___, ___, Record No. 190738, slip op. at 12 (October 22, 2020). In this context, it simply meant
that the insurer’s contractual duties will continue to inure to the benefit of (i) the decedent’s
“spouse,” and (ii) any “legal representative . . . appointed and qualified” to represent his estate,
and (iii) any other “covered person” under the policy. See J.A. at 83.
A true right-of-survivorship provision would not (and could not) have said any of this. It
would have said either, “upon your death, any payments under this policy shall be paid
exclusively to your spouse and to no one else,” or “all contractual rights and proceeds belonging
to you under this policy, upon your death, shall belong exclusively to your spouse.” Only then
would “the whole of the estate,”
Vasilion, 192 Va. at 740
, go exclusively to Cathy Phillips upon
the death of Terry Phillips. In short, saying to the named insured, “we cover your spouse if you
die” is not the same thing as saying “your spouse (and no one else) receives your rights under the
contract upon your death.” The Chubb policy contains no language describing a common-law
right of survivorship.
24
The event-of-death provision, moreover, appeared in the “General Provisions” section of
the policy, J.A. at 83, and governed all aspects of the policy’s coverage. It provided contractual
rights to all “covered person[s],”
id., under the policy
— which included persons other than
Terry and Cathy Phillips. The policy’s “Personal Liability Coverage,” for example, protected the
named insured, as well as any “family member,” any permitted users of vehicles or watercraft,
and “any person or organization with respect to their legal responsibility for covered acts or
omissions” of the named insured or a “family member.”
Id. at 70.
These other “covered”
persons shared in the non-exclusive contractual rights owed by the insurer separately to all
insureds, not just Terry and Cathy Phillips. Nothing in the Chubb insurance policy, therefore,
attempted to satisfy the common-law unities sufficient to silo within it a tenancy by the entirety
for Terry and Cathy Phillips.
IV.
In sum, the circuit court erred in dismissing the garnishment under Code § 55.1-136(C).
A disposition involves an “act of transferring something to another’s care or possession” or “the
relinquishing of property,” Black’s Law Dictionary 592 (11th ed. 2019) (emphasis added). The
property in this case was not transferred to the insurer or to anyone else. There being no
disposition of the property, Code § 55.1-136(C)’s statutory immunity does not apply. We also
reject the alternative argument raised by Terry and Cathy Phillips that they held the contractual
right to the insurance payments as tenants by the entirety. Even if they did have the requisite
common-law unities (a question that we do not resolve), the insurance policy nowhere created a
contractual right held by them with the common-law right of survivorship, an essential attribute
of a tenancy by the entirety. For these reasons, we reverse the judgment dismissing the
garnishment action and remand the case for further proceedings consistent with this opinion.
Reversed and remanded.
25
JUSTICE GOODWYN, with whom JUSTICE MIMS and JUSTICE POWELL join, dissenting.
My colleagues in the majority hold that insurance payments, owed to a husband and wife
because of the fire loss of property entitled to immunity under Code § 55.1-136(C) 1, are not
exempt from garnishment by a separate creditor of one of the spouses. I respectfully disagree.
I.
Terry Marshall Phillips (Mr. Phillips) and his wife, Cathy Sue Phillips (Mrs. Phillips),
originally owned their home and its contents (the Residence) as tenants by the entireties. In
2010, they retitled the Residence to their trusts, the Terry Marshall Phillips Revocable Trust and
the Cathy Sue Phillips Revocable Trust. Code § 55.1-136(C) gives such trust property the same
immunity from the claims of the spouses’ separate creditors as the property would have had if it
continued to be held as tenants by the entireties.
The Residence was covered by a homeowners insurance policy (the policy) issued by
Chubb. The policy states that “[t]his policy is a contract between you and us.” The policy
defines “you” as “the person named in the [c]overage [s]ummary, and a spouse who lives with
that person.” Mr. Phillips is the person named in the policy’s coverage summary. It is
undisputed that at all times relevant to this case, Mrs. Phillips was Mr. Phillips’ spouse and she
lived with Mr. Phillips. Thus, “you” is Mr. and Mrs. Phillips. The policy defines “us” as Chubb.
The policy requires Chubb to pay Mr. and Mrs. Phillips in the event of physical loss of the
Residence. In February 2018, the Residence was lost to fire, and a claim was filed with Chubb.
1
In October 2019, Code § 55-20.2 was amended and reenacted as Code § 55.1-136,
which contains near-identical language as the former Code § 55-20.2. 2019 Acts ch. 712. To be
consistent with the majority, we will also refer to the current statute.
26
Chubb proceeded to pay Mr. and Mrs. Phillips for the damage, destruction, and loss of
their property. It sent two checks as partial payment of the Phillipses’ claim. The checks were
made payable to Mr. Phillips and Mrs. Phillips.2 Chubb made additional payments on the claim
by wiring the payments to an account that Mr. and Mrs. Phillips owned as tenants by the
entireties. Additional amounts were owed on the claim when, on March 2, 2018, Andrea Gail
Jones (Ms. Jones), who has a judgment against Mr. Phillips, but not Mrs. Phillips, instituted a
garnishment action in the Circuit Court of Powhatan County, seeking to garnish any subsequent
homeowners insurance proceeds Chubb owes to Mr. Phillips.3
Mr. Phillips and Mrs. Phillips each filed motions to quash and dismiss the garnishment.
They argued that the homeowners insurance payments were exempt from garnishment because
Ms. Jones’ judgment lien could not attach to the Residence, and it should follow that it cannot
attach to any proceeds resulting from the damage, destruction, or loss of the Residence, pursuant
to Code § 55.1-136(C). The Phillipses also argued that, regardless of the applicability of Code
§ 55.1-136(C), the proceeds from the policy are personal property owned by them as tenants by
the entireties, and as such, are exempt from Ms. Jones’ garnishment for a debt owed solely by
Mr. Phillips.
The circuit court entered an order granting the Phillipses’ motions to quash, ruling that
the insurance payments were proceeds of a disposition and thus exempted from garnishment
under Code § 55.1-136(C). It noted that its ruling was consistent with that of other jurisdictions
that had examined the issue, stating that “cases in other jurisdictions have held that insurance
2
The checks also listed Goodman-Gable Gould Adjusters International as a payee. The
Phillipses hired these adjusters to assist them with filing their insurance claim.
3
In 2013, Ms. Jones prevailed in an unlawful termination claim. As part of that
litigation, a federal district court entered a judgment award against Mr. Phillips, who had served
as chairman and majority shareholder of a corporation that formerly employed Ms. Jones.
27
proceeds that derive from property that was held as tenants by the entirety are likewise deemed
to be owned as tenants by the entirety.” See J.A. at 324 (citing Cooper v. Cooper,
284 S.W.2d 617
(Ark. 1955)).
This appeal followed.
II.
The issue of whether the circuit court erred in its application of Code § 55.1-136(C) is a
question of statutory interpretation, which is a pure question of law that we review de novo. JSR
Mech., Inc. v. Aireco Supply, Inc.,
291 Va. 377
, 383 (2016). Although the satisfaction of the
other requirements of Code § 55.1-136(C) is not disputed, the parties disagree as to whether the
insurance payments from Chubb are the “proceeds of [a] sale or disposition.” Code
§ 55.1-136(C) states, in relevant part:
[A]ny property of spouses that is held by them as tenants by the entirety and
conveyed to their joint revocable or irrevocable trusts, or to their separate
revocable or irrevocable trusts, and any proceeds of the sale or disposition of such
property, shall have the same immunity from the claims of their separate creditors
as it would if it had remained a tenancy by the entirety, so long as (i) they remain
married to each other, (ii) it continues to be held in the trust or trusts, and (iii) it
continues to be their property, including where both spouses are current
beneficiaries of one trust that holds the entire property or each spouse is a current
beneficiary of a separate trust and the two separate trusts together hold the entire
property, whether or not other persons are also current or future beneficiaries of
the trust or trusts.
The majority concludes that the homeowners insurance payments were not the proceeds
of a disposition because a disposition of property requires the act of transferring property. See
ante at 5-6. I disagree with the majority’s conclusion that property can only be disposed of by
transferring its ownership or possession.
Quoting an aphorism attributed to Albert Einstein, our Court has previously stated
“everything should be made as simple as possible, but not simpler.” Levick v. MacDougall,
294 Va. 283
, 291 (2017). In reaching its conclusion regarding the plain meaning of “disposition,” as
28
the word is used in Code § 55.1-136(C), the majority fails to consider all of the definitions for
disposition in Black’s Law Dictionary, and it also fails to consider meanings of the word not
found in the “vocabulary of law.” Unfortunately, the problematic result of this shortcoming is
further compounded because consideration of the varying definitions of the word “disposition”
leads to an understanding of the term’s ambiguity, which needs to be addressed in interpreting its
meaning in the context of Code § 55.1-136(C).
The majority appears to resolve this case on the basis of a Black’s Law Dictionary
definition of disposition that was not argued before the circuit court or this Court, and to reverse
the circuit court based upon an argument that the circuit court did not have the opportunity to
consider. The parties and the circuit court failed to discern any jurisprudential rationale for
choosing the particular sub-definition from Black’s Law Dictionary found by the majority to be
definitive. Perhaps it is because the circuit court and the parties considered other sources in
addition to Black’s Law Dictionary in their attempts to interpret the meaning of the statutory
language, but no party to this action has asserted that the resolution of the issue of the meaning
of disposition as used in Code § 55.1-136(C) was as simple as deferring to a particular Black’s
Law Dictionary definition– not Ms. Jones, not the Phillipses, and not the circuit court. In fact,
the Black’s Law Dictionary definition of disposition is not mentioned at all in any briefing or
arguments before the circuit court or this Court.
Regarding Ms. Jones’ argument concerning why the insurance proceeds are not a
disposition under Code § 55.1-136(C), I believe it is best to directly quote from her brief:
The trial court’s holding that the proceeds of the Policy was a disposition
under [the statute] is incorrect. First, such a finding contradicts the statement of
[the] Pitts Court, which explicitly chose not to extend [tenancy by the entirety]
protections to proceeds from a homeowner’s insurance policy. Second, since the
holding in Pitts, the Legislature has taken no affirmative action to extend
protections to homeowner’s insurance contracts.
29
Still, if forced to categorize the payment of proceeds from an insurance
contract under the current framework, the proceeds are at most a partial
disposition of the underlying property. As is the case here, the owners of the real
property retain it, even when catastrophe strikes.
As stated above, the Legislature adopted the rule from Oliver extending
the protection to proceeds from the voluntary sale or disposition. No disposition
occurred in the instant case; the Phillips[es] retain all the sticks in the Property’s
bundle. They retain ownership of the Property, remain seized of the land, and
retain the requisite unities, continuing to own the Property as tenants by the
entireties. The Property has been neither sold, nor devised, nor given away.
Given the long history of [tenancy by the entirety], “sale or disposition” could be
interpreted to apply only to the sale, gift, or devise of the property by the spouses.
It logically follows that personalty protection could extend to those
situations in which the entire bundle of sticks was exchanged. It also follows
logically that an owner may sell their land and that an author needs a legal-catch-
all phrase for which “disposition” covers the gamut. Still, [the statute] speaks
only to the total disposition of the marital asset, which the receipt of proceeds
from an insurance contract are not.
Brief for Appellant at 22-23.
As noted by Ms. Jones, “sale or disposition” could be interpreted to apply only to the
sale, gift, or devise of property. However, we must determine if it should be interpreted that
way.
In interpreting a statute, we “apply the plain language of a statute unless the terms are
ambiguous or applying the plain language would lead to an absurd result.” Boynton v. Kilgore,
271 Va. 220
, 227 (2006) (internal citations and quotation marks omitted). Statutory language is
ambiguous if it is subject to more than one reasonable interpretation, “lacks clarity and
precision,” or is “difficult to comprehend.” Herndon v. St. Mary’s Hosp. Inc.,
266 Va. 472
, 475
(2003). We also presume that every part of a statute has “some effect and no part will be
considered meaningless unless absolutely necessary.” City of Richmond v. Virginia Elec. &
Power Co.,
292 Va. 70
, 75 (2016) (quoting Lynchburg Div. of Soc. Servs. v. Cook,
276 Va. 465
,
483 (2008)).
30
Proceeds are defined as “what is produced by or derived from something (as a sale,
investment, levy, business) by way of total revenue; the total amount brought in” or “the net sum
received (as for a check, a negotiable note, an insurance policy) after deduction of any discount
or charges.” Webster’s Third New International Dictionary 1807 (1993). It is “the value of land,
goods or investments when converted into money.” Black’s Law Dictionary 1458 (11th ed.
2019). It is undisputed that the insurance payments are not proceeds of a sale; at issue in this
case is whether the insurance payments are the proceeds of a disposition.
The majority uses what it terms as a “vocabulary of law” definition of disposition as the
word’s plain meaning in the statute. See ante at 4-5. It indicates that disposition is required to
be interpreted according to one of its definitions in Black’s Law Dictionary, and only considers
definitions from that source. There is no Virginia authority that supports doing so.
In Black’s Law Dictionary, disposition is defined as:
1. The act of transferring something to another’s care or possession, esp[ecially]
by deed or will; the relinquishing of property.
2. A final settlement or determination.
3. Temperament or character; personal makeup.
Black’s Law Dictionary 592 (11th ed. 2019). The majority examines the definitions from
Black’s Law Dictionary and correctly determines that the Residence, which was destroyed by
fire, did not have a person’s “temperament or character,” so the third definition was inapplicable
in this instance. See ante at 5-6. I agree. However, it did not cite or consider the second
definition of disposition, which may have some bearing on the meaning of disposition as used in
the relevant statute. Instead, the majority concludes that, in the “vocabulary of law,” disposition
as used in Code § 55.1-136(C) should be defined, essentially, as it is described in the first
definition in the most current edition of Black’s Law Dictionary, as “[t]he act of transferring
something to another’s care or possession [especially by deed or will]” or “the relinquishing of
31
property.” See ante at 4-5 (citing Black’s Law Dictionary 592 (11th ed. 2019), adding emphasis
on transferring). Putting aside the majority’s failure to consider the second definition of
disposition in Black’s Law Dictionary and its unexplained emphasis on the word “transferring”
in reaching its conclusion concerning the meaning of disposition as used in Code § 55.1-136(C),
the majority’s analysis also suffers from the fact that Black’s Law Dictionary is but one source to
consider in attempting to determine the meaning of statutory language used by the General
Assembly, and needless to say, the law dictionary is not always the best source for determining
plain meaning.
Consideration of the definition of a word as found in a common usage dictionary is often
a worthwhile endeavor in the search for the word’s plain meaning. In such a dictionary,
disposition is defined as: “the act or the power of disposing or disposing of or the state of being
disposed or disposed of; as a: administration, control, management; b: a placing elsewhere, a
giving over to the care and possession of another or the relinquishing” and “c: an ordering or
arranging or a state of being ordered or arranged usu[ally] systematically or in an orderly way
and esp[ecially] as part of a whole.” Webster’s Third New International Dictionary 654 (1993).
The majority properly acknowledges that in the past, disposition has also been defined as
the “[a]ct of disposing; transferring to the care or possession of another” or “[t]he parting with,
alienation of, or giving up of property.” See ante at 5 (citing Black’s Law Dictionary 471 (6th
ed. 1990), adding emphasis to transferring). It is also worth considering that in an even earlier
edition of Black’s Law Dictionary, disposition was also defined as “[a] destruction of property.”
Black’s Law Dictionary 558 (4th ed. 1957) (citations omitted).
Given the broadly varying definitions of “disposition,” which are discerned upon
considering various sources and definitions, as did the parties and the circuit court, I believe that
the meaning of disposition as used in Code § 55.1-136(C) is ambiguous. As there is no
32
precedent for the adoption of a “vocabulary of law” definition, which is but one of several
meanings which could be ascribed to the word “disposition,” I disagree with the majority’s
conclusion that a disposition of property cannot occur without the property being transferred.
When we find a term to be ambiguous, we resort to rules of statutory construction, which
can include an analysis of legislative and jurisprudential history. See Virginia-American Water
Co. v. Prince William Cty. Serv. Auth.,
246 Va. 509
, 514 (1993); see also Newberry Station
Homeowners Ass’n v. Board of Supervisors,
285 Va. 604
, 614 (2013) (“When the language of an
enactment is free from ambiguity, resort to legislative history and extrinsic facts is not
permitted.”). Ultimately, “we must apply the interpretation that will carry out the legislative
intent behind the statute.” Conyers v. Martial Arts World of Richmond, Inc.,
273 Va. 96
, 104
(2007).
In her brief, Ms. Jones implicitly asserts that the meaning of disposition as used in Code
§ 55.1-136(C) is ambiguous. As noted above, in her attempt to discern the meaning of
disposition as used in the statute, Ms. Jones looks to the historical development of the tenancy by
the entirety doctrine in Virginia, and concludes that “sale and disposition” as used in Code
§ 55.1-136(C) “could be interpreted” to apply only to the total voluntary disposition of marital
assets through the sale, gift, or devise of property by the spouses. She asserts that the use of the
word is limited to the total disposition of marital assets because of related tenants by the
entireties precedent, specifically Oliver v. Givens,
204 Va. 123
(1963) and Pitts v. United States,
242 Va. 254
(1991).
Ms. Jones notes that Oliver, in which this Court first recognized that personal property
could be held as tenants by the entireties, and Pitts, which followed the ruling in Oliver, both
involved a voluntary, complete exchange of the real property for personalty. In both cases, our
Court ruled that the proceeds from the voluntary sale of property owned by spouses as tenants by
33
the entireties are likewise owned and held by them as tenants by the entireties. See
Oliver, 204 Va. at 126
-27;
Pitts, 242 Va. at 262
. Ms. Jones claims that when the General Assembly acts, it
must be presumed to do so with the full knowledge of this Court’s previous decisions, and that
the General Assembly’s decision not to include the word “partial” or another modifier before
disposition in Code § 55.1-136(C) means that disposition is limited to voluntary and complete
dispositions because the voluntary sales of real estate approved by this Court in Pitts and Oliver,
as producing personal property proceeds held as tenants by the entireties, were voluntary and
complete dispositions.
According to Ms. Jones, in this case, no disposition occurred as the term is used in Code
§ 55.1-136 because the admittedly catastrophic fire was presumably not voluntary, and the
conceded resulting disposition of the property by fire was only partial, because the Phillipses
retained some rights in the Residence after the fire. Ms. Jones avers that because the disposition
of the Residence was not voluntary or complete, the circuit court erred in ruling that the
insurance payments were the proceeds of a disposition and that Code § 55.1-136(C) exempted
the proceeds from garnishment. I disagree.
As noted by the majority, tenancy by the entirety is one of the co-tenancies that existed at
common-law that has survived to modern times. 48A C.J.S. Joint Tenancy § 1 (March 2020
update). Because a tenancy by the entirety is “[b]ased on the [common-law] fiction of the unity
of husband and wife,” property owned by this tenancy is “immune from the claims of creditors
against either husband or wife alone.” Vasilion v. Vasilion,
192 Va. 735
, 740, 742 (1951).
Historically, this tenancy, and therefore the protection from separate creditors, only
applied to real property. See 2 Raleigh C. Minor, The Law of Real Property §§ 837, 852
(Frederick D.G. Ribble ed. 1928) (explaining that an estate in joint tenancy exists in land or
tenements and stating that a tenancy by the entirety is governed by nearly identical principles as
34
joint tenancies); see also
Vasilion, 192 Va. at 740
(discussing how the right of a creditor to attach
land is of no use where the realty is subject to a tenancy by the entirety). However, decisions of
this Court and acts by the General Assembly have expanded the application of this form of
tenancy to include personal property as well.
In Oliver we determined, as an issue of first impression, that Virginia law allows personal
property, not just real property, to be held by the
entirety. 204 Va. at 126
. We then stated that
“[i]n those jurisdictions which recognize a tenancy by the entirety in personal property it is
almost universally held that, in the absence of an agreement or understanding to the contrary, the
proceeds derived from a voluntary sale of real estate held by the entireties are likewise held by
the entireties.”
Id. at 126-27.
The Court then ruled in accordance with those referenced cases
from other jurisdictions and held, as a matter of first impression in Virginia, that the personal
property proceeds, from the voluntary sale of real property held as tenants by the entireties, are
also held as tenants by the entireties, absent an agreement or understanding otherwise.
Id. at 127.
Later, in Pitts, we were asked to determine whether our holding in Oliver applied to
another type of personal property, payments received on promissory notes exchanged as part of a
voluntary sale of real estate that was held by the
entirety. 242 Va. at 256-57
. We reiterated the
rule adopted in Oliver, and ruled that the promissory notes were proceeds of the voluntary sale of
the real estate held by the entirety, and as such, pursuant to our decision in Oliver, the notes and
the payments on the notes were personal property proceeds held by the entirety.
Id. at 261-62.
Although the Court acknowledged that other jurisdictions, which recognized that personalty
could be owned as tenants by the entireties, had extended the Oliver rule to proceeds from other
types of disposals and conversions of property, including “payments of insurance claims and
judgments resulting from injury to realty,” the Court declined to extend the rule beyond the facts
35
articulated in Oliver.
Pitts, 242 Va. at 262
. We stated “[w]e leave the choice [of further
extending the entireties doctrine to other types of proceeds] to the General Assembly.”
Id. Perhaps accepting this
Court’s invitation to do so, the General Assembly has clearly acted
to extend the benefits of the entireties doctrine. The General Assembly has specifically provided
that “[p]ersonal property may be owned as tenants by the entirety, whether or not the personal
property represents the proceeds of the sale of real property.” Code § 55-20.2(B) (2001). Thus,
it eliminated the assertion that personal property must be the proceeds of a transfer of real
property in order to be owned as tenants by the entireties. The General Assembly also expanded
the instances in which certain real and personal property, originally held by a husband and wife
as tenants by the entireties, would retain the same immunity from the claims of separate creditors
as if it continued to be held by tenancy by the entirety, although it was no longer held as such.
Id. Specifically, the General
Assembly provided that
[t]he principal family residence of a husband and wife that [was] held by
them as tenants by the entireties and conveyed to their joint revocable or
irrevocable trust, or in equal shares to their separate revocable or
irrevocable trusts, shall have the same immunity from the claims of their
separate creditors as it would if it had remained a tenancy by the entirety,
so long as (i) they remain husband and wife, (ii) it continues to be held in
the trust or trusts, and (iii) it continues to be their principal family
residence.
Id. (emphasis added). In
2006, the General Assembly amended that statute to extend the protection afforded by
Code § 55-20.2(B) to any property formerly owned by a husband and wife as tenants by the
entireties, instead of just to property that continued to be their principal family residence. Code
§ 55-20.2(B) (2006).
In 2015, the General Assembly amended Code § 55-20.2(B) again, expanding its
application further by adding the language that is at issue in this case. See Code § 55-20.2(B)
36
(2015). 4 The amendment provided that not only is property held in the trust protected from the
claims of separate creditors as it would have been if it had remained a tenancy by the entirety,
but “any proceeds of the sale or disposition of such property” are also entitled to the same
protection.
Id. The General Assembly,
through this amendment, expressly expanded the type of
proceeds that are afforded the same protection from creditors as the property from which it is
derived, beyond the parameters of the rule this Court recognized in Oliver and Pitts, which
restricted such protection to the proceeds derived from the voluntary sale of real estate.
In Pitts, we stated
We are aware that, in several jurisdictions which recognize that personalty
can be owned as a tenancy by the entirety, the rule that we applied to the
proceeds of voluntary sales of realty owned by the entireties in Oliver has
been extended to the proceeds of other kinds of disposal or conversion of
real estate. For example, some courts have applied the rule to the
proceeds of judicial sales, condemnations, and mortgages; to the surplus
remaining after foreclosure; to payments of insurance claims and damage
judgments resulting from injury to realty; and to the derivatives of
proceeds of voluntary sales.
Pitts, 242 Va. at 262
(internal citation and quotation marks omitted). We stated that we left the
choice to the General Assembly to extend the rule articulated in Oliver and Pitts.
Id. Through Code §
55.1-136(C), 5 the General Assembly expressly extends the rule stated in
Oliver to “any proceeds of the sale or disposition of such property.” Note that in Code
§ 55.1-136(C), unlike in the rule expressed in Oliver, the proceeds immunized from the claims of
separate creditors of the spouses are not limited to the proceeds which are derived from the
voluntary sale of real property. The immunity applies to all proceeds, including those from
4
In 2017, the General Assembly amended the statute to its most recent form before its
2019 amendment and reenactment as Code § 55.1-136, inserting a new subsection (B) and
moving the existing subsection (B) to subsection (C). Code § 55-20.2 (2017).
5
See supra note 4.
37
personal property, as well as real property and it includes proceeds from involuntary sales as well
as voluntary sales; it also applies to proceeds from any other type of disposition of real or
personal property.
As noted by the circuit court, and alluded to in dicta by our Court in Pitts, other
jurisdictions which recognize that personal property may be owned by tenants by the entireties,
have afforded tenants by the entireties protection to insurance proceeds paid to replace or repair
such property, absent an agreement otherwise. See Cooper v. Cooper,
284 S.W.2d 617
, 620
(Ark. 1955); Regnante v. Baldassare,
448 N.E.2d 775
, 777-78 (Mass. App. Ct. 1983); Gaunt v.
Shelter Mut. Ins.,
808 S.W.2d 401
, 404-05 (Mo. Ct. App. 1991); cf. McDivitt v. Pymatuning Mut.
Fire Ins.,
449 A.2d 612
, 615-16 (Pa. Super. 1982) (finding based on the facts of the case that
there was an agreement otherwise).
“We presume that when the General Assembly enacts legislation, it is aware of this
Court’s precedents.” Lambert v. Sea Oats Condo. Ass’n,
293 Va. 245
, 254 (2017); Philip Morris
USA Inc. v. Chesapeake Bay Found., Inc.,
273 Va. 564
, 576 (2007). Further, we presume “that
the legislature has purposefully chosen the precise statutory language, ‘and we are bound by
those words when we apply the statute.’” David v. David,
287 Va. 231
, 240 (2014) (quoting
Halifax Corp. v. First Union Nat’l Bank,
262 Va. 91
, 100 (2001)).
The General Assembly’s choice of the word “disposition” as used in Code § 55.1-136(C),
to extend the application of tenants by the entireties protection against creditors to additional
types of proceeds from property owned by spouses, was purposeful, deliberate, and with
knowledge of our previous decisions in this area of the law, and the various meanings of the
word. Disposition was used in addition to the word “sale.” Recognizing that the meaning of
disposition as used in the statute should not be duplicative of the term “sale,” which in the statute
is not limited to voluntary sales, indicates that disposition has to mean something other than the
38
transfer of property for a price. Disposition’s meaning may include a gift of property, as
mentioned by Ms. Jones, but that is not relevant to the analysis of the present statute because that
type of disposition would not provide proceeds. Disposition as used in Code § 55.1-136(C) must
have been intended to have a broader meaning than that articulated by the majority or Ms. Jones.
Disposition is a broad term, and it is used in the statute without qualification. Review of
the language in Code § 55.1-136, this Court’s relevant precedent, and the numerous legislative
amendments and enactments passed by the General Assembly on these topics, leads to the
conclusion that the meaning of disposition as used in Code § 55.1-136(C) is purposefully broad
and the word is intended to be interpreted as having a broad meaning, the act or power of
disposing; a disposition concerns the disposal of property. See Black’s Law Dictionary 592
(11th ed. 2019); Webster’s Third New International Dictionary 654 (1993). It can concern a
final settlement or determination regarding property rights. See Black’s Law Dictionary 592
(11th ed. 2019). It can mean to treat or to handle something with the result of finishing with it.
See Webster’s Third New International Dictionary 654 (1993). It can be a transfer or loss of
property. In other words, a disposition may take many different forms as it relates to the
property rights to realty and to personalty; it is a catch-all phrase which covers the gamut.
Property can be disposed of without it being transferred, such as by being discarded or
destroyed. See Webster’s Third New International Dictionary 654 (1993). A disposal or
conversion can be accomplished voluntarily, as through sale, gift, devise, or abandonment of
property; but it can also be accomplished involuntarily through foreclosure, condemnation,
destruction, or other means. A disposition can be of the full disposition of rights to property, but
it can also be a partial disposition of property or property rights, as through granting a lease on
the property or an easement, or by conversion, partition, damages, or other means of partial loss
39
or relinquishment of property or its value. Code § 55.1-136(C) does not limit the type of
disposition considered for purposes of the statute.
Through the use of the term “disposition,” Code § 55.1-136(C) protects proceeds derived
from the disposal of property against the claims of the spouses’ separate creditors, no matter the
manner in which such disposal results in proceeds that replace the property or value of the
property which was entitled to immunity from creditors. Just as creditors are not prejudiced by a
gift of property that is exempt from their claim, there is no prejudice to creditors in allowing
proceeds that replace property or loss in value of property that was immune from the claims of a
spouse’s separate creditors to be immune also. See
Oliver, 204 Va. at 127
(citing
Vasilion, 192 Va. at 740
; 1 Garrard Glenn, Fraudulent Conveyances § 172, at 313 (2d ed. 1931); 24 Am. Jur.,
Fraudulent Conveyances, § 109 (1983); 37 C.J.S., Fraudulent Conveyances, §§ 29-a, 30).
There are no indicia that the General Assembly intended to limit the meaning of
disposition to instances in which property rights are transferred, as the majority has ruled.
Nothing in our prior cases or the language of the relevant statute supports limiting the meaning
of disposition to the particular Black’s Law Dictionary definition that the majority has concluded
is the proper interpretation of the word. The majority has adopted an overly restrictive definition
of the word “disposition.” See, e.g., Brown v. Commonwealth,
284 Va. 538
, 542 (2012)
(observing that the Court “will not apply an unreasonably restrictive interpretation of [a] statute”
and that “[t]he plain, obvious, and rational meaning of a statute is to be preferred over any
curious, narrow, or strained construction” thereof) (citations and internal quotation marks
omitted).
The majority’s particularized “vocabulary of law” definition of disposition conflicts with
the obligation to give the language of the statute its plain meaning, and it is also contrary to the
apparent intent of the General Assembly. It is clear from the legislative history of the statutes
40
discussed above that the General Assembly has purposefully decided to expand the protection
provided to tenancies by the entireties properties to certain trust property, and to all dispositions
of such properties which result in proceeds. The majority’s holding, which restricts the
definition of dispositions to only those dispositions which concern transfers of property is at odds
with that intent. The interpretation put forth by the majority allows a married couple protection
from individual creditors for proceeds from the sale of property held by them under the
provisions of Code § 55.1-136(C), but allows creditors to attach the proceeds paid to replace the
property if compensation is paid because of the property’s loss by negligence, calamity, or any
other manner which is not a transfer. I do not believe that was the intent of the General
Assembly.
According to the majority, the General Assembly by using the word “disposition,”
intended to protect the proceeds from the transfer of property from a separate creditor, but allow
that separate creditor to garnish proceeds paid to the spouses for loss of property in instances
when the property is disposed of, but neither the ownership or the possession of the property is
transferred. Under the majority’s view, if a married couple has a piece of expensive equipment,
that they own as tenants by the entireties and place in a trust pursuant to Code § 55.1-136(C), and
they subsequently sell that equipment to a neighbor, the proceeds of a sale would be protected
from garnishment by a creditor of only one of the spouses, because there was a transfer of the
property from the couple to the neighbor. However, if that same neighbor destroyed the couple’s
equipment through an act of negligence, and was required to pay the couple for that property, the
payments from the neighbor would be subject to a garnishment by a separate creditor of one of
the spouses because there was no transfer of the property. The same is true when insurance
payments are made to the spouses because of loss or damage to trust property subject to
Code § 55.1-136(C). I do not believe that such disparate treatment is consistent with the intent
41
expressed by the General Assembly in extending the protections from separate creditors of the
spouses to all proceeds from the dispositions of such property.
Considering the statute and the context in which it is used, the meaning of disposition is
broad and “proceeds of a disposition” includes proceeds of any type of disposition, including the
proceeds from all of the examples of disposals and conversions mentioned by our Court in Pitts.
One of those examples was “payments of insurance claims and damage judgments resulting from
[damage to property].” See
Pitts, 242 Va. at 262
(citing
22 A.L.R. 4th 459
(1983)).
The payments owed to Mr. and Mrs. Phillips by Chubb were the proceeds of a
disposition. In this instance, the Residence was literally disposed of when it was consumed by
fire; Mr. and Mrs. Phillips lost the Residence due to the fire; the Residence no longer exists.
Because of a contract of insurance, Chubb was required to pay Mr. Phillips and Mrs. Phillips for
the value of the property lost to the fire. The insurance payments by Chubb were contractually
required proceeds paid because of the involuntary disposition of the Residence. The checks
made in payment of the homeowners insurance claim were made payable to both Mr. Phillips
and Mrs. Phillips and prior insurance payments were wired to an account held by them as tenants
by the entireties.
The circuit court did not err in holding that the insurance payments owed to the Phillipses
were proceeds of a disposition of property they had previously owned as tenants by the entireties
and that Code § 55.1-136(C) exempted those proceeds from Ms. Jones’ garnishment action.
Therefore, I would affirm the circuit court’s judgment.
Accordingly, I respectfully dissent.
42 |
4,639,137 | 2020-12-03 14:24:33.526328+00 | null | http://www.courts.state.va.us/opinions/opnscvwp/1190846.pdf | PRESENT: Lemons, C.J., Goodwyn, Mims, Powell, Kelsey, and McCullough, JJ., and
Millette, S.J.
RAEQUAN EVANS, s/k/a RAEQUAN D. EVANS
v. Record No. 190846
COMMONWEALTH OF VIRGINIA OPINION BY
JUSTICE STEPHEN R. McCULLOUGH
and December 3, 2020
MARIAH LESLIE CONWAY
v. Record No. 190898
COMMONWEALTH OF VIRGINIA
FROM THE COURT OF APPEALS OF VIRGINIA
In these consolidated appeals, we must determine whether Code § 19.2-294 precludes
convictions for possession of a firearm by a convicted felon when the defendants were convicted
in prior prosecutions of carrying a concealed weapon. We take this opportunity to clarify the
proper test that governs the application of the successive prosecution bar found in Code
§ 19.2-294. For the reasons noted below, we will affirm the defendants’ convictions.
BACKGROUND
Evans
The parties stipulated to the facts at trial. On July 30, 2017, a Norfolk police officer on
bicycle patrol noticed that Raequan Evans had what appeared to be a partially concealed
handgun beneath his shirt. The officer detained him.
Id. Evans admitted he
had a firearm.
Id. The officer lifted
Evans’s shirt and retrieved a semi-automatic pistol from the front of Evans’s
pants.
Id. Evans did not
have a concealed weapon permit.
Id. The officer confiscated
the
firearm and issued a summons for carrying a concealed weapon in violation of Code § 18.2-308.
Id. The charge of
possession of a concealed weapon was continued several times, with two
such occasions being necessitated by Evans’s failure to appear. On February 15, 2018, in
Norfolk General District Court, Evans entered a guilty plea pursuant to a written plea agreement
and was convicted of carrying a concealed weapon. The conviction was based on the encounter
with the police officer on July 30, 2017.
Id. On October 4,
2017, the Commonwealth obtained an indictment charging Evans with
possession of a firearm by a convicted felon based on the officer’s seizure of the pistol from
Evans on July 30, 2017. Evans filed a motion to dismiss, contending that Code § 19.2-294
barred his prosecution for possession of a firearm as a convicted felon. The circuit court denied
his motion. Evans subsequently entered a conditional plea of guilty reserving the right to
challenge his conviction under Code § 19.2-294. He was later sentenced to serve the mandatory
five years in prison called for by Code § 18.2-308.2.
Conway
On April 7, 2016, Danville police officers encountered several individuals on the street,
including Mariah Conway. Police recovered a revolver in the grass near where Conway was
standing. Later, after a review of the officers’ body worn camera footage, the Commonwealth
charged Conway with carrying a concealed weapon. On August 29, 2016, Conway pled guilty in
the Danville General District Court to a charge of carrying a concealed weapon in violation of
Code § 18.2-308.
On January 3, 2018, Conway was indicted for possession of a firearm as a convicted
felon. She filed a motion to dismiss, arguing that Code § 19.2-294 barred this prosecution. The
2
trial court denied her motion. Conway proceeded to trial by a jury. She was convicted and
sentenced to serve the mandatory five-year term of incarceration imposed by Code § 18.2-308.2.
Evans and Conway Appeal to the Court of Appeals
Relying on Jefferson v. Commonwealth,
43 Va. App. 361
, 367 (2004) and Johnson v.
Commonwealth,
38 Va. App. 137
, 147 (2002), the Court of Appeals denied Evans’s and
Conway’s appeals by unpublished per curiam orders. Evans v. Commonwealth, Record
1537-18-1 (May 31, 2019); Conway v. Commonwealth, Record 1094-18-3 (April 10, 2019). In
declining the appellants’ invitations to overturn Jefferson and Johnson, the Court of Appeals
noted that these published cases could only be overturned by the Court of Appeals, sitting en
banc, or by this Court.
Id. We awarded Evans
and Conway an appeal and paired the two cases.
ANALYSIS
We review questions of statutory construction de novo. Courtney v. Commonwealth,
281 Va. 363
, 366 (2011). “[I]f the language of a statute is unambiguous, courts may not interpret the
language in a way that effectively holds that the General Assembly did not mean what it actually
expressed.” Hicks ex rel. Hicks v. Mellis,
275 Va. 213
, 218 (2008).
Evans and Conway argue that under the plain language of Code § 19.2-294, their
convictions for possession of a firearm as a convicted felon must be dismissed. They
acknowledge hostile precedent but contend those cases were wrongly decided. The
Commonwealth responds that our own precedent compels affirmance and urges us to adhere to
precedent from the Court of Appeals.
3
I. ORIGIN AND INTERPRETATION OF CODE § 19.2-294.
In 1918, the General Assembly enacted Code § 4775, the predecessor to Code
§ 19.2-294. It provided that:
If the same act be a violation of two or more statutes, or of two or more municipal
ordinances, a prosecution or proceeding under one of such acts or ordinances shall
be a bar to a prosecution under the other or others.
In 1920, the statute was amended to substitute “conviction” for “a prosecution or proceeding”
and to add the last sentence, which resulted in the following form of the statute:
If the same act be a violation of two or more statutes, or of two or more municipal
ordinances, conviction under one of such acts or ordinances shall be a bar to a
prosecution or proceeding under the other or others. Furthermore, if the same act
be a violation of both a State and a Federal statute a prosecution or proceeding
under the Federal statute shall be a bar to a prosecution or proceeding under the
State statute.
1920 Va. Acts ch. 118. Although there have been additional amendments, none of them
substantively changed the language of the statute as is relevant here. Currently, Code § 19.2-294
provides that:
If the same act be a violation of two or more statutes, or of two or more
ordinances, or of one or more statutes and also one or more ordinances,
conviction under one of such statutes or ordinances shall be a bar to a
prosecution or proceeding under the other or others.
“Like the Fifth Amendment bar of former jeopardy, Code § 19.2-294 prevents the
Commonwealth from ‘subjecting an accused to the hazards of vexatious, multiple
prosecutions.’” Phillips v. Commonwealth,
257 Va. 548
, 551 (1999) (quoting Hall v.
Commonwealth,
14 Va. App. 892
, 899 (1992) (en banc)). Unlike the Fifth Amendment
Blockburger test (developed under Blockburger v. United States,
284 U.S. 299
(1932)
(“Blockburger”)), however, Code § 19.2-294 is not concerned with the elements of an offense.
Instead, it bars a subsequent prosecution based on the “same act.” Therefore, the plain language
4
of Code § 19.2-294 requires an examination of the act committed by a defendant upon which a
prior prosecution was predicated. Additionally, the statutory bar applies only if there has been “a
conviction under one of the acts or ordinances before this clause of the statute operates. A mere
proceeding or prosecution which does not result in a conviction does not bar another prosecution
in a state court.” Owens v. Commonwealth,
129 Va. 757
, 759 (1921). Code § 19.2-294 also
“does not apply to simultaneous prosecutions.”
Phillips, 257 Va. at 552
. 1
The statute traces its origin to Arrington v. Commonwealth,
87 Va. 96
(1890). In that
case, the defendant was convicted of selling liquor on a Sunday.
Id. at 99-100.
Afterwards, she
was charged with selling liquor without a license based on the same acts.
Id. We held in
Arrington that her prior conviction for the unlawful sale of liquor on a Sunday did not bar her
subsequent prosecution and conviction for the sale of the same liquor without a license because
“[t]he two indictments [were] under different statutes; the penalties prescribed [were] different;
and the evidence required to support a conviction in either case [was] not the same.”
Id. at 100.
The applicable test was “not whether the defendant ha[d] already been tried for the same act, but
whether [she] ha[d] been put in jeopardy for the same offense.”
Id. at 99-100.
Arrington thus
prefigured Blockburger, the seminal Double Jeopardy decision from the United States Supreme
Court.
That outcome was of concern to the legislature, as we acknowledged in Owens v.
Commonwealth,
129 Va. 757
(1921). In Owens, the defendant was charged with a violation of
the prohibition laws, and while his case was pending in state court he was charged with the same
offense in federal court.
Id. at 758-59.
We ultimately rejected his argument that the filing of the
1
We held in Quidley v. Commonwealth,
190 Va. 1029
, 1036 (1950) that the predecessor
statute to Code § 19.2-294 did not apply to civil forfeitures.
5
federal charge required dismissal of the then-pending state charge under the predecessor statute
to Code § 19.2-294.
Id. at 761-62.
In reviewing the history of the statute, we cited as
authoritative the Revisors’ Note to the 1920 amendment, observing that, in enacting the statute,
the legislature “desired to remove the apparent hardship manifest in Arrington v. Commonwealth,
87 Va. 96
[(1890)], in which a prisoner had committed but a single act, but, inasmuch as it
violated two statutes, she was convicted under both.”
Id. at 759-60.
In the decades that followed Owens, two divergent strands emerged. Some of the cases
from this Court and the Court of Appeals tack closely to the plain language of the statute by
examining whether the successive prosecutions were based on the “same act.” For example, in
Jones v. Commonwealth,
218 Va. 757
(1978), the defendant argued that the theft of certain
money from a hotel clerk at the hotel’s reception desk, underlying his robbery conviction, and
the theft of the hotel’s courtesy car from the hotel parking lot 200 yards away, underlying his
conviction for grand larceny, constituted continuous, indivisible parts of the same act and,
therefore, his subsequent prosecution was barred by operation of Code § 19.2-294.
Id. at 760.
The Commonwealth, citing
Blockburger, 284 U.S. at 304
, argued that “even if it be
assumed that these were but one act, the statute [would] not apply because the two thefts
constituted two different offenses.”
Id. (internal quotation marks
omitted). Under Blockburger,
this Court observed, “[t]he applicable rule is that where the same act or transaction constitutes a
violation of two distinct statutory provisions, the test to be applied to determine whether there are
two offenses or only one is whether each provision requires proof of an additional fact which the
other does not.” Id. (quoting
Blockburger, 284 U.S. at 304
). This Court rejected the
Commonwealth’s argument, explaining that the identity of the offense test in Blockburger
applied to the constitutional guarantees and not to Code § 19.2-294, which refers to the identity
6
of the act.
Id. “Thus, if the
offenses are different and one is not lesser-included in the other, the
constitutional guarantee does not apply. If the acts are different, the statutory mandate does not
apply.”
Id. at 760-61
(internal citations omitted).
Having set forth this framework, we reviewed the facts to determine the identity of the
act. We concluded that the thefts were not the same act for purposes of the statute because the
theft of the money and the theft of the car were not committed “at one and the same time.”
Id. at 761.
Rather, the theft of the money from the clerk was completed when the money was taken
and carried out of the hotel.
Id. The theft of
the car, which was located two hundred yards away
in the hotel parking lot, occurred at a different place and later point in time.
Id. Despite the fact
that the thefts involved the same victim and were committed by the same criminal agent, in terms
of time and situs, they involved separate and distinct acts of taking and asportation, rather than a
continuous, indivisible act.
Id. Therefore, the statute
did not apply to bar Jones’ prosecution for
grand larceny of an automobile subsequent to his conviction for robbery of money from the hotel
clerk.
Id. Other decisions adhere
to this fact-based inquiry. See Roach v. Commonwealth, 51 Va.
App. 741, 747-48 (2008) (Code § 19.2-294 did not apply because the “misdemeanor and felony
obstruction of justice charges arose from two separate acts, committed by appellant at different
times, and in different geographical locations.”); Wade v. Commonwealth,
9 Va. App. 359
,
363-65 (1990) (Where both the obstruction of justice charge and the attempted murder charge
arose from the same act of firing a gun, the subsequent charge violated Code § 19.2-294 and
further noting that the statute “speaks to ‘acts’ of the accused, not elements of the offense.”).
A parallel line of precedent developed, however, in which this Court and the Court of
Appeals conflated the protections of the Double Jeopardy bar with those of the statutory “same
7
act” bar. In Hundley v. Commonwealth,
193 Va. 449
, 450-51 (1952), we examined whether the
statute precluded a conviction for driving while under the influence of intoxicants and for
reckless driving, when both convictions arose from one occurrence of driving. We related that
the defendant drove at such high rates of speed and in such a dangerous manner that the officer
in pursuit, despite employing “every method [he] could think of,” could not stop him.
Id. at 451.
The officer testified that when he would try to pull up beside Hundley’s vehicle, Hundley would
“cut very sharply over in front of [him]” and that he did so while traveling at excessive speeds.
Id. We concluded that
these facts established two separate acts resulting in the commission of
the two offenses at issue and therefore the statute did not apply.
Id. We observed that
a person
under the influence of intoxicants can drive properly and a person not under the influence may
drive recklessly.
Id. In addition, however,
we stated that:
A test of the identity of acts or offenses is whether the same evidence is required
to sustain them; if not, then the fact that several charges relate to and grow out of
one transaction or occurrence does not make a single act or offense where two
separate acts or offenses are defined by statute, as in the instant case.
Id. In support of
this test, we cited to several foreign cases employing the same evidence test.
Id. (citations omitted). We
also cited to foreign cases that had determined that reckless driving
and driving under the influence of intoxicants, when both were involved in the same occurrence,
were separate acts, and “therefore constitute[d] separate offenses and the prosecution for one
offense [was] no bar to a prosecution for that coupled with it.”
Id. at 451-52
(citations omitted).
Although this Court in Hundley examined the facts to determine whether the acts of the
accused in both prosecutions constituted the “same act,” we nevertheless articulated a test that
departed from the inquiry the statute contemplates. Hundley conflated the statutory “same act”
bar with principles governing the constitutional bar against Double Jeopardy. A number of
8
Court of Appeals decisions followed in Hundley’s wake. 2 For example, the Court of Appeals
stated in Jefferson that “[t]he test of whether there are separate acts sustaining several offenses
‘is whether the same evidence is required to sustain
them.’” 43 Va. App. at 367
(quoting Estes v.
Commonwealth,
212 Va. 23
, 24 (1971)).
Applying this test in Johnson, the Court of Appeals assumed that the time, situs and
victim coincided, but concluded that:
[T]he nature of the specific act peculiar to each prosecution is distinct. In the
first instance, defendant admittedly was unlawfully operating a vehicle while
his privileges were in suspension. In contrast, the subject prosecution resulted
from such operation after he had been adjudicated an habitual offender.
While driving was conduct common and necessary to each offense, the legal
disability upon defendant that attended and was integral to the respective acts
was significantly different. Thus, the “same evidence” would not produce a
conviction for both offenses. Accordingly, the disparate “nature” of the acts
saves the instant prosecution from the reach of Code §
19.2-294. 38 Va. App. at 146-47
. A “legal disability” differs from, and should not be part of, the “same
act” analysis. A legal disability or status, such as being declared an habitual offender or a
previously convicted felon, is an adjudication; it has nothing to do with an inquiry into whether a
subsequent prosecution is based on the “same act” as a prior prosecution.
The “same evidence” test cannot be reconciled with the plain language of Code
§ 19.2-294 and can, in practice, defeat the protection afforded by this statute. The protection
2
Subsequent to Hundley, the legislature enacted what is now Code § 19.2-294.1, which
provides that:
Whenever any person is charged with a violation of [the statute prohibiting
driving while intoxicated] or any similar ordinances of any county, city, or town
and with reckless driving . . . growing out of the same act or acts and is convicted
of one of these charges, the court shall dismiss the remaining charge.
(1960 Acts ch. 493). This statute overruled Hundley’s holding that driving while intoxicated and
driving recklessly constituted two separate acts.
9
afforded by Code § 19.2-294 depends on whether a given action is or is not the “same act.” To
restore clarity to the law, we overrule
Jefferson, 43 Va. App. at 367
and
Johnson, 38 Va. App. at 147
, and reject any test articulated in
Hundley, 193 Va. at 451
or other prior cases that diverge
from the factually based “same act” analysis required by Code § 19.2-294.
Instead, whether an act at issue is the “same act” under Code § 19.2-294 turns on a
common sense assessment of whether (1) the act in question is a separate volitional act, (2) the
acts are separated in time and place, and (3) the act differs in its nature.
To summarize, Code § 19.2-294 bars a prosecution when:
(1) The defendant was previously prosecuted – if the prosecutions are simultaneous, Code
§ 19.2-294 does not apply;
(2) the prior prosecution resulted in a conviction – if the defendant was not convicted,
Code § 19.2-294 does not apply; and
(3) the prior prosecution was based on the “same act.” In resolving this question, the
court should compare the act proved in a prior prosecution with the act alleged in the successive
prosecution to determine whether the act is the same: was it separated in time or location, was it
a separate volitional act, and did the act differ in its nature?
II. APPLICATION OF THE TEST TO THE TWO CASES BEFORE US.
Both defendants were convicted in separate prosecutions of carrying a concealed weapon
in a first prosecution and possessing a firearm as a convicted felon in a second prosecution. Both
cases hinge on whether possession of a firearm by a convicted felon is the “same act” as
concealing a weapon. The guns at issue did not materialize, concealed, in the defendants’ pocket
or waistband. To be concealed, the weapons had to first be possessed. The possession and
concealment may (or may not) have been close temporally, but there can be no dispute that the
10
defendants had to possess the firearms at issue, and that it took separate acts to conceal
them. Just as brandishing a gun differs from concealing it, concealing a weapon differs in its
qualitative nature from merely possessing it. In short, the additional act of concealing the
weapon makes it a different act from merely possessing it. The successive prosecutions did not
rest on the “same act.” Consequently, Code § 19.2-294 does not bar the subsequent
prosecutions.
Finally, we acknowledge that the judges who heard the cases below believed that
possession of the firearm constituted the same act for purposes of Code § 19.2-294. In some
cases, the outcome will undoubtedly turn on the trial judge’s findings of fact. Here, however, the
facts are undisputed. The question before us is how to apply the law to those facts. The act of
concealing a weapon was an act separate from the act of simply possessing the weapon, and,
therefore, we affirm the defendants’ convictions.
CONCLUSION
We will affirm the defendants’ convictions.
Affirmed.
SENIOR JUSTICE MILLETTE, with whom JUSTICE GOODWYN and JUSTICE POWELL
join, dissenting.
I agree with the majority that the purpose and intended effect of Code § 19.2-294 is to
provide a defense of former jeopardy which prevents the Commonwealth from “subjecting an
accused to the hazards of vexatious, multiple prosecutions.” Phillips v. Commonwealth,
257 Va. 548
, 551 (1999) (quoting Hall v. Commonwealth,
14 Va. App. 892
, 899 (1992) (en banc)). We
have specifically held that Code § 19.2-294 applies to neither simultaneous prosecutions,
11
Phillips, 257 Va. at 552
, nor to prior prosecutions that did not result in a conviction, Owens v.
Commonwealth,
129 Va. 757
, 759 (1921).
I also agree that, unlike the Fifth Amendment protections against former jeopardy, Code
§ 19.2-294 is not concerned with whether an accused is being tried for the “same offense,” which
is determined by application of the “same evidence” test developed under Blockburger v. United
States,
284 U.S. 299
(1932). Rather, as the majority explains, “the plain language of Code § 19.2-
294 bars a subsequent prosecution based on the ‘same act’ and therefore requires an examination
of the act committed by a defendant upon which a prior prosecution was predicated.”
Further, as the majority’s review of the relevant cases demonstrates, this Court and the
Court of Appeals, in applying the Blockburger “same evidence” test to ascertain if Code § 19.2-
294 applies, has conflated the protections of constitutional double jeopardy with the similar
protections against double jeopardy afforded by Code § 19.2-294. Therefore, I agree with the
majority that “to restore clarity to the law it is necessary to overrule Jefferson v. Commonwealth,
43 Va. App. 361
(2004) and Johnson v. Commonwealth,
38 Va. App. 137
(2002) and to reject
any test articulated in Hundley v. Commonwealth,
193 Va. 449
(1952) or other prior cases that
diverges from the factually based “same act” analysis required by Code § 19.2-294.”
I disagree, however, with the test the majority articulates and its application to the facts in
each of the cases at bar.
The majority states that:
[W]hether an act at issue is the “same act” under Code § 19.2-294 turns on a
common sense assessment of whether (1) the act in question is a separate
volitional act, (2) the acts are separated in time and place, and (3) the act differs in
its nature.
It explains that courts “should compare the act proved in a prior prosecution with the act alleged
in the successive prosecution to determine whether the act is the same: was it separated in time
12
or location, was it a separate volitional act, and did the act differ in its nature?” In identifying
the act to be compared in these cases, the majority first observes that “both defendants were
convicted in separate prosecutions of carrying a concealed weapon in a first prosecution and
possessing a firearm as a convicted felon in a second prosecution.” It concludes therefore that
the cases at bar “hinge on whether possession of a firearm by a convicted felon is the same act as
concealing a weapon.” Thus, the majority focuses upon whether the two offenses have the same
elements, rather than upon whether the evidence of the same act is being presented to prove the
defendant’s guilt of both crimes. It is the act of the defendant proven at trial that determines if
Code § 19.2-294 has been violated.
The majority reasons that:
The guns at issue did not materialize, concealed, in the defendants’ pocket or
waistband. To be concealed, the weapons had to first be possessed. The possession
and concealment may (or may not) have been close temporally, but there can be no
dispute that the defendants had to possess the firearms at issue, and that it took
separate acts to conceal them. Just as brandishing a gun differs from concealing it,
concealing a weapon differs in its qualitative nature from merely possessing it.
Based upon this rationale, the majority concludes that the subsequent prosecutions here did not
rest on the “same act” and Code § 19.2-294 does not apply.
In my view, the majority’s stated identification of the act erroneously continues to focus
on the evidence in support of a conviction for the offense rather than the actual evidence
presented regarding the specific act of the defendant, upon which the offenses are based.
I also fail to see how ascertaining whether “the act differs in its nature” advances the
objective of ascertaining whether an accused has been prosecuted for the same act as
contemplated by Code § 19.2-294. The act the witnesses testify to regarding the actions of the
defendant are either the same or they are not. If the same act is testified to, Code § 19.2-294 bars
prosecution of the subsequently charged crime, and drawing different inferences from the same
13
evidence does not eliminate the bar created by Code § 19.2-294. The majority reasons that
“[j]ust as brandishing a gun differs from concealing it, concealing a weapon differs in its
qualitative nature from merely possessing it.” I disagree with the majority’s comparison of the
acts of brandishing a weapon and possession of that weapon with the concealment and
possession of a weapon as charged here. Brandishing requires a volitional act of pointing or
holding a weapon in such a manner as to induce fear which is a separate act from the mere
possession of the weapon. However, concealment and possession of that weapon require proof
of only the singular act of possession of the weapon while it is being concealed. The majority’s
analysis continues to focus on the elements of the offenses at issue rather than the evidence
regarding the act upon which the offenses are based.
Last, notwithstanding that the majority explicitly, and rightly so, concludes that an
accused’s status, such as an adjudication as an habitual offender or a previously convicted felon,
should never be included in the inquiry to ascertain the same act for purposes of Code § 19.2-
294, it nevertheless retains the “nature of the act” as part of the test, which was established in
Johnson, 38 Va. App. at 146-47
, thus focusing the analysis back to the identity of the offense.
Therefore, rather than clarifying this body of law, when it applies its test to the facts of
the instant cases, the majority has come full circle, and has returned to an analysis of the
elements of the offense.
I believe we need look no further than the test we set out in Jones v. Commonwealth,
218 Va. 757
, 761 (1978). There we established that an act is the same act as contemplated by Code § 19.2-294
if it involves the same victim and same criminal agent and if it was committed at the same time and
situs (the “Jones test”).
Id. In identifying the
act for comparison under this test, we must focus on the
act or action that served as the basis for the Commonwealth’s charge, not the acts that are inseparable
14
from the elements of the offense. Indeed, the majority instructs courts to “compare the act proved in a
prior prosecution with the act alleged in the successive prosecution to determine whether the act is the
same.” However, as noted above, the majority discerned the act based on the offenses for which the
defendants were convicted: “carrying a concealed weapon in a first prosecution and possessing a
firearm as a convicted felon in a second prosecution.” As a practical matter, a defendant who raises
Code § 19.2-294 as a bar to a subsequent prosecution does so prior to any subsequent conviction.
Therefore, he or she cannot compare a prior prosecution and conviction with a subsequent prosecution
and conviction, as the majority does here. Instead, just as both Conway and Evans did below, a
defendant moves to dismiss the Commonwealth’s indictment because the act upon which the
subsequent charge is based is the same operative set of facts and the same act upon which the prior
prosecution and conviction was based.
A review of Evans’s and Conway’s records from this perspective requires the conclusion that
“the act” involved in both offenses was the same act of possession of a weapon, which was concealed
at the time the defendant was first observed by the relevant witnesses.
Evans
The record establishes that on July 30, 2017, a police officer observed Evans walking on a
city street in Norfolk with “what appeared to be an inch of the end of a firearm sticking out from
underneath [Evans’] shirt.” In its first prosecution, the Commonwealth charged Evans for a violation
of Code § 18.2-308. This statute provides in relevant part that:
If any person carries about his person, hidden from common observation, . . . (i) any
pistol . . . he is guilty of a Class 1 misdemeanor . . . . It shall be an affirmative defense
to a violation of clause (i) regarding a handgun, that a person had been issued, at the
time of the offense, a valid concealed handgun permit.
Evans’s act of walking on a city street with “what appeared to be an inch of the end of a firearm
sticking out from underneath [Evans’] shirt” was unlawful, under Code § 18.2-308, because, as Evans
15
admitted, he did not have the required concealed handgun permit. Therefore, the evidence shows that
the act upon which Evans was first prosecuted was for possession of a concealed weapon in the City
of Norfolk on July 30, 2017.
In its subsequent prosecution, the Commonwealth indicted Evans under Code § 18.2-
308.2(A), which provides in relevant part that “[i]t shall be unlawful for (i) any person who has
been convicted of a felony . . . to knowingly and intentionally possess or transport any firearm
. . . .” The indictment provided that “on July 30, 2017, in the City of Norfolk, [Evans] did
feloniously, knowingly and intentionally possess or transport a firearm, after having been
previously convicted of a violent felony . . . .” The indictment is specific about the date and
place. There is no charge, allegation, or other factual support to put the defendant on notice that
the Commonwealth intends to prove any separate additional volitional acts, such as where or
when Evans came to possess the gun in the first instance or where or when he concealed it
underneath his shirt. Rather, the basis for the Commonwealth’s charge is that on July 30, 2017,
while in the City of Norfolk, Evans possessed a concealed weapon and the evidence that
supported that charge and conviction was based upon the same act which was the basis for
Evans’s conviction for possession of a concealed weapon.
Applying the Jones test to these facts, it is clear that Evans’s possession of a concealed
weapon involved the same victim (the Commonwealth), was committed by the same criminal
agent (Evans), and was committed at the same time (July 30, 2017) and situs (Norfolk).
Therefore, because Evans’s possession of a concealed weapon was the act that forms the basis
for a violation of both Code §§ 18.2-308 and -308.2, the Commonwealth should have been
precluded, pursuant to Code § 19.2-294, from its subsequent prosecution of Evans under Code
§ 18.2-308.2, because the alleged witnessed “act” by Evans was the same in both cases.
16
Conway
The record establishes that on April 7, 2016, Conway, and several other individuals, were
gathered on a certain street in Danville. Two Danville police officers approached the gathered
individuals. During their encounter with the group, an officer found a revolver lying on the
ground near where Conway was standing. Later, after viewing the footage from the officers’
body worn cameras, Conway was charged with “carrying[,] hidden from common observation a
.22 caliber revolver handgun.” Conway pled guilty to the charge in the Danville General District
Court and was convicted for violating Code § 18.2-308. Thus, the act upon which the
Commonwealth based its first prosecution of Conway was possession of a concealed weapon.
Nearly two years after Conway’s conviction under Code § 18.2-308, she was indicted in
the Circuit Court of Danville for a violation of Code § 18.2-308.2. The indictment provided that
“[o]n or about April 7, 2016, in the City of Danville, [Conway] did unlawfully feloniously,
knowingly and intentionally possess or transport a firearm, having been previously convicted of
a violent felony . . . .” As in Evans’s case, the indictment is specific with regard to the date and
place, but it does not allege where or when Conway came to possess the gun in the first instance
or where or when she concealed it, or any act on her part which was different from that alleged
regarding her prior conviction for possession of the firearm. It is clear therefore that the
concealment is the basis for the charge of possession.
Applying the Jones test to the relevant facts in Conway’s case, it is clear that her
possession of a concealed weapon involved the same victim (the Commonwealth), was
committed by the same criminal agent (Conway), and was committed at the same time (April 7,
2016) and situs (Danville). Therefore, because Conway’s act concerning a single alleged
possession of a concealed weapon was a violation of two statutes, the Commonwealth should
17
have been precluded, pursuant to Code § 19.2-294, from its subsequent prosecution of Conway
under Code § 18.2-308.2.
For these reasons I would dismiss each defendant’s conviction under Code § 18.2-308.2.
To conclude otherwise permits a conviction based only on inferences, not any alleged or charged
actions, that at some unknown time and place prior to concealing the weapon, the defendants
each had to independently possess the weapons. The majority’s conclusion permits one alleged
act of concealment to form the basis for two convictions in contravention of the statute. It was
within the Commonwealth’s discretion to prosecute the defendants simultaneously for both
offenses at issue or it could have chosen to prosecute them for the felony offenses rather than the
misdemeanor offenses. Application of the majority’s proposed test focuses upon the elements of
the offense rather than the previously articulated act of the defendant in determining whether
Code § 19.2-294 was violated. Accordingly, affirming the convictions under the facts of these
cases frustrates the purpose of Code § 19.2-294 by subjecting Evans and Conway “to the hazards
of vexatious, multiple prosecutions.”
Phillips, 257 Va. at 551
.
I respectfully dissent.
18 |
4,639,138 | 2020-12-03 15:00:11.740571+00 | null | http://www.ca2.uscourts.gov/decisions/isysquery/c0089649-a736-423d-949d-9c55d94e93f8/1/doc/19-4331_opn.pdf | 19-4331
United States v. Strock
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
_______________
August Term, 2020
(Argued: September 24, 2020 Decided: December 3, 2020)
Docket No. 19-4331
_______________
UNITED STATES OF AMERICA,
Appellant,
– v. –
LEE STROCK, CYNTHIA ANN GOLDE, STROCK CONTRACTING, INC.,
Defendants-Appellees,
KENNETH CARTER,
Defendant.
_______________
B e f o r e:
CALABRESI, KATZMANN, and CARNEY, Circuit Judges.
_______________
1
The United States of America appeals from an order of the United States
District Court for the Western District of New York (Geraci, C.J.) dismissing its
claims under the False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and federal
common law against defendants-appellees Lee Strock, Cynthia Golde, and Strock
Contracting, Inc (“SCI”). In particular, the government challenges the district
court’s conclusion that the complaint failed to state a claim under the FCA because
it did not adequately allege that the purported misrepresentations—that Strock’s
business qualified as a service-disabled veteran-owned small business
(“SDVOSB”)—were material to the government’s decision to pay that business
under contracts reserved for SDVOSBs. The government also challenges the
district court’s conclusion that the complaint failed to allege defendants-appellees’
knowledge of materiality, as well as its dismissal of the common law claims.
We conclude that the district court’s finding with respect to materiality was
erroneous because it was premised on too restrictive a conception of the FCA
materiality inquiry set out in Universal Health Services, Inc. v. United States ex rel.
Escobar,
136 S. Ct. 1989
(2016). Further, we find that the district court’s conclusion
that the complaint failed to allege defendants-appellees’ knowledge was
erroneous as to Lee Strock, and potentially as to SCI, but not as to Cynthia Golde.
Finally, we conclude that the district court should not have dismissed the common
law claims on jurisdictional grounds because it had original jurisdiction over these
claims under 28 U.S.C. § 1345. Accordingly, we AFFIRM in part, REVERSE in part,
and VACATE in part the district court’s dismissal of the complaint.
_______________
CHARLES W. SCARBOROUGH, Appellate Staff Attorney, for Joseph H.
Hunt, Assistant Attorney General, James P. Kennedy, United
States Attorney for the Western District of New York, Buffalo,
NY, for Appellant.
ROBERT C. SINGER, ESQ., Singer Legal PLLC, Williamsville, NY, for
Defendants-Appellees Lee Strock and Strock Contracting, Inc.
REETUPARNA DUTTA, ESQ. (David A. Short, on the brief), Hodgson
Russ LLP, Buffalo, NY for Defendant-Appellee Cynthia Ann
Golde.
_______________
2
KATZMANN, Circuit Judge:
This case calls upon us to address the materiality inquiry under the False
Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., in light of Universal Health Services,
Inc. v. United States ex rel. Escobar,
136 S. Ct. 1989
(2016).
Veteran Enterprises Company, Inc. (“VECO”) was putatively owned by
Terry Anderson, a service-disabled veteran. VECO applied for and received
millions of dollars of federal government contracts that are reserved for small
businesses owned by service-disabled veterans (known in this context as “service-
disabled veteran-owned small businesses” or “SDVOSBs”). According to the
government, however, Anderson’s ownership was illusory, and he never
controlled or managed VECO. In fact, the government alleges, the company was
controlled by defendant-appellee Lee Strock, who set up VECO as a front to funnel
contract work to his company, defendant-appellee Strock Contracting, Inc.
(“Strock Contracting” or “SCI”). The government filed suit under the FCA and
federal common law against Strock, SCI, and Cynthia Golde, an employee of both
VECO and SCI.
The United States District Court for the Western District of New York
(Geraci, C.J.) granted defendants’ motion to dismiss the government’s amended
3
complaint, concluding that the government had not adequately pleaded that the
alleged misrepresentation—that VECO qualified as an SDVOSB—was material to
the government’s decision to make payments under the awarded contracts or that
defendants knew of this materiality. Further, the district court dismissed the
common law claims on jurisdictional grounds. Because we find that the district
court’s conclusion as to materiality relied on an unduly restrictive understanding
of the FCA materiality analysis set out in Escobar, and that the complaint
adequately alleges Strock’s knowledge, we reverse in part. Additionally, we
vacate the district court’s dismissal insofar as it relied on these errors to dismiss
the claims against SCI. Finally, we vacate the dismissal of the common law claims.
BACKGROUND
Several statutory provisions authorize awarding government contracts to
SDVOSBs. 15 U.S.C. § 657f(a) and (b) permit contracts to be awarded to SDVOSBs
either on a sole-source basis or based on competition limited to SDVOSBs. 15
U.S.C. § 644(g)(1)(A)(ii) establishes a “[g]overnmentwide goal” that at least three
percent of all contracts awarded during the fiscal year go to SDVOSBs. 38 U.S.C.
§ 8127 establishes a similar program specifically for contracts issued by the
Department of Veterans Affairs (“VA”).
4
As relevant to this appeal, a SDVOSB must be majority-owned by, and its
management and daily operations must be controlled by, one or more service-
disabled veterans. 15 U.S.C. § 632(q)(2)(A); 38 U.S.C. § 8127(k)(3). 1 To be
“controlled” by a service-disabled veteran “means that both the long-term
decision[] making and the day-to-day management and administration of the
business operations must be conducted by one or more service-disabled veterans.”
13 C.F.R. § 125.13(a).
“At the time that a service-disabled veteran-owned small business concern
submits its offer” to perform government contracting work, “it must represent to
the contracting officer that it is a [SDVOSB].” 48 C.F.R. § 19.1403(b). Where
contracts “have been set aside for” SDVOSBs, “[o]ffers received from concerns that
are not [SDVOSBs] shall not be considered,” and “[a]ny award resulting from this
solicitation will be made to a[n] [SDVOSB].” 48 C.F.R § 52.219-27(b)(1), (c)(1)–(2);
see also 48 C.F.R. § 852.219-10(b)(1)–(2).
1 Prior to 2016, and throughout the time period during which the contracts at
issue in this case were awarded, section 8127 had its own definition of SDVOSB instead
of incorporating section 632’s. See 38 U.S.C. § 8127(l) (2016). The definitions, however,
are indistinguishable for purposes of this appeal.
5
Defendant Lee Strock is the owner of defendant Strock Contracting. 2 In 2006,
Strock met defendant Terry Anderson, a service-disabled veteran. The two formed
Veteran Enterprises Company, Inc. (“VECO”), with Anderson as president and
51% owner, Strock as vice-president and 30% owner, and Ken Carter as secretary
and 19% owner. 3 VECO subsequently applied for and received SDVOSB
recognition from the VA. Between 2008 and 2013, VECO was awarded over $21
million in SDVOSB-reserved contracts from the VA, the Army, and the Air Force.
According to the government, however, VECO’s SDVOSB status was a
sham. After another company owned by Strock lost its eligibility for a Small
Business Administration contracting program, Strock “decided to recruit a
service-disabled veteran,” Anderson, “to head a company in order that Lee Strock
and Strock Contracting could earn profits on federal contracts from the VA and
other federal agencies that were set aside for SDVOSBs.” Joint App’x 21 ¶ 30. But
Anderson’s leadership of VECO existed only on paper. Strock, not Anderson,
controlled the day-to-day operations at VECO. Strock decided which contracts
As this appeal is from a motion to dismiss, all facts are drawn from the
2
government’s Amended Complaint, which is the operative pleading.
3 Mr. Carter was initially named as a defendant, but he was dismissed from this
appeal after he passed away. See No. 19-4331, Dkt. No. 30.
6
VECO would bid on; Anderson was not involved. Anderson was not given access
to payroll records. He made no decisions about hiring or firing. He would
“occasionally” attend meetings and perform inspections, but he did little else.
Id. at 25–26 ¶¶ 63–64.
Strock owned the building that VECO “leased” as office space,
and Anderson did not even have a key to the office; defendant Cynthia Golde (or
another employee) had to let him in. Nor did Anderson have access to the
company email account, which nonetheless displayed his name as the sender.
Although he was nominally the president, he was not the highest-paid employee;
and although he was purportedly the majority shareholder, he was paid less than
5% of VECO’s profits. VECO also made several “questionable” payments to Strock
Contracting, totaling several hundred thousand dollars.
Id. at 31 ¶ 102.
The
government claims that, had it known that VECO was not a bona fide SDVOSB, it
would either not have awarded the contracts or would have terminated them.
The government filed suit, asserting violations of the False Claims Act, as
well as common law fraud, unjust enrichment, and payment by mistake. The
district court granted the defendants’ motion to dismiss. The court concluded that
the government had not pleaded with the particularity required by Federal Rule
of Civil Procedure 9(b) that any of the individual defendants knew that VECO did
7
not qualify as an SDVOSB, or knew that such a designation would be material to
the government’s decision to pay VECO. The district court further held that the
complaint did not adequately plead that any misrepresentation was material for
FCA purposes, reasoning that “a misrepresentation is not necessarily material to
the Government’s payment decision just because the Government would not have
awarded the contract but for the misrepresentation.”
Id. at 74. 4
The district court
then “decline[d] to exercise jurisdiction over the Government’s common law
claims.”
Id. at 75.
This appeal followed.
DISCUSSION
I. Standard of Review
“We review the district court’s grant of defendants’ Rule 12(b)(6) motion to
dismiss de novo, accepting all factual claims in the complaint as true and drawing
all reasonable inferences in the plaintiff’s favor.” United States v. Wells Fargo & Co.,
943 F.3d 588
, 594 (2d Cir. 2019). 5
4 The district court also held that the complaint did not adequately plead a
conspiracy under the False Claims Act. The government does not challenge this aspect
of the court’s ruling on appeal.
5 Unless otherwise indicated, case quotations omit all internal quotation marks,
citations, footnotes, and alterations.
8
II. The False Claims Act Counts
A. Legal Standard
The False Claims Act imposes liability, as relevant here, on a person who
either “knowingly presents, or causes to be presented, a false or fraudulent claim
for payment or approval,” or who “knowingly makes, uses, or causes to be made
or used, a false record or statement material to a false or fraudulent claim.” 31
U.S.C. § 3729(a)(1)(A)–(B). “Knowingly” means that a person “(i) has actual
knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity
of the information; or (iii) acts in reckless disregard of the truth or falsity of the
information.”
Id. § 3729(b)(1)(A). It
“require[s] no proof of specific intent to
defraud.”
Id. § 3729(b)(1)(B). “Material”
means “having a natural tendency to
influence, or be capable of influencing, the payment or receipt of money or
property.”
Id. § 3729(b)(4). The
government must “plead [its] claims with
plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b) by,
for instance, pleading facts to support allegations of materiality.” Universal Health
Servs., Inc. v. United States ex rel. Escobar,
136 S. Ct. 1989
, 2004 n.6 (2016).
B. Materiality
We turn first to whether the government sufficiently alleges that
defendants’ misrepresentations about VECO’s SDVOSB status were material. To
9
be actionable under the FCA, “[a] misrepresentation about compliance with a
statutory, regulatory, or contractual requirement must be material to the
Government’s payment decision.”
Id. at 1996.
The Supreme Court recently
clarified this materiality requirement in Universal Health Services, Inc. v. United
States ex rel. Escobar,
136 S. Ct. 1989
(2016). In Escobar, the Court explained that the
FCA’s “materiality standard is demanding,”
id. at 2003
,
and “looks to the effect on
the likely or actual behavior of the recipient of the alleged misrepresentation,”
id. at 2002,
rather than superficial designations. Thus, a misrepresentation is not
necessarily material because “the Government would have the option to decline
to pay if it knew of the defendant’s noncompliance.”
Id. at 2003.
Nor is “the
Government’s decision to expressly identify a provision as a condition of
payment . . . automatically dispositive,” although it is “relevant.”
Id. Rather, determining materiality
requires an inquiry into at least the following factors:
[P]roof of materiality can include, but is not necessarily limited to,
evidence that the defendant knows that the Government consistently
refuses to pay claims in the mine run of cases based on noncompliance
with the particular statutory, regulatory, or contractual requirement.
Conversely, if the Government pays a particular claim in full despite
its actual knowledge that certain requirements were violated, that is
very strong evidence that those requirements are not material. Or, if
the Government regularly pays a particular type of claim in full
despite actual knowledge that certain requirements were violated,
10
and has signaled no change in position, that is strong evidence that
the requirements are not material.
Id. at 2003–04;
see also Bishop v. Wells Fargo & Co.,
870 F.3d 104
, 107 (2d Cir. 2017)
(per curiam). In addition, we inquire into whether or not the “noncompliance is
minor or insubstantial.”
Escobar, 136 S. Ct. at 2003
.
Each party argues that Escobar requires resolving the question of whether
defendants’ alleged misrepresentations were “material to the Government’s
payment decision” in its favor.
Escobar, 136 S. Ct. at 1996
. Central to this dispute is
not, however, any disagreement over Escobar’s definition of the term “material,”
but instead its definition of the term “payment decision.”
Id. at 1996.
Underlying
the government’s argument is its assumption that the primarily relevant “payment
decision” was the government’s decision to award VECO contracts in the first
instance. Underlying defendants’ claim is the assumption that the only relevant
“payment decision” is the government’s decision to ultimately pay claims under
these contracts.
Because resolving this dispute over the meaning of “payment decision” is
thus essential to our materiality analysis in this case, we address this question first.
Guided by Escobar, and for the reasons that follow, we assign “payment decision”
a broader scope than either party would. In this case, the government’s “payment
11
decision” comprised both the decision to award contracts in the first instance and
the decision to ultimately pay claims under these contracts.
The government’s argument that materiality must be assessed primarily
with regard to the government’s decision to award contracts to VECO is premised
on the fact that its legal theory is one of “fraudulent inducement.” Under this
fraudulent inducement theory, FCA liability attaches not because a defendant has
submitted any claim for payment that is “literally false,” but instead because “the
contract under which payment [is] made is procured by fraud.” United States ex
rel. Longhi v. United States,
575 F.3d 458
, 467–68 (5th Cir. 2009); United States ex rel.
Marcus v. Hess,
317 U.S. 537
, 543–45 (1943) (finding that contractors who secured
contracts through collusive bidding were liable for claims arising under those
contracts under the FCA), abrogated in part by statute on other grounds. 6 The theory
6 See also, e.g., United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc.,
393 F.3d 1321
, 1326 (D.C. Cir. 2005); Harrison v. Westinghouse Savannah River Co.,
176 F.3d 776
, 787–88 (4th Cir. 1999). We implicitly approved the fraudulent inducement theory in
United States ex rel. Feldman v. van Gorp,
697 F.3d 78
, 91 (2d Cir. 2012) (“If the
government made payment based on a false statement, then that is enough for liability
in an FCA case, regardless of whether that false statement comes at the beginning of a
contractual relationship or later.”). We did so even before Feldman, in United States ex rel.
Kirk v. Schindler Elevator Corp.,
601 F.3d 94
, 114–15 (2d Cir. 2010), rev’d on other grounds,
563 U.S. 401
(2011), when we held that the relator had stated an FCA claim by alleging
that the defendant submitted false certifications with bids and thereby won a
government contract.
12
is based on the notion that “fraud d[oes] not spend itself with the execution of the
contract,” but instead “taint[s]” every claim subsequently brought under the
contract, rendering these claims actionably false.
Hess, 317 U.S. at 543
; see also
Longhi, 575 F.3d at 468
. The government argues that because the falsity of the
claims in a fraudulent inducement case is imported from the falsity of statements
made to obtain the contract in the first instance, “the appropriate focus . . . is on
the likely effect of the defendant’s fraud on the government’s actions at the time it
awarded the contract, not when the government subsequently paid claims.”
Appellant’s Br. 21. In other words, on the government’s view, the primarily
relevant “payment decision” is the decision to award the contract, not the decision
to ultimately pay a claim under the contract.
Escobar, however, precludes understanding the relevant “payment
decision” in this case as so narrowly focused on the government’s decision to
award contracts. In rejecting the view that a contractual, statutory, or regulatory
provision is material only where it is “expressly designated a condition of
payment,” 136 S. Ct. at 2001
, and similarly rejecting the view that a provision is
necessarily material where “the Government would be entitled to refuse payment
were it aware of the violation,”
id. at 2004,
Escobar eschews a materiality analysis
13
that prioritizes the government’s claims about how it would treat a requirement
over how the government actually treats a requirement upon discovering a
violation. Specifically, Escobar identifies as the primary example of such actual
treatment the government’s reaction to noncompliance when a claim for ultimate
payment is made—whether it be “refus[al] to pay claims in the mine run of cases,”
“pay[ment of] a particular claim” despite the government’s actual knowledge that
conditions of payment have been violated, or “regular[] pay[ment of] a particular
type of claim” despite the government’s knowledge of program violations.
Id. at 2003.
Accordingly, the government’s conduct after claims arise under a contract,
not merely at the time of contract award, is highly relevant to Escobar’s materiality
analysis. The government’s position is thus unpersuasive.
The defendants’ suggestion that the relevant “payment decision” excludes
the government’s initial decision to award a contract, however, is no better. As
noted above, this approach makes little sense in a fraudulent inducement case,
where a defendant’s alleged misrepresentations at the time the government
awarded the contract are what render any subsequent claim under that contract
fraudulent at all. This theory of fraud recognizes that the government’s decision
to enter a contract in some sense undergirds any decision to ultimately pay claims
14
arising under the contract. See
Hess, 317 U.S. at 543
(finding contractors’
misrepresentation that they satisfied a non-collusive bidding requirement material
because “[t]he government’s money would never have been placed in the joint
fund for payment to respondents had its agents known the bids were collusive”).
As a result, other circuits addressing FCA fraudulent inducement claims have
assessed materiality at least partly with regard to the government’s decision to
enter a relationship with a defendant in the first instance. See, e.g., United States v.
Luce,
873 F.3d 999
, 1008-09 (7th Cir. 2017) (considering as part of its materiality
analysis that a defendant’s misrepresentation concerned a “threshold eligibility
requirement that, by extension, was tied to every” claim); United States ex rel. Miller
v. Weston Educ., Inc.,
840 F.3d 494
, 504 (8th Cir. 2016) (focusing materiality analysis
on whether a misrepresentation “influenced the government’s decision to enter
into its relationship with” the defendant).
More importantly, Escobar itself supports understanding the government’s
“payment decision” to include the government’s initial decision to enter a contract
in fraudulent inducement cases. Escobar rejected the notion that FCA liability is
limited to instances in which a defendant violates an express condition of payment
in part because such a rule would “undercut[]” the FCA by imposing no liability
15
for “misrepresenting compliance with a condition of eligibility to even participate
in a federal program when submitting a
claim.” 136 S. Ct. at 2002
. This language
strongly suggests that FCA liability attaches where a defendant’s
misrepresentations impact government decisions about eligibility, and by
extension, that FCA materiality analysis can encompass a misrepresentation’s
impact on the government’s decision to do business with a defendant in the first
instance. This conclusion in no way contradicts Escobar’s focus at other points on
the government’s ultimate payment decision; Escobar taught that “materiality
cannot rest on a single fact or occurrence as always determinative” such that
consideration of both points of decision is entirely appropriate.
Id. at 2001;
see also
id. at 2003
(explaining that “proof of materiality can include, but is not necessarily
limited to,” the factors explicitly listed in Escobar). Accordingly, we reject the
defendants’ suggestion that the “payment decision” relevant to our materiality
analysis does not include the government’s decision to award VECO contracts in
the first instance.
In sum, we find that, at least in fraudulent inducement cases, the
government’s “payment decision” under Escobar encompasses both its decision to
award a contract and its ultimate decision to pay under that contract. We thus
16
assess whether the complaint sufficiently pleads materiality under the Escobar
factors with a view to both aspects of the government’s decision.
1. Whether the Requirement Was an Express Condition of
Payment
The first factor that Escobar identifies as relevant to materiality is whether
the government “expressly identif[ied] a provision as a condition of payment.”
Id. at 2003.
The district court concluded that this factor weighed against a finding of
materiality here because the government “d[id] not allege that it expressly
conditioned payment to VECO on VECO’s compliance with SDVOSB contracting
requirements.” Joint App’x 69. While the district court was correct—as the
government concedes—that SDVOSB compliance was not an express condition of
ultimate payment under any government contract with the defendants, the district
court erred by concluding that this fact was dispositive with regard to this first
factor.
Because, as explained above, materiality must also be assessed with regard
to the government’s decision to award contracts to VECO in the first instance, the
analysis of the first Escobar factor must also include the complaint’s allegations that
the government expressly named SDVOSB compliance as a condition of any
contract award. Indeed, Escobar faults a theory of materiality that places too much
17
emphasis on whether a provision is an express condition of ultimate payment in
part because such emphasis would preclude a finding of materiality in cases where
a defendant “misrepresent[ed] compliance with a condition of eligibility to even
participate in a federal
program.” 136 S. Ct. at 2002
. In other words, where a
misrepresentation relates to a condition of eligibility, examining only the express
conditions of ultimate payment will obscure the true materiality of a requirement.
Because the government alleges that it expressly designated SDVOSB compliance
a condition of contract eligibility, we thus find that this factor weighs in favor of a
finding of materiality.
2. The Government’s Response to Similar Misrepresentations
The next factor concerns the government’s response to noncompliance with
the relevant contractual, statutory, or regulatory provision. Escobar directs
examination of the government’s reaction to noncompliance both “in the mine run
of cases,” as well as in the “particular” case at issue.
Id. at 2003.
We turn first to
the adequacy of the complaint’s allegations regarding the government’s response
to noncompliance after it has already awarded a contract (“post-award” conduct),
and then turn to examine the government’s response to noncompliance before it
has awarded a contract (“pre-award” conduct).
18
While we agree with the district court’s ultimate conclusion that the
complaint’s allegations about the government’s post-award conduct do not
strongly support a finding of materiality, our reasoning differs from that of the
district court. The complaint’s primary allegation about the government’s
generalized post-award conduct consists of its claim, based on a number of Office
of Inspector General reports, that “the Government has regularly prosecuted . . .
parties that fraudulently obtain SDVOSB set-aside contracts.” Joint App’x 46 ¶ 150.
The district court discounted these allegations because defendants “cite
evidence”—specifically, a 2009 Government Accountability Office (“GAO”)
report—suggesting that enforcement is sporadic, and because the examples of
enforcement the government identified were “not all . . . FCA cases.”
Id. at 69.
Neither reason is persuasive.
First, the district court’s reliance on the GAO report to reach its conclusion
was inappropriate. In considering a motion to dismiss for failure to state a claim,
“the district court is normally required to look only to the allegations on the face
of the complaint.” Roth v. Jennings,
489 F.3d 499
, 509 (2d Cir. 2007). While the court
may consider documents that “are attached to the complaint,” “incorporated in it
by reference,” “integral” to the complaint, or the proper subject of judicial notice,
19
id., none of these
exceptions justifies the district court’s reliance on the GAO report
here. First, the GAO report was neither attached to the complaint nor incorporated
by reference. Second, the GAO report was not “integral” to the complaint. As
defendants acknowledge, a document is “integral” when the complaint “relies
heavily upon [the document’s] terms and effect.” DiFolco v. MSNBC Cable L.L.C.,
622 F.3d 104
, 111 (2d Cir. 2010). Here, the complaint does not rely on the GAO
report at all, so it is not “integral.” Third, while the district court could have taken
judicial notice of the GAO report, it should only have “do[ne] so in order to
determine what statements [it] contained . . . not for the truth of the matters asserted”
therein.
Roth, 489 F.3d at 509
. The district court’s consideration of the GAO Report
as evidence of the government’s spotty post-award enforcement record was thus
inappropriate in ruling on the motion to dismiss.
The district court’s second justification for discounting the government’s
allegations that it “has regularly prosecuted, both criminally and civilly, parties
that fraudulently obtain SDVOSB set-aside contracts,” Joint App’x 46 ¶ 150, is
unpersuasive for a different reason. The district court suggested that this
allegation was not probative of materiality because “not all of” the cases the
government cited in support of it “appear to be FCA cases.“
Id. at 69.
The district
20
court, however, provided no basis for the proposition that post hoc enforcement
efforts, to the extent they are probative of materiality at all, must be from the FCA
context. More importantly, the district court’s focus on what kinds of post hoc
enforcement actions are relevant to materiality obscures the more fundamental
question of whether post hoc enforcement actions are relevant to FCA materiality
analysis at all. This question was not directly addressed by Escobar, which focused
on whether the government “consistently refuses to pay claims,” not whether the
government later pursues damages or criminal
prosecution. 136 S. Ct. at 2003
.
Nonetheless, Escobar indirectly indicates that allegations of post hoc
prosecutions or other enforcement actions do not carry the same probative weight
as allegations of nonpayment. Escobar emphasized that “[t]he materiality standard
is demanding,” and that the government may not manufacture materiality by
alleging it had an option not to pay after the fact.
Id. Allowing the government
to
rely on post hoc enforcement efforts to satisfy the materiality requirement would
allow the government to engage in just such materiality manufacturing, and at
relatively low cost. Unlike mid-contract refusals to pay, engaging in post hoc
enforcement does not require the government to risk delay of a project. Instead,
the government needs risk only the cost of litigation, a risk that is mitigated by an
21
opportunity to recoup the cost of a completed project. Thus, while purely post hoc
enforcement actions can carry some weight in a materiality analysis, they are less
probative than allegations that the government actually refuses to make payments
once it determines that the SDVOSB condition has been violated. The
government’s allegations that it prosecutes those who fraudulently obtain
SDVOSB set-aside contracts thus are at best only neutral with regard to a finding
of materiality, particularly in light of the complaint’s failure to allege even a single
instance in which the government actually refused to pay a claim or terminated an
existing contract based on a false SDVOSB representation.
The complaint’s allegations about the post-award actions the government
took in response to the defendants’ particular instances of alleged noncompliance
are no more indicative of materiality. Significantly, the complaint makes no
allegation that the government refused to pay VECO, suspended its contracts, or
debarred it from bidding on future contracts. Instead, the complaint alleges that
the contracting officers might have taken steps to cease payments, terminate the
contracts, or both had they learned that VECO was not a bona fide SDVOSB. Some
of these allegations amount to no more than the suggestion “that the Government
would have the option to decline to pay if it knew of the defendant’s
22
noncompliance,” and are thus not “sufficient for a finding of materiality.”
Escobar, 136 S. Ct. at 2003
. While other allegations are less conditional and allege what the
government “would have” done had it learned of the noncompliance, such
inherently self-serving and unverifiable claims alone cannot be sufficient to
demonstrate materiality. Thus, the complaint’s allegations about the government’s
post-award behavior provide only weak support for a finding of materiality.
The government’s allegations about its pre-award response to
noncompliance, however, add some support to its allegations of materiality.
Although the government does not specifically allege that it does not award
contracts to entities it knows not to be SDVOSBs, the complaint as a whole
supports such an inference. See Wells Fargo &
Co., 943 F.3d at 594
(noting that we
must “draw[] all reasonable inferences in the plaintiff’s favor”). The complaint
outlines the numerous steps the government takes to ensure an applicant is an
SDVOSB before awarding a contract and it identifies multiple contracting officers
or specialists who allegedly would not have awarded contracts to VECO had they
been aware it was not an SDVOSB. Taken together, these allegations lead to a
reasonable inference that, in general, the government does not award contracts to
companies that it knows not to have complied with SDVOSB requirements. This
23
suggests that defendants’ misrepresentations were material to the government’s
decision to enter the contract in the first instance.
Given the government’s allegations that it was not aware of VECO’s
noncompliance, analyzing the government’s response to known noncompliance in
this particular case is not particularly enlightening. Strock nonetheless contends
that this analysis weighs against materiality because there is evidence that the
government awarded VECO contracts despite actual knowledge that VECO was
not in compliance with program requirements. The only record citation Strock
offers in support of this contention, however, is a claim made upon information
and belief in an attorney affidavit that the defendants filed in support of the
motion to dismiss. We once again decline Strock’s invitation to consider a
document that is not attached to, incorporated by, or integral to the complaint, and
find that this factor has no bearing on the materiality analysis at the motion to
dismiss stage of the proceedings.
In sum, the government’s alleged post-award conduct in response to
noncompliance provides at most weak support for materiality with regard to the
government’s decision to ultimately pay under the relevant contracts. The
government’s pre-award conduct, however, better supports materiality with
24
regard to the government’s decision to award the relevant contracts. Given both
decisions are part of the government’s “payment decision,” these considerations
taken together indicate that this factor supports materiality, if weakly.
3. Whether Noncompliance Was Minor or Insubstantial
Finally, we examine whether the defendants’ alleged noncompliance was
substantial.
Escobar, 136 S. Ct. at 2003
. The district court held that this factor
weighed against materiality because the complaint failed to allege that
noncompliance with the SDVOSB condition was substantial as to the
government’s “payment decision,” even though it might have been substantial
with respect to the government’s decision to award the contract. As previously
established, however, this reasoning relies on an unduly narrow understanding of
the scope of the relevant “payment decision.” The complaint plausibly alleges that
defendants’ SDVOSB-status violation was substantial, whether viewed in light of
the government’s decision to award the relevant contracts or ultimately pay out
under those contracts.
The government alleges that performance by an SDVOSB is at the very heart
of the SDVOSB statutory and regulatory regime: “increas[ing] contracting
opportunities for small business concerns owned and controlled by . . . veterans
with service connected disabilities.” Joint App’x 17 ¶ 17 (quoting 38 U.S.C. §
25
8127(a)(1)). Further it alleges that defendants, by misrepresenting their SDVOSB
status, “undercut th[is] express congressional purpose” “[b]y diverting contracts
and benefits . . . intended for service-disabled veterans towards an ineligible
company.”
Id. at 13 ¶ 3.
These allegations, accepted as true, indicate that VECO’s
noncompliance was substantial from the very inception of its contracts with the
government through their completion.
The defendants’ attempt to minimize their alleged noncompliance by
recasting the relevant contracts as aimed at the construction of government
buildings alone is unpersuasive. First, the defendants’ characterizations cannot, at
the motion to dismiss stage, displace the government’s well-pleaded allegations
about the contracts’ purpose or the allegations that the defendants’ noncompliance
deprived the government of “the intended benefits of a SDVOSB receiving and
performing federal contracts.”
Id. Second, the complaint’s
characterizations of the
contracts’ purpose are eminently plausible in light of Congress’s own statements
about the purpose of the SDVOSB statutory and regulatory regime. See 38 U.S.C.
§ 8127(a)(1). The substantiality factor thus weighs strongly in favor of materiality.
In sum, we find that two factors—the express nature of the eligibility
condition and the substantiality of the defendants’ alleged noncompliance—weigh
26
firmly in favor of materiality, while the third—the government’s response to
noncompliance in this and other cases—only weakly supports materiality. This is
enough to find that the government has plausibly alleged materiality.
C. Knowledge
To find FCA liability, it is not enough for the defendants to have presented
a materially false claim; they must have done so “knowingly,” see 31 U.S.C.
§ 3729(a)(1)(A)–(B), meaning with “actual knowledge of the information, “in
deliberate ignorance of the truth or falsity of the information,” or “in reckless
disregard of the truth or falsity of the information”
Id. § 3729(b)(1)(A). In
other
words, the government must allege that the defendants “knowingly violated a
requirement that the defendant[s] know[] is material to the Government’s
payment decision.”
Escobar, 136 S. Ct. at 1996
.
Claims under the FCA are subject to the particularity requirement of Federal
Rule of Civil Procedure 9(b).
Id. at 2004
n.6. 7 “Rule 9(b) permits knowledge to be
averred generally,” but plaintiffs, including the government, still must “plead the
7 Strock argues that the complaint’s general failure to comply with Rule 9(b)
offers an independent ground for dismissal. But none of the purported deficiencies
cited by Strock was sufficient to deprive him of the requisite “fair notice” of the
government’s claim, and they thus do not warrant dismissal. United States ex rel.
Chorches v. Am. Med. Response, Inc.,
865 F.3d 71
, 86 (2d Cir. 2017).
27
factual basis which gives rise to a strong inference of fraudulent intent.” O’Brien v.
Nat’l Prop. Analysts Partners,
936 F.2d 674
, 676 (2d Cir. 1991). “The requisite strong
inference of fraud may be established either (a) by alleging facts to show that
defendants had both motive and opportunity to commit fraud, or (b) by alleging
facts that constitute strong circumstantial evidence of conscious misbehavior or
recklessness.” Lerner v. Fleet Bank, N.A.,
459 F.3d 273
, 290–91 (2d Cir. 2006). The
complaint must plead facts supporting scienter as to each defendant. In re DDAVP
Direct Purchaser Antitrust Litig.,
585 F.3d 677
, 695 (2d Cir. 2009). We address each
defendant in turn.
1. Lee Strock
The district court acknowledged that the complaint alleges that Strock
“decided to establish an SDVOSB to obtain set-aside contracts,” “recruited
Anderson as the ‘figurehead’ president,” and “direct[ed]” VECO employees to
submit false certifications and false claims. Joint App’x 64–65. And the court
further acknowledged that facts alleged by the government “could support an
inference that Strock knew that VECO did not qualify as an SDVOSB, such as that
Strock gave Anderson a 51% share in VECO (the minimum required for veteran
ownership), set up email addresses in Anderson’s name to be managed by other
employees, and established VECO for his and Strock Contracting’s profit.”
Id. at 28 65.
But the court concluded that the complaint nevertheless failed to adequately
allege that Strock knew that VECO’s SDVOSB status was material to the
government.
We respectfully disagree. At a minimum, the complaint adequately alleges
that Strock acted in reckless disregard of whether the SDVOSB-status requirement
was material. First, the complaint alleges “strong circumstantial evidence of . . .
recklessness” as to materiality.
Lerner, 459 F.3d at 291
. The complaint alleges that
all the contract solicitations at issue prominently advised that only bids from
SDVOSBs would be considered and that firms wishing to bid on such contracts
must certify their SDVOSB status. Moreover, the complaint alleges that Strock
undertook elaborate steps to make it appear that VECO was in fact in compliance
with SDVOSB requirements, such as recruiting Terry Anderson, giving Anderson
the minimum share required for veteran ownership, and setting up email
addresses in Anderson’s name to be managed by other employees. This is strong
circumstantial evidence that Strock acted in reckless disregard of whether VECO’s
SDVOSB status was material to the government’s decision to both award and pay
out under SDVOSB contracts.
29
Moreover, the complaint adequately alleges that Strock had “motive and
opportunity to commit fraud.”
Lerner, 459 F.3d at 290
. As to motive, the complaint
alleges that Strock set up VECO as an SDVOSB to replace the federal contracting
opportunities he lost after Strock Contracting graduated out of the Small Business
Administration contracting program. As to opportunity, the government alleges
that Strock owned the building that VECO “leased” as office space and VECO
made several “questionable” payments to Strock Contracting, totaling several
hundred thousand dollars. In other words, Strock stood to benefit directly from
VECO’s success, and had the wherewithal to do so. Thus, the government has
plausibly alleged at least that Strock acted in reckless disregard of the materiality
of the SDVOSB compliance. The government has therefore met its burden with
regard to Strock’s knowledge.
2. Cynthia Golde
We agree with the district court, however, that the complaint does not
sufficiently allege that Golde individually knew that VECO did not qualify as an
SDVOSB. Some of the allegations against Golde are not indicative of such
knowledge because they do not specify whether Golde was actually involved.
Other allegations relate to behavior too mundane to support an inference of
knowing falsity.
30
Further, while the complaint alleges that Golde presented bids for SDVOSB
set-aside contracts and made requests for payment under such contracts, the
complaint does not specify which bids were made by Golde or which
representations were contained in those bids. We thus cannot infer from these
allegations that Golde knowingly submitted false bids. This point is illustrated by
the only invoice that the complaint specifically alleges that Golde submitted. That
invoice appears to have simply included a certification that “the contract was
performed in accordance with the specifications, terms and conditions of the
contract.” Joint App’x 34 ¶ 113. Such a boilerplate certification, which may not
have even mentioned the SDVOSB requirement, is not likely to have alerted Golde
to any noncompliance. Without any allegations about whether other documents
submitted by Golde contained more explicit misrepresentations, the complaint’s
general allegations that Golde submitted bids or requests for payment are
insufficient to allege knowledge.
A few of the allegations against Golde are slightly more suggestive of
knowledge. For example, Golde was allegedly employed simultaneously by
VECO and Strock Enterprises (a company related to SCI and VECO), and she
discussed moving employees between the two. This could be taken as evidence
31
that Golde was aware that VECO was just a front aimed to provide Strock access
to SDVOSB contracts. But absent more specific allegations of what Golde knew of
Strock’s plans, this is too speculative to support a claim for fraud under Rule 9(b).
Similarly, the allegation that Golde “knew that Lee Strock controlled the day-to-
day and long-term business operations of VECO,” Joint App’x 28 ¶ 82, might
support the inference that Golde knew VECO was not a bona fide SDVOSB. That
inference, however, relies on the assumption—not supported elsewhere in the
complaint—that Golde knew that SDVOSB certification requires that the veteran
not only own but also control the business in question.
Absent more information about which bids Golde submitted, or the content
of those bids, the complaint does not adequately plead knowledge as to Golde
with the particularity required under Rule 9(b). And, unlike Strock, none of the
allegations establish either “motive and opportunity to commit fraud” or “strong
circumstantial evidence of conscious misbehavior or recklessness.”
Lerner, 459 F.3d at 290
–91. We therefore affirm the district court’s dismissal of the claims
against Golde.
D. Remaining Claims
In addition to the FCA claims against Strock and Golde, the district court
also dismissed the complaint’s FCA claim against Strock Contracting as well as its
32
common law claims against all defendants. The district court’s reasons for doing
so were erroneous. First, the district court dismissed the FCA claim against Strock
Contracting, which was based on a theory of vicarious liability, because it found
that the complaint did not state a claim against the individual defendants. As
explained, however, the complaint adequately states a claim against Strock. 8
Second, the district court dismissed the government’s common law claims
on the ground that it could decline to exercise supplemental jurisdiction over
them. However, as the government argues, and as the defendants apparently
concede, the district court had original jurisdiction over these claims under 28
U.S.C. § 1345 (“[T]he district courts shall have original jurisdiction of all civil
actions, suits or proceedings commenced by the United States . . . .”).
The defendants urge that there are nonetheless alternative grounds upon
which to affirm the district court’s judgment as to these claims. However, “this
Court generally will not review an issue the district court did not decide,” Macey
v. Carolina Cas. Ins. Co.,
674 F.3d 125
, 131 (2d Cir. 2012), and we find that there is
no reason to do so here. Accordingly, we vacate the district court’s dismissal of
these claims and leave it to the district court on remand to determine in the first
8 We express no view about the potential merit of a theory of vicarious liability,
which is not a theory that has yet been adopted in our circuit.
33
instance whether dismissal is appropriate on any of the defendants’ proposed
alternative grounds.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s dismissal of the
FCA counts against Golde and REVERSE the dismissal of the FCA counts against
Strock. Further, we VACATE the dismissal of the FCA counts against Strock
Contracting, Inc. and the federal common law claims against all defendants. We
REMAND the case for the district court to consider the adequacy of the latter
claims in the first instance and to conduct additional proceedings consistent with
this opinion.
34 |
4,639,139 | 2020-12-03 15:00:14.74406+00 | null | http://www.ca2.uscourts.gov/decisions/isysquery/e68d091c-06bf-477d-be0b-58757c74830b/1/doc/18-1823_so.pdf | 18-1823
Liu v. Barr
BIA
Douchy, IJ
A205 804 265
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals
2 for the Second Circuit, held at the Thurgood Marshall
3 United States Courthouse, 40 Foley Square, in the City of
4 New York, on the 3rd day of December, two thousand twenty.
5
6 PRESENT:
7 ROSEMARY S. POOLER,
8 REENA RAGGI,
9 JOSEPH F. BIANCO,
10 Circuit Judges.
11 _____________________________________
12
13 JINLONG LIU,
14 Petitioner,
15
16 v. 18-1823
17 NAC
18 WILLIAM P. BARR, UNITED STATES
19 ATTORNEY GENERAL,
20 Respondent.
21 _____________________________________
22
23 FOR PETITIONER: Thomas V. Massucci, New York, NY.
24
25 FOR RESPONDENT: Joseph H. Hunt, Assistant
26 Attorney General; Paul Fiorino,
27 Senior Litigation Counsel; Andrew
28 B. Insenga, Trial Attorney, Office
29 of Immigration Litigation, United
30 States Department of Justice,
31 Washington, DC.
1 UPON DUE CONSIDERATION of this petition for review of a
2 Board of Immigration Appeals (“BIA”) decision, it is hereby
3 ORDERED, ADJUDGED, AND DECREED that the petition for review
4 is DENIED.
5 Petitioner Jinlong Liu, a native and citizen of the
6 People’s Republic of China, seeks review of a May 25, 2018,
7 decision of the BIA affirming a July 6, 2017, decision of an
8 Immigration Judge (“IJ”) denying him asylum, withholding of
9 removal, and relief under the Convention Against Torture
10 (“CAT”). In re Jinlong Liu, No. A205 804 265 (B.I.A. May 25,
11 2018), aff’g No. A205 804 265 (Immig. Ct. N.Y. City July 6,
12 2017). We assume the parties’ familiarity with the
13 underlying facts and procedural history.
14 We have reviewed both the IJ’s and the BIA’s opinions
15 “for the sake of completeness.” Wangchuck v. Dep’t of
16 Homeland Sec.,
448 F.3d 524
, 528 (2d Cir. 2006). The
17 applicable standards of review are well established. See
18 8 U.S.C. § 1252(b)(4)(B); Y.C. v. Holder,
741 F.3d 324
, 332
19 (2d Cir. 2013). The agency did not err in concluding that
20 Liu failed to satisfy his burden of proving a well-founded
21 fear of future persecution in China on account of his practice
22 of Christianity.
23 Absent past persecution, an alien may establish
2
1 eligibility for asylum by demonstrating a well-founded fear
2 of future persecution. 8 C.F.R. § 1208.13(b)(2); Hongsheng
3 Leng v. Mukasey,
528 F.3d 135
, 142 (2d Cir. 2008). To do so,
4 an applicant must show either a reasonable possibility that
5 he would be singled out for persecution or that the country
6 of removal has a pattern or practice of persecuting similarly
7 situated individuals. 8 C.F.R. § 1208.13(b)(2)(iii);
8 Hongsheng
Leng, 528 F.3d at 142
. “[A]n alien must make some
9 showing that authorities in his country of nationality are
10 either aware of his activities or likely to become aware of
11 his activities.” Hongsheng
Leng, 528 F.3d at 143
.
12 As an initial matter, we find no merit to Liu’s arguments
13 that the IJ applied an incorrect burden of proof,
14 mischaracterized his claim, and ignored his fear that he will
15 be persecuted for proselytizing in China. The IJ explicitly
16 set forth the correct well-founded fear standard and
17 recognized that Liu’s claim was based on his assertion that
18 he would proselytize as well as attend an underground church
19 in China.
20 The agency did not err in finding that Liu failed to
21 establish a well-founded fear of persecution because he did
22 not demonstrate that Chinese officials are aware or likely to
23 become aware of his religious activities. At his hearing,
3
1 Liu admitted that Chinese officials do not know about his
2 religious practice. As to whether Chinese officials are
3 likely to discover his religious activities, Liu testified
4 that that he would attend an unregistered Christian church in
5 China and spread the gospel, and he speculated that
6 nonbelievers would report him to government officials. Liu
7 did not testify that he knew anyone who had such an
8 experience, and he admitted that he did not know of anyone by
9 name who had been persecuted in his hometown. Further, the
10 agency reasonably declined to credit Liu’s mother’s unsworn
11 letter because the letter was written by an interested witness
12 who was not available for cross-examination. See Y.C.,
741 13 F.3d at 334
. Regardless, the letter claimed that unnamed
14 Christians were detained and beaten but provided no details
15 from which to conclude that Liu’s religious practice would
16 likely be discovered. And, as the IJ noted, the State
17 Department’s International Religious Freedom Report provides
18 that there are 68 million Christians in China and that
19 approximately 45 million of them practice in unregistered
20 churches. Given Liu’s purely speculative testimony that
21 officials will likely discover his religious practice and the
22 fact that there are tens of millions of Christians practicing
23 in unregistered churches in China, Liu did not demonstrate
4
1 that Chinese officials are likely to discover his religious
2 practice as required to state an objectively reasonable fear
3 of being singled out for persecution. See Hongsheng Leng,
4 528 F.3d at 143
; see also Jian Xing Huang v. U.S. INS, 421
5 F.3d 125
, 129 (2d Cir. 2005) (“In the absence of solid support
6 in the record . . . [an applicant’s] fear is speculative at
7 best.”).
8 The agency also did not err in determining that Liu
9 failed to establish a pattern or practice of persecution of
10 similarly situated individuals. The IJ acknowledged that the
11 country conditions evidence demonstrated that Chinese
12 government officials restrict religious activities and
13 harass, detain, and sentence religious practitioners in some
14 areas of China. As the IJ noted, however, the country
15 conditions evidence also provides that Christians practice
16 their religion without government interference in some areas
17 of the country. The IJ also reasonably relied on the fact
18 that none of the evidence mentions any incidents of harm
19 befalling Christians in Liu’s home province of Fujian. See
20 Jian Hui Shao v. Mukasey,
546 F.3d 138
, 143, 149 (2d Cir.
21 2008) (finding no error in the agency’s requirement that an
22 applicant demonstrate a well-founded fear of persecution
23 specific to his or her local area when persecutory acts vary
5
1 according to locality). Given that restrictions on Christian
2 activities varied by region, the agency did not err in
3 determining that Liu failed to demonstrate “systemic or
4 pervasive” persecution of similarly situated Christians
5 sufficient to demonstrate a pattern or practice of
6 persecution. In re A-M-, 23 I. & N. Dec. 737, 741 (BIA 2005);
7 see also 8 C.F.R. § 1208.13(b)(2)(iii).
8 Accordingly, the agency did not err in concluding that
9 Liu failed to establish a well-founded fear of persecution.
10 See 8 U.S.C. § 1158(b)(1)(B)(i); Hongsheng
Leng, 528 F.3d at 11
142–43. That finding was dispositive of asylum, withholding
12 of removal, and CAT relief because all three claims were based
13 on the same factual predicate. Paul v. Gonzales,
444 F.3d 14
148, 156–57 (2d Cir. 2006).
15 For the foregoing reasons, the petition for review is
16 DENIED.
17 FOR THE COURT:
18 Catherine O’Hagan Wolfe
19 Clerk of Court
6 |
4,639,147 | 2020-12-03 15:03:14.365487+00 | null | http://www.illinoiscourts.gov/Opinions/SupremeCourt/2020/124992.pdf |
2020 IL 124992
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 124992)
THE PEOPLE OF THE STATE OF ILLINOIS, Appellee, v.
JUSTIN KNAPP, Appellant.
Opinion filed December 3, 2020.
JUSTICE KILBRIDE delivered the judgment of the court, with opinion.
Justices Garman, Karmeier, and Theis concurred in the judgment and opinion.
Chief Justice Anne M. Burke dissented, with opinion, joined by Justice Neville.
Justice Neville dissented, with opinion.
Justice Michael J. Burke took no part in the decision.
OPINION
¶1 This appeal requires us to review the circuit court’s summary dismissal of a
petition seeking relief under the Post-Conviction Hearing Act (Act) (725 ILCS
5/122-1 et seq. (West 2014)). The pro se petition alleged, in relevant part, that
petitioner Justin Knapp did not voluntarily relinquish his right to testify at his trial.
The appellate court affirmed.
2019 IL App (2d) 160162
, ¶ 68.
¶2 In this court, petitioner argues that the appellate court erred in affirming
summary dismissal of his postconviction petition because the court applied “too
stringent of a standard” at the first stage of postconviction proceedings. Petitioner
further argues that the appellate court misunderstood his right-to-testify claim when
it found that his claim was positively rebutted by the record. For the following
reasons, we affirm the appellate court’s judgment.
¶3 I. BACKGROUND
¶4 Petitioner Justin Knapp and codefendant Luis Rodriguez were charged with
attempted first degree murder, mob action, and aggravated battery in connection
with the stabbing of petitioner’s friend Jorge Avitia. The victim survived the attack
and identified petitioner and Rodriguez as the assailants.
¶5 A. Trial Proceedings
¶6 At petitioner’s jury trial in the circuit court of McHenry County, the State
argued that petitioner and Rodriguez were members of the Norteños 14 street gang
and that they attacked the victim based on his alleged association with a rival street
gang, the Latin Kings.
¶7 The State’s evidence showed that in the early morning hours of June 10, 2008,
petitioner, the victim, and their mutual friend Andres Pedroza were at Pedroza’s
house in Crystal Lake. Pedroza, who was 19 years old, testified that he was friends
with both petitioner and the victim since elementary school. At approximately 2:30
a.m., another friend, Christian Saenz, arrived at Pedroza’s home with codefendant
Rodriguez. The group of men left together in Saenz’s car. After stopping briefly at
-2-
an apartment building, Saenz drove them to a residence located at 672 Brink Street
in Woodstock. The group entered the home and sat together in the living room.
¶8 At some point, the victim and Rodriguez began to argue. Pedroza testified that
he was sitting next to petitioner on the couch during the argument. Pedroza heard
Rodriguez curse at the victim and call the victim a “King killer,” a statement
Pedroza understood as a reference to the Latin Kings street gang. Pedroza did not
know whether petitioner was involved in the argument, but Pedroza did hear
petitioner talking while Rodriguez and the victim argued. Pedroza could not hear
what either petitioner or the victim said during the argument. Pedroza denied
knowing whether petitioner was in a street gang but acknowledged that petitioner
had tattoos on his face and arm that might be associated with the Norteños 14 gang.
¶9 As the argument continued, Pedroza told the victim “let’s go,” and they left the
house together and walked toward a train station. After leaving the house, Pedroza
realized that Rodriguez and petitioner were following them. Pedroza heard
Rodriguez say “14 something.” Petitioner was also talking, but Pedroza could not
understand what he was saying. Eventually, Rodriguez and petitioner caught up to
Pedroza and the victim. Pedroza saw petitioner and Rodriguez repeatedly hit the
victim. Pedroza also saw either Rodriguez or petitioner holding a “shiny” object
that Pedroza thought may have been a screwdriver, but Pedroza could not remember
who was holding the object.
¶ 10 At some point, Pedroza intervened as the other two men attacked the victim.
Pedroza grabbed petitioner and asked him what he was doing. After Rodriguez hit
the victim one more time, both petitioner and Rodriguez ran away together. The
victim fell to the ground and lost consciousness. Pedroza called 911.
¶ 11 On cross-examination, Pedroza conceded that he and petitioner consumed
alcohol that night. Pedroza acknowledged that he was unaware of any prior fights
between petitioner and the victim.
¶ 12 Several police and paramedics responded to Pedroza’s 911 call, and they
located the victim lying unconscious in a parking lot. Pedroza was also present and
reported the details of the attack. Paramedics discovered that the victim sustained
multiple stab wounds, including a puncture wound that was later revealed to have
punctured his heart. After the victim was stabilized, medical personnel transported
-3-
him to a hospital, where he was treated for three stab wounds to his left collarbone,
left armpit, and right lower abdomen.
¶ 13 Pedroza provided police officers with a description of Rodriguez and petitioner,
including information that both men were wearing white shirts. Pedroza also told
officers the direction that they ran after the attack.
¶ 14 Woodstock police officer Daniel Henry testified that, after he received a radio
description of the assailants, he saw petitioner, who matched Pedroza’s description,
standing near the front door of 672 Brink Street. Petitioner was holding two red gas
cans. Petitioner ran inside the residence when he saw Officer Henry’s marked
police car. Officer Henry knocked on the door, and he was let inside by the owner,
James Kelley.
¶ 15 After entering the house, Officer Henry and his partner located petitioner lying
on a couch under a blanket. Petitioner’s white shirt and shoes were muddy, he was
sweating, and he appeared out of breath. As the officers arrested petitioner, he
became aggressive and started yelling references to the Norteños 14 gang.
Petitioner also threatened to kill the officers and their families. The officers arrested
petitioner and removed him from the residence.
¶ 16 When petitioner was brought outside, Pedroza, who was brought to the scene
by another police officer, positively identified petitioner as one of the victim’s
attackers. Pedroza later identified Rodriguez as the second assailant in a photo array
at the police station.
¶ 17 James Kelley testified that he lived with his girlfriend at 672 Brink Street, the
residence where petitioner and Rodriguez reportedly argued with the victim. When
Kelley arrived home the night of June 9, 2008, Rodriguez and another man were at
his house. Kelley went to bed about 12:30 a.m. but was awakened in the early
morning hours to the sounds of “banging” on his front door. Kelley saw petitioner
“pacing” inside his house. Kelley did not recognize petitioner and did not know
why petitioner was in his house. Petitioner asked Kelley not to open the door.
Kelley ignored petitioner’s request and told petitioner to sit down. Kelley testified
that petitioner laid down on a couch and covered himself with a blanket.
-4-
¶ 18 Kelley opened the door to his residence and saw police officers standing
outside. Kelley also saw two red gas cans outside his front door that he did not
remember placing there. Kelley allowed the officers to enter his house and gave
consent to their search of the house. After police officers entered, Kelley heard
petitioner “freaking out on [the] couch[,] screaming things in Spanish, [and]
threatening the police.” Kelley described petitioner as “very aggressive” and heard
him “yelling out some kind of gang thing about Nortenos.”
¶ 19 On cross-examination, Kelley admitted that he was friends with Rodriguez and
that on prior occasions he gave Rodriguez permission to “bring people to [Kelley’s]
house and party.” Kelley denied that petitioner was ever at his house prior to the
incident.
¶ 20 Kelley’s girlfriend, Katrina Cardella, testified and generally corroborated
Kelley’s testimony. Cardella heard petitioner make several threats to police
officers, their wives, and their children. Petitioner also threatened the lives of
Kelley and Cardella. Cardella further testified that petitioner “kept yelling gang
slogans about the 14s and how he was a gang banger and they never die.”
¶ 21 The victim testified at trial, largely corroborating Pedroza’s account of the
events preceding the incident. Specifically, the victim confirmed that, prior to being
attacked by petitioner and Rodriguez, he argued with them “about Nortenos and
Kings.” The victim knew petitioner was a member of the Norteños 14 street gang.
The victim remembered being initially “attacked” by both petitioner and Rodriguez
and that both men were “punching” his body. The next thing the victim remembered
was waking up in a hospital.
¶ 22 On cross-examination, the victim denied being a member of a street gang. The
victim conceded that he and petitioner never fought before and described petitioner
as “basically” his best friend prior to the incident. The victim acknowledged that
he and Pedroza were drinking alcohol prior to the incident. The victim confirmed
that he did not see petitioner or Rodriguez holding a knife during the attack and he
did not know who stabbed him.
¶ 23 The State introduced the testimony of two Crystal Lake police officers with
experience in street gangs, Officer Paul Olazak and Officer Dimitri Boulahanis.
Officer Olazak testified that petitioner admitted being a member of the Norteños 14
-5-
gang, a rival of the Latin Kings gang. Similarly, Officer Boulahanis testified that
he was aware petitioner was a member of the Norteños 14 gang. Officer Boulahanis
stated that petitioner had four gang tattoos, wore the colors of the Norteños 14 gang,
and used hand gestures associated with that gang. Officer Boulahanis testified that
he had observed the victim wearing the colors of the Latin Kings gang and
socializing with known Latin Kings gang members, although the victim denied any
membership in that gang.
¶ 24 The State introduced a knife that police officers recovered from the grass
outside the residence at 672 Brink Street. When recovered, the knife had grass on
it but no blood. No fingerprints were recovered from the knife. The parties
stipulated that two suspected bloodstains on petitioner’s watch and shoe could not
be matched to the victim’s DNA profile.
¶ 25 The defense offered certified statements of conviction to impeach two of the
State’s witnesses. Kelley had a conviction for theft by deception under $300, and
the victim had a conviction for aggravated driving under the influence. After the
court allowed the publication of those prior convictions to the jury, the defense
rested.
¶ 26 Relevant to the issue in this appeal, during the jury instruction conference and
before closing arguments, the State asked the trial court to admonish petitioner of
his right to testify. The following exchange occurred:
“THE COURT: I will. Thank you, Miss Kelly. Sir, your attorney has just
rested the defense case. Have you discussed with [defense counsel] your right
to testify?
[PETITIONER]: Yes, ma’am.
THE COURT: Sir, is it your choice not to testify?
[PETITIONER]: Yes, ma’am.
THE COURT: You discussed that thoroughly with [defense counsel]?
[PETITIONER]: Yes.
-6-
THE COURT: You understand that the right to testify is a decision that you
and you alone have the right to make but you should make that decision only
after discussing it with your attorney. You have done that?
[PETITIONER]: Yes, ma’am.
THE COURT: It’s your choice not to testify?
[PETITIONER]: Yes, ma’am.
THE COURT: Thank you.
[DEFENSE COUNSEL]: I have discussed it at great length with him and
it’s his decision and I respect it.
THE COURT: Okay. The record will so reflect. Thank you.”
¶ 27 During closing arguments, the State argued that the undisputed evidence,
including the victim’s own testimony, showed that petitioner actively participated
with Rodriguez in the attack on the victim. The State further argued that, even if
petitioner did not stab the victim during the attack, petitioner was legally
accountable for Rodriguez’s conduct during the attack. In addition, the evidence
demonstrated that the motive for the attack was a dispute over rival street gangs.
Finally, the State maintained that petitioner’s behavior after the attack was
indicative of his guilt.
¶ 28 Defense counsel argued that the case depended on whether the jury believed
that Pedroza and the victim truly knew whether petitioner was trying to help or hurt
the victim during the incident. Counsel stressed that there was no forensic evidence
connecting petitioner to the crime—no DNA, no fingerprints, no blood, and no
photographs. Counsel further argued that the State’s proposed gang-related motive
for the attack did not make sense because the victim and petitioner were friends for
years and were “well aware” of each other’s respective gang connections prior to
the incident. Ultimately, counsel asserted that the group was “drinking way too
much and I don’t think anyone knows what took place that night.”
¶ 29 The jury returned guilty verdicts on all counts. The trial court entered judgment
on the attempted murder conviction and sentenced petitioner to 16 years of
imprisonment.
-7-
¶ 30 On direct appeal, petitioner argued that his counsel was ineffective because
counsel “elicited inadmissible other crimes evidence that was similar to the charged
offense and also false” and failed to “pursue a ruling on the State’s motion to
introduce gang evidence or renew his objection to the admission of such evidence.”
The appellate court rejected both claims and affirmed the trial court’s judgment in
a summary order. People v. Knapp, No. 2-09-0089 (2010) (unpublished summary
order pursuant to Illinois Supreme Court Rule 23(c)).
¶ 31 B. Postconviction Proceedings
¶ 32 On November 19, 2015, petitioner filed a pro se postconviction petition that is
the subject of the instant appeal. In that petition, petitioner raised claims of actual
innocence, involuntary waiver of his right to testify, and ineffective assistance of
appellate counsel. Petitioner attached his affidavit and more than 80 pages of
supporting exhibits, including various documents and transcripts related to his
criminal case and the associated police investigation.
¶ 33 Relevant to this appeal, petitioner argued that the “waiver of his right to testify
at trial was not knowing and/or [sic] voluntary where defense counsel failed to
inform petitioner that counsel was in possession of police reports and other
evidence corroborative of petitioner’s version of the relevant events.” According to
petitioner, he had several conversations with defense counsel about his right to
testify. Petitioner told his counsel that the argument with the victim was not about
gangs but instead was over a girl named Jackie Gutierrez that Rodriguez had
insulted. Petitioner also claimed that he met Rodriguez only once before that night
and he did not know Rodriguez was in a gang. Petitioner told his counsel that he
saw blood on Rodriguez’s pants and that petitioner moved the two gas cans after
Rodriguez attempted to burn a bloody shirt. In response, petitioner’s counsel told
petitioner that this proposed testimony was not supported by independent evidence
and that petitioner’s denial of Rodriguez’s gang affiliation would open the door for
the State’s gang expert to testify.
¶ 34 In petitioner’s attached affidavit, he averred that the answers he gave during the
colloquy with the court on his right to testify were “the direct result and proximate
cause of my attorney’s representations to me that there must be corroborative
evidence supporting my testimony.” Petitioner denied that he was ever told by his
-8-
counsel or the court that he had an “absolute right to testify and the decision was
mine alone to make.” Lastly, petitioner attested that “[a]t no time was I made aware
by my attorney that he in fact possessed physical and circumstantial evidence
tending to support my intended testimony. Had I known such evidence existed, or
that my right to testify was not contingent on any extrinsic evidence, I never would
have waived my right to testify at trial.”
¶ 35 In January 2016, the circuit court summarily dismissed the petition, concluding
that petitioner’s claims were frivolous and patently without merit. Petitioner
appealed, challenging only the trial court’s determination that petitioner’s right-to-
testify claim was frivolous and patently without merit. The appellate court affirmed
summary dismissal, concluding that the record positively rebutted petitioner’s
claim. Alternatively, even if petitioner alleged the gist of a claim of constitutionally
deficient performance from trial counsel, the court reasoned that petitioner’s claim
still failed because petitioner did not sufficiently allege prejudice under Strickland
v. Washington,
466 U.S. 668
(1984).
2019 IL App (2d) 160162
, ¶¶ 1, 38, 42.
¶ 36 The dissenting justice argued that the majority erroneously applied heightened
postconviction standards to the trial court’s first-stage summary dismissal of the
petition and misconstrued petitioner’s claim on his right to testify. The dissent
argued that the record did not positively rebut petitioner’s claim because petitioner
relied on off-the-record conversations with counsel.
2019 IL App (2d) 160162
¶¶ 70-134 (McLaren, J., dissenting).
¶ 37 Petitioner filed a petition for leave to appeal pursuant to Illinois Supreme Court
Rules 315 (eff. July 1, 2018) and 612 (July 1, 2017). We allowed his petition.
¶ 38 II. ANALYSIS
¶ 39 On appeal, petitioner argues that the appellate court erred in affirming the
circuit court’s summary dismissal of his postconviction petition because it
erroneously applied “too stringent of a standard” and misunderstood the nature of
his right-to-testify claim by concluding that the claim was rebutted by the record.
We review de novo a circuit court’s dismissal of a postconviction petition. People
v. Allen,
2015 IL 113135
, ¶ 19.
-9-
¶ 40 We first address petitioner’s contention that the appellate court applied “too
stringent” of a standard to his petition. Specifically, petitioner argues that the
appellate court erroneously relied on two decisions that involved a second-stage
dismissal in its analysis of his claims, thereby showing that his petition “was
unfairly held to second-stage postconviction standards despite being dismissed at
the first stage.” Petitioner asks this court to reaffirm our prior precedent,
particularly our decision in People v. Hodges,
234 Ill. 2d 1
(2009), holding that at
the first stage of postconviction proceedings, the pleadings should be liberally
construed and the threshold for advancing to the second stage is low.
¶ 41 As petitioner notes, the appellate court majority cited two decisions involving
the second-stage dismissal of a postconviction petition for general standards
applicable to ineffective assistance of counsel claims. See
2019 IL App (2d) 160162
, ¶ 38 (citing People v. Domagala,
2013 IL 113688
, ¶ 36, and People v.
Coleman,
183 Ill. 2d 366
, 397 (1998)). We observe, however, that the appellate
court majority’s analysis also cited several applicable first-stage decisions,
including our decision in Hodges.
2019 IL App (2d) 160162
, ¶¶ 36-37.
¶ 42 The appellate court majority’s citation to two second-stage decisions does not
affect our analysis. As we have already observed, this court reviews de novo the
circuit court’s summary dismissal of a postconviction petition. Allen,
2015 IL 113135
, ¶ 19. We now consider the petitioner’s arguments on the substantive issue
in this case—whether the circuit court erred in determining that petitioner’s
allegation on his right to testify was frivolous and patently without merit.
¶ 43 The Post-Conviction Hearing Act provides a three-stage procedural mechanism
for a criminal defendant to challenge his or her conviction or sentence for violations
of federal or state constitutional rights. 725 ILCS 5/122-1 et seq. (West 2014);
People v. Hommerson,
2014 IL 115638
, ¶ 7. At the first stage, within 90 days after
the petition is filed and docketed, a circuit court shall dismiss a petition summarily
if the court determines it is “frivolous or is patently without merit.” 725 ILCS
5/122-2.1(a)(2) (West 2014); Allen,
2015 IL 113135
, ¶ 21.
¶ 44 Because most postconviction petitions are drafted by pro se petitioners, the
threshold for a petition to survive the first stage of review is low. Hodges,
234 Ill. 2d
at 9. Consequently, summary dismissal of a postconviction petition is warranted
in a limited number of situations. Allen,
2015 IL 113135
, ¶ 25.
- 10 -
¶ 45 Generally, a petition may be summarily dismissed as frivolous or patently
without merit at the first stage only “ ‘if the petition has no arguable basis either in
law or in fact’ ” or when the petition relies on “ ‘an indisputably meritless legal
theory or a fanciful factual allegation.’ ” Allen,
2015 IL 113135
, ¶ 25 (quoting
Hodges,
234 Ill. 2d
at 16-17). For purposes of summary dismissal, a meritless legal
theory is one completely contradicted by the record, while fanciful factual
allegations may be “ ‘fantastic or delusional.’ ” Allen,
2015 IL 113135
, ¶ 25
(quoting Hodges,
234 Ill. 2d
at 17).
¶ 46 A postconviction petition alleging ineffective assistance of counsel should not
be summarily dismissed if (1) it is arguable that counsel’s performance fell below
an objective standard of reasonableness and (2) it is arguable that the petitioner was
prejudiced. People v. Cathey,
2012 IL 111746
, ¶ 23 (citing Hodges,
234 Ill. 2d
at
17). Relevant here, it is settled that the decision whether to testify in one’s own
defense during a criminal trial is a fundamental constitutional right that belongs
solely to the defendant. People v. Medina,
221 Ill. 2d 394
, 403 (2006); People v.
Enis,
194 Ill. 2d 361
, 399 (2000); People v. Madej,
177 Ill. 2d 116
, 145-46 (1997).
The decision, however, should be made with the advice of counsel. People v. Smith,
176 Ill. 2d 217
, 235 (1997). To preserve the right to testify, a criminal defendant is
required to make a “contemporaneous assertion” of that right.
Enis, 194 Ill. 2d at 399
;
Smith, 176 Ill. 2d at 236
; People v. Thompkins,
161 Ill. 2d 148
, 177-78 (1994);
People v. Brown,
54 Ill. 2d 21
, 24 (1973).
¶ 47 Petitioner maintains that his postconviction petition was sufficient to survive
summary dismissal because it “presented the gist of a constitutional claim that
defense counsel was ineffective for providing bad advice” on his right to testify.
Petitioner contends that it is arguable his counsel’s performance fell below an
objective standard of reasonableness because counsel incorrectly told petitioner
that he could not testify unless there was corroborating evidence to support his
testimony. Similarly, petitioner asserts that it was arguable he was prejudiced by
counsel’s bad advice because his proposed testimony arguably would have attacked
the credibility of the victim and Pedroza and the State’s theory of the gang-related
motive for the attack.
¶ 48 Petitioner asserts that his failure to make a contemporaneous assertion of his
right to testify does not defeat his claim at the first stage of postconviction
- 11 -
proceedings. According to petitioner, because the petition alleged that he had
several off-the-record conversations with his counsel, “it can be inferred that he did
indeed make a contemporaneous assertion to counsel, even if he did not have the
legal knowledge to explicitly phrase it as such in his postconviction petition.”
¶ 49 The State responds that summary dismissal was appropriate because petitioner
failed to present the gist of a claim that counsel violated his right to testify when
petitioner failed to make a contemporaneous assertion of his right to testify. The
State also argues that the trial court asked petitioner on the record about his decision
to relinquish his right to testify and petitioner affirmed that he chose not to testify,
positively rebutting the claims in his petition. Alternatively, the State contends that
petitioner failed to allege sufficiently that trial counsel’s performance was arguably
deficient. In addition, the State asserts that petitioner failed to show that any
deficiency of counsel arguably prejudiced petitioner when the evidence of his guilt
was overwhelming and his proposed testimony did nothing more than provide an
alternative motive for the attack.
¶ 50 Because we find it dispositive, we first address whether the record rebuts
petitioner’s allegations on his right to testify. We agree with petitioner’s general
proposition that a pro se petitioner is not required to use precise legal language
alleging a “contemporaneous assertion of the right to testify” to survive first-stage
summary dismissal. Our postconviction jurisprudence, however, holds that
summary dismissal is warranted when the record positively rebuts the allegations.
Allen,
2015 IL 113135
, ¶ 25 (citing Hodges,
234 Ill. 2d
at 17).
¶ 51 Here, the record contains nothing to suggest that petitioner ever alerted the trial
court of his desire to testify, that he had any questions about his right to testify, or
that he otherwise was unsure about waiving his right to testify. See Smith,
176 Ill. 2d
at 234 (observing that “a vast majority of the states considering this question
have held that a defendant’s waiver of his right to testify is presumed if *** he fails
to testify or notify the court of his desire to do so”). Petitioner did not express any
indication that he wanted to testify when the circuit court admonished him of that
right at the request of the State prior to closing arguments.
¶ 52 Petitioner acknowledges that the trial court admonished him on the record of
his right to testify. Petitioner asserts, however, that those admonishments do not
rebut his postconviction claim that trial counsel’s incorrect advice rendered
- 12 -
petitioner’s decision not to testify involuntary. Similar to the dissenting justice’s
position, petitioner argues that “[j]ust because [his] off-record claims were not
supported by on-record evidence does not mean that they were rebutted” for
purposes of postconviction proceedings. We disagree.
¶ 53 Critically, the record demonstrates that petitioner not only understood his right
to testify but that it was petitioner’s decision not to testify. See
Enis, 194 Ill. 2d at 399
(“The decision whether to take the witness stand and testify in one’s own behalf
ultimately belongs to the defendant.” (citing
Thompkins, 161 Ill. 2d at 177
)). The
circuit court admonished petitioner that “the right to testify is a decision that you
and you alone have the right to make but you should make that decision only after
discussing it with your attorney.” Petitioner immediately confirmed that it was his
decision not to testify. Trial counsel also confirmed on the record that he discussed
the matter “at great length” with petitioner and that petitioner made the decision not
to testify.
¶ 54 Even taking petitioner’s allegations as true and construing them liberally (Allen,
2015 IL 113135
, ¶ 25), the alleged off-the-record conversations with counsel on
petitioner’s right to testify occurred before the circuit court’s admonishments. After
the court’s admonishments, petitioner confirmed on the record that the decision not
to testify was his alone. See, e.g., People v. Cleveland,
2012 IL App (1st) 101631
,
¶ 65 (explaining that, “[a]s with many constitutional rights that may be waived, it
is incumbent upon the defendant to assert his right to testify such that his right can
be vindicated during the course of the trial”). Nothing in our postconviction
jurisprudence allows, let alone requires, a reviewing court to ignore the record. In
our view, petitioner’s responses during the trial court’s admonishments
unequivocally rebut his allegations that his decision not to testify was involuntary
or based on allegedly erroneous advice from counsel.
¶ 55 We acknowledge, as petitioner directs to our attention, that the Seventh Circuit
Court of Appeals has commented on the appellate court decision in this case.
Specifically, in a footnote the Seventh Circuit stated that
“we are troubled by the obligation that Illinois caselaw appears to impose upon
a defendant to contemporaneously assert a right to testify in circumstances
where defense counsel has just silenced the defendant. Perhaps the Illinois
Supreme Court will find occasion to take another look at its approach when it
- 13 -
considers Knapp later this term.” Hartsfield v. Dorethy,
949 F.3d 307
, 315 n.5.
(7th Cir. 2020).
¶ 56 Respectfully, we find those concerns inapplicable here. In Hartsfield, Hartsfield
and his mother both alleged that Hartsfield communicated his desire to testify and
counsel disagreed and said he would not put Hartsfield on the stand. Counsel
assured Hartsfield that he would get his chance to speak when the trial judge
admonished him on the right to testify, but the trial court never gave Hartsfield any
admonishments on his right to testify. Later, when Hartsfield attempted to assert his
right to testify on the record and in open court, he claimed that counsel
“ ‘shushed’ ” him and prevented Hartsfield from expressing his desire to testify.
(Emphasis added.)
Hartsfield, 949 F.3d at 315
. None of those circumstances are
present here.
¶ 57 It is worth noting that Hartsfield recognized there is not settled United States
Supreme Court precedent on the preservation of a defendant’s right to testify at his
or her criminal trial.
Hartsfield, 949 F.3d at 316
. In fact, the Seventh Circuit cited
favorably the First Circuit’s determination that “ ‘the [United States] Supreme
Court has never articulated the standard for assessing whether a criminal defendant
has validly waived his right to testify or determined who has the burden of
production and proof under particular circumstances.’ ”
Hartsfield, 949 F.2d at 316
(quoting Jenkins v. Bergeron,
824 F.3d 148
, 153 (1st Cir. 2016)). Necessarily, then,
we adhere to settled Illinois law on the matter.
¶ 58 In summary, the record in this case contains not even the slightest suggestion
that petitioner was hesitant or unsure of his decision not to testify or otherwise
wished to exercise his right to testify. Instead, the record demonstrates that the trial
court confirmed that petitioner consulted with counsel on his decision whether to
testify, petitioner understood that the decision whether to testify was his alone, and
then petitioner chose not to testify. On this record, we agree with the appellate court
that summary dismissal was warranted because petitioner’s postconviction
allegations are positively rebutted by the record and, therefore, without merit. Allen,
2015 IL 113135
, ¶ 25 (citing Hodges,
234 Ill. 2d
at 17).
¶ 59 III. CONCLUSION
- 14 -
¶ 60 For the reasons stated, we conclude that the circuit court did not err in
summarily dismissing petitioner’s postconviction petition. We therefore affirm the
appellate court’s judgment that reached the same conclusion.
¶ 61 Affirmed.
¶ 62 CHIEF JUSTICE ANNE M. BURKE, dissenting:
¶ 63 A majority of this court affirms the appellate court judgment, which affirmed
the circuit court’s summary dismissal of the pro se postconviction petition brought
by petitioner, Justin Knapp. In reaching this result, the majority fundamentally
misinterprets petitioner’s postconviction claim. Accordingly, I respectfully dissent.
¶ 64 Petitioner filed a pro se postconviction petition, alleging that he did not
voluntarily relinquish his right to testify at his trial. In support, petitioner provided
an affidavit in which he asserted that counsel misled him by misstating the law, i.e.,
telling him that he could not testify if he did not have extrinsic evidence supporting
his proposed testimony. In addition, petitioner averred in his affidavit that counsel
failed to tell him that certain evidence existed that would have supported
petitioner’s proposed testimony, thus making counsel’s advice both legally and
factually inaccurate. The circuit court summarily dismissed the petition, and the
appellate court affirmed, with Justice McLaren dissenting.
2019 IL App (2d) 160162
, ¶ 68.
¶ 65 A majority of this court affirms. The majority holds that summary dismissal
was warranted because the record positively rebuts petitioner’s allegations. The
majority states, “the record contains nothing to suggest that petitioner ever alerted
the trial court of his desire to testify, that he had any questions about his right to
testify, or that he otherwise was unsure about waiving his right to testify.” Supra
¶ 51.
¶ 66 According to petitioner’s postconviction petition, the reason petitioner told the
trial court that he had no questions about his right to testify is because his attorney
gave him bad advice. To merely state that petitioner said he had no questions about
testifying—which is all the majority does here—is to completely miss the point of
- 15 -
petitioner’s contention. Stated otherwise, the majority has concluded that, no matter
how inaccurate or ill-informed an attorney’s advice may be, it can have no effect
on the voluntariness of a defendant’s decision to testify, so long as the defendant
tells the trial court that he has no questions about testifying. I do not think this is a
reasonable result.
¶ 67 In a lengthy and thorough dissent in the appellate court Justice McLaren
explained why the analysis adopted by the majority here is flawed. Because
petitioner’s postconviction petition was dismissed at the first stage, his petition only
needed to present the gist of a constitutional claim, which is a low threshold,
“ ‘requiring only that the petitioner plead sufficient facts to assert an arguably
constitutional claim.’ People v. Brown,
236 Ill. 2d 175
, 184 (2010).” 2019 IL App
(2d) 160162 ¶ 73 (McLaren, J., dissenting). Noting that “[i]ncomplete or inaccurate
information given to a defendant regarding his right to testify ‘ “is arguably a factor
in consideration of whether counsel was ineffective.” ’
Id. ¶ 91
(quoting People v.
Lester,
261 Ill. App. 3d 1075
, 1079 (1994), quoting People v. Nix,
150 Ill. App. 3d 48
, 51 (1986)),” the dissent concluded that “petitioner pled sufficient facts to assert
an arguably constitutional claim (see
Brown, 236 Ill. 2d at 184
) such that the
petition was neither frivolous nor [patently] without merit.”
Id. I
agree with the
analysis and conclusions reached in Justice McLaren’s dissent and adopt it in its
entirety. Accordingly, I would hold that the trial court’s dismissal should be
reversed and the cause remanded for second-stage proceedings.
¶ 68 JUSTICE NEVILLE joins in this dissent.
¶ 69 JUSTICE NEVILLE, dissenting:
¶ 70 I join in Chief Justice Burke’s dissent and agree that Justice McLaren’s dissent
correctly analyzes and resolves the first-stage postconviction question presented in
this case. I write separately to restate and highlight the well-settled rule that at the
first stage of postconviction proceedings, a pleading review stage, the trial court is
limited to examining the pleadings to determine whether the allegations in the
petition allege a constitutional infirmity or denial of rights that would necessitate
relief under the Act. See People v. Robinson,
2020 IL 123849
, ¶¶ 42, 45; see also
People v. Allen,
2015 IL 113135
, ¶ 24; People v. Brown,
236 Ill. 2d 175
, 184
(2010); People v. Collins,
202 Ill. 2d 59
, 65-66 (2002). As explained in Robinson,
- 16 -
at the pleading stage the trial court is precluded from making factual and credibility
determinations. Robinson,
2020 IL 123849
, ¶ 45. Therefore, at the first stage of
postconviction proceedings, the trial court cannot consider the merits of substantive
issues raised in the petition.
Id. Accordingly, I join
in this dissent because the
majority ignored the first-stage postconviction procedural rules delineated in
Illinois Supreme Court jurisprudence.
¶ 71 JUSTICE MICHAEL J. BURKE took no part in the consideration or decision
of this case.
- 17 - |
4,639,148 | 2020-12-03 15:03:14.917068+00 | null | http://www.illinoiscourts.gov/Opinions/SupremeCourt/2020/124417.pdf |
2020 IL 124417
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 124417)
THE PEOPLE OF THE STATE OF ILLINOIS ex rel. LISA MADIGAN, Attorney General,
Appellant, v. STATELINE RECYCLING, LLC, et al. (Elizabeth Reents, Appellee).
Opinion filed December 3, 2020.
JUSTICE NEVILLE delivered the judgment of the court, with opinion.
Chief Justice Anne M. Burke and Justices Kilbride, Garman, Karmeier, and
Theis concurred in the judgment and opinion.
Justice Michael J. Burke took no part in the decision.
OPINION
¶1 The Illinois Attorney General and the Illinois Environmental Protection Agency
(IEPA) initiated this civil enforcement action, alleging several violations of the
Environmental Protection Act (Act) (415 ILCS 5/1 et seq. (West 2016)) with regard
to a parcel of property located in Rockford, Illinois. The complaint was brought
against defendants Elizabeth Reents, as the owner of the subject property, and
Stateline Recycling, LLC, a limited liability company that allegedly conducted an
operation involving the dumping of construction and demolition debris on the
property. Pursuant to Illinois Supreme Court Rule 214(a) (eff. July 1, 2014), the
Attorney General initiated pretrial discovery seeking to inspect the subject
property. Reents refused to permit the inspection, and the circuit court of
Winnebago County granted the Attorney General’s motion to compel her to comply
with the Rule 214(a) inspection request. After Reents asserted a good-faith
objection and respectfully refused to comply with the discovery order, the circuit
court held her in contempt so that she could file an appeal.
¶2 The appellate court reversed, holding that fourth amendment principles must be
considered because the party requesting the inspection in this case was the
government.
2018 IL App (2d) 170860
, ¶¶ 39-40. The appellate court vacated the
discovery order and remanded the case to the circuit court for application of fourth
amendment principles in ruling on the Attorney General’s motion to compel.
Id. ¶¶ 69-70.
We allowed the Attorney General’s petition for leave to appeal. Ill. S. Ct.
R. 315(a) (eff. July 1, 2018). For the reasons that follow, we vacate the judgment
of the appellate court and remand to that court for further proceedings.
¶3 I. BACKGROUND
¶4 The subject matter of this environmental enforcement action is a parcel of
property consisting of approximately 10 acres, which is locked and gated and
located at 2317 Seminary Street in Rockford, Illinois. Reents became the owner of
the site when she obtained a tax deed to the property on April 8, 2015.
¶5 In January 2017, the Attorney General, on her own motion and at the request of
the IEPA, on the behalf of the People of the State of Illinois, filed this civil
enforcement action against defendants for violations of the Act (415 ILCS 5/1 et
seq. (West 2016)). 1 The complaint, as finally amended, asserted several counts
against both Reents and Stateline Recycling, LLC, including allegations of open
dumping of waste without a permit; disposal, storage, and abandonment of waste
at an unpermitted facility; open dumping of waste resulting in litter and the
1
Attorney General Kwame Raoul succeeded Attorney General Lisa Madigan in January 2019
and pursues the appeal before this court. See 735 ILCS 5/2-1008(d) (West 2018).
-2-
deposition of construction and demolition debris; and failure to pay clean
construction and demolition debris fill operation fees.
Id. §§ 21(a), (e),
(p),
22.51(a). The Attorney General sought injunctive relief as well as a civil penalty of
$50,000 for the violation of the Act, an additional $10,000 for each day the violation
continues, and costs pursuant to the Act.
Id. §§ 42, 43.
¶6 The complaint alleged that Stateline Recycling, LLC, and/or its corporate
predecessor, Busse Development & Recycling, Inc., conducted an operation for the
dumping of construction and demolition debris at the site. According to the
complaint, an inspection of the site by an IEPA inspector on July 29, 2015, showed
mixed piles consisting of concrete, brick, painted cinder blocks, asphalt, and soil.
Some of the mixed materials were placed above the ground. The inspection also
revealed that there was no indication of recycling the material, although a Stateline
Recycling, LLC, representative indicated an intention to recycle it. The complaint
further alleged that at a follow-up inspection on July 14, 2016, the IEPA inspector
found the gate to the site unlocked and open, although no personnel were present.
From his vantage point by the front gate, the inspector observed the continued
presence of the same materials that were noted in the July 2015 inspection.
¶7 In April 2017, the Attorney General issued Reents a discovery request pursuant
to Illinois Supreme Court Rule 214(a) (eff. July 1, 2014), seeking access to the site
to perform an inspection. In particular, the Rule 214(a) discovery notice requested
that Reents permit the following:
“[a]llow representatives of the Illinois Attorney General access to the real
property controlled and/or owned by Reents located at 2317 Seminary Street,
Rockford, Winnebago County, Illinois, including any buildings, trailers, or
fixtures thereupon. Plaintiff requests access on May 5, 2017 at 11 a.m., or at
such other time as may be agreed between the parties. At this inspection,
representatives of the Illinois Environmental Protection Agency may also
accompany Attorney General representatives and conduct an inspection
pursuant to their authority under 415 ILCS 5/4 (2014).”
¶8 In response, Reents objected to the site inspection, claiming that it improperly
sought to circumvent the constitutional requirement for a warrant and violated the
fourth amendment of the United States Constitution (U.S. Const., amend. IV) and
article I, section 6, of the Illinois Constitution (Ill. Const. 1970, art. I, § 6).
-3-
¶9 The Attorney General attempted to resolve the discovery dispute during the
spring and summer of 2017 pursuant to Illinois Supreme Court Rule 201(k) (eff.
July 1, 2014), but Reents refused to permit access to the site. In July 2017, the
Attorney General filed a motion to compel Reents to allow her representatives
access to the site. In support, the Attorney General explained that, because the site
was the subject matter of the action, the nature and condition of the site were
relevant to the alleged violations of the Act and the site was subject to inspection
under this court’s rules. The Attorney General argued that her representatives
should be allowed access to the site, including any buildings, trailers, or fixtures for
inspection under Rule 214(a). The Attorney General also argued that IEPA
representatives should be allowed to accompany her representatives during the
inspection because of its own independent statutory authority to conduct
inspections of the site (415 ILCS 5/4(c) (West 2016)) and to monitor compliance
with the Act (id. § 4(d)). The Attorney General further noted that certain industries
have a history of government oversight and that no reasonable expectation of
privacy could exist for an owner of property used in such industries. According to
the Attorney General, landfills are a highly regulated commercial activity, and
inspections by the IEPA can be expected.
¶ 10 Reents opposed the motion to compel and again contended that the inspection
request constituted an attempt to use Rule 214(a) to circumvent the probable cause
and warrant requirements of the fourth amendment. Reents also disputed that she
was engaged in a highly regulated commercial activity because she had recently
obtained title to the property through a tax purchase and there was no evidence that
she had conducted or permitted the conduct of regulated activities upon her
property.
¶ 11 In reply, the Attorney General reasoned that Rule 214(a)’s plain language
applies to all parties in civil litigation, without excepting a government litigant. The
Attorney General maintained that the civil discovery rules, including their
relevance, reasonableness, and judicial oversight requirements, satisfy
constitutional concerns.
¶ 12 Following a hearing at which Reents acknowledged that the site had been a
landfill in the past, the circuit court granted the Attorney General’s motion to
compel her compliance with the 214(a) request to inspect the site. The circuit court
-4-
reasoned that Rule 214 applies to all civil cases and permits any party to request
access to real estate for inspection when it is relevant to the subject matter of the
litigation. The circuit court determined that the subject matter of the litigation is the
property currently owned by Reents and that the alleged violations of the Act
pertained to the property. The court further explained that, because this was a civil
case and not a criminal case, the fourth amendment posed no impediment to the
Attorney General’s right to inspect the site pursuant to Rule 214(a).
¶ 13 Based on Reents’s good-faith objection to the order compelling her to comply
with the inspection notice, the circuit court subsequently held her in contempt and
imposed a monetary sanction of $100 so that she could appeal the issue. The circuit
court stayed the discovery order pending appeal.
¶ 14 The appellate court reversed the circuit court’s discovery order, vacated the
contempt order, and remanded the case for further proceedings.
2018 IL App (2d) 170860
, ¶ 73.
¶ 15 Initially, the appellate court took judicial notice of the fact that the Attorney
General successfully obtained an administrative warrant pursuant to section 4 of
the Act, authorizing IEPA representatives to enter the site to “ ‘observe, inspect,
and photograph the Site, and all operations, processes, structures and materials
upon said Site.’ ”
Id. ¶ 19
.
The appellate court also acknowledged that the Attorney
General was not relying on that portion of the civil discovery order.
Id. ¶ 16
The appellate court explained that, although Rule 214(a) allows the inspection
of property relevant to the subject matter and the site is relevant to this action,
relevance did not set the bar here.
Id. ¶¶ 42-43.
The appellate court reasoned that,
though civil in form, this action amounted to a quasi-criminal proceeding since the
statutory scheme allows for substantial civil penalties, injunctive relief, and,
although not currently sought in this case, criminal penalties and forfeiture.
Id. ¶ 43. ¶ 17
The appellate court held that the civil discovery rules do not satisfy the core
protection of the fourth amendment.
Id. ¶ 54.
The court further held that fourth
amendment protection applies to Reents’s privacy interest in the property and to
the government’s request for access to the site.
Id. -5- ¶ 18
Relying on New York v. Burger,
482 U.S. 691
, 702-03 (1987), the appellate
court determined that a warrantless administrative inspection of a closely regulated
business is reasonable only if (1) there is a substantial government interest
underlying the regulatory scheme pursuant to which the inspection is made, (2) the
inspection is necessary to further the regulatory scheme, and (3) the regulatory
scheme sets forth sufficient “ ‘certainty and regularity’ ” to provide the business
owner with a constitutionally adequate substitute for a warrant.
2018 IL App (2d) 170860
, ¶ 64. The appellate court concluded that the circuit court erred in failing to
consider fourth amendment principles and Burger’s framework in crafting the
discovery order.
Id. ¶ 19
Lastly, the court explained that Reents had forfeited any constitutional
challenge to section 4(d)(1) of the Act because she had not raised the challenge in
the circuit court.
Id. ¶ 68. ¶ 20
This court granted the Attorney General’s petition for leave to appeal. Ill. S. Ct.
R. 315(a) (eff. July 1, 2018).
¶ 21 II. ANALYSIS
¶ 22 A. Statutory Overview
¶ 23 The purpose of the Act is to establish a unified, statewide program,
supplemented by private remedies, to restore, protect, and enhance the quality of
the environment and to assure that adverse effects upon the environment are fully
considered and borne by those who cause them. The terms and provisions of this
Act are liberally construed so as to effectuate the purposes of the Act, and to the
extent that the Act prescribes criminal penalties, it is construed in accordance with
the Criminal Code of 2012 (720 ILCS 5/1-1 et seq. (West 2016)). 415 ILCS 5/2
(West 2016).
¶ 24 The IEPA has authority to conduct a program of continuing surveillance and of
regular or periodic inspection of actual or potential refuse disposal sites. 415 ILCS
5/4(c) (West 2016). In accordance with constitutional limitations, the Agency has
authority to enter at all reasonable times upon any private or public property for the
-6-
purpose of inspecting and investigating to ascertain possible violations of this Act.
Id. § 4(d)(1). ¶
25 The Act also provides that any person that violates any provision of the Act
shall be liable for a civil penalty not to exceed $50,000 for the violation and an
additional civil penalty not to exceed $10,000 for each day during which the
violation continues.
Id. § 42(a). In
addition, although not sought in this case, the
criminal penalty for violation of this Act is a Class A misdemeanor (id. § 44), and
the Act provides for forfeiture of profits, benefits, or other property (id. § 44.1(a)).
¶ 26 B. Governing Civil Discovery Rules
¶ 27 In Illinois, discovery in civil actions is governed by Illinois Supreme Court
Rules 201 through 224. Ill. S. Ct. Rs. Art. II, part E. Rule 201 and related rules,
which control the specific discovery methods, form a comprehensive scheme for
fair and efficient discovery, with judicial oversight to protect litigants from
harassment. Kunkel v. Walton,
179 Ill. 2d 519
, 531 (1997).
¶ 28 Relevant here, the plain language of Rule 214(a) includes four distinct and
critical aspects:
(1) the rule applies to any party and makes no distinction for government
litigants;
(2) it specifically allows for the inspection of real estate;
(3) it permits such inspection whenever the nature, contents, or condition of
the real estate is relevant to the subject matter of the action; and
(4) it requires that the request specify a reasonable time (with at least 28
days’ notice), along with the place and manner of the inspection. Ill. S. Ct. R.
214(a) (eff. July 1, 2014).
¶ 29 Rule 201 sets out several of the general principles regarding civil discovery. Ill.
S. Ct. R. 201 (eff. July 1, 2014). It addresses the scope for pretrial discovery and
provides that a party may obtain, by discovery, full disclosure regarding any matter
relevant to the subject matter involved in the pending action.
Id. -7- ¶ 30
Further, Rule 201 contains several provisions to prevent discovery abuse. Rule
201(c)(1) allows the entry of a protective order to deny, limit, condition, or regulate
discovery, as justice requires, to prevent unreasonable annoyance, expense,
embarrassment, disadvantage, or oppression. Ill. S. Ct. R. 201(c)(1) (eff. July 1,
2014). In addition, Rule 201(c)(2) provides that the circuit court, on its own
initiative, may supervise all or any part of any discovery procedure. Ill. S. Ct. R.
201(c)(2) (eff. July 1, 2014).
¶ 31 Rule 219(a) provides that, if a party refuses to comply with an inspection of real
property, the party serving the request may on like notice move for an order
compelling compliance with the request. Ill. S. Ct. R. 219(a) (eff. July 1, 2002). If
the court finds that the refusal or failure was without substantial justification, the
court shall require the offending party or deponent, or the party whose attorney
advised the conduct complained of, or either of them, to pay to the aggrieved party
the amount of the reasonable expenses incurred in obtaining the order, including
reasonable attorney fees.
Id. When appropriate, the
court may, by contempt
proceedings, compel obedience by any party to any order entered under these rules.
Ill. S. Ct. R. 219(c) (eff. July 1, 2002).
¶ 32 In the context of civil discovery, our rules provide certain safeguards by limiting
discovery to information that is relevant to the issues in the lawsuit. Ill. S. Ct. R.
201(b)(1) (eff. July 1, 2014). This court has recognized that the scope of
information considered relevant can be broad, including both evidence that would
be admissible at trial and information leading to discovery of admissible evidence.
Monier v. Chamberlain,
31 Ill. 2d 400
, 403 (1964). In addition, the relevance
requirement safeguards against “improper and abusive” discovery and acts as an
“independent constraint on discovery.”
Kunkel, 179 Ill. 2d at 533
. Further, the
discovery rules’ relevance and proportionality requirements ensure the
constitutional reasonableness of discovery orders.
Id. at 538
(observing that, in the
context of civil discovery, reasonableness is a function of relevance).
¶ 33 Civil discovery proceedings compel discovery within the judicial process under
the direction of the neutral circuit court judge, who ensures that a discovery request
and ensuing order comply with this court’s rules’ reasonable protections, after the
responding party has notice and an opportunity to be heard. See Illinois v. Krull,
480 U.S. 340
, 348 (1987). Whether the discovery order is too broad in scope is a
-8-
matter of discretion committed to the circuit court. People ex rel. General Motors
Corp. v. Bua,
37 Ill. 2d 180
, 191 (1967). Pursuant to our rules, the circuit court has
authority and responsibility to issue orders that will discourage abuse of the
discovery process. Ill. S. Ct. R. 201 (eff. July 1, 2014); see also Zagorski v. Allstate
Insurance Co.,
2016 IL App (5th) 140056
, ¶ 36.
¶ 34 C. Consideration of the Appellate Court’s Judgment
¶ 35 Initially, we observe that the only issue that was properly before the appellate
court was whether the circuit court’s discovery order constituted an abuse of
discretion. Yet, the appellate court did not resolve that question and, instead, held
that fourth amendment principles must be applied to its review of the discovery
order. Given the nature of the appellate court’s disposition and Reents’s arguments
before this court, we deem it necessary to clarify that the following questions are
not at issue in this case: (1) the constitutionality of section 4(d) of the Act (415
ILCS 5/4(d) (West 2016)), permitting warrantless inspections; (2) the propriety of
the administrative warrant issued to the IEPA, allowing inspection of the site;
(3) any inquiry as to the constitutionality of discovery pursuant to statute or an
administrative warrant that is issued outside of litigation; (4) any criminal liability
or penalties that could be available under the Act in a different case; and (5) the
constitutionality of our Rule 214(a) (Ill. S. Ct. R. 214(a) (eff. July 1, 2014)).
¶ 36 Although discovery orders are not final and, therefore, ordinarily are not
appealable, the correctness of a discovery order may be tested through contempt
proceedings where, as here, a party is found in contempt for refusing to comply.
Harris v. One Hope United, Inc.,
2015 IL 117200
, ¶ 6; Norskog v. Pfiel,
197 Ill. 2d 60
, 69 (2001); see also Ill. S. Ct. R. 304(b)(5) (eff. Feb. 26, 2010). Review of a
circuit court’s contempt finding requires review of the order upon which it was
based.
Norskog, 197 Ill. 2d at 69
. Discovery orders are typically reviewed for an
abuse of discretion.
Id. at 70. ¶ 37
The Attorney General argues, inter alia, that the appellate court erred in
deciding the appeal on constitutional grounds. In particular, the Attorney General
contends that, because the issue presented involves a civil discovery order that was
entered pursuant to our rules, the appellate court should have reviewed the order
for an abuse of discretion. We agree.
-9-
¶ 38 As this court has explained on numerous occasions, cases should be decided on
nonconstitutional grounds whenever possible, and constitutional issues should be
reached only as a last resort. The Carle Foundation v. Cunningham Township,
2017 IL 120427
, ¶ 34; see also People v. Melchor,
226 Ill. 2d 24
, 33-36 (2007); Wade v.
City of North Chicago Police Pension Board,
226 Ill. 2d 485
, 510 (2007); Mulay v.
Mulay,
225 Ill. 2d 601
, 607 (2007). Consequently, courts must avoid reaching
constitutional issues when a case can be decided on nonconstitutional grounds. The
Carle Foundation,
2017 IL 120427
, ¶ 34; see also People v. Hampton,
225 Ill. 2d 238
, 244 (2007). With this long-standing rule in mind, we consider whether the
appellate court acted properly in addressing Reents’s constitutional arguments. See
Melchor, 226 Ill. 2d at 34-36
.
¶ 39 As noted above, the sole issue presented by this appeal is whether the circuit
court’s discovery order compelling Reents to comply with the Attorney General’s
Rule 214(a) request to inspect the site constituted an abuse of discretion. The
appellate court acknowledged that such orders are reviewed for abuse of discretion
(
2018 IL App (2d) 170860
, ¶ 17) but did not address that question. Rather, the
appellate court ignored our established rule mandating avoidance of constitutional
questions where possible and proceeded directly to an analysis of whether the
discovery order violated Reents’s constitutional rights under the fourth amendment.
In concluding that the protections found in our civil discovery rules do not satisfy
the reasonableness standard when the government is the requesting party, the
appellate court effectively held that Rule 214(a) is unconstitutional but failed to
explain whether that rule is unconstitutional on its face or as applied to Reents. The
appellate court further failed to recognize that Reents had not challenged the
constitutionality of Rule 214.
¶ 40 Courts should not find our discovery rules unconstitutional when a particular
case does not require it. Reents has not disputed that the circuit court applied the
plain language of Rule 214(a) as written. Therefore, if she sought to argue that
application of Rule 214(a) violated her constitutional rights, she was required to
specifically challenge the rule itself—either on its face or as applied to her in this
case. But she has not done so. She did not assert that argument in the appellate
court, and she has not presented such a claim in this court. Indeed, she repeatedly
assured this court at oral argument that she was not asserting a constitutional
challenge to the rule.
- 10 -
¶ 41 In light of our long-standing rule that cases should be decided on
nonconstitutional grounds whenever possible, the appellate court should have
proceeded to review the discovery order for an abuse of discretion. First, the court
should have examined the Attorney General’s Rule 214(a) inspection notice to
ascertain whether it satisfied the explicit requirements of the rule. Second, the court
should have considered any specific objections asserted by Reents as to the scope,
timing, or manner of inspection. Lastly, the court should have addressed whether
the circuit court abused its discretion by failing to limit the request, enter a
protective order, or supervise the discovery to ensure that the Attorney General’s
inspection targeted only what was relevant to the subject matter of the litigation.
¶ 42 Given that Reents did not challenge the constitutionality of the rule, there was
absolutely no basis for the appellate court to reach any constitutional questions in
this case, and it was improper for the court to do so. Accordingly, we vacate the
appellate court’s judgment and remand the cause to the appellate court with
directions to address the nonconstitutional issue of whether the circuit court abused
its discretion.
¶ 43 As a final matter, we note the Attorney General’s contention that, because
Reents failed to assert any specific objection to the scope or timing of the Rule
214(a) inspection request, she has forfeited all such challenges and the circuit
court’s order can be affirmed on that ground. However, Rule 201(c) provides that
the circuit court can, on its own initiative, issue protective orders and supervise
discovery to prevent abuse. Ill. S. Ct. R. 201(c) (eff. July 1, 2014). Although
Reents’s primary contentions focus on alleged violations of her fourth amendment
rights, she argued, in the alternative, that the circuit court’s order constituted an
abuse of discretion. The appellate court should have addressed that
nonconstitutional issue. For this reason, we remand the case to the appellate court
for review of the circuit court’s order under the abuse-of-discretion standard.
¶ 44 III. CONCLUSION
¶ 45 For the foregoing reasons, we vacate the judgment of the appellate court and
remand the case to that court with directions that it review the circuit court’s
discovery order for an abuse of discretion.
- 11 -
¶ 46 Appellate court judgment vacated and remanded with directions.
¶ 47 JUSTICE MICHAEL J. BURKE took no part in the consideration or decision
of this case.
- 12 - |
4,639,149 | 2020-12-03 15:03:15.936459+00 | null | http://www.illinoiscourts.gov/Opinions/SupremeCourt/2020/125262.pdf |
2020 IL 125262
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 125262)
DALE GILLESPIE et al., Appellees, v. ROBERT EDMIER et al.
(East Manufacturing Corporation, Appellant).
Opinion filed December 3, 2020.
JUSTICE KILBRIDE delivered the judgment of the court.
Chief Justice Anne M. Burke and Justice Theis concurred in the judgment and
opinion.
Justice Karmeier specially concurred, joined by Justices Garman and Michael
J. Burke.
Justice Neville took no part in the decision.
OPINION
¶1 In this appeal, we address whether the circuit court of Cook County erroneously
granted summary judgment under section 2-1005(c) of the Code of Civil Procedure
(735 ILCS 5/2-1005(c) (West 2018)) in favor of defendant manufacturer, East
Manufacturing Corporation (East Manufacturing), in a strict liability action brought
by plaintiffs, Dale and Christine Gillespie. The appellate court reversed the grant
of summary judgment in favor of East Manufacturing and remanded for further
proceedings.
2019 IL App (1st) 172549
. We allowed East Manufacturing’s petition
for leave to appeal. Ill. S. Ct. R. 315(a) (eff. Oct. 1, 2019). We now affirm the
judgment of the appellate court and remand the cause for further proceedings.
¶2 BACKGROUND
¶3 Plaintiff Dale Gillespie worked as a truck driver for Barge Terminal. On
February 14, 2012, he was working on a dump trailer manufactured and sold by
defendant East Manufacturing and leased by Barge Terminal from defendant Trail
Quest, Inc. The dump trailer was loaded with mulch for a delivery. Using the front
cast iron side steps, Gillespie climbed on top of the dump trailer and lowered
himself into the trailer to rake and level the mulch. After leveling the mulch, he
turned to climb down the trailer using the front side steps. Gillespie crawled to the
front of the trailer, positioned his right knee on the aluminum cap, placed his left
foot down on the first cast iron step, and attempted to place his right foot on the
second step. At this point, his hands slid off the top of the trailer, and his left foot
slipped, causing him to fall off the cast iron stairs. He landed on his feet and felt a
sharp pain in his back. He immediately reported his injury to his supervisor before
returning to work.
¶4 Dale and his wife Christine Gillespie filed suit against Robert Edmier, Thomas
Edmier, and John Edmier (the owners and operators of Barge Terminal); Trail
Quest; and East Manufacturing. 1 The Gillespies alleged, inter alia, that East
Manufacturing is strictly liable for, and acted negligently in, designing,
manufacturing, and selling a defective and unreasonably dangerous product. The
Gillespies further alleged that the product lacked adequate safety features, that East
Manufacturing failed to warn consumers about foreseeable dangers from unsafe
modifications, and that the product did not undergo product testing for safety.
1
Only East Manufacturing is a party to this appeal. We therefore limit the facts to the
involvement of East Manufacturing and those relevant to this appeal.
-2-
¶5 In a deposition, the Gillespies’ expert, Gary Hutter, opined that the steps on the
dump trailer were defective and unreasonably dangerous. Hutter explained that the
spacing and width of the steps, as well as the lack of side rails on the dump trailer,
did not comply with the recommended practices of the Occupational Safety and
Health Administration (OSHA), the American National Standards Institute, the
Federal Motor Carrier Safety Regulations, and the Truck Trailer Manufacturers
Association.
¶6 East Manufacturing moved for summary judgment. The circuit court granted
the motion, ruling that OSHA does not apply to trailers and that industry standards
are not mandatory. The court also found that East Manufacturing’s trailer met the
industry custom and practice because East Manufacturing built the trailer pursuant
to the specifications of the purchaser and the purchaser had the trailer modified by
a third party who added a tarp cover and cap. The court further found that the third-
party modifications demonstrated that the trailer was not unreasonably dangerous
when it left East Manufacturing’s control.
¶7 The Gillespies appealed, challenging, inter alia, the trial court’s grant of
summary judgment on their strict liability claim against East Manufacturing. 2 The
appellate court reversed the grant of summary judgment in favor of East
Manufacturing and remanded for further proceedings.
2019 IL App (1st) 172549
.
The appellate court reasoned that the deposition testimony of Hutter and others was
sufficient to create a genuine issue of material fact as to whether the trailer was
unreasonably dangerous. 3 This court allowed East Manufacturing’s petition for
leave to appeal. Ill. S. Ct. R. 315(a) (eff. Oct. 1, 2019). We also allowed the Illinois
Chamber of Commerce, the Truck Trailer Manufactures Association, Inc., and the
Illinois Trial Lawyers Association to file amicus curiae briefs. Ill. S. Ct. R. 345
(eff. Sept. 20, 2010).
2
On appeal, the Gillespies did not challenge the trial court’s grant of summary judgment in
favor of East Manufacturing on the negligence counts.
3
The appellate court also addressed issues not raised in this appeal.
-3-
¶8 ANALYSIS
¶9 This matter comes for our review on the circuit court’s grant of summary
judgment in favor of defendant East Manufacturing. Summary judgment is
appropriate if the pleadings, depositions, admissions, and affidavits on file establish
that there is no genuine issue of material fact and that the moving party is entitled
to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2018); Coleman v.
East Joliet Fire Protection District,
2016 IL 117952
, ¶ 20. When determining
whether a genuine issue of material fact exists, we must construe the pleadings,
depositions, admissions, and affidavits strictly against the movant. Adams v.
Northern Illinois Gas Co.,
211 Ill. 2d 32
, 43 (2004). We review a motion for
summary judgment in the light most favorable to the nonmoving party. Coleman,
2016 IL 117952
, ¶ 20. A circuit court’s order granting summary judgment is
reviewed de novo. Cohen v. Chicago Park District,
2017 IL 121800
, ¶ 17.
¶ 10 East Manufacturing argues that the trial court properly granted summary
judgment in its favor on the Gillespies’ strict liability claim. It is well established
that, to recover in a strict product liability action, a plaintiff must plead and prove
that (1) the injury complained of resulted from a condition of the product, (2) the
condition was unreasonably dangerous, and (3) the condition existed at the time the
product left the manufacturer’s control. Mikolajczyk v. Ford Motor Co.,
231 Ill. 2d 516
, 525 (2008). This court recognized in Mikolajczyk, that
“[a] product may be found to be unreasonably dangerous based on proof of any
one of three conditions: a physical defect in the product itself, a defect in the
product’s design, or a failure of the manufacturer to warn of the danger or to
instruct on the proper use of the product.”
Mikolajczyk, 231 Ill. 2d at 525
.
¶ 11 A showing that the product is unreasonably dangerous in a strict liability claim,
based on an alleged design defect, may be proved “by evidence of the availability
and feasibility of alternate designs at the time of its manufacture, or that the design
used did not conform with the design standards of the industry, design guidelines
provided by an authoritative voluntary association, or design criteria set by
legislation or governmental regulation.” Anderson v. Hyster Co.,
74 Ill. 2d 364
, 368
(1979). A product may be found unreasonably dangerous based on a design defect
when the plaintiff presents evidence of an alternative design that is “economical,
practical and effective.” Kerns v. Engelke,
76 Ill. 2d 154
, 162-63 (1979). Evidence
-4-
of an alternative design introduces the question of feasibility because a
manufacturer’s product cannot be faulted when safer alternatives are not feasible.
Mikolajczyk, 231 Ill. 2d at 526
. Plaintiffs may demonstrate that a product was
defectively designed by presenting evidence that the product fails to satisfy the
“consumer-expectation test” or the “risk-utility test.” Calles v. Scripto-Tokai Corp.,
224 Ill. 2d 247
, 255 (2007). The determination of whether a product is defective
and unreasonably dangerous is ordinarily a question of fact for the jury to consider.
Korando v. Uniroyal Goodrich Tire Co.,
159 Ill. 2d 335
, 344 (1994).
¶ 12 On appeal before this court, East Manufacturing submits that summary
judgment was proper under the risk-utility test. Under the risk-utility test, the utility
of the design must be weighed against the risk of harm created, and if the likelihood
and gravity of the harm outweigh the benefits and utilities of the product, the
product is unreasonably dangerous.
Calles, 224 Ill. 2d at 259
. Courts may consider
numerous factors, including the availability and feasibility of alternate designs at
the time of manufacture or whether the design conformed with design standards of
the industry, design guidelines provided by an authoritative voluntary association,
or design criteria set by legislation or government regulation.
Calles, 224 Ill. 2d at 263-64
. Other factors that may also be relevant include
“ ‘(1) the appearance and aesthetic attractiveness of the product; (2) its utility
for multiple uses; (3) the convenience and extent of its use, especially in light
of the period of time it could be used without harm resulting from the product;
and (4) the collateral safety of a feature other than the one that harmed the
plaintiff.’ ”
Calles, 224 Ill. 2d at 265-66
(quoting American Law of Products
Liability 3d § 28:19, at 28-30 through 28-31 (1997)).
¶ 13 East Manufacturing argues that the appellate court erroneously reversed the
circuit court’s grant of summary judgment in its favor because government
regulations and industry standards not applicable to it or the dump trailer are
irrelevant and that the appellate court erred in considering those standards in this
case. The Gillespies counter that the government regulations and industry standards
addressing the dimension and spacing of steps and ladders served as a basis for their
expert’s opinion and that the issue in this appeal is limited to expert Hutter’s use of
such standards in forming his opinion and, if proper, created a genuine issue of
material fact, precluding summary judgment.
-5-
¶ 14 We agree with the Gillespies. Whether OSHA and the other protocols
mentioned by Hutter during his deposition testimony are also admissible in
evidence is not the touchstone for this appeal. Hutter used these sources solely to
form his expert opinion. The sources were not admitted as substantive evidence.
That is a separate issue that is not the subject of this appeal. Rather, the issue here
is whether experts may rely on such data for the limited purpose of explaining the
basis for the expert’s opinion.
¶ 15 This court has already addressed that question. Specifically, this court approved
the use of OSHA standards by expert witnesses in Schultz v. Northeast Illinois
Regional Commuter R.R. Corp.,
201 Ill. 2d 260
(2002). In Schultz, one of the issues
addressed by this court was whether the trial court erred in allowing the plaintiff’s
expert to testify that various government regulations, such as OSHA, were evidence
of the standard of care in an action brought under the federal Employers’ Liability
Act (45 U.S.C.A. § 51 et seq. (1994)). The defendant in Schultz argued that
plaintiff’s expert should not have been allowed to testify that OSHA and other
safety standards indicated a standard of care because they are inapplicable to the
retaining wall where the plaintiff was injured. This court concluded that “an expert
must be allowed to testify regarding the basis for his opinion [citations] because an
expert’s opinion is only as valid as the reasons that underlie it [citation].”
Schultz, 201 Ill. 2d at 298-99
. Accordingly, this court determined that the expert’s testimony
in Schultz “was simply intended to support his expert opinion that defendant was
negligent.”
Schultz, 201 Ill. 2d at 299
.
¶ 16 In this case, Hutter’s deposition testimony, that the spacing and width of the
steps and the lack of side rails conflict with OSHA protocol and other industry
guidelines, was intended to support his expert opinion that East Manufacturing
designed steps that were defective and unreasonably dangerous. Viewed in a light
most favorable to the Gillespies, as the nonmovants, Hutter’s deposition testimony
was sufficient to create a genuine issue of material fact as to whether the dump
trailer was unreasonably dangerous. Accordingly, we agree with the appellate court
that the circuit court erroneously granted summary judgment in favor of East
Manufacturing.
¶ 17 East Manufacturing also argues that summary judgment on the strict liability
count was proper under the consumer expectations test and under a failure to warn
-6-
theory. We need not address the remaining arguments raised on appeal because we
have already determined that the circuit court erroneously granted summary
judgment in favor of East Manufacturing on the Gillespies’ strict liability claim.
See Hertz Corp. v. City of Chicago,
2017 IL 119945
, ¶ 31. We therefore affirm the
judgment of the appellate court and remand the cause to the circuit court of Cook
County for further proceedings.
¶ 18 CONCLUSION
¶ 19 For the foregoing reasons, we affirm the judgment of the appellate court that
reversed the circuit court’s order granting summary judgment in favor of defendant,
East Manufacturing Corporation. We remand the cause to the circuit court of Cook
County for further proceedings consistent with this opinion.
¶ 20 Appellate court judgment affirmed.
¶ 21 Circuit court judgment reversed.
¶ 22 Cause remanded.
¶ 23 JUSTICE KARMEIER, specially concurring:
¶ 24 While I find the lead opinion reaches the correct conclusion in this case, it
misapprehends the legal analysis required here, leaving an incorrect impression that
experts may always rely on regulations and standards as a basis for their opinions
and must be allowed to testify to such evidence at trial to explain the basis for their
opinion in every circumstance. Supra ¶ 15. As a result, the opinion could be
misconstrued to impermissibly undermine the trial judge’s role as a gatekeeper.
Decker v. Libell,
193 Ill. 2d 250
, 254 (2000) (trial judge has the role of gatekeeper,
barring testimony that is not sufficiently relevant or reliable to be admitted into
evidence). I therefore write separately to clarify the relevant legal principles.
¶ 25 As a preliminary matter, I note that defendant argued in this court that plaintiffs
forfeited the argument that the criteria set forth by OSHA, the American National
Standards Institute (ANSI), the Federal Motor Carrier Safety Regulations
-7-
(FMCSR), and the Truck Trailer Manufacturers Association (TTMA) were
admissible to explain the basis for Hutter’s expert opinion, because plaintiffs had
argued in the lower courts that those standards, regulations, and practices were
substantively admissible. The lead opinion does not acknowledge or address
defendant’s forfeiture argument. The lead opinion simply states that the issue
before this court is whether an expert may rely upon such standards, regulations,
and practices to explain the basis for the expert’s opinion.
¶ 26 It well settled that this court may ignore forfeiture “in the interests of achieving
a just result and maintaining a sound and uniform body of precedent.” Jackson v.
Board of Election Commissioners,
2012 IL 111928
, ¶ 33. In addition, the appellate
court arguably suggested that the standards and regulations at issue were admissible
to support Hutter’s expert opinion, in addition to being substantively admissible.
See
2019 IL App (1st) 172549
, ¶ 45. Nonetheless, I believe the lead opinion should
have acknowledged the argument, as defendant is correct that plaintiffs’ argument
in the lower courts and the decisions of the lower courts concerned the substantive
admissibility of the OSHA regulations and the FMCSR, ANSI, and TTMA
standards and practices. Plaintiffs have now essentially abandoned that argument
in this court.
¶ 27 After noting that this court is not addressing whether the standards at issue are
admissible as substantive evidence, the lead opinion finds the controlling case is
Schultz—which held OSHA standards are admissible and may be relied upon by an
expert to determine defendant-railroad’s standard of care with respect to installing
a guardrail on a retaining wall, off which plaintiff fell. Schultz v. Northeast Illinois
Regional Commuter R.R. Corp.,
201 Ill. 2d 260
, 296-98 (2002). I do not disagree
with the Schultz holding or that an expert may rely upon and testify to such
standards in explaining the basis of the opinion when appropriate. However, the
lead opinion’s bare citation to Schultz—while not incorrect—is misleading without
clarification.
¶ 28 In Wilson v. Clark, this court adopted Federal Rules of Evidence 703 and 705,
which regard the basis for an expert’s opinion and disclosure of the expert’s basis
at trial. Wilson v. Clark,
84 Ill. 2d 186
, 196 (1981). In Wilson, plaintiff’s expert
provided his opinion to a hypothetical question based upon medical records that
were improperly admitted into evidence without proper foundation.
Id. at 191-92. -8-
While this court found reversible error 4 (id. at 195-96), it clarified that, under the
newly adopted rules, admission of the medical records was unnecessary for the
expert to testify to his opinion, as experts may rely on data and facts not otherwise
admissible when that information is of a type that is reliable (id. at 192-93).
¶ 29 Importantly, this court has explained that courts need not allow an expert to
testify to the basis of his opinion. City of Chicago v. Anthony,
136 Ill. 2d 169
, 185
(1990) (trial judge need not allow the expert to recite inadmissible evidence to
explain the basis of the opinion when, under Federal Rule of Evidence 703, adopted
by this court in Wilson, its probative value in explaining the expert’s opinion pales
beside its likely prejudicial impact or its tendency to create confusion); People v.
Anderson,
113 Ill. 2d 1
, 12 (1986) (same). Consequently, the information experts
may rely upon as the basis for their opinion is much broader than that allowed to
come before a trier of fact. See
Anthony, 136 Ill. 2d at 186
(“If another rule of law
applicable to the case excludes the information sought to be relied upon by the
expert, the information may not be permitted to come before the jury under the
guise of a basis for the opinion of the expert.”); Ill. R. Evid. 703 (eff. Jan.1, 2011)
(facts and data need not be admissible for an expert to rely upon them in averring
an opinion);
Wilson, 84 Ill. 2d at 192
. The trial court remains the gatekeeper of
information and must determine whether the information upon which the expert
bases his opinion is of a type that is reliable.
Anthony, 136 Ill. 2d at 186
(citing In re
“Agent Orange” Product Liability Litigation,
611 F. Supp. 1223
, 1245 (E.D.N.Y.
1985));
Decker, 193 Ill. 2d at 254
.
¶ 30 Under this standard, data and facts need to be reliable and probative of the
particular facts in the case.
Anthony, 136 Ill. 2d at 185-86
;
Decker, 193 Ill. 2d at 254
; Ruffiner v. Material Service Corp.,
116 Ill. 2d 53
, 59-60 (1987); In re “Agent
Orange” Product Liability
Litigation, 611 F. Supp. at 1245
(“If the underlying data
are so lacking in probative force and reliability that no reasonable expert could base
an opinion on them, an opinion which rests entirely upon them must be excluded.”).
As such, a court’s determination should be made on a case-by-case basis.
Anthony, 136 Ill. 2d at 185
. Therefore, while regulations and standards are trustworthy
4
This court determined it was unfair to hold the plaintiff in Wilson to its pronounced rule, except
on retrial, because the adoption of Federal Rules of Evidence 703 and 705 was a change in law.
Wilson, 84 Ill. 2d at 195-96
. Therefore, plaintiff had no notice that the expert’s opinion to a
hypothetical question could be based on inadmissible records.
Id. -9-
information upon which an expert’s opinion may be based, they are not always an
appropriate basis for an expert’s opinion. Compare
Schultz, 201 Ill. 2d at 296-98
(OSHA standards were relevant to standard of care regarding retaining wall where
expert explained standards indicate that change in elevation was hazardous and
required a handrail, even though standards were admissible as evidence of standard
of care, although the standards were not binding on defendant), with
Ruffiner, 116 Ill. 2d at 58-59
(foundation to admit ANSI standards was insufficient where expert
provided only common goal of safety to establish relevance of the standards).
¶ 31 The record shows that Hutter provided a factual basis for his opinion and did
not rely solely on OSHA standards. His testimony included some conclusory
statements and relied heavily on standards, but he provided the factual basis of the
spacing and width of the stepladder on the dump trailer along with the absence of a
handle and provided measurements that would have been reasonably safe. See
Ruffiner, 116 Ill. 2d at 60
(“Although the plaintiff’s expert relied heavily on the
ANSI standards, which we have found to have been improperly admitted here, the
basis for his opinion was directed at what he perceived to be the inadequate depth
and width of the ladders, matters that could sustain a judgment for the plaintiff.”).
Hutter referenced pictures of similar trailers in the industry, examples of safe
ladders purchased by defendant, sales literature, and his extensive experience. He
also relied upon standards other than OSHA, to which the trial court failed to make
any findings other than stating that they were not mandatory. See Schultz,
201 Ill. 2d
at 296-98 (OSHA standards were relevant to standard of care regarding retaining
wall although the standards were not binding on defendant).
¶ 32 Based on this record, Hutter provided a sufficient basis for his opinion, which
raised a genuine issue of material fact as to whether the steps were unreasonably
dangerous. Thus, the trial court erred in granting summary judgment.
¶ 33 Although I do not determine whether any standard raised by Hutter is
sufficiently reliable to form the basis for his expert opinion, these issues may arise
again in the course of the proceedings below. Note, Hutter not only cited OSHA
regulations and standards to support his opinion but provided an explanation—
other than safety—as to why the standards were relevant although not explicitly
applicable to dump trailers. Moreover, the experts in this case also dispute whether
OSHA is in fact applicable to the stepladder when this trailer is parked for loading
- 10 -
and unloading. Accordingly, I reiterate that the determination of the admissibility
of any standard to explain the basis of an expert’s opinion and the reliability of the
basis of an expert’s opinion should be made on the facts of the case pursuant to the
above principles and precedent of this court.
¶ 34 Lastly, unlike the lead opinion, I would address plaintiff’s failure-to-warn claim
although summary judgment has been found improper under the risk-utility test.
Presumably, the lead opinion took a contrary position because the core proof
essential to survive summary judgment for plaintiff’s design defect claim under
both the risk-utility and consumer-expectation tests, as well as his failure-to-warn
claim, was the same: Hutter’s opinion on the dangerousness of the stepladder and
defendant’s knowledge that the user would install a tarp system on its trailers. I do
not necessarily disagree with its position with respect to the consumer-expectation
test, 5 because the risk-utility test and consumer-expectation tests are methods of
proof for the same liability and depend on essentially the same facts. Mikolajczyk
v. Ford Motor Co.,
231 Ill. 2d 516
, 548 (2008). However, it could have noted this.
¶ 35 On the other hand, the failure to warn claim is a separate method of liability that
warrants a separate analysis.
Id. In their failure-to-warn
claim, plaintiffs assert that
defendant should have warned of the potential dangers when a user installs a tarp
on its dump trailer. To impose strict liability for the failure to warn, the
manufacturer must have known or should have known of the danger that caused the
injury and failed to warn plaintiffs of that danger. Woodill v. Parke Davis & Co.,
79 Ill. 2d 26
, 35 (1980).
¶ 36 Here, it is undisputed that defendant failed to provide any warning regarding
the dump trailer. The record reflects that defendant’s own employee testified that
5
East Manufacturing also asserts plaintiffs forfeited any argument under the consumer-expectation test
because they failed to raise it in the trial court. Forfeiture is an admonition to the parties, and not a limitation
on the court. People v. McCarty,
223 Ill. 2d 109
, 142 (2006). Nevertheless, plaintiffs raised the consumer-
expectation test in their response to defendant’s summary judgment motion. While plaintiffs did not clearly
delineate what arguments and facts were made to support liability under the risk-utility test and which were
made to support liability under the consumer-expectation test, Hutter explained how use of the ladder was
unsafe. In light of the requirements under the consumer-expectation test (Mikolajczyk v. Ford Motor Co.,
231 Ill. 2d 516
, 554 (2008) (“whether the product is unsafe when put to a use that is reasonably foreseeable
considering its nature and function. [Citation.] No evidence of ordinary consumer expectations is required,
because the members of the jury may rely on their own experiences to determine what an ordinary consumer
would expect.”)), this is sufficient to preserve this issue.
- 11 -
defendant sometimes installs tarp systems on its trailers and that defendant knew
third parties installed a tarp system on its trailers. Based on this fact, Hutter opined
that defendant should have warned consumers to also install a handle for safety
when a user installed a tarp system. Accordingly, plaintiffs raised a genuine issue
of whether the defendant should have provided a warning, and summary judgment
was improper.
¶ 37 For these reasons, I specially concur.
¶ 38 JUSTICES GARMAN and MICHAEL J. BURKE join in this special
concurrence.
¶ 39 JUSTICE NEVILLE took no part in the consideration or decision of this case.
- 12 - |
4,489,850 | 2020-01-17 22:02:03.866864+00 | Arundell | null | *84OPINION.
Arundell:
The returns of the petitioner for the years 1918 and 1919 having been filed on June 16, 1919, and March 14, 1920, respectively, the period for assessment of taxes for those years expired five years thereafter (section 277(a)(2), Revenue Act of 1924) unless the limitation periods were extended pursuant to the provisions of section 278(c) of the same Act. On the dates set forth in our findings of fact the petitioner executed instruments having for their purpose an extension of the statutory periods for assessment and collection, first for an unlimited time, and then to December 31, 1925. The letter notifying the petitioner of the deficiencies for the taxable years was mailed October 14, 1925, a date within the statutory periods of limitation as extended by the documents signed by the petitioner and delivered to the respondent.
The petitioner questions the effectiveness of the several documents introduced into the record by the respondent over the objection of its cojmsel to extend the statutory periods of limitation, on the ground that it has not been shown that they were signed by *85the Commissioner or a duly authorized agent prior to the running of the statute. No contention is being made that they were not signed on behalf of the petitioner on the dates shown on the papers.
Neither the original petition filed herein on December 9, 1925, nor the amended petition filed on December 8, 1928, set up as a defense the bar of the statute of limitations. The defense was pleaded for the first time in an amendment to the amended petition filed March 18, 1929. No evidence was offered by either party to the proceeding as to the time the Commissioner’s signature was affixed to the instruments or that the signature is not what it purports to be. A short time after the instruments were executed in behalf of the petitioner they were delivered to the Commissioner, in whose custody they remained until the hearing of the case.
We have heretofore decided that it is not necessary for the Commissioner to sign consents personally in order to give them validity. Perkins Land & Lumber Co., 9 B. T. A. 528; Trustees of Ohio & Big Sandy Coal Co., 9 B. T. A. 617; Greylock Mills, 9 B. T. A. 1281, and National Piano Manufacturing Co., 11 B. T. A. 46.
It is a general principle to presume that public officials act correctly, in accordance with the law and their instructions, until the contrary appears.” Trustees of Ohio & Big Sandy Coal Co., supra, citing authorities. This rule was applied in National Piano Manufacturing Co., supra, where the taxpayer, like the petitioner here, questioned the validity of the consent on the ground .that the evidence did not show when and by whom they were signed on behalf of the Commissioner. In Maple Coal Co., 10 B. T. A. 1336, there was no proof of the date the Commissioner affixed his signature to the consents and in the absence of evidence that it was withdrawn prior to acceptance by the Commissioner, we held the consent to be valid. See also Joy Floral Co., 7 B. T. A. 800; Consumers Ice Co., 11 B. T. A. 144; and Wells Brothers Co., 16 B. T. A. 79.
In our opinion the consents are valid and operate to extend the statutory periods of limitation for assessment and collection of the deficiencies beyond the mailing of the deficiency notice.
No error was committed by the respondent in reducing invested capital by the amount of taxes due for prior years. Section 1207, Revenue Act of 1926, and Russel Wheel & Foundry Co., 3 B. T. A. 1168.
Judgment will be entered for the respondent. |
4,489,851 | 2020-01-17 22:02:03.909149+00 | Phillips | null | OPINION.
Phillips :
The respondent determined deficiencies in income tax as follows:
*821[[Image here]]
The petitioners thereupon duly instituted these proceedings which, at the time of hearing, were consolidated and submitted upon the pleadings and stipulations. It is sufficient to set out here the principal facts without reciting the details contained in the record.
Fred N. Chambers died testate in May, 1918, and by his last will and testament, admitted to probate in Pennsylvania, provided for the distribution of his residuary estate as follows:
Thikd. Anti all the rest, residue and remainder of my estate, real, personal and mixed, of whatsoever kind and wheresoever situated of which I may die seized or possessed, I give, devise and bequeath unto my said wife, Anna M. Chambers, and William J. Gealy, and the survivors of them, to have and to hold jointly, In Titusr, nevertheless for the following uses and purposes, and not otherwise to-wit:
a. — To manage and control the said estate, sell and dispose of any part or all of my personal and mixed property lease, sell and dispose of all or any part of my real estate, upon such terms and conditions and for such price or prices as to the said Trustees, or the survivor of them shall seem proper and to make, execute and deliver good'and sufficient leases, deeds and conveyances for said real estate or any part thereof, and to receipt for the rentals and considerations thereof; to borrow money when said trustees may deem it necessary in the proper management of said estate, and to pledge said personal property and mortgage said real estate and mixed property to secure the same; to operate said real estate and leaseholds for oil, gas or other purposes ; to receive all moneys due said estate from any source and to invest the same and to change investments and make new investments and in general to do all other things in the premises which said trustees or the survivor of them, shall deem for the best interests of the estate, and all said property to have and to hold for the following uses and purposes and not otherwise;
b. — To keep said estate together and intact as to principal except as hereinafter provided, and the income thereof to divide into two equal portions; one-half of said income, or so much thereof as may be necessary is to be used by said trustees for the support and education of my daughter Thalia Lee Chambers, until she shall arrive at full age, and after she shall be of full age, said trustees shall pay over to her, the said Thalia Lee Chambers, during her natural life so much of the income from said one-half of my said residuary estate, as in the discretion of said trustees may be proper and necessary for her proper use and maintenance in a suitable manner; said estate and income, however, not to be liable in any way for the debts, contracts and liabilities of my said daughter Thalia Lee Chambers, or any husband she may have; provided, however, that said trustees, should they deem said income not sufficient for the proper education or maintenances of my said daughter, may use so much as may be necessary of the principal for said purposes; and further, said trustees, after my said daughter shall be of full age may allow her such control over said estate or any part thereof as in their judgment may be to her best interests and may after she becomes of full age, assign or pay over to her, absolutely a part or all of the principal *822of her share of said estate; any income from said half of said estate, not used for my said daughter nor paid over to her, shall be kept separated and invested for her benefit and shall not go in any way to increase the remaining one-half of said estate; at the death of my said daughter all of said one-half of said residuary estate and accumulated income not distributed shall be paid to the lawful issue of said Thalia X^ee Chambers, if she leave any to survive her, and if she leave no lawful issue then it shall be paid to my said wife, Anna M: Chambers.
c.- — The income from the remaining one-half of said residuary estate is to be paid by said trustees at least semi-annually, to my said wife, Anna M. Chambers, during her natural life, and at her death the undistributed principal from which said income is derived, is to be paid as she may by her will direct, and if she leave no will to the persons who under the intestate laws of the State of Pennsylvania would be entitled to her estate, and in the same proportion as they would take under said intestate laws; neither said principal however nor income shall be liable to attachment in the hands of said trustees for any debts, contracts or liabilities of my said wife, Anna M. Chambers; after my daughter becomes of full age, however, and should at any time thereafter said trustees, or the survivor of them, determine to pay over and distribute to my said daughter any share of the principal of my said estate as hereinbefore provided, then they shall at the same time likewise pay and distribute to my said wife a like part of her share of my estate, so that the principal of said estate in the hands of said trustees, or the survivor, shall always be held by them, one-half for my said daughter and one-half for my said wife, and no distribution of said principal shall be made to one of the two, without the making of a like distribution to the other.
The petitioner, Thalia 0. Taylor, is the daughter of said decedent, referred to in his will as Thalia Lee Chambers.
The income of the estate for each of the years involved was computed as follows:
1921 1922 1923 Profit from operation of oil and gas properties.. Less depreciation and depletion... Operation of buildings.. Depreciation... Loss from operation of buildings_ Dividends... Interest.. Profit from sale of stocks and bonds. Other income. DEDUCTIONS Loss on sale of stock.,__ Interest paid_ Taxes paid_ Loss by fire__ Contributions. Trustees commissions_ Total deductions. Net income.J $13,715.69 7,485.39 (5,230.30 -6,200.40 2,214.00 -8,420.40 29,504.17 308.93 27,623.00 2,314.41 14,531.76 1,351.96 200.00 3,438.74 21,836.87 5,786.13 $6,743.55 7,306.47 -562.92 -3,283.00 2/402.68 -5,685.08 26,982.76 32.37 3,165.81 23,932.34 14,952.98 1,134.87 3,487.77 19,575.62 4,356.72 $254.78 7,383.40 -7,128.62 122.96 2,332.59 —2,209.63 32,981.83 454.47 391.82 24,489.87 14,559.74 1,256.33 676.66 3,507.20 19,999.93 4,489.94
*823Out of the amounts charged off as depreciation and depletion, the trustees reinvested for the estate, in buildings, gasoline plant, equipment and other investments, amounts as follows:
Year Amount
1921_$6,327.12
1922_ 5,266. 85
1923_ 16.454.44
Amounts charged off as depreciation and depletion and not reinvested in the taxable year were retained as reserves for future reinvestment.
During each of the taxable years involved, the net income as computed above was equally divided between Anna M. Chambers and Thalia C. Taylor and one-half of such amount was paid to each of such persons. In their individual returns each of such persons returned one-half of such net income as her distributive share of the income of the trust estate.
Under a similar method of computing the distributive share of each of these beneficiaries, there was due to each of them, from income for the years 1918, 1919, and 1920, $42,995.12. All of such amounts were returned as income in those years and income taxes paid thereon. During those same years, the total paid to the beneficiaries was $20,500 each, leaving undistributed in the hands of the trustees on January 1, 1921, net income due each beneficiary of $22,495.12. From the amount so due payments were made to each beneficiary as follows:
Year Amount
1921_$5,106. 93
1922_ 5, 921.64
1923_ 6, 755.03
The Commissioner rules that the estate was not entitled to deduct any depreciation or depletion. In his brief the respondent concedes that this was error and that depreciation and depletion are allowable in the amounts claimed on the returns, but contends that such amounts do not enter into the computation of the distributive share of each of the petitioners. The Commissioner takes a similar position with respect to the losses suffered on the sale of securities in 1921 and the loss from fire in 1923.
The pertinent provisions of the Revenue Act of 1921 are as follows:
Sec. 219. (a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including—
* * * * * * H»
(2) Income accumulated in trust for the benefit of unborn or unascertained-persons or persons with contingent interests;
(3) Income held for future distribution under the terms of the will or trust; and
*824(4) Income which is to be distributed to the beneficiaries periodically, whether or not at regular intervals, and the income collected by a guardian of an infant to be held or distributed as the court may direct.
(b) The fiduciary shall be responsible for making the return of income for the estate or trust for which he acts. The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, except * * ⅜. In cases in which there is any income of the class described in paragraph (4) of subdivision (a) of this section the fiduciary shall include in the return a statement of the income of the estate or trust which, pursuant to the instrument or order governing the distribution, is distributable to each beneficiary whether or not distributed before the close of the taxable year for which the return is made.
(c) In cases under paragraphs (1), (2), or (3) of subdivision (a) or in any other ease within subdivision (a) of this section except paragraph (4) thereof the tax shall be imposed upon the net income of the estate or trust and shall be paid by the fiduciary, * ⅜ ⅜
(d) In cases under paragraph (4) of subdivision (a), ⅜ * ⅜ the tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary that part of the income of the estate or trust for its taxable year which, pursuant to the instrument or order governing the distribution, is distributable to such beneficiary, whether distributed or not ⅜. * *.
The plan of the revenue act is to tax annually to the beneficiary of any trust his distributable share of the income of the trust for such year and to tax to the trustee in his fiduciary capacity any income which is not distributable. The act thus presents, in the computation of taxable income the same problems which are presented to a court upon an accounting in determining whether items of income or expenditure are to be credited to or charged against the beneficiary or the remainderman. Ordinarily gains or losses from the sale of capital assets do not affect the computation of the income of the beneficiary but are chargeable to the corpus of the fund. The same is ordinarily true of depreciation of assets and depletion of natural resources, especially if exhaustion thereof had begun before the trust became effective. In such cases the distributable income of the beneficiary is to be computed without reference to such items, which must be accounted for by the trustee in the return of undistributable income which he must file for the estate and upon which the estate, and not the beneficiary, is taxable. Baltzell v. Mitchell, 3 Fed. (2d) 428; Arthur H. Flemming, 6 B. T. A. 900; Louise P. V. Whitcomb, 4 B. T. A. 80; aff'd. Whitcomb v. Commissioner, 25 Fed. (2d) 528; Boxburghe v. United States, 64 Ct. Cls. 223; Kate Fowler Merle-Smith, 11 B. T. A. 254; Elizabeth M. Abell, 4 B. T. A. 87. It is upon this principle and these decisions that respondent relies. The basis of each of these decisions is that the income of the beneficiary is not affected by the loss in question and it is plainly indicated in some of them that the situation would be different if the trust instrument were so framed that the loss served to reduce his income. Indeed, it needs no argument to demonstrate that since it is only *825the distributable net income of the beneficiary which is taxable to him, any loss which serves to reduce his income from the trust must be taken into account in the computation of the amount upon which he is to be taxed. We have so held in John S. Ames, 9 B. T. A. 1336; E. L. E. Brenneman, 10 B. T. A. 544; Kate M. Simon, 10 B. T. A. 1186; John L. Whitehurst, 12 B. T. A. 1416. The rulings of the Bureau of Internal Revenue have been to the same effect. T. D. 2267; Comm. Rec. 3959, II-2 C. B. 162; G. C. M. 5479, VIII-1, 6.
The question for decision in the last analysis is whether these petitioners are entitled to receive the income of the trust estate undiminished by' depreciation and depletion of the buildings and oil properties and by losses upon sales and from fires or whether the trustees properly reduce their distributable shares on account of these items. Stated in other words, could these petitioners, upon an accounting by the trustees, successfully contend that the trustees were in error in withholding these amounts out of income and require that the whole of the operating income be distributed to them without making any deduction for depreciation, depletion or losses. The provision of the will with which we are immediately concerned directs the trustees “ to keep said estate together and intact as to principal except as hereinafter provided, and the income thereof to divide into two equal portions.” The parties concerned have interpreted this to mean that the capital is to be kept intact by reserving a sufficient amount out of income to provide for depreciation and depletion of capital assets of a wasting nature. In a similar situation, in E. L. E. Brenneman, supra, we said:
Prior to the years in question the trustees, with the acquiescence of the beneficiaries, interpreted the directions of the decedent to mean that only “net income ” of the trust estate, as that term is used in the taxing statutes, should be distributed to the beneficiaries. Accordingly, they set up reserves to conserve the corpus of the trust. In 1917 and 1018, as well as the years in question, the trustees took deductions for depreciation and depletion of the oil-producing property and distributed to the beneficiaries only the net income so determined.
It is strenuously urged by the petitioners that the interpretation thus placed on the will can not be collaterally attacked. It is undoubtedly true that as between the parties in interest an interpretation of long standing placed on the instrument by them will not be disturbed and the courts of Pennsylvania have so held. Appeal of Follmer, 37 Pa. 121; Hayerty v. Albright, 52 Pa. 274. We are not inclined therefore lightly to cast aside or disregard the interpretation placed upon the trust instrument by the parties -thereto and adopt a contrary view as a basis for the taxes in question. See Grace Scripps Clark, 1 B. T. A. 491. We think that the decedent’s will is susceptible of the interpretation placed thereon by the parties in interest, and, consequently, we hold that the deductions for depreciation and depletion, the amounts of which are not in dispute were properly taken by the trustees and do not ronstitute income to the beneficiaries.
*826See, also, Kate M. Simon, supra, and John L. Whitehurst, supra.
In construing a will the intention of the decedent is to be sought. The only evidence in the record which can serve as our guide is the language of the will and the construction placed upon it by his wife, daughter and trustees, consistently maintained since his death. They are the parties who are most likely to know what was intended. Moreover, the direction that the principal be kept intact must be given some significance. The Commissioner has distributed the income as if these words were not in the will. Occurring in the will of one who owned depletable assets, the construction given them by the interested parties seems to us entirely reasonable and proper. We are accordingly of the opinion that the distributable income' of the trust estate is only the amount of income remaining after the deduction of the reserve for exhaustion and after capital losses have been made good.
The stipulations of fact and the briefs of the respondent point out that during the taxable years there was distributed to the petitioners not only their distributable share of the income of each of those years, but payments from distributable income of prior years. This seems to us to be of no importance. The law provides that the beneficiary shall include as his income his distributable share of the income, whether or not distributed. Amounts which properly became distributable in prior years were taxable in those years, not in the years of distribution and distribution in the years before us can serve neither to increase the taxable income of those years nor to affect the construction of the will.
Decision will be entered under Rule 50. |
4,639,171 | 2020-12-03 16:00:46.429358+00 | null | http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/19-2395.OPINION.12-3-2020_1695334.pdf | Case: 19-2395 Document: 93 Page: 1 Filed: 12/03/2020
United States Court of Appeals
for the Federal Circuit
______________________
DILLINGER FRANCE S.A.,
Plaintiff-Appellant
v.
UNITED STATES, SSAB ENTERPRISES LLC,
NUCOR CORPORATION,
Defendants-Appellees
______________________
2019-2395
______________________
Appeal from the United States Court of International
Trade in No. 1:17-cv-00159-GSK, Judge Gary S.
Katzmann.
______________________
Decided: December 3, 2020
______________________
MARC EDWARD MONTALBINE, Dekieffer & Horgan,
PLLC, Washington, DC, argued for plaintiff-appellant.
Also represented by JAMES KEVIN HORGAN, GREGORY S.
MENEGAZ, ALEXANDRA H. SALZMAN.
KELLY A. KRYSTYNIAK, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee United States.
Also represented by JEFFREY B. CLARK, JEANNE DAVIDSON,
TARA K. HOGAN; AYAT MUJAIS, Office of the Chief Counsel
for Trade Enforcement and Compliance, United States
Case: 19-2395 Document: 93 Page: 2 Filed: 12/03/2020
2 DILLINGER FRANCE S.A. v. UNITED STATES
Department of Commerce, Washington, DC.
CYNTHIA CRISTINA GALVEZ, Wiley Rein, LLP, Washing-
ton, DC, argued for defendant-appellee Nucor Corporation.
Also represented by ALAN H. PRICE, STEPHANIE MANAKER
BELL, TESSA V. CAPELOTO, MAUREEN E. THORSON,
CHRISTOPHER B. WELD.
ROGER BRIAN SCHAGRIN, Schagrin Associates, Wash-
ington, DC, for defendant-appellee SSAB Enterprises LLC.
Also represented by NICHOLAS J. BIRCH, CHRISTOPHER
CLOUTIER, GEERT M. DE PREST, ELIZABETH DRAKE, WILLIAM
ALFRED FENNELL, PAUL WRIGHT JAMESON, LUKE A.
MEISNER, KELSEY RULE.
______________________
Before NEWMAN, DYK, and HUGHES, Circuit Judges.
DYK, Circuit Judge.
Defendant Dillinger France S.A. (“Dillinger”) appeals a
decision of the United States Court of International Trade
(“Trade Court”). That decision affirmed the final anti-
dumping determination of the U.S. Department of Com-
merce (“Commerce”) for certain carbon and alloy steel cut-
to-length plate from France. We affirm in part, vacate in
part, and remand.
BACKGROUND
“Dumping occurs when a foreign firm sells a product in
the United States at a price lower than the product’s nor-
mal value.” Home Prods. Int’l, Inc. v. United States,
633 F.3d 1369
, 1372 (Fed. Cir. 2011). Commerce is required to
impose antidumping duties on imported merchandise that
is being sold, or is likely to be sold, in the United States at
less than fair value to the detriment of a domestic industry.
19 U.S.C. § 1673.
Case: 19-2395 Document: 93 Page: 3 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 3
On April 28, 2016, Commerce initiated an antidumping
duty investigation into certain carbon and alloy steel cut-
to-length plate from France. Commerce chose Dillinger, a
European producer of cut-to-length plate, as one of the
mandatory importer respondents.
Commerce assigned Dillinger a 6.15% antidumping
margin. See Certain Carbon and Alloy Steel Cut-To-Length
Plate from France, 82 Fed. Reg. 24,096, 24,098 (Dep’t of
Commerce May 25, 2017). Dillinger appealed to the Trade
Court, which initially sustained most of Commerce’s deter-
mination but remanded to Commerce issues that are not
involved in this appeal. The Trade Court then sustained
Commerce’s remand results and the 6.15 percent duty. Dil-
linger appeals the Trade Court’s judgment, contending
that Commerce erred in the antidumping determination.
We have jurisdiction under 28 U.S.C. § 1295(a)(5).
DISCUSSION
We review the Trade Court’s decision to sustain Com-
merce’s final results and remand redeterminations de
novo. See U.S. Steel Corp. v. United States,
621 F.3d 1351
,
1357 (Fed. Cir. 2010). We will affirm Commerce unless its
decision is “unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19 U.S.C.
§ 1516a(b)(1)(B)(i).
I
Dillinger raises three issues on appeal. We first ad-
dress Dillinger’s argument that, in calculating normal
value, Commerce improperly allocated costs between Dil-
linger’s non-prime and prime products based on Dillinger’s
books and records, which allocate cost based on likely sell-
ing price rather than actual cost. 1 Because Dillinger’s
1 It is unclear from Commerce’s final determination
and brief whether Commerce’s calculation of normal value
Case: 19-2395 Document: 93 Page: 4 Filed: 12/03/2020
4 DILLINGER FRANCE S.A. v. UNITED STATES
books and records did not reasonably reflect the costs asso-
ciated with the production and sale of the merchandise as
required by 19 U.S.C. § 1677b(f), we vacate and remand for
further proceedings on this issue.
Dillinger sells plates designated as prime and non-
prime. Non-prime plates are plates that are rejected after
the production process for not meeting the standards for
prime plate. Prime plate is sold with a warranty, whereas
non-prime plate is not and thus cannot be used in applica-
tions that require a warranty. In reporting costs to Com-
merce, Dillinger reported the cost of non-prime plate as
equal to the average actual cost of all plate because, accord-
ing to Dillinger, “non-prime plate undergoes the same pro-
duction process as prime plate and . . . is not less costly to
produce simply because it cannot be sold at full price.”
J.A. 1346.
Commerce did not dispute that prime and non-prime
plate undergo the same production process, but Commerce
noted that Dillinger’s accounting system uses a different
approach, valuing “non-prime plate at the likely selling
price based on current market conditions and uses this
amount to offset the cost of prime plates.” J.A. 1347. Com-
merce accordingly adjusted Dillinger’s reported costs for
non-prime plate “to reflect the sales values recorded in [Dil-
linger’s] normal books and records” and allocated the dif-
ference to the costs for Dillinger’s prime plate.
Id. at 968,
involved determining constructed value (determining the
sum of “the cost of materials and fabrication or other pro-
cessing of any kind employed in producing the merchan-
dise” and other factors under 19 U.S.C. § 1677b(e)), or
involved determining cost of production so as to exclude
home market sales made below cost of production under
§ 1677b(b)(3). In either event, § 1677b(f) applies, and the
alleged errors would affect either calculation. See
id. § 1677b(f). Case:
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DILLINGER FRANCE S.A. v. UNITED STATES 5
1347. In doing so, Commerce reduced the cost of non-prime
plate and allocated a greater portion of cost to prime plate
based on the selling price of non-prime plate. Dillinger ar-
gues that Commerce’s reliance on Dillinger’s books and rec-
ords was improper because the books and records were not
based on the costs associated with the production of its
products.
The applicable statutory provision, 19 U.S.C.
§ 1677b(f)(1)(A), provides that “[f]or purposes of subsec-
tions (b) [sales at less than cost of production] and (e) [con-
structed value] . . . , [c]osts shall normally be calculated
based on the records of the exporter or producer of the mer-
chandise, if such records are kept in accordance with the
generally accepted accounting principles [(“GAAP”)] of the
exporting country (or the producing country, where appro-
priate) and reasonably reflect the costs associated with the
production and sale of the merchandise.”
Id. (emphasis added). Section
1677b(f)(1)(A) thus requires “that reported
costs must ‘normally’ be used” only if (1) “they are ‘based
on the records . . . kept in accordance with the [GAAP]’”
and (2) “‘reasonably reflect’ the costs of producing and sell-
ing the merchandise.” Thai Plastic Bags Indus. Co. v.
United States,
746 F.3d 1358
, 1365 (Fed. Cir. 2014) (quot-
ing 19 U.S.C. § 1677b(f)(1)(A)).
The dual nature of the test seems apparent from the
face of the statute and is clear as well from our prior deci-
sions and the legislative history. Before § 1677b(f), our
case law had established that, “[a]s a general rule, an
agency may either accept financial records kept according
to [GAAP] in the country of exportation, or reject the rec-
ords if accepting them would distort the company’s true
costs.” Thai Pineapple Pub. Co. v. United States,
187 F.3d 1362
, 1366 (Fed. Cir. 1999)).
In IPSCO, Inc. v. United States,
965 F.2d 1056
(Fed.
Cir. 1992), we held a method that “calculat[ed] costs for
both limited-service and prime products on the basis of
Case: 19-2395 Document: 93 Page: 6 Filed: 12/03/2020
6 DILLINGER FRANCE S.A. v. UNITED STATES
their relative prices” to be “an unreasonable circular meth-
odology” because it “contravened the express requirements
of the statute which set forth the cost of production as an
independent standard for fair value.”
Id. at 1061;
see also
id. at 1060
(“The legislative history confirms the statute’s
unambiguous intent to provide cost of production as an in-
dependent yardstick for deciding whether home and export
sales prices are suitable for fair value comparisons.”). We
relied on section 1677b(e), the provision that “expressly co-
vers actual production costs,” for computing constructed
value, and section 1677b(b), which “disregards, under spec-
ified circumstances, home or export market sales at less
than the cost of production.”
Id. at 1059
(citing 19 U.S.C.
§ 1677b(b), (e) (1988)). Here, there is no dispute that Com-
merce relied on the likely selling price of non-prime plate
in its determination of cost. Thus, if IPSCO governs, Com-
merce’s reliance on Dillinger’s books and records was im-
permissible.
Commerce argues that IPSCO should not govern be-
cause the Tariff Act was amended to add § 1677b(f). When
Congress added § 1677b(f), Congress did not repeal
§§ 1677b(b) or (e), the sections we relied on in IPSCO,
which still require determination of “the cost of materials
and fabrication or other processing of any kind,”
id. § 1677b(e), 2
and there is no indication that Congress in-
tended for the addition of section 1677b(f) to overrule
IPSCO. “Section 224 of [the Uruguay Round Agreements
Act] add[ed] new section 773(f) to the [Tariff] Act to
2 Subsection (b) at the time of our decision in IPSCO
required determination of “cost of producing the merchan-
dise,”
IPSCO, 965 F.2d at 1060
(quoting 19
U.S.C. § 1677b(b) (1988)), and has since been amended to
require determination of “the cost of materials and of fab-
rication or other processing of any kind.” 19 U.S.C.
§ 1677b(b)(3)(A).
Case: 19-2395 Document: 93 Page: 7 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 7
incorporate the provisions of the [Antidumping Agree-
ment 3] regarding the calculation of costs. In addition, sec-
tion 773(f) harmonize[d] the methods of calculating cost for
purposes of examining sales below cost and determining
constructed value.” H.R. Rep. No. 103-826, pt. 1, at 91
(1994). The legislative history indicates Congress’s clear
intent for Commerce to “continue its current practice of cal-
culating costs,”
id., and that such
costs should “accurately
reflect the resources actually used in the production of the
merchandise in question,” S. Rep. No. 103-412, at 75
(1994).
In codifying this rule, Congress noted that “[u]nder
[then-]existing U.S. law and practice, Commerce normally
calculate[d] costs on the basis of records kept by the ex-
porter or producer of the merchandise, provided such rec-
ords [were] kept in accordance with [GAAP] of the
exporting (or producing) country and reasonably reflect[ed]
the costs associated with the production and sale of the
merchandise” and that “[u]nder new section [1677b(f)],
Commerce [would] continue its current practice.” H.R.
Rep. No. 103-826, pt. 1, at 90–91.
Congress also concluded that “[c]osts shall be allocated
using a method that reasonably reflects and accurately
captures all of the actual costs incurred in producing and
selling the product under investigation or review.” State-
ment of Administrative Action (“SAA”), H.R. Rep. 103-316
(1994), as reprinted in 1994 U.S.C.C.A.N. 4040, 4172. Con-
gress “expect[ed] [Commerce], in determining whether a
producer’s or exporter’s records reasonably reflect the costs
associated with the production and sale of the product in
3 The Antidumping Agreement means the Agree-
ment on Implementation of Article VI of the General Agree-
ment on Tariffs and Trade 1994. Uruguay Round
Agreements Act §§ 121(9), 101(d)(7), PL 103–465, Decem-
ber 8, 1994, 108 Stat 4809.
Case: 19-2395 Document: 93 Page: 8 Filed: 12/03/2020
8 DILLINGER FRANCE S.A. v. UNITED STATES
question, to examine the recorded production costs with a
view to determining as closely as possible the costs that
most accurately reflect the resources actually used in the
production of the merchandise in question.” S. Rep. No.
103-412, at 75. Thus, the legislative history of section
1677b(f), consistent with its plain meaning, indicates Con-
gress intended that Commerce rely on a producer’s or ex-
porter’s books and records if they are in accordance with
GAAP and reasonably reflect the costs of production.
Nonetheless, Commerce argues that our decision in
Thai Pineapple, decided after the Tariff Act was amended
to include section 1677b(f) (but deciding issues raised un-
der the pre-amended Tariff Act), supports Commerce’s po-
sition here. In Thai Pineapple, in determining costs of
production and constructed value, Commerce relied on a
producer’s allocation methodology for “material cost” for
pineapple fruit, which the producer used to make canned
pineapple products and juice
products. 187 F.3d at 1366
.
The producer’s books and records “allocate[ed] a range of
82 to 91% of the pineapple fruit costs to canned pineapple
fruit production, and 9 to 18% to production of juice prod-
ucts.”
Id. “Commerce’s allocation of
the cost of the raw
pineapple fruit between canned pineapple fruit and other
products was not based on the selling price or output value
of these products.”
Id. at 1369.
“Thus, unlike [IPSCO], the selling price of the [subject]
products was not a factor in determining the cost of raw
material component in Commerce’s calculation of [costs of
production and constructed value].”
Id. Instead, “Com- merce’s
methodology reflected the raw material allocations
of [the producer] as shown by their books and records.”
Id. We held that,
“[t]o the extent that the records of [the pro-
ducer] reasonably reflect the costs of production, Com-
merce may rely upon them.”
Id. at 1367.
The government
relies on footnote 5 of Thai Pineapple, but that part of the
decision simply “note[d] that this rule is now codified in 19
U.S.C. § 1677b(f)(1)(A) (1996).”
Id. at 1366
n.5. Thai
Case: 19-2395 Document: 93 Page: 9 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 9
Pineapple is not inconsistent with IPSCO as to the deter-
mination of production costs. 4
The government also relies on PSC VSMPO-Avisma
Corp. v. United States,
688 F.3d 751
(Fed. Cir. 2012), but
that case does not support Commerce’s position. In PSC,
we affirmed Commerce’s method of basing the costs of chlo-
rine “upon what [the exporter] would have to spend to pur-
chase the chlorine necessary for its titanium production
process.”
Id. at 757.
Thus, PSC concerned the use of pur-
chase price to determine cost rather than using likely sell-
ing price of the end product to allocate costs as here.
There is no dispute that Dillinger’s records were kept
in accordance with GAAP. However, Dillinger’s records
that Commerce relied on for the cost of non-prime and
prime plate were based on “likely selling price” rather than
costs of producing and selling the merchandise. J.A. 1347.
Because Dillinger’s books and records were based on “likely
selling price” rather than cost of production
, id., Commerce erred in
relying on them. A remand is required for Com-
merce to determine the actual costs of prime and non-prime
products.
4 To the extent that Thai Pineapple disagreed with
IPSCO, it was to distinguish Commerce’s use of a weight-
based methodology in IPSCO. In IPSCO, we sustained
Commerce’s weight-based allocation because “[t]he steel
pipe was manufactured from the same raw material and
underwent one production process,” but in Thai Pineapple,
we found that “pineapple fruit [was] not a homogeneous
raw material like the raw material used to make the pipe
in [IPSCO], and the production process [was] entirely dif-
ferent for the various pineapple products produced.” Thai
Pineapple, 187 F.3d at1369. Accordingly, we found that
Commerce’s determination not to use a weight-based meth-
odology was reasonable.
Id. Case: 19-2395 Document:
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10 DILLINGER FRANCE S.A. v. UNITED STATES
II
We next consider Dillinger’s argument that Com-
merce’s use of the average-to-transaction method in deter-
mining the dumping margin was improper. The dumping
margin is the “amount by which the normal value exceeds
the export price or constructed export price of the subject
merchandise.” 19 U.S.C. § 1677(35)(A). To determine the
dumping margin, Commerce uses one of three methods: the
average-to-average method, the transaction-to-transaction
method, and the average-to-transaction method. 5 Here,
Commerce’s decision used the average-to-transaction
5 The average-to-average method compares the
weighted average of the normal values to the weighted av-
erage of the export prices. 19 U.S.C. § 1677f-1(d)(1)(A)(i).
Commerce “will use the average-to-average method unless
[Commerce] determines another method is appropriate in
a particular case.” 19 C.F.R. § 351.414(c)(1) (2020).
The transaction-to-transaction method compares the
normal values of individual transactions to the export
prices of individual transactions. 19 U.S.C. § 1677f-
1(d)(1)(A)(ii). Commerce “will use the transaction-to-trans-
action method only in unusual situations, such as when
there are very few sales of subject merchandise and the
merchandise sold in each market is identical or very simi-
lar or is custom-made.” 19 C.F.R. § 351.414(c)(2).
The average-to-transaction method compares weighted
average of the normal values to the export prices of indi-
vidual transactions for comparable merchandise. 19
U.S.C. § 1677f-1(d)(1)(B). Commerce may use the average-
to-transaction method if “there is a pattern of export prices
. . . for comparable merchandise that differ significantly
among purchasers, regions, or periods of time,” and Com-
merce “explains why such differences cannot be taken into
account using [the average-to-average or transaction-to-
transaction methods].”
Id. § 1677f-1(d)(1)(B)(i)–(ii). Case:
19-2395 Document: 93 Page: 11 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 11
method, which may be used if “there is a pattern of export
prices . . . for comparable merchandise that differ signifi-
cantly among purchasers, regions, or periods of time.”
19 U.S.C. § 1677f-1(d)(1)(B)(i). This provision addresses
situations “where targeted dumping may be occurring.”
SAA, 1994 U.S.C.C.A.N. at 4178. Targeted dumping occurs
where “an exporter may sell at a dumped price to particular
customers or regions, while selling at higher prices to other
customers or regions.”
Id. at 4177–78.
To determine a pattern of export prices for comparable
merchandise that differ significantly among purchasers,
regions, or periods of time, Commerce used the Cohen’s d
test. The Cohen’s d coefficient is a “generally recognized
statistical measure” of the extent of the difference between
the weighted-average price of a test group and the
weighted-average price of a comparison group. J.A. 958.
Here, the test groups were export prices for a purchaser,
region, and time period, and the corresponding comparison
groups were all other export prices (i.e., the export sales to
all other purchasers, regions, or time periods). If the Co-
hen’s d coefficient is equal to or greater than 0.8, then Com-
merce considers the difference between the average prices
of the test group and the average prices of the comparison
group to be significant, and thus the test group passes the
Cohen’s d test.
Commerce next applied the “ratio test,” in which Com-
merce calculated the sales value for all test groups that
passed the Cohen’s d test. “If the value of sales to purchas-
ers, regions, and time periods that pass the Cohen’s d test
account for 66 percent or more of the value of total sales,
then the identified pattern of prices that differ significantly
supports the consideration of the application of the aver-
age-to-transaction method to all sales as an alternative to
the average-to-average method.” J.A. 959.
In its final determination, Commerce determined that
95.78 percent of Dillinger’s U.S. sales passed the Cohen’s d
Case: 19-2395 Document: 93 Page: 12 Filed: 12/03/2020
12 DILLINGER FRANCE S.A. v. UNITED STATES
test and that this “confirm[ed] the existence of a pattern of
prices that differ[ed] significantly among purchasers, re-
gions, or time periods.”
Id. at 1306.
Commerce accordingly
used the average-to-transaction method for all U.S. sales
to calculate the dumping margin.
Dillinger raises two challenges to Commerce’s determi-
nation of a pattern. First, Dillinger contends that Com-
merce’s use of the Cohen’s d test and the ratio test to
determine a pattern “ignor[ed] the word ‘pattern’ in section
1677f-1(d)(1)(B)(i).” Appellant’s Br. 15. Dillinger appears
to argue that Commerce’s ratio test improperly aggregated
sales across categories (purchasers, regions, or time peri-
ods) and that comparing aggregated sales across categories
cannot be done to establish a pattern.
Id. at 21
(stating
Commerce’s methodology “does not analyze the categories
of purchasers, regions and time periods individually”).
Such aggregation is not inconsistent with the statute,
which requires that Commerce determine that there is “a
pattern of export prices . . . for comparable merchandise
that differ significantly among purchasers, regions, or pe-
riods of time.” 19 U.S.C. § 1677f-1(d)(1)(B)(i). The statute
is silent as to how Commerce must determine a “pattern.”
See
id. §§ 1677, 1677f-1.
“[I]f the statute is silent or ambig-
uous with respect to the specific issue, the question for the
court is whether the agency’s answer is based on a permis-
sible construction of the statute.” Chevron, U.S.A., Inc. v.
Nat. Res. Def. Council, Inc.,
467 U.S. 837
, 843 (1984). We
find that Commerce’s interpretation of pattern was reason-
able.
Dillinger relies on a determination from the World
Trade Organization (“WTO”), which reached the opposite
conclusion in interpreting Article 2.4.2 of the Anti-Dump-
ing Agreement. Appellate Body Report, United States –
Antidumping and Countervailing Measures on Large Resi-
dential Washers from Korea, WTO Doc. WT/DS464/AB/R,
at 25–31 (adopted Sep. 7, 2016). The WTO Appellate Body
Case: 19-2395 Document: 93 Page: 13 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 13
determined that Commerce’s methodology of using the Co-
hen’s d test and the ratio test “is inconsistent” with deter-
mining “a pattern of export prices which differ significantly
among different purchasers, regions, or time periods” be-
cause the methodology “aggregates prices found to differ
among different purchasers, among different regions, and
among different time periods for the purposes of identify-
ing a single pattern.”
Id. at 25, 31.
The WTO “oversee[s] the application of the various
WTO agreements and serve[s] as the framework for mem-
ber governments to conduct their trade relations under
those agreements.” SAA, 1994 U.S.C.C.A.N. at 4043.
“WTO decisions are ‘not binding on the United States,
much less this court.’” Corus Staal BV v. Dep’t of Com-
merce,
395 F.3d 1343
, 1348 (Fed. Cir. 2005) (quoting Tim-
ken Co. v. United States,
354 F.3d 1334
, 1344 (Fed. Cir.
2004)). 6
Dillinger’s other arguments regarding the interpreta-
tion of “pattern” are not adequately developed, and we de-
cline to consider them. See Agile Def., Inc. v. United States,
959 F.3d 1379
, 1384 n.* (Fed. Cir. 2020) (because party
“fail[ed] to adequately develop [an] argument,” the court
“decline[d] to consider it on appeal”); SmithKline Beecham
Corp. v. Apotex Corp.,
439 F.3d 1312
, 1320 (Fed. Cir. 2006)
(declining to consider argument that “[did] not amount to a
developed argument”).
6 Dillinger also argues that Commerce’s application
of the Cohen’s d test applied “an irrebuttable presumption”
that a 0.8 Cohen’s d coefficient indicates that a price differ-
ence is significant. Appellant’s Br. 24. The record does not
indicate that Commerce’s use of the Cohen’s d test or its
thresholds is irrebuttable. To the contrary, Commerce con-
sidered Dillinger’s objections to its methodology and pro-
vided its reasons for rejecting them.
Case: 19-2395 Document: 93 Page: 14 Filed: 12/03/2020
14 DILLINGER FRANCE S.A. v. UNITED STATES
Second, Dillinger argues that Commerce’s use of the
Cohen’s d test to determine a pattern among export prices
was not in accordance with the law because Dillinger’s
products are custom-made. Thus, in Dillinger’s view, Com-
merce was not permitted to use the average-to-transaction
test and instead should have used the default average-to-
average test. 7 But there is nothing in § 1677f-1 or the reg-
ulations promulgated thereunder that requires Commerce
to consider custom products differently when determining
whether “there is a pattern of export prices . . . that differ
significantly among purchasers, regions, or periods of time”
so long as such comparison is made between “comparable
merchandise.” 19 U.S.C. § 1677f-1(d)(1)(B).
Here, Dillinger has not shown how Commerce failed to
use “comparable merchandise.” “Comparable merchan-
dise” was defined by product control numbers (“CON-
NUMs”), which have certain “physical characteristics” that
were subject to notification and comment during Com-
merce’s investigation. J.A. 958, 1310. In making its com-
parison, Commerce rejected Dillinger’s assertion that “its
made-to-order products are inferably so unique and em-
brace such a wide range of grades within a given
[CONNUM] that any comparison of U.S. prices on a
CONNUM basis must take into account these inter-
CONNUM variations.”
Id. at 1309–10.
We see no error in
Commerce’s determination.
7 Dillinger does not argue on appeal that Commerce
should have used the transaction-to-transaction method,
even though the regulations state that Commerce “will use
the transaction-to-transaction method only in unusual sit-
uations, such as when there are very few sales of subject
merchandise and the merchandise sold in each market is
identical or very similar or is custom-made.” 19 C.F.R.
§ 351.414(c)(2) (emphasis added).
Case: 19-2395 Document: 93 Page: 15 Filed: 12/03/2020
DILLINGER FRANCE S.A. v. UNITED STATES 15
III
Finally, we consider Dillinger’s argument that Com-
merce erred in determining that Dillinger’s factory sales
and sales from its affiliated service centers constituted a
single level of trade in France and thus concluding that a
level of trade adjustment was not warranted.
Commerce is required to establish normal value “to the
extent practicable, at the same level of trade as the export
price.” 19 U.S.C. § 1677b(a)(1)(B)(i). If Commerce is una-
ble to find sales in the foreign market at the same level of
trade as the sales in the United States, normal value shall
be “increased or decreased to make due allowance for any
difference (or lack thereof) between the export price . . . and
[normal value] that is shown to be wholly or partly due to
a difference in level of trade.”
Id. § 1677b(a)(7)(A). “[T]he
level of trade adjustment is designed to ensure that the
normal value and U.S. price are being compared . . . at the
same level of trade, that is, at the same marketing stage in
the chain of distribution that begins with the manufac-
turer.” Micron Tech., Inc. v. United States,
243 F.3d 1301
,
1314 (Fed. Cir. 2001). Commerce will grant a level of trade
adjustment where “there is a difference between the actual
functions performed by the sellers at the different levels of
trade in the two markets.” SAA, 1994 U.S.C.C.A.N. at
4168.
Dillinger makes sales directly from its factories to end
users and distributors and from affiliated service centers
to downstream customers. Dillinger argues that Com-
merce erred in determining that inventory maintenance
performed on service center sales did not require a finding
of a separate level of trade. “Substantial differences in sell-
ing activities are a necessary, but not sufficient, condition
for determining that there is a difference in the stage of
marketing.” 19 C.F.R. § 351.412(c)(2). Commerce deter-
mined that inventory maintenance alone did not make a
substantial difference between the selling activities
Case: 19-2395 Document: 93 Page: 16 Filed: 12/03/2020
16 DILLINGER FRANCE S.A. v. UNITED STATES
commonly performed by Dillinger’s factories and service
centers, and we find this determination to be supported by
substantial evidence and in accordance with law.
In addition to the selling functions performed by its fac-
tories, Dillinger’s affiliated service centers also perform
service center functions such as cutting, sawing, drilling,
and bending. Dillinger argues that Commerce “improperly
ignored processing activities such as cutting and sawing of
plate into smaller sizes for resale.” Appellant’s Br. 51.
Commerce agreed that Dillinger’s service centers per-
formed service center functions such as cutting and sawing
“to make downstream sales.” J.A. 1330. It also determined
that “these items (i.e., cutting, sawing, drilling[,] and[]
bending) are not selling functions . . . contained in the list
provided in [Commerce’s] standard section A question-
naire. . . . Instead, . . . these items are performed in con-
nection with the further processing of the merchandise,
which are part of the cost to produce the downstream prod-
uct.”
Id. We see no
error in Commerce’s refusal to consider
these processing activities to be selling functions.
CONCLUSION
We have considered the parties’ remaining arguments
and find them unpersuasive. We vacate the Trade Court’s
judgment sustaining Commerce’s decision to rely on Dil-
linger’s books and records to determine cost. We affirm the
Trade Court’s judgment sustaining Commerce’s determi-
nations of the pattern requirement of the average-to-trans-
action method and level of trade. We remand the case to
the Trade Court for Commerce to recalculate the dumping
margin consistent with this opinion.
AFFIRMED IN PART, VACATED IN PART, AND
REMANDED
COSTS
No costs. |
4,639,172 | 2020-12-03 16:01:00.329398+00 | null | https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv1171-28 | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
________________________________
)
WAYNE R. WERTH, )
)
Plaintiff, )
)
v. ) Civil Action No. 18-1171 (EGS)
)
U.S. DEPARTMENT OF JUSTICE et al., )
)
)
Defendants. )
________________________________ )
MEMORANDUM OPINION
In June 2018, plaintiff, a federal prisoner appearing pro se, filed this action to compel the
United States Marshals Service to respond to his Freedom of Information Act (“FOIA”) request
for documentation concerning materials he allegedly lost during an airlift. In light of the
complaint, the Marshals Service conducted a search, released one of eighty-nine potentially
responsive records, and moved for summary judgment. Initially, the Court denied summary
judgment because the record raised questions about the declarant’s competency to testify about
the matters at hand. See ECF No. 21, Mem. Op. and Order at 4-5 (finding “nothing” to suggest
that Defendant’s declarant “coordinated the search, conducted the search, or reviewed the 89
potentially responsive pages and determined one to be responsive”). Pending before the Court is
Defendants’ Renewed Motion for Summary Judgment, ECF No. 24. Plaintiff “waives his right
1
to respond” to the motion. Resp. to Order, ECF No. 26. 1 For the following reasons, defendants’
motion will be granted.
The background and legal framework are set forth in the court’s initial ruling and bear no
repeating here. That said, the Court must “determine for itself whether the record and any
undisputed material facts justify granting summary judgment.” Winston & Strawn, LLP v.
McLean,
843 F.3d 503
, 505 (D.C. Cir. 2016) (internal quotation marks and citation omitted)).
Defendants have supplemented the record with the Declaration of Associate General
Counsel Charlotte Luckstone (“Luckstone Decl.”), who serves as the FOIA/PA Officer for the
Marshals Service. Luckstone Decl. ¶ 1, ECF No. 22-1. By his waiver, plaintiff admits that the
Service (1) conducted a reasonably adequate search for responsive records and (2) released “the
sole page relating to Plaintiff’s property at the airlift—a Field Report pertaining to a property
inquiry.” Stmt. of Undisputed Material Facts (“SOMF”) ¶ 21; see Luckstone Decl. ¶¶ 8-17
(describing search and retrieval methods). In addition, the Service properly invoked FOIA
Exemption 6 to redact the identifying information of two law enforcement personnel. 2 SOMF ¶
23; see 5 U.S.C. § 552(b)(6) (exempting “personnel” files from disclosure); Nat'l Ass'n of
Retired Fed. Employees v. Horner,
879 F.2d 873
, 875 (D.C. Cir. 1989) (because FOIA
disclosures are to “the whole world,” the “privacy interest of an individual in avoiding the
unlimited disclosure of his or her name and address is significant”). Therefore, the Court may
1
Plaintiff’s response is to the order duly advising him about the consequences of failing to respond
to defendant’s dispositive motion. See Order, ECF No. 25.
2
The Court need not address defendants’ withholding of the same identifying information
under FOIA Exemption (7)(C) but finds it properly justified. See Defs.’ Mem. at P. & A at 7-11,
ECF No. 24-2.
2
appropriately grant summary judgment to the defendants. A separate order accompanies this
Memorandum Opinion.
SIGNED: EMMET G. SULLIVAN
UNITED STATES DISTRICT JUDGE
Date: December 3, 2020
3 |
4,639,173 | 2020-12-03 16:02:13.234341+00 | null | http://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2020/JV20-0220%20-%20Lara%20S.pdf | NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
LARA S., Appellant,
v.
DEPARTMENT OF CHILD SAFETY, O.S., O.S., Appellees.
No. 1 CA-JV 20-0220
FILED 12-3-2020
Appeal from the Superior Court in Maricopa County
No. JD21161
JS20335
The Honorable Robert Ian Brooks, Judge
AFFIRMED
COUNSEL
John L. Popilek, Scottsdale
Counsel for Appellant
Arizona Attorney General’s Office, Phoenix
By Sandra L. Nahigian
Counsel for Appellee Department of Child Safety
LARA S. v. DCS, et al.
Decision of the Court
MEMORANDUM DECISION
Presiding Judge Samuel A. Thumma delivered the decision of the Court, in
which Judge D. Steven Williams and Judge David D. Weinzweig joined.
T H U M M A, Judge:
¶1 Lara S. (Mother) challenges the superior court’s order
terminating her parental rights to her biological twin children. Because
Mother has shown no error, the order is affirmed.
FACTS AND PROCEDURAL HISTORY
¶2 Mother is 31 years old. She began using methamphetamines
when she was 12. Other than when she has been incarcerated, Mother has
not been sober for more than a year or two since then. Mother had three
children before the twins. Her first child was born substance–exposed in
late 2011, and the Department of Child Services (DCS) took custody of the
child. Mother refused to participate in services, including for substance
abuse, and her parental rights were terminated in late 2012. Mother’s
second child, V.F., was born substance–exposed in late 2018, and DCS took
custody of the child. Again, Mother refused to participate in services and
her parental rights to V.F. were terminated in early 2020, based on
substance abuse, abandonment, six months’ time-in-care and length of
felony prison sentence. Mother’s third child lives with his father in South
Carolina; Mother’s parental rights to that child have not been terminated.
¶3 In July 2019, Mother was arrested for absconding from
probation (for a possession of heroin offense) and a new offense of unlawful
flight from law enforcement. By that time, Mother had been on probation
for more than eight years. She had participated in many outpatient
substance abuse treatment programs, but continued to abuse drugs,
showing “a lack of commitment to living a drug-free lifestyle.” While in
custody for the probation violation, Mother completed several counseling
and substance-abuse treatment programs. Within a month of being
released, however, Mother returned to using methamphetamine. In
September 2019, Mother was sentenced to two years in prison, with an early
release date in October 2020 and a maximum end date in April 2021.
2
LARA S. v. DCS, et al.
Decision of the Court
¶4 When initially incarcerated, Mother tested positive for opiates
and apparently first learned she was pregnant with the twins, who were
born in December 2019. DCS took custody of the twins soon after they were
born and filed both a dependency petition and a petition to terminate her
parental rights to the twins. DCS alleged two grounds for terminating
parental rights: substance abuse and prior termination for the same cause
within two years. DCS also alleged that termination would be in the best
interests of the twins.
¶5 At a one-day termination adjudication in July 2020, Mother
testified she had been using drugs up until she was incarcerated in July 2019
and admitted she would have continued to use drugs if she had not been
arrested, meaning her children would likely have been born substance-
exposed. The court terminated Mother’s parental rights to the twins on the
grounds alleged and because termination would be in the twins’ best
interests. This court has jurisdiction over Mother’s timely appeal pursuant
to Article 6, Section 9 of the Arizona Constitution, Arizona Revised Statutes
(A.R.S.) sections 8-235(A), 12-120.21(A) and 12-2101(A) and Arizona Rules
of Procedure for the Juvenile Court 103–104 (2020).1
DISCUSSION
¶6 As applicable here, to terminate parental rights, a court must
find by clear and convincing evidence that at least one statutory ground set
out in A.R.S. § 8-533(B) has been proven and must find by a preponderance
of the evidence that termination is in the best interests of the child. See Kent
K. v. Bobby M.,
210 Ariz. 279
, 288 ¶ 41 (2005); Michael J. v. Ariz. Dep’t of Econ.
Sec.,
196 Ariz. 246
, 249 ¶ 12 (2000). Because the superior court “is in the best
position to weigh the evidence, observe the parties, judge the credibility of
witnesses, and resolve disputed facts,” this court will affirm an order
terminating parental rights as long as it is supported by reasonable
evidence. Jordan C. v. Ariz. Dep’t of Econ. Sec.,
223 Ariz. 86
, 93 ¶ 18 (App.
2009) (citation omitted).
1Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.
3
LARA S. v. DCS, et al.
Decision of the Court
I. Mother Has Not Shown the Superior Court Erred in Finding
Terminating Her Parental Rights to the Twins Was the “Same
Cause” as the Prior Termination.
¶7 The parent-child relationship may be terminated when a
parent had her “parental rights to another child terminated within the
preceding two years for the same cause and is currently unable to discharge
parental responsibilities due to the same cause.” A.R.S. § 8-533(B)(10); see
also Mary Lou C. v. Ariz. Dep’t of Econ. Sec.,
207 Ariz. 43
, 48–49 ¶¶ 11–13
(App. 2004). The “same cause” requirement refers to the same underlying
factual cause that led to the prior termination. See Mary Lou
C., 207 Ariz. at 48
¶ 11.
¶8 The court terminated Mother’s parental rights to V.F. on
various grounds, including chronic substance abuse. The court found
Mother had a history of chronic substance abuse, beginning at age 12 and
continuing until the trial. The court also found DCS made reasonable efforts
to provide Mother with appropriate services (including substance–abuse
treatment) but that Mother refused to participate. Given these findings, the
court found Mother’s substance abuse would remain an issue in the future.
¶9 DCS alleged that the cause for terminating Mother’s parental
rights to both V.F. and the twins included chronic substance abuse. In
terminating Mother’s parental rights to the twins, the court held that “[t]he
cause of this termination [is] virtually indistinguishable from [V.F.’s]
termination. Mother remains incarcerated, has not demonstrated that she
can maintain sobriety outside of a controlled environment, and has
maintained almost no contact with” DCS. Mother argues the fact that she is
now addressing mental health issues underlying her substance abuse
differentiates the present circumstances from those that led to the
termination of her parental rights to V.F. However, the record supports the
court’s determination that Mother’s chronic drug abuse would continue,
finding “the path to parenting could be a period of years given her history
of substance abuse.” Accordingly, the court did not abuse its discretion in
finding, by clear and convincing evidence, that Mother is currently unable
to parent the twins because of the same cause that led to the termination of
her parental rights to V.F.2
2 Given this conclusion, this court need not address Mother’s arguments
regarding the other statutory ground found by the superior court. See
Michael J. v. Ariz. Dep’t of Econ. Sec.,
196 Ariz. 246
, 251 ¶ 27 (2000).
4
LARA S. v. DCS, et al.
Decision of the Court
II. Mother Has Not Shown the Court Erred in Finding Termination
Was in the Twins’ Best Interests.
¶10 The best interests determination “focuses primarily upon the
interest of the child, as distinct from those of the parent.” Kent
K., 210 Ariz. at 287
¶ 37. “[A] determination of the child’s best interest[s] must include a
finding as to how the child would benefit from a severance or be harmed
by the continuation of the relationship.” Maricopa Cty. Juv. Action No. JS-
500274,
167 Ariz. 1
, 5 (1990) (citing cases). A best interests finding may be
based on “the immediate availability of an adoptive placement.” Audra T.
v. Ariz. Dep’t of Econ. Sec.,
194 Ariz. 376
, 377 ¶ 5 (App. 1998). Maintaining
sibling relationships also supports a best interests finding. See
id. at 378 ¶ 6. ¶11
Here, the twins and V.F. currently are in a familial placement
that is looking to adopt the twins. Although Mother has made some
progress in addressing her mental health issues, the court found that
delaying permanency for an extended (and perhaps indefinite) period was
not in the twins’ best interests. See In re. Maricopa Cty. Juv. Action No. JS-
501568,
177 Ariz. 571
, 577 (App. 1994). Accordingly, Mother has not shown
the court erred in finding that DCS proved termination was in the twins’
best interests.
CONCLUSION
¶12 The superior court’s order terminating Mother’s parental
rights to the twins is affirmed.
AMY M. WOOD • Clerk of the Court
FILED: AA
5 |
4,639,140 | 2020-12-03 15:00:29.463859+00 | null | http://media.ca11.uscourts.gov/opinions/pub/files/201814096.1.pdf | USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 1 of 46
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-14096
________________________
D.C. Docket No. 4:16-cv-00511-MW-CAS
REIYN KEOHANE,
Plaintiff - Appellee,
versus
FLORIDA DEPARTMENT OF CORRECTIONS SECRETARY,
Defendant - Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Florida
________________________
Before WILLIAM PRYOR, Chief Judge, WILSON, MARTIN, JORDAN,
ROSENBAUM, JILL PRYOR, NEWSOM, BRANCH, GRANT, LUCK, LAGOA,
and BRASHER, Circuit Judges.
BY THE COURT:
A petition for rehearing having been filed and a member of this Court in
active service having requested a poll on whether this appeal should be reheard by
the Court sitting en banc, and a majority of the judges in active service on this
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 2 of 46
Court having voted against granting rehearing en banc, it is ORDERED that this
appeal will not be reheard en banc.
2
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 3 of 46
WILLIAM PRYOR, Chief Judge, joined by BRANCH, Circuit Judge, statement
respecting the denial of rehearing en banc:
I voted with the majority not to rehear this appeal en banc. I write separately
to explain why my dissenting colleague is wrong to assert that a grant of en banc
review is somehow objectively “demand[ed]” or is “an obligation,” Dissenting Op.
at 23, 45–46, in this appeal or any other. No statute, precedent, rule, or internal
operating procedure imposes such an obligation. The decision to grant en banc
review is always discretionary and disfavored.
No source of law obligates us to hear any appeal en banc. To be sure, a
statute grants us the authority to hear appeals en banc. See 28 U.S.C. § 46(c). And
a rule elucidates some procedural aspects of en banc review. See Fed. R. App. P.
35. We have added details of our own. See 11th Cir. R. 35-1–35-10; Fed. R. App.
P. 35, IOP 1–9. But none of those rules requires us to hear any appeals en banc.
Precedent points in the same direction. The Supreme Court long ago
explained that the statute permitting en banc review “vests in the court[s of
appeals] the power to order hearings en banc.” W. Pac. R.R. Case,
345 U.S. 247
,
250 (1953). But “[i]t goes no further. It neither forbids nor requires each active
member of a Court of Appeals to entertain each petition for a hearing or rehearing
en banc.”
Id. Ten years later,
the Supreme Court reaffirmed this view: “the rights
of the litigant go no further than the right to know the administrative machinery
3
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 4 of 46
that will be followed and the right to suggest that the en banc procedure be set in
motion in his case.” Shenker v. Balt. & Ohio R.R. Co.,
374 U.S. 1
, 5 (1963). And
more recently, the Supreme Court acknowledged yet again that “[r]ehearing [e]n
banc is a discretionary procedure employed only to address questions of
exceptional importance or to maintain uniformity among Circuit decisions.”
Missouri v. Jenkins,
495 U.S. 33
, 46 n.14 (1990) (emphasis added); see also Bryan
A. Garner et al., The Law of Judicial Precedent § 61, at 496 (2016) (“The decision
to grant a petition for hearing or rehearing en banc, or to initiate en banc review on
the court’s own motion, is discretionary.”); 16AA Charles A. Wright et al., Federal
Practice and Procedure § 3981.1, at 496 (5th ed. 2020) (“Consideration en banc
rests in the discretion of the court of appeals.”). The Supreme Court has described
this process as “essentially a policy decision of judicial administration.” Moody v.
Albemarle Paper Co.,
417 U.S. 622
, 627 (1974).
The grant of en banc review is and should be rare. The Federal Rules of
Appellate Procedure say so: “An en banc hearing or rehearing is not favored . . . .”
Fed. R. App. P. 35(a). Practical considerations confirm why: “[T]he institutional
cost of rehearing cases en banc is extraordinary. . . . It is an enormous distraction
to break into [our regular] schedule and tie up the entire court to hear one case en
banc.” Bartlett ex rel. Neuman v. Bowen,
824 F.2d 1240
, 1243 (D.C. Cir. 1987)
(Edwards, J., concurring in denial of rehearing en banc). After all, a panel of three
4
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 5 of 46
judges has already spent considerable resources deciding the appeal once. For that
reason, we and our sister circuits have said again and again that the “heavy
artillery” of en banc review should be used rarely. United States v. Hogan,
986 F.2d 1364
, 1369 (11th Cir. 1993); see, e.g., Mitts v. Bagley,
626 F.3d 366
, 369–71
(6th Cir. 2010) (Sutton, J., concurring in denial of rehearing en banc); Kane County
v. United States,
950 F.3d 1323
, 1324 (10th Cir. 2020) (Phillips, J., concurring in
denial of rehearing en banc); Church of Scientology of Cal. v. Foley,
640 F.2d 1335
, 1339–42 (D.C. Cir. 1981) (en banc) (Robinson, J., dissenting).
Because en banc review is both discretionary and disfavored, reasonable
minds can differ about whether it is appropriate in a particular case. Indeed, the
problem of deciding whether to grant en banc review is evergreen; a judge
wrestling with the decision decades ago remarked that sometimes “one judge’s
case of ‘exceptional importance’ is another judge’s ‘routine or run-of-the-mill’
case.”
Bartlett, 824 F.2d at 1242
(Edwards, J., concurring in denial of rehearing en
banc). Judges can reasonably disagree about the best way to allocate our judicial
resources. And, of course, I never take any colleague’s disagreement personally.
Cf. Dissenting Op. at 24 n.1. For the same reason, disagreements about whether to
grant rehearing do not warrant attacks on the integrity of judges or their
commitment to the rule of law nor, good grief, on the legitimacy of this Court. See
id. at 23–24
& n.1, 28–29, 41–42, 45.
5
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 6 of 46
NEWSOM, Circuit Judge, joined by LUCK, Circuit Judge, concurring in the denial
of rehearing en banc:
I offer the following pre-buttal to Judge Rosenbaum’s dissent from the
denial of rehearing en banc.
Before jumping into the merits, let me say this by way of introduction:
More often than not, any writing’s persuasive value is inversely proportional to its
use of hyperbole and invective. And so it is with today’s dissental—which, rather
than characterizing, I’ll let speak for itself.1 Among other things, the dissental
accuses me—as the author of the panel opinion—of “inaccurately purport[ing]”
(and alternatively “claiming”) “to apply the governing prior precedent” in Thomas
v. Bryant,
614 F.3d 1288
(11th Cir. 2010), “reimagin[ing]” Thomas’s holding,
construing Thomas “as [I] pleased,” “pretending” that Thomas sanctioned a
standard of appellate review that it “demonstrably did not,” “distort[ing] beyond
recognition” this Court’s prior-panel-precedent rule and “remold[ing]” it into an
“unrecognizable and dangerous form,” and now, in this opinion, of engaging in
“distraction tactics.” Rosenbaum Dissenting Op. at 23, 24, 26, 28, 30, 32, 42, 43,
44.
1
For the most part, I’ll use the term “dissental” to refer to Judge Rosenbaum’s dissent from the
denial of rehearing en banc, thereby distinguishing it from Judge Wilson’s panel-stage dissent.
See Alex Kozinski & James Burnham, I Say Dissental, You Say Concurral, 121 Yale L.J. Online
601 (2012).
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And there’s so much more where that came from. The dissental saves its
most biting criticism—and its most soaring rhetoric—for the seven judges who
voted against rehearing. All of us, the dissental not so subtly implies, cast our
votes simply because we “agree[d] . . . with the ultimate outcome” of the panel
opinion.
Id. at 24.
In declining to rehear the case, the dissental charges, we have
blessed a “rogue interpretation of the prior-precedent rule,” sanctioned a “critical
threat to the stability and predictability of the law,” and thereby unleashed
“potentially devastating consequences.”
Id. at 23, 45.
Strong words. Not a one of them true. Allow me to turn down the volume
and provide a little perspective.
I
I begin with a brief factual summary.
Reiyn Keohane is a Florida inmate currently serving a 15-year sentence for
attempted murder. Keohane was born anatomically male, but she began to identify
as female sometime during her preadolescent years. Beginning at age 14—and up
until the time she was incarcerated at 19—Keohane wore women’s clothing,
makeup, and hairstyles. At 16, she was formally diagnosed with gender dysphoria.
About six weeks before the arrest that eventually landed her in prison, Keohane
began hormone therapy under the care of a pediatric endocrinologist. See Keohane
v. Fla. Dep’t of Corr. Sec’y,
952 F.3d 1257
, 1262 (11th Cir. 2020).
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Upon her incarceration in a Florida prison, Keohane requested (as relevant
here) two forms of treatment. First, she sought to continue hormone therapy. That
request was initially denied for reasons that have no real bearing on my colleague’s
dissental and that I therefore won’t belabor. See
id. at 1262–63.
In short, though,
not long after Keohane filed suit, the Florida Department of Corrections reversed
course and referred Keohane to an outside endocrinologist, who immediately
prescribed her hormone therapy. See
id. at 1263.
The panel majority held that the
FDC’s decision to grant Keohane’s hormone-therapy request mooted her challenge
to the initial denial of that treatment. See
id. at 1270–72.
The dissental doesn’t
take issue with the panel’s mootness determination, so for present purposes we can
leave the hormone-therapy requests to the side. See Rosenbaum Dissenting Op. at
30 n.3.
Second, and separately, Keohane requested the ability to engage in “social
transitioning”—in particular, she asked to wear female undergarments and
makeup, and to grow out her hair in a long, feminine style.
Keohane, 952 F.3d at 1263
. The FDC refused Keohane’s social-transitioning requests on the grounds
that they violated prison policy—which required male inmates to wear “[u]nder
shorts” and to “have their hair cut short to medium uniform length at all times with
no part of the ear or collar covered,” Fla. Admin. Code r. 33-602.101(2), (4)—and
that they posed a security risk.
Keohane, 952 F.3d at 1263
. Most notably, the
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FDC expressed concern that an inmate wearing makeup and female undergarments
would inevitably become a target in an all-male prison, thereby endangering not
only the inmate but also the prison employees who would have to step in to protect
her.
Id. The FDC also
(and relatedly) determined that there were clear advantages
to maintaining uniformity in a prison setting, including the ability to more readily
detect contraband.
Id. As relevant to
the concerns raised in the dissental, the district court held that
by refusing Keohane’s social-transitioning requests, Florida prison authorities were
“deliberately indifferent” to Keohane’s serious medical needs in violation of the
Eighth Amendment.
Id. at 1264–65.
Accordingly, the court entered an injunction
ordering prison officials to “permit Ms. Keohane to socially transition by allowing
her access to female clothing and grooming standards.”
Id. at 1265.
On appeal,
the panel held (again, as relevant here) that the FDC did not violate the Eighth
Amendment by refusing to accommodate Keohane’s social-transitioning-related
requests, and we therefore vacated the district court’s injunction. See
id. at 1272
–
80.
In so doing, we reviewed de novo the district court’s ultimate determination
that there was an Eighth Amendment violation, and we reviewed subsidiary issues
of fact for clear error. See
id. at 1272
& n.8 (citing Thomas v. Bryant,
614 F.3d 1288
(11th Cir. 2010)).
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II
Next, a bit of necessary legal background: A deliberate-indifference claim
entails two components, the latter of which entails three sub-components. See
Hoffer v. Sec’y, Fla. Dep’t of Corr.,
973 F.3d 1263
, 1270 (11th Cir. 2020). First,
the inmate must establish “an objectively serious medical need”—that is, “one that
has been diagnosed by a physician as mandating treatment or one that is so obvious
that even a lay person would easily recognize the necessity for a doctor’s
attention”—that, “if left unattended, poses a substantial risk of serious harm.”
Id. (quotation marks omitted).
Second, the inmate must prove that prison officials
acted with deliberate indifference to that need by showing (1) that they had
“subjective knowledge of a risk of serious harm” and (2) that they “disregarded”
that risk (3) by conduct that was “more than gross negligence.”
Id. Here, there’s no
debate about the first component—everyone agrees that
Keohane’s gender dysphoria constitutes a serious medical need. Rather, the
parties’ dispute (and the dissental’s concern) hinges on the application of—and in
particular our review of—the second component.
III
Today’s dissental is predicated on an assertion that the panel only
“purport[ed] to follow,” but instead strategically “reimagine[d],” this Court’s
earlier decision in Thomas v. Bryant,
614 F.3d 1288
(11th Cir. 2010), when we
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held that the de novo—rather than the clear-error—standard of review applied to
the district court’s determination that prison officials violated the Eighth
Amendment in refusing Keohane’s social-transitioning requests. See Rosenbaum
Dissenting Op. at 26, 29, 43. And because the panel turned its back on Thomas,
the dissental asserts, it violated this Court’s prior-panel-precedent rule, pursuant to
which “a prior panel’s holding is binding on all subsequent panels unless and until
it is overruled or undermined to the point of abrogation by the Supreme Court or
by this court sitting en banc.” United States v. Archer,
531 F.3d 1347
, 1352 (11th
Cir. 2008).
With respect, the panel didn’t “reimagine” Thomas—let alone reimagine it
“as [we] pleased.” Rosenbaum Dissenting Op. at 26, 32. To the contrary, and the
dissental’s shade-throwing notwithstanding, the panel followed Thomas—or, to be
more precise, it followed the breadcrumbs left in Thomas’s various (and sometimes
conflicting) passages. Because the panel followed (rather than “flout[ed],” see
id. at 23)
Thomas, it didn’t violate the prior-panel-precedent rule. And because the
panel didn’t violate the prior-panel-precedent rule, the basis for the dissental
evaporates.
In an effort to paint a picture of lawless, result-oriented judging, the
dissental gives the misleading impression that Thomas is pellucidly clear—that it
just says, over and over and over, that the entirety of an Eighth Amendment claim,
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from stem to stern, is subject only to clear-error review, and that the panel, in the
face of all that clarity, willfully bulled ahead with de novo review instead. As is so
often the case, the reality is more complicated.
It is true, as the dissental says, that Thomas states that “[a] prison official’s
deliberate indifference is a question of fact which we review for clear
error.” 614 F.3d at 1312
; see also
id. at 1302
(“Subsidiary issues of fact are reviewed for clear
error.”). In our opinion, the panel candidly admitted as much. See
Keohane, 952 F.3d at 1272
n.8. But Thomas also holds—and I’ll just quote it directly—that an
appellate court must review the ultimate determination “that there was an Eighth
Amendment violation warranting equitable relief . . . de novo.”
Thomas, 614 F.3d at 1303
.
For better or worse, then, it fell to the panel to try to synthesize those
competing directives. And for what it’s worth—and totally unsurprisingly, I’m
sure—I think the panel got it exactly right. Let me explain.
A
Despite all the adverbs that the dissental uses to describe the Thomas
opinion—it says, in turn, that Thomas “expressly,” “demonstrably,”
“unmistakably,” “unambiguously,” and “repeatedly” prescribed across-the-board
clear-error review—everyone recognizes that some synthesis of Thomas’s mixed
messages is necessary. I recognize it. Judge Wilson’s panel dissent recognized it.
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And, yes, even Judge Rosenbaum’s dissental ultimately recognizes it. Here, it
seems to me, are the contenders:
1. The Panel Opinion. In tackling the case, the panel took seriously
Thomas’s dual directives (1) that an appellate court must review de novo the
district court’s ultimate determination “that there was an Eighth Amendment
violation warranting equitable relief” and (2) that “[s]ubsidiary issues of fact are
reviewed for clear
error.” 614 F.3d at 1302
. Accordingly, we held (1) that the
clear-error standard governs what we (echoing the Supreme Court) called
“historical facts—e.g., what happened, who knew what, how did they respond?”—
but (2) that “what the Eighth Amendment means—and requires in a given case—is
an issue squarely within the core competency of appellate courts” and is thus
subject to de novo review.
Keohane, 952 F.3d at 1272
–73 n.8. The panel opinion
therefore gives meaningful roles to both the de novo and clear-error standards, both
of which Thomas prescribes.
2. The Dissental’s Proposal. Today’s dissental suggests (without quite
saying) that, perhaps, de novo review applies only to the first, objective component
of a deliberate-indifference claim: “Thomas’s precise statements applying clear-
error review to all components of the subjective inquiry . . . are entirely
harmonious with Thomas’s statement that de novo review applies to the
overarching question of deliberate-indifference. The overarching standard of
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review is necessarily de novo because it incorporates within it de novo review of
the objective inquiry of the deliberate-indifference analysis.” Rosenbaum
Dissenting Op. at 33 (emphasis added); see also
id. at 34
n.5 (“[De novo review]
extends to the ultimate conclusion because the ultimate conclusion necessarily
includes within it a determination based on de novo review (the objective
inquiry).” (emphasis added)).
With respect, that can’t be correct. The Thomas opinion prescribes de novo
review in two separate places—with respect to two different issues. In one place, it
states that the constituent determination whether the deprivations suffered by the
inmate “are objectively ‘sufficiently serious’ to satisfy the objective prong” of the
deliberate-indifference standard “is a question of law” subject to de novo review.
Thomas, 614 F.3d at 1307
. In another, it states, separately, that the district court’s
ultimate determination “that there was an Eighth Amendment violation warranting
equitable relief”—i.e., the entirety of that determination—“is reviewed de novo.”
Id. at 1302.
So de novo review unquestionably applies to more than just the first
prong of the deliberate-indifference standard—it applies, somehow or another, to
the whole enchilada.
3. The Panel Dissent. Which brings me to the panel dissent’s reading of
Thomas. It seemed to appreciate that de novo review applies to the entirety of the
deliberate-indifference claim—to the ultimate determination that the Eighth
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Amendment was violated—but it left the de novo standard only a vanishingly
small role:
[I]f the district court, despite checkmarks in both the objective and
subjective boxes, still concluded that there was no Eighth Amendment
violation, we would lend no deference to this error. We would review
it de novo, and would no doubt reverse. And if the district court,
despite holding that one of the elements was not met, still concluded
that there was an Eighth Amendment violation, we would do the
same. We would review this error de novo, and no doubt
reverse. That is the ultimate conclusion that we review de novo.
Keohane, 952 F.3d at 1288
(Wilson, J., dissenting).
With respect, that can’t be right, either. As the panel majority explained in
our opinion, it is inconceivable that “the de novo standard’s sole office is to ensure
that the district court puts ‘checkmarks’ in the right boxes, and then doesn’t make a
truly boneheaded, asinine mistake.”
Id. at 1273
n.8.2
B
Among the available alternatives, it won’t surprise you to learn that I think
the panel’s synthesis of Thomas’s mixed messages is clearly correct. I say so for
2
The dissental suggests that the panel “g[ave] itself permission to reimagine what Thomas held
because it conclude[d] that what Thomas expressly said ‘cannot possibly be what we’ve meant.’”
Rosenbaum Dissenting Op. at 26 (quoting
Keohane, 952 F.3d at 1273
n.8). No. What the panel
said in the passage that the dissental snatch-quotes is that the panel dissent’s “checkmark”
interpretation of de novo review “cannot possibly be what we’ve meant when we have
repeatedly held that de novo review applies to the district court’s determination whether ‘there
was an Eighth Amendment violation warranting equitable relief.’”
Keohane, 952 F.3d at 1273
n.8 (quoting
Thomas, 614 F.3d at 1303
).
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reasons that I have already explained and that neither of my dissenting colleagues
has even engaged, let alone rebutted.
1
First, the panel’s interpretation gives meaningful roles to both the de novo
and clear-error standards—both of which, again, Thomas expressly prescribes. By
contrast, neither of my dissenting colleagues has any viable explanation of what
role de novo review should play in Eighth Amendment deliberate-indifference
cases. As between the courts of appeals and the district courts, who decides what
the Eighth Amendment ultimately means and requires in a given case? On their
theories, the district courts do—at which point the appellate courts’ hands are
pretty much tied. What an odd state of affairs. In what other circumstance do the
courts of appeals effectively cede to district courts the job of determining the
meaning and proper application of the Constitution?3
2
Second, “meaningful appellate review of a district court’s ultimate
constitutional holding follows straightaway from Supreme Court precedent
3
I note that while a holding that clear-error review applies to the entirety of the deliberate-
indifference analysis—and effectively binds us to the district courts’ determinations—might
serve Keohane well in this particular case, it would be cold comfort to the multitude of prisoners
who appeal from district court orders rejecting deliberate-indifference claims. And of course,
the vast majority of deliberate-indifference cases that appellate courts see arise on appeal by
inmates who have lost below.
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prescribing de novo review of other application-of-law-to-fact questions—
including those arising under the Eighth Amendment.”
Keohane, 952 F.3d at 1273
n.8. In United States v. Bajakajian,
524 U.S. 321
(1998), for instance, the
Supreme Court rejected the contention that an appellate court should defer to a
district court’s determination whether a fine is excessive for Eighth Amendment
purposes. As the Supreme Court explained there, while the district court’s factual
findings in conducting the excessiveness inquiry “must be accepted unless clearly
erroneous,” “whether a fine is constitutionally excessive calls for the application of
a constitutional standard to the facts of a particular case”—and thus calls for “de
novo review.”
Id. at 336–37
& n.10.
Similarly, in Ornelas v. United States, the Supreme Court held “that as a
general matter determinations of reasonable suspicion and probable cause should
be reviewed de novo on appeal.”
517 U.S. 690
, 699 (1996). The Court
acknowledged—precisely as our opinion did—“that a reviewing court should take
care both to review findings of historical fact only for clear error and to give due
weight to inferences drawn from those facts by resident judges and local law
enforcement officers.”
Id. (emphasis added); see
Keohane, 952 F.3d at 1273
n.8.
But it insisted that the ultimate determination—the application of the constitutional
standard to those facts—demands de novo review. Significantly, the Court gave
three reasons to support its holding, all of which apply equally here: (1) the
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constitutional standards at issue involve “fluid concepts that take their substantive
content from the particular contexts in which the standards are being assessed”; (2)
the applicable “legal rules . . . acquire content only through application,” and
“[i]ndependent review is therefore necessary if appellate courts are to maintain
control of, and to clarify, the legal principles”; and (3) “de novo review tends to
unify precedent” and “stabilize the law.”
Ornelas, 517 U.S. at 696
–98.
Finally, applying Bajakajian and Ornelas—and repeating the same
considerations—the Supreme Court held in Cooper Industries, Inc. v. Leatherman
Tool Group, Inc., “that courts of appeals should apply a de novo standard of review
when passing on district courts’ determinations of the constitutionality of punitive
damages awards” under the Fourteenth Amendment.
532 U.S. 424
, 436 (2001).
Except to say that they aren’t deliberate-indifference cases, neither of my
dissenting colleagues has offered any explanation why the rationale of Bajakajian,
Ornelas, and Cooper Industries doesn’t apply here. District courts are
undoubtedly better situated than appellate courts to make findings of what the
panel (echoing the Supreme Court in Ornelas) called “historical facts,” and their
determinations with respect to those facts are accordingly entitled to deference.
But what the Eighth Amendment means—and requires in a given case—is, as I
have said, an issue squarely within the core competency of appellate courts. And
to be clear, it’s no answer to say, as the panel dissent did—citing Justice Scalia’s
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solo dissent in Ornelas—that some issues underlying a deliberate-indifference
claim may be “fact-specific and not easy to generalize.”
Keohane, 952 F.3d at 1291
n.13 (Wilson, J., dissenting). The Supreme Court recognized as much
regarding the “mixed questions” in Bajakajian, Ornelas, and Cooper Industries—
and yet applied de novo review anyway. Just so here.
3
Finally, the panel’s synthesis of Thomas’s standard-of-review conundrum
squares precisely with the First Circuit’s en banc decision in the factually similar
Kosilek v. Spencer,
774 F.3d 63
(1st Cir. 2014). The court there rejected the very
arguments that my dissenting colleagues have made and held that de novo, rather
than clear-error, review governed a district court’s determination that the Eighth
Amendment required prison authorities to accommodate a transgender inmate’s
medical-treatment requests. In Kosilek, an inmate alleged that the Massachusetts
Department of Correction’s refusal to provide sex-reassignment surgery to treat the
inmate’s gender-identity disorder constituted deliberate indifference.
Id. at 68–69.
Sitting en banc, the First Circuit explained that “[t]he test for establishing an
Eighth Amendment claim of inadequate medical care encompasses a multitude of
questions that present elements both factual and legal”—and, therefore, that
“[r]eview of such ‘mixed questions’ is of a variable exactitude,” such that “the
more law-based a question, the less deferentially we assess the district court’s
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conclusion.”
Id. at 84.
Citing our opinion in Thomas, the Kosilek court held that
“[t]he ultimate legal conclusion of whether prison administrators have violated the
Eighth Amendment is reviewed de novo.”
Id. In so holding,
the court rejected the
dissenting judges’ argument that “the ultimate constitutional question is
inextricably tied up with the factual details that emerged at trial,” which, according
to them, “counsels against pure de novo review.”
Id. at 99
(Thompson, J.,
dissenting). While acknowledging—again, just as the panel did here—that
appellate courts “award[] deference to the district court’s resolution of questions of
pure fact and issues of credibility,” the Kosilek majority stood by its conclusion
that the ultimate Eighth Amendment question is reviewed de novo.
Id. at 84–85.
Notably, the court buttressed its holding with citations to decisions from several
other circuits reaching the same conclusion. See, e.g., Hallett v. Morgan,
296 F.3d 732
, 744 (9th Cir. 2002) (“The district court’s factual findings regarding conditions
at the Prison are reviewed for clear error. However, its conclusion that the facts do
not demonstrate an Eighth Amendment violation is a question of law that we
review de novo.”); Hickey v. Reeder,
12 F.3d 754
, 756 (8th Cir. 1993) (“Whether
conduct, if done with the required culpability, is sufficiently harmful to establish
an Eighth Amendment violation is an objective or legal determination which we
decide de novo.”); Alberti v. Klevenhagen,
790 F.2d 1220
, 1225 (5th Cir. 1986)
(“[O]nce the facts are established, the issue of whether these facts constitute a
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violation of constitutional rights is a question of law that may be assayed anew
upon appeal.”).
* * *
So in short, the panel here didn’t “reimagine” this Court’s earlier decision in
Thomas but, rather, synthesized Thomas’s mixed messages in accordance with
Supreme Court and other circuits’ precedents.
IV
I’ll conclude where I began. For all its rhetorical flourish, today’s dissent
from denial simply doesn’t make a compelling argument that this case warranted
en banc reconsideration. The panel was faced with the vexing question of how the
de novo and clear-error standards of review map onto the various elements and
sub-elements of an Eighth Amendment deliberate-indifference claim—a question
made all the more vexing by Thomas’s (let’s just say) imprecise discussion of that
issue. Faced with all that ambiguity, the panel did its level best—both to apply
Thomas and to faithfully and correctly decide the case before it. I, for one, think
the panel got it exactly right. But even if I’m wrong about that—and reasonable
minds can disagree—the worst that can be said of the panel opinion is that it
“misappli[ed the] correct precedent to the facts of the case.” 11th Cir. R. 35-3. In
this Circuit, that is not a ground for en banc rehearing.
Id. 21
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While the dissental’s spicy rhetoric doesn’t enhance its argument—but
rather pretty severely diminishes it, to my mind—it does, I fear, corrode the
collegiality that has historically characterized this great Court. Here’s hoping for
better—and more charitable—days ahead.
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ROSENBAUM, Circuit Judge, joined by WILSON, MARTIN, and JILL PRYOR,
Circuit Judges, dissenting from the denial of rehearing en banc:
This is not an easy dissent to write—not because the legal issue involved in
the merits of this case is complex or difficult (it’s not), but because our denial of
rehearing en banc here is not—or at least should not be—normal. We are denying
en banc rehearing in a case that objectively qualifies for it under the Federal Rules
of Appellate Procedure and that indeed demands it to preserve the sanctity of the
prior-precedent rule and the important policies of stability and predictability that that
rule serves.
Our failure to hold en banc review in a case where the panel opinion
contradicts our holdings in opinions earlier panels issued yet claims nonetheless to
comply with the prior-precedent rule introduces uncertainty and confusion into the
law of our Circuit. And worse, it undermines the prior-precedent rule, “the
foundation of our federal judicial system.” Smith v. GTE Corp.,
236 F.3d 1292
(11th
Cir. 2001) (quoting Jaffree v. Wallace,
705 F.2d 1526
, 1533 (11th Cir. 1983)). We
as a Court must reckon with these potentially devastating consequences of our
actions if we continue to allow opinions that flout the prior-precedent rule while
claiming they comply with it to issue unchecked.
A case like this one, where the opinion distorts beyond recognition the prior-
precedent rule—a fundamental mechanism by which this Court ensures the
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predictability and stability of the law—is exactly the kind of case for which the en
banc tool was designed. For that reason, whether any individual judge agrees or
disagrees with the ultimate outcome of Keohane should be irrelevant to the question
of whether this case warrants en banc review. Too much is at stake.
I am sure each of us believes that we are applying the appropriate standards
in determining whether to vote for en banc rehearing.1 But an objective analysis
suggests we are not. So we need to recalibrate. I urge our Court—and each of us
individually—to carefully and objectively reexamine this vote and to truly reflect on
the dangers of condoning panel opinions that contradict our prior precedent while
nonetheless claiming to follow the prior-precedent rule.
I divide my discussion into three substantive sections. In Section I, I review
the law governing the limited circumstances in which en banc review is appropriate.
In Section II, I show that this case warrants en banc rehearing. And in Section III, I
1
I am truly sorry that Chief Judge Pryor and Judge Newsom seem to have taken my
concerns personally. I do not believe this dissent to be personal. I have great respect for all my
colleagues, and I value this Court’s collegiality. But I also have great respect for the rule of law
and the need for our Court to maintain its legitimacy. And I don’t agree that defending these things
or pointing out what I think is wrong with Keohane and explaining why I view it as such a big
problem makes me “[un]collegial[]” and “[un]charitable,” see Newsom Op. at 22, or is an “attack[
on] . . . the integrity of judges or their commitment to the rule of law . . . [or] the legitimacy of this
Court,” W. Pryor Op. at 5. Nor do the labels and characterizations the W. Pryor and Newsom
Opinions feel a need to impose provide a good enough reason to remain silent in the face of the
threat Keohane represents to our judicial norms. I am aware of no other way to oppose what I see
as the failure of our Court to require the Keohane panel to comply with the prior-precedent rule,
other than by writing a dissent that candidly discusses that problem and its significance.
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explain why we must insist on strict adherence to the prior-precedent rule by every
panel.
But first, a word of caution: this dissent is not about what the substantive law
that governs Keohane’s case should or should not be. And to avoid any possible
misunderstanding on that, I begin by stating expressly that I take no position on that
in this dissent. Even assuming without deciding that Keohane arrived at the
objectively legally correct rule for the appropriate standard of review in Eighth
Amendment deliberate-indifference claims, the problem here is that on the way to
doing so, it issued a new rule that is contrary to our binding precedent while
nonetheless attributing that new rule to that same precedent. The proper procedure
for overruling binding precedent in this Circuit requires the Court sitting en banc to
set it aside; a panel is not free to overrule binding precedent on its own. To be clear,
then, this dissent is solely about the importance to the stability and predictability of
the law of ensuring every panel strictly follows our prior-precedent rule.
I.
Rule 35, Fed. R. App. P., anticipates that en banc rehearing will be ordered
only when it is “necessary to secure or maintain uniformity of the court’s decisions”
or the case “involves a question of exceptional importance.” Fed. R. App. P. 35(a).
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This is one of those cases.2 First, this case objectively warrants en banc review under
Rule 35(a) because the panel majority opinion here, Keohane v. Florida Department
of Corrections,
952 F.3d 1257
(11th Cir. 2020), creates confusion and inconsistency
in our Eighth Amendment Circuit jurisprudence. But second and more urgent is
what the Keohane panel’s interpretation and application of the prior-precedent rule
and our refusal to take this case en banc do to that rule. In trying unsuccessfully to
avoid running afoul of our prior-precedent rule and raising a conflict with our earlier
precedent known as Thomas v. Bryant,
614 F.3d 1288
, 1312 (11th Cir. 2010), the
Keohane majority opinion remolds the prior-precedent rule into an unrecognizable
and dangerous form: it gives itself permission to reimagine what Thomas held
because it concludes that what Thomas expressly said “cannot possibly be what
we’ve meant,”
Keohane, 952 F.3d at 1272
.
Our “firmly established” prior-precedent rule strictly requires later panels to
follow the precedent of earlier panels unless and until the prior precedent is overruled
or undermined to the point of abrogation by the Supreme Court or this Court sitting
2
Chief Judge Pryor notes that “[t]he grant of en banc review is and should be rare.” W.
Pryor Op. at 4. Of course, as I recognize above, that’s true, when we consider the total number of
cases we review every year. But that’s also an oversimplification of what happened here. By my
count, in the most recent nearly two-year period (since January 1, 2019), we have voted for en
banc rehearing in twelve cases. During that same period, we have voted against en banc review
only seven times when a member in active service on this Court has requested an en banc poll. So
once a member of this Court in active service has sought an en banc poll, we have granted en banc
rehearing at a rate of 63%—a majority of the time. Presumably, that is because we exercise
extreme discretion in requesting an en banc poll in the first place.
26
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en banc. United States v. Steele,
147 F.3d 1316
, 1318 (11th Cir. 1998) (en banc);
see also
Smith, 236 F.3d at 1303
n.11. We have described ourselves as “emphatic”
in our strict adherence to this rule, see
Steele, 147 F.3d at 1318
(quoting Cargill v.
Turpin,
120 F.3d 1366
, 1386 (11th Cir. 1997)), and have said that this Court “take[s]
[the prior-precedent] rule seriously,” Atl. Sounding Co., Inc. v. Townsend,
496 F.3d 1282
, 1286 (11th Cir. 2007) (Ed Carnes, J., concurring).
We have gone so far as to hold that under that rule, a later panel cannot
overrule a prior one’s holding “even though convinced it is wrong.”
Steele, 147 F.3d at 1317-18
. Indeed, we have held that the prior-precedent rule binds later panels
even when the prior panel’s decision failed to mention controlling Supreme Court
precedent and reached a holding in conflict with that precedent.
Smith, 236 F.3d at 1302-03
. So strong is the prior-precedent rule that under it, a later panel is bound
by the earlier panel’s “reasoning and result,” even when the prior panel does not
explicitly state its rule. See
id. at 1304.
No exceptions to the prior-precedent rule exist. See
id. at 1302
. That is so,
we have explained, because if an exception applied, “it could end up nullifying the
well-established prior panel precedent rule that is an essential part of the governing
law of this Circuit.”
Id. (emphasis added). Not
only that but the prior-precedent rule
“helps keep the precedential peace among the judges of this Court, and it allows us
to move on once an issue has been decided.”
Townsend, 496 F.3d at 1286
(Ed
27
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Carnes, J., concurring). Without it, as Judge Ed Carnes has cautioned, “every sitting
of this court would be a series of do-overs, the judicial equivalent of the movie
‘Groundhog Day.’”
Id. The Newsom Opinion
takes issue with my discussion, describing it as full of
“hyperbole and invective” because of my concerns that continued disregard of our
prior-precedent rule jeopardizes the rule of law. See Newsom Op. at 6. But those
concerns are not overblown. Indeed, our own Court has emphasized that the prior-
precedent rule “serves as the foundation of our federal judicial system[, as]
[a]dherence to it results in stability and predictability.”
Smith, 236 F.3d at 1303
(quoting Jaffree v. Wallace,
705 F.2d 1526
, 1533 (11th Cir. 1983)). For these
reasons, if we continue to allow panels to skirt the prior-precedent rule, we certainly
ask for trouble.
Under our prior-precedent rule, if a panel vehemently disagrees with a prior
precedent, its only option is to apply it, anyway, and call for en banc rehearing. It
may not, under any circumstances, create its own conflicting rule and inaccurately
purport to apply the governing prior precedent. And if it does, en banc review is in
order—either to correct the panel opinion and make it comply with binding
precedent, or to overrule the prior precedent. But in any case, changing prior
precedent is not something that a panel may do.
II.
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Yet that’s precisely what the Keohane panel did: while insisting it was
following Thomas, it instead created a new rule diametrically opposed to Thomas’s
holding. To show that this is necessarily the case, I must first briefly review the
relevant facts of Keohane’s case (Section A) and the law governing claims of
deliberate indifference to prisoners’ medical claims (Section B). Then in Section C
I point out how the Keohane panel opinion is at war with Thomas, the precedent it
purports to follow.
A.
Reiyn Keohane was assigned male at birth, but she has identified as female
since she was about eight years old. ECF No. 171 at 1. She was formally diagnosed
with gender dysphoria when she was sixteen.
Id. at 2.
At that time, Keohane began
a hormone-therapy regimen.
Id. After her arrest,
she was cut off from her treatment, including hormone
therapy and the ability to dress and groom as a woman.
Id. at 2.
She complained,
but the prison did not respond.
Id. Keohane’s untreated dysphoria
caused her such
extreme anxiety that she attempted to kill herself and castrate herself while in
custody.
Id. These facts and
others led Keohane to sue the Florida Department of
Corrections (the “FDC”) under 42 U.S.C. § 1983, alleging violations of her Eighth
Amendment rights and seeking declaratory and injunctive relief. As the panel
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opinion explained, after a bench trial, the district court entered a 61-page order
awarding Keohane relief. As relevant to the concerns I raise in this dissent,3 the
district court directed the FDC to permit Keohane “to socially transition by allowing
her access to female clothing and grooming
standards.” 952 F.3d at 1262
(quoting
district court order).
The panel opinion reversed. Claiming to follow Thomas, the Keohane panel
applied the de novo standard of review to certain components of the district court’s
findings for which the Thomas Court had instructed a clear-error standard governs.
In so doing, the panel simultaneously injected conflict into our Eighth Amendment
deliberate-indifference jurisprudence and stretched interpretation of our prior-
precedent rule beyond recognition.
B.
The Eighth Amendment prohibits the government from inflicting “cruel and
unusual punishments” on inmates. Wilson v. Seiter,
501 U.S. 294
, 296–97 (1991).
That prohibition encompasses “deprivations . . . not specifically part of [a] sentence
but . . . suffered during imprisonment.”
Id. at 297.
An inmate who suffers
“deliberate indifference” to her “serious medical needs” may state a claim for a
violation of the Eighth Amendment. Estelle v. Gamble,
429 U.S. 97
, 104 (1976);
3
Appellant’s motion for rehearing also seeks rehearing on whether the Majority Opinion
correctly applied our mootness exception for voluntary cessation. For purposes of this dissent
from the denial of rehearing en banc, I express no views about the propriety of that holding.
30
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Brown v. Johnson,
387 F.3d 1344
, 1351 (11th Cir. 2004). Under our precedent, a
deliberate-indifference claim has two components: an objectively serious medical
need and subjective deliberate indifference by the official to that need.
Brown, 387 F.3d at 1351
.
Thomas holds that the objective inquiry (whether a serious medical need
exists) includes both questions of fact subject to clear-error review and a question of
law subject to de novo review.
Thomas, 614 F.3d at 1307
, 1308. I am not concerned
with that aspect of Keohane because the panel opinion had no occasion to comment
on or apply the Thomas standard of review to the objective inquiry, since “all
agree[d] that Keohane’s gender dysphoria” satisfies that
requirement. 952 F.3d at 1273
. Instead, I focus on the subjective component of Keohane’s deliberate-
indifference claim.
Before Keohane, we had described the subjective inquiry (whether the
defendant was subjectively deliberately indifferent to the plaintiff’s serious medical
need) to require the plaintiff “to prove three facts: (1) subjective knowledge of a
risk of serious harm; (2) disregard of that risk; and (3) by conduct that is more than
mere negligence” (the “subjective-inquiry components”).
Brown, 387 F.3d at 1351
(emphasis added). Of course, in characterizing as “facts” the three things that the
plaintiff must prove to satisfy the subjective inquiry, we suggested that the district
court’s resolutions of the three subjective-inquiry components were findings of fact.
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Then, as Judge Wilson plainly showed in his dissent in
Keohane, 952 F.3d at 1289-92
(Wilson, J., dissenting), we said precisely that a few years later in Thomas.
There, several inmates sued FDC employees, alleging that their use of chemical
agents on certain mentally ill inmates violated the Eighth
Amendment. 614 F.3d at 1293
. After a five-day bench trial, the district court determined that the FDC’s non-
spontaneous disciplinary use of chemical agents on inmates who, at the time, were
unable to conform their behavior to prison standards because of their mental
illnesses, violated the Eighth Amendment.
Id. at 1294.
The FDC employees
appealed this conclusion (among other district-court actions not relevant here).
Id. In analyzing the
appeal, we noted that we review de novo the “legal
conclusion—that there was an Eighth Amendment violation[,]”—but that
“[s]ubsidiary issues of fact are reviewed for clear error.”
Id. at 1303.
Had we
stopped there and both said nothing more about the standard of review and not
applied the standard of review in a way that demonstrated what we meant by this
division of the standard of review, perhaps the Keohane panel would have been free
to construe those two propositions as it pleased, without running afoul of the prior-
precedent rule.4
4
That, too, is questionable (though less so than Keohane’s characterization of Thomas), in
light of our prior description in
Brown, 387 F.3d at 1351
, that a plaintiff had to prove three “facts”
to establish all three aspects of the subjective part of a deliberate-indifference claim.
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But that was not the end of our discussion and application of the standard of
review. Rather, later in Thomas, our statements concerning the appropriate standard
of review, as well as our application of that standard of review, unmistakably show
that the phrase “legal conclusion . . . that there was an Eighth Amendment violation”
refers to “[t]he ultimate legal conclusion” of whether the defendants violated the
Eighth Amendment, Kosilek v. Spencer,
774 F.3d 63
(1st Cir. 2014). And the phrase
“[s]ubsidiary issues of fact” refers to the issues of fact that one of the objective-
inquiry components and all the subjective-inquiry components of the deliberate-
indifference analysis constitute.
Contrary to the Newsom Opinion’s characterization of Thomas, there is
nothing “conflicting” or “competing,” see Newsom Op. at 11, 12, about Thomas’s
direction. Nor does Thomas send “mixed messages.”
Id. at 12.
Thomas’s precise
statements applying clear-error review to all components of the subjective inquiry—
outlined in detail below—are entirely harmonious with Thomas’s statement that de
novo review applies to the overarching question of deliberate-indifference. The
overarching standard of review is necessarily de novo because it incorporates within
it de novo review of the objective inquiry of the deliberate-indifference analysis.5
5
The Newsom Opinion attempts to alter the focus from my reason for seeking en banc
review—Keohane’s failure to follow Thomas and abide by the prior-precedent rule—by arguing
that daylight exists between Judge Wilson and me concerning Thomas’s holding on the applicable
standard of review. See Newsom Op. at 13-15. It doesn’t. I fully agree with Judge Wilson that
Thomas applies the clear-error standard to all aspects of the subjective-inquiry prong of the
deliberate-indifference test. See
Keohane, 952 F.3d at 1287-90
(Wilson, J., dissenting). I likewise
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And nothing in Thomas supports the Keohane majority opinion’s suggestion
that, by “[s]ubsidiary issues of fact,” Thomas meant only what the Keohane majority
opinion deemed “historical facts.” See
Keohane, 952 F.3d at 1272
n.8. Tellingly,
the Keohane majority opinion cited nothing in Thomas for its contention. Nor did
Thomas ever use the term “historical facts.” On the contrary, as Judge Wilson’s
Keohane dissent and this dissent demonstrate in detail, see infra at 35-38, Thomas
unambiguously applied the clearly erroneous standard of review to each of the three
components of the subjective inquiry. The Keohane majority opinion was not free
to stray from the clear-error standard of review that Thomas held governs the
components of the subjective inquiry. Yet that is what it did.
understand Thomas’s statement that we review “the district court’s . . . conclusion [] that there was
an Eighth Amendment violation warranting equitable relief [] . . . de novo,”
Thomas, 614 F.3d at 1303
, to refer in context to the notion that “[o]ur de novo review extends only to questions of law
(i.e., the objectively-serious-need element) and to the district court’s ultimate conclusion whether
the objective and subjective elements of a deliberate indifference claim state an Eighth
Amendment violation.”
Keohane, 952 F.3d at 1287
(Wilson, J., dissenting). As I have noted, it
extends to the ultimate conclusion because the ultimate conclusion necessarily includes within it a
determination based on de novo review (the objective inquiry). And we’re not the only ones to
understand Thomas’s clear analysis this way. Indeed, in Kosilek v. Spencer,
774 F.3d 63
(1st Cir.
2014), the First Circuit cited Thomas for the proposition that “[t]he ultimate legal conclusion of
whether prison administrators have violated the Eighth Amendment is reviewed de novo,” while
quoting from Thomas in the supporting parenthetical only the following: “Whether the record
demonstrates that [the prisoner] was sprayed with chemical agents . . . and that he suffered
psychological injuries from such sprayings are questions of fact. Whether these deprivations are
objectively ‘sufficiently serious’ to satisfy the objective prong, is a question of law . . . .”
Kosilek, 774 F.3d at 84
(quoting
Thomas, 614 F.3d at 1307
) (quotation marks omitted) (alterations by the
Kosilek Court) (emphasis added). Tellingly, Kosilek never refers to the subjective inquiry to
provide an example of presenting any legal questions to show why Thomas refers to the
overarching question of deliberate-indifference liability as subject to de novo review. Nor does
Kosilek cite Thomas for the proposition that any components of the subjective inquiry are subject
to de novo review.
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46 Cow. I
begin with what Thomas had to say about how the standard of review applies
to the evaluation of a district court’s determination on the subjective inquiry of an
Eighth Amendment deliberate-indifference claim—that is, whether the defendant (1)
subjectively knew of a risk of serious harm; (2) nonetheless disregarded that risk;
and (3) did so by conduct that is more than mere negligence.
Thomas, 614 F.3d at 1312
. Thomas explained that this inquiry requires us to determine whether “the
evidence . . . demonstrate[s] that with knowledge of the infirm conditions, the official
knowingly or recklessly declined to take actions that would have improved the
conditions.”
Id. (internal quotation marks
and alterations omitted). This summary
of what the subjective inquiry requires encompassed all three prongs of the
subjective inquiry: “knowledge of the infirm conditions” means the defendant
“subjectively knew of a risk of serious harm”; “declined to take actions that would
have improved the conditions” means the defendant “disregarded the risk”; and
“knowingly or recklessly” did so means the defendant “did so by conduct that is
more than mere negligence.”
Immediately after we summarized what the three components of the
subjective inquiry require, we unambiguously stated that “[a] prison official’s
deliberate indifference is a question of fact which we review for clear error.”
Id. (emphasis added). Based
on the placement and content of the remark, it is clear that
35
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with this statement, we were referring to the entirety of the three-part subjective
inquiry. Not only did this quotation appear immediately following our summary of
all the elements of the subjective component of an Eighth Amendment violation, but
significantly, by definition, “[a] prison official” can engage in “deliberate
indifference” only if all three subjective-inquiry components are satisfied.
We need not review Thomas any further than this to know that we
unambiguously held in Thomas that the district court’s rulings on the entire
subjective inquiry—including its rulings on all three of the subjective inquiry’s
components—are subject to the clearly erroneous standard of review.
But there’s more. In addressing each of the three parts of the subjective
inquiry in Thomas, we again said and demonstrated that each component is to be
reviewed for clear error.
With respect to the first question—whether the defendant subjectively knew
of a risk of serious harm—we relied in Thomas on Farmer v. Brennan,
511 U.S. 825
,
842 (1994), citing to Farmer’s proposition that “[w]hether a prison official had the
requisite knowledge of a substantial risk is a question of fact subject to
demonstration in the usual ways . . . .” 6 See
Thomas, 614 F.3d at 1313
(quoting
Farmer, 511 U.S. at 842
) (alteration omitted) (emphasis added).
6
Though in Thomas we omitted the phrase “question of fact” from the Farmer quotation,
we did so only to avoid repetition of the phrase “question of fact,” which appears in the sentence
immediately preceding the Farmer quotation. As I’ve noted above, that sentence states that the
36
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As to the second and third parts of the test—whether the defendant
disregarded this risk by more than mere negligence—we concluded that “[t]he
record . . . supports the district court’s finding that the Secretary of the [FDC] and
the Warden . . . recklessly disregarded the risk of psychological harm to inmates like
[the Thomas plaintiff].”
Id. at 1315
(emphasis added). We then described the
evidence in the record that underpinned the district court’s finding.
Id. For example, we
opined that “the [FDC]’s refusal to modify its non-spontaneous use-of-force
policy provides support for the district court’s finding of more than mere or even
gross negligence on the part of the [FDC].”
Id. (emphasis added). The
repeated
references to evidence in the record and uses of the words “support for the district
court’s finding” further unmistakably demonstrate that we viewed the district court’s
“findings” as factual findings, and we reviewed them for clear error.
But you need not take my word for it. Thomas says as much. Thomas began
its analysis by invoking the clear error-test and by summarizing its conclusion that
the defendant failed to meet that standard: “[O]ur review of the district court’s
voluminous uncontested factual findings as they relate to the defendants’ deliberate
indifference does not leave us with the definite and firm conviction that a mistake
has been committed. Accordingly, the defendants have failed to satisfy their burden
entire subjective inquiry is a question of fact we review for clear error. See
Thomas, 614 F.3d at 1312
.
37
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of demonstrating the district court’s clear error.”
Thomas, 614 F.3d at 1313
(emphasis added).
That was no mistake. Thomas also ended its discussion of the second and
third components of the subjective inquiry by summing up that it could not
“conclude that the district court was clearly erroneous in finding that the record
demonstrates that FDC officials turned a blind eye to [the plaintiff’s] mental health
needs and the obvious danger that the use of chemical agents presented to his
psychological well-being.”
Id. at 1316
(internal quotation marks omitted and
emphasis added). In our very next sentence, we explained that “[t]urning a blind eye
to such obvious danger provides ample support for the [district court’s] finding of
the requisite recklessness.”
Id. (emphasis added). Finally,
we held that “an
examination of [the] entire record demonstrates that the district court did not commit
clear error in finding the defendants’ deliberate indifference.”
Id. at 1317
(emphasis
added).
In short, our discussion in Thomas of the subjective inquiry of the deliberate-
indifference claim repeatedly shows that we characterized and treated each of the
three components as factual ones, governed by the clearly erroneous standard of
review on appeal.
Whether each of us personally agrees or disagrees that a clear-error standard
of review is a good idea for each of the components of the subjective inquiry, see
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Newsom Op. at 16 n.3, is irrelevant. It is beyond dispute that Thomas held that clear-
error review governs.
In contrast, the Keohane majority opinion reviewed de novo the district
court’s findings on the second and third parts of the subjective inquiry.7 See
Keohane, 952 F.3d at 1274-78
. In fact, except in a footnote dismissing the notion
that clear-error review applies to each of the three components of the district court’s
factual findings on the subjective inquiry, the majority opinion never once employed
the term “clear error” in conducting its analysis. See
id. And even in
that footnote,
the Keohane panel opined only that even assuming the clear-error standard of review
governs review of the district court’s findings on each of the three subparts of the
subjective inquiry, “we would have little trouble formulating the required firm
conviction that a mistake had been committed.”
Id. at 1272
n.8 (citation and internal
quotation marks omitted). The majority opinion said so, though, without any
corresponding analysis other than a throwaway reference to its legal-error analysis
in the text. See
id. Perhaps most disturbingly,
though, despite the Keohane majority opinion’s
use of the de novo standard of review to review the second and third subparts of the
7
The Keohane majority opinion concluded that it did not need to evaluate whether the
district court correctly determined that the prison officials had actual knowledge of a risk of serious
harm because, in any case, Keohane did not establish the second and third parts of the subjective
inquiry. 952 F.3d at 1274
. For that reason, the Keohane majority opinion did not expressly review
the first part of the district court’s ruling on the subjective inquiry.
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district court’s subjective inquiry on Keohane’s deliberate-indifference claim, the
Keohane majority opinion asserted that it followed Thomas. But in support of this
proposition, the Keohane majority opinion relied solely on Thomas’s statements that
we review de novo whether “there was an Eighth Amendment violation” and that
“[s]ubsidiary issues of fact are reviewed for clear error.” See
Keohane, 952 F.3d at 1265
n.2. Likewise, that is the sole “breadcrumb[]” from Thomas that the Newsom
Opinion cites in justifying Keohane’s application of de novo review to all
components of the subjective inquiry. See Newsom Op. at 11-12.
But as I have already discussed, that one “breadcrumb[]” is part of a trail that
leads inescapably to the conclusion that Thomas holds that the clear-error standard
governs the subjective inquiry.
Yet that one statement deprived of its proper context is the only thing that
Keohane and the Newsom Opinion point to from Thomas to justify Keohane’s
conclusion that Thomas required de novo review of the subjective inquiry. Indeed,
neither Keohane nor the Newsom Opinion responds to any of the numerous
quotations Judge Wilson’s dissent and I have cited from Thomas that show that
Thomas held that clear-error review governs the subjective inquiry. Keohane and
the Newsom Opinion just ignore them. But ignoring Thomas’s words does not make
Thomas’s holding go away.
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Rather than explaining how Keohane’s holding can possibly be consistent
with Thomas’s numerous quotations, the Newsom Opinion takes a different tack: it
appears to attempt to distract the reader from its inability to demonstrate that
Keohane does not violate Thomas. Indeed, careful readers can’t help but notice that
the Newsom Opinion spends nearly all its pages trying to change the subject.
For example, it defends at length the correctness of the outcome of Keohane
and the new rule that the Keohane panel imposed contrary to Thomas’s rule. See,
e.g., Newsom Op. at 8-9 (arguing the facts of Keohane’s case—including defending
the FDC’s decision not to allow Keohane to dress and groom herself as a woman—
that have no bearing on whether Keohane followed Thomas), 16 (opining that, as a
matter of law, it makes better sense for appellate courts to “decide[] what the Eighth
Amendment ultimately means and requires in a given case” because anything else
would be “an odd state of affairs.”8), 16-19 (contending that United States v.
Bajakajian,
524 U.S. 321
(1998), Ornelas v. United States,
517 U.S. 690
(1996),
Cooper Industries, Inc. v. Leatherman Tool Group, Inc.,
532 U.S. 424
(2001)—none
of which Thomas cites, by the way—support the new Keohane rule), 19-21
(discussing Kosilek v. Spencer,
774 F.3d 63
(1st Cir. 2014), to support the notion
8
Most respectfully, I disagree that district courts are somehow not equipped to make
capable rulings on the application of the subjective-inquiry components of the Eighth Amendment
deliberate-indifference standard in any given case. And even if a district court erred, it would not
be the last word on the matter, since a party could always appeal to the circuit court. Clearly
erroneous review does not mean no review.
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that de novo review is the correct legal answer to the standard of review that should
govern the components of the subjective inquiry9).
The Newsom Opinion also tries to divert attention from its failure to show
how it is consistent with Thomas by grading my writing and that of the Thomas
panel. See, e.g., Newsom Op. at 3, 4, 12, 21, 22.
These distraction tactics miss the point. Whether de novo review of the
components of the subjective inquiry is or is not a better answer than Thomas’s clear-
error review is not the issue here. And whether I use too many adverbs in my writing
or whether the Newsom Opinion likes how Thomas is written is similarly irrelevant
to the issue before the Court.
The only question here is whether Keohane is faithful to Thomas. The
Newsom Opinion’s failure to show how the numerous quoted statements from
Thomas can possibly be consistent with Keohane’s new rule applying the de novo
standard of review to the subjective inquiry answers that question with a resounding
“no.”10
9
Kosilek’s sole citation of Thomas for the proposition that “[t]he ultimate legal conclusion
of whether prison administrators have violated the Eighth Amendment is reviewed de novo.”
Kosilek, 774 F.3d at 84
, also does not show that Thomas applied de novo review to the components
of the subjective inquiry. In fact, as I have explained in note
5, supra
, it demonstrates the opposite.
So to be clear, Kosilek did not purport to read Thomas to hold that the components of the subjective
inquiry are subject to de novo review.
10
The W. Pryor Opinion’s silence on this issue likewise speaks volumes: the W. Pryor
Opinion doesn’t even try to show that Keohane is consistent with Thomas or that it didn’t violate
the prior-precedent rule. Nor does it defend Keohane’s interpretation of the prior-precedent rule,
which allows a later panel to reinvent the holding of a prior panel.
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The Keohane majority opinion reached another conclusion only because it
viewed Thomas’s plain language to require a “mindless, mechanical box-checking
assessment.”
Id. So the Keohane
majority opinion reasoned that what Thomas
unambiguously said “cannot possibly be what we’ve meant[.]”
Id. That language from
Keohane, in and of itself, gives up the game and implicitly concedes that the
Keohane majority opinion did not follow Thomas.
III.
Under our prior-precedent rule, it was not up to the Keohane panel to
reimagine the meaning of Thomas’s unmistakable language holding that the clearly
erroneous standard of review applies to the second and third components of the
subjective inquiry. The Keohane panel was bound by Thomas, whether it agreed
with it or not and whether it found Thomas’s standard of review to be consistent with
“meaningful appellate review” or not.
Id. If the Keohane
panel had a problem with
the standard of review that Thomas requires, as Judge Wilson pointed out in his
Keohane
dissent, 952 F.3d at 1292
(Wilson, J., dissenting), its only option under the
prior-precedent rule was to apply the Thomas standards and call for en banc review.
There was no option to recast Thomas as having held that de novo review applies
when Thomas in fact and unmistakably held that clearly erroneous review governs.
Because the Keohane panel’s holding on the applicable standards of review
conflicts directly with the Thomas panel’s, the Keohane panel introduced conflict in
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our precedent. Under our earliest-precedent rule, “[w]hen we have conflicting
[precedents], we follow our oldest precedent.” CSX Transp., Inc. v. Gen. Mills, Inc.,
846 F.3d 1333
, 1338 (11th Cir. 2017) (citation and internal quotation marks
omitted). So the earliest-precedent rule requires later panels and district courts to
follow Thomas. But because Keohane claims to be consistent with Thomas,
Keohane purports to render the earliest-precedent rule inapplicable. To do that,
though, it violates the prior-precedent rule by failing to abide by Thomas’s true
holding imposing the clearly erroneous standard of review and by instead pretending
that Thomas sanctioned the de novo standard of review when it demonstrably did
not.
Ultimately, our refusal to hear Keohane en banc creates a mess with respect
to the current state of the law concerning the correct standards of review governing
the components of the subjective inquiry on an Eighth Amendment deliberate-
indifference claim: should district courts and later panels follow Thomas, as our
prior-precedent rule requires, or should they follow Keohane, which holds the
opposite of Thomas while claiming to have followed it?
But the real problem is that our refusal to hear Keohane en banc sows
uncertainty as to the meaning and strength of our prior-precedent rule. This may be
no big deal to the W. Pryor Opinion (though that opinion never tells us why). But
as I have noted,
see supra
at Section I, for good reason, we as a Court have
44
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 45 of 46
historically viewed anything that erodes the prior-precedent rule as a critical threat
to the stability and predictability of the law. See
Smith, 236 F.3d at 1303
; see also
Steele, 147 F.3d at 1317-18
. Keohane’s rogue interpretation of the prior-precedent
rule certainly qualifies as such a threat.
If we are willing to accept Keohane as compliant with our prior-precedent
rule, then our prior precedent means only what the last panel to have reconstrued
what the deciding panel held says it means—no matter how inconsistent the most
recent panel’s interpretation may be with what the deciding panel actually held. As
a result, the practical effect is that no later panel will be bound by anything an earlier
panel said.
For these reasons, regardless of what any individual judge on this Court
believes the correct standard of review here to be, a bigger issue is at stake: the rule
of law imposes an obligation to rehear Keohane en banc and reaffirm our
“emphatic[ally]” strict adherence to the prior-precedent rule. See
Steele, 147 F.3d at 1318
(citation omitted). Then, if a majority of judges on the Court thinks Thomas
got it wrong, the Court can say so and change our precedent. But a panel cannot and
should not be allowed to do that. And a panel certainly should not be permitted to
do so by reinterpreting our prior-precedent rule to the point where it allows precisely
what it has always prohibited: a later panel to issue a holding that directly conflicts
with an earlier panel’s precedent.
45
USCA11 Case: 18-14096 Date Filed: 12/03/2020 Page: 46 of 46
By any recognized measure, Keohane demands en banc review. We must do
better in the future.
46 |
4,639,151 | 2020-12-03 15:14:27.270408+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/published/a4042-19.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4042-19T3
TODD B. GLASSMAN, as
Executor of the Estate of
JENNIFER K. COLLUM-
GLASSMAN, deceased, APPROVED FOR PUBLICATION
December 3, 2020
Plaintiff-Appellant, APPELLATE DIVISION
v.
STEVEN P. FRIEDEL, M.D.,
CHARLES W. FARRELL, M.D.,
LON WEINER, M.D., NATACHA
FIELD, R.N., TANYA GOODEN,
R.N., CONSTANCE MACKAY,
R.N., ANURADHA THALASILA,
M.D., and HACKENSACK
MERIDIAN HEALTH d/b/a
RIVERVIEW MEDICAL CENTER,
Defendants-Respondents,
and
JUANITO'S INC. and KLE
PROPERTIES, LLC,
Defendants.
________________________________
Argued September 21, 2020 – Decided December 3, 2020
Before Judges Messano, Suter and Smith.
On appeal from the Superior Court of New Jersey,
Law Division, Monmouth County, Docket No. L-
2383-18.
Christina Vassiliou Harvey argued the cause for
appellant (Lomurro, Munson, Comer, Brown &
Schottland, LLC, attorneys; Jonathan H. Lomurro, of
counsel; Christina Vassiliou Harvey, of counsel and
on the brief; Alan J. Weinberg, on the brief).
Jeffrey J. Niesz argued the cause for respondent
Steven Friedel, M.D. (Orlovsky, Moody, Schaaff,
Conlon & Gabrysiak, attorneys; Paul F. Schaaff, Jr.,
of counsel; Jeffrey J. Niesz, on the brief).
Matthew J. Heagen argued the cause for respondent
Charles W. Farrell, M.D. (Grossman, Heavy & Halpin,
PC, attorneys; Matthew J. Heagen, on the brief).
Charles C. Koernig argued the cause for respondent
Lon Weiner, M.D. (Kaufman Borgeest & Ryan,
attorneys; Charles C. Koernig and Jennifer C. Willis,
on the brief).
Anthony M. Tracy argued the cause for respondents
HMH Hospitals, Corp. d/b/a Riverview Medical
Center, Natasha Field, R.N., and Tanya Gooden, R.N.
(Ronan, Tuzzio & Giannone, attorneys; Anthony M.
Tracy, of counsel and on the brief).
Michael R. Ricciardulli argued the cause for
respondent Anuradha Thalasila, M.D. (Ruprecht Hart
Ricciardulli & Sherman, LLP, attorneys; Michael R.
Ricciardulli, of counsel and on the brief; Jessica J.
Mahony, on the brief).
Herbert Kruttschnitt, III argued the cause for
respondent Constance Mackay, R.N. (Dughi, Hewit &
Domalewski, PC, attorneys; Herbert Kruttschnitt, III,
A-4042-19T3
2
of counsel and on the brief; Ryan A. Notarangelo, on
the brief).
The opinion of the court was delivered by
MESSANO, P.J.A.D.
In Ciluffo v. Middlesex General Hospital, we adopted a framework for
trial courts to follow in addressing the thorny issues posed when a plaintiff
settles a negligence claim with the original tortfeasor and proceeds to trial
against a medical professional whose subsequent negligent treatment results in
additional injuries and damages.
146 N.J. Super. 476
(App. Div. 1977). In
Ciluffo, the plaintiff injured her neck when she fell down a flight of stairs at a
friend's house.
Id. at
479.
After examining the plaintiff the next afternoon at
the hospital, the defendant-doctor released her home with a cervical collar and
medication for pain.
Ibid. Further review by
another doctor of the x-rays
taken at the hospital revealed a fracture of the plaintiff's cervical spine.
Ibid. Treatment of the
fracture led to further complications, including the need for
cervical traction, and the onset of blood poisoning and pneumonia.
Ibid. The plaintiff settled
her claim with the owner of the premises where she
fell for $30,000.
Id. at
480.
Based on the evidence, the trial judge determined
that plaintiff failed to prove any complications were causally related to the
delayed treatment of the fracture.
Ibid. He also "dismissed
[the] plaintiff's
A-4042-19T3
3
claim for added pain and suffering for the period between her release from the
emergency room and the time she reported back to the hospital for further
treatment," concluding "in effect, that the claim for pain and suffering during
the period of less than [twenty-four] hours during which treatment was delayed
would not support a verdict in excess of the $30,000 already paid to plaintiff "
by settlement with the premises owner.
Id. at
480–81.
We observed that "[w]hen a plaintiff settles with the first of successive
independent tortfeasors we usually do not know whether that settlement
constituted payment in full for all claims."
Id. at
482
(emphasis added). The
initial tortfeasor — the owner of the premises — was "potentially liable for all
the natural and proximate injuries that flow from the initial tort, including the
consequences of medical treatment . . . caused by his wrong."
Ibid. (citing Knutsen v.
Brown,
96 N.J. Super. 229
, 235 (App. Div. 1967)). However, we
noted that "questions of liability may make [the] plaintiff's recovery from
either tortfeasor uncertain[,]" and "[t]he degree of injury caused by the second
tortfeasor adds another variable."
Ibid. In reversing and
remanding for a new trial on liability and damages as to
the doctor, we held that "where [the] plaintiff has settled with the first
tortfeasor and claims that she was not paid for all of her injuries, she is entitled
to have the injuries caused by the successive independent tortfeasor assessed
A-4042-19T3
4
and compared with the damages recoverable for all of her injuries ."
Ibid. (emphasis added). In
other words, the plaintiff was entitled to have a
factfinder apportion the damages caused by the two events, i.e., her fall and the
delay in treatment.
Our decision then set forth what is the crux of this appeal. We held that
if the plaintiff succeeded in proving the doctor's negligence and damages
caused by the delay in treatment at a new trial, the defendant-doctor was
entitled potentially to a pro tanto credit 1 against any award based on the
plaintiff's prior settlement with the owner of the premises.
If the settlement exceeds plaintiff's total provable
damages she would be entitled to no further recovery
from [the doctor]. If the settlement exceeds the
amount of her provable damages minus the damages
caused by [the doctor], the amount of such excess
should be credited against the damages assessed solely
for the harm caused by [the doctor]. If the settlement
is less than the amount of her total provable damages
minus the damages caused solely by [the doctor],
plaintiff should recover the full amount of damages
assessed against [the doctor] alone for the pain and
suffering allegedly endured by her during the delay in
treatment within the first [twenty-four] hours.
1
"Pro tanto" is defined as "[t]o that extent; for so much[.]" Black's Law
Dictionary 1478 (11th ed. 2019). A "pro tanto credit" is "a credit in the
amount of the settlement with the settling tortfeasor[.]" Restatement (Third) of
Torts: Apportionment of Liability § 16 cmt. c (Am. Law Inst. 2000)
(Restatement (Third)).
A-4042-19T3
5
[
Id. at
482
–83 (citations omitted).]
We explained the rationale for awarding a full pro tanto settlement credit to the
defendant-doctor if the plaintiff's settlement exceeded the amount of her total
"provable damages" as determined by the jury, or a partial credit if the
settlement exceeded the difference between the total amount of damages, and
the amount the jury apportioned to the medical negligence:
[N]either tortfeasor in this case has an interest in the
claim [the] plaintiff has asserted against the other
except that, as here, where two parties commit
successive independent torts, one may receive credit
for part of the payment made earlier by the other
tortfeasor "to avoid duplicating compensation to the
plaintiff."
[
Id. at
483 (quoting Daily v. Somberg,
28 N.J. 372
,
381–86 (1958)) (emphasis added).]
Our decision in Ciluffo did not address the continued viability of a
settlement credit after enactment of the Comparative Negligence Act (CNA),
N.J.S.A. 2A:15–5.1 to -5.8.2 However, since passage of the CNA, the
framework we devised in Ciluffo for potentially awarding the non-settling
tortfeasor a pro tanto credit based upon the plaintiff's settlement with the
original tortfeasor has been accepted, albeit without significant analysis, by
2
The CNA became effective on August 22, 1973, see L. 1973, c. 146, while
the events in Ciluffo occurred during April 1972.
Id. at
479–80.
A-4042-19T3
6
other reported cases. See, e.g., Clark v. Univ. Hosp.-UMDNJ,
390 N.J. Super. 108
, 119 (App. Div. 2006) ("Ciluffo can be applied in situations, like the
instant matter, where plaintiff is first subjected to a tort that brings him to a
hospital where medical care providers then subject plaintiff to a second,
independent tort."); Mitchell v. Procini, PA,
331 N.J. Super. 445
, 456 (App.
Div. 2000) ("[T]o avoid duplicating compensation paid to a plaintiff, the
successive tortfeasor may receive a credit for part or all of the payment made
by the initial tortfeasor." (citing
Ciluffo, 146 N.J. Super. at 483
)).
None of these cases, however, discussed the continued viability, after
enactment of the CNA, of awarding an adjudicated tortfeasor a pro tanto
settlement credit absent any finding that the initial tortfeasor was culpably
negligent. And, although the Court has cited Ciluffo with approval in other
contexts, see Williamson v. Waldman,
150 N.J. 232
, 252 (1997); Evers v.
Dollinger,
95 N.J. 399
, 411 (1984); Lynch v. Rubacky,
85 N.J. 65
, 80 n.3
(1981) (Clifford & Schreiber, JJ., dissenting), it has never endorsed application
of a pro tanto credit to a successive tortfeasor based on a plaintiff's settlement
with an initial tortfeasor.
Here, plaintiff Todd Glassman, as executor of the estate of his deceased
wife, Jennifer K. Collum-Glassman, sued defendants Juanito's Inc. and KLE
Properties, LLC (collectively, Juanito's), the restaurant and property owner of
A-4042-19T3
7
the site where Jennifer fell and fractured her left ankle. 3 Jennifer received
medical treatment for the injury, ultimately "coming under the care" of
defendants Hackensack Meridian Health, d/b/a Riverview Medical Center,
Doctors Steven P. Friedel, Lon Weiner, Charles W. Farrell, Anuradha
Thalasila, and Registered Nurses Natacha Field, Tanya Gooden, and Constance
MacKay (collectively, the Medical Defendants).
In an amended complaint that added the Medical Defendants, plaintiff
alleged their negligence during surgery performed on Jennifer's left ankle five
days after the fall led to post-operative complications and injuries to her right
leg, including weakness, "impaired sensory motor function[,]" "[p]ost-
operative compressive neuropathy," "foot drop," and "[c]ompression of the
distal aspect of the right sciatic nerve and peroneal nerve with sensory
impairment[.]"4
Approximately one month after surgery, and one day before her forty -
sixth birthday, Jennifer died from a pulmonary embolism. At the time of her
death, Jennifer was a special education teacher at a local high school and the
3
To avoid confusion, we use the first name of plaintiff's decedent. We intend
no disrespect by this informality.
4
The record before us is scant. We refer, therefore, to the allegations
contained in plaintiff's complaint. We are advised discovery continues.
A-4042-19T3
8
mother of two teenage sons. Plaintiff contends the Medical Defendants'
negligent treatment resulted in injury to Jennifer's right leg, increasing her
immobility as a result, and that they failed to provide appropriate
"anticoagulation" medications, resulting in the fatal embolism.
Plaintiff settled with Juanito's for $1.15 million. Citing our holding in
Ciluffo, the Medical Defendants filed motions seeking a declaration that they
would be entitled to a pro tanto credit against any potential damage award
based on the formula we explained in that case. Plaintiff opposed the motion
and requested oral argument; however, the judge decided the motions on the
papers, granting the relief. Plaintiff moved for reconsideration, which, after
hearing oral argument, the judge denied.
We granted plaintiff leave to appeal. He argues the judge erred by
deciding a factual issue — whether Juanito's was negligent — which must be
reserved for the jury. In other words, plaintiff contends it was error to grant
the Medical Defendants the possibility of any credit based on the settlement
with Juanito's without proof of Juanito's fault. Additionally, plaintiff argues
that, even assuming Juanito's fault was established, the CNA applies equally to
joint and successive tortfeasors, replaces Ciluffo's formulation and eliminates
the possibility of a pro tanto credit based on the settlement with Juanito's.
A-4042-19T3
9
The Medical Defendants contend that the CNA only applies to joint
tortfeasors, not successive tortfeasors, each of whom, if found negligent, are
only responsible for damages proximately caused by their negligence, and not
damages occasioned by the negligence of the original tortfeasor. Therefore,
the Medical Defendants argue that the potential pro tanto settlement credit
envisioned by Ciluffo's framework must apply to avoid a duplication of
damages and a potential windfall recovery by plaintiff.
Although we find neither set of arguments wholly satisfying, we
conclude that application of a pro tanto settlement credit in a negligence case,
whether it involves joint or successive tortfeasors, is a vestige of the common
law and has no support in our current jurisprudence. We therefore reverse and
vacate the orders under review.
I.
All parties concede this suit involves allegations of negligence by
successive, and not joint, tortfeasors. The essence of the Medical Defendants'
argument is that this distinction compels different results regarding the effect
of plaintiff's settlement with Juanito's on any award of damages proximately
caused by their medical negligence. The contention requires us first to discuss
joint versus successive tort liability, and how those two statuses impact an
award of damages.
A-4042-19T3
10
A.
Joint tortfeasors are "'two or more persons [who are] jointly [and]
severally liable in tort for the same injury' . . . and not . . . the cumulative
damages the tort victim sustained as a result of multiple disparate injuries
caused by multiple tortfeasors." Cherry Hill Manor Assocs. v. Faugno,
182 N.J. 64
, 75 (2004) (quoting N.J.S.A. 2A:53A-1) (emphasis added). The Joint
Tortfeasors Contribution Law (JTCL), N.J.S.A. 2A:53A-1 to -5, "was enacted
to change the injustice of the common law, which permitted a plaintiff to place
the entire burden of fault on one defendant, who was then helpless to shift any
of the responsibility to any other joint defendants." Tino v. Stout,
49 N.J. 289
,
298 n.3 (1967); see also Town of Kearny v. Brandt,
214 N.J. 76
, 97 (2013)
(noting the JTCL "was enacted to promote the fair sharing of the burden of
judgment by joint tortfeasors and to prevent a plaintiff from arbitrarily
selecting his or her victim" (quoting Holloway v. State,
125 N.J. 386
, 400–01
(1991))). Once enacted, the JTCL apportioned any damage award on a pro rata
basis among adjudicated tortfeasors. See Blazovic v. Andrich,
124 N.J. 90
,
103 (1991) (noting that under the JTCL, "[a] court determined a tortfeasor's
pro rata share simply by dividing the total verdict by the number of available
tortfeasors, that is, those solvent tortfeasors not beyond the reach of process").
A-4042-19T3
11
However, enactment of the CNA two decades later, working in
conjunction with the JTCL, significantly altered the respective rights of joint
tortfeasors. See Kranz v. Schuss,
447 N.J. Super. 168
, 170–71 (App. Div.
2016) (explaining relationship between the two statutes). "[W]hen applied
together, the [CNA and JTCL] implement New Jersey's approach to fair
apportionment of damages among plaintiffs and defendants, and among joint
defendants."
Brandt, 214 N.J. at 97
(quoting Erny v. Estate of Merola,
171 N.J. 86
, 99 (2002)). The CNA forged the critical link between a joint
tortfeasor's relative fault and its share of damages. See Johnson v. Am.
Homestead Mortg. Corp.,
306 N.J. Super. 429
, 436 (App. Div. 1997) ("[T]he
effect of the [CNA] was to replace the former pro rata liability of joint
tortfeasors under the [JTCL] . . . with the obligation of each tortfeasor to pay
damages in accordance with its own adjudicated percentage of fault.").
Because of the CNA, a plaintiff may recover the full quantum of
damages from a single tortfeasor only if that party is "determined by the trier
of fact to be [sixty percent] or more responsible for the total damages."
N.J.S.A. 2A:15-5.3(a). Those tortfeasors determined "by the trier of fact to be
less than [sixty percent] responsible for the total damages[,]" are liable "[o]nly
[for] that percentage of the damages directly attributable to that [tortfeasor's]
negligence or fault[.]" N.J.S.A. 2A:15-5.3(c).
A-4042-19T3
12
In tandem, the two statutes also altered the effect of a plaintiff's
settlement with one tortfeasor on his or her claim against any remaining joint
tortfeasors and the non-settling defendant's right to contribution. Pursuant to
the JTCL:
[A] settling tortfeasor . . . ha[d] no further liability to
any party beyond that provided in the terms of
settlement, and . . . a non-settling defendant's right to
a credit reflecting the settler's fair share of the amount
of the verdict — regardless of the actual settlement —
represent[ed] the judicial implementation of the
statutory right to contribution.
[Young v. Latta,
123 N.J. 584
, 591 (1991) (emphasis
added).]
"The pro rata contribution scheme of the [JTCL was] eclipsed by the
percentage-liability formula established by sections 5.2 and 5.3 of the [CNA]."
Id. at
592
(citing Cartel Cap. Corp. v. Fireco of N.J.,
81 N.J. 548
, 569–70
(1980); Rogers v. Spady,
147 N.J. Super. 274
, 277 (App. Div. 1977)).
"Pursuant to the [CNA], the finder of fact must make an allocation of
causative fault between settling and non-settling defendants so that the court
can calculate the amount of the credit due [to] the non-settler even though the
non-settler cannot pursue a claim for contribution against the settler."
Ibid. (citing Dimogerondakis v.
Dimogerondakis,
197 N.J. Super. 518
(Law Div.
1984)). As Judge Pressler explained:
A-4042-19T3
13
A necessary corollary of this scheme is to deny to
comparative-negligence joint tortfeasors a reduction of
their liability based on a plaintiff's pretrial settlement
with a defendant who is never found to be liable at all.
Thus, under the comparative-negligence scheme, a
plaintiff is entitled to retain the proceeds of the
pretrial settlement as well as the full jury verdict as
allocated among all other defendants.
....
[U]nless the settling defendant's percentage of
liability is adjudicated at trial, there is simply no right
in the adjudicated tortfeasors to a reduction of their
own separately-allocated responsibility for the verdict.
[Johnson, 306 N.J. Super. at 436
–37 (emphasis
added).]
The CNA therefore significantly altered the landscape that existed after
enactment of the JTCL "as construed by Theobald v. Angelos,
44 N.J. 228
(1965) [Theobald II],5 under which the non-settling defendants were entitled to
a pro tanto credit for the proceeds of the settlement made by plaintiff with the
settling defendant whose liability was never adjudicated."
Id. at
436–37;
see
also Tefft v. Tefft,
192 N.J. Super. 561
, 568 (App. Div. 1983) (noting that the
Theobald II "pro tanto deduction . . . if the settling party is not found to be
5
We discuss both cases in greater detail below.
A-4042-19T3
14
negligent" was "changed with the introduction and interpretation of the
[CNA]" (citing
Rogers, 147 N.J. Super. at 277
)).
The Medical Defendants do not dispute these basic principles but rather
contend they are inapplicable to situations involving successive tortfeasors. In
other words, despite the CNA's elimination of pro rata and pro tanto credits
among joint tortfeasors in personal injury negligence actions, and replacement
with a credit based solely upon a settling joint tortfeasor's adjudicated
percentage of fault, the Medical Defendant's argue that Ciluffo's calculus still
applies to successive tortfeasors, even if the settling tortfeasor's culpable
negligence was never adjudicated. The Medical Defendants assert a single
reason for the continued vitality of the Ciluffo pro tanto credit, namely,
without it, a plaintiff who settles with the initial tortfeasor might receive a
windfall at trial.
B.
We acknowledge the differences between joint and successive
tortfeasors. In the case of successive tortfeasors, the common law rejected any
notion of joint and several liability and long provided that the first tortfeasor
"is responsible for all damages that naturally and proximately flow from the
initial tort, including the consequences of medical malpractice in treating the
injuries caused by his wrong." New Milford Bd. of Educ. v. Juliano, 219 N.J.
A-4042-19T3
15
Super. 182, 187 (App. Div. 1987) (citing
Ciluffo, 146 N.J. Super. at 482
;
Knutsen, 96 N.J. Super. at 235
); accord
Williamson, 150 N.J. at 252
("Traditionally, our courts have held that an initial tortfeasor is liable for the
results of the medical treatment of an injured victim." (citing Ciluffo, 146 N.J.
Super. at 482;
Knutsen, 96 N.J. Super. at 235
)); Doe v. Arts,
360 N.J. Super. 492
, 510 (App. Div. 2003) (citing Williamson). See also Restatement
(Second) of Torts § 457 (Am. Law Inst. 1965) (Restatement (Second)) ("If the
negligent actor is liable for another's bodily injury, he is also subject to
liability for any additional . . . harm resulting from normal efforts of third
persons in rendering aid . . . irrespective of whether such acts are done in a
proper or a negligent manner."); Prosser & Keeton on Torts § 44, at 309 (5th
ed. 1984) (collecting cases holding "the defendant liable for the results of
medical treatment of the injured victim[, e]ven where such treatment is itself
negligent").
Although the initial tortfeasor may not seek contribution, a purely
statutory right, from the successive tortfeasor because they are not joint
tortfeasors, it may seek indemnification. In Juliano, after settling the claim of
an injured student, the plaintiffs, a town and its school board, sought
indemnification from non-party doctors who they alleged negligently treated
A-4042-19T3
16
the student, causing amputation of three of her
toes. 219 N.J. Super. at 184
.
As Judge Skillman characterized the plaintiffs' claim against the doctors:
Plaintiffs do not seek to escape responsibility for their
tortious conduct by holding defendant doctors liable
for all damages incurred by [the student]. Rather,
plaintiffs' claim is limited to the difference between
what [the student's] damages would have been if
defendants had not committed malpractice and the full
amount of damages which she suffered as a result of
both the original accident and the subsequent
malpractice.
[
Id. at
186–87 (emphasis added).]
In recognizing the initial tortfeasor's right to seek indemnification, we noted:
the responsibility of an initial tortfeasor for the
additional harm caused by subsequent medical
malpractice is less immediate and less direct than the
responsibility of the party or parties who have actually
committed the malpractice. Indeed, the initial
tortfeasor's responsibility for that additional harm can
be viewed as a form of constructive or secondary
liability.
[
Id. at
187.]
Accordingly, we held that "justice require[d] recognition" of the initial
tortfeasor's right to seek indemnification from the successive tortfeasor.
Ibid. In the case
of successive tortfeasors, neither party may have any interest
in the plaintiff's claim against the other on the issue of liability.
Ciluffo, 146 N.J. Super. at 483
. However, each clearly has an interest in paying no more
A-4042-19T3
17
than its fair share of the plaintiff's total damages. We have recognized the
successive tortfeasor's right to limit its damages, even if responsibility for the
initial causative event is not before the factfinder.
In Lewis v. Preschel, the plaintiffs obtained a liability verdict for
malpractice committed in the medical treatment of a broken arm, the result of
an automobile accident. 6
237 N.J. Super. 418
, 420 (App. Div. 1989).
Following a damages only trial and judgment in favor of the plaintiffs for over
$800,000, we agreed with the defendant-doctor's argument that "the trial judge
prejudicially restricted [him] . . . from presenting evidence which would have
addressed the extent to which the malpractice, as distinct from the accident -
caused initial injury, contributed to the damages proved[.]"
Id. at
420–21.
We
reversed and remanded for a new trial on damages, because the jury was not
instructed on the issue of "how much of the damages award was attributable
to . . . malpractice, as distinguished from those damages which would have
arisen even if the reduction and related treatment had not been negligently
performed."
Id. at
422–23.
6
Our decision fails to indicate if the car accident was the result of any
negligence or the subject of prior litigation. Therefore, strictly speaking, there
may not have been successive tortfeasors, although there were clearly
successive events that caused the plaintiff's total quantum of injuries and
damages.
A-4042-19T3
18
C.
Unlike the joint tortfeasor situation where multiple defendants may be
liable for the "same injury," N.J.S.A. 2A:53A-1, a successive tortfeasor is
liable generally only for damages proximately caused by the independent
tortious conduct succeeding the original event. See Restatement (Second) §
433A cmts. b, c (discussing limit on successor tortfeasor's liability when there
are "[d]istinct harms" or "[s]uccessive injuries"). In other words, the issue
may not be one of comparative fault as between the initial and successive
tortfeasor; instead, it is the apportionment of damages between those injuries
proximately caused by the initial tort and those proximately caused by the
successive tort that matters.
We find no support for the Medical Defendants' general proposition that
the CNA has no relevance to actions brought against successive tortfeasors.
By its express terms, the CNA applies to "all negligence actions and strict
liability actions in which the question of liability is in dispute[.]" N.J.S.A.
2A:15-5.2(a). Moreover, the CNA requires the factfinder to determine "the
full value of the injured party's damages[,]" "regardless of any consideration of
negligence or fault[.]" N.J.S.A. 2A:15-5.2(a)(1). The CNA only uses the term
joint tortfeasors in discussing contribution, a right statutorily granted to joint
tortfeasors by the JTCL, and, in the context of social host liability. See
A-4042-19T3
19
N.J.S.A. 2A:15-5.3(e) ("Any party who is compelled to pay more than his
percentage share may seek contribution from the other joint tortfeasors.");
N.J.S.A. 2A:15-5.8 (noting that when a "social host . . . is determined to be a
joint tort-feasor, the social host or other party shall be responsible for no more
than th[eir] percentage share of the damages . . . equal to the[ir] percentage of
negligence").
The Court has acknowledged the relevance of the CNA's principles to
situations involving successive tortfeasors. In Campione v. Soden, the
plaintiff was a passenger in a car rear-ended by one driven by the defendant
Jensen.
150 N.J. 163
, 168 (1997). While the plaintiff was outside the car
inspecting the damage, a second car rear-ended Jensen's car, crushing the
plaintiff's legs and launching him into the air.
Ibid. Although the cause
of [the plaintiff's] leg injuries was
undisputed, the source of his back, neck, periodontal,
and psychological injuries was vigorously contested.
Jensen[] argued that all of those injuries were caused
by the second impact, while [the plaintiff] contended
that the injuries could not be apportioned between the
two accidents.
[
Id. at
170.]
While the trial court submitted special interrogatories to the jury, "[t] he
verdict form failed to inquire about the percentage of fault attributable to the
negligence of Jensen[] as a proximate cause of the second impact.
A-4042-19T3
20
Additionally, the form did not adequately inform the jury of its responsibility
to attempt to allocate all damages between the two accidents."
Id. at
171
(emphasis added). The Court in Campione cited with approval Loui v. Oakley,
438 P.2d 393
, 396–97 (Haw. 1968), for the proposition that a jury should
determine "how much of the plaintiff's damages are attributable to each
defendant's negligence[,]" and, if it "is unable to do so precisely, it may make
a 'rough apportionment.'"
Id. at
176.
Importantly for our purposes, the Court
said:
Although the [CNA] does not specifically address the
jury's responsibility in cases involving injuries
sustained in successive accidents, we infer that the
legislative objective would be achieved by requiring
juries to apportion damages between the successive
accidents and to apportion fault among the parties
responsible for each accident.
[
Id. at
184 (emphasis added); see also Kiss v. Jacob,
138 N.J. 278
, 284 (1994) (applying "the principles of
comparative negligence" derived from the CNA to the
jury award of causative fault and damages in a chain
reaction collision).]
Our jurisprudence generally favors apportionment of damages.
Boryszewski v. Burke,
380 N.J. Super. 361
, 374 (App. Div. 2005). See also
Restatement (Second) § 433A (1) ("Damages for harm are to be apportioned
among two or more causes where (a) there are distinct harms . . . ."). The Court in
A-4042-19T3
21
Campione explained the principles the trial court should employ in
apportioning damages for two different "causative events":
At the conclusion of a trial where allocation of
damages among multiple tortfeasors is an issue, the
trial court is to determine, as a matter of law, whether
the jury is capable of apportioning damages. The
absence of conclusive evidence concerning allocation
of damages will not preclude apportionment by the
jury, but will necessarily result in a less precise
allocation than that afforded by a clearer record. If
the court establishes as a matter of law that a jury
would be incapable of apportioning damages, the court
is to apportion damages equally among the various
causative events. If the court concludes that the jury
would be capable of apportioning damages, the jury
should be instructed to do so.
[150 N.J. at 184–85 (internal citations omitted).]
D.
We have long recognized that a party's status as a tortfeasor cannot be
presumed simply because the plaintiff settled his or her claim against that
party. See, e.g., Shatz v. TEC Tech. Adhesives,
174 N.J. Super. 135
, 145
(App. Div. 1980) ("We see no reason why a settlement should reverse the
ordinary rule that a person is not presumed to be culpable.") (citing Dziedzic v.
St. John's Cleaners & Shirt Launderers, Inc.,
53 N.J. 157
, 161 (1969)). As
already noted, the CNA essentially codified this principle because after its
enactment, a non-settling defendant was not entitled to any reduction in its
A-4042-19T3
22
share of a plaintiff's total damages unless it proved the settling defendant's
liability. See Green v. Gen. Motors Corp.,
310 N.J. Super. 507
, 545–47 (App.
Div. 1998) (holding that the non-settling defendant, "by failing to have the jury
assess the [settling defendant's] percentage of fault," was not entitled to credit
for settlement monies paid);
Johnson, 306 N.J. Super. at 437
(holding that
"unless the settling defendant's percentage of liability is adjudicated at trial,
there is simply no right in the adjudicated tortfeasors to a reduction of their
own separately-allocated responsibility for the verdict"); Mort v. Besser Co.,
287 N.J. Super. 423
, 431–32 (App. Div. 1996) (noting that a non-settling
defendant could shift a portion of liability to a settling defendant, but "that
liability must be proven"); Young v. Latta,
233 N.J. Super. 520
, 526 (App.
Div. 1989) ("[I]f no issue of fact is properly presented as to the liability of the
settling defendant, the fact finder cannot be asked, under N.J.S.A. 2A:15-5.2 or
otherwise, to assess any proportionate liability against the settler."), aff'd,
123 N.J. 584
(1991).
However, the distinction between joint and successive tortfeasors
compels us to reject plaintiff's blanket assertion that the CNA requires an
adjudication of Juanito's fault before the appropriate quantum of damages
could be determined if any Medical Defendant were found to be liable. Under
principles of comparative responsibility embodied by the CNA, a successive
A-4042-19T3
23
tortfeasor may, upon adequate proof, seek the factfinder's apportionment of
damages between those proximately caused by its negligence and those caused by
the initial tortfeasor, regardless of whether the initial tortfeasor was adjudged to
have been negligent or whether the initial tortfeasor remains in the case.
Campione, 150 N.J. at 184
; see Schwarze v. Mulrooney,
291 N.J. Super. 530
,
541 (App. Div. 1996) (collecting cases where, in various factual contexts, the
burden of apportioning damages has been placed upon the defendant). The
successive tortfeasor may seek apportionment of damages even if the initial
tortfeasor is not adjudicated culpably negligent.
Lewis, 237 N.J. Super. at 422
–
23.
Depending on the facts of the case, when successive torts are involved
and one tortfeasor has settled before trial, issues of comparative fault may
indeed become less significant. Had plaintiff not reached a settlement with
Juanito's, and the case was tried against all defendants, the jury would have to
decide the comparative fault of Jennifer and Juanito's as to the initial fall, and
the quantum of damages associated with the fractured ankle. The Medical
Defendants would unlikely be concerned about the jury's assessment of
comparative fault for the fall, because even if the jury concluded Jennifer was
not entitled to any recovery from Juanito's based on findings of compara tive
fault, her claim against the Medical Defendants would continue, and, if
A-4042-19T3
24
successful, the jury would then assess the amount of damages proximately
caused by their negligence.
Generally speaking, we think it is safe to assume that the focus of the
Medical Defendants' defense in this case, and in most other litigation like this,
will be on the issue of their own culpability, and, secondarily, the
apportionment of damages between Jennifer's fall and the care they
administered to her. The jury would first determine whether some or all of the
Medical Defendants were negligent after Jennifer came under their care. If
more than one Medical Defendant was found negligent and a proximate cause
of Jennifer's subsequent injuries, the jury would first assess the comparative
fault of those adjudicated tortfeasors and then assess the total amount of
damages, apportioned between those caused by the fractured ankle and those
caused by the medical negligence. In this regard, any Medical Defendants
found liable would not have to prove Juanito's negligence in order to limit
their potential exposure for proximately caused damages. Indeed, in a scenario
such as this case, where the only defendants remaining are those alleged to
have caused the subsequent injuries, the jury must apportion the total amount
of damages between those caused by the initial injuries, and those caused by
the Medical Defendants' negligence, so that the remaining defendants are not
A-4042-19T3
25
obliged to pay for injuries they did not proximately cause. The relative fault
of the party causing the initial injuries is irrelevant.
There certainly may be other scenarios where a non-settling defendant
chooses to adduce proof of the settling initial tortfeasor's negligence. This
may occur in cases where the non-settling defendant proves that the settling
tortfeasor was negligent and its negligence was a proximate cause of the
second "causative event." See, e.g.,
Campione, 150 N.J. at 170
–71 (noting
dispute as to which event caused which set of damages and the failure of the
trial court's interrogatories to ask the jury to determine whether initial
tortfeasor was a proximate cause of the second collision); see also Mahoney &
Forte, New Jersey Personal Injury Recovery § 15:1-1 (2020) (noting possibility
that "the party who caused the original accident would be a proximate cause of
both the initial pain and suffering and the subsequent malpractice" (citing
Juliano, 219 N.J. Super. at 187
;
Ciluffo, 146 N.J. Super. at 482
)).
After the jury apportions the damages caused by each causative event, it
determines the relative fault for each occurrence, and the court molds the
verdict accordingly. The Court envisioned this two-step scenario in
Campione, 150 N.J. at 184
; see also Mahoney & Forte, § 15:1-1 (discussing this
"two-step process" "when separate elements of damages are attributable to
different, but related, events").
A-4042-19T3
26
This two-step process has now been adopted by the most recent
Restatement, which provides:
(a) When damages for an injury can be divided by
causation, the factfinder first divides them into their
indivisible component parts and separately apportions
liability for each indivisible component part . . . .
(b) Damages can be divided by causation when the
evidence provides a reasonable basis for the factfinder
to determine:
(1) that any legally culpable conduct of a
party or other relevant person to whom the
fact-finder assigns a percentage of
responsibility was a legal cause of less
than the entire damages for which the
plaintiff seeks recovery and
(2) the amount of damages separately
caused by that conduct.
[Restatement (Third) § 26.]7
"This process effectuates the basic policies of causation and comparative
responsibility[, and] . . . does not make a . . . defendant responsible for
damages that person did not cause . . . ."
Id. at
cmt. d. As the Restatement
7
We limit our discussion and application of this section of the Restatement
(Third) to factual circumstances where, as a matter of law, the jury is capable
of apportioning the amount of total damages between each causative event.
Campione, 150 N.J. at 484
. The Restatement (Third) provides examples of
"[e]mploying the two-step process" in various fact patterns.
Id. at
cmt. c.
A-4042-19T3
27
(Third) has noted, "[c]ommentators [have] generally favor[ed] all or part of the
Loui-Campione approach."
Id. at
notes to cmt. h (citations omitted).
To summarize, the CNA applies to situations involving successive
tortfeasors, but not in the same way it applies to joint tortfeasors. In the context of
successive torts, the CNA helps to achieve the "legislative objective" of
comparative responsibility "by requiring juries to apportion damages
between . . . successive [events] and to apportion fault amount the parties
responsible for each [event]."
Campione, 150 N.J. at 184
. At trial, a non-
settling successive tortfeasor may not only dispute its negligence and the quantum
of damages it proximately caused, but it may also adduce proof as to the
negligence of the settling tortfeasor, and whether the initial tortfeasor's negligence
was a proximate cause of the second "causative event." The burden of proof is on
the non-settling defendant.
Young, 123 N.J. at 597
.
We now consider the continued vitality of the Ciluffo pro tanto settlement
credit.
II.
The sole justification for a pro tanto credit provided by Ciluffo was to
eliminate a windfall recovery through a duplication of damage awards to the
plaintiff. 146 N.J. Super. at 483
. We consider the continued vitality of this
rationale against the backdrop of what is a well-recognized phenomenon,
A-4042-19T3
28
namely the "dramatic impact" of "the nearly universal adoption of comparative
responsibility by American courts and legislatures[.]" Restatement (Third) § 1
cmt. a.
A.
As some commentators have noted, prior to the passage of the JTCL and
the CNA two decades later, New Jersey embraced "what might be termed an
'absolute morality' common law tort recovery system," whereby "a tort
plaintiff needed to be absolutely blameless as a prerequisite to recovery ."
Mahoney & Forte, §1:1-1, p. 2; see also Renz v. Penn Cent. Corp.,
87 N.J. 437
,
450–57 (1981) (detailing history of common law of contributory negligence in
New Jersey to 1973, and noting that "issues relating to liability in the personal
injury tort field . . . must now be developed and applied in a manner consistent
with the new doctrine, . . . [the CNA]"). "'[A]ny fault kept a claimant from
recovering under the system,' whether that claimant was a plaintiff seeking
compensation from a defendant or one joint tortfeasor looking for contribution
from another." Dunn v. Praiss,
139 N.J. 564
, 575 (1995) (quoting Ostrowski v.
Azzara,
111 N.J. 429
, 436 (1988)).
A common law corollary was the rule that a plaintiff's release of one
joint tortfeasor automatically operated as a release of all who may have caused
the injury, regardless of the intention of the parties or the sufficiency of the
A-4042-19T3
29
plaintiff's recovery. The original rationale for this doctrine was that "the cause
of action[,] which is one and indivisible, having been released, all persons
otherwise liable thereto are consequently released." Adolph Gottscho, Inc. v.
Am. Marking Corp.,
18 N.J. 467
, 470 (1955) (quoting Salmond, Torts (11th
ed. 1953), 90). Our courts applied this "automatic release" doctrine not only to
joint tortfeasors, but also to successive tortfeasors in situations similar to the
facts in this case. See Knutsen v. Brown,
93 N.J. Super. 522
, 536 (Law. Div.
1966) (noting that "[t]he majority of early American cases . . . held that where
plaintiff had released the original tortfeasor, he was barred from an action for
malpractice against treating physicians"), aff'd,
96 N.J. Super. 229
(App. Div.
1967); Adams v. De Yoe,
11 N.J. Misc. 319
, 320 (Sup. Ct. 1933) (applying
doctrine to bar the plaintiff's claim against doctor who treated broken arm
suffered in accident when party allegedly causing accident was released by
settlement). "The one-settlement-releases-all rule may [have] be[en] the most
widely and harshly criticized legal rule of all time." Restatement (Third) § 24
notes to cmt. b.
Changes developed. First, in Brandstein v. Ironbound Transp. Co.,
112 N.J.L. 585
(E. & A. 1934), the court reasoned that when the plaintiff settled
with one tortfeasor and executed a covenant not to sue instead of a release,
A-4042-19T3
30
granting a pro tanto credit to a non-settling tortfeasor did not violate the
common law prohibition on contribution. The court explained:
It is urged that, inasmuch as there can be no division
of responsibility and no enforced contribution as
between joint tort-feasors, there can be no application
of payments by one or more tortfeasors in diminution
of the amount recoverable by suit from another joint
tort-feasor. Such argument overlooks entirely the
fundamental rule that a person damaged can receive
but one satisfaction for his injury. If he has received
from one joint wrongdoer satisfaction and executed a
release, it is taken to be full satisfaction and releases
all jointly liable for the injury. A covenant not to sue
one joint tort-feasor does not release other joint tort-
feasors. If less than full satisfaction has been received
for a covenant not to sue, reason, as well as authority,
require that an injured person recover from other joint
tort-feasors who are liable for his damage, but that his
recovery from all the persons charged with
responsibility for his injury be limited to the amount
of his damage. Justice and fair dealing commend such
rule.
[
Id. at
593.]
In Daily, the Court observed that it was "modern and eminently just" to
modify the common law "automatic release" doctrine with respect to
successive
torts. 28 N.J. at 383
. 8 In Daily, the plaintiff filed suit in New York
8
The Court decided Breen v. Peck,
28 N.J. 351
(1958), the same day it
decided Daily. In Breen, the Court modified the absolute release doctrine as
applied to joint tortfeasors, holding "our State no longer recognizes the English
A-4042-19T3
31
against the owner and driver of a truck (the accident defendants) responsible
for injuries he suffered in a motor vehicle accident in Ohio.
Id. at
375. He
filed a suit in New Jersey against the doctors who provided him with
subsequent medical care for his injuries.
Id. at
375–76. The plaintiff settled
his claim with the accident defendants and executed a formal release.
Id. at
376.
Construing Ohio law, the trial judge granted the doctors' motion for
summary judgment, concluding that the release barred the plaintiff's recovery,
since his complaint alleged only an aggravation of the injuries caused by the
accident, and the plaintiff could have recovered the full amount of damages
from the accident defendants.
Id. at
378–79. However, applying New Jersey
law, the Court, rejected the automatic release rationale of Adams, and held:
Where . . . the court is concerned not with a joint tort
but with successive independent torts, it is even more
evident that the release of the original tortfeasor may
not rationally be given the effect of automatically
releasing the successive tortfeasor who, though he has
made no payment whatever towards satisfaction of the
injury he wrongfully inflicted, seeks a windfall
because of the compromise of the claim against the
original tortfeasor.
(continued)
common-law rule which, in absolute terms, released all joint tortfeasors upon
the release of one."
Id. at
364.
A-4042-19T3
32
[
Id. at
383–84 (citations omitted).]
The Court concluded that the release did not bar the plaintiff's medical
malpractice claim unless it "was actually intended to release the doctors, or . . .
the amount paid by [the accident defendants] actually constituted full
compensation for the plaintiff's claims against [the accident defendants] and
the doctors or was accepted as such," in which case "the plaintiff may not
fairly or equitably seek further recovery."
Id. at
384.
While both Breen and Daily abrogated the automatic release rule, both
assumed that a pro tanto credit would apply to reduce any damage award
against the unreleased, non-settling defendants at trial. See
Breen, 28 N.J. at 365
–66 (noting in joint tortfeasor context that the defendant "would in any
event receive a benefit from the partial payment of his co-wrongdoer[,] for it
would ultimately be allowed as a credit on the claim against him");
Daily, 28 N.J. at 386
(noting in successive tortfeasor context that, if the plaintiff
received "partial compensation" from the settling defendant for injuries
attributed to the doctors, "the amount of the partial compensation will be
credited against any sum otherwise recoverable by the plaintiff; in no event
will there be duplicating compensation to the plaintiff or duplicating liability
on the part of the defendants").
A-4042-19T3
33
The Court's opinions in Theobold v. Angelos,
40 N.J. 295
(1963)
(Theobold I), and Theobold II,
44 N.J. 228
, significantly changed the
settlement-credit landscape for joint tortfeasors. 9 In that case, one defendant
settled prior to trial for $1500 ($1500 settler) and another settled for $88,500
($88,500 settler), for a total settlement of $90,000. Theobold
I, 40 N.J. at 298
–99. The jury had answered written interrogatories "calling for a specific
finding" as to the negligence of the two settling defendants and "whether such
negligence was a 'concurring and proximate cause of' plaintiffs' injuries."
Id. at
299. The jury found that the $88,500 settler was negligent, the $1500 settler
was not, the trial defendant was negligent, and the plaintiff's total damages
were $65,000.
Ibid. Thus, under the
terms of the JTCL and prior to passage of
the CNA, the $88,500 settler and the trial defendant were joint tortfeasors, but
the $1500 settler was not a tortfeasor at all; therefore, the trial judge divided
the verdict equally between the $88,500 settler and the trial defendant.
Id. at
300. He then deemed one half of the judgment satisfied by the $88,500
settlement, deducted the $1500 settlement from the remaining $32,500 award
and entered judgment against the trial defendant for $31,000.
Ibid. 9
The plaintiff's name is spelled differently in both cases. From here on in, we
adopt the spelling used in the first case.
A-4042-19T3
34
The Court in Theobold I noted that adoption of the JTCL "did not
change the fundamental doctrine that an injured person is entitled to receive
full and fair compensation but once, regardless of the number of wrongdoers
who participated in inflicting the damage."
Id. at
302. However, application
of the statute "in certain situations where a plaintiff has made a partial
settlement with less than all of the alleged tort-feasors without trial of his case,
may result in actual receipt of a lesser sum than that fixed by a jury as
representing full compensation."
Ibid. (emphasis added). The
Court then
posed a series of hypothetical outcomes from "[t]he other side of the coin,"
i.e., where the plaintiff settled for a greater sum than awarded by the jury at
trial.
Id. at
302–03. Without resolving the issue, the Court reversed based on
the judge's jury instructions
, id. at 305–07,
and remanded for a new trial as to
damages only, leaving the issue of "the propriety of the allocation of the
verdict among the various alleged tort[-]feasors" for the future.
Id. at
308.
At the second trial, the jury awarded the plaintiff $165,000 in total
damages. Theobold
II, 44 N.J. at 231
. The judge split the verdict equally on a
pro rata basis between the $88,500 settler and the trial defendant, applied a
$1500 pro tanto credit, and entered judgment against the trial defendant for
$81,000.
Id. at
231–32. Before the Court, the trial defendant argued that
either: (1) the total damages should be split pro rata between all three
A-4042-19T3
35
defendants, leaving one $55,000 share left to be paid: or, (2), if a three-way
pro rata split was not allowed, the trial defendant should receive a pro tanto
credit of $90,000, i.e., all the settlement monies the plaintiff had received,
leaving a judgment of $75,000, not $81,000, against it.
Ibid. The Court rejected
both alternatives. As to the $1500 settler, the Court
found no basis to consider him responsible for a pro rata share of the plaintiff's
damages.
Id. at
234–35. The Court noted that the JTCL "calls for an
adjustment only if the payor was a party to the wrong[,]" and it "does not
direct that credit be given if there is a settlement with one who is not in fact a
tortfeasor."
Id. at
235 (emphasis added). Although the plaintiff did not
challenge on appeal the award of a pro tanto credit to the trial defendant for
the monies paid by the $1500 settler who was adjudicated not negligent at
trial
, id. at 232,
the Court in dicta cited Brandstein and approved application of
the pro tanto credit to the trial defendant's share.
Id. at
236.
However, "invok[ing] the rule that there may be but one satisfaction of a
wrong[,]" the trial defendant argued that holding him responsible for $81,000
in damages resulted in a windfall to the plaintiff, who would receive a total of
$171,000 in damages ($1500 + $88,500 + $81,000), even though the jury
awarded only $165,000.
Id. at
239. Justice Weintraub wrote:
A-4042-19T3
36
The one-satisfaction rule is equitable in nature
and was designed to prevent unjust enrichment. . . .
[I]t probably came into being at a time when courts of
law could not achieve contribution among co-obligors.
While the rule remains useful as an instrument for a
just result, the question is whether it should be
invoked in a situation in which [the JTCL] applies.
Defendant's just liability under [JTCL], based
on the equitable doctrine that equality is equity, is for
a pro rata share. He . . . seeks to avoid part of his
liability because a co-tortfeasor paid more than he had
to under the law. If defendant can invoke the one-
satisfaction rule, he will enrich himself to the extent of
another's overpayment. Hence, as plaintiff correctly
puts it, the question is whether it is the plaintiff or the
defendant who should be "unjustly" enriched if there
in fact is any "unjust" enrichment in this scene.
We think plaintiff has the better of the argument
in terms of both fairness and utility.
As to fairness, it is difficult to know whether a
tort claimant has received more than full satisfaction.
There is no precise measure of the amount of wrong.
Even if the trial is as to damages only, successive
juries would rarely make the identical appraisal. Nor
is there reason to suppose that a jury's evaluation of
losses is more accurate than the evaluation made by
the parties to the settlement.
[
Id. at
239–40 (emphasis added) (citations omitted).]
Despite these statements, the Court nevertheless approved the application of a
pro tanto settlement credit, even when the settling defendant was "not a party
to" the wrong.
Id. at
241.
A-4042-19T3
37
B.
After passage of the CNA, Theobold II's award of a pro tanto credit
based upon a plaintiff's settlement with a non-adjudicated joint tortfeasor is no
longer viable. We first addressed the issue in Rogers, a case involving joint
tortfeasors and decided five days after Ciluffo.
In Rogers, the settling defendant paid the plaintiffs $5000 in exchange
for a covenant not to
sue. 147 N.J. Super. at 275
–76. The jury found no
negligence on the settling defendant's part, 100% negligence on the remaining
defendant's part, and total damages of $10,750.
Ibid. "[R]elying solely" on
Theobold II, the remaining defendant claimed entitlement to a pro tanto credit
for the settlement monies received from the non-negligent settler.
Ibid. We noted first
that in Theobold II, "[t]his pro tanto credit was not
challenged . . . on appeal."
Id. at
276. We rejected application of a pro tanto
credit, observing that under the CNA, a plaintiff who "makes a particularly
good bargain in settlement" with a tortfeasor who is ultimately assigned a
small percentage of fault at trial, or with a party later found to be without
liability entirely "will benefit by the excess amount."
Id. at
277–78. We
explained:
This necessarily means that if the settling defendant is
found [zero percent] negligent (as in the present case),
plaintiff will receive the settlement plus the full
A-4042-19T3
38
verdict. Under previous law in New Jersey the pro
tanto amount paid by a non[-]negligent settling
defendant was deducted from the verdict as long as the
amount deducted did not exceed the possible pro rata
share. Of course, under the [CNA] only the
percentage amount equal to the percentage of
negligence attributable to the settling defendant is
deducted, no matter what the size of the settlement. It
follows that the potential for enrichment of plaintiff
beyond the loss suffered has been increased.
However, this is offset by the potential for a greater
loss to plaintiff if he makes a low settlement. While
ideally a claimant should not receive more than one
satisfaction for a wrong, when the situation arises in
which additional enrichment must necessarily flow to
someone, the more just result is to have the person
wronged receive the benefit and not a wrongdoer.
[Ibid. (citing Theobold
II, 44 N.J. at 239
–41)
(emphasis added).]
In the context of joint tortfeasors, our caselaw has consistently followed
Rogers' rationale, i.e., that the CNA eliminated pro tanto credits based on a
plaintiff's settlement with another party, and the adjudicated tortfeasor was
entitled to a "credit" — a reduction in any award of damages — only by
application of the adjudicated percentage responsibility of other tortfeasors.
See, e.g.,
Young, 123 N.J. at 591
(citing Rogers and holding that "[t]he non-
settling defendant is not entitled to a credit if the plaintiff settles with a party
found not to be a tortfeasor");
Johnson, 306 N.J. Super. at 436
–37 (noting, "as
Rogers pointed out, the comparative-negligence scheme differs from the
A-4042-19T3
39
former [JTCL], as construed by [Theobold II], under which the non-settling
defendants were entitled to a pro tanto credit for the proceeds of the settlement
made by plaintiff with the settling defendant whose liability was never
adjudicated"). Indeed, "[t]he rationale of Rogers . . . has been consistently
reaffirmed and adhered to" and "the rule applies to every multiple defendant
case in which a comparative negligence allocation among them is required to
be made."
Johnson, 306 N.J. Super. at 437
(emphasis added).
Because, as outlined above, common law concepts that limited a
faultless plaintiff's full recovery of her damages have long been jettisoned, and
because our jurisprudence has moved inexorably toward apportioning damages
based on adjudicated fault, we see no principled reason for continuing the
Ciluffo pro tanto credit formula simply because this case involves successive
instead of joint tortfeasors. As every case since Rogers has recognized, the
CNA, which by its express terms does not apply solely to joint tortfeasors,
reflected a legislative policy judgment that in turn reflected monumental
changes in the common law. While it remains important that a plaintiff "not
receive more than one satisfaction for a wrong, when the situation arises in
which additional enrichment must necessarily flow to someone, the more just
result is to have the person wronged receive the benefit and not a wrongdoer ."
Rogers, 147 N.J. Super. at 278
.
A-4042-19T3
40
Indeed, with the exception of Clark and Mitchell — two cases that cite
Ciluffo and ostensibly approve the pro tanto credit formula — the Medical
Defendants point to no decisions that approve pro tanto settlement credits in
any context other than alleged medical malpractice in the treatment of prior
occurring injuries. We doubt that our courts intended to carve out such an
exception to our general tort jurisprudence. 10 Moreover, a close reading of
those two cases lend little support to the Medical Defendants' arguments that a
potential pro tanto settlement credit should still apply.
In Clark, the plaintiff suffered serious injuries in an auto accident and
later died from cardiac arrest after the medical defendants provided neglig ent
10
The Court has recognized the continued vitality of pro tanto credits in the
context of uninsured motorist claims brought pursuant to a personal
automobile insurance policy. Riccio v. Prudential Prop. & Cas. Ins. Co.,
108 N.J. 493
, 503–05 (1987). However, there the Court differentiated the public
policy supporting the uninsured motorist coverage and noted, "The policy
behind the [JTCL] and the [CNA], on the other hand, is quite different. It is
one of equity among joint tortfeasors — that is, those responsible for injury to
an innocent victim should share equally the burden of recompense."
Id. at
504.
Accord Childs v. N.J. Mfrs. Ins. Co.,
108 N.J. 506
, 512–15 (1987). In Gold v.
Aetna Life & Casualty Insurance Co., we recognized the viability of the
Ciluffo pro tanto settlement credit in a claim brought under the underinsured
motorist provisions of a policy.
233 N.J. Super. 271
, 277 (App. Div. 1989).
Citing Riccio, we noted that "[i]f plaintiffs had brought a common law suit
against these defendants, the outcome might be different[,]" but Rogers was
inapplicable because "the deduction of settlement proceeds from any potential
underinsured motorist benefits is consistent with the public policy underlying
the availability of contracted UIM coverage."
Id. at
278 n.3.
A-4042-19T3
41
treatment. 390 N.J. Super. at 112
–13. The jury found the medical defendants
were negligent and awarded the plaintiff's survivor $2 million in pain and
suffering damages and $1 million in wrongful death pecuniary losses.
Id. at
111. One of the points raised on the medical defendants' appeal was that the
trial judge failed to charge in accordance with Ciluffo regarding the plaintiff's
settlement of more than $700,000 with the driver involved in the accident, who
was never a party to the suit.
Id. at
119.
"[I]nstead of asking the jury to determine total damages and the
malpractice damages, the judge instructed the jury to determine what damages
flowed from the malpractice and what damages were caused by the initial
accident. Therefore, the two damage amounts together would constitute 'total
damages.'"
Id. at
120. The judge told the jury that the medical defendants
would "receive a credit for any amount paid by the other driver in the
settlement in excess of the amount you determine to be the damage s ustained
solely from the automobile accident."
Ibid. The jury was
not told the amount
of the settlement and apportioned the damages as $2 million from the medical
negligence and $1.5 million from the car accident.
Id. at
120–21. We rejected
the medical defendants' argument regarding the charge, finding "no essential
difference between the process contemplated by Ciluffo and the process
utilized here."
Id. at
121.
A-4042-19T3
42
Importantly, "because the amount of damages assigned by the jury for
the accident far exceeded the settlement amount, there was no credit due
defendants from the settlement."
Ibid. And, we refused
to consider as moot
"whether Ciluffo applies at all to this case where the other driver was never
sued[.]"
Ibid. In short, the
actual application of a pro tanto credit based on the
plaintiff's prior settlement was not before us in Clark.
In Mitchell, the plaintiff sued the owner of a bar at which he was injured
during a brawl and, in a separate lawsuit, the dentist who allegedly was
negligent in treating the injuries to his
mouth. 331 N.J. Super. at 448
–49. On
the day of trial, the plaintiff settled with the bar owner for $125,000, and, on
the same day, moved to amend the complaint to alleged malpractice by the
defendant dentist.
Id. at
449. The trial court dismissed the suit against the
dentist on the grounds that he had been substantially prejudiced by the
plaintiff's failure "to comply with the then-applicable entire controversy
doctrine and notice requirements of Rule 4:5-1(b)(2)[,]" but we disagreed and
reversed.
Id. at
449–55, 458.
The Mitchell defendant also argued that the plaintiff was "not entitled to
proceed against him because the $125,000 settlement represented
compensation for all injuries sustained[.]"
Id. at
456. We disagreed and held
that the plaintiff was "entitled to have a jury determine the issue of full
A-4042-19T3
43
compensation, as well as that amount attributed to defendant's alleged
malpractice."
Id. at
458.
We cited the Ciluffo calculation with approval, noting that "to avoid
duplicating compensation paid to [the] plaintiff, the successive tortfeasor may
receive a credit for part or all of the payment made by the initial tortfeasor."
Id. at
456. We noted, however, that, "[a]t oral argument, plaintiff's counsel
conceded that plaintiff had been satisfied to the extent of the settlement with
the Cherry Hill defendants and would not be entitled to collect additio nal
damages, unless the verdict attributed to defendant's negligence exceeded
$125,000."
Ibid. (emphasis added). In
short, the plaintiff in Mitchell never
raised the issue we now address.
III.
The developments in tort law since Ciluffo was decided regarding the
apportionment of liability among multiple parties have been significant. It
remains true that "[n]o party should be liable for harm it did not cause[.]"
Restatement (Third) § 26 cmt. a. However, under the two-step process
outlined in Campione, successive tortfeasors suffer no prejudice if the jury can
properly apportion "divisible damages into their indivisible component parts."
Id. at
cmt. c. This certainly seems to be such a case, since the jury can easily
understand that the Medical Defendants cannot be held liable for Jennifer's
A-4042-19T3
44
fractured ankle, the pain and suffering that occurred as a result, and the need
for surgery. We specifically anticipated the ability of a jury to apportio n
damages in such circumstances in Ciluffo, Mitchell, and Clark.
The only real issue is whether plaintiff or the Medical Defendants should
benefit from the jury's assessment of the damages related solely to the
fractured ankle when compared to the $1.15 million settlement plaintiff
reached with Juanito's. Without a possible pro tanto credit, if the settlement is
less than the jury's assessment, plaintiff reaps the result of what may have been
a bad bargain, but the Medical Defendants are only responsible for the
damages attributed to their negligence. If the settlement is more than the jury's
assessment, plaintiff receives the benefit, but the Medical Defendants are still
responsible only for what the jury has determined is the full measure of the
damages attributed to their negligence. Such a result is fair and wholly
consonant with the developments in our law since Ciluffo was decided, and we
specifically disapprove of its holding regarding the award of a potential pro
tanto credit in circumstances like these.
The orders under review are reversed, and the matter is remanded to the
Law Division for further proceedings consistent with this opinion. We do not
A-4042-19T3
45
retain jurisdiction.
A-4042-19T3
46 |
4,639,153 | 2020-12-03 15:14:29.557971+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a4570-18.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4570-18T1
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
JEFFERY RICHARDSON,
a/k/a JEFFERY OSBORNE
RICHARDSON, JEFFREY
RICHARDSON, JEFFREY
RICHRARDSON, JEFFEY
RICHRARDSON, and
J-THUG,
Defendant-Appellant.
_________________________
Submitted November 4, 2020 – Decided December 3, 2020
Before Judges Yannotti and Mawla.
On appeal from the Superior Court of New Jersey, Law
Division, Essex County, Indictment No. 12-04-1144.
Joseph E. Krakora, Public Defender, attorney for
appellant (David J. Reich, Designated Counsel, on the
brief).
Theodore N. Stephens, II, Acting Essex County
Prosecutor, attorney for respondent (Stephen A.
Pogany, Special Deputy Attorney General/Acting
Assistant Prosecutor, on the brief).
Appellant filed a pro se supplemental brief.
PER CURIAM
Defendant appeals from an order dated March 8, 2019, which denied his
petition for post-conviction relief (PCR). We affirm in part, reverse in part, and
remand for resentencing on count six.
I.
Defendant was charged under Essex County Indictment No. 12-04-1144
with third-degree receiving stolen property, N.J.S.A. 2C:20-7 (count two);
second-degree unlawful possession of a handgun, N.J.S.A. 2C:39-5(b) (count
three); fourth-degree possession of a defaced firearm, N.J.S.A. 2C:39-3(d)
(count four); fourth-degree possession of hollow-point bullets, N.J.S.A. 2C:39-
3(f) (counts five and seven); second-degree possession of an assault firearm,
N.J.S.A. 2C:39-5(f) (count six); fourth-degree possession of a certain weapon,
a large capacity ammunition magazine, N.J.S.A. 2C:39-3(j) (count eight); and
fourth-degree resisting arrest, N.J.S.A. 2C:29-2(a) (count ten). Co-defendant
A-4570-18T1
2
Colby Richardson (Colby) was charged with these offenses, as well as second-
degree eluding, N.J.S.A. 2C:29-2(b) (count one).1
Defendant and Colby were tried before a jury in September 2014. We
briefly summarize the evidence presented at trial, as set forth in our opinion on
defendant's direct appeal. State v. Richardson (Richardson I), Nos. A-4021-14,
A-4026-14 (App. Div. June 23, 2017) (slip op. at 5-9). On July 21, 2011, the
Newark Police responded to a report that armed men, wearing gloves, had been
seen in a red vehicle in an area of Irvine Turner Boulevard.
Id. at 5.
The officers
observed a red Ford Taurus with three occupants and noticed that the driver was
wearing gloves.
Ibid. A detective turned
his patrol car and pulled up behind the vehicle, which
immediately sped off.
Ibid. After the ensuing
chase, the occupants of the Taurus
exited the moving car and fled on foot.
Ibid. A detective saw
the rear-seat
passenger fleeing and pursued him on foot.
Id. at 6.
The detective apprehended
and arrested the suspect, who was later identified as defendant.
Ibid. Back-up officers spotted
and arrested the driver of the Taurus, who was later identified
as defendant's brother, Colby.
Ibid. 1
We use Colby's first name because he and defendant share a common surname.
A-4570-18T1
3
While examining the Taurus, the police noticed the ignition had been
damaged.
Ibid. Inside the vehicle,
the police found a .45 caliber handgun, a
rifle, a high capacity magazine, and a screwdriver.
Id. at 6-7.
At the scene, the
police also recovered gloves, bandanas, cellphones, and a cap.
Id. at 7.
A
ballistics expert testified that both guns were operable, and their serial numbers
had been obliterated.
Ibid. The State presented
testimony from a scientist who
linked defendant's and Colby's DNA to items of clothing found at the scene.
Ibid. Defendant presented an
expert forensic scientist who disputed the State's
DNA evidence.
Ibid. Colby testified he
was not the driver of the Taurus and he
did not possess the guns.
Id. at 8.
Defendant also denied owning or using the
Taurus or possessing the weapons.
Id. at 9.
Defendant was found guilty on counts two, three, four, six, seven, and
eight, and not guilty on count five. Colby was found guilty of the same offenses
as defendant, and not guilty on counts one and five. Colby and defendant also
were found guilty of resisting arrest, which was charged separately in counts
nine and ten, respectively.
On count two, the trial court sentenced defendant to five years of
imprisonment. On count three, the court imposed a fifteen-year term, with seven
A-4570-18T1
4
and one-half years of parole ineligibility, to run consecutively to count two. On
count four, the court sentenced defendant to eighteen months of imprisonment,
to run consecutively to counts two and three.
On count six, the court imposed ten years of imprisonment, with five years
of parole ineligibility, to run consecutively to counts two, three, and four. In
addition, the court imposed eighteen-month terms of imprisonment on counts
seven, eight, and ten to run concurrently with counts two, three, and four. The
resulting sentence is an aggregate prison term of thirty-one years and six months,
with twelve years and six months of parole ineligibility.
The trial court entered a judgment of conviction (JOC) dated February 23,
2015, and an amended JOC dated February 27, 2015. Defendant appealed the
conviction and argued that the trial court erred by: (1) limiting his attorney's
opening statement; (2) limiting cross-examination of a key witness; (3) denying
his motion to dismiss count two charging receipt of stolen property; (4)
committing cumulative errors that warranted a new trial; and (5) imposing a
"draconian and unjust" sentence.
We rejected defendant's arguments and affirmed his convictions and
sentences.
Id. at 48.
The Supreme Court later denied defendant's petition for
certification. State v. Richardson,
231 N.J. 522
(2017).
A-4570-18T1
5
II.
Thereafter, defendant filed a pro se petition for PCR. The court assigned
counsel for defendant and counsel filed a brief in which he argued: (1) the trial
court erred by imposing multiple consecutive sentences for the
contemporaneous possession offenses; (2) the imposition of consecutive
sentences was unlawful; (3) the sentencing judge erred by finding aggravating
factor eleven; (4) trial and appellate counsel were ineffective; and (5) defendant
is entitled to an evidentiary hearing.
On March 8, 2019, Judge Marysol Rosero heard oral argument and placed
her decision on the record. The judge found that defendant's sentencing
arguments were barred by Rule 3:22-5; however, the judge addressed the merits
of defendant's arguments. The judge found that the trial judge did not err by
imposing multiple, consecutive sentences and adequately explained the reasons
for the sentences. The judge also found defendant failed to present a prima facie
case of ineffective assistance of counsel and therefore concluded he was not
entitled to an evidentiary hearing.
The judge entered an order dated March 8, 2019, denying PCR. This
appeal followed. On appeal, defendant argues:
A-4570-18T1
6
POINT I:
THE PCR COURT ERRED IN CONCLUDING THAT
[DEFENDANT'S] CLAIMS WERE
PROCEDURALLY BARRED.
POINT II:
THE PCR COURT ERRED IN CONCLUDING THAT
NONE OF THE COUNTS SHOULD HAVE
MERGED.
POINT III:
THE PORTION OF THE SENTENCE IMPOSING
FIVE YEARS OF PAROLE INELIGIBILITY
CONCERNING THE SIXTH COUNT WAS
ILLEGAL. (Not raised below).
POINT IV:
[DEFENDANT] WAS DEPRIVED OF THE
EFFECTIVE ASSISTANCE OF COUNSEL BY
VIRTUE OF BOTH HIS TRIAL AND APPELLATE
COUNSEL'S FAILURE TO POINT OUT THAT
THERE WAS NO SUPPORT IN THE RECORD FOR
THE CONCLUSION THAT THE WEAPONS WERE
OBTAINED AT DIFFERENT TIMES AND FOR
DIFFERENT PURPOSES.
POINT V:
[DEFENDANT] WAS DEPRIVED OF THE
EFFECTIVE ASSISTANCE OF COUNSEL BY
VIRTUE OF HIS APPELLATE COUNSEL'S
FAILURE TO POINT OUT THAT CONSECUTIVE
AND MAXIMUM SENTENCING SHOULD NOT
ORDINARILY BE COMBINED.
Defendant has filed a pro se supplemental brief in which he argues:
A-4570-18T1
7
[POINT I]
THE PCR COURT ERRED WHEN DENYING
RELIEF FOR [AN] ILLEGAL SENTENCE WITH
REGARDS TO MERGER OF WEAPONS
OFFENSES, ALTHOUGH THEY WERE
SIMULTANEOUSLY POSSESSED.
[POINT II]
ON PETITION FOR POST CONVICTION RELIEF,
THE TRIAL COURT ERRED WHEN DENYING
RELIEF WITH REGARDS TO MERGER BASED ON
THIS COURT'S (APPELLATE DIVISION)
PREVIOUS AFFIRMATION OF [DEFENDANT'S]
SENTENCE, SINCE ARGUMENTS THERE STEM
FROM [YARBOUGH] - CONCURRENT OPPOSE[D]
TO CONSECUTIVE SENTENCING. (Not Raised
Below).
[POINT III]
THE PCR COURT ERRED WHEN IMPOSING
GRAVES ACT SENTENCING ON COUNT [SIX];
THERFORE [THE] SENTENCE IS ILLEGAL.
[POINT IV]
THE ESSEX COUNTY PROSECUTOR'S OFFICE
HAS FORGOTTEN THAT THE DOMINANT, IF NOT
PARAMOUNT[,] GOAL OF THE CODE IS
UNIFORMITY IN SENTENCING.
[POINT V]
[THE] PCR COURT ERRED WHEN DENYING
RELIEF WITH REGARDS TO THE HOLDING IN
[MILLER], AS EXEMPLIFIED BY [STREATER],
WHICH CAUSED DISPARITY.
A-4570-18T1
8
III.
Defendant argues that the PCR court erred by finding his sentencing
arguments are barred by Rule 3:22-5. He contends his sentencing arguments are
based on the trial judge's failure to merge offenses, an argument that we did not
specifically address in our opinion on his direct appeal. Defendant therefore
contends he is not barred from asserting that his sentence is illegal.
We need not address defendant's contention that the PCR court erred by
finding his sentencing claims barred under Rule 3:22-5. As noted, the court
addressed the merits and determined that the trial court did not err by refusing
to merge counts two, three, four, and six.
"We follow a 'flexible approach' in merger issues that 'requires us to focus
on the "elements of the crimes and the Legislature's intent in creating them," and
on "the specific facts of each case."'" State v. Miller,
237 N.J. 15
, 32 (2019)
(quoting State v. Brown,
138 N.J. 481
, 561 (1994) (citations omitted)). The
overriding principle of our merger analysis "is that a defendant who has
committed one offense 'cannot be punished as if for two.'"
Ibid. (quoting Brown, 138
N.J. at 561 (citations omitted)). This approach requires
analysis of the evidence in terms of, among other
things, the time and place of each purported violation;
whether the proof submitted as to one count of the
indictment would be a necessary ingredient to a
A-4570-18T1
9
conviction under another count; whether one act was an
integral part of a larger scheme or episode; the intent of
the accused; and the consequences of the criminal
standards transgressed.
[Id. at 33 (quoting State v. Davis,
68 N.J. 69
, 81
(1975)).]
Moreover, "merger issues implicate a defendant's substantive state
constitutional rights that are rooted in principles of double jeopardy, due
process, or some other legal tenet. The purpose of merger is to avoid double
punishment for a single wrongdoing." State v. Hill,
182 N.J. 532
, 542 (2005)
(quoting State v. Diaz,
144 N.J. 628
, 637-38 (1996) (citations omitted)).
However, "the Legislature may fractionalize a single criminal episode into
separate offenses when the Legislature intends them to be punished separately
and when the fractionalization does not offend constitutional principles."
Miller, 237 N.J. at 33
(quoting State v. Mirault,
92 N.J. 492
, 504 (1983)).
Defendant argues that the only evidence presented by the State was that a
detective saw him in the Taurus, which was believed to have been stolen, and
two weapons were found in the vehicle after he was apprehended. He argues
that it was inappropriate to charge and convict him of four separate offenses
where each charged offense was part of the same criminal episode. We disagree.
A-4570-18T1
10
In our opinion on defendant's appeal, we rejected his contention that the
trial judge erred by imposing consecutive sentences on counts two, three, four,
and six. Richardson I, slip op. at 46-47. We stated that
the judge rejected the argument [that] these crimes
constituted a single event. He found the identified
crimes were "separate and apart." Noting that there are
no "free crimes," the judge found it would be "grossly
unjust" were he to ignore the necessity to "provide for
the safety of the general public" and imposed a
consequence for the distinct offenses committed. The
offenses of receipt of a stolen automobile, unlawful
possession of a handgun, possession of a defaced
firearm, and possession of an assault rifle occurred at
separate times, and were not a single transaction, but
each offense had distinct, independent objectives and
involved separate threats of violence.
[Id. at 46.]
Our discussion of defendant's contention regarding the imposition of
consecutive sentences applies to defendant's merger argument.
In support of his contention that, at the very least, the weapons offenses
should merge, defendant relies upon State v. Harper,
153 N.J. Super. 86
(App.
Div. 1977). In that case, the defendant was charged under N.J.S.A. 2A:151-8
with unlawful possession of a loaded revolver, brass knuckles, and a bludgeon.
Id. at 87-88.
The statute made it unlawful for any person, who had been
A-4570-18T1
11
convicted of certain crimes, to possess any firearms or dangerous instruments.
Id. at 88.
We held that the three counts of the indictment should merge.
Id. at 90.
We noted that the "weapons were found in the same place, the bedroom dresser,
and at the same time, upon execution of the search warrant."
Ibid. However, in Harper
, the defendant was charged with three offenses under the same statute.
Id. at 87-88.
Here, defendant was charged with unlawful possession of a handgun
under N.J.S.A. 2C:39-5(b), possession of a defaced firearm under N.J.S.A.
2C:39-3(d) (count four); and possession of an assault firearm under N.J.S.A.
2C:39-5(f). These are separate offenses in the Code of Criminal Justice, which
indicates the Legislature intended that these three offenses would be punished
separately.
Miller, 237 N.J. at 33
(citing
Mirault, 92 N.J. at 504
).
Defendant also relies upon State v. Lattimore,
197 N.J. Super. 197
(App.
Div. 1984). There, the defendants were found guilty "of six [weapons] offenses,
two involving a sawed-off shotgun and four involving two handguns."
Id. at 206.
We held the convictions for possession of the handguns without a permit
to carry should merge.
Id. at 214-15.
A-4570-18T1
12
We stated that "[t]he gravamen of the offense [was] the failure to have a
permit" and if "a defendant had such a permit it would cover all handguns owned
by him but not necessarily all handguns possessed by him . . . ."
Id. at 215.
We
noted that there was no evidence as to the ownership of the guns and the co -
defendants had constructive possession of the weapons.
Ibid. Defendant's reliance upon
Lattimore is misplaced. In that case, the
merged offenses pertained to the same type of weapon, namely handguns.
Moreover, as we explained, the "gravamen of the offense [was] the failure to
have a permit," and one permit would have covered all handguns owned by the
person who possessed them.
Ibid. Here, defendant has
been found guilty of
possessing a handgun, a defaced firearm, and an assault weapon.
IV.
Defendant argues that the trial court erred by imposing five years of parole
ineligibility for his conviction of unlawful possession of an assault firearm, in
violation of N.J.S.A. 2C:39-5(f). Defendant contends that in 2011, when he
committed the offense, N.J.S.A. 2C:43-6(c) required imposition of a mandatory
minimum term of between "one-third and one-half of the sentence imposed by
the court or three years, whichever is greater, or [eighteen] months in the case
of a fourth degree crime, . . ."
A-4570-18T1
13
The statute did not expressly include sentences for persons convicted
under N.J.S.A. 2C:39-5(f). In 2013, the Legislature amended N.J.S.A. 2C:43-
6(c) to include persons convicted under N.J.S.A. 2C:39-5(f). L. 2013, c. 113.
The statute also was amended to provide that the minimum punishment "shall
be fixed at one-half of the sentence . . . or [forty-two] months, whichever is
greater, . . ."
Ibid. The State asserts
the trial court assumed that it was required to impose the
five-year period of parole ineligibility on count six. The State therefore agrees
this aspect of the sentence is illegal and a remand for resentencing on count six
is required. The State notes, however, that before the 2013 amendment, N.J.S.A.
2C:39-5(f) was a second-degree offense and the trial court could have imposed
a mandatory minimum sentence pursuant to N.J.S.A. 2C:43-6(b).
Accordingly, we vacate the minimum term imposed on count six and
remand for resentencing on this count. We express no view as to whether the
trial court should impose a minimum term pursuant to N.J.S.A. 2C:43-6(b).
V.
Defendant also argues that the PCR court erred by finding he was not
deprived of the effective assistance of trial and appellate counsel. Defendant
contends there was no support in the record for the trial court's statement that it
A-4570-18T1
14
was "reasonable to assume" the defendant probably or "more than likely"
obtained the weapons at different times "and surely for different purposes."
Defendant argues that his trial and appellate counsel were ineffective in failing
to highlight, or even mention, the alleged absence of support in the record for
the trial court's findings.
A defendant asserting a claim of ineffective assistance of counsel must
satisfy the two-part test established in Strickland v. Washington,
466 U.S. 668
,
687 (1984), and later adopted by our Supreme Court in State v. Fritz,
105 N.J. 42
, 58 (1987). Under that test, a defendant first "must show that counsel's
performance was deficient."
Strickland, 466 U.S. at 687
. The defendant must
establish that the attorney's performance "fell below an objective standard of
reasonableness" and that "counsel made errors so serious that counsel was not
functioning as the 'counsel' guaranteed the defendant by the Sixth Amendment."
Id. at 687-88.
The defendant also must show "that the deficient performance prejudiced
the defense."
Id. at 687.
To establish prejudice, the defendant must establish
"there is a reasonable probability that, but for counsel's unprofessional errors,
the result of the proceeding would have been different. A reasonable probability
A-4570-18T1
15
is a probability sufficient to undermine confidence in the outcome" of the matter.
Id. at 694.
When deciding whether to impose concurrent or consecutive sentences,
the court considers the following guidelines established in State v. Yarbough,
100 N.J. 627
, 643-44 (1985):
(1) there can be no free crimes in a system for which
the punishment shall fit the crime;
(2) the reasons for imposing either a consecutive or
concurrent sentence should be separately stated in the
sentencing decision;
(3) some reasons to be considered by the sentencing
court should include facts relating to the crimes,
including whether or not:
(a) the crimes and their objectives were
predominantly independent of each other;
(b) the crimes involved separate acts of violence
or threats of violence;
(c) the crimes were committed at different times
or separate places, rather than being committed
so closely in time and place as to indicate a single
period of aberrant behavior;
(d) any of the crimes involved multiple victims;
(e) the convictions for which the sentences are to
be imposed are numerous;
A-4570-18T1
16
(4) there should be no double counting of aggravating
factors;
(5) successive terms for the same offense should not
ordinarily be equal to the punishment for the first
offense . . . . [2]
The record shows that the trial court considered the Yarbough guidelines
and found that consecutive sentences should be imposed on counts three, four,
and six. There was sufficient evidence in the record to support the judge's
finding that the weapons offenses were committed at different times or separate
places and were not committed in "in a single period of aberrant behavior."
Id. at 644.
As stated previously, in our opinion on defendant's direct appeal, we noted
that the Newark Police had responded to a report of armed men wearing gloves
in a red vehicle. Richardson I, slip op. at 5. They observed a red Ford Taurus
with three occupants and one of the occupants was wearing gloves.
Ibid. The police pulled
up behind the Taurus, which immediately sped off.
Ibid. After a car
chase, the occupants of the Taurus exited the vehicle and fled
on foot.
Ibid. The police pursued
and arrested defendant and Colby.
Id. at 6.
2
Yarbough included a sixth guideline placing an "outer limit" on the cumulation
of consecutive sentences.
Id. at 644.
This guideline was eliminated by an
amendment to N.J.S.A. 2C:44-5(a) enacted in 1993. L. 1993, c. 223.
A-4570-18T1
17
Upon returning to the Taurus, the police noted that its ignition was damaged,
and inside the car they found a .45 caliber handgun, a rifle, a high capacity
magazine, and a screwdriver.
Id. at 6-7.
At the scene, they also recovered
gloves, bandanas, cellphones, and a cap.
Ibid. The evidence supported
the judge's finding that the vehicle had been
stolen before the chase and the apprehension of defendant and Colby. The
evidence also supported the judge's finding that defendant and Colby had
obtained the weapons separately, noting that the assault rifle had been registered
to an individual in the western United States.
Id. at 41,
n.8.
Defendant has not shown that the trial judge probably would have reached
a different decision on the imposition of consecutive sentences if defense
counsel had argued the evidence did not support the conclusion that the crimes
had been committed at different times and in different places. Defendant also
has not shown that this court would have reached a different decision in
addressing his argument regarding the consecutive sentences on appeal.
Defendant further argues appellate counsel was deficient in failing to
argue that the imposition of consecutive sentences was inconsistent with State
v. Miller,
108 N.J. 112
(1987). In that case, the Court stated that
factors relied on to sentence a defendant to the
maximum term for each offense should not be used
A-4570-18T1
18
again to justify imposing those sentences
consecutively. Where the offenses are closely related,
it would ordinarily be inappropriate to sentence a
defendant to the maximum term for each offense and
also require that those sentences be served
consecutively, especially where the second offense did
not pose an additional risk to the victim.
[Id. at 122.]
Here, the trial court granted the State's motion for imposition of a
discretionary extended term on count three, unlawful possession of a handgun.
See N.J.S.A. 2C:44-3(a). The court imposed the maximum term on counts four
and six, but not count three. Moreover, Miller does not preclude the sentencing
court from imposing the maximum term for multiple offenses and requiring that
they be served consecutively where the offenses pose different and additional
risks. In sentencing defendant, the trial court noted that the offenses for which
defendant was convicted involved separate threats of violence.
On direct appeal, we rejected defendant's contention that his sentences
were "draconian and unjust" and affirmed the sentences. Richardson I, slip op.
at 44, 48. Defendant also has not shown a reasonable probability the appeal
would have been decided differently if his counsel had cited and relied upon
Miller.
A-4570-18T1
19
As noted, defendant has filed a pro se supplemental brief. We have
considered his arguments, including his contention that there is an impermissible
disparity between his sentence and the sentence imposed on the defendant in
State v. Shelly, No. A-1758-15 (App. Div. May 31, 2017). We are convinced
the arguments in defendant's pro se supplemental brief lack sufficient merit to
warrant discussion. R. 2:11-3(e)(2).
Affirmed in part, reversed in part, and remanded to the trial court for
resentencing on count six in accordance with this opinion. We do not retain
jurisdiction.
A-4570-18T1
20 |
4,639,154 | 2020-12-03 15:14:30.814418+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a4489-18.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4489-18T2
STATE OF NEW JERSEY,
Plaintiff-Respondent,
v.
HARPAL SINGH,
Defendant-Appellant.
_________________________
Submitted November 16, 2020 – Decided December 3, 2020
Before Judges Rothstadt and Mayer.
On appeal from the Superior Court of New Jersey, Law
Division, Middlesex County, Indictment No. 11-06-
0923.
Joseph E. Krakora, Public Defender, attorney for
appellant (Kisha M. Hebbon, Designated Counsel, on
the brief).
Yolanda Ciccone, Middlesex County Prosecutor,
attorney for respondent (Patrick F. Galdieri, II,
Assistant Prosecutor, of counsel and on the brief).
PER CURIAM
Defendant appeals from the denial of his petition for post-conviction relief
(PCR) without an evidentiary hearing. For the reasons that follow, we affirm.
Following a jury trial, defendant was convicted of first-degree aggravated
manslaughter, N.J.S.A. 2C:11-4(a); first-degree felony murder, N.J.S.A. 2C:11-
3A(3); first-degree robbery, N.J.S.A. 2C:15-1; second-degree aggravated arson,
N.J.S.A. 2C:17-1A; and third-degree hindering an investigation, N.J.S.A.
2C:29-3B(4). On December 23, 2013, the trial court sentenced defendant to an
aggregate term of life in prison subject to the No Early Release Act, N.J.S.A.
2C:43-7.2.
Defendant filed a direct appeal and argued that the trial court
impermissibly excluded testimony, deprived him of a fair trial by permitting the
State to enter graphic photographs of the victim, committed reversible error by
instructing the jury that defendant's flight could be indicative of guilt, and th at
cumulative errors denied him a fair trial. Defendant also challenged his sentence
as being excessive, unduly punitive, and not in accord with New Jersey's
sentencing guidelines. In a supplemental brief, he also argued that he was
denied his Sixth Amendment right because of the ineffective assistance of
counsel (IAC).
A-4489-18T2
2
In an unpublished opinion, we "declin[ed] to address defendant's . . .
argument about [IAC], without prejudice to his right to raise that claim in a
petition for [PCR]," rejected each of defendant's other arguments, and affirmed
his convictions and sentence. State v. Singh, No. A-3203-13 (App. Div. Jan. 23,
2017) (slip op. at 3–10). On September 6, 2017, the New Jersey Supreme Court
denied defendant's petition for certification. State v. Singh,
230 N.J. 560
(2017).
The facts underlying defendant's conviction were set forth in our prior
opinion and need not be repeated here. Singh, slip op. at 4–5. It is sufficient to
state that defendant was acquainted with the victim, went to the victim's home,
robbed her of her jewelry, killed her, and set the home on fire.
Ibid. Defendant filed a
PCR petition on June 15, 2018 claiming IAC. In his pro
se petition, defendant raised issues about unidentified "newly discover[ed]
evidence," his wife testifying against him and being transported to court by the
State, and IAC "during motions at trial." In a brief filed on his behalf, defendant
argued that his trial counsel was ineffective because he failed to conduct a proper
investigation and did not prepare for trial.
As to the lack of investigation, defendant argued that "on numerous
occasions, [he] suggested that trial counsel undertake some investigation in t his
case" and that "counsel was deficient and ineffective when he did not conduct
A-4489-18T2
3
adequate investigation of the facts and circumstances of the case rather he relied
solely on his trial abilities to raise reasonable doubt with the jury." According
to defendant, trial counsel "failed to investigate, failed to argue and failed to
present to the court the issues in such [a] way as to effectively and properly
represent him." He also contended that there was a "reasonable probability" that
his argument trial counsel's deficient performance affected the outcome of his
trial was "at least as plausible" as the defendant's allegations in State v. Preciose,
129 N.J. 451
(1992). Finally, defendant argued that he was entitled to an
evidentiary hearing because "it [was] imperative in this PCR to complete the
record and have [defendant] and counsel testify as to why trial attorney did not
investigate this case and how that affected the outcome."
On April 8, 2019, Judge Diane Pincus considered counsels' oral arguments
on defendant's petition. At the hearing, PCR counsel argued that there were
"certain investigations" that trial counsel should have conducted but did not
conduct. He argued that an evidentiary hearing where defendant and his trial
counsel would "take the stand and articulate what occurred, what [defendant]
wanted to occur, what didn't happen, and perhaps why [trial counsel] didn't do
that," was necessary to "resolve the issues" raised by defendant. In opposition,
A-4489-18T2
4
the State argued that defendant did not meet the two-prong standard set forth
under Strickland v. Washington,
466 U.S. 668
(1984).
On April 10, 2019, the judge issued a written decision denying the petition
without an evidentiary hearing. Judge Pincus rejected defendant's argument that
his trial counsel was constitutionally ineffective and found that to the contrary,
his counsel "pursued a vigorous defense." Specifically, trial counsel stressed
the lack of forensic evidence linking defendant to the crime, aggressively cross -
examined the State's witnesses, and suggested other suspects could be
responsible, including the victim's husband and son. As to the victim's husband,
defendant's trial counsel "attempted to proffer expert testimony regarding the
cultural phenomenon of dowry murders in India, which trial counsel argued
provided a motive for the victim's husband to murder her," although the judge
denied admission of the testimony. As to the victim's son, trial counsel
highlighted the son's lies to his mother on the day of the murder and a potential
"blow up" between the two.
As to defendant's argument that trial counsel failed to conduct an
investigation, the judge explained that trial counsel conducted "an independent
investigation . . . with the assistance of a private investigator, and zealously
defended [defendant]." The judge found that trial counsel was "prepared and
A-4489-18T2
5
well versed" in the facts. The judge concluded defendant failed to satisfy the
first prong of Strickland because he did not show that "trial counsel's
performance was so deficient that he was not functioning in a way guaranteed
by the Sixth Amendment."
Moreover, as to Strickland's second prong, the judge found that defendant
failed to allege "any facts or evidence that a more thorough investigation would
have revealed," and also failed to "specif[y] how such an investigation would
have affected the result of the trial." She characterized his allegations as "bald
assertions" of IAC and concluded that he failed to satisfy the second prong of
Strickland. According to Judge Pincus, "[defendant] ha[d] not shown that had
trial counsel conducted a more extensive investigation, the result of the
proceeding would have been different." She then concluded defendant "failed
to show a prima facie case that he was denied effective assistance of counsel ."
This appeal followed.
On appeal, defendant presents the following issues for our consideration:
POINT I
THE TRIAL COURT ERRED IN DENYING
DEFENDANT'S PETITION FOR [PCR] WITHOUT
AFFORDING HIM AN EVIDENTIARY HEARING
TO DETERMINE THE MERITS OF HIS
CONTENTION THAT HE WAS DENIED THE
A-4489-18T2
6
RIGHT TO THE EFFECTIVE ASSISTANCE OF
TRIAL COUNSEL.
A. THE PREVAILING LEGAL PRINCIPLES
REGARDING CLAIMS OF [IAC], EVIDENTIARY
HEARINGS AND PETITIONS FOR [PCR].
B. TRIAL COUNSEL RENDERED
INEFFECTIVE LEGAL REPRESENTATION BY
VIRTUE OF HIS FAILURE TO THOROUGHLY
INVESTIGATE ALL POSSIBLE DEFENSES AND
TO ADEQUATELY PREPARE FOR TRIAL.
C. DEFENDANT IS ENTITLED TO A
REMAND TO THE TRIAL COURT TO AFFORD
HIM AN EVIDENTIARY HEARING TO
DETERMINE THE MERITS OF HIS CONTENTION
THAT HE WAS DENIED THE EFFECTIVE
ASSISTANCE OF TRIAL COUNSEL.
We are not persuaded by defendant's arguments. We affirm substantially
for the reasons expressed by Judge Pincus in her thorough written decision.
To establish a PCR claim of IAC, a defendant must satisfy the two-
pronged test formulated in
Strickland, 466 U.S. at 687
, and adopted by our
Supreme Court in State v. Fritz,
105 N.J. 42
, 58 (1987), first by "showing that
counsel made errors so serious that counsel was not functioning as the 'counsel'
guaranteed . . . by the Sixth Amendment."
Fritz, 105 N.J. at 52
(quoting
Strickland, 466 U.S. at 687
). Second, the defendant must then prove he suffered
prejudice due to counsel's deficient performance.
Strickland, 466 U.S. at 687
,
A-4489-18T2
7
691–92. Defendant must show by a "reasonable probability" that the deficient
performance affected the outcome.
Fritz, 105 N.J. at 58
.
The mere raising of a claim for PCR does not entitle the defendant to an
evidentiary hearing. State v. Cummings,
321 N.J. Super. 154
, 170 (App. Div.
1999). A defendant is only entitled to an evidentiary hearing when he "has
presented a prima facie [case] in support of [PCR]," meaning that a defendant
must demonstrate "a reasonable likelihood that his . . . claim will ultimately
succeed on the merits." State v. Marshall,
148 N.J. 89
, 158 (1997) (first
alteration in original) (quoting
Preciose, 129 N.J. at 463
).
"[I]n order to establish a prima facie claim, a [defendant] must do more
than make bald assertions that he was denied the effective assistance of counsel."
Cummings, 321 N.J. Super. at 170
. A defendant must allege specific facts
sufficient to support a prima facie claim.
Ibid. The relevant facts
must be shown
through "affidavits or certifications based upon the personal knowledge of the
affiant or the person making the certification." Ibid.; see also R. 3:22-10(c);
State v. Jones,
219 N.J. 298
, 312 (2014).
Here, defendant did not present a prima facie case of IAC to support his
petition and was therefore not entitled to an evidentiary hearing. First, defendant
did not meet the first prong because he did not demonstrate that his trial
A-4489-18T2
8
counsel's performance was deficient. On appeal, he argues that he was denied
effective assistance of counsel because his trial counsel failed to conduct a
thorough investigation into the facts and circumstances of the case. However,
defendant never specified which facts and circumstances should have been
investigated, what trial counsel should have done a better job of investigating,
or what could have been discovered through further investigation and how that
would have affected the outcome of the trial.
Defendant's arguments are also belied by the record. As highlighted by
Judge Pincus, defendant's trial counsel investigated the case and worked with a
private investigator. Using information from the investigator, trial counsel also
proposed other suspects to the jury, namely the victim's husband and son. Trial
counsel investigated the incriminating surveillance video and highlighted that
the victim's son was also driving in the neighborhood at the time of the crime.
Moreover, trial counsel attempted to present testimony from the investigator
regarding "dowry murders," albeit unsuccessfully, that allegedly would have
demonstrated that the victim's husband had a motive. Additionally, trial counsel
highlighted lies the victim's son told her the day of the murder to cast doubt on
defendant's guilt.
A-4489-18T2
9
Under these circumstances, defendant did not establish that counsel was
deficient as required by Strickland's first prong. Moreover, without specifically
identifying what more counsel could have done, defendant could not establish
the prejudice required by Strickland's second prong. Defendant's arguments to
the contrary were supported only by "bald assertions," of IAC, which are not
sufficient to establish a prima facie claim as required for an evidentiary hearing.
Accordingly, Judge Pincus correctly concluded that an evidentiary hearing was
not warranted.
Affirmed.
A-4489-18T2
10 |
4,639,155 | 2020-12-03 15:14:31.865644+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a0047-19.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0047-19T3
MARIA CIRANNI IONFRIDA,
Plaintiff-Respondent,
v.
GIUSEPPE IONFRIDA,
Defendant-Appellant.
_____________________________
Submitted November 17, 2020 – Decided December 3, 2020
Before Judges Haas and Mawla.
On appeal from the Superior Court of New Jersey,
Chancery Division, Family Part, Morris County,
Docket No. FM-14-1399-09.
Giuseppe Ionfrida, appellant pro se.
Maria Ciranni Ionfrida, respondent pro se.
PER CURIAM
In this post-judgment matrimonial matter, defendant appeals from the
Family Part's July 26, 2019 order, which denied his motion to enforce a
November 29, 2017 order concerning child support and his motion for
reconsideration of a May 3, 2019 order. We affirm.
The parties were married in May 2000, and they divorced in September
2010. They have three children. In the parties' property settlement agreement,
defendant agreed to pay plaintiff $3500 per month in child support.
Between May 2014 and July 2017, defendant filed several motions
attempting to reduce his child support obligation. These motions were all
unsuccessful.
In response to yet another motion filed in late 2017, however, the trial
court determined that defendant had established a change of circumstances
warranting a re-examination of his child support obligation due to an alleged
decrease in income. Because neither party had submitted a Case Information
Statement (CIS or Statement) setting forth their financial information, the court's
November 29, 2017 order directed them to do so, together with their last three
pay stubs and their tax returns for the past three years.
Thereafter, defendant consistently failed to comply with this directive.
Instead, he submitted outdated Statements without any of the required
supporting financial documentation. In an attempt to resolve the matter, the
court ordered the parties to participate in mediation, but defendant refused to
A-0047-19T3
2
cooperate until July 2018. When it was finally held, the mediation failed to
settle the parties' dispute. 1
Over six months later, defendant filed a motion to enforce the November
29, 2017 order. Defendant did not submit a new CIS with his application.
Instead, he merely wrote a new date, "March 11, 2019," on a CIS he had
originally prepared on May 4, 2017. Defendant also did not provide any of his
tax returns, W-2 statements, or paystubs. In addition, defendant failed to apprise
the court that mediation had been completed. Accordingly, the court denied
defendant's motion on May 3, 2019.
On July 17, 2019, defendant filed another motion to enforce the November
29, 2017 order and a motion for reconsideration of the court's May 3, 2019 order.
Because a motion for reconsideration must be filed within twenty days after
service of the order for which reconsideration is sought, defendant's motion for
reconsideration was untimely under Rule 4:49-2.2 The court found that
defendant's motion was also deficient because it did not include the Notice to
1
Although defendant was obviously aware of the mediation, he did not provide
the court with any information concerning the outcome until his July 17, 2019
motion, which we discuss below.
2
Pursuant to Rule 1:3-4(c), this twenty-day time period may not be enlarged.
A-0047-19T3
3
Litigants required by Rule 5:5-4(d), copies of the court's prior orders as required
by Rule 5:5-4(a)(3), or exhibit tabs as required by Rule 5:5-4(g).
Despite these serious deficiencies, the court considered the substance of
defendant's arguments and found they lacked merit. Because defendant had once
again failed to provide a new CIS with complete financial information, the court
had no basis to address defendant's child support obligation. As the court
explained in its written statement of reasons:
The CIS is important because it provides the [c]ourt
with a glimpse into the party's finances. For example,
when [d]efendant files a motion to modify his child
support obligation because his financial circumstances
have worsened, the [c]ourt needs proof that his
financial circumstances have worsened. When
[d]efendant simply provides the same CIS time and
time again with new dates, there is no proof before the
[c]ourt that his financial circumstances have worsened.
Therefore, the court denied defendant's motion to enforce the November
29, 2017 judgment. Because defendant had merely reiterated the same
arguments he had unsuccessfully presented in connection with his prior motions,
the court also denied defendant's motion for reconsideration of the May 3, 2019
order. This appeal followed.
On appeal, defendant asserts that the Family Part erred when it denied his
motion to enforce the November 29, 2017 order by modifying his child support
A-0047-19T3
4
obligation. Defendant also alleges that the court mistakenly denied his motion
for reconsideration of the May 3, 2019 order. We disagree.
Established precedents guide our task on appeal. We owe substantial
deference to the Family Part's findings of fact because of that court's special
expertise in family matters. Cesare v. Cesare,
154 N.J. 394
, 411-12 (1998).
Thus, "[a] reviewing court should uphold the factual findings undergirding the
trial court's decision if they are supported by adequate, substantial and credible
evidence on the record." MacKinnon v. MacKinnon,
191 N.J. 240
, 253-54
(2007) (alteration in original) (quoting N.J. Div. of Youth & Family Servs. v.
M.M.,
189 N.J. 261
, 279 (2007)). We will only reverse the judge's decision
when it is necessary to "ensure that there is not a denial of justice because the
family court's conclusions are [] clearly mistaken or wide of the mark." Parish
v. Parish,
412 N.J. Super. 39
, 48 (App. Div. 2010) (alteration in original)
(internal quotations omitted) (quoting N.J. Div. of Youth & Family Servs. v.
E.P.,
196 N.J. 88
, 104 (2008)).
Further, we review the denial of a motion for reconsideration to determine
whether the trial court abused its discretion. Cummings v. Bahr,
295 N.J. Super. 374
, 389 (App. Div. 1996). "Reconsideration cannot be used to expand the
record and reargue a motion." Capital Fin. Co. of Delaware Valley, Inc. v.
A-0047-19T3
5
Asterbadi,
398 N.J. Super. 299
, 310 (App. Div. 2008). A motion for
reconsideration is meant to "seek review of an order based on the evidence
before the court on the initial motion . . . not to serve as a vehicle to introduce
new evidence in order to cure an inadequacy in the motion record."
Ibid. For these reasons,
reconsideration should only be granted in "those cases
which fall into that narrow corridor in which either 1) the [c]ourt has expressed
its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious
that the [c]ourt either did not consider, or failed to appreciate the significance
of probative, competent evidence. . . ."
Cummings, 295 N.J. Super. at 384
(quoting D'Atria v. D'Atria,
242 N.J. Super. 392
, 401-02 (Ch. Div. 1990)).
Therefore, we have held that "the magnitude of the error cited must be a game-
changer for reconsideration to be appropriate." Palombi v. Palombi, 414 N.J.
Super. 274, 289 (App. Div. 2010).
After applying these principles, we discern no basis for disturbing the trial
court's reasoned determinations. The "complete financial information of both
parents [is] necessary for any order of child support." Zazzo v. Zazzo, 245 N.J.
Super. 124, 129 (App. Div. 1990). The financial information submitted to the
court must be current and updated prior to any modification order. Gulya v.
Gulya,
251 N.J. Super. 250
, 253-54 (App. Div. 1991).
A-0047-19T3
6
The requirement that parties file current financial disclosure statements is
"not just window dressing. It is, on the contrary, a way for the trial judge to ge t
a complete picture of the finances of the movants in a modification case."
Id. at 253.
Thus, the trial court here acted well within its discretion when it ordered
defendant to submit an updated, accurate, and complete CIS.
When defendant disregarded the November 29, 2017 order, and the orders
that followed it, which all required him to provide a current CIS, he in turn
provided the court with "an [in]adequate factual basis for the court to assess
essential facts necessary to a determination of the issues presented" by his
repeated motions.
Palombi, 414 N.J. Super. at 288
. For that reason, the court
properly exercised its discretion in denying defendant's motion to enforce the
November 29, 2017 order by modifying his child support obligation. A litigant
who files a motion and asks the Family Part for a downward adjustment in a
child support obligation, and then disregards the court's order requiring the
information necessary to decide the motion, should expect to have the motion
denied.
Finally, the court did not abuse its discretion by denying defendant's
untimely motion for reconsideration of the May 3, 2019 order. Defendant raised
the same contentions that were previously unsuccessful and the court's well -
A-0047-19T3
7
grounded decision was certainly not based "upon a palpably incorrect or
irrational basis."
Cummings, 295 N.J. Super. at 384
.
Affirmed.
A-0047-19T3
8 |
4,639,156 | 2020-12-03 15:14:33.439443+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a3899-18.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3899-18T4
KYLE J. FUNSCH,
Plaintiff-Appellant,
v.
PROCIDA FUNDING, LLC,
WILLIAM PROCIDA,
and JOHN MULLANE,
Defendants-Respondents.
Argued November 2, 2020 - Decided December 3, 2020
Before Judges Sabatino, Currier and DeAlmeida.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-7221-16.
Leonard Feiwus argued the cause for appellant
(Kasowitz Benson Torres LLP and Michael J. Bowe, of
the New York bar, admitted pro hac vice, attorneys;
Leonard Feiwus, Michael J. Bowe and Lauren
Tabaksblat, on the brief).
Leo V. Leyva argued the cause for respondents
(Cole Schotz PC, attorneys; Leo V. Leyva and Jason
Melzer, of counsel and on the brief; Wendy F. Klein,
Krista L. Kulp and Elizabeth A. Carbone, on the brief).
PER CURIAM
This appeal involves a dispute between two men about a business
relationship gone awry. The relationship began in 2009 when co-defendant
William "Billy" Procida hired plaintiff Kyle J. Funsch to work at Procida's real-
estate investment company, Procida Funding, LLC ("the LLC" or "the
Company"). Procida was the sole member of the LLC. In the ensuing years,
Funsch was mentored by Procida, and handled many transactions that raised
millions of dollars.
In May 2011, Procida sent an email to Funsch and another employee, co-
defendant John Mullane, that is the heart of this dispute. As interpreted by
Funsch, the 2011 email granted Funsch and Mullane the right to each receive a
12.5% share of the Company's net earnings, and allegedly promised them an
ownership share of the business. However, the LLC's Operating Agreement was
never amended to specify that Funsch had become an authorized member of the
LLC, nor did it detail the terms of his alleged membership.
Eventually the relationship between Procida and Funsch deteriorated, and
Funsch stopped working for the Company in December 2015. Funsch claimed
an equity interest in the LLC and a right to certain additional compensation,
A-3899-18T4
2
which Procida denied. According to Funsch, Procida also made disparaging
statements about him to business associates and clients.
In his complaint in the Law Division, Funsch asserted that, based on the
May 2011 email and other conduct by Procida holding him out at times as a
"partner" or "principal," he is entitled to an equity share in the LLC as well as
additional unpaid compensation. Funsch also sought damages from Procida for
alleged defamation.
After a non-jury trial, the court found Funsch's claims lacking in merit.
The court rejected his assertion of membership status in the LLC, finding the
May 2011 email and the other evidence inadequate to make Funsch a member
under the applicable LLC statutes and the Operating Agreement.
The court adopted Procida's trial testimony explaining the course of
events, and concluded the parties never achieved a meeting of the minds with
sufficiently definite terms to create an enforceable agreement. The court
particularly noted that Funsch never agreed to or signed any of the multiple
proposed amendments to the Operating Agreement that Procida presented to
him. Additionally, the court dismissed Funsch's defamation claims as a matter
of law, and also determined he was not owed any further compensation.
A-3899-18T4
3
On appeal, Funsch variously argues: (1) the case should be reversed and
remanded for a jury trial, which the trial court improperly denied; (2) he should
have been declared an equity owner of the Company; (3) he is entitled to an
unpaid portion of the Company's profits from 2015; (4) the court should not have
excluded his damages expert's supplemental report; and (5) his cause of action
for defamation should be revived.
For the reasons to follow, we affirm the court's judgment in favor of
defendants.
I.
The record reveals the following relevant facts, allegations, and
procedural history.
The LLC
William Procida created Procida Funding, LLC in 2008 and was the sole
member at the time of its creation. The LLC is the fund manager for the 100
Mile Fund, a private equity investment enterprise launched in 2011. The 100
Mile Fund specializes in bridge, construction, mezzanine, and preferred real
estate equity investments.
The LLC is governed by an operating agreement dated December 16, 2008
(the "Operating Agreement"). Pertinent to this ownership dispute, Section 1.8
A-3899-18T4
4
of the Operating Agreement specifies that a new member may be admitted to the
LLC upon "the unanimous written consent of [its] Members." Because William
Procida was the sole member of the LLC, his personal consent was required to
admit any new members.
The Business Relationship Between Funsch and Procida
The business relationship between Funsch and Procida commenced in
2009. Funsch, who is much younger than Procida, had recently launched an
internet-based real estate company.
Between 2009 and 2011, Funsch, working with Mullane and under
Procida's tutelage, developed and implemented a residential "fix and flip"
program for the Company.
The May 13, 2011 Email
On May 13, 2011, Procida sent an email jointly to Funsch and Mullane
that is at the core of this litigation. The email contains the subject line, "my new
partners," and states the following:
[Y]our work to date has been admirable and your skill
sets improve daily. I am proud to work with you both
(despite that I beat you to the office today) therefore I
am making you partners. [T]he terms of which are as
follows: for as long as you work here, you will each
own and be entitled to 12.5% of the combined
companies [sic] net earnings. [Y]ou will receive a draw
against those earnings . . net income will be calculated
A-3899-18T4
5
by all income less all expenses exclusive of interest
income on my investments. [S]hould either of you
leave the firm you will forfeit any rights to future
earnings or ownership. [S]ince talk is cheap I wanted
to put something in writing, so we can consider this
legally binding. [A]s we've got many things to do save
this email.
[(Emphasis added).]
The email continued:
[I]f I die or become disabled it is my wish that you guys
own 50% and send the balance to my kids. [Y]ou are
now to refer to yourselves as my partners. [W]e will
fine tune this over time. [W]e will do a press release to
announce this shortly.
[(Emphasis added).]
Funsch argued this email constituted "unanimous written consent" by
Procida to make Funsch an equity owner in the Company. In opposition, Procida
argued the May 2011 email was merely a promotion of Funsch to a salaried
employee who could hold himself out publicly as a "partner" in the business , but
only as long as Funsch worked at the Company.
It is undisputed that in the weeks following the May 2011 email, the
Company issued multiple public announcements describing Funsch and Mullane
as "partners." The announcements appeared on the Company's website and in
the June 6, 2011 issue of Institutional Investor News, a trade publication.
A-3899-18T4
6
As Procida conceded on cross-examination at trial, Funsch was also held
out to investors, lenders, regulators, and the public on several occasions as a
"principal" or "partner." For example, these statements appeared in the
following publications, filings, and communications:
• SEC Form D signed by Procida dated January 9, 2012
identifying Funsch as a "principal" of Procida Funding;
• Procida Funding's website, listing Funsch as a
"Principal";
• a Final Private Placement Memorandum for the 100
Mile Fund, LLC identifying Funsch as a "principal at
Procida Funding";
• a May 18, 2011 email from Procida to Gregory R.
Haworth, attorney for Procida Funding, stating: "[J]ohn
and [K]yle should be noted as partners in the fund
manager";
• a September 22, 2012 email from Procida to a client,
Salvatore Pappalardo, stating "Kyle is a partner who has
successfully closed over 200 million in the last [three]
years. With several repeat customers. . . . If u can’t
deal with [K]yle I’m sorry but that’s how we run our
company";
• an October 4, 2012 email from Procida to Carl Schwartz
describing "Kyle Funsch and John Mullane. Both
partners" as "[m]y new [Z]urlini and [Mc]clain. Great
guys," thereby drawing an analogy to Procida's former
equity partners in Palisades Financial, Procida’s former
company; and
A-3899-18T4
7
• a June 8, 2015 business magazine story entitled "Urban
Renewal: The money men," identifying Funsch as one
of the Company's "principals" in an interview with
Funsch, Procida, and Mullane, and in which Procida
personally described Funsch as "the partner in charge of
originations."
Defendants underscored at trial that the May 2011 email is devoid of any
references to "membership," "equity," or "ownership interest" in the Company
itself. They further stressed the email lacks any specific terms and/or conditions
related to: (1) loss sharing; (2) capital contributions; (3) work schedule; (4)
consent rights; (5) amending the books and records or other Company
documents; and (6) the Company's debts.
As further counterproof, defendants cited to an email sent by Procida on
July 26, 2011 to Funsch, Mullane, and third parties, asserting that Procida owned
"100%" of the Company and that "[J]ohn and [K]yle are cash flow partners."
[(Emphasis added).]
Defendants also stressed that Funsch never received a Schedule K-1 or
any membership certificates; made any capital contributions to the Company;
executed any amended operating agreement for the Company; shared in the
Company's losses; or managed the Company or possessed any voting rights of
any nature.
A-3899-18T4
8
In another email chain on February 8, 2012 between Funsch and Ali Betts,
the controller of the Company, Betts stated that Funsch needed an "official
partnership agreement with [Procida], not an email, not today you are his
partner[], tomorrow his junior partner[], then his employee[], then his kid[] . . .
a real agreement with 3 . . . count them 1 2 3 signatures from all parties!"
[(Emphasis added).] Funsch responded:
I will speak for myself in saying that I will not sign
documents, represent the company nor my family when
I have [zero] say. The one thing at Palfi [Procida's
former company] that [Procida] attributes to failure was
control, that isn't changing this time around.
Sometimes a little input is helpful but it's extremely
difficult when you are treated as a pawn in a game of
chess.
[(Emphasis added).]
Later, in his testimony at trial, Funsch acknowledged that he never sought a
"partnership agreement" from Procida.
In December 2012, Procida raised the revenue-sharing percentage earned
by Funsch and Mullane from 12.5% to 15% each. Procida wrote an email on
December 20, 2012 to, among others, Procida’s attorney, stating, "I want to
amend the [P]rocida [F]unding operating agreement to admit [K]yle. [A]nd
[J]ohn as [straight] up 15% partners. Effective [J]an. 1." As instructed by this
A-3899-18T4
9
email, Funsch and Mullane were thereafter compensated at the rate of 15% of
net earnings.
As we have already noted, the parties never executed an amended
Operating Agreement. Between 2012 and 2015, a series of four draft proposed
amendments were circulated between Procida and Funsch, along with other
persons. But none of these proposed amendments were signed or agreed to by
Funsch.
In one such proposed amendment, the terms of which were explained in a
June 19, 2015 email from Procida, he made clear that he would still retain
exclusive control over any and all Company decisions. For example, Procida's
exclusive authority would extend to any decision to stop cash flow distributions,
or to remove any "operating manager" from the Company if that individual
performed a so-called "bad boy act." As Procida described in his email, such
"bad boy acts" would include "lying cheating or stealing or violating the
moonlighting clause," and whether such an act occurred would be determined at
his own "sole discretion."
Funsch did not respond to the June 19, 2015 email from Procida. Indeed,
the only action Funsch appeared to take in connection with the proposed
Operating Agreement amendments was when he forwarded an email to his
A-3899-18T4
10
mother in October 2015 with Procida's comments about such a proposal. Funsch
wrote his mother, "[Procida] produced an unassignable document then gives
[four] business days [for me] to review and give comments. It took [four] years
to get a document." In her reply, Funsch's mother, who evidently has business
experience, questioned what advantage it would be for Funsch to be a member
of the Company. She suggested to him that he instead "just [get] a contract that
says [he] is entitled to [a rate of] 13.04% [in compensation]."
The parties disputed the legal significance of the exchange of drafts of
proposed amendments to the Operating Agreement. Funsch argued the drafts
"continued to recognize [his] and Mullane's previously conferred status as
members." By contrast, defendants argued that such proposed amendments
constituted mere negotiations that, only if fully consummated, would elevate
Funsch and Mullane from employees to "partners."
As support for their position, defendants noted that throughout his time at
the Company, Funsch received W-2s,1 the type of tax form an employee
1
IRS Form W-2 (entitled "Wage and Tax Statement").
A-3899-18T4
11
receives, as opposed to a K-1 form,2 which a partner in a firm typically receives.3
Defendants also pointed out that Funsch "never asked why he was not receiving
a Schedule K-1 for his share of Company profits, despite knowing what a
Schedule K-1 was and having a family accountant at his disposal." Defendants
further noted that, in 2012, Funsch "requested that Procida increase his base
salary." [(Emphasis added).]
Termination of the Business Relationship Between Funsch and Procida
The parties sharply disputed at trial whether Procida fired Funsch or
Funsch voluntarily quit. The record is clear that, towards the end of their
business relationship, Funsch and Procida frequently argued in the office.
The tensions reached an apex on December 17, 2015, when Funsch and
Procida had an altercation. According to Funsch, he attempted to avoid
escalating the altercation by walking away, but Procida followed him into the
parking lot and "continued to scream" at him. Procida's version was that while
2
Schedule K-1 (IRS Form 1065, entitled "Partner's Share of Income,
Deductions, Credits, etc.").
3
Funsch's W-2s reflect he earned $109,038.50 in 2012, $185,577.03 in 2013,
$306,601.16 in 2014, and $282,985.07 in 2015. Funsch testified at trial that he
believed he was entitled to an additional sum of approximately $200,000 for
work he performed in 2015 but was unable to substantiate that full figure. He
presently asserts he is owed a lower figure of $65,638.93 for 2015.
A-3899-18T4
12
he was "yelling" orders in the office, Funsch stood up and suddenly and
belligerently proclaimed to him, "[D]o you have to talk so damn loud?" and left
the office. Procida recalled he followed Funsch into the hallway to ask what
was going on, to which Funsch responded, "[I]t's your f***ing [C]ompany, do
what you want," and sprinted down to the parking lot. According to Procida, he
followed Funsch to the parking lot, whereupon Funsch jumped into his car and
began to drive away.
Following the December 17 altercation, according to Procida, Funsch's
resignation was thereafter accepted. Procida further asserts in his brief, "out of
an abundance of caution, a text message [4] was sent to Funsch confirming that
he was no longer associated with the Company."
Funsch admitted that he drove away from Procida after the altercation, but
noted there is no evidence that he ever tendered his resignation. Funsch argues
in his brief that Procida sent the post-altercation text message "purporting to fire
4
The text message states:
I think that this relationship is over. We will discuss an
unwind tomorrow. No need to come back to the office
now or ever[.] Leo [his attorney] will be sending u
formal notice. I ask that u don't go to the office today
or tomorrow. We will arrange for u to get your personal
belongings. Pls don't make me have u removed.
A-3899-18T4
13
[Funsch], even though he lacked the authority to do so under the 2008 Operating
Agreement." That argument presumes that Procida had made Funsch a member
of the LLC before the altercation.
Events After Funsch's Departure
According to Funsch's testimony, he has been unemployed since leaving
the Company in 2015, aside from a brief foray into starting his own limited
liability company. As of the time of trial, he reportedly had applied to about
four jobs over three years.
Funsch alleged he has been unable to find work because Procida
"intentionally disparaged and defamed [Funsch's] work performance to, among
others, [Funsch's] colleagues, and prospective investors, partners, and
employers."
As support for this claim, Funsch cited two emails: one Procida sent the
day after Funsch's departure to the entire staff at the Company, berating their
performance and questioning why he had to perform everyone else's work and
beseeching them to do better. The other email was the previously mentioned
email forwarded by Procida to two of the Company's main investors, with the
following message:
No need to be alarmed but as my valued friends, trusted
advisors and my [two] most important investment
A-3899-18T4
14
partners I needed u to be aware of the below email
which is only a small part of why I had to terminate
[K]yle yesterday which trust me was one of the most
difficult decisions of my life[.]
Defendants disputed plaintiff's claim of intentional wrongdoing by
pointing out that a few weeks after Funsch left the Company, Procida "attempted
to assist Funsch to find another job that would have paid $300,000.00 a year."
The Trial Court's Decision
After considering the documentary exhibits, the trial testimony of Funsch,
Procida, and other witnesses, and the arguments of counsel, the trial court issued
a fifteen-page written decision on April 15, 2019, ruling in defendants' favor.
With respect to Funsch's central claim of an ownership stake in the LLC,
the court found the evidence "demonstrated that Mr. Funsch did not have, and
knew he never had, a membership interest in Procida Funding." The court
reasoned that under both the New Jersey Limited Liability Company Act (the
"LLCA"), and the New Jersey Revised Limited Liability Company Act (the
"RULLCA"), a "member" of an LLC is a person who has been admitted as
"provided in and upon compliance with the [LLC's] operating agreement."
N.J.S.A. 42:2B-21(b)(1) (the LLCA provision); N.J.S.A. 42:2C-31(c)(1) (the
cognate RULLCA provision).
A-3899-18T4
15
Here, the sole executed Operating Agreement clearly established that
Procida, the Company's founder, was the sole member of the LLC. Under the
express terms of the Operating Agreement, Funsch could only be admitted as a
member with Procida's "prior unanimous written consent." The court found that
Procida "did not consent, in writing or otherwise, to Mr. Funsch's admission as
a member."
The court recognized the series of four proposed amendments to the
Operating Agreement would have admitted Funsch as an LLC member "if
finalized and executed," but that he "rejected each and every [such] draft
agreement." The court added that "[t]he existence of ongoing negotiations
concerning Mr. Funsch's admission, demonstrates that the parties had never
come to any agreement." The court insightfully added its perception that the
various communications between the parties about the draft agreements
evidenced "a reluctance by [Funsch] to consummate an agreement, where
instead of just receiving income from [the Company], he would potentially face
liability."
The court flatly rejected Funsch's contention that the May 2011 email
sufficed to imbue him with the legal status of a member of the LLC. As the
court observed, the email "does not state that it is amending or supplementing
A-3899-18T4
16
the operating agreement." The court further noted the email "lacks core, basic,
and material terms relating to Funsch's relationship with Procida Funding" that
would be expected to be included in an amendment admitting a new member.
For example, the court pointed out the email omitted any provisions addressing
such topics as loss sharing, capital contributions, and consent rights.
The court further underscored that the May 2011 email promised Funsch
a percentage of the Company's net earnings only "for as long as [he] work[ed]
[there]," and that "should Funsch leave the firm [he] will forfeit any rights to
future earnings or ownership." The court agreed with defendants that the
message was "simply an email notifying Mr. Funsch about his promotion and
altering the manner in which [his] compensation was calculated." The court also
found significant that the May 2011 email was thereafter "clarified" by Procida's
July 26, 2011 email, which specifically referred to Funsch and Mullane as "cash
flow partners," and not members. The court further noted that Funsch confirmed
he was paid as a W-2 employee and did not receive any K-1 forms reflecting
any owner distributions.
In addition, the court rejected Funsch's argument that the various press
announcements and other statements Procida made to third parties referring to
Funsch and Mullane as "partners" and "principals" were sufficient to grant them
A-3899-18T4
17
the legal status of members in the LLC. The court cited Procida's testimony that
he imprecisely used the term "partner" and similar words "to inveigh apparent
authority for negotiation purposes, but not to confer [upon Funsch and Mullane]
LLC membership status."
The court summarized its rejection of plaintiff's ownership claim as
follows: "At best the evidence only demonstrates that Mr. Procida was
considering admitting Mr. Funsch and that there were ongoing negotiations over
same." More pointedly, the court characterized Funsch's claim of ownership as
"absolute folly," and that "any claim [he] somehow thought he was a member of
the LLC or somehow entitled to be a member is entirely fallacious."
The court further determined in its findings of fact that Funsch had
voluntarily resigned from the Company when he walked off the premises in
December 2015 and did not return. Because of that voluntary departure, Funsch
was not entitled to any more payment from the Company's earnings for 2015,
consistent with the conditions set forth in the May 2011 email.
With regard to plaintiff's defamation claim, the court acknowledged that
at times Procida used coarse and sometimes profane language to criticize Funsch
and other employees of the Company. The court also acknowledged that Procida
"clearly is a hard-driving real estate entrepreneur," and that in this "highly
A-3899-18T4
18
stressed . . . business milieu," Procida "would scream and be abusive." Even so,
the court found no evidence that Procida had defamed Funsch to others.
The court determined in this regard that an August 11, 2015 email Procida
sent to John Newman, which contained a line saying that "[m]y guys suck," did
not identify Funsch or any another individual personally. In addition, the court
found that a long email Procida sent to Company staff the day after Funsch's
departure, alluding to a previous "famous blow out" with Funsch, did not rise to
actionable defamation. Further, the court rejected Funsch's claim that a private
text message Procida sent to Funsch about this litigation and disclaiming
liability was likewise not a viable basis for a defamation claim.
On the whole, the court determined that Procida's critiques of Funsch's
work amounted to "non-actionable statements of opinion." The court further
noted that Funsch had not produced at trial any witness who received or had
been affected by the allegedly defamatory statements, or any proof that the
statements were harmful to Funsch. The court rejected Funsch's theory that the
statements were so pernicious as to be defamatory per se.
The present appeal followed.
A-3899-18T4
19
II.
We first address Funsch's argument that he was unfairly denied the
opportunity to have his claims tried by a jury. In approaching that issue, we
recognize that Funsch included a jury demand with his complaint in accordance
with Rule 4:35-1(a).
We are mindful that during a colloquy with the court on March 3, 2017,
when the attorneys appeared that day to argue a defense motion to dismiss the
complaint, the lawyers and the judge mentioned on the record that a jury trial
had been requested. At that time, the judge stated he anticipated that equitable
facets of the case would be decided by the court after a jury first decided "the
legal issues[,] which would be contract or – or defamation."
Nevertheless, for reasons that are not clear to us from the record, the trial
court's docket entries at some point classified this lawsuit as a non-jury case,
despite the jury demand accompanying the complaint. This apparently led to
the case being assigned a trial date for a non-jury proceeding in early November
2018.
On October 12, 2018, counsel appeared for oral argument on defendants'
motion for summary judgment. At that motion argument, Funsch was
represented by a different partner of the law firm because the partner's colleague
A-3899-18T4
20
who had been primarily handling the case was in trial on another matter. During
the course of that October 2018 proceeding, which was more than eighteen
months after the March 2017 hearing, the following discussion took place about
whether the case would be tried by a jury:
THE COURT: Well shouldn't -- now let's cut to the
chase. Shouldn't we wait to hear the [evidence of an
alleged creation of an ownership interest] in court? We
have a trial date, a bench trial, on 11-13-2018 and then
we can find out if [such a right] ever really was really
[e]nunciated.
DEFENSE COUNSEL: Absolutely not, Your Honor.
THE COURT: Okay.
DEFENSE COUNSEL: Because the undisputed facts
that he was never listed as an owner on the tax returns,
never insisted he was an owner --
THE COURT: Well, it will be a real short trial then,
right?
DEFENSE COUNSEL: But that's not what the standard
is here.
THE COURT: Okay.
[(Emphasis added).]
The argument then focused on the May 2011 email:
DEFENSE COUNSEL: The e-mail says what it says,
it's not a matter -- it's not a matter for a jury.
A-3899-18T4
21
THE COURT: Well, I have to find out if he left [the
Company] or not even, don't I?
DEFENSE COUNSEL: He left, he's not there.
[(Emphasis added).]
A few minutes later, plaintiff's counsel, who had not previously appeared in the
case, rose to present his opposition to defendants' summary judgment motion:
PLAINTIFF'S COUNSEL: I had to parachute into this
case about a month ago because [my partner], who has
been taking lead on it has been handling it for a couple
of years, is trying the case in Morristown and in fact, I
think she's waiting for a jury today. So you know, I
apologize that she couldn't be here --
THE COURT: Yeah because we -- by the way,
November 13th is the main event, we're not cancelling
that.
PLAINTIFF'S COUNSEL: Yeah, I --
THE COURT: When I write down a trial day on a
complex commercial date, that's the date we're going,
it's a done deal, unless you lose your motion today.
PLAINTIFF'S COUNSEL: Right.
THE COURT: So tell me –
PLAINTIFF'S COUNSEL: Well, Your Honor, first of
all --
THE COURT: -- about facts.
A-3899-18T4
22
PLAINTIFF'S COUNSEL: -- we do welcome that date
and we're pleased that we're finally getting an
opportunity. You did mention, though, that it was a
bench trial. We do have a jury demand on the front
page of our complaint. So --
THE COURT: Well, it's been listed as no jury for the
entire time. It's --
PLAINTIFF'S COUNSEL: Well, there's a -- there is a
jury demand in our complaint, Your Honor.
THE COURT: I don't know about that. We put this
down as a non-jury trial forever.
DEFENSE COUNSEL: That's our understanding too,
Your Honor.
PLAINTIFF'S COUNSEL: I don't know, I think that's
an --
THE COURT: So you can try to figure out how you can
now change it to a jury trial but it's not going to happen,
I don't think.
PLAINTIFF'S COUNSEL: Your Honor, if you look at
page 12 of our complaint --
THE COURT: I'm not looking at page 12 of your
complaint. This thing has been marked as a non-jury
case. It was stipulated as that, it was set down as that
and for you to now pull out a complaint at last minute,
as a substitute attorney, and say it's going to be a jury
trial, isn't going to happen.
PLAINTIFF'S COUNSEL: And Your Honor, quite
frankly, quite frankly, as I said, I haven't been working
A-3899-18T4
23
on it. If there was such a stipulation, I'm not aware of
it so I apologize.
THE COURT: And even if there wasn't, that's the way
this thing has been already carried for the whole nine
yards.
PLAINTIFF'S COUNSEL: Right.
THE COURT: I didn't come up with it because when I
came up with the whole idea of when we were going to
do it, that's how I slipped it in. I knew I could do it as
a non-jury trial and fit it in with the way scheduling is.
PLAINTIFF'S COUNSEL: Understood and I appreciate
Your Honor clarifying it for me because I was unaware
of that but --
THE COURT: Anyway, tell me the facts.
PLAINTIFF'S COUNSEL: Certainly.
[(Emphasis added).]
Plaintiff's counsel then proceeded to present his arguments opposing the
dispositive motion, and there was no further discussion about the court's clear
plan to try the case without a jury. As it turned out, plaintiff successful ly
convinced the court to deny summary judgment and the case proceeded to a
bench trial on November 13. In the meantime, no one from plaintiff's law firm
wrote the court a letter or filed a motion asking the judge to reconsider his
decision to try the case without a jury.
A-3899-18T4
24
Based on what has been presented to us on appeal, the court evidently was
mistaken in several respects about the jury demand. There is no evidence
presented to us of any stipulation of the parties to waive a jury.
In addition, the judge's observations on October 12, 2018 that the case had
been listed as a non-jury case from its inception are contradicted by the
discussion at the earlier proceeding in March 2017 about using a jury in the case
to decide certain issues. It may well be that, without a transcript 5 to consult, the
judge simply did not remember what was said at the earlier session that occurred
more than a year before, and was relying on the docket's "non-jury" entry. It is
also possible that defense counsel, who personally had not appeared at the March
2017 session, was unaware of those discussions about a jury trial.
Funsch argues that the court unfairly deprived him of a right to jury trial,
brushed aside his jury request, and afforded his attorney no fair chance to show
that the docket's non-jury designation was mistaken. He requests that the
evidence and the results of the bench trial be swept aside and the case remanded
for a new trial, this time by jury.
5
A transcript of the March 3, 2017 proceeding was not prepared until the present
post-judgment appeal.
A-3899-18T4
25
In opposition, defendants argue that plaintiff and his counsel waived his
right to a jury trial by acquiescence. They do not assert, however, that there had
been a stipulation with a jury waiver. They note that after the October 12
proceeding, plaintiff did not submit any jury voir dire questions or proposed jury
charges in accordance with Rule 4:25-7 and Appendix XXIII of the Court Rules.
Nor did plaintiff attempt to move for leave to appeal seeking relief from this
court, although we note such interlocutory review would have been
discretionary. See R. 2:5-6.
It is possible that plaintiff, having succeeded in persuading a judge who
planned to be the factfinder at trial to deny defendants' motion for summary
judgment, could have strategically decided to accept the judge for that role. Or
perhaps, on reflection, the client and counsel might have felt that a swifter trial
date and a less costly trial without the extra time and expense of jury selection,
jury instructions, and deliberations was to their potential benefit. We simply do
not know what, if any, strategic factors may have affected plaintiff's lack of
further action in the intervening four weeks before the bench trial started.
It is well established that waiver is a "voluntary relinquishment of a known
right" evidenced by a clear, unequivocal, and decisive act from which an
intention to relinquish the right can be based. Sroczynski v. Milek,
197 N.J. 36
,
A-3899-18T4
26
63-64 (2008) (quoting Knorr v. Smeal,
178 N.J. 169
, 177 (2003)). At times, a
waiver may be implied by conduct or acquiescence. Guber v. Peters, 149 N.J.
Super. 138, 140 (App. Div. 1977) (holding that the defendants had waived their
right to a jury trial requested in their initial pleadings by failing to press that
right to the court thereafter). Silence by counsel may be construed in appropriate
circumstances as waiver of a jury. See, e.g., Van Note-Harvey Assocs., P.C. v.
Twp. of E. Hanover,
175 N.J. 535
, 541 (2003) (holding that defendants waived
any right to have a jury decide prejudgment interest claims by failing to object
after the court repeatedly made clear that the court would decide that interest
claim post-trial).
That said, we also recognize the trial judge put plaintiff's counsel, who
was appearing for the first time in the case, in an awkward situation by
mistakenly telling him the case had always been regarded as a non-jury matter
and suggesting, without a contrary word from defense counsel, that there was a
stipulation to that effect. The judge should have afforded counsel a fuller
opportunity to state his concerns on the record after telling him in no uncertain
terms that a jury trial "is not going to happen."
To be sure, plaintiff's attorney did not voice the words "I object" after the
judge interrupted him, and instead politely thanked the judge for "clarifying" the
A-3899-18T4
27
topic. Plaintiff argues his counsel made a sufficient attempt to preserve his
opposition to a bench trial under Rule 1:7-2, and that we should deem that
attempt to be a valid continuing objection which preserved his right to appeal.
In this regard, we bear in mind the Supreme Court's observation in Mead v.
Wiley Methodist Episcopal Church,
4 N.J. 200
, 205 (1950), that "[c]ounsel is
not required to continuously object or take exception to a [ruling] he deems
erroneous after having made known his objection and clearly stating the grounds
therefor."
We also appreciate that an attorney in counsel's shoes might have wanted
to avoid possibly antagonizing the court by renewing opposition to a bench trial,
since the judge had made clear there would be no jury and would thus be the
trier of fact. However, we caution that it is wrong to ever presume that a judge
will not abide by his oath and ethical duty to judge the merits of a case fairly,
just because the judge made a certain pretrial ruling on an issue against that
party. See Liteky v. United States,
510 U.S. 540
, 550-56 (1994) (observing that
a judge's ability to decide a case fairly should not be impugned simply because
the judge made earlier rulings against that litigant). And, although the judge
had stated his plan to try the case without a jury firmly, we will not presume the
judge would have denied fair consideration to a further application by plaintiff
A-3899-18T4
28
for relief, particularly if the judge had been presented with a transcript of the
March 2017 proceeding showing what had been discussed earlier, or an
acknowledgment by defendants of that discussion. We will not presume the
judge was incapable of changing course, once apprised of a fuller and accurate
background.
Given the circumstances, we decline to resolve the thorny question of
whether plaintiff's attorney's comments to the court on October 12 and
subsequent participation in the bench trial amounted to a waiver of the claimed
right to a jury trial. It is unnecessary for us to do so because, upon a closer
assessment of the issues, there was no jury right to be waived on a viable claim.
The right to a civil jury trial is preserved federally as the Seventh
Amendment to the United States Constitution. Allstate N.J. Ins. Co. v. Lajara,
222 N.J. 129
, 141 (2015). However, the Seventh Amendment guarantee
"extends only to federal trials because the Seventh Amendment has not been
made applicable to the States through the Fourteenth Amendment's Due Process
Clause."
Ibid. Thus, "the right
to a trial by jury in New Jersey must arise under
either a statute or the state constitution."
Ibid. (quoting In re
Env't Ins.
Declaratory Judgment Actions,
149 N.J. 278
, 292 (1997)).
A-3899-18T4
29
As the Court in Lajara noted, New Jersey's constitutional jurisprudence
dictates that the right to a jury trial only applies to causes of action that sound
in law rather than equity, which entails not only looking at whether the remedy
is legal in nature, but also whether the cause of action resembles one that existed
at common law.
Id. at 142.
Here, Funsch's core contention that he is entitled to
be declared a member of the LLC under the applicable statutes and Operating
Agreement is fundamentally an issue for the court rather than one cognizable as
a common law claim suitable for a jury.
Our opinion in IMO Indus. Inc. v. Transamerica Corp.,
437 N.J. Super. 577
, 636 (App. Div. 2014), finding no viable right to a civil trial by jury, is
instructive. In that case, the plaintiff sought a jury trial on certain of its claims
seeking compensatory and punitive damages. Nonetheless, we held that the
original complaint primarily focused on declaratory relief, seeking the court's
aid in defining and fixing the obligations of the defendants pursuant to an
agreement between the parties.
Id. at 634.
We also noted the damages that the
plaintiff sought were in connection with pending or future obligations of the
defendants.
Ibid. Consequently, the case
was not one in which a plaintiff had a
right to a trial by jury. As Judge Ashrafi wrote:
All of IMO's pleadings sought declarations about the
future obligations of defendants. Any alleged claims of
A-3899-18T4
30
bad faith, wrongful abandonment, breach of fiduciary
duty, or tortious interference stem from whether the
contractual rights alleged by IMO in fact existed. From
the outset and throughout the litigation, IMO's
complaints were mainly equitable.
[Id. at 634-35 (emphasis added).]
Similarly here, Funsch's contentions that he had the legal status of an
equity "member" of the LLC are mainly equitable in nature. His claims for
additional monetary compensation are predicated upon a legal assessment as to
whether the parties' course of conduct rises to a level that satisfies the
membership criteria of the LLC statutes (the LLCA and the RULLCA) and the
unamended Operating Agreement. That assessment was based on documentary
evidence, such as the May 2011 email and other written statements, the existence
of which was undisputed. What the parties essentially fought over at trial was
the legal import of those statements. The assessment of ownership or
membership status inherently involved complex issues of contract law, business
law, and statutory law. Arguably, the only credibility issue at trial concerned
exactly what occurred in December 2015 when the parties had an argument and
Funsch left the building. But that discrete event did not bear upon the core legal
issue of whether Funsch was a member of the LLC.
A-3899-18T4
31
We are cognizant that, in some breach-of-contract cases, it may be
appropriate for a jury to resolve disputed issues of fact, and, as plaintiff's counsel
reminds us, model civil jury charges are available for such cases. But here the
predicate dispute was not about what was said or done, but rather the legal
consequences of the parties' actions and inactions. Those were appropriate
issues for the court to decide, not a jury. If, hypothetically, the court had decided
that Funsch was indeed a member of the LLC with an equity share, then perhaps
the residual dispute over whether Funsch was entitled to further compensation
might have been an appropriate damages issue for a jury. But no such
membership status was ever established as a matter of law. And, to the extent
that Funsch contends as an alternative claim that he was short-changed in his
2015 payout as a mere employee, that subsidiary issue does not alter the primary
thrust of the case as a whole.
We do agree with plaintiff that his claim of defamation, had it been viable,
would have been appropriate for a jury. Even so, for the reasons we briefly
discuss in Part IV, the evidence that emerged at trial shows there was no genuine
issue of material fact for a jury to decide because there was insufficient proof of
the legal elements of such a claim.
A-3899-18T4
32
In sum, waiver or no waiver, plaintiff was not deprived of an enforceable
right to a jury trial. There is no need for the case to be tried anew before a jury.
III.
We turn to the substance of plaintiff's arguments, specifically his
contentions that the trial court misapplied the law and lacked a sufficient basis
in the evidence to conclude he never became a member of the LLC with an
equity interest in the Company. We further consider plaintiff's claim that the
trial court erred in rejecting his claim for additional compensation.
In assessing these points, we are guided by well-established principles of
appellate review. An appellate court shall "not disturb the factual findings and
legal conclusions of the trial judge unless [it is] convinced that they are so
manifestly unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence as to offend the interests of justice." Seidman v.
Clifton Sav. Bank,
205 N.J. 150
, 169 (2011) (quoting In re Trust Created by
Agreement Dated Dec. 20, 1961,
194 N.J. 276
, 284 (2008)); see also Anderson
v. City of Bessemer City,
470 U.S. 564
, 574 (1985) (noting the trial court's
"major role is the determination of fact"); Rova Farms Resort, Inc. v. Invs. Ins.
Co. of Am.,
65 N.J. 474
, 484 (1974). We only review de novo the trial court's
A-3899-18T4
33
legal determinations. 30 River Ct. E. Urb. Renewal Co. v. Capograsso, 383 N.J.
Super. 470, 476 (App. Div. 2006) (citing Rova
Farms, 65 N.J. at 483-84
).
Applying that scope of review, we affirm the trial court's substantive
decision, substantially for the sound reasons set forth in its detailed wr itten
opinion dated April 15, 2019. We need not reiterate that analysis here, as we
are satisfied the court correctly applied the LLC statutes and the Company's
Operating Agreement, and that the court's conclusions have ample support in the
evidence.
We agree with the trial court that the May 2011 email was simply too
incomplete and indefinite to establish the necessary terms to elevate Funsch to
membership status in the LLC. We also concur that Funsch's admitted steadfast
refusal to execute any of the proposed draft Operating Agreements severely
undermines his claims. We are likewise convinced that the parties' course of
conduct and Procida's imprecise references to Funsch as a "partner" were
insufficient to grant him the legal status of a member. 6
6
That said, we do note some concern about Procida's representation to the SEC
on the Form D filing stating that Funsch was a "principal" of the LLC, but the
truth and materiality of that representation would be more appropriate for
securities regulators or investors to address, if at all, see 17 C.F.R. §§ 230.501
and 230.503(a) (concerning Form D disclosure requirements), and does not
control the internal relationships of these parties under the LLC statutes. We do
not make any ruling here about that issue.
A-3899-18T4
34
We reject plaintiff's argument that the court focused unduly in its analysis
upon the absence of any capital contribution by Funsch. Although we are
mindful that the statutes do not require a person to make a capital contribution
in order to become a member of an LLC, it still can be one indication of such
membership rights. The court duly considered several other factors apart from
the absence of a capital investment in soundly concluding that Funsch never
attained the status of a member in the LLC.
We likewise uphold the court's determination that Funsch was not owed
any additional compensation for 2015 after his departure from the firm. The
May 2011 email, on which Funsch so heavily relies as part of his ownership
claim, specifies that "should either of you [Funsch or Mullane] leave the firm
you will forfeit any rights to future earnings or ownership." The trial court
determined, as a matter of fact, that Funsch voluntarily resigned after the
argument with Procida on December 17, 2015. That finding of fact, even if it
can be reasonably debated, is supported by ample evidence to deserve our
appellate deference. Rova
Farms, 65 N.J. at 484
.
Further, even if this court held Funsch had been duly admitted as a
member pursuant to the 2008 Operating Agreement, the distinction between
voluntarily leaving and being fired would not affect his claim of an equity share
A-3899-18T4
35
in the enterprise. The Operating Agreement provides in Section Eight that a
member can only sell, assign, or otherwise dispose of his interest in the
Company with the "prior written consent of a majority of the other
nontransferring [m]embers" or if he dies, becomes incompetent, or goes
bankrupt.
As the trial court correctly noted, the default "statutory provisions" of the
LLCA and RULLCA 7 apply only in the absence of an operating agreement.
Hence, the language in Section Eight of the Operating Agreement controls here.8
See Union Cnty. Improvement Auth. v. Artaki, LLC,
392 N.J. Super. 141
, 152
(App. Div. 2007); IE Test, LLC v. Carroll,
226 N.J. 166
, 178 (2016). Under that
7
It appears the LLCA would apply to this case, as the "alleged operative event,"
i.e., the May 2011 email, occurred prior to the effective date of the RULLCA.
8
The Operating Agreement further states in Section Eight that:
The value of each Member's Interest in the Company
will be determined on the date this Agreement is signed,
and the value will be endorsed on Schedule 3 attached
. . . . The value of each Member's Interest will be
redetermined unanimously by the Members annually
....
While Funsch produced expert testimony on the valuation of the Company at
trial, the fact that he never signed a revised Operating Agreement and never
completed its pursuant "Schedule 3" lends further support to his status as an
employee rather than an equity owner, as it is unclear what exactly his share of
the Company would be.
A-3899-18T4
36
provision, Funsch had no viable claim for a buyout of his alleged interest in the
Company.
We also defer to the trial court's determination that Funsch was not owed
any additional compensation for 2015 for the period preceding his walkout. The
court reasonably relied in this regard on the Company's Profit and Loss
Statement for 2015.
Funsch argues the trial court should not have relied on the 2015 Profit and
Loss Statement, since it only reflects Funsch's alleged share of the profits, prior
to so-called "audit and 'true-up,'" not what Funsch was actually paid during this
period. Funsch asserts he is entitled to an additional $65,638.93 for 2015.
Funsch also argues he should have been awarded additional profits from the
Company derived from the "promote" of loans originated by the 100 Mile Fund ,
which he says were typically distributed in the first quarter of the following year
and would not have been reflected on the 2015 Profit and Loss Statement.
In response, defendants note the only competent evidence produced by
Funsch to support his claim is the 2015 Profit and Loss Statement, which
demonstrates "the profits of the Company for all of 2015 – not the relevant
period January 1, 2015-December 17, 2015 (the time frame in which Funsch was
still employed)." Defendants point out it is "entirely possible that the Company
A-3899-18T4
37
closed deals after December 17, 2015 (prior to year-end [sic]) thus earning
profits after Funsch was no longer employed" and which profits he would not
be entitled to collect. Defendants thus assert that Funsch did not meet his burden
to demonstrate what the Company's profits were as of December 17, 2015.
We agree with defendants that plaintiff has failed to show the trial court
clearly erred in rejecting his claim to an additional $65,638.93 in compensation.
While not explicitly stated, Funsch appears to calculate the figure of $65,638.93
by subtracting the total wages he received (less income tax withheld) on his 2015
W-2, i.e., $282,985.07, from the total amount of distribution on the 2015 Profit
and Loss Statement, $348,624. However, Funsch does not compare the 2015
Profit and Loss Statement to the 2014 Profit and Loss Statement , which
comparison helps explain the approximately $23,000 decrease in his salary in
2015 from 2014. In 2015, the Company's net income was approximately
$125,000 less than its net income in 2014, resulting in a decrease in Funsch's
distribution on the Profit and Loss Statement, from $367,724 in 2014 to
$348,624 in 2015. That appears to account for the difference between Funsch's
2014 and 2015 W-2s, reflecting that he took home $306,601.16 in wages in 2014
and earned $282,985.07 in 2015. Although that comparison does not refute
A-3899-18T4
38
Funsch's claim for additional compensation in its entirety, it undercuts his
quantification of a shortfall of over $65,000.
Additionally, Funsch does not reconcile his admission that he would not
be entitled to any "future earnings or ownership" with his argument that he is
entitled to the so-called "promote," i.e., additional profits calculated following
the Company audit and "true-up," which for 2015 was computed and distributed
in the first quarter of 2016. Funsch admitted in his brief that the promote is
calculated at the conclusion of each calendar year and disbursed in the first
quarter of the following year, but he does not explain why he was entitled to
such profits when his relationship with the Company ended on December 17,
2015.
Given our limited scope of appellate review, and bearing in mind that
Funsch bore the burden of proof on his claims, we are unpersuaded that the trial
court clearly erred in its denial of additional compensation.
IV.
We briefly address the rejection of Funsch's claim for defamation. We
concur with the trial court that Funsch failed to put forward sufficient evidence
to sustain such a cause of action.
A-3899-18T4
39
To succeed on a defamation claim, a plaintiff is obligated to prove by a
preponderance of the evidence that the defendant: (1) made false and defamatory
statements of fact about plaintiff, (2) to third parties in a non-privileged setting,
(3) depending upon the nature of the speech and the plaintiff, with either
knowledge that the statements were false, a reckless disregard for the truth or
falsity of the statements, or negligence in failing to ascertain the truth or falsity
of the statements. See G.D. v. Kenny,
205 N.J. 275
, 292-93 (2011) (citing
DeAngelis v. Hill,
180 N.J. 1
, 13 (2004)); see also Restatement (Second) of
Torts § 558 (1977).
Importantly, a defendant's statements of opinion about a plaintiff, rather
than of fact, are not actionable defamation. As the trial court properly noted,
"[s]tatements of opinion, like unverifiable statements of fact, generally cannot
be proved true or false." Lynch v. N.J. Educ. Ass'n,
161 N.J. 152
, 167 (1999).
Moreover, "insults, epithets, name-calling, and other forms of verbal abuse,
although offensive, are not defamatory."
Ibid. (citation omitted). Here,
the
various negative things that Procida said about Funsch after their relationship
devolved are fundamentally expressions of opinion.
Moreover, as an independent basis for rejecting the defamation claim, the
court reasonably determined that Funsch failed to identify any person who
A-3899-18T4
40
received Procida's communications and, as a result, thought less of him.
Plaintiff failed to show that a particular prospective employer or client was
aware of or affected by Procida's words. To be sure, certain slanderous
statements can be defamation per se and enable reputational damages to be
presumed, see W.J.A. v. D.A.,
210 N.J. 229
, 240 (2012). However, we are
unpersuaded that Procida's utterances conveying negative opinions about
plaintiff (and, for that matter, at times about other employees at his company)
comprise actionable false statements of fact.
To the extent we have not otherwise addressed them, the balance of
plaintiff's arguments, including his claim the trial court abused its discretion on
evidential rulings, lack sufficient merit to warrant discussion. R. 2:11-
3(e)(1)(E).
Affirmed.
A-3899-18T4
41 |
4,639,157 | 2020-12-03 15:14:34.559734+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a0451-18.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0451-18T2
JOHN DECHIARA,
Plaintiff-Respondent/
Cross-Appellant,
v.
STEPHANIE KLAAR DECHIARA,
Defendant-Appellant/
Cross-Respondent.
______________________________
Argued November 9, 2020 – Decided December 3, 2020
Before Judges Rothstadt and Mayer.
On appeal from the Superior Court of New Jersey,
Chancery Division, Family Part, Morris County,
Docket No. FM-14-0653-12.
Stephanie Klaar DeChiara, appellant/cross-respondent,
argued the cause pro se (Douglas J. Kinz, on the brief).
Coulter K. Richardson argued the cause for
respondent/cross-appellant (Richardson & Richardson,
attorneys; Katherine F. Richardson and Coulter K.
Richardson, of counsel and on the brief).
PER CURIAM
In this post-judgment matrimonial matter, defendant Stephanie Klaar
DeChiara appeals from a May 21, 2018 order reducing the amount of alimony
to be paid by plaintiff John DeChiara. Plaintiff cross-appeals from that same
order, contending the judge's imputation of income and determination that his
income would rebound after one year was erroneous. In addition, plaintiff cross -
appeals from the denial of his request for attorney's fees. We affirm.
Plaintiff and defendant married on August 17, 1991. They divorced on
October 3, 2013. A signed property settlement agreement (PSA) was
incorporated into the parties' final judgment of divorce.
In June 2016, plaintiff filed a motion to reduce his alimony and child
support obligations based on changed circumstances. The parties attended a
post-judgment early settlement panel and mediation to resolve the issues but
were unsuccessful in reaching an agreement. As a result, Judge Michael Paul
Wright scheduled a plenary hearing.
After conducting a plenary hearing, spanning seven days during which
plaintiff and defendant testified at length, Judge Wright rendered an oral
decision, setting forth his findings of fact and conclusions of law based on the
documentary evidence and testimony of the parties. Applying and analyzing the
factors enumerated in N.J.S.A. 2A:34-23(k), Judge Wright determined plaintiff
demonstrated sufficient changed circumstances, warranting a downward
A-0451-18T2
2
modification of his alimony obligation. The judge found "plaintiff's loss of
income [was] due to a change in the company's management, and that the
owner/employer relationship no longer [drove] the income earned, and where
the plaintiff ha[d] lost that employment, and where the plaintiff ha[d] reasonably
secured new income at a lower rate."
However, the judge also concluded that plaintiff stopped his search for
new employment in April 2016, after plaintiff "found employment at a lesser
income," and failed to continue searching for employment that paid a salary
comparable to his former job. Judge Wright found "it was . . . incumbent upon
the [plaintiff] to continue to seek employment at an increased income equal to
that previously earned and utilized to base the [PSA]." The judge stated,
"plaintiff must seek, not only new employment haphazardly, but must set
himself up, create a situation where his skill set is more than it has been, license,
certifications, training, whatever is necessary to become conversant in the new
technologies which will hopefully allow him to earn his former income." Based
on the evidence and testimony adduced at the plenary hearing, Judge Wright
held, "[i]t would appear that plaintiff's income may well be back or headed back
to the levels utilized to fashion the PSA." Because plaintiff demonstrated four
to five years "where [his] income was substantially reduced," the judge found a
one year "temporary downward modification [was] appropriate."
A-0451-18T2
3
Regarding the denial of plaintiff's request for attorney's fees, the judge
reviewed the factors for awarding counsel fees and found "both parties' positions
were very reasonable. Neither party . . . achieved a global victory. Both parties
. . . fared as well as the facts would allow."
Having reviewed the record, we affirm substantially for the reasons set
forth in the comprehensive oral decision rendered by Judge Wright. We add the
following brief comments.
Our scope of review of the Family Part judge's order is limited. "The
modification of alimony is best left to the sound discretion of the trial court."
Innes v. Innes,
117 N.J. 496
, 504 (1990). Because family courts exercise
"special jurisdiction and expertise in family matters, appellate courts should
accord deference to family court factfinding." Cesare v. Cesare,
154 N.J. 394
,
413 (1998). We will not disturb a Family Part judge's decision on support
obligations "unless it is manifestly unreasonable, arbitrary, or clearly contrary
to reason or other evidence, or the result of whim or caprice." Jacoby v. Jacoby,
427 N.J. Super. 109
, 116 (App. Div. 2012) (quoting Foust v. Glaser, 340 N.J.
Super. 312, 316 (App. Div. 2001)). "A reviewing court should uphold the
factual findings undergirding a trial court's decision if they are supported by
adequate, substantial and credible evidence on the record." MacKinnon v.
A-0451-18T2
4
MacKinnon,
191 N.J. 240
, 253-54 (2007) (quoting N.J. Div. of Youth & Family
Servs. v. M.M.,
189 N.J. 261
, 279 (2007)).
We "'should not disturb the factual findings and legal conclusions of the
trial judge unless . . . convinced that they are so manifestly unsupported by or
inconsistent with the competent, relevant and reasonably credible evidence as to
offend the interests of justice' or when we determine the court has palpably
abused its discretion." Parish v. Parish,
412 N.J. Super. 39
, 47 (App. Div. 2010)
(quoting
Cesare, 154 N.J. at 412
). We will only reverse the judge's decision
when it is necessary to "'ensure that there is not a denial of justice' because the
family court's 'conclusions are [] "clearly mistaken" or "wide of the mark."'"
Id. at 47
(quoting N.J. Div. of Youth & Family Servs. v. E.P.,
196 N.J. 88
, 104
(2008) (alteration in original)).
Alimony "may be revised and altered by the court from time to time as
circumstances may require." N.J.S.A. 2A:34-23. To warrant such a
modification, a party must demonstrate "changed circumstances." Lepis v.
Lepis,
83 N.J. 139
, 150 (1980).
When considering a motion for the modification of a support award, a
court applies the same factors as when determining an initial alimony award:
"the dependent spouse's needs, that spouse's ability to contribute to the
fulfillment of those needs, and the supporting spouse's ability to maintain the
A-0451-18T2
5
dependent spouse at the former standard." Crews v. Crews,
164 N.J. 11
, 33
(2000) (quoting
Lepis, 83 N.J. at 152
). "In computing alimony, '[i]ncome may
be imputed to a party who is voluntarily unemployed or underemployed.'" Gnall
v. Gnall,
432 N.J. Super. 128
, 158 (App. Div. 2013) (quoting Golian v. Golian,
344 N.J. Super. 377
, 341 (App. Div. 2001)). Imputation of income is a
"discretionary matter not capable of precise or exact determination but rather
requires a trial judge to realistically appraise capacity to earn and job
availability." Bermeo v. Bermeo,
457 N.J. Super. 77
, 85 (App. Div. 2018)
(quoting
Gnall, 432 N.J. Super. at 158
). The trial court's decision on the
imputation of income will not be disturbed unless shown to be a mistaken
exercise of discretion.
Gnall, 432 N.J. at 158
(citing Robertson v. Robertson,
381 N.J. Super. 199
, 206 (App. Div. 2005)).
Based on the testimony and evidence adduced during the multi-day
plenary hearing, Judge Wright found plaintiff demonstrated changed
circumstances, warranting a temporary modification of his alimony obligation.
The judge noted plaintiff took one of the first jobs he was offered and then
abandoned searching for a job that provided a similar income as he earned at the
time of the PSA. The judge considered plaintiff's employment history and his
ability to obtain additional training, certifications, and licenses that would
A-0451-18T2
6
improve his opportunities to earn income commensurate with his earnings at the
time of the JOD.
The judge's statement of reasons for the temporary downward
modification of alimony and his imputation of income that plaintiff would earn
in the near future is supported by substantial credible evidence in the record.
We discern no abuse of discretion in the judge's factual and legal determinations
as to the appeal challenging the temporary downward modification of alimony
and cross-appeal challenging the imputation of future income to plaintiff.
We next consider whether the judge erred in denying plaintiff's request
for attorney's fees. An award of attorney's fees in a matrimonial action rests in
the discretion of the Family Part judge. R. 5:3-5(c); Tannen v. Tannen, 416 N.J.
Super. 248, 285 (App. Div. 2010) (citing Eaton v. Grau,
368 N.J. Super. 215
,
225 (App. Div. 2004)). On appeal, the Family Part judge's decision regarding
attorney's fees will be upheld absent a showing of abuse of discretion.
Ibid. In deciding whether
to award attorney's fees, the court should consider:
(1) the financial circumstances of the parties; (2) the
ability of the parties to pay their own fees or to
contribute to the fees of the other party; (3) the
reasonableness and good faith of the positions
advanced by the parties both during and prior to trial;
(4) the extent of the fees incurred by both parties; (5)
any fees previously awarded; (6) the amount of fees
previously paid to counsel by each party; (7) the results
obtained; (8) the degree to which fees were incurred to
A-0451-18T2
7
enforce existing orders or to compel discovery; and (9)
any other factor bearing on the fairness of an award.
[R. 5:3-5(c).]
Here, Judge Wright explained his reason for rejecting the counsel fee
request consistent with these factors. He determined "[a] review of the relevant
factors, establishe[d] that both parties' positions were very reasonable." He also
explained "[n]either party achieved a global victory" because both parties
received less than the full relief requested. In addition, he found the parties were
essentially in equivalent financial positions.
With these findings, there is no basis to disturb the judge's denial of
plaintiff's request for counsel fees. We also discern no abuse of discretion
because the judge did not specifically enumerate every factor in reviewing the
request for attorney's fees. See Reese v. Weis,
430 N.J. Super. 552
, 585 (App.
Div. 2013) (affirming denial of attorney's fees despite the court's failure to
address every factor under Rule 5:3-5(c)).
Affirmed.
A-0451-18T2
8 |
4,639,158 | 2020-12-03 15:14:35.479008+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a2724-18.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2724-18T1
IN THE MATTER OF
JOHN P. WARNOCK
_____________________________
Submitted November 16, 2020 – Decided December 3, 2020
Before Judges Fasciale and Rothstadt.
On appeal from the Department of Human Services,
Division of Family Development, Office of Child
Support Services.
Fusco & Macaluso Partners, LLC, attorney for
appellant (Amie E. Dicola, on the brief).
Gurbir S. Grewal, Attorney General, attorney for
respondent (Melissa H. Raksa, Assistant Attorney
General, of counsel; Mark D. McNally, Deputy
Attorney General, on the brief).
PER CURIAM
John P. Warnock appeals from a January 14, 2019 final agency decision
by the Department of Human Services, Office of Child Support Services
(OCSS), which denied his challenge to its bank-account levy. Warnock's sole
contention is that this decision was arbitrary, capricious, and unreasonable. We
disagree and affirm.
Warnock owes $31,549.08 in child support. On December 7, 2018, OCSS
obtained a levy on a bank account at Lakeland Bank. OCSS subsequently
notified Warnock of its levy, informed him that he could contest it, and provided
the contest form. Warnock filed a timely contest with OCSS, checking off the
"other" box and claiming the bank account's funds were proceeds from the sale
of his mother's home. As her durable power of attorney, Warnock claimed the
funds were used for his mother's financial obligations.
OCSS acknowledged Warnock's contest, but requested additional
information, specifically: (1) proof of power of attorney over his mother's
financial obligations; (2) proof of the sale of her property; (3) the last three
months of bank statements including deposit slips; and (4) his last three pay
stubs. Warnock supplied this information on January 14, 2019, and on the same
day, OCSS issued its Notice of Contest Resolution and Right to Appeal. In the
Notice, OCSS denied Warnock's contest, giving two reasons: "1) [o]utstanding
arrears balance and 2) [f]ailure to pay child support as court ordered."
Warnock appealed to us. OCSS filed a motion to remand seeking to
clarify its reasons for denying Warnock's contest, and on January 7, 2020, we
A-2724-18T1
2
granted that motion. On remand, OCSS issued a revised Notice of Contest
Resolution and Right to Appeal dated February 24, 2020, which denied the
contest and emphasized:
The levy will continue. [Warnock] stated in [his]
contest that [he is] Power of Attorney (POA) for [his]
mother and [he] handle[s] her financial obligations,
including those with funds obtained from the sale of her
property. Section ii of the POA provided states that
[he] can "conduct any business with any banking or
financial institution . . . with respect to any of my
accounts . . ." The "my" referring to [his] mother.
Statements provided from the levied bank account were
reviewed and found to be solely in [Warnock's] name.
It is not an account in [his] mother's name that [he]
accessed on her behalf nor is it a joint bank account.
The proof of deposits provided were also reviewed but
do not reflect the use of those funds for [his] mother's
financial obligations. Therefore, the levy will continue.
On appeal, Warnock raises the following point:
POINT I
THE COURT SHOULD REVERSE THE DENIAL OF
. . . WARNOCK'S CONTEST OF THE NOTICE OF
BANK LEVY AND OVERTURN THE LEVY UPON
. . . WARNOCK'S ACCOUNT WITH [THE] BANK
BECAUSE THE DECISION TO DENY THE CONTEST
WAS ARBITRARY, CAPRICIOUS AND
UNREASONABLE, GIVEN THE AMPLE
DOCUMENTATION SUPPLIED BY . . . WARNOCK
AND THE COMPLETE LACK OF ANY BASIS TO
SUPPORT THE DENIAL OF THE CONTEST.
A-2724-18T1
3
Our review of an administrative agency's final determination is limited.
Burlington Cty. Bd. of Soc. Servs. v. G.W.,
425 N.J. Super. 42
, 45 (App. Div.
2012). We will intervene "only in those rare circumstances in which an agency
action is clearly inconsistent with its statutory mission or with other State
policy." Brady v. Bd. Of Review,
152 N.J. 197
, 210 (1997) (quoting George
Harms Constr. Co. v. N.J. Tpk. Auth.,
137 N.J. 8
, 27 (1994)). We should only
reverse when an agency's decision is "arbitrary, capricious, or unreasonable, or
[] not supported by substantial credible evidence in the record as a whole." In
re Stallworth,
208 N.J. 182
, 194 (2011) (alteration in original) (quoting Henry
v. Rahway State Prison,
81 N.J. 571
, 579-80 (1980)).
New Jersey enacted the New Jersey Child Support Improvement Act
(Support Improvement Act), pertinently N.J.S.A. 2A:17-56.53 and N.J.S.A.
2A:17-56.57, which authorizes the Department of Human Services (DHS) to
take action without a court order to recognize and enforce the authority of state
agencies, including the authority to "[s]ecure assets to satisfy [child support]
arrearages[.]" N.J.S.A. 2A:17-56.53(g). "The [Support Improvement Act]
authorizes DHS to conduct quarterly data matches with banks and other financial
institutions based on the obligor's social security number in order to identify
financial assets, and to freeze and seize the funds in order to satisfy child support
A-2724-18T1
4
arrears." Spuler v. Dep't of Human Servs.,
340 N.J. Super. 549
, 550 (App. Div.
2001) (citing N.J.S.A. 2A:17-56.53(g)(2), -56.57(d)).
As an administrative agency, OCSS uses its authority to locate financial
assets when "non-custodial parents . . . who owe past due child support that
equals or exceeds the amount of support payable for three months and for which
no regular payments are being made."
Id. at 551
(alteration in original) (quoting
N.J.S.A. 2A:17-56.57(a)). Once OCSS effectuates a bank levy freezing access
to funds, the child support obligor is given notice and instructed that he or she
may contest OCSS's action. See N.J.S.A. 2A:17-56.57(d).
Here, OCSS had the statutory authority to levy the bank account, and it
provided Warnock with a notice of levy, as well as the contest form. After
Warnock contested by claiming the funds were proceeds from the sale of his
mother's home and for her care, OCSS requested further information, which it
reviewed prior to issuing its Notice of Contest Resolution and Right to Appeal.
On remand, OCSS issued a revised Notice and clarified its reasoning for denying
Warnock's contest. Warnock failed to address the revised notice in his merits
brief. Moreover, there is no evidence in this record establishing that his mother
jointly owns the bank account, nor evidence showing that the charges in the bank
statements were for his mother's care. Applying our settled standard of review,
A-2724-18T1
5
we therefore conclude OCSS did not act arbitrarily, capriciously, or
unreasonably.
Affirmed.
A-2724-18T1
6 |
4,639,159 | 2020-12-03 15:14:36.534162+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a1208-19.pdf | RECORD IMPOUNDED
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1208-19T2
C.J.C.,
Plaintiff-Respondent,
v.
K.A.M.,
Defendant-Appellant.
______________________________
Submitted November 17, 2020 – Decided December 3, 2020
Before Judges Fisher and Moynihan.
On appeal from the Superior Court of New Jersey,
Chancery Division, Family Part, Ocean County, Docket
No. FV-15-0237-20.
Helmer, Conley & Kasselman, PA, attorneys for
appellant (Patricia B. Quelch, of counsel and on the
brief).
Respondent has not filed a brief.
PER CURIAM
Plaintiff C.J.C. (Carl) and defendant K.A.M. (Kathy) resided together,
raising two children, for approximately five years – a period interrupted only for
a time when Carl was incarcerated. At the end of June 2019, their relationship
ended and Carl was asked to leave their apartment; Carl vacated the premises on
August 4, 2019. Two days later, Carl took the children to the doctor. After the
appointment, he reached out to Kathy, telling her they needed to talk. Carl
arrived at Kathy's apartment, where a physical encounter took place. Claiming
he was assaulted by Kathy and harassed by her telephone calls that soon
followed, Carl filed a complaint against Kathy under the Prevention of Domestic
Violence Act, N.J.S.A. 2C:25-17 to -35. Kathy filed a similar complaint against
Carl, alleging an assault, harassment, criminal mischief, and criminal trespass.
The parties' complaints were the subject of a five-day hearing in
September and October 2019, during which Judge Deborah L. Gramiccioni
heard from numerous witnesses. On October 7, 2019, the last hearing day, the
judge rendered thorough factual findings during the course of a lengthy and
comprehensive oral decision. The judge explained in great detail why she found
Carl to be far more credible than Kathy about the events on which their
complaints were based.
A-1208-19T2
2
Kathy's version, according to the judge, "completely fell apart under
cross[-]examination as contrasted with [Carl's] version which held up
completely under cross[-]examination." For example, there was no genuine
question about whether Kathy kicked Carl in the neck. As the judge found,
Kathy asserted during her direct testimony that she kicked Carl in self-defense
but during cross-examination she acknowledged she kicked him out of
frustration. The judge also explained that while Kathy called numerous other
witnesses, and that those found credible did not corroborate Kathy's version,
other witnesses were either biased or gave testimony unworthy of being credited.
Based on what came from credible witnesses, the judge determined that,
on the day in question, Carl approached Kathy to speak about their daughter's
well-being. Kathy was holding a phone and Carl admitted that he grabbed the
phone from her hand. But then, as the judge found, based on Carl's credible and
"vivid" description, Kathy
threw an overhand closed fisted punch which did land
on the side of [Carl's] face, . . . a hugely
disproportionate response to [Carl's] grabbing of the
cell phone.
Carl has a prosthetic leg, and the judge found that Kathy's foot then came into
contact with the back of Carl's knee, causing him to "tumble down the stairs."
She then "threw a high kick into his throat connecting with [the] left side of his
A-1208-19T2
3
neck," an act the judge found to be "purposeful . . . not reckless." The judge
rejected Kathy's testimony, which fizzled out on cross-examination, that the kick
was an act of self-defense.
Later that same evening, Kathy telephoned Carl numerous times and –
according to the judge's findings, based on recordings made by Carl – Kathy was
"very aggressive" and at times "screaming" at Carl. During these calls, Kathy
admitted to punching Carl in the throat, and she called him, among other things,
"a jackass," "a psychopath," "a stupid mother[]fucker," and "a fuckin' piece of
shit." According to the judge, Kathy was "barely" able to contain her anger,
which "almost boil[ed] over in rage." Kathy also admitted during those calls
that after the fall down the stairs, she kicked him "the fuck back down."
We need not go on. Based on this and other evidence found credible, the
judge found Kathy was the aggressor throughout these events. The judge
concluded that Carl sustained his burden of proving the predicate acts of
harassment and assault and that Kathy failed to sustain her burden of proving
the predicate acts she alleged. The judge's view of the testimony and the
credibility of the witnesses commands our deference because the judge had the
opportunity to see and hear the witnesses testify, while we only have a transcript
to consider. See Cesare v. Cesare,
154 N.J. 394
, 412 (1998).
A-1208-19T2
4
Before entering a final restraining order (FRO) based on the predicate acts
of assault and harassment, the judge considered the second so-called Silver
factor, which requires a finding that an FRO is necessary "to protect the victim
from an immediate danger or to prevent further abuse." Silver v. Silver,
387 N.J. Super. 112
, 127 (App. Div. 2006) (relying on N.J.S.A. 2C:25-29(a) and
(b)). Judge Gramiccioni correctly observed that when the proven predicate act
is a physical assault, like the assault here, the presence of the second factor is
self-evident
, ibid. (recognizing that this
factor "is most often perfunctory and
self-evident"); see also A.M.C. v. P.B.,
447 N.J. Super. 402
, 414 (App. Div.
2016). But the judge also credited evidence that Kathy had been violent toward
Carl in the past in concluding an FRO was needed to prevent further abuse.
Based on these and other findings, the judge entered an FRO in Carl's
favor and dismissed Kathy's complaint. In later proceedings, the judge awarded
Carl $16,286.67 in counsel fees.
In appealing the FRO and the counsel fee order,1 Kathy argues that: (1)
the trial judge's "findings of credibility are not entitled to deference"; (2) the
judge erred by admitting "the photograph of [Carl] and the partial recordings of
1
Kathy does not argue that the judge erred in dismissing her complaint but,
even if she were, we would find such an argument lacking in sufficient merit to
warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).
A-1208-19T2
5
telephone conversations" between Carl and Kathy; (3) "the evidence did not
support the issuance of an FRO" against Kathy; and (4) if the FRO is affirmed,
"the amount of the attorney's fees awarded is excessive." We find insufficient
merit in Kathy's first and third arguments to warrant further discussion in this
opinion. R. 2:11-3(e)(1)(E). We reject her fourth argument about counsel fees
substantially for the reasons set forth in Judge Gramiccioni's written opinion on
that subject.
We also find no merit in Kathy's second argument. Kathy contends that a
photograph – offered to show the marks on Carl's neck caused by her kick – was
not adequately authenticated. She argues that "[t]he photograph is not the
original" and there is "no indication of the date the photograph was taken." Her
argument misapprehends the guiding standards.
The proponent of a photograph must make a prima facie showing of its
authenticity, State v. Joseph,
426 N.J. Super. 204
, 220 (App. Div. 2012), a
burden "not designed to be onerous," State v. Hockett,
443 N.J. Super. 605
, 613
(App. Div. 2016). It is enough if the record contains sufficient evidence to
support the claim that the photograph depicts "what its proponent claims."
N.J.R.E. 901. Carl testified that the image offered into evidence was taken on
August 6, 2019, and that it depicted the injuries to his neck caused by Kathy's
A-1208-19T2
6
kick. Based on this testimony alone, the judge was entitled to admit the
photograph and, in considering her ruling, we find no abuse of discretion. See
Brenman v. Demello,
191 N.J. 18
, 31 (2007). Indeed, the admission of the
photograph – even if we could somehow assume the judge erred in admitting it
– caused no harm or prejudice because, as Kathy acknowledges in her appeal
brief, she had admitted that "she kicked [Carl's] neck."
Kathy also argues that the audio recordings captured by Carl of her later
phone calls – the content of which we have briefly alluded – should not have
been admitted because she believes that they too were not properly authenticated
and were incomplete. Much has been written about the admissibility of audio
recordings in criminal matters and the multi-part test devised by the Court in
State v. Driver,
38 N.J. 255
, 287 (1962), but even in criminal matters the test is
not so rigid as to preclude the admission of audio recordings even when they are
incomplete or partially inaudible, see State v. Nantambu,
221 N.J. 390
, 404-11
(2015). Kathy did not deny at the hearing that it was her voice on the recordings,
and she did not argue that the recordings were altered, only that what Carl
presented was incomplete. We reject that contention.
Kathy argues in this court that the judge admitted "partial recordings."
That's not accurate. What the record reveals is that, at the outset of the hearing,
A-1208-19T2
7
Carl offered selected portions of the phone calls he recorded. When Kathy's
counsel objected to their completeness, Carl then produced all his recordings,
which were played for the court during the thorough voir dire. Notwithstanding
that full turnover, Kathy's counsel continued to press the objection at the hearing
that the recordings were incomplete, but this was based only on the fact that, as
Carl testified, he did not immediately start recording one conversation until ten
minutes elapsed. That circumstance doesn't make the recordings incomplete. It
just means the complete recording did not contain the complete conversation.
The trial judge soundly admitted into evidence only the complete version, not
the edited portions offered earlier in the proceedings.
To the extent Kathy's argument at the hearing about admission of the
recordings had any substance at all, it only went to the weight of the recorded
evidence, not its admissibility. We find no abuse of discretion.
Affirmed.
A-1208-19T2
8 |
4,639,160 | 2020-12-03 15:14:37.540342+00 | null | http://www.judiciary.state.nj.us/attorneys/assets/opinions/appellate/unpublished/a1790-19.pdf | NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1790-19T3
ANDRES PRIETO,
Plaintiff-Appellant,
v.
EH ASSOCIATES, LLC d/b/a
FAIRBRIDGE INN & SUITES,
Defendant-Respondent.
___________________________
Submitted October 21, 2020 – Decided December 3, 2020
Before Judges Accurso and Vernoia.
On appeal from the Superior Court of New Jersey, Law
Division, Passaic County, Docket No. L-1556-18.
Amy L. Peterson, PC, and Goffinet Law, LLC,
attorneys for appellant (Amy L. Peterson, of counsel
and on the briefs; Samuel M. Goffinet, on the briefs).
Clark & Fox, attorneys for respondent (John M. Clark,
Patrick J. Reilly, III and James McCarrick, on the
brief).
PER CURIAM
Plaintiff Andres Prieto appeals from an order granting defendant EH
Associates, LLC d/b/a Fairbridge Inn & Suites' motion for summary judgment
and dismissing his personal injury lawsuit. Plaintiff sustained injuries after
falling from a ladder while performing work in defendant's hotel. The court
granted defendant's summary judgment motion, finding defendant had no
liability for plaintiff's injuries because he sustained them while performing work
as an independent contractor. Plaintiff contends the court erred because there
are genuine issues of material fact that preclude summary judgment. Based on
our review of the record, we conclude the court correctly determined there are
no disputed issues of material fact, and defendant is entitled to summary
judgment as a matter of law. We therefore affirm.
I.
We discern the following facts from the motion record, viewed in the light
most favorable to plaintiff, the non-moving party. Brill v. Guardian Life Ins.
Co. of Am.,
142 N.J. 520
, 540 (1995). We give plaintiff "the benefit of the most
favorable evidence and most favorable inferences drawn from that evidence."
Estate of Narleski v. Gomes,
244 N.J. 199
, 205 (2020) (quoting Gormley v.
Wood-El,
218 N.J. 72
, 86 (2014)).
A-1790-19T3
2
Plaintiff works full-time as a spray painter for a company. At the time he
sustained his claimed injuries, plaintiff, Esteban Romero Lujan (Romero), and
two others also performed side jobs generally involving painting for various
customers. Romero described this group as a "team" with no specific manager
or supervisor. The team supplied its own equipment for these side jobs.
Defendant owns an East Hanover hotel. At the time plaintiff sustained his
claimed injuries, Danny Barot was the hotel's on-site manager, and his
responsibilities included hiring independent contractors to perform work at the
hotel. Barot has known Romero for several years, and he occasionally hired
Romero to perform painting jobs at his residence and at properties he managed.
Before hiring Romero for a job, Barot explained the scope of the project, and
Romero determined the amount of labor necessary. When Barot hired Romero
for these occasional jobs, Barot did not discuss with Romero how to perform the
work, and he did not supervise or control the work performed. Prior to 2017,
Barot hired Romero to paint some guest rooms at defendant's hotel, and, on
another occasion, he hired Romero to paint a portion of the hotel's exterior.
In September 2017, Barot hired Romero to place sheetrock over skylights
in the hotel's ballroom and paint the ballroom's walls. Before Romero accepted
the job, he spoke with plaintiff to determine whether the team could perform the
A-1790-19T3
3
job because plaintiff was more familiar with the type of work required. In
September 2017, plaintiff, Romero, and the others on the team worked in the
ballroom for three or four days without incident. The team used the same ladders
each day to perform the work, and no hotel employees supervised the team's
work.
On September 23, 2017, the team arrived at the hotel in the morning. One
member of the team opened a side door of the hotel so plaintiff could enter the
ballroom with their materials. There were no hotel employees in the ballroom
that morning. Once in the ballroom, the team placed plastic on the ballroom's
floor. Plaintiff set up a ladder and then climbed it to spackle. Romero owned
the ladder, and plaintiff had used it previously on the team's other jobs and
during the team's prior days' work in the ballroom. Approximately twenty
minutes after he began spackling, plaintiff fell from the ladder. Plaintiff is not
sure what caused him to fall because his eyes were focused on the ceiling, not
the floor. The record lacks any evidence establishing a physical condition of the
hotel caused plaintiff to fall.
On December 13, 2019, the trial court heard oral argument on defendant's
summary judgment motion. Defendant argued it did not owe a duty to plaintiff
because plaintiff was an independent contractor who brought his own equipment
A-1790-19T3
4
and sustained injuries after failing to properly secure the ladder his team brought
to perform the work at the hotel. Defendant further argued plaintiff did not
present evidence that it supervised or controlled plaintiff's work or establish that
there was any issue concerning plaintiff's or the team's competency as
independent contractors. Plaintiff argued defendant violated a duty to plaintiff
because it supervised plaintiff, it permitted work to proceed in an unsafe work
environment, the work was dangerous, and defendant had a responsibility to
ensure the workers were competent to perform the work before hiring them.
After hearing oral argument, the court rendered an opinion from the bench,
finding the undisputed facts established defendant hired plaintiff and his team
as independent contractors, defendant never controlled the means and methods
of plaintiff's work, and defendant never supervised plaintiff's work. 1 The court
explained that on the date of the incident, plaintiff failed to properly secure his
1
The court referenced Romero's statement that plaintiff did not properly place
the ladder into position because plaintiff did not fully extend the ladder to ensure
it was securely in place. Romero's statements are not competent evidence,
however, because they were not "made on personal knowledge." R. 1:6-6.
Romero stated he was told by other members of the team that plaintiff
improperly placed the ladder. Because Romero's statements are not based on
his personal knowledge, we do not rely on them in our review of the court's
summary judgment order.
Brill, 142 N.J. at 540
(requiring a court to consider
whether the competent evidence suffices to resolve a factual dispute in the
moving party's favor).
A-1790-19T3
5
ladder and fell from it as a result. The court also found the record was bereft of
evidence establishing plaintiff was defendant's employee or that defendant had
reason to believe plaintiff was not competent to do the work. The court
determined defendant was entitled to summary judgment as a matter of law
because "a landowner is under no duty to protect a contractor's employee from
the very hazard created by doing the contract work."
The court entered an order granting defendant summary judgment.
Plaintiff appealed and argues the trial court erred because there are genuine
issues of material fact which preclude the granting of summary judgment,
including issues as to whether plaintiff was an independent contractor or a
"casual employee," and whether defendant breached any duty owed to plaintiff.
II.
We review an order granting summary judgment by applying the same
standard as the trial court. Globe Motor Co. v. Igdalev,
225 N.J. 469
, 479
(2016). Under this standard, summary judgment is appropriate "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
challenged and that the moving party is entitled to a judgment or order as a
matter of law."
Ibid. (quoting R. 4:46-2(c)).
We review the trial court's legal
A-1790-19T3
6
conclusions de novo. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co.,
202 N.J. 369
, 385 (2010).
It is well-settled that "the difference between an employee and an
independent contractor is . . . that[] 'one who hires an independent contractor
"has no right of control over the manner in which the work is to be done, [and
the work] is to be regarded as the contractor's own enterprise . . . ."'" Basil v.
Wolf,
193 N.J. 38
, 62-63 (2007) (quoting Baldasarre v. Butler,
132 N.J. 278
,
291 (1993)). That determination requires consideration of such factors as "the
extent of control which, by . . . agreement," the alleged employer "exercise[s]
over the details of the work"; whether the individual performing the work "is
engaged in a distinct occupation or business"; whether "the work is usually done
under the direction of the [alleged] employer or by a specialist without
supervision"; the skill required to perform the work; whether the alleged
employer or the individual performing the work "supplies the instrumentalities,
tools, and the place of work" during the work's performance; the "length of time"
the individual performs the work; "the method of payment, whether by the time
or by the job"; whether the work is part of the alleged employer's "regular
business"; whether "the parties believe they are creating" an employer-employee
relationship; and whether the alleged employer is a business. Restatement
A-1790-19T3
7
(Second) of Agency § 220(2) (Am. Law Inst. 1958); see also Mavrikidis v.
Petullo,
153 N.J. 117
, 132 (1998) (applying Restatement (Second) of Agency §
220(2) to determine whether an individual was an employee or independent
contractor). A court will find an individual is an "independent contractor" if he
or she "is a person 'who, in carrying on an independent business, contracts to do
a piece of work according to his [or her] own methods without being subject to
the control of the employer as to the means by which the result is to be
accomplished . . . .'" Muhammad v. N.J. Transit,
176 N.J. 185
, 196 (2003)
(quoting Bahrle v. Exxon Corp.,
145 N.J. 144
, 157 (1996)).
Here, defendant presented competent and undisputed evidence that
plaintiff and the others comprising the team worked various side jobs for which
they provided their own equipment and controlled all aspects of their work.
When Barot hired Romero to place sheetrock and paint the hotel's ballroom, he
did not discuss with Romero how to perform the work, nor did he or any other
representative of defendant supervise or control the work performed by plaintiff
and the other members of the team in the ballroom.
These undisputed facts establish plaintiff was an independent contractor
who, along with the rest of the team, provided his own equipment, was hired
only for the specific span of time it took for the team to complete the job, and
A-1790-19T3
8
performed work that was not part of the hotel's regular business. See
Mavrikidis, 153 N.J. at 132
(finding a worker was an independent contractor because he
provided his own equipment; the work did not involve the regular business of
the employer; the worker was only hired for the span of time it took to complete
the job; and the worker was paid per job rather than by hour or month) . In
opposition to defendant's summary judgment motion, plaintiff did not present
any evidence demonstrating he was defendant's employee—casual or
otherwise—whose work defendant supervised or for whom defendant controlled
the means and method of performing his work.
Under these circumstances, the court correctly found as a matter of law
that plaintiff was an independent contractor who carried on an independent
business with Romero and the others using their own methods and equipment to
perform the work. See
Muhammad, 176 N.J. at 196
(finding a company was
"clearly" an independent contractor when it was hired to remove asbestos, and
the employer did not supervise or direct the project). For the reasons we explain,
the court also properly found as a matter of law that defendant, the hotel owner,
owed no duty to plaintiff, an independent contractor.
"As a general rule, a landowner has 'a nondelegable duty to use reasonable
care to protect invitees against known or reasonably discoverable dangers.'"
A-1790-19T3
9
Moore v. Schering Plough, Inc.,
328 N.J. Super. 300
, 305 (App. Div. 2000)
(quoting Rigatti v. Reddy,
318 N.J. Super. 537
, 541 (App. Div. 1999)).
Notwithstanding this non-delegable duty, "the landowner '[i]s under no duty to
protect an employee of an independent contractor from the very hazard created
by doing the contract work.'"
Rigatti, 318 N.J. Super. at 541-42
(alteration in
original) (quoting Dawson v. Bunker Hill Plaza Assocs.,
289 N.J. Super. 309
,
318 (App. Div. 1996)). "This exception is carved out of the landowner's general
duty to protect his invitees because the landowner may assume that the
independent contractor and [its] employees are sufficiently skilled to recognize
the dangers associated with their task and adjust their methods accordingly to
ensure their own safety." Accardi v. Enviro-Pak Sys. Co.,
317 N.J. Super. 457
,
463 (App. Div. 1999).
The exception does not apply (1) when "the landowner retains control over
the 'manner and means'" of the independent contractor's work; (2) when the
landowner hires an incompetent contractor; or (3) when the activity constitutes
a "nuisance per se."
Ibid. (quoting Dawson, 289
N.J. Super. at 318); see also
Majestic Realty Assocs., Inc. v. Toti Contracting Co.,
30 N.J. 425
, 431 (1959);
Tarabokia v. Structure Tone,
429 N.J. Super. 103
, 113 (App. Div. 2012).
A-1790-19T3
10
Here, defendant had no duty to protect plaintiff from the very hazard
created by doing the contract work because the team was comprised of
independent contractors,
Rigatti, 318 N.J. Super. at 541-42
, and defendant did
not retain control over the manner and means of the team's work. The
undisputed facts establish Barot did not instruct Romero, the team, or plaintiff
on how to perform the work; neither Barot nor any of defendant's other
employees supervised the team or its work; and the team used its own
equipment, including the ladder from which plaintiff fell. See Slack v. Whalen,
327 N.J. Super. 186
, 194, 196 (App. Div. 2000) (holding landowners owed no
duty to a worker injured on the job when they did not control the methods or
means of the project, did not provide any equipment for the project, and did not
supervise the workers). Similarly, the record lacks any evidence establishing
plaintiff or the others on the team were incompetent contractors or that plaintiff's
work constituted a nuisance per se. See Majestic
Realty, 30 N.J. at 431-40
(describing proofs required to establish a contractor's incompetency and to
establish work constitutes a nuisance per se). The court therefore properly found
as a matter of law that defendant owed no duty to protect plaintiff from the
hazard he created when he fell from the ladder he brought and set up to perform
the team's tasks as an independent contractor. See
Slack, 327 N.J. Super. at 194
A-1790-19T3
11
(finding the defendants could not be held liable when they "were completely
unaware of the methods [the] plaintiff was utilizing to spackle the ceiling, and
knew nothing of the risk of harm [the] plaintiff himself created by climbing into
the rafters and standing on the board").
We further find defendant owed no duty under general negligence
principles, which plaintiff argues should be applied in this case. Under general
negligence principles, "foreseeability of the risk of injury" is a "major
consideration" in determining the existence of a duty. Tarabokia, 429 N.J.
Super. at 113-14. Other considerations include "the relationship of the parties,
the nature of the attendant risk, the opportunity and ability to exercise care, and
the public interest in the proposed solution."
Id. at 114
(quoting Alloway v.
Bradlees, Inc.,
157 N.J. 221
, 230 (1999)). In sum, "[t]he analysis leading to the
imposition of a duty of reasonable care . . . must satisfy 'an abiding sense of
basic fairness under all of the circumstances in light of considerations of public
policy.'"
Ibid. (alterations in original)
(quoting
Alloway, 157 N.J. at 230
).
Here, defendant did not control the means or methods of plaintiff's work
or supply the equipment, and there is no evidence defendant was aware of the
risk of harm plaintiff created for himself by climbing the ladder he supplied to
perform his work as an independent contractor. Barot hired Romero, who then
A-1790-19T3
12
brought in the team to perform the work with its own equipment, using its own
means and methods, and without any supervision or direction from defendant.
Under these circumstances, "'fairness and policy' preclude imposing a tort duty
on defendant[]." See
Slack, 327 N.J. Super. at 194
. We therefore affirm the
court's order granting defendant summary judgment.
Plaintiff's arguments to the contrary are unavailing. For example, plaintiff
argues there is a genuine issue of material fact because plaintiff observed a
woman, who he "imagine[d]" worked for the hotel, sleeping in the ballroom
where the work was performed. His belief the woman worked for the hotel is
not a fact grounded in his personal knowledge, see R. 1:6-6, and, even if she
worked at the hotel, plaintiff did not present any evidence the woman had
authority to direct the team's and plaintiff's work. The woman's purported
presence does not create a genuine issue of material fact because it is not based
on competent evidence and her slumberous presence, without more, is "of an
insubstantial nature" to any proper determination of defendant's alleged legal
duty to plaintiff.
Brill, 142 N.J. at 529
(quoting Judson v. Peoples Bank & Tr.
Co.,
17 N.J. 67
, 75 (1954)).
Equally unpersuasive is plaintiff's claim there is a genuine issue of
material fact as to whether defendant is a "de facto general contractor."
A-1790-19T3
13
Defendant owed no duty to plaintiff even if it is deemed a general contractor
because it did not control the means and methods of plaintiff's work, did not
supervise plaintiff or the team, and did not provide the ladder, which plaintiff
brought to the work site and set up himself. See
Slack, 327 N.J. Super. at 194
,
196 (finding landowners who took on the role of general contractor owed no
duty to a worker injured on the job when they did not control the methods or
means of the project, did not provide any equipment for the project, and did not
supervise the workers); cf. Costa v. Gaccione,
408 N.J. Super. 362
, 365-66, 374-
75 (App. Div. 2009) (finding a property owner acting as his own general
contractor "could at least be found jointly liable with others sharing control of
the locus of the accident" because the property owner hired subcontractors,
purchased materials, frequented the site, and oversaw the workplace).
Finally, we reject plaintiff's argument that the jury must decide the issue
of comparative negligence because, as we have explained, defendant owed no
duty to plaintiff, and, therefore, it cannot be found liable as a matter of law.
Johnson v. Usdin Louis Co.,
248 N.J. Super. 525
, 529 (App. Div. 1991)
("[B]efore recovery may be had, a duty must exist in law and a failure in that
duty must be proved as a fact." (quoting Mergel v. Colgate-Palmolive-Peet Co.,
41 N.J. Super. 372
, 379 (App. Div. 1956))).
A-1790-19T3
14
To the extent we have not discussed any other arguments raised by
plaintiff, they do not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
A-1790-19T3
15 |
4,639,161 | 2020-12-03 15:21:09.034502+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5514.pdf | [Cite as Tabbaa v. Lexpro, L.L.C., 2020-Ohio-5514.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
MOHAMMAD TABBAA, :
Plaintiff-Appellant, :
Nos. 109690 and 109691
v. :
LEXPRO, L.L.C., ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-926735
Appearances:
Michael Drain, for appellant.
RaslanPLA & Company, L.L.C., Erika Molnar, and Nadia
R. Zaiem for appellee Lexpro, L.L.C.
Law Office of David Ledman and David Ledman for
appellees Lila and Fares Raslan.
SEAN C. GALLAGHER, J.:
Mohammad Tabbaa appeals the dismissal of his declaratory
judgment action advanced against Lexpro, L.L.C. (“Lexpro”), and Lila and Fares
Raslan (“Raslans”). For the following reasons, we affirm.
In 2008, two judgments were entered against Tabbaa and the Raslans
in separate actions in the Cuyahoga County Court of Common Pleas — Natl. City
Bank v. Kay Properties L.L.C., et al., Cuyahoga C.P. No. CV-08-677951 (Dec. 3,
2008), and Natl. City Bank v. Luna M. Tabbaa, et al., Cuyahoga C.P. No. CV-08-
676689 (Dec. 3, 2008) — both of which were based on an outstanding mortgage
debt totaling nearly $800,000. The resulting judgments were ultimately assigned
to Lexpro sometime in 2011, and the pertinent judgment liens were filed in 2012.
According to the allegations in the complaint, Lexpro released the Raslans from the
judgment debt shortly thereafter, although that fact is disputed, and Lexpro
proceeded to execute on the judgment as against Tabbaa. Lexpro has been pursuing
“extraterritorial collections measures outside the United States against property or
properties believed to belong to [Tabbaa] in Jordan” in order to satisfy the
outstanding judgments that were entered jointly and severally against Tabbaa and
the Raslans.
Tabbaa initiated the underlying action seeking a declaration that
Lexpro’s attempts to execute on the judgment liens were illegal because Lexpro is
currently attempting to execute on property not located in Ohio or, in the
alternative, because the judgments had become dormant under Ohio law — despite
the alleged fact that Lexpro is actively engaging in proceedings in aid of execution.
R.C. 2329.07(B) (a judgment becomes dormant unless a proceeding in aid of
execution is commenced or ongoing); 62 Ohio Jurisprudence 3d, Judgments,
Section 137 (providing an example that a judgment entered in another state was not
dormant when the judgment creditor filed a judgment lien and writ of execution in
Ohio within five years of the judgment). In addition, Tabbaa claimed that because
Lexpro allegedly released the Raslans from their debt, it was required to release
Tabbaa from his portion as well, and therefore, the proceedings in aid of execution
were invalid.1 And finally, Tabbaa sought a declaration that he had the right of
contribution from the Raslans should he be forced to pay any portion of the
judgment in excess of his rightful share. In separate entries, the trial court dismissed
all claims under Civ.R. 12(B)(6), which provides for a dismissal of allegations for the
failure to state a claim upon which relief can be granted. This timely appeal
followed.
In this appeal, Tabbaa argues that the trial court erred by granting the
motion to dismiss under Civ.R. 12(B)(6) because affirmative defenses, such as the
statute of frauds, cannot be tested through a motion to dismiss and the facts of the
1 It appears that Tabbaa is confusing full satisfaction of a judgment with a release
based on partial payment. In general, “[s]atisfaction of a judgment against one of several
obligors is a bar to an action against the others for the same debt or obligation.” 63 Ohio
Jurisprudence, Judgments, Section 582; see also In re Miamisburg Train Derailment
Litigation,
132 Ohio App. 3d 571
, 582,
725 N.E.2d 738
(2d Dist.1999). However, the
general rule is dependent upon the judgment being satisfied in full. Until the judgment
has been satisfied, the judgment creditor may execute upon the judgment. There are no
allegations that the judgment has been satisfied such to release Tabbaa from any liability.
complaint must be accepted in the light most favorable to the plaintiff. Tabbaa also
asks this court to recognize that the two judgments issued in separate cases were
dormant because more than five years had passed, and thus, the trial court erred in
dismissing the action for declaratory relief. Tabbaa’s arguments are misplaced.
There are no affirmative defenses being raised, especially one related to the statute
of frauds that would be irrelevant to the collection of a judgment debt. And because
Tabbaa’s complaint alleges the existence of an ongoing proceeding to attach
property in satisfaction of the judgments assigned to Lexpro, it cannot be concluded
that the judgments have become dormant. R.C. 2329.07(B) (a judgment becomes
dormant unless a proceeding in aid of execution is commenced or ongoing). The
more pertinent question in this case is whether the trial court has authority to grant
the declaratory relief sought — an issue that Tabbaa has largely avoided.
“A declaratory judgment action is a creature of statute” as set forth
under Revised Code Sections 2721.01 through 2721.15. Galloway v. Horkulic, 7th
Dist. Jefferson No. 02 JE 52, 2003-Ohio-5145, ¶ 21. R.C. 2721.03 expressly provides
as follows:
A person interested under a deed, will, written contract, or other
writing constituting a contract * * * may have determined any question
of construction or validity arising under the instrument,
constitutional provision, statute, rule, ordinance, resolution, contract,
or franchise and obtain a declaration of rights, status, or other legal
relations under it.
(Emphasis added.) Id.; Freedom Rd. Found. v. Ohio Dept. of Liquor Control,
80 Ohio St. 3d 202
, 204, 1997-Ohio-346,
685 N.E.2d 522
. A court may declare such
rights, status, or other legal relations whether or not further relief could be claimed.
R.C. 2721.02(A). Declaratory relief is merely in the alternative to other remedies.
Swander Ditch Landowners’ Assn. v. Joint Bd. of Huron & Seneca Cty. Commrs.,
51 Ohio St. 3d 131
, 135,
554 N.E.2d 1324
(1990) (concluding that a declaratory action
will not be considered where another remedy exists). In order to properly plead a
complaint seeking declaratory relief, the plaintiff must demonstrate that (1) the
action is within the scope of the Declaratory Judgment Act; (2) a justiciable
controversy exists between adverse parties; and (3) speedy relief is necessary to
preserve rights that may otherwise be impaired. Freedom Rd. Found. at 204. A
complaint seeking declaratory relief under R.C. Chapter 2721 must be dismissed
where it does not meet any of those requirements. Horkulic at ¶ 24; State ex rel.
Ford v. Ruehlman,
149 Ohio St. 3d 34
, 2016-Ohio-3529,
73 N.E.3d 396
, ¶ 76 (a
declaration of venue is not within the scope of the declaratory judgment statute).
In this case, Tabbaa’s request for declaratory relief against Lexpro is
improper. Essentially, Tabbaa is seeking to invalidate proceedings in aid of
execution that are ongoing in another jurisdiction, according to the allegations of
the complaint. Such a request is beyond the scope of the Declaratory Judgment Act.
None of the allegations in the complaint against Lexpro seek a determination as to
the construction or validity of an “instrument, constitutional provision, statute, rule,
ordinance, resolution, contract, or franchise” and fails to include any request to
“obtain a declaration of rights, status, or other legal relations under” a “deed, will,
written contract, or other writing constituting a contract” as authorized under R.C.
2721.03. See, e.g., Lima Mem. Hosp. v. Dardio, 3d Dist. Allen No. 1-95-38, 1995
Ohio App. LEXIS 4809, 1 (Oct. 18, 1995) (declaratory judgment action instituted to
challenge the constitutionality of the statute under which a proceeding in
garnishment was ongoing). Instead, Tabbaa sought a declaration to invalidate
extraterritorial proceedings to execute on property located in another country that
were initiated based on judgment liens filed in separate proceedings. In essence,
Tabbaa is attempting to collaterally challenge the final judgment rendered in
separate cases and the ensuing attempts to execute upon such judgments.
It is well settled that “[c]ollateral attacks of final judgments are
disfavored and succeed only in limited situations—fraud or lack of jurisdiction.”
Wymsylo v. Bartec, Inc.,
132 Ohio St. 3d 167
, 2012-Ohio-2187,
970 N.E.2d 898
, ¶ 34,
citing Ohio Pyro, Inc. v. Ohio Dept. of Commerce,
115 Ohio St. 3d 375
, 2007-Ohio-
5024,
875 N.E.2d 550
, ¶ 22-23. A declaratory judgment action filed under R.C.
Chapter 2721 cannot be used to collaterally attack the validity of the judgment
rendered by another court. Tabbaa’s requested relief — seeking to declare the
judgment lien to be invalid based on the dormancy of the judgment or to attack the
execution proceedings that have occurred outside of Ohio — is an impermissible,
collateral attack on another court’s proceedings and judgments. Further, because
Tabbaa’s action against Lexpro is not within the scope of the Declaratory Judgment
Act, the trial court did not err in dismissing the complaint as against Lexpro.
And finally, with respect to the claims advanced against the Raslans,
Tabbaa has not asserted facts demonstrating the existence of a justiciable
controversy that exists between the adverse parties. The sole allegation against the
Raslans in the complaint is limited to a declaration that Tabbaa be granted a right
to contribution from the Raslans “in the event any property of [Tabbaa’s] is
attached” by Lexpro. (Emphasis added.) Generally in Ohio, a “claim is not ripe if it
depends on ‘future events that may not occur as anticipated, or may not occur at
all.’” Kalnasy v. MetroHealth Med. Ctr., 8th Dist. Cuyahoga No. 90211, 2008-Ohio-
3035, ¶ 5, quoting Texas v. U.S.,
523 U.S. 296
, 140 L.Ed.2d. 406,
118 S. Ct. 1257
(1998); State v. Loving,
180 Ohio App. 3d 424
, 2009-Ohio-15,
905 N.E.2d 1234
, ¶ 4
(10th Dist.); see also Keller v. Columbus,
100 Ohio St. 3d 192
, 2003-Ohio-5599,
797 N.E.2d 964
, ¶ 26 (declaratory judgment action is not well pleaded when it relies on
the allegation of a future event that may never occur). The allegations in the
complaint are contingent on the possibility of a future event that may never occur.
There are no allegations that Tabbaa has paid any portion of the judgment, much
less more than his share of the judgment entered against him and the Raslans. A
declaratory judgment action cannot be used to obtain a judgment that is advisory in
nature or based on an abstract question or a hypothetical statement of facts. Bilyeu
v. Motorists Mut. Ins. Co.,
36 Ohio St. 2d 35
, 37,
303 N.E.2d 871
(1973).
The allegations against the Raslans are limited to the existence of a
potential controversy should Tabbaa pay more than his share of the judgment debts.
That event may or may not occur. Tabbaa claims that his property in Jordan is in
the process of being seized, but none of the allegations in the complaint demonstrate
that the property has been seized and is in excess of his share of the judgment debt.
Accordingly, that allegation is insufficient to create a justiciable controversy for the
purposes of properly pleading the claim for declaratory relief against the Raslans.
The trial court did not err in dismissing the declaratory relief action as against the
Raslans.
Having resolved the merits of the appeal, we must briefly address the
request for sanctions accompanying Lexpro’s appellate briefing in accordance with
App.R. 23 and Loc.App.R. 23(A). An appeal is frivolous if it presents no reasonable
question for review, is prosecuted for delay, harassment, or any other improper
purpose. Cleveland v. FOP, 2017-Ohio-9174,
103 N.E.3d 235
, ¶ 31 (8th Dist.), citing
State v. G.D., 8th Dist. Cuyahoga Nos. 104317 and 104328, 2016-Ohio-814, ¶ 258;
Loc.App.R. 23(A). Further, and although Loc.App.R. 23 provides for the award of
sanctions upon the finding of frivolity, before awarding sanctions we “must consider
‘whether the attorney or pro se party who signed the document: (1) read it; (2) to the
best of his knowledge, had good grounds for filing it; and (3) did not file it for the
purpose of delaying the proceedings’” or for some other nefarious purpose.
E. Cleveland v. Dailey, 8th Dist. Cuyahoga No. 108873, 2019-Ohio-4267, ¶ 15, citing
State ex rel. Bristow v. Baxter, 6th Dist. Erie Nos. E-17-060, E-17-067, and E-17-
070, 2018-Ohio-1973, ¶ 25, and Bergman v. Genoa Banking Co., 6th Dist. Ottawa
No. OT-14-019, 2015-Ohio-2797, ¶ 33. Thus, it has been concluded that under
Loc.App.R. 23, “[s]anctions are proper only for willful, bad faith violations of Civ.R.
11—not merely negligent ones.”
Id., citing State ex
rel. Bardwell v. Cuyahoga Cty.
Bd. of Commrs.,
127 Ohio St. 3d 202
, 2010-Ohio-5073,
937 N.E.2d 1274
, ¶ 8;
Gallagher v. AMVETS, 6th Dist. Erie No. E-09-008, 2009-Ohio-6348, ¶ 33.
Lexpro contends that Tabbaa’s appeal is not reasonably grounded in
fact because he and his attorney were aware of the ongoing litigation in Jordan for
over eight years. Lexpro also argues that there is no good faith basis in law from
which to appeal the trial court’s decision and that executing on judgments in foreign
jurisdictions is permissible. It is claimed that Tabbaa’s current appeal is meant to
delay the proceedings that are occurring in Jordan meant to attach and sell certain
real property in an effort to collect on the outstanding judgment. Even if we were
inclined to agree with Lexpro’s position on the issue of frivolity, there is no willful
misconduct apparent from the record. Tabbaa attempted to challenge the
collections proceedings through a declaratory judgment action. Although we have
concluded that such an action is beyond the scope of the Declaratory Judgment Act,
Lexpro has not provided any citations to authority directly refuting Tabbaa’s claims.
Instead, Lexpro’s brief addresses the merits of Tabbaa’s appellate arguments.
Accordingly, even if we concluded that Tabbaa’s legal arguments were misguided
and legally incorrect, none of the arguments rise to the level of frivolity, much less
accompanied with the requisite willful misconduct. The motion for sanctions is
denied.
The decision of the trial court is affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
___________________________________
SEAN C. GALLAGHER, JUDGE
EILEEN T. GALLAGHER, A.J., AND
LARRY A. JONES, SR., J., CONCUR |
4,639,162 | 2020-12-03 15:21:09.663541+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5511.pdf | [Cite as State v. Shannon, 2020-Ohio-5511.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
STATE OF OHIO, :
Plaintiff-Appellee, :
No. 109271
v. :
ADAM SHANNON, :
Defendant-Appellant. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Criminal Appeal from the Cuyahoga County Court of Common Pleas
Case No. CR-19-638562-C
Appearances:
Michael C. O’Malley, Cuyahoga County Prosecuting
Attorney, and Jennifer Meyer, Assistant Prosecuting
Attorney, for appellee.
Carolyn Kaye Ranke, for appellant.
EILEEN A. GALLAGHER, J.:
Defendant-appellant Adam Shannon appeals the imposition of
consecutive prison sentences after he pled guilty to two counts of drug trafficking in
violation of R.C. 2925.03(A)(2), one count of drug possession in violation of R.C.
2925.11 and one count of possession of criminal tools in violation of R.C. 2923.24.
Shannon asserts two assignments of error for review:
First Assignment of Error: Appellant’s sentence is contrary to law as
consecutive sentences were not properly imposed.
Second Assignment of Error: Appellant’s sentence is contrary to the
provisions of HB 49 which was enacted to reduce jail sentences for low
level felony offenses of the 4th and 5th degrees.
Finding no merit to the appeal, we affirm.
Factual Background and Procedural History
On April 25, 2019, Shannon was indicted by a Cuyahoga County
Grand Jury in a 17-count indictment along with three codefendants. The indictment
against Shannon was for 14 of those counts which included five counts of drug
trafficking, five counts of drug possession, one count of having weapons while under
disability and three counts of possession of criminal tools.1 Many of the counts
1 Specifically, Shannon was indicted on the following counts: drug trafficking in
violation of R.C. 2925.03(A)(2), a first-degree felony, to wit: cocaine in an amount equal
to or exceeding 100 grams (Count 1); drug possession in violation of R.C. 2925.11(A), a
first-degree felony, to wit: cocaine in an amount equal to or exceeding 100 grams (Count
2); drug trafficking in violation of R.C. 2925.03(A)(2), a first-degree felony, to wit: heroin
in an amount equal to or exceeding 100 grams (Count 3); drug possession in violation of
R.C. 2925.11(A), a first-degree felony, to wit: heroin in an amount equal to or exceeding
one hundred grams (Count 4); drug trafficking in violation of R.C. 2925.03(A)(2), a first-
degree felony, to wit: fentanyl-related compound in an amount equal to or exceeding 500
unit doses but less than 1,000 unit doses or equal to or exceeding 50 grams but less than
100 grams (Count 5); drug possession in violation of R.C. 2925.11(A), a first-degree
felony, to wit: fentanyl-related compound in an amount equal to or exceeding 500 unit
doses but less than 1,000 unit doses or equal to or exceeding 50 grams but less than 100
grams (Count 6); drug possession in violation of R.C. 2925.11(A), a fifth-degree felony, to
wit: Clonazepam in an amount less than the bulk amount with a furthermore clause that
he was previously convicted of a drug abuse offense (Count 7); drug possession in
violation of R.C. 2925.11(A), a fifth-degree felony, to wit: Buprenorphine/Naloxone in an
included one-year firearm specifications, major drug offender specifications,
schoolyard specifications and forfeiture specifications seeking forfeiture of multiple
guns as well as a scale, a cell phone and $7,252. The charges arose out of an
investigation of a suspected drug trafficking operation occurring at a residence at
3625 Newark Avenue in Cleveland by the Cuyahoga County Sheriff’s Department.
Through the use of a confidential informant, deputies conducted six controlled buys
at the residence, two of which involved Shannon. During one of the controlled buys,
Shannon was allegedly observed wearing blue latex gloves while he and another
male weighed and packaged large amounts of drugs.
A search warrant was executed at 3625 Newark Avenue and multiple
handguns and shotguns along with 280 grams of cocaine, 250 grams of heroin and
68 grams of fentanyl, a large portion of which was secured in a safe to which
Shannon allegedly had access were found. When a search warrant was executed at
Shannon’s residence, .11 grams of cocaine and $7,252 in cash were found that
included $100 from one of the controlled buys. At the time he committed the
offenses in this case, Shannon was on judicial release in Cuyahoga C.P. No. CR-17-
615863 (“615863”).
amount less than the bulk amount with a furthermore clause that he had previously been
convicted of a drug abuse offense (Count 8); having weapons while under disability in
violation of R.C. 2923.13(A)(3), a third-degree felony (Count 12); possessing criminal
tools in violation of R.C. 2923.24(A), a fifth-degree felony (Counts 13 and 17); drug
trafficking in violation of R.C. 2925.03(A)(2), a fifth-degree felony, to wit: marihuana in
an amount less than 200 grams (Count 15) and drug possession in violation of R.C.
2925.11(A), a fifth-degree felony, to wit: cocaine in an amount less than five grams (Count
16).
The parties reached a plea agreement. On July 22, 2019, Shannon
pled guilty to one count of drug trafficking (heroin) in violation of R.C.
2925.03(A)(2), a felony of the fourth degree, with forfeiture specifications (amended
Count 3),2 one count of drug trafficking (marihuana) in violation of R.C.
2925.03(A)(2), a felony of the fifth degree, with forfeiture specifications (as charged
in Count 15), drug possession (cocaine) in violation of R.C. 2925.11(A), a felony of
the fifth degree, with forfeiture specifications (as charged in Count 16) and
possessing criminal tools in violation of R.C. 2923.24(A), a felony of the fifth degree,
with forfeiture specifications (as charged in Count 17). An additional term of the
plea agreement was that Shannon would be sentenced to prison. The length of his
prison sentences and whether his sentences would be served consecutively or
concurrently were to be determined by the trial court. In exchange for Shannon’s
guilty pleas, the remaining counts were nolled. Shannon waived a presentence
investigation and report.
On July 31, 2019, the trial court held a sentencing hearing in this case
as well as a hearing regarding Shannon’s violation of community control sanctions
on judicial release in 615863. The trial court heard first from Jessica Alvarado,
Shannon’s probation officer. Alvarado indicated that Shannon had been granted
judicial release in 615863 on March 1, 2018, a little more than one year prior to the
commission of the crimes for which Shannon had entered guilty pleas in this case.
2 Count 3 was amended to reduce the amount of heroin from “equal to or exceeding
100 grams” to “1 to 5 grams.” The one-year firearm specification, schoolyard specification
and major drug offender specification were also deleted.
She stated that Shannon violated the terms of his judicial release but that, on April 3,
2018, supervision was continued. Shannon appeared before the trial court on
September 4, 2018 for a second violation hearing based on the fact that he had been
convicted of a DUI in the Euclid Municipal Court on August 28, 2019 and had failed
to inform his probation officer of the charge. Shannon was found to have violated
community control sanctions, but his supervision was again continued. A third
violation of judicial release was levied against Shannon due to positive alcohol and
marijuana screens in December 2018. On January 3, 2019, the trial court, once
again, found Shannon to be in violation but continued his supervision. During the
July 31, 2019 hearing, Shannon waived his right to a preliminary revocation hearing
and admitted his violation of community control sanctions in 615683 based on his
guilty pleas in this case.
At the hearing, the trial court also heard from the assistant
prosecuting attorney, defense counsel and Shannon. The assistant prosecuting
attorney described the facts leading to the charges against Shannon in this case,
showed the trial court photographs of the contents of the safe and asserted that
Shannon was a “high-level drug supplier.” The state requested that Shannon receive
“as lengthy of a prison term as possible.”
Defense counsel, in turn, argued that this was “a routine incident
involving drug sales” and that Shannon was “actually quite a bit removed” from the
drug trafficking operations that had occurred inside the residence at 3625 Newark
Avenue. Defense counsel denied that Shannon had access to the safe where the
drugs were found and claimed that Shannon had been selling drugs to “catch-up on
his expenses,” including his financial obligations to his children, after he was laid off
from a lighting company where he had worked in 2018. He asked that the trial court
consider a “lower sentence” in this case.
Shannon read a letter he had written to the trial court in which he
apologized for his actions and stated that “financial hardship and being behind on
bills” led to his poor decision making. He requested leniency in sentencing so that
he could “continue [his] employment in the near future, further [his] education to
receive better job opportunities and lead by example for [his] family.”
After hearing from each of these individuals and considering “the
record, the oral statements made here today, the plea negotiations, the status from
the probation department as well as the affidavit of indigency,” the trial court
sentenced Shannon to an aggregate prison term of 36 months at the Lorain
Correctional Institution. The trial court sentenced Shannon to 12-month prison
terms on each of Counts 3, 15, 16 and 17. The trial court further ordered that the
sentences on Counts 3, 15 and 16 were to run consecutive to each other and
consecutive to the sentence imposed in 615863 and that the sentence on Court 17
was to be served concurrently to the sentences imposed on Counts 3, 15 and 16 and
concurrently to the sentence imposed in 615863.3 The trial court also imposed three
3 At the time of his sentencing, Shannon had 12 months left on his sentence in
615683.
years of discretionary postrelease control and Shannon was ordered to forfeit seven
guns, a cell phone, a scale and $7,252 in U.S. currency.
When sentencing Shannon, the trial court made the followings
findings in support of the imposition of consecutive sentences at the sentencing
hearing:
The court makes this finding to support the imposition of consecutive
sentences that it is necessary to punish Mr. Shannon and to protect the
public from future crime, that this sentence is not disproportionate to
the seriousness of the conduct and the danger posed by Mr. Shannon
and that one or more of these offenses were committed while Mr.
Shannon was on community control sanctions [on] judicial release.
In its August 1, 2019 sentencing journal entry, the trial court set forth
the findings it had made in support of the imposition of consecutive prison
sentences as follows:
The court considered all required factors of the law. The court finds
that prison is consistent with the purpose of R.C. 2929.11. * * * The
court imposes prison terms consecutively finding that consecutive
service is necessary to protect the public from future crime or to punish
defendant; that the consecutive sentences are not disproportionate to
the seriousness of defendant’s conduct and to the danger defendant
poses to the public; and that, the defendant committed one or more of
the multiple offenses while the defendant was awaiting trial or
sentencing or was under a community control or was under post-
release control for a prior offense.
On December 19, 2019, this court granted Shannon’s motion for leave
to file a delayed appeal. On September 30, 2020, the trial court granted Shannon
judicial release.
Law and Analysis
Imposition of Consecutive Sentences — Findings under R.C.
2929.14(C)(4)
In his first assignment of error, Shannon contends that his
consecutive sentences should be modified to run concurrently4 or vacated and the
case remanded for resentencing because his consecutive sentences are “contrary to
law” and “not supported by the record.”
Felony sentences are reviewed under the standard provided in R.C.
2953.08(G)(2). State v. Marcum,
146 Ohio St. 3d 516
, 2016-Ohio-1002,
59 N.E.3d 1231
, ¶ 1, 16. An appellate court “may increase, reduce, or otherwise modify a
sentence” or it “may vacate the sentence and remand the matter to the sentencing
court for resentencing” if it “clearly and convincingly finds” that (1) the record does
not support certain specified findings, including a sentencing court’s findings under
R.C. 2929.14(C)(4), or (2) “the sentence is otherwise contrary to law.” R.C.
2953.08(G)(2); State v. Rapier, 8th Dist. Cuyahoga No. 108583, 2020-Ohio-1611,
¶ 7. ‘“Clear and convincing evidence is that measure or degree of proof * * * which
will produce in the mind of the trier of facts a firm belief or conviction as to the facts
sought to be established.’” State v. Franklin, 8th Dist. Cuyahoga No. 107482, 2019-
Ohio-3760, ¶ 29, quoting Cross v. Ledford,
161 Ohio St. 469
,
120 N.E.2d 118
(1954),
4 Shannon does not dispute that the trial court properly ordered that the sentences
in this case be served consecutively to the sentence imposed in 615863. Shannon requests
that we modify the consecutive sentences in this case “to run concurrent with each other
but consecutively to the imposition of the sentence in CR 615863.”
paragraph three of the syllabus. It is “an extremely deferential standard of review.”
State v. Venes, 2013-Ohio-1891,
992 N.E.2d 453
, ¶ 21 (8th Dist.).
To impose consecutive sentences, a trial court must find that (1)
consecutive sentences are necessary to protect the public from future crime or to
punish the offender, (2) consecutive sentences are not disproportionate to the
seriousness of the offender’s conduct and to the danger the offender poses to the
public and (3) at least one of the following applies:
(a) The offender committed one or more of the multiple offenses while
the offender was awaiting trial or sentencing, was under a sanction
imposed pursuant to section 2929.16, 2929.17, or 2929.18 of the
Revised Code, or was under postrelease control for a prior offense.
(b) At least two of the multiple offenses were committed as part of one
or more courses of conduct, and the harm caused by two or more of the
multiple offenses so committed was so great or unusual that no single
prison term for any of the offenses committed as part of any of the
courses of conduct adequately reflects the seriousness of the offender’s
conduct.
(c) The offender’s history of criminal conduct demonstrates that
consecutive sentences are necessary to protect the public from future
crime by the offender.
R.C. 2929.14(C)(4).
The trial court must make the requisite findings in support of the
imposition of consecutive sentences at the sentencing hearing and incorporate those
findings into its sentencing journal entry. State v. Bonnell,
140 Ohio St. 3d 209
,
2014-Ohio-3177,
16 N.E.3d 659
, syllabus.
There are two ways a defendant can challenge consecutive sentences
on appeal. State v. Tidmore, 8th Dist. Cuyahoga No. 107369, 2019-Ohio-1529, ¶ 15;
State v. Johnson, 8th Dist. Cuyahoga No. 102449, 2016-Ohio-1536, ¶ 7. First, the
defendant can argue that consecutive sentences are contrary to law because the trial
court failed to make all of the findings required by R.C. 2929.14(C)(4). See R.C.
2953.08(G)(2)(b). Second, the defendant can argue that the record clearly and
convincingly does not support the findings made by the trial court under R.C.
2929.14(C)(4). See R.C. 2953.08(G)(2)(a).
To “make” the requisite “findings” under the statute, “‘the [trial] court
must note that it engaged in the analysis’ and that it ‘has considered the statutory
criteria and specifie[d] which of the given bases warrants its decision.’” Bonnell at
¶ 26, quoting State v. Edmonson,
86 Ohio St. 3d 324
, 326,
715 N.E.2d 131
(1999).
“[A]s long as the reviewing court can discern that the trial court engaged in the
correct analysis and can determine that the record contains evidence to support the
findings, consecutive sentences should be upheld.” Bonnell at ¶ 29. When
considering whether the trial court has made the requisite findings, an appellate
court must view the trial court’s statements on the record “in their entirety.” See,
e.g., State v. Blevins, 2017-Ohio-4444,
93 N.E.3d 246
, ¶ 23, 25 (8th Dist.).
In this case, the record reflects that the trial court determined at the
sentencing hearing that (1) consecutive sentences were necessary to protect the
community from future crime and to punish Shannon, R.C. 2929.14(C)(4), (2)
consecutive sentences were not disproportionate to the seriousness of Shannon’s
conduct and to the danger he poses to the public
, id., (3)
and the offenses were
committed while Shannon was “on community control sanctions [on] judicial
release,” R.C. 2929.14(C)(4)(a). The trial court’s consecutive sentence findings were
incorporated in its August 1, 2019 sentencing journal entry.
Shannon does not dispute that the trial court made each of these
findings at the sentencing hearing and in its sentencing journal entry. He further
admits that his “commission of new criminal offenses while under supervision meets
the first prong of R.C. 2929.14(C)(4)(a).” However, he contends that his
“commission of new criminal offenses while under supervision” could only
“demonstrate[] the need to have the remaining time under his underlying sentence
in [615863] be served consecutive to the sentence imposed in CR 19 638562” and
that an additional or different finding, i.e., a finding under R.C. 2929.14(C)(4)(b) or
(c), was necessary to impose consecutive sentences on the individual counts to which
Shannon pled guilty in this case. We disagree.
Shannon cites no legal authority in support of this contention. There
is no such limitation in R.C. 2929.14(C)(4). Had the legislature intended to impose
such a limitation on the imposition of consecutive sentences it could have done so.
This court has previously affirmed the imposition of consecutive sentences on
individual counts based on a finding that the defendant was on probation or
community control sanctions in another case when he or she committed the offenses
at issue. See, e.g., State v. Jordan, 8th Dist. Cuyahoga No. 103813, 2016-Ohio-5709,
¶ 7, 51-57.
Shannon also contends that the record does not support a finding
under R.C. 2929.14(C)(4)(b) that “[a]t least two of the multiple offenses were
committed as part of one or more courses of conduct, and the harm caused by two
or more of the multiple offenses so committed was so great or unusual that no single
prison term for any of the offenses committed as part of any of the courses of conduct
adequately reflects the seriousness of the offender’s conduct” and or a finding under
R.C. 2929.14(C)(4) that the imposition of consecutive sentences was
disproportionate to the seriousness of Shannon’s conduct, given that (1) Shannon’s
crimes “were part of singular conduct” based on evidence seized during a single
search of the 3625 Newark Avenue residence rather than “numerous or multiple
offenses,” (2) Shannon was personally involved in only two of the six controlled buys
that led to the search, (3) large quantities of drugs were found in the safe at the 3625
Newark Avenue residence rather than at Shannon’s residence, (4) Shannon pled
guilty to only a handful of the counts with which he had been charged and (5) the
charge against Shannon that involved the “more serious drug compound of heroin”
(Count 3) was reduced from a charge of drug trafficking more than 100 grams of
heroin to a charge of drug trafficking heroin in an amount between one and five
grams.
The trial court, however, did not make a finding, and was not required
to make a finding that R.C. 2929.14(C)(4)(b) applied before it could impose
consecutive sentences. Only one of the circumstances in R.C. 2929.14(C)(4)(a)-(c)
needs to be found to support the imposition of consecutive sentences. See, e.g.,
Jordan at ¶ 57; Rapier, 2020-Ohio-1611, at ¶ 10 (“The legislature authorized the
imposition of consecutive sentences if three findings are made, the last of which
contains three, independent alternative findings under R.C. 2929.14(C)(4)(a)-(c).”);
State v. Black, 8th Dist. Cuyahoga No. 108335, 2020-Ohio-188, ¶ 11 (“The
legislature authorized the trial court to impose consecutive sentences if only one of
three findings under R.C. 2929.14(C)(4)(a)-(c) is made.”). Here the trial court found
that R.C. 2929.14(C)(4)(a) applied.
Further, the trial court was not limited to consideration of the facts
associated with the specific offenses to which Shannon pled guilty in determining
whether consecutive sentences were warranted. See, e.g., State v. West, 8th Dist.
Cuyahoga No. 105568, 2018-Ohio-956, ¶ 13 (‘“A plea agreement does not * * *
preclude the trial court’s consideration of the underlying facts of the case in
determining the appropriate sentence to impose’ and, therefore, ‘the trial court is
permitted to consider the original charge when imposing its sentencing.’”), quoting
Blevins, 2017-Ohio-4444,
93 N.E.3d 246
, at ¶ 36; see also State v. Reeves, 8th Dist.
Cuyahoga No. 100560, 2014-Ohio-3497, ¶ 31 (“[T]he trial court is permitted to
consider the original charge when sentencing. * * * When the defendant’s
convictions result from a plea agreement, that agreement does not preclude the trial
court’s consideration of the underlying facts of the case in determining the
appropriate sentence to impose. * * * “‘[T]he seriousness of the offense will generally
be based upon the judge’s perception of the real facts of what occurred, and the plea
bargained offense will simply set a ceiling on what the judge can impose.’”), quoting
Griffin & Katz, Ohio Felony Sentencing Law, at 450-451 (2000 Ed.); State v.
Roberts, 2017-Ohio-9014,
101 N.E.3d 1067
, ¶ 16-17 (“Consecutive sentences are not
imposed upon a consideration limited to the offender’s conduct as it relates to the
convictions. * * * ‘Conduct’ under R.C. 2929.14(C)(4) is ‘understood to encompass
more than just the facts supporting conviction on a particular offense.”’), quoting
State v. Dennison, 10th Dist. Franklin No. 15AP-592, 2016-Ohio-8361, ¶ 61
(citations omitted).
Although it was not obligated to do so, the trial court explained its
reasoning in sentencing Shannon to consecutive prison sentences as follows:
I’m not going to get on a soap box. When Ms. Alvarado went through
the status of your supervision [in 615863], I was kicking myself. You
know, maybe had I terminated your supervision at your first violation
hearing, you wouldn’t have found yourself in this mess.
And that’s something that I struggle with. You know? Do I send
you back? Because judicial release is so few and far between, and if you
can’t follow the rules, then maybe I shouldn't have granted it and I
should have sent you back at that first violation hearing. Or the second
violation hearing. Or the third violation hearing. So I feel like I need
to take some responsibility, too, because maybe the leniency made you
believe that we don’t take these things seriously, but we do and we have
to. * * * [W]e can’t consider this a routine drug trafficking offense. It’s
not.
***
[T]his is a career for you. Now, we have to not just talk about
drug trafficking. It’s the drugs that you’re trafficking in, the drugs that
are polluting and killing members of our community. That addict has
no control over their addiction, and they’re out there just looking for
that next fix. And there is a safe full of cocaine and heroin and fentanyl
that is killing people. You’re putting it in their hands. And thank God
this is a drug trafficking case and not a corrupting with drugs or a
manslaughter case because they trace these drugs back to you.
I appreciate that you’re taking responsibility. I have come to
know you, and I don’t know if the person that kept coming through
these doors for all of your violation hearings and the compliance
hearings is the same person that was conducting himself in the
community. I choose to believe that you’re a good person, and I’ve
maintained that since the first time I met you. A good person making
bad decisions. But it has to change.
And it didn’t seem like the time that you said that you spent in
prison made that impact on you the time before. So what kind of
message do I have to send you today to make you understand it’s
against the law, it will not be tolerated and there can’t be leniency when
the behavior continues?
There’s just a lot that’s not adding up for me here. I can’t
reconcile the person that kept coming through these doors with great
ambition with the person that’s looking at these convictions. I’m
having a difficult time. And I don’t like that we’re in this situation. And
I don’t like having to impose sentence on you today, but that’s my job.
***
The court must and has formulated this decision based upon the
overriding purposes and principles of felony sentencing, namely, to
protect the public from future crime by you, Mr. Shannon, and to
punish you using the minimum sanctions that the court determines
accomplishes those purposes without imposing an unnecessary burden
on state or local government resources. I have considered the need for
incapacitation, deterrence and rehabilitation. * * * I’ve considered the
seriousness and recidivism factors relevant to the offense and the
offender. Yes, these are serious crimes and the recidivism factor is
through the roof. Do I believe that if I let you walk today, that maybe
you don’t pick up the business today or tomorrow but maybe the day
after? That’s just a reality. And that’s what you’ve shown me.
The court is ensuring that the sentence being imposed does not
demean the seriousness of the offense, the impact on our community
and is consistent with other similar offenses committed by like
offenders. Finally, the sentence is not based upon any impermissible
purposes, namely the race, ethnic background, gender or religion of
Mr. Shannon.
The transcript from the sentencing hearing shows that the trial court
made its findings and imposed consecutive sentences after considering not only the
facts of this particular case (including its perception of the “real facts” of what
occurred and not simply the “facts” of the charges to which Shannon pled guilty)
but also Shannon’s lengthy history of drug trafficking, other drug-related offenses
and repeated probation violations. In 615863, Shannon violated the terms of his
judicial release four times before it was revoked. Prior to the charges in 615863 and
this case, Shannon appeared before the Cuyahoga County Court of Common Pleas
in eight cases that resulted in convictions and, in six of those cases, Shannon was
found to have violated the terms of his probation.
The record shows that the trial court’s consecutive sentence findings
were the result of a thorough, carefully-considered analysis regarding whether
consecutive sentences were necessary to protect the public and punish Shannon in
light of the seriousness of the offenses, Shannon’s history and background and the
danger Shannon poses to the public.
There is nothing in the record before us that leads us to conclude that
any of the trial court’s findings in support of the imposition of consecutive sentences
is clearly and convincingly unsupported by the record. The record shows that the
trial court complied with its obligations under R.C. 2929.14(C)(4). Accordingly, we
overrule Shannon’s first assignment of error.
Claim that Imposition of Consecutive Prison Sentences is Contrary
to the “Spirit” of H.B. 49 and R.C. 2929.24(C)
In his second assignment of error, Shannon argues that the trial court
abused its discretion in imposing consecutive prison sentences on Counts 3 (as
amended), 15 and 16 because “the imposition of consecutive sentences for low level
felony 4 and 5 drug offenses” is “contrary to the spirit of H.B. 49 as codified in R.C.
2929.24(C).” Specifically, Shannon contends that the trial court abused its
discretion by sentencing Shannon to consecutive prison terms without considering
whether “some part of the sentence could not be served in a jail alternative or
community based correctional facility * * * as opposed to consecutive sentences.”
Once again, Shannon cites no authority in support of this contention aside from H.B.
49 and R.C. 2929.24(C). Shannon requests that the case be remanded to the trial
court for “determination of [his] ability to participate in jail alternatives or in a
community based correctional facility.”
The state asserts that Shannon’s sentences are not reviewable under
R.C. 2953.08(D)(1) because (1) “defense counsel and the prosecution both jointly
agreed to a prison term, to be decided by the trial court” as a condition of the plea
agreement, (2) the trial court (as agreed) sentenced Shannon to a prison term and
(3) the sentences imposed were authorized by law. R.C. 2953.08(D)(1) states: “A
sentence imposed upon a defendant is not subject to review under this section if the
sentence is authorized by law, has been recommended jointly by the defendant and
the prosecution in the case, and is imposed by a sentencing judge.” In this case, the
record reflects that the parties agreed, as a condition of the plea agreement, that
Shannon would be sentenced to a prison term, but did not have an agreement as to
any particular sentence, sentencing range or sentencing cap or an agreement as to
whether Shannon’s sentences would be served concurrently or consecutively. The
state cites no case in which a court declined to review a defendant’s sentences based
on R.C. 2953.08(D)(1) under similar circumstances. Further, we note that in State
v. Jackson, 8th Dist. Cuyahoga No. 108364, 2020-Ohio-491, this court stated that
where the prosecutor and defense counsel represented to the court that “they had
agreed that some term of prison, rather than probation, was an appropriate sanction
in the case,” the case did not involve an “agreed sentence” subject to R.C.
2953.08(D)(1).
Id. at ¶ 5, 13
(“An agreed sentence is one in which ‘the defendant
and the state have agreed to be mutually bound to a specific sentence or a sentence
authorized by law within a prescribed range.’”), quoting State v. Huffman, 8th Dist.
Cuyahoga No. 105805, 2018-Ohio-1192, ¶ 17. We need not decide whether the
parties’ agreement that Shannon would be sentenced to a prison term constitutes an
unreviewable jointly recommended sentence under R.C. 2953.08(D)(1) because
even if the trial court’s decision to impose prison sentences was reviewable,
Shannon’s argument is meritless.
First, as stated above, the standard of review of felony sentences is not
abuse of discretion. Felony sentences are reviewed under the standard provided in
R.C. 2953.08(G)(2). Marcum,
146 Ohio St. 3d 516
, 2016-Ohio-1002,
59 N.E.3d 1231
,
at ¶ 1, 16.
Second, with respect to Shannon’s assertion that his consecutive
prison sentences are “contrary to the spirit of H.B. 49 as codified in R.C.
2929.24(C),” R.C. 2929.24(C) has no application here. That provision addresses jail
terms for misdemeanors.5 The offenses to which Shannon pled guilty were fourth-
and fifth-degree felonies.
Further, as this court explained in State v. Neville, 2019-Ohio-151,
128 N.E.3d 937
(8th Dist.):
H.B. 49 was a budget bill. * * * [T]he purpose of the relevant
amendments to H.B. 49 was to reduce the amount of low-level felony
offenders in the state’s prison population, to save the state money, and
to provide drug addiction treatment to offenders by keeping them in
their local communities.
Id. at ¶ 30.
H.B. 49 included a provision, which was applicable to ten “target”
counties in Ohio (including Cuyahoga County) and any “volunteer” counties
agreeing to it, that when a defendant was sentenced to 12 months or less for certain
fifth-degree felonies, the prison term would not be served in an institution under the
control of the Ohio Department of Rehabilitation and Correction; instead, the
5 R.C. 2929.24(C) provides:
If a court sentences an offender to a jail term under this section and the
court assigns the offender to a county jail that has established a county
jail industry program pursuant to section 5147.30 of the Revised Code,
the court shall specify, as part of the sentence, whether the offender
may be considered for participation in the program. During the
offender’s term in the county jail, the court retains jurisdiction to
modify its specification regarding the offender’s participation in the
county jail industry program.
sentence would be served locally, in a county or municipal jail or workhouse,
community-based correctional facility or “community alternative sentencing
center.” See former R.C. 2929.34(B)(3)(c); 2929.34(C)-(D); see also Neville, 2019-
Ohio-151,
128 N.E.3d 937
, at ¶ 22, fn. 3. However, H.B. 49 also set forth various
exceptions where this did not apply, including “to any person to whom * * * the
felony of the fifth degree” was an offense of violence under R.C. 2901.01, a sex
offense under R.C. Chapter 2907, an offense for which a mandatory prison term was
required or drug trafficking in violation of R.C. 2925.03 — as in this case.6 See
former R.C. 2929.34(B)(3)(d)(i).
6 At the time of Shannon’s sentencing, R.C. 2929.34(B)(3)(c)-(d) provided, in
relevant part:
(c) Except as provided in division (B)(3)(d) of this section, on and after July 1,
2018, no person sentenced by the court of common pleas of a target county
[which included Cuyahoga County] or of a voluntary county to a prison term
that is twelve months or less for a felony of the fifth degree shall serve the
term in an institution under the control of the department of rehabilitation
and correction. The person shall instead serve the sentence as a term of
confinement in a facility of a type described in division (C) or (D) of this
section. * * *
(d) Division (B)(3)(c) of this section does not apply to any person to whom
any of the following apply:
(i) The felony of the fifth degree was an offense of violence, as defined
in section 2901.01 of the Revised Code, a sex offense under Chapter
2907. of the Revised Code, a violation of section 2925.03 of the
Revised Code, or any offense for which a mandatory prison term is
required.
(ii) The person previously has been convicted of or pleaded guilty to
any felony offense of violence, as defined in section 2901.01 of the
Revised Code.
(iii) The person previously has been convicted of or pleaded guilty to
any felony sex offense under Chapter 2907. of the Revised Code.
Third, in any event, given that Shannon agreed, as part of his plea
agreement, that he would be sentenced to prison in this case, he is not in a position
to challenge the trial court’s decision to sentence him to prison. Cf. State v.
Brownlee, 2018-Ohio-739,
107 N.E.3d 822
, ¶ 25 (8th Dist.) (“a party cannot take
advantage of an error that the party induced the trial court make”), citing State v.
Smith,
148 Ohio App. 3d 274
, 2002-Ohio-3114,
772 N.E.2d 1225
, ¶ 30 (8th Dist.).
The record reflects that when sentencing Shannon to prison, the trial court
considered the principles and purposes of sentencing under R.C. 2929.11, the
relevant sentencing factors under R.C. 2929.12 and the factors relevant to its
decision to impose consecutive sentences under R.C. 2929.14(C)(4). Shannon
admits that his sentences are within the statutory range for fourth- and fifth-degree
felonies. Based on the record before us, we cannot say that Shannon’s sentences
were clearly and convincingly unsupported by the record or otherwise contrary to
law.
Finally, on September 30, 2020, Shannon was granted judicial
release. Accordingly, Shannon’s requested relief, i.e., that the case be remanded to
the trial court for a “determination of [his] ability to participate in jail alternatives
or in a community based correctional facility,” is now moot.
(iv) The person’s sentence is required to be served concurrently to any
other sentence imposed upon the person for a felony that is required
to be served in an institution under the control of the department of
rehabilitation and correction.
Effective October 17, 2019, R.C. 2929.34(B)(3)(c) was amended to remove the references
to “a target county” and “that is 12 months or less.” 2019 H.B. 166.
Shannon’s second assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellant the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
Cuyahoga County Court of Common Pleas to carry out this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
EILEEN A. GALLAGHER, JUDGE
PATRICIA A. BLACKMON, J., CONCURS;
SEAN C. GALLAGHER, P.J., CONCURS WITH SEPARATE OPINION
SEAN C. GALLAGHER, P.J., CONCURRING:
I fully concur with the majority opinion but write separately out of the
fear that the majority’s conclusion — the granting of judicial release moots
Shannon’s argument regarding resentencing — has potential to be considered in too
broad of a context in future cases. It is noteworthy that the majority’s conclusion is
precisely worded: “Shannon’s requested relief, i.e., that the case be remanded to the
trial court for a ‘determination of [his] ability to participate in jail alternatives or in
a community based correctional facility,’ is now moot.” Majority Opinion, ¶ 37. In
light of the limited argument presented by Shannon, I fully concur with the
majority’s assessment — no resentencing can occur in light of the granting of judicial
release. However, it must be noted that in the broader context, the granting of
judicial release does not necessarily moot all sentencing challenges. State v.
Delmonico, 8th Dist. Cuyahoga No. 108578, 2020-Ohio-3368, ¶ 30, fn. 6
(concluding that the granting of judicial release did not moot the particulars of that
defendant’s assigned errors); State v. Buckway, 8th Dist. Cuyahoga No. 100591,
2014-Ohio-3715, ¶ 2, fn. 1 (noting a conflict among districts). The majority’s
narrowly tailored conclusion is in harmony with the law of this district, and
accordingly, I fully concur. |
4,639,163 | 2020-12-03 15:21:13.226963+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5508.pdf | [Cite as State v. Sayles, 2020-Ohio-5508.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
STATE OF OHIO, :
Plaintiff-Appellee, :
No. 108524
v. :
ANTONIO SAYLES, :
Defendant-Appellant. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Criminal Appeal from the Cuyahoga County Court of Common Pleas
Case No. CR-18-628148-A
Appearances:
Michael C. O’Malley, Cuyahoga County Prosecuting
Attorney, and Gregory Paul, Assistant Prosecuting
Attorney, for appellee.
Mark A. Stanton, Cuyahoga County Public Defender, and
Erika Cunliffe, Assistant Public Defender, for appellant.
KATHLEEN ANN KEOUGH, J.:
In this delayed appeal, defendant-appellant, Antonio Sayles, appeals his
convictions. For the reasons that follow, we affirm.
In May 2018, Sayles was named in a 30-count indictment charging him
with multiple counts of rape, kidnapping, and gross sexual imposition; most counts
contained sexually violent predator and sexual motivation specifications. The
charges stemmed from allegations of sexual misconduct involving Sayles’s minor-
aged daughter and two stepdaughters from 2011 until 2018.
At trial, a jury considered DNA evidence and testimony from multiple
witnesses, including each of the victims, their mother, each of the victim’s social
worker, and the nurse who examined and performed the rape kits on each victim.
The jury convicted Sayles of 24 counts, and the court sentenced him to 100 years to
life in prison.
Because Sayles does not challenge on appeal the sufficiency or manifest
weight of the evidence, this court will only set forth the facts as they pertain to each
assignment of error.
I. Effective Assistance of Counsel
The Sixth Amendment to the United States Constitution and Article I,
Section 10 of the Ohio Constitution provide that defendants in all criminal
proceedings shall have the assistance of counsel for their defense. The United States
Supreme Court has recognized that “the right to counsel is the right to effective
assistance of counsel.” Strickland v. Washington,
466 U.S. 668
, 686,
104 S. Ct. 2052
,
80 L. Ed. 2d 674
(1984).
To establish ineffective assistance of counsel, a defendant must
demonstrate that counsel’s performance fell below an objective standard of
reasonable performance and that he was prejudiced by that deficient performance,
such that but for counsel’s error, the result of the proceedings would have been
different. State v. Drummond,
111 Ohio St. 3d 14
, 2006-Ohio-5084,
854 N.E.2d 1038
, ¶ 205, citing Strickland at 687-688. In short, counsel’s errors must be so
serious as to render the result of the trial unreliable. State v. Jamie, 8th Dist.
Cuyahoga No. 102103, 2015-Ohio-3583, ¶ 24. In evaluating a claim of ineffective
assistance of counsel, a court must be mindful that there are countless ways for an
attorney to provide effective assistance in a given case, and it must give great
deference to counsel’s performance. Strickland at 689.
Sayles contends in his first assignment of error that his trial counsel
failed to provide him with effective representation, thus violating his rights under
the Sixth and Fourteenth Amendments of the United States Constitution and
Article I, Section 10 of the Ohio Constitution. Sayles raises four instances where
counsel allegedly provided ineffective representation — (1) failing to provide
competent representation during the plea discussion; (2) failing to object to the
state’s request to amend the indictment after it presented its case-in-chief; (3) failing
to object to hearsay from the sexual assault nurse examination (“SANE”) nurse who
examined and interviewed the victims; and (4) failing to object to the testimony of
each of the victim’s social worker because each social worker allegedly vouched for
the victim’s credibility and provided inadmissible victim impact evidence.
A. Plea Discussion
A month prior to trial, the state set forth a proposed plea agreement. It
would amend the rape offenses charged in Counts 1, 7, 9, 15, 19, 21, and 23 to first-
degree felonies by deleting the sexually violent predator specification on each count.
Deleting the specification reduced the penalty on those counts from 10-25 years to
life to a possible punishment on each count of three to 11 years in prison. The state
also offered to amend the rape offenses charged in Counts 3 and 17 to gross sexual
imposition, a felony of the third degree, punishable by one to five years in prison.
Finally, the agreement required Sayles to plead guilty to Counts 11 and 29, gross
sexual imposition, a felony of the fourth degree. In exchange for guilty pleas to those
counts as stated or amended, the state would nolle the remaining offenses.
Sayles rejected the plea, stating he wished to proceed to trial. The trial
court then engaged in a discussion with Sayles about the plea and his sentencing
exposure if he were unsuccessful at trial. The court stated that he was facing a 30-
count indictment and if he were found guilty on Count 21, rape of a person under 10
years in age, the penalty would be life without parole. Sayles stated that he
understood.
The court then explained that he was charged with four counts of rape
(Counts 1, 5, 13, and 25) that if he were found guilty, he “would be looking at the
imposition of 25 years to life imprisonment on each of those.” The court further
advised Sayles that 23 of the counts carried a possible sentence of ten years to life,
and two counts were high-tiered felonies of the third degree that carried a possible
penalty of one to five years.1 The court also advised him about the imposition of
fines, mandatory postrelease control, and sexual offender classification.
The trial court then set forth the potential penalties under the plea
agreement. The court advised Sayles that pursuant to the agreement offered, the
state would amend the rape offenses charged in Counts 1, 7, 9, 15, 19, 21, and 23 that
carried to a life-term to now only carry a mandatory prison term of three years to 10
and/or 11 years. The agreement would also amend Counts 3 and 17, two first-degree
felonies, to “high-tier” third-degree felonies carrying a possible prison term of one
to five years. Finally, the trial court advised Sayles that the agreement also provided
that he plead guilty to Counts 11 and 29, felonies of the fourth degree, carrying a
possible penalty of six to 18 months.
Following these advisements, the court asked:
Mr. Sayles, have you had full opportunity to speak with your lawyer?
Because this is kind of a stunning indictment here. You only need one
finding of guilt on one of these life terms. They are mandatory terms.
Do you understand that, sir?
Sayles responded:
Yes. I talked to him. I understand. But it’s kind of hard for me to agree
to something I didn’t do.
(Tr. 9.)
1 It appears the trial court misspoke about the third-degree felonies. A review of
the indictment reveals that the gross sexual imposition counts are fourth-degree felonies,
as the trial court mentioned later in the plea discussion. The third-degree felonies that
the trial court spoke of related to the plea agreement, not the indictment. Regardless,
Sayles does not raise any argument on appeal about the sentencing exposure on these
counts.
Sayles rejected the plea offer, and the case proceeded to trial.
Following the close of evidence, the trial court granted the state’s motion to dismiss
Counts 27 (rape) and 28 (kidnapping). (Tr. 615-616.) The jury found Sayles not
guilty of Counts 21 (rape), 22 (kidnapping), 29 (gross sexual imposition), and 30
(kidnapping). The jury found Sayles guilty of the remaining counts, including the
sexual motivation specifications. Following the verdict, the state moved to dismiss
all sexually violent predator specifications from the indictment.
At sentencing, the parties agreed that the rape counts merged with
corresponding kidnapping counts, and the state elected that the court sentence
Sayles on the rape counts — Counts 1, 3, 5, 7, 9, 13, 15, 17, 19, 23, and 25. The court
noted that Counts 1, 3, 5, and 13 each carried a mandatory term of 25 years to life in
prison, and the remaining rape counts carried a possible punishment of three to 11
years.
Defense counsel advocated to the trial court that it did not “need to
necessarily run [Counts 1, 3, 5, and 13] consecutively because it doesn’t serve any
additional purpose.” The trial court agreed and imposed a concurrent total sentence
of 25 years to life in prison.
Subsequently, but prior to the court journalizing the sentence, the
state advised the trial court that the concurrent 25-year-to-life sentence was
contrary to law. Pursuant to R.C. 2971.03(B)(1)(c) and (E), the trial court was
required to order the minimum sentences in Counts 1, 3, 5, and 13 to be served
consecutively. Accordingly, the court should have sentenced Sayles on those counts
to 100 years to life in prison. Defense counsel agreed with the correction but
requested that the trial court set aside the conviction because Sayles was not fully
advised of the possibility that if convicted, the law required consecutives sentences
on those counts. Sayles also told the court that he was unaware that the law required
mandatory consecutive sentences. The court denied vacating the convictions and
resentenced Sayles to an aggregate sentence of 100 years to life in prison.
In this assignment of error, Sayles contends that he did not receive
effective assistance of counsel during the plea discussion because counsel did not
advise him that if he were found guilty of rape as charged in Counts 1, 3, 5, and 13,
the court was required to run the minimum sentences on each count consecutively.
To establish that ineffective assistance of counsel occurred during plea
negotiations, a defendant who did not accept a plea offer must show not only that
counsel rendered flawed and deficient representation, but also that there is a
reasonable probability that (1) the defendant would have accepted the plea offer; (2)
the offer would not have been withdrawn and would have been accepted by the
court; and (3) the end result would have been more favorable to the defendant. State
v. Weakley, 8th Dist. Cuyahoga No. 105293, 2017-Ohio-8404, ¶ 23.
By citing to Lafler v. Cooper,
566 U.S. 156
,
132 S. Ct. 1376
,
182 L. Ed. 2d 398
(2012), and Weakley, Sayles insinuates that his counsel’s inaccurate
information or lack of advisement regarding his sentence exposure induced him into
rejecting the plea. In both Cooper and Weakley, however, the record clearly
demonstrated that counsel’s misstatements or deficiencies induced the defendants,
who expressed a desire to accept a plea, to subsequently reject the plea deals offered.
In this case, such inducement is lacking. Nothing in the record
indicates that Sayles rejected the state’s plea offer based on counsel’s misstatements.
Rather, the record reflects that during the plea discussion, Sayles rejected the state’s
plea offer because of claims of innocence — “it’s kind of hard for me to agree to
something I didn’t do.” (Tr. 9.) Rejection of a plea offer based on protestations of
innocence undermines Sayles’s claim that he received ineffective assistance of
counsel. See State v. McKelton,
148 Ohio St. 3d 261
, 2016-Ohio-5735,
70 N.E.3d 508
, ¶ 301 (argument of ineffective assistance of counsel during plea negotiations
undermined by evidence that defendant rejected offer to prove his innocence); and
State Burton, 8th Dist. Cuyahoga No. 100716, 2014-Ohio-4207, ¶ 12-13 (summarily
rejecting defendant’s ineffective assistance of counsel argument because the record
showed that the defendant was not interested in accepting a plea).
Moreover, by rejecting the plea agreement, Sayles was risking the
possibility of receiving a sentence of life without parole on Count 21. Although
counsel later stated during the resentencing that he and Sayles believed the evidence
would not support a conviction on that count, the record is clear that Sayles accepted
the risk and proceeded to trial, knowing a life sentence could be imposed.
Finally, Sayles rejected the plea agreement with a full understanding
that Counts 1, 3, 5, and 13 each carried a sentence of 25 years to life in prison. Even
if Sayles proceeded under the misunderstanding that Counts 1, 3, 5, and 13 allowed
for concurrent sentences, the sentences still contained a life-tail. The trial court
advised Sayles that “each” of those sentences carried a life-tail; thus, inferring that
the court could impose those sentences consecutively. By rejecting the plea
agreement, Sayles was subject to a life-sentence regardless, and nothing in the
record indicates that he was concerned about his eligibility for parole. If a concern
about parole existed, he would have accepted the plea agreement because it removed
all life-tail exposure. We find disingenuous Sayles’s argument that had he known
that he could receive a sentence that amounted to a life sentence, i.e. 100 years, he
would have accepted the plea. There is nothing in the record that demonstrates that
Sayles would have accepted the plea offer had he known the consecutive nature of
the sentence if found guilty at trial. Accordingly, we find that he did not receive
ineffective assistance of counsel during the plea discussion.
B. Amendment to the Indictment
Following the state’s case-in-chief, the state moved to amend the
indictment to conform to the evidence presented. Specifically, the state moved to
amend Counts 7, 8, 22, 23, and 24 to reflect the dates of when the offenses were
alleged to have occurred based on the testimony of the victims.
In Counts 7 and 8 (rape and kidnapping), the indictment provided
that the offenses occurred between December 3, 2016 and December 2, 2017. The
state moved to amend the date to reflect that the offense occurred between
December 3, 2015 and December 2, 2016. The purpose of the amendment was “to
reflect age 12 for [the victim].” (Tr. 591.) In Count 22 (kidnapping), the indictment
alleged that the offense occurred on June 1, 2012. The state moved to amend the
date to reflect that the offense occurred between January 1, 2011 through June 1,
2012. The amendment would conform with the corresponding rape offense in
Count 21 that alleged the same date range.2 In Counts 23 and 24 (rape and
kidnapping), the indictment provided that the offense occurred from January 1,
2015 to June 1, 2016. The state moved to amend the date to reflect that the offense
occurred between March 1, 2018 to April 15, 2018. Defense counsel did not
specifically object to the amendments, and the trial court granted the state’s request.
Sayles contends on appeal that his counsel was ineffective for not
objecting to the state’s motion because the amendments allowed for convictions of
offenses on evidence that the grand jury did not consider, i.e. the amendment
changed the nature of the offense.
Crim.R. 7(D) provides that a court may amend an indictment “at any
time before, during, or after a trial * * * provided no change is made in the name or
identity of the crime charged.” “A change in the name or identity of a crime charged
occurs when the offense alleged in the indictment and the offense alleged in the
amended indictment contain different elements that require independent proof.”
State v. Buchanan, 2017-Ohio-1361,
88 N.E.3d 686
, ¶ 22 (8th Dist.).
Sayles relies upon this court’s decision in State v. Vitale, 96 Ohio
App.3d 695,
645 N.E.2d 1277
(8th Dist.1994), for the proposition that the change in
2The jury acquitted Sayles of Counts 21 and 22. Accordingly, any error, if at all,
would be harmless by virtue of the not guilty verdict.
the date range for the offenses changed the identity of the crimes. In Vitale, this
court found that the amendment was different from the evidence on which the grand
jury issued the indictment. Accordingly, we held that because it included a different
potential theft, occurring at a different address, over an expanded time period, the
amendment to the indictment was prejudicial to Vitale’s defense.
Vitale is clearly distinguishable. In this case, the amendments did not
change the name or identity of the crimes charged — they only changed the range of
dates for the offenses as testified to by the victims. In cases involving sexual
misconduct with a young child, precise times and dates of the conduct or offenses
often will not be determined. State v. Boyer, 10th Dist. Franklin No. 06AP-05,
2006 Ohio 6992
, ¶11. And unless it is detrimental to the defense, the precise time and
date of an alleged offense are ordinarily not essential elements. State v. Sellards,
17 Ohio St. 3d 169
, 171,
478 N.E.2d 781
(1985) (absent material detriment to the
preparation of a defense, the omission of specific dates and times is without
prejudice, and without constitutional consequence).
We find that the amendment was not in error, and therefore, counsel
was not ineffective for failing to object. Moreover, Sayles has not demonstrated how
the amendment prejudiced his defense. His defense strategy was that he never
engaged in any sexual contact or conduct with the victims. Unlike where a defendant
intends to use or rely on an alibi, Sayles’s defense was actual innocence. See, e.g.,
State v. Czech, 8th Dist. Cuyahoga No. 100900, 2015-Ohio-1536 (vague time frames
may be detrimental when presenting an alibi defense).
Accordingly, Sayles has not demonstrated that counsel was ineffective
by failing to object to the state’s Crim.R. 7(D) amendment during trial.
C. Failure to Object — Hearsay Testimony
Kathleen Hackett, the sexual assault nurse examination (“SANE”)
program coordinator for Rainbow Babies and Children’s Hospital and SANE nurse,
stated that she conducted the victims’ rape-kit examinations. She testified regarding
her examination and interview with each victim.
Sayles contends that counsel was ineffective for failing to object to the
“nonmedical parts” of Hackett’s testimony and for failing to request the court to
redact those portions of her report that she obtained for use during prosecution. He
claims this testimony and evidence strengthened the victims’ allegations and
provided a more clear and concise account of the allegations. Sayles, however, fails
to specifically identify what parts of her testimony or report were objectionable.
Statements made for the purposes of medical diagnosis and treatment
are a clearly defined, long-standing exception to the hearsay rules. Evid.R. 803(4)
provides an exception for “[s]tatements made for purposes of medical diagnosis or
treatment and describing medical history, or past or present symptoms, pain, or
sensations, or the inception or general character of the cause or external source
thereof insofar as reasonably pertinent to diagnosis or treatment.” Further, in
considering cases of sexual assault, “courts have consistently found that a
description of the encounter and identification of the perpetrator are within the
scope of statements for medical treatment and diagnosis.” In re D.L., 8th Dist.
Cuyahoga No. 84643, 2005-Ohio-2320, ¶ 21, citing State v. Stahl, 9th Dist. Summit
No. 22261, 2005-Ohio-1137, ¶ 15. However, not every statement made by a
declarant in aid of treatment is admissible under the rule: “The exception is limited
to those statements made by the patient which are reasonably pertinent to an
accurate diagnosis and should not be a conduit through which matters of no medical
significance would be admitted.” Staff Note to Evid.R. 803(4); State v. Echols, 8th
Dist. Cuyahoga No. 102504, 2015-Ohio-5138, ¶ 28.
In this case, when viewing the entirety of Hackett’s testimony and
reports prepared during the examination, we find the victims’ statements were
admissible pursuant to Evid.R. 803(4) because they made them in aid of medical
diagnosis and treatment. The victims’ statements provided to Hackett allowed her
to understand where injury, if any, might be present, or explain why no injury was
visible. Each victim reported where the assaults occurred, described the nature and
duration of the assault, how and where Sayles touched them, whether and where
they experienced pain and discomfort, whether Sayles ejaculated or wore a condom,
whether the touching was under on or top of clothing, and whether they engaged in
consensual sexual relations. This information was for the purpose of medical
diagnosis and treatment to guide Hackett in her examination and determine where
potential injury may have occurred or where certain areas needed treatment.
Even if portions of the victims’ statements or Hackett’s report were
inadmissible, the error was harmless because each victim testified about each
offense as it pertained to them, and to whom and when they made their disclosures.
The record reflects that counsel effectively cross-examined the victims exposing
some inconsistencies and casting doubt on the allegations. The jury was able to
assess the credibility of each victim and believe or disbelieve the victims where they
deemed it appropriate. The jury’s ability to make these credibility assessments and
segregate proof is reflected in the not guilty verdicts on certain counts in the
indictment. See, e.g., State v. Bonneau, 8th Dist. Cuyahoga No. 97565, 2012-Ohio-
3258, ¶ 22 (not guilty verdict as counts pertaining to one victim and guilty verdicts
as to another demonstrated jury was able to separate the evidence and consider
victims separately). Moreover, our review of the record demonstrates that defense
counsel effectively cross-examined Hackett about the nature of the examination and
her inability to “to detect any injuries of any type in any of the three [victims].” (Tr.
585.)
Accordingly, Sayles has failed to demonstrate that counsel was
ineffective by failing to object to portions of Hackett’s testimony.
D. Failure to Object—Vouching for Victim Credibility
Sayles contends that counsel was ineffective for failing to object to
testimony from the social workers regarding the trauma the victims suffered
because of the abuse. He summarily maintains that the social workers’ testimony
inappropriately vouched for the credibility of the victims, which amounted to
improper victim impact evidence.
“An expert [and law witness] may not testify as to the expert’s opinion
of the veracity of the statements of a child declarant." State v. Boston,
46 Ohio St. 3d 108
,
545 N.E.2d 1220
(1989), syllabus. Such testimony is presumptively prejudicial
and inadmissible because it “‘infringe[s] upon the role of the fact finder, who is
charged with making determinations of veracity and credibility.’”
Id. at
128-129,
quoting State v. Eastham,
39 Ohio St. 3d 307
, 312,
530 N.E.2d 409
(1988) (Brown,
J., concurring).
There is a fine line between an expert offering an opinion as to the
truth of a child’s statement and “testimony which is additional support for the truth
of the facts testified to by the child, or which assists the fact finder in assessing the
child’s veracity.” State v. Stowers,
81 Ohio St. 3d 260
, 262-263,
690 N.E.2d 881
(1998). Whereas offering an opinion on truthfulness is strictly prohibited,
testimony under the second category is allowed. In Stowers, the court addressed
the admissibility of expert testimony that the behavior of the victims was consistent
with behavior observed in sexually abused children. The court found that it was
admissible and did not violate Boston because the expert’s testimony provided
information to the jury that would allow it to make an “educated determination”
regarding the ultimate issues in the case. The court emphasized a distinction
“between expert testimony that a child witness is telling the truth and evidence
which bolsters a child’s credibility insofar as it supports the prosecution’s efforts to
prove that the child has been abused.”
Id. at
262.
In this case, each victim was referred to a separate therapist for the
purpose of receiving counseling and treatment. Each therapist, who was also a
licensed social worker, testified about the background information they received
from the referring agencies. Based on the background information and their
individual interactions with the victims, all three of the social workers, like the social
worker in Stowers, stated that the behavior of the victims was consistent with
behavior observed in sexually abused children. Because the Ohio Supreme Court
has stated that this type of testimony is admissible in helping the jury and does not
vouch for witness credibility, trial counsel was not ineffective for failing to object to
the testimony. Further, at no point did any of the social workers offer an opinion
about whether the victims were telling the truth.
We also find that the social workers’ testimony did not rise to victim
impact testimony. This court has previously held that a licensed social worker’s
testimony about diagnosis and treatment is not victim impact evidence as defined
under the law. State v. Ibrahim, 8th Dist. Cuyahoga No. 102114, 2015-Ohio-3345,
¶ 42.
Even if counsel were deficient in failing to object to the social workers’
testimony, Sayles has not demonstrated how he was prejudiced by the deficient
performance such that the result of the trial would have been different. Each victim
testified about the assaults and how they felt during the sexual assaults. Again, the
jury was able to assess the credibility of the victims during trial. Accordingly, we
find that Sayles was not deprived of effective assistance of counsel when his counsel
failed to object to the testimony of each social worker.
Based on the foregoing, Sayles’s first assignment of error is overruled.
II. Inaccurate Information During Plea Discussion
In his second assignment of error, Sayles contends that the trial court
plainly erred by providing inaccurate information during the plea discussion about
his sentencing exposure in the event of a guilty verdict following trial. Accordingly,
he contends that his convictions should be set aside.
Notice of plain error should be with “utmost caution, under
exceptional circumstances and only to prevent a manifest miscarriage of justice.”
State v. Long,
53 Ohio St. 2d 91
,
372 N.E.2d 804
(1978), paragraph three of the
syllabus. Plain error under Crim.R. 52(B) requires a finding that, but for the error,
the outcome of the trial clearly would have been different.
Id. at
paragraph two of
the syllabus.; State v. Watson,
61 Ohio St. 3d 1
, 6,
572 N.E.2d 97
(1991) (“Plain error
does not exist unless, but for the error, the outcome * * * would have been
different.”).
We do not find any error, plain or otherwise. Without citing to any
rule or case law in support, Sayles contends that that much like in accepting a guilty
plea where the defendant must be advised of the maximum penalty involved for the
offenses, the same should be true for when a defendant rejects a guilty plea. We
disagree. Pursuant to Crim.R. 11, the maximum penalty advisement pertains to the
offenses the defendant would be pleading guilty to, not the offenses with which the
defendant was originally charged. See generally Crim.R. 11(C); State v. Rogers, 12th
Dist. Butler No. CA2019-11-194, 2020-Ohio-4102, ¶ 13, quoting State v. Bishop,
156 Ohio St. 3d 156
, 2018-Ohio-5132,
124 N.E.3d 766
, ¶ 42 (Kennedy, J., dissenting)
(Crim.R. 11(C)(2)(a) “‘requires the trial court to advise the defendant of the
maximum penalty for each of the charges that the accused is resolving with the
plea.’”)
In this case, the trial court engaged in a plea discussion with Sayles
and addressed the consequences of not accepting the plea. The court advised him
regarding Counts 1, 3, 5, and 13 that “if you are found guilty you would be looking at
the imposition of twenty-five to life imprisonment on each of those.” (Tr. 6-7.)
Admittedly, the trial court did not advise Sayles that the trial court was required to
impose the minimum terms consecutively if he were found guilty. However, because
Sayles rejected the plea agreement and elected to proceed to trial, the trial court was
not required to conform its plea discussions pursuant to Crim.R. 11. There is nothing
in the rule that requires a trial court to compare the sentencing exposure under the
plea agreement to that in the indictment.
Even if there was error, Sayles has again failed in his burden to
demonstrate that he would have accepted the plea agreement. We have already
determined that Sayles did not receive ineffective assistance of counsel during the
plea discussion because Sayles failed to demonstrate that he would have accepted
the plea agreement had he known the mandatory consecutive nature of the
sentences imposed in Counts 1,3, 5, and 13. We further find that the trial court did
not commit plain error by failing to advise Sayles that if he was found guilty of
Counts 1, 3, 5, and 13, the court was required to impose the minimum terms
consecutively. Again, Sayles has failed to demonstrate that the outcome of the
proceedings would have been different had he been advised that those counts
carried mandatory consecutive sentences. Without such a demonstration, this court
will not recognize that plain error occurred.
Accordingly, Sayles’s second assignment of error is overruled.
III. Inadmissible Evidence
Without citation to the record, Sayles contends in his third
assignment of error that the trial court erred in allowing the victims’ mother to
vouch for the credibility of one of the victims. He summarily contends that the
“error’s impact was harmful” because the case hinged on credibility.
Our review of the record reveals that during cross-examination,
counsel questioned mother about her younger daughter’s truthfulness. (Tr. 274.)
On redirect, the prosecutor followed up about daughter’s truthfulness and whether
her children lie. (Tr. 279-280.) She explained that they do not lie, but tell “small
fibs.” (Tr. 280.) The prosecutor then questioned: “Have they ever lied to you about
anything like, ‘I was raped by my step-dad,’ they ever lie to you about that? Is that
the sort of lie we’re dealing with here?” (Tr. at id.) Over objection, mother
responded “no.” (Tr. at id.)
A trial court has broad discretion concerning the admission of
evidence; in the absence of an abuse of discretion that materially prejudices a
defendant, a reviewing court generally will not reverse an evidentiary ruling. State
v. Humberto,
196 Ohio App. 3d 230
, 2011-Ohio-3080,
963 N.E.2d 162
, ¶ 25 (10th
Dist.), citing State v. Issa,
93 Ohio St. 3d 49
, 64,
752 N.E.2d 904
(2001).
Lay witnesses are prohibited from testifying as to another witness’s
veracity. State v. Pawlak, 8th Dist. Cuyahoga No. 99555, 2014-Ohio-2175, ¶ 113,
citing State v. Kovac,
150 Ohio App. 3d 676
, 2002-Ohio-6784,
782 N.E.2d 1185
, ¶ 32
(2d Dist.). “[I]t is the fact-finder, not the so-called expert or lay witness, who bears
the burden of assessing the credibility and veracity of witnesses.” Boston, 46 Ohio
St.3d at 129,
545 N.E.2d 1220
.
In this case, even if we find that mother vouched for the credibility of
her daughter, violating Boston, the error was harmless. A Boston violation may be
harmless error beyond a reasonable doubt “(1) if the victim testifies and is subject to
cross-examination, (2) the state introduces substantial medical evidence of sexual
abuse, and (3) the expert or lay person's opinion testimony is cumulative to other
evidence.” State v. Djuric, 8th Dist. Cuyahoga No. 87745, 2007-Ohio-413, ¶ 44,
citing State v. Palmer, 9th Dist. Medina No. 2323-M, 1995 Ohio App. LEXIS 514
(Feb. 8, 1995). Moreover, this court has implied that “Boston does not apply when
the child victim actually testifies and is subjected to cross-examination.” Djuric;
State v. Benjamin, 8th Dist. Cuyahoga No. 87364, 2006-Ohio-5330, ¶ 19
In this case, all three victims testified and were subject to cross-
examination. Additionally, the state introduced DNA evidence obtained from the
inner thigh area of the younger daughter — the victim whose mother allegedly
vouched for her credibility. This DNA was consistent with Sayles’s DNA profile.
Accordingly, we find that any Boston violation was harmless beyond a reasonable
doubt.
Accordingly, Sayles’s third assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution. The defendant’s
convictions having been affirmed, any bail pending is terminated. Case remanded
to the trial court for execution of sentence.
A certified copy of this entry shall constitute the mandate pursuant to Rule
27 of the Rules of Appellate Procedure.
KATHLEEN ANN KEOUGH, JUDGE
MARY J. BOYLE, P.J., and
ANITA LASTER MAYS, J., CONCUR |
4,639,164 | 2020-12-03 15:21:14.838302+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5510.pdf | [Cite as State v. Doss, 2020-Ohio-5510.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
STATE OF OHIO, :
Plaintiff-Appellee, :
No. 109235
v. :
SANFORD D. DOSS, :
Defendant-Appellant. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Criminal Appeal from the Cuyahoga County Court of Common Pleas
Case No. CR-19-638751-A
Appearances:
Michael C. O’Malley, Cuyahoga County Prosecuting
Attorney, and Eben McNair, Assistant Prosecuting
Attorney, for appellee.
John F. Corrigan, for appellant.
SEAN C. GALLAGHER, P.J.:
Sanford Doss appeals his conviction for two counts of aggravated
vehicular homicide, one count of aggravated vehicular assault, and one count of
operating a vehicle while intoxicated — all arising from Doss’s decision to drive a
pickup truck while having a blood-alcohol concentration over three times the legal
limit, which resulted in the death of two victims and serious injury to another in a
vehicle that Doss violently collided with when he failed to stop at a red light. Before
the collision, Doss was driving 86 m.p.h. on a surface street with a 35-m.p.h. speed
limit, and was estimated to be traveling 50-60 m.p.h. at the moment of impact.
At the scene of the accident, after ascertaining that Doss was the
driver of the vehicle that ran the red light, the responding officer noticed that Doss
was visibly intoxicated and seemed confused when attempting to answer basic
biographical questions. According to the responding officer, when Doss first
indicated he was the driver of the other vehicle involved in the collision, “he had
glassy, watery eyes, a strong odor of an alcoholic beverage coming from his person,
and at times his speech was mumbled and confused and slurred.” Doss admitted to
consuming at least one shot of whiskey before driving. Based on Doss’s appearance
and voluntary statement, and the nature of the accident itself, the officer indicated
that he would have to conduct the field sobriety tests, to which Doss consented. Doss
failed the field sobriety tests and was arrested and transported to a nearby hospital
for a medical evaluation.
Doss ultimately pleaded no contest to the indictment after the trial
court denied Doss’s motion to suppress the results of the blood-alcohol
concentration test conducted during his medical evaluation. After merging the
applicable offenses, the trial court sentenced Doss to a minimum aggregate term of
16 years, with the maximum term of 19.5 years (the court imposed 7-year minimum
prison sentences on each of the aggravated vehicular homicide counts, 2 years on
the aggravated vehicular assault count, and 6 months on the operating a vehicle
while intoxicated count, although only the latter was not imposed consecutively).
In the first assignment of error, Doss claims that his no contest plea
to aggravated vehicular assault under R.C. 2903.08(A)(1)(a) was not voluntarily
entered because the trial court failed to inform Doss of the mandatory nature of the
prison sentence at the second change-of-plea hearing. In the first change-of-plea
hearing, the trial court informed Doss that the penalty on the aggravated vehicular
assault count was a prison term ranging up to five years in six-month increments.
Under R.C 2903.08(D)(1), some term of imprisonment is mandatory. The trial
court, however, generally advised that prison would not be mandatory on the “felony
offenses.” After the change-of-plea hearing, the trial court realized that it incorrectly
informed Doss of the maximum sentence on a qualifying felony under R.C. 2929.144
—the then newly enacted sentencing law providing for a minimum and maximum
indefinite term of imprisonment on qualifying felony offenses. At the second
change-of-plea hearing, the trial court outlined the terms of imprisonment related
to all offenses, including the qualifying felony offenses under R.C. 2929.144.
Although the trial court again spoke in general terms with respect to the felony
offenses during that colloquy, the prosecutor specifically asked the trial court to
clarify the sentence that could be imposed on the aggravated vehicular assault count
— to which the court stated that the sentence potential was “five years.” The trial
court ultimately imposed a two-year prison term on that count. Further, as Doss
concedes in his appellate briefing, there was no question that a prison sentence was
being imposed upon his plea even at the time of the change-of-plea hearing — also
demonstrated by the fact that Doss’s trial counsel never even attempted to seek a
community-control sanction during the sentencing hearing.
“When a defendant enters a plea in a criminal case, the plea must be
made knowingly, intelligently, and voluntarily.” State v. Engle,
74 Ohio St. 3d 525
,
527, 1996-Ohio-179,
660 N.E.2d 450
. The standard of review for determining
whether a plea was knowing, intelligent, and voluntary within the meaning of
Crim.R. 11 is substantial compliance for nonconstitutional issues and strict
compliance for constitutional issues. State v. Nero,
56 Ohio St. 3d 106
, 108,
564 N.E.2d 474
(1990), citing State v. Stewart,
51 Ohio St. 2d 86
, 92-93,
364 N.E.2d 1163
(1977). “Substantial compliance means that under the totality of the circumstances
the defendant subjectively understands the implications of his plea and the rights he
is waiving.” Nero. When challenging a guilty plea based on the trial court’s lack of
substantial compliance, a defendant must also show a prejudicial effect — that the
plea would not have been otherwise entered but for the error. State v. Clark,
119 Ohio St. 3d 239
, 2008-Ohio-3748,
893 N.E.2d 462
, ¶ 32, citing Nero at 108.
Doss’s entire argument with respect to his pleading no contest to
aggravated vehicular assault arguably rests on a technical error in the process, but
not one that affected his decision-making process. As he concedes, it was a foregone
conclusion shared by all parties that Doss was going to be sentenced to prison after
pleading no contest to the indictment. At no time during the change-of-plea or
sentencing process did Doss ever voice any indication that he thought a community-
control sanction would be imposed instead of a prison sentence for any of the
offenses. On this point, State v. Smith, 8th Dist. Cuyahoga No. 83395, 2004-Ohio-
1796, is instructive.
In Smith, the trial court failed to inform the offender of the mandatory
nature of a sentence during the change-of-plea process.
Id. at ¶ 8-10.
Despite this
oversight, the panel concluded that the offender never held the belief that
community control would be an option.
Id. According to the
Smith court, “the mere
fact that the court failed to specifically notify the offender that he was ineligible for
anything but a prison sentence, is not ‘fatal unless the record clearly indicates that
the defendant was unaware that he would be sent to prison upon a plea of guilty and
he was prejudiced by that fact.’”
Id. at ¶ 11,
citing
Nero, 56 Ohio St. 3d at 108
, and
State v. Stewart,
51 Ohio St. 2d 86
,
364 N.E.2d 1163
(1977). Further, the Smith court
concluded that the offender’s statements in sentencing demonstrated that he was
aware of the fact that a prison sentence would be imposed such that there was no
indication that the offender entered the plea with any notion that a term of
community control could be imposed.
Id. In this case,
Doss concedes that the totality of the circumstances
indicates that he was aware that a term of imprisonment would be imposed upon
his entering a no contest plea. At no point during the change-of-plea or the
sentencing hearing did Doss ever demonstrate a belief that a term of community
control would be imposed on any of the counts surviving merger, and more
important, the court expressly warned Doss that a five-year prison term was
applicable to the aggravated vehicular assault count. In addition, the trial court
never informed Doss of the possibility of community control or explained what that
would entail upon which Doss’s ability to render an informed decision as to pleading
no contest could have been compromised. Nothing distinguishes this case from
Smith, and thus, we reach the same conclusion.
Doss’s reliance on State v. Tutt, 2015-Ohio-5145,
54 N.E.3d 619
(8th
Dist.), is therefore, misplaced. In that case, similarly involving the failure to notify
the offender of the mandatory prison term associated with some of the counts at
issue, the panel concluded that the offender was “unaware of the full extent of the
penalties associated with his no contest pleas” based on the totality of the
circumstances because “the defendant ‘could not have subjectively understood that
he was subject to a mandatory prison term on the robbery charge.’”
Id. at ¶ 32, 34.
This conclusion is in harmony with the analysis used in Smith. In light of our
conclusion that Doss was subjectively aware of the fact that the term of
imprisonment would be imposed upon the no contest plea under a totality of the
circumstances and because Doss was expressly warned that a possible five-year
prison term was applicable to the aggravated vehicular assault count, Tutt is not
applicable. The first assignment of error if overruled.
In the remaining assignments of error, Doss claims the trial court
erred in denying his motion to suppress because the state failed to demonstrate that
the field sobriety test was conducted in compliance with the applicable standards,
that officers lacked probable cause to arrest Doss because the state failed to prove
he caused the accident or committed a traffic infraction, or because Doss’s consent
to the blood draw at the hospital was not voluntary. None of Doss’s claims has merit.
“Appellate review of a motion to suppress presents a mixed question
of law and fact.” State v. Burnside,
100 Ohio St. 3d 152
, 2003-Ohio-5372,
797 N.E.2d 71
, ¶ 8. With regard to factual determinations, “[a]n appellate court must accept the
trial court’s findings of fact if they are supported by competent, credible evidence.”
State v. Hawkins,
158 Ohio St. 3d 94
, 2019-Ohio-4210,
140 N.E.3d 577
, ¶ 16, citing
State v. Fanning,
1 Ohio St. 3d 19
, 20,
437 N.E.2d 583
(1982). “But the appellate
court must decide the legal questions independently, without deference to the trial
court’s decision.”
Id., citing Burnside at
¶ 8.
Although the state must demonstrate by clear and convincing
evidence that the field sobriety tests were conducted in accordance with the
applicable testing standard in order for the results to be admissible in court under
R.C. 4511.19(D)(4), Doss did not contest the admissibility of the field sobriety tests
at the suppression hearing, much less in his motion to suppress and the supplement
thereto. His sole claim with respect to the failure to adhere to testing standards was
limited to the blood draw taken at the hospital after Doss was arrested. The trial
court did not resolve whether the field sobriety tests were conducted in substantial
compliance with the applicable regulations, and we therefore will not consider that
issue for the first time on appeal. In State v. Codeluppi,
139 Ohio St. 3d 165
, 2014-
Ohio-1574,
10 N.E.3d 691
, the offender’s motion to suppress alleged that the officer
failed to conduct field sobriety tests in substantial compliance with NHTSA
guidelines as required by R.C. 4511.19(D)(4)(b) and the Ohio Supreme Court found
this sufficient to identify the issues the defendant was raising.
Id. at ¶ 13.
Thus, the
issue was deemed to have been preserved for review and the matter was remanded
to the trial court for consideration.
Id. However, by “failing
to file a motion to
suppress illegally obtained evidence, a defendant waives any objection to its
admission.” State v. Osie,
140 Ohio St. 3d 131
, 2014-Ohio-2966,
16 N.E.3d 588
,
¶ 136, quoting State v. Campbell,
69 Ohio St. 3d 38
, 44, 1994-Ohio-492,
630 N.E.2d 339
. At the minimum, based on the combination of Codeluppi and Osie, a defendant
needs to identify that the suppression of evidence in a case involving the operation
of a vehicle while intoxicated in part depends on the officer’s substantial compliance
with the field sobriety testing standards in order to preserve the issue for further
review.
In this case, Doss failed to object to the admissibility of the field
sobriety results in his motion to suppress and, in part, claimed that he actually
passed the tests that were administered for the purposes of demonstrating that the
police officers lacked probable cause to arrest him and conduct the blood draw. The
focus of the suppression motion was on the blood draw and whether the officers had
a reasonable, articulable suspicion warranting the administration of the field
sobriety tests that Doss consented to undergo — an issue that Doss has not raised in
this appeal. Parma Hts. v. Dedejczyk, 8th Dist. Cuyahoga No. 97664, 2012-Ohio-
3458, ¶ 29, citing State v. Evans,
127 Ohio App. 3d 56
, 62,
711 N.E.2d 761
(11th
Dist.1998) (outlining what is considered reasonable suspicion to conduct a field
sobriety test). It is for this reason, and contrary to the argument presented in this
appeal, that the record contains little information on the applicable testing
standards — those standards were not at issue during the suppression hearing. See,
e.g., State v. Osborne, 11th Dist. Lake Nos. 2018-L-124, 2018-L-125, and 2018-L-
126, 2019-Ohio-3235, ¶ 69. Doss has waived any challenges to the admissibility of
the field sobriety tests.
Accordingly, we need not consider Doss’s claim that there was no
probable cause to arrest him at the scene of the collision. Probable cause to arrest is
based on “‘whether at that moment the facts and circumstances within [the officer’s]
knowledge and of which they had reasonably trustworthy information were
sufficient to warrant a prudent man in believing that the [arrestee] had committed
or was committing an offense.’” Cleveland v. Jones, 8th Dist. Cuyahoga No. 107257,
2019-Ohio-1525, ¶ 26, quoting Beck v. Ohio,
379 U.S. 89
, 91,
85 S. Ct. 223
,
13 L. Ed. 2d 142
(1964). In this case, the responding officer testified that Doss was visibly
intoxicated, had trouble answering basic questions, and performed poorly on the
field sobriety tests. There was probable cause to arrest Doss for operating a vehicle
while intoxicated that directly led to his causing the horrific accident. See, e.g.
, id. And finally, we
summarily find no merit to Doss’s claim as to the
exclusion of the blood-alcohol concentration result based on the notion that the
blood-draw procedure occurred before his consent was delivered. Doss claims that
his written consent was procured, as portrayed in the body camera video, while the
nurse can be seen handling the blood samples in the background. According to the
officer’s testimony, there were two written consent forms executed, the Bureau of
Motor Vehicle’s Form 2255, as well as the hospital’s own consent form. There is no
dispute that Doss signed both. His sole claim, presented in a cursory manner, is that
the forms were signed after the blood sample was procured and that for the written
consent to be valid, it cannot be coerced pursuant to Schneckloth v. Bustamonte,
412 U.S. 218
, 233,
93 S. Ct. 2041
,
36 L. Ed. 2d 854
(1973). There is no indication as
to the basis of Doss’s belief that his consent was coerced. App.R. 16(A)(7).
The officer testified that he procured Doss’s consent for the blood
draw three minutes before the hospital employee obtained the blood sample. Even
if we agreed with Doss that the memorialization of that consent occurred
immediately after the blood draw according to the video evidence, the nurse who
procured the blood sample expressly testified that Doss’s consent to the procedure
was communicated before it was conducted. A motion to suppress presents a mixed
question of law and fact. Burnside,
100 Ohio St. 3d 152
, 2003-Ohio-5372,
797 N.E.2d 71
. Appellate courts defer to the trial court’s factual findings.
Id. In this case,
the trial court concluded that Doss timely consented to the blood draw based
on the officer’s and the nurse’s testimony of the timing, and at a minimum ratified
that consent by executing the consent forms. We cannot conclude the trial court
erred in finding that Doss consented to the blood draw for the purpose of deeming
the results of the blood-alcohol concentration test to be admissible.
We affirm the convictions.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution. The defendant’s
conviction having been affirmed, any bail pending appeal is terminated. Case
remanded to the trial court for execution of sentence.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
___________________________________
SEAN C. GALLAGHER, PRESIDING JUDGE
PATRICIA ANN BLACKMON, J., and
EILEEN A. GALLAGHER, J., CONCUR |
4,639,166 | 2020-12-03 15:21:15.998361+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5509.pdf | [Cite as Bartel v. Farrell Lines, Inc., 2020-Ohio-5509.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
WILLARD E. BARTEL :
ADMINISTRATOR, ET AL.,
: No. 109139
Plaintiffs-Appellees, :
v. :
FARRELL LINES, INC., ET AL., :
Defendants. :
[Appeal by Ford Motor Company, :
Defendant-Appellant.] :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-16-872251
Appearances:
The Jaques Admiralty Law Firm, P.C. and Timothy A.
Swafford, pro hac vice, for appellees.
Roetzel & Andress, Susan Squire Box, Leighann K. Fink,
and Moira H. Pietrowski, for appellant.
ANITA LASTER MAYS, P.J.:
Defendant-appellant Ford Motor Company (“Ford”) appeals the trial
court’s decision granting plaintiffs-appellees, Willard E. Bartel and David C.
Peebles’s (“appellees”) motion to reinstate their smoking lung cancer case to the
active docket, and asks this court to reverse the trial court’s decision. We affirm.
I. Facts and Procedural History
The appellees filed suit against Ford in their capacity as the
administrators of the Estate of Robert F. Stewart (“Stewart”). Stewart, who had been
employed by Ford as a merchant marine, was a deck department worker for 27 years.
During that time, it was routine for Stewart to clean up asbestos on ships, as Ford
had asbestos-insulated steam lines throughout its ships, which needed constant
repair. Stewart, who repaired the steam lines, was frequently exposed to asbestos.
In addition to exposure to asbestos, Stewart was a smoker until he quit in 2008 and
was diagnosed with lung cancer in 2013. Stewart died from lung cancer in 2016.
Appellees filed suit in 2016, under the Jones Act and the General
Maritime Law, against Ford and other defendants1 for damages arising from
Stewart’s lung cancer and death. Appellees conducted depositions in which
Stewart’s co-workers testified that because of Stewart’s job responsibilities, he had
been exposed to asbestos on the ships. Ford and the other defendants filed a motion
1 The original defendants included Farrell Lines, Inc.; BP Products North America,
Inc.; Atlantic Richfield Company; CLTA L.L.C.; Chevron USA Inc.; Arcelorrmittal USA
L.L.C.; Texaco Inc.; Coastwise Trading Company; and Keystone Tank Ship Corp.
to dismiss the case arguing that the appellees failed to meet the statutory
requirement of R.C. 2307.92, which required the appellees to provide prima facie
evidence that Stewart’s exposure to asbestos was a substantial contributing factor to
his development of lung cancer.
In response to the other defendants and Ford’s motion to dismiss the
case, the appellees submitted Stewart’s doctors’ reports. The first report (“Alonzo
Report”) was from Dr. Clive Alonzo (“Dr. Alonzo”), which stated,
The patient had a known history of tobacco abuse for about 20 years
and he had quit in 2008. Upon review of his records, he had a CT scan
of [his] chest in April 2010 that showed bullous emphysema and also
pleural plaques likely related to chronic asbestos exposure. It is also
known from review of his records that he had extensively worked in
the maritime industry from 1964 to 1997 on ships. In my medical
opinion, it is reasonable to conclude that exposure to asbestos on the
ships and his tobacco history were substantial factors that contributed
to his lung malignancy.
Alonzo Report (Oct. 5, 2017).
The second doctor’s report (“Zajac Report I”) was from Dr. Andrej J.
Zajac (“Dr. Zajac”), Stewart’s treating oncologist, which stated,
Mr. Stewart had been a heavy smoker with over 60 pack-year smoking
history though he had stopped smoking 10 years prior to his cancer
diagnosis. He also had a significant occupational exposure to
asbestos. As noted above, he had imaging evidence of asbestosis.
Given these findings and the synergistic carcinogenic effects of both
asbestos and smoking, it is fairly certain that Mr. Stewart’s lung
cancer was substantially attributed to by his asbestos exposure.
Zajac Report I (Oct.12, 2017).
After reviewing the evidence and the doctors’ reports, the trial court
granted the motion to dismiss. Referencing the doctors’ reports, the trial court
stated in its journal entry,
Each of these reports is close to the statutory language of “substantial
contributing factor”; thus, plaintiff argues that the spirit of that
statute has been met and the doctors need not use the precise wording
of the Act to comply. This might be a plausible argument until we look
further to the legislature’s definition of “substantial contributing
factor”:
(1) [exposure to asbestos is the predominate cause of the
physical impairment alleged in the asbestos claim [;and]
(2) [a] competent medical authority has determined with a
reasonable degree of medical certainty that without the
asbestos exposures the physical impairment of the exposed
person would not have occurred.
Whatever doubt might remain has been erased by the Supreme Court
in Ackison v. Anchor Packing Co.,
120 Ohio St. 3d 228
(2008), where
it was held that the act:
* * * “require[s] that asbestos exposure be a significant, direct
cause of the injury to the degree that without the exposure to
asbestos the injury would not have occurred.”
The language of the proffered reports does not rise to the level of “but
for” as the Court and the Act require. The motion for administrative
dismissal is granted.
Journal entry No. 109237741 (June 18, 2019).
In July 2019, the appellees filed a motion to reinstate the case. In their
motion, the appellees submitted a 2019 report from Dr. Zajac (“Zajac Report II”).
In this report, Dr. Zajac included the same statements in the Zajac Report I, but
added that “Mr. Stewart’s combined exposure to asbestos and tobacco history were
the predominate causes of Mr. Stewart’s lung cancer. But for Mr. Stewart’s exposure
to asbestos and smoking history, Mr. Stewart would not have developed lung
cancer.” Zajac Report II (July 17, 2019).
This time the trial court granted the appellees’ motion to reinstate and
stated in its journal entry,
Dr. Andrej J. Zajac was the late Mr. Stewart’s treating physician; he is
also Board Certified in the specialties of Internal Medicine, Oncology,
and Radiology. As such, he is a qualified medical witness under the
statute. His opinion that asbestos exposure was a predominate cause
of Mr. Stewart’s fatal lung cancer satisfies the statutory requirement
for the case to proceed. Plaintiffs motion to reinstate this case to the
active docket is granted. Cf. Howell v. Conrail, [2017-Ohio-6881,]
94 N.E.3d 1127
(8th Dist.).
Journal entry No. 110518328 (Sept. 20, 2019).
As a result of this ruling, the other defendants in this case and Ford
filed a joint notice of appeal. Subsequent to filing this appeal, the other defendants
and the appellees reached a settlement. Ford assigns the following two errors for
our review:
I. The trial court erred in granting Appellees’ Motion to Reinstate
their smoking lung cancer case to the active docket; and
II. The trial court erred in ruling that Appellees’ prima facie
evidentiary submission in support of their Motion to Reinstate
their smoking lung cancer case was sufficient to satisfy the
requirements of R.C. 2307.92(C) and 2307.92(D).
II. Motion to Reinstate
A. Standard of Review
The trial court granted the appellees’ motion to reinstate this case to
the active docket after determining that the appellees satisfied the statutory
requirement for the case to proceed. “‘A trial court applies a summary judgment
standard in assessing the sufficiency of R.C. 2307.92 prima facie evidence showing
under R.C. 2307.93.’” Howell v. Conrail, 2017-Ohio-6881,
94 N.E.3d 1127
, ¶ 10 (8th
Dist.), quoting Renfrow v. Norfolk S. Ry. Co.,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
, ¶ 17. “We review a trial court’s decision on summary judgment
under a de novo standard of review.” Elam v. Woodhawk Club Condominium, 8th
Dist. Cuyahoga No. 107092, 2019-Ohio-457, ¶ 7, citing Baiko v. Mays, 140 Ohio
App.3d 1, 10,
746 N.E.2d 618
(8th Dist.2000).
Additionally, “[t]rial courts have the inherent power to manage their
own dockets.” Wells Fargo Bank, N.A. v. Unknown Heirs, 8th Dist. Cuyahoga
No. 97662, 2012-Ohio-3259, ¶ 27, citing State ex rel. Charvat v. Frye,
114 Ohio St. 3d 76
, 2007-Ohio-2882,
868 N.E.2d 270
, ¶ 23.
B. Law and Discussion
Ford argues that the trial court erred in granting the appellees’ motion
to reinstate their case by not applying the “but for” causation standard articulated in
Ackison v. Anchor Packing Co.,
120 Ohio St. 3d 228
, 2008-Ohio-5243,
897 N.E.2d 1118
(2008). In Ackison, the court held that in asbestos cases,
R.C. 2307.91(FF)(2) requires that a competent medical authority
determine that “without the asbestos exposures the physical
impairment of the exposed person would not have occurred.” This
requirement is, in essence, a “but for” test of causation, which is the
standard test for establishing cause in fact. See Anderson v. St.
Francis-St. George Hosp., Inc.,
77 Ohio St. 3d 82
, 84-85,
671 N.E.2d 225
(1996). Cause in fact is distinct from proximate, or legal, cause.
Once cause in fact is established, a plaintiff then must establish
proximate cause in order to hold a defendant liable. See id. at 86,
671 N.E.2d 225
, citing Prosser & Keeton, Law of Torts (5 Ed.1984) 265-
266. See also Prosser & Keeton
, id., at 272-273.
Id. at ¶ 48.
In Zajac’s Report II, Dr. Zajac stated, “[b]ut for Mr. Stewart’s
exposure to asbestos and smoking history, Mr. Stewart would not have developed
lung cancer.” The trial court relied on this report in its decision. This reliance is not
in conflict with Ackison. The court in Ackison does not state that asbestos exposure
has to be the only cause, but yet a substantial contributing factor. Ackison at ¶ 48.
R.C. 2307.91(FF)(1) and (2) states,
“Substantial contributing factor” means both of the following:
(1) Exposure to asbestos is the predominate cause of the physical
impairment alleged in the asbestos claim.
(2) A competent medical authority has determined with a reasonable
degree of medical certainty that without the asbestos exposures the
physical impairment of the exposed person would not have occurred.
Ford also cites Renfrow,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
, to support its contention that the trial court did not correctly apply the
“but for” causation standard. Specifically, Ford identifies where the court in
Renfrow states that the medical authority did not establish that without asbestos
exposure, the plaintiff in the case would not have had lung cancer.
Id. at ¶ 23.
However, Ford incorrectly applies Renfrow to this case. The court in
Renfrow first determined that the doctor who provided the medical report did “not
satisfy the definition of ‘competent medical authority’ contained in R.C. 2307.91(Z)”
because the doctor did not treat the plaintiff or have a doctor-patient relationship
with the plaintiff in the case.
Id. at ¶ 22.
Secondly, the court determined that the
doctor’s report was insufficient to establish that asbestos was a substantial
contributing factor to the plaintiff’s lung cancer. We can distinguish the facts in
Renfrow from the instant case because the doctors’ reports were vastly different.
Specifically, the doctor’s report in Renfrow stated,
After reviewing all the information provided, I have come to the
conclusion within a reasonable degree of medical certainty that
Mr. Renfrow had inoperable lung cancer with brain metastasis. * * *
[I]t is my opinion within a reasonable degree of medical certainty that
occupational exposure to asbestos dust, diesel fumes and exhaust in
part contributed to the development of his lung cancer and eventual
death. Asbestos exposure acted synergistically with the cigarette
smoking, diesel fumes and exhaust to greatly increase the risk of lung
cancer beyond that expected from either exposure alone.
Id. at ¶ 23.
The doctor in Renfrow did not state in his report that “but for”
asbestos exposure, the plaintiff would not have had cancer. Nor did the doctor state
that asbestos exposure was a substantial contributing factor. Instead, the doctor
stated that asbestos exposure contributed, in part, to the plaintiff’s lung cancer.
Again, this is distinguishable because Dr. Zajac stated in his report that asbestos
exposure and tobacco use were substantial contributing factors to Stewart
developing lung cancer.
Additionally, Ford cites Holston v. Adience, Inc., 8th Dist. Cuyahoga
No. 93616, 2010-Ohio-2482 to support its argument. In Holston, this court held
that the doctor’s “statement fails to meet the requirement of the statute, which
requires ‘but for’ [plaintiff’s] workplace exposure to asbestos, he would not have
developed lung cancer.”
Id. at ¶ 19.
The doctor in Holston provided the following
statement regarding plaintiff’s cancer:
“Mr. Holston’s work history reveals he has substantial occupational
exposure to asbestos while working at Wheeling-Pittsburgh Steel’s
Follansbee Coke Plant and Steubenville plant from 1971 to 2000. The
type of work that he performed required that he work in close
proximity to other workers who altered, repaired or otherwise worked
with asbestosis [sic]-containing products in such a manner that
exposed him to asbestos in a regular manner. In my medical opinion
I feel that Mr. Holstons [sic] work history and his history of tobacco
use directly contribute to his diagnosis of Lung Cancer.”
Id. at ¶ 6.
Again, as in Renfrow,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
, the doctor in Holston does not state that asbestos exposure was a substantial
contributing cause of the plaintiff’s cancer. Nor does he state that “but for” the
plaintiff’s exposure to asbestos, he would not have developed lung cancer. As
previously stated, Dr. Zajac does both in his reports. Hence the decisions in Ackison,
120 Ohio St. 3d 228
, 2008-Ohio-5243,
897 N.E.2d 1118
, Renfrow, and Holston are
consistent with the trial court’s decision.
In its decision, the trial court referenced Howell, 2017-Ohio-6881,
94 N.E.3d 1127
, as a reason for granting the appellees’ motion to reinstate the case to
the active docket. Ford, however, claims that our decision in Howell is contrary to
Ackison and Renfrow because the court in Howell attempts to expand the definition
of substantial contributing factor beyond the legislature’s intent.2 Ford is incorrect
in its assertion.
Ford argues that the statement, “[t]he Ohio Act specifically considers
the dual causation factors of asbestos exposure and smoking,” is in error. Howell at
¶ 31. Ford states that if the legislature intended for claimants to be able to combine
smoking and asbestos exposure together as a dual cause of lung cancer, it would
have said so in the statute. However, even the court in Ackison acknowledged that
smoking and asbestos exposure could cause lung cancer. “The plain language states
that asbestos must be the ‘predominate’ cause of the impairment.”
Id. at ¶ 31,
citing
Ackison,
120 Ohio St. 3d 228
, 2008-Ohio-5243,
897 N.E.2d 1118
, at ¶ 33, citing
R.C. 2307.91(FF)(1). Thus, in light of R.C. 2307.92(C)(1), the decision in Howell is
consistent with the decision in Ackison.
Additionally, the decision in Howell supports the decision in
Renfrow. This court stated in Howell,
[o]ne of the statutory prerequisites necessary to establish a prima
facie tort action alleging an asbestos claim based upon lung cancer
requires a person who is a smoker to demonstrate a diagnosis by a
2 On February 28, 2018, the Supreme Court of Ohio did not accept the appellants’
appeal for review in Howell v. Conrail, 2018-Ohio-723, 2018 Ohio LEXIS 549,
92 N.E.3d 879
(Feb. 28, 2018).
competent medical authority that the exposure to asbestos is a
substantial contributing factor. (See R.C. 2307.92(C)(1)(a).)
Id. at ¶ 30,
citing Renfrow,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
,
at syllabus.
Yet Ford argues that dual causation factors do not comport with the
plain language of H.B. 292 and that, if applied, Howell, 2017-Ohio-6881,
94 N.E.3d 1127
, entirely defeats the intent of H.B.292. Ford’s assertion is misplaced.
The key provisions of H.B. 292 are codified in R.C. 2307.91 to
2307.98. Among other things, these provisions require a plaintiff
bringing an asbestos claim to make a prima facie showing that the
exposed person has a physical impairment resulting from a medical
condition, and that the person’s exposure to asbestos was a
substantial contributing factor to the medical condition. See
R.C. 2307.92(B)-(D) and 2307.93(A)(1).
Wilson v. AC&S, Inc.,
169 Ohio App. 3d 720
, 2006-Ohio-6704,
864 N.E.2d 682
, ¶ 5
(12th Dist.).
The Zajac Report II cites exposure to asbestos as a substantial
contributing factor. In light of the court’s decisions in Ackison,
120 Ohio St. 3d 228
,
2008-Ohio-5243,
897 N.E.2d 1118
, and Renfrow, and this court’s decisions in
Holston, 8th Dist. Cuyahoga No. 93616, 2010-Ohio-2482, and Howell, we find that
the trial court did not err in its reliance on Howell when it granted the appellees’
motion to reinstate their case to the active docket.
Therefore, Ford’s first assignment of error is overruled.
III. Prima Facie Case
A. Standard of Review
The trial court ruled that the appellees’ prima facie evidence was
sufficient to satisfy statutory requirements to reinstate their case. A trial court
applies a summary judgment standard in assessing the sufficiency of a
R.C. 2307.92 prima facie evidence showing under R.C. 2307.93:
Upon a challenge to the adequacy of the prima facie evidence of the
exposed person’s physical impairment, R.C. 2307.93(B) directs a
court to resolve the issue whether a plaintiff has made a prima facie
showing required by R.C. 2307.92(B), [2307.92](C), or [2307.92](D)
by applying the standard for resolving a motion for summary
judgment. Pursuant to R.C. 2307.93(C), a court “shall
administratively dismiss” the plaintiff’s claim without prejudice upon
a finding of failure to make the prima facie showing required by
R.C. 2307.92(B), [2307.92](C), or [2307.92](D). However,
R.C. 2307.93(C) requires a court to maintain its jurisdiction over any
case that is administratively dismissed and permits the plaintiff to
reinstate the case if the plaintiff makes a prima facie showing that
meets the minimum requirements specified in R.C. 2307.92(B),
[2307.92](C) or [2307.92](D).
Renfrow,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
, at ¶ 17.
Our review of summary judgment is de novo. Grafton v. Ohio Edison
Co.,
77 Ohio St. 3d 102
, 105,
671 N.E.2d 241
(1996).
Summary judgment is proper only when the movant demonstrates
that, viewing the evidence most strongly in favor of the non-movant,
reasonable minds must conclude that no genuine issue of material fact
remains to be litigated, and the moving party is entitled to judgment
as a matter of law. Hoover v. Norfolk S. Ry. Co., 8th Dist. Cuyahoga
Nos. 93479 and 93689, 2010-Ohio-2894, ¶ 12, citing Doe v. Shaffer,
90 Ohio St. 3d 388
,
738 N.E.2d 1243
(2000).
Bland v. Ajax Magnethermic Corp., 8th Dist. Cuyahoga No. 95249, 2011-Ohio-
1247, ¶ 7.
B. Law and Analysis
Ford contends that the appellees’ evidence was not sufficient to satisfy
the requirements of R.C. 2307.92(C) and 2307.92(D) because the appellees failed to
provide an opinion from a competent medical authority that, but for Stewart’s
exposure to asbestos, the lung cancer and death would not have occurred. Ford
argues that the 2019 Zajac Report II is insufficient to satisfy the requirements of the
statute because Dr. Zajac’s opinions do not provide the degree of confidence
required under Ohio law, and also Dr. Zajac does not state that but for Stewart’s
asbestos exposure, his lung cancer and death would not have occurred.
Ford cites Rossi v. Conrail, 8th Dist. Cuyahoga No. 94628, 2010-
Ohio-5788, to support its contention that a medical authority’s opinion that asbestos
exposure may have played a role in the development of a person’s lung cancer is not
sufficient to satisfy the requirements of the statute. In Rossi, the medical doctor
submitted a report stating,
Robert Rossi, deceased, was a patient for many years. He died of lung
cancer on 04/16/2009. He gave a history of asbestos exposure during
his working career. Asbestos is a known carcinogen and exposure to
asbestos increases one’s risk of developing cancer during his lifetime.
I believe that this exposure may have played a role in the development
of his lung cancer.
Id. at ¶ 5.
The court in Rossi held that, “[t]he doctor’s belief that Robert’s
asbestos exposure ‘may have’ played a role in the development of his lung cancer
does not state an opinion to a reasonable degree of medical certainty.”
Id. at ¶ 6.
The facts in Rossi differ from the facts in the instant case. In this case, Stewart’s
doctor did submit a report stating that asbestos exposure was a predominate cause
of him developing lung cancer and that, but for this exposure and smoking, he would
not have developed lung cancer. The trial court’s decision is not in conflict with this
court’s decision in Rossi.
The trial court determined that the appellees’ evidence was sufficient
to reinstate the case to the active docket, congruent with R.C. 2307.92.
R.C. 2307.92(C)(1) prescribes the prima facie showing required of smokers pursuing
asbestos claims in Ohio:
No person shall bring or maintain a tort action alleging an asbestos
claim based upon lung cancer of an exposed person who is a smoker,
in the absence of a prima-facie showing, in the manner described in
division (A) of section 2307.93 of the Revised Code, that the exposed
person has a physical impairment, that the physical impairment is a
result of a medical condition, and that the person’s exposure to
asbestos is a substantial contributing factor to the medical condition.
That prima-facie showing shall include all of the following minimum
requirements:
(a) A diagnosis by a competent medical authority that the exposed
person has primary lung cancer and that exposure to asbestos is a
substantial contributing factor to that cancer;
(b) Evidence that is sufficient to demonstrate that at least ten years
have elapsed from the date of the exposed person’s first exposure to
asbestos until the date of diagnosis of the exposed person’s primary
lung cancer. The ten-year latency period described in this division is
a rebuttable presumption, and the plaintiff has the burden of proof to
rebut the presumption.
(c) Either of the following:
(i) Evidence of the exposed person’s substantial occupational
exposure to asbestos;
(ii) Evidence of the exposed person’s exposure to asbestos at
least equal to 25 fiber per cc years as determined to a reasonable
degree of scientific probability by a scientifically valid
retrospective exposure reconstruction conducted by a certified
industrial hygienist or certified safety professional based upon
all reasonably available quantitative air monitoring data and all
other reasonably available information about the exposed
person’s occupational history and history of exposure to
asbestos.
A “competent medical authority” must be a board certified:
(1) pulmonary specialist; (2) pathologist; (3) occupational medicine specialist;
(4) oncologist; or (5) internist. R.C. 2307.91(Z)(1). The claimant and doctor must
have, or previously have had, a doctor-patient relationship, and the doctor must
have actually treated the claimant. R.C. 2307.91(Z)(2). The doctor may not expend
more than 25 percent of practice time, or earn more than 25 percent of revenues,
serving as an expert or consultant for potential or actual tort actions.
R.C. 2307.91(Z)(4).
The doctor may not rely on any of the following as a basis for
diagnosis:
(a) The reports or opinions of any doctor, clinic, laboratory, or testing
company that performed an examination, test, or screening of the
claimant’s medical condition in violation of any law, regulation,
licensing requirement, or medical code of practice of the state in
which that examination, test, or screening was conducted;
(b) The reports or opinions of any doctor, clinic, laboratory, or testing
company that performed an examination, test, or screening of the
claimant’s medical condition that was conducted without clearly
establishing a doctor-patient relationship with the claimant or
medical personnel involved in the examination, test, or screening
process;
(c) The reports or opinions of any doctor, clinic, laboratory, or testing
company that performed an examination, test, or screening of the
claimant’s medical condition that required the claimant to agree to
retain the legal services of the law firm sponsoring the examination,
test, or screening.
R.C. 2307.91(Z)(3)(a)-(c).
The competent medical authority’s supporting evidence must
demonstrate that
the exposed person has primary lung cancer, and that the exposure to
asbestos is a substantial contributing factor; evidence that there was
a latency period of ten or more years since the exposure and the
diagnosis of lung cancer; and evidence of either the exposed person’s
substantial occupational exposure or evidence that the exposure to
asbestos was at least equal to 25 fiber per cc years as determined to a
reasonable degree of scientific probability by a certified industrial
hygienist or safety professional.
R.C. 2307.92(C)(1); Hoover, 8th Dist. Cuyahoga Nos. 93479 and 93689, 2010-
Ohio-2894, at ¶ 8.
Dr. Zajac was Stewart’s oncologist and treated Stewart for years due
to Stewart’s lung cancer and, in accordance with the statutes above, satisfies the
requirement of a competent medical authority. The medical reports submitted by
the appellees demonstrated that Stewart had lung cancer and that asbestos exposure
was a substantial contributing factor. Stewart worked as a merchant marine for
Ford from 1970 to 1997, where he was exposed to asbestos. He was diagnosed with
lung cancer in 2013, more than 10 years after his last exposure.
Ford argues that Dr. Zajac does not use the exact wording of the
statute. While this court has previously determined that there is no requirement to
use magic words mirroring the statutory language of R.C. 2307.91(FF), those words
are, in fact, present in Dr. Zajac’s report. See, e.g., Paul v. Consol. Rail Corp., 8th
Dist. Cuyahoga No. 98716, 2013-Ohio-1038, ¶ 22; Howell, 2017-Ohio-6881,
94 N.E.3d 1127
, at ¶ 30. Thus, the trial court’s decision and our decision in Howell are
not in contradiction to the Supreme Court’s decision in Renfrow,
140 Ohio St. 3d 371
, 2014-Ohio-3666,
18 N.E.3d 1173
.
“No new guidance was established by the Ohio Supreme Court in
Renfrow regarding how courts should interpret the laws governing
asbestos litigation.” Turner v. Certainteed Corp., 2016-Ohio-7776,
66 N.E.3d 802
, ¶ 31. The court “merely reiterated” that establishment of
a prima facie case requires that the asbestos litigant provide a
diagnosis by a “competent medical authority * * * that the asbestos
exposure is a substantial contributing factor.”
Id. Howell at ¶
28. Therefore, we determine that the report of Dr. Zajac is sufficient
to support the prima facie requirements.
Pursuant to R.C. 2307.93(B), we construe the evidence most strongly
in the appellees’ favor in determining whether a prima facie case has been
established. Wagner v. Anchor Packing Co., 4th Dist. Lawrence No. 05CA47, 2006-
Ohio-7097, ¶ 39; Hoover, 8th Dist. Cuyahoga Nos. 93479 and 93689, 2010-Ohio-
2894, at ¶ 12. We find that it has.
Ford’s second assignment of error is without merit, and we overrule
it.
Judgment affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to
Rule 27 of the Rules of Appellate Procedure.
_________________________________
ANITA LASTER MAYS, PRESIDING JUDGE
FRANK D. CELEBREZZE, JR., J., and
KATHLEEN ANN KEOUGH, J., CONCUR |
4,639,167 | 2020-12-03 15:21:16.687672+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5513.pdf | [Cite as AmeriCredit Fin. Servs. v. Blue, 2020-Ohio-5513.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
AMERICREDIT FINANCIAL :
SERVICES, D.B.A. GM FINANCIAL,
Plaintiff-Appellee, : No. 109650
v. :
MARIO D. BLUE, :
Defendant-Appellant. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-925073
Appearances:
Weltman, Weinberg & Reis, Co., L.P.A., and Daniel A.
Friedlander, for appellee.
Mario D. Blue, pro se.
SEAN C. GALLAGHER, P.J.:
Defendant-appellant Mario D. Blue, pro se, appeals the trial court’s
decision to grant summary judgment in favor of plaintiff-appellee AmeriCredit
Financial Services, d.b.a. GM Financial. Upon review, we affirm.
Background
On November 13, 2019, GM Financial filed a complaint for money
judgment and motion for possession of personal property (replevin). GM Financial
alleged that Blue breached the terms of a retail installment sale contract by failing
to make payments and failed to surrender a 2014 Dodge Durango that was pledged
as collateral. Both the retail installment sale contract and the certificate of title,
which were attached to the complaint, identified AmeriCredit Financial Services,
Inc., not GM Financial. Blue, acting pro se, filed a motion titled “objection to
replevin demand dismissal” in which he claimed the action should be dismissed
because GM Financial was not identified in the retail installment sale contract. In
opposing the dismissal, GM Financial asserted that it is the real party in interest
because GM Financial is a registered trade name of AmeriCredit Financial Services,
Inc.
After further objection by Blue, the trial court granted GM Financial’s
motion for leave to file an amended complaint instanter. The amended complaint
for money judgment and replevin named “AmeriCredit Financial Services, d.b.a.
GM Financial” as the plaintiff in the action. GM Financial filed documents reflecting
that GM Financial is in fact a registered trade name of AmeriCredit Financial
Services, Inc.
On December 19, 2019, the trial court granted GM Financial’s motion
for possession of personal property (replevin). Thereafter, GM Financial filed a
motion for summary judgment with supporting affidavits and documents. The
evidence reflects that Blue breached the terms of the retail installment sale contract
and was in default by failing to make payments. The evidence also established the
amount due and owing. The motion for summary judgment was opposed by Blue.
On March 24, 2020, the trial court granted the motion for summary
judgment and rendered judgment in favor of AmeriCredit Financial Services, d.b.a.
GM Financial in the principal sum of $17,308.50, plus late charges in the amount of
$71.68, plus accrued interest in the amount of $1,306.73 through December 10,
2019, with interest thereafter on the principal balance at the rate of 11.58 percent
per annum, and court costs. The trial court also found the plaintiff was entitled to
permanent possession of the described collateral. Blue timely filed this appeal.
Law and Analysis
Under his sole assignment of error, Blue argues the trial court abused
its discretion, deprived him of due process, and failed to follow contract law. He
argues the retail installment sale contract was entered with Ganley Chrysler Jeep
Dodge, Inc., and AmeriCredit Financial Services and the contract does not identify
GM Financial. Because GM Financial’s identity, as a wholly owned subsidiary of
AmeriCredit Financial Services was not disclosed at the time the contract was
entered into, Blue argues that a valid contract was not entered into, that GM
Financial lacks standing in this matter, that all of the claims should have been
dismissed, and that the trial court’s judgment “violates standing contract law of
conducting business in different tradenames and not disclosing this mandatory
information to their customers at the time of signing or in writing.”
An appellate court reviews a trial court’s grant of summary judgment
de novo. Argabrite v. Neer,
149 Ohio St. 3d 349
, 2016-Ohio-8374,
75 N.E.3d 161
,
¶ 14. Also, whether a party has standing to sue is a question of law that we review
de novo. Moore v. Middletown,
133 Ohio St. 3d 55
, 2012-Ohio-3897,
975 N.E.2d 977
, ¶ 20, citing Cuyahoga Cty. Bd. of Commrs. v. State,
112 Ohio St. 3d 59
, 2006-
Ohio-6499,
858 N.E.2d 330
, ¶ 23.
“It is fundamental that a party commencing litigation must have
standing to sue in order to present a justiciable controversy and invoke the
jurisdiction of the common pleas court.” Fed. Home Loan Mtge. Corp. v.
Schwartzwald,
134 Ohio St. 3d 13
, 2012-Ohio-5017,
979 N.E.2d 1214
, ¶ 41. R.C.
1329.10(B) prohibits a person from commencing an action in a trade name or
fictitious name until it has complied with R.C. 1329.01, which provides the
procedure to register a trade name with the Ohio secretary of state. “[U]pon
compliance, such an action may be commenced or maintained on any contracts and
transactions entered into prior to compliance.” R.C. 1329.10(B). A “trade name” is
“a name used in business or trade to designate the business or the user and to which
the user asserts a right to exclusive use.” R.C. 1329.01.
In this action, the plaintiff filed the registration document and the
state of Ohio certificates establishing that GM Financial is a registered trade name
of AmeriCredit Financial Services, Inc. The record shows that AmeriCredit
Financial Services, Inc., was doing business under the registered trade name GM
Financial and that Blue’s loan was maintained by GM Financial. Therefore, the
plaintiff had standing to file suit.
Nonetheless, we recognize that AmeriCredit Financial Services was
the entity named in the contract and that the plaintiff in the initial complaint was
characterized by its trade name GM Financial. We certainly understand that Blue
was unaware of the relationship between AmeriCredit Financial Services and GM
Financial at the time he entered into the retail installment sale contract. However,
contrary to Blue’s argument, the record reflects that Blue entered into a valid and
enforceable contract. The plaintiff was permitted to amend the complaint and
corrected the caption to name AmeriCredit Financial Services, d.b.a. GM Financial
as the plaintiff in the action.
We find that the naming of the plaintiff by its registered trade name
in the initial complaint did not deprive the trial court of jurisdiction in this matter,
that the plaintiff had standing to file suit, and that the amended complaint corrected
any error in the captioning of the complaint. Further, the record reflects that Blue
breached the terms of the contract and defaulted on his payments, and the record
also supports the amount awarded. Therefore, we affirm the trial court’s judgment,
which was entered in favor of AmeriCredit Financial Services, d.b.a. GM Financial.
Blue’s sole assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
__________________________
SEAN C. GALLAGHER, PRESIDING JUDGE
PATRICIA ANN BLACKMON, J., and
EILEEN A. GALLAGHER, J., CONCUR |
4,639,168 | 2020-12-03 15:21:16.998427+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5515.pdf | [Cite as State ex rel. Peterson v. Miday, 2020-Ohio-5515.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
STATE EX REL. DAMIEN L.
PETERSON, :
Relator, :
No. 109982
v. :
HON. JUDGE SHERRIE M. MIDAY, :
Respondent. :
JOURNAL ENTRY AND OPINION
JUDGMENT: WRIT DENIED
DATED: November 30, 2020
Writ of Procedendo
Motion No. 541871
Order No. 542451
Appearances:
Damien L. Peterson, pro se.
Michael C. O’Malley, Cuyahoga County Prosecuting
Attorney, and James E. Moss, Assistant Prosecuting
Attorney, for respondent.
PATRICIA ANN BLACKMON, P.J.:
On September 28, 2020, the relator, Damien L. Peterson,
commenced this procedendo action against the respondent, Judge Sherrie Miday,
to compel the judge to rule on Peterson’s “Motion to vacate void judgment and
sentence due to lack of subject-matter jurisdiction,” which he filed on May 28, 2020,
in the underlying case, State v. Peterson, Cuyahoga C.P. No. CR-19-639520-A. On
October 20, 2020, the respondent, through the Cuyahoga County Prosecutor,
moved for summary judgment on the grounds of lack of jurisdiction. Peterson filed
a brief in opposition on November 2, 2020. For the following reasons, this court
grants the respondent’s motion for summary judgment and denies the application
for a writ of procedendo.
In the underlying case, the trial court found Peterson guilty of four
counts of aggravated robbery, four counts of theft, and four counts of having
weapons while under disability, all with multiple firearm specifications, and in a
November 20, 2019 journal entry imposed a prison sentence of 39 years to 41.5
years. Peterson, represented by counsel, appealed to this court on December 16,
2019. State v. Peterson, 8th Dist. Cuyahoga No. 109306. This case is currently
pending.
In the subject motion, Peterson argues that there were multiple
defects in the initial complaint; it was not a sworn document and lacks a file-stamp.
Thus, it failed to vest jurisdiction in the court. Similarly, the affidavit for establishing
probable cause was not sworn and fatally defective. Furthermore, he was not
provided with a timely preliminary hearing. Because these prerequisites were not
fulfilled, Peterson argues that his subsequent indictment is void ab initio. Because
the subject motion has been pending for more than four months without a
resolution, he seeks the writ of procedendo to obtain a ruling.
The writ of procedendo is an order from a court of superior
jurisdiction to one of inferior jurisdiction to proceed to judgment. Yee. v. Erie Cty.
Sheriff’s Dept.,
51 Ohio St. 3d 42
,
553 N.E.2d 1254
(1990). Procedendo is
appropriate when a court has either refused to render a judgment or has
unnecessarily delayed proceeding to judgment. State ex rel. Watkins v. Eighth Dist.
Court of Appeals,
82 Ohio St. 3d 532
, 1998-Ohio-190,
696 N.E.2d 1079
. However,
the writ will not issue to control what the judgment should be, nor will it issue for
purpose of controlling or interfering with ordinary court procedure. Procedendo
will not issue if the relator has or had an adequate remedy at law. State ex rel.
George v. Burnside, 8th Dist. Cuyahoga No. 90531, 2007-Ohio-6632.
The respondent judge argues that she cannot rule on the motion
because the pending appeal deprives her of jurisdiction. The filing of a notice of
appeal divests the trial court of jurisdiction to act inconsistently with the appellate
court’s jurisdiction to review, affirm, modify, or reverse the appealed judgment.
State v. Rogers, 8th Dist. Cuyahoga No. 101063, 2014-Ohio-3924, ¶ 5; State ex rel.
Dobson v. Handwork,
159 Ohio St. 3d 442
, 2020-Ohio-1069,
151 N.E.3d 613
. In
Dobson, the Supreme Court of Ohio issued a writ of prohibition and ordered rulings
on post-judgment motions vacated because the trial judge lacked jurisdiction to rule
on those motions once an appeal had been filed.
In State v. Corrigan, 8th Dist. Cuyahoga No. 95139, 2010-Ohio-4364,
the state of Ohio sought a writ of mandamus to compel a judge to rule on a 60(B)
motion. However, the state had also filed an appeal that was currently pending.
This court held that the mandamus complaint failed to state a claim upon which
relief could be granted, because while the appeal was pending the trial court had no
jurisdiction to rule on the 60(B) motion. State ex rel. Robinson v. Lucci, 11th Dist.
Lake No. 2010-L-117, 2011-Ohio-2095.
In response, Peterson argues that the transfer of jurisdiction principle
is not applicable because his motion argues that the trial court’s judgment is void for
lack of subject-matter jurisdiction. A court has the inherent power to vacate a void
judgment, and subject-matter jurisdiction may be raised at any time. State v.
Bedford,
184 Ohio App. 3d 588
, 2009-Ohio-3972,
921 N.E.2d 1085
(9th Dist.).
However, this argument is not persuasive. The purpose of the transfer of
jurisdiction rule is to prevent the trial court from interfering with the court of
appeals’ jurisdiction to affirm, modify, or reverse the trial court’s judgment.
Allowing the trial court to rule on a motion to vacate would necessarily interfere
with appellate jurisdiction. Therefore, the trial court does not have jurisdiction
to rule on the subject motion, and procedendo will not issue.
Accordingly, this court grants the respondent judge’s motion for
summary judgment and denies the application for a writ of procedendo. Relator to
pay costs. The court instructs the clerk to serve upon the parties notice of this
judgment and its date of entry upon the journal. Civ.R. 58(B).
Writ denied.
____________________________________
PATRICIA ANN BLACKMON, PRESIDING JUDGE
ANITA LASTER MAYS, J., and
FRANK D. CELEBREZZE, JR., J., CONCUR |
4,639,169 | 2020-12-03 16:00:40.610536+00 | null | http://media.ca11.uscourts.gov/opinions/unpub/files/202012486.pdf | USCA11 Case: 20-12486 Date Filed: 12/03/2020 Page: 1 of 4
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 20-12486
Non-Argument Calendar
________________________
D.C. Docket No. 4:19-cv-00113-RH-MJF
RICARDO JOSE FERNANDEZ,
Plaintiff-Appellant,
versus
UNITED STATES,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Florida
________________________
(December 3, 2020)
Before MARTIN, JORDAN, and GRANT, Circuit Judges.
PER CURIAM:
Ricardo Fernandez, proceeding pro se, appeals the district court’s order
granting summary judgment to the government, in his action brought pursuant to the
USCA11 Case: 20-12486 Date Filed: 12/03/2020 Page: 2 of 4
Federal Tort Claims Act (“FTCA”), 28 U.S.C. §§ 2671-80, alleging that medical
providers at hospitals run by the Department of Veterans Affairs (“VA”) provided
negligent medical care. Specifically, Fernandez alleged that medical providers at
the VA negligently prescribed and treated him with medications known as “beta
blockers” and “ACE inhibitors” despite knowing that Fernandez was allergic to
those medications. The district court granted summary judgment because it
concluded that Fernandez failed to create a genuine issue of material fact as to any
of the elements of his FTCA medical negligence claim. In response to Fernandez’s
appeal, the government moves this Court for summary affirmance of the district
court’s ruling and for a stay of briefing on appeal. After careful review, we grant
the government’s motion for summary affirmance.
I.
We review de novo the grant of a motion for summary judgment, “applying
the same legal standards used by the district court.” Yarbrough v. Decatur Hous.
Auth.,
941 F.3d 1022
, 1026 (11th Cir. 2019) (quotation marks omitted).
For an argument to be sufficiently briefed on appeal, the argument must
include the appellant’s “contentions and the reasons for them, with citations to the
authorities and parts of the record on which the appellant relies.” Fed. R. App. P.
28(a)(8)(A). “When an appellant fails to challenge properly on appeal one of the
grounds on which the district court based its judgment, he is deemed to have
2
USCA11 Case: 20-12486 Date Filed: 12/03/2020 Page: 3 of 4
abandoned any challenge of that ground, and it follows that the judgment is due to
be affirmed.” Sapuppo v. Allstate Floridian Ins. Co.,
739 F.3d 678
, 680 (11th Cir.
2014). And we do not consider arguments raised for the first time in a reply brief.
Id. at 682–83.
Although pro se pleadings are held to a less stringent standard than
counseled pleadings, Tannenbaum v. United States,
148 F.3d 1262
, 1263 (11th Cir.
1998) (per curiam), pro se litigants are still required to conform to procedural rules,
Albra v. Advan, Inc.,
490 F.3d 826
, 829 (11th Cir. 2007) (per curiam).
Summary disposition is appropriate where, among other things, “the position
of one of the parties is clearly right as a matter of law so that there can be no
substantial question as to the outcome of the case.” Groendyke Transp., Inc. v.
Davis,
406 F.2d 1158
, 1162 (5th Cir. 1969). 1
II.
Summary disposition is appropriate in this case because there is no
“substantial question” that Fernandez has abandoned any challenge to the district
court’s order granting summary judgment. Groendyke
Transp., 406 F.2d at 1162
.
Fernandez does not challenge any portion of the district court’s ruling in his initial
brief, arguing only the facts and merits of his underlying FTCA medical negligence
claim. These arguments fail to properly raise any grounds for appeal. See Sapuppo,
1
In Bonner v. City of Prichard,
661 F.2d 1206
(11th Cir. 1981) (en banc), we adopted as
binding precedent all decisions of the former Fifth Circuit handed down before October 1, 1981.
Id. at 1209. 3
USCA11 Case: 20-12486 Date Filed: 12/03/2020 Page: 4 of
4 739 F.3d at 680
; see also Fed. R. App. P. 28(a)(8)(A). To take one example,
Fernandez does not argue that he presented evidence sufficient to create a genuine
issue of material fact as to what standard of care the VA doctors owed him. His
abandonment of that ground alone is enough for us to affirm the judgment, because
without it, Fernandez cannot establish the remaining elements of his FTCA medical
negligence claim. See Gooding v. Univ. Hosp. Bldg., Inc.,
445 So. 2d 1015
, 1018
(Fla. 1984) (“To prevail in a medical malpractice case a plaintiff must establish the
following: the standard of care owed by the defendant, the defendant’s breach of the
standard of care, and that said breach proximately caused the damages claimed.”);
Sapuppo, 739 F.3d at 680
(“[I]ssues that clearly are not designated in the initial brief
ordinarily are considered abandoned.” (quotation marks and citation omitted)). Even
liberally construing Fernandez’s reply brief as challenging the district court’s
conclusion that he had not presented adequate evidence as to the standard of care,
summary affirmance is still warranted because arguments made for the first time in
reply are not deemed preserved. See
id. at 682–83.
Because there is no substantial question that Fernandez has not properly raised
any arguments concerning the district court’s order granting summary judgment, the
government’s motion for summary affirmance is GRANTED. See Groendyke
Transp., 406 F.3d at 1162
. The government’s motion to stay the briefing schedule
is DENIED as moot.
4 |
4,639,170 | 2020-12-03 16:00:41.667661+00 | null | http://media.ca11.uscourts.gov/opinions/unpub/files/202011474.pdf | USCA11 Case: 20-11474 Date Filed: 12/03/2020 Page: 1 of 5
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 20-11474
Non-Argument Calendar
________________________
Agency No. A206-471-961
FRANCISCO FRANCISCO-PEDRO,
Petitioner,
versus
UNITED STATES ATTORNEY GENERAL,
Respondent.
________________________
Petition for Review of a Decision of the
Board of Immigration Appeals
________________________
(December 3, 2020)
Before MARTIN, LAGOA, and BRASHER, Circuit Judges.
PER CURIAM:
Francisco Francisco-Pedro, a native and citizen of Guatemala, seeks review
of a Board of Immigration Appeals decision affirming denial of his application for
cancellation of removal. Francisco-Pedro argues that the Immigration Judge
USCA11 Case: 20-11474 Date Filed: 12/03/2020 Page: 2 of 5
erroneously concluded that he had failed to establish that his removal would cause a
qualifying relative to suffer an exceptional and extremely unusual hardship. Because
Francisco-Pedro has not argued any constitutional or legal error, only a discretionary
one, we lack jurisdiction over his petition. Upon consideration, the petition is
DISMISSED.
BACKGROUND
We presume familiarity with the factual and procedural history and describe
it below only to the extent necessary to address the issues raised in this appeal.
The Department of Homeland Security issued a notice to appear to Francisco-
Pedro, charging that he was removable because he was present in the country without
having been admitted or paroled and without a valid entry document. Francisco-
Pedro sought to avoid removal by filing an application for cancellation of removal
and adjustment of status. He argued that his removal would cause his citizen son,
now sixteen, to suffer exceptional and extremely unusual hardship from his father’s
removal. At a preliminary hearing, Francisco-Pedro admitted to the Department’s
allegations and conceded he was removable as charged.
At the merits hearing, Francisco-Pedro testified that in 2000 he entered the
United States. He was in his mid-teens at the time. His parents and siblings remained
in Guatemala where they are farmers. Soon after entering the United States, he began
living with his partner. They had a son together. Francisco-Pedro’s main concern for
2
USCA11 Case: 20-11474 Date Filed: 12/03/2020 Page: 3 of 5
his son is that he would not have access to the same medical care and educational
opportunities in Guatemala. Francisco-Pedro testified that his son is a good student.
He also testified that his son sometimes gets sick but has no specific medical
problems.
On direct examination, Francisco-Pedro testified that, if removed, he would
not bring his son and partner with him to Guatemala because he would not be able
to support them, they would not have accommodations, and his son does not speak
much Spanish. On cross-examination, Francisco-Pedro stated that, if removed, he
would take his son and partner with him, but they would experience hardship.
The Immigration Judge denied Francisco-Pedro’s application for cancellation
of removal in a written decision. The Immigration Judge found that Francisco-Pedro,
if removed, would leave his son in the United States. The Immigration Judge also
found that although Francisco-Pedro had been continuously present in the United
States for more than ten years and had good moral character, he had not established
that the emotional or financial toll on his son would rise to the requisite level of
exceptional and unusual hardship. The Board summarily affirmed the decision. This
appeal followed.
DISCUSSION
Francisco-Pedro asks us to revisit the Immigration Judge’s discretionary
determination that he failed to establish that the emotional or financial toll on his
3
USCA11 Case: 20-11474 Date Filed: 12/03/2020 Page: 4 of 5
citizen son would rise to the requisite level of exceptional and unusual hardship. The
government responds that this Court does not have jurisdiction to review an
Immigration Judge’s discretionary decisions. We review our own subject matter
jurisdiction de novo. Jeune v. Att’y Gen.,
810 F.3d 792
, 799 (11th Cir. 2016). When
the Board summarily affirms an Immigration Judge’s decision, the affirmed decision
“becomes the final removal order subject to review.” Sepulveda v. U.S. Att’y Gen.,
401 F.3d 1226
, 1230 (11th Cir. 2005).
The Attorney General, in his discretion, may grant cancellation of removal to
an applicant who (1) has been physically present in the United States for at least ten
years, (2) “has been a person of good moral character,” (3) has not been convicted
of certain crimes, and (4) establishes his “removal would result in exceptional and
extremely unusual hardship to [his] spouse, parent, or child, who is a citizen of the
United States or an alien lawfully admitted for permanent residence.” 8 U.S.C. §
1229b(b)(1). The Immigration Judge found that Francisco-Pedro met all of these
criteria except for exceptional and extremely unusual hardship to a family member.
This discretionary decision, like all discretionary decisions by the
Department, lies beyond our appellate jurisdiction. 8 U.S.C. § 1252(a)(2)(B)(i). Our
review is limited to constitutional claims and questions of law raised by challenges
to the agency’s decisions. 8 U.S.C. § 1252(a)(2)(D). Section 1252(a)(2)(D) “does
not restore our jurisdiction” where the Board affirms an Immigration Judge’s order
4
USCA11 Case: 20-11474 Date Filed: 12/03/2020 Page: 5 of 5
“due to the petitioner’s failure to demonstrate the requisite hardship.” Alhuay v. U.S.
Att’y Gen.,
661 F.3d 534
, 549–50 (11th Cir. 2011). “[S]uch challenges are not
constitutional claims or questions of law because what constitutes an ‘exceptional
and extremely unusual hardship’ is itself a discretionary determination.”
Id. at 550.
Such is the case here. Francisco-Pedro’s only argument is that we should
review the Immigration Judge’s conclusion that he failed to demonstrate the
requisite level of hardship. He neither argues that the Immigration Judge applied the
wrong legal standard nor that his constitutional rights were violated. As we have
previously held, whether circumstances constitute an exceptional and extremely
unusual hardship is a discretionary determination, over which we have no
jurisdiction.
CONCLUSION
Because we have no jurisdiction over an Immigration Judge’s discretionary
determinations, the petition is DISMISSED.
5 |
4,639,174 | 2020-12-03 16:03:25.203349+00 | null | https://www.floridasupremecourt.org/pre_opinion_content_download/692680 | Supreme Court of Florida
______________
No. SC20-1668
______________
IN RE: CERTIFICATION OF NEED
FOR ADDITIONAL JUDGES.
December 3, 2020
PER CURIAM.
This opinion fulfills our constitutional obligation to determine the State’s
need for additional judges in fiscal year 2021/2022 and to certify our “findings and
recommendations concerning such need” to the Florida Legislature.1 Certification
is “the sole mechanism established by our constitution for a systematic and
1. Article V, section 9 of the Florida Constitution provides in pertinent part:
Determination of number of judges.—The supreme court
shall establish by rule uniform criteria for the determination of the
need for additional judges except supreme court justices, the necessity
for decreasing the number of judges and for increasing, decreasing or
redefining appellate districts and judicial circuits. If the supreme
court finds that a need exists for increasing or decreasing the number
of judges or increasing, decreasing or redefining appellate districts
and judicial circuits, it shall, prior to the next regular session of the
legislature, certify to the legislature its findings and recommendations
concerning such need.
uniform assessment of this need.” In re Certification of Need for Additional
Judges,
889 So. 2d 734
, 735 (Fla. 2004).
In re Certification of Need for Additional Judges,
287 So. 3d 489
(Fla.
2019), last year’s opinion, certified the need for two additional circuit court
judgeships in the Ninth Judicial Circuit, one additional circuit court judgeship in
the First Judicial Circuit, one additional circuit court judgeship in the Fourteenth
Judicial Circuit, four additional county court judgeships in Hillsborough County,
one additional county court judgeship in Orange County, and one additional county
court judgeship in Lee County. In that opinion, we also decertified the need for
two county court judgeships in Brevard County, one county court judgeship in
Monroe County, and one county court judgeship in Collier County.
The Legislature authorized the ten additional trial court judgeships, as
certified, in the Florida Statutes 2 and appropriated funding in the fiscal year
2020/2021 General Appropriations Act3 for them, as well as for complementary
staff support positions. The Governor approved the statutory changes4 but vetoed
2. Fla. HB 5301, §§ 1-2 (2020) (enrolled) (amending section 26.031, Florida
Statutes, to authorize the four circuit court judgeships, and section 34.022, Florida
Statutes, to authorize the six county court judgeships).
3. Fla. HB 5001, § 7, at 414, 417 (2020) (enrolled) (provisos accompanying
specific appropriations 3222, 3224, 3236, 3238, 3240, and 3246).
4. Ch. 2020-112, §§ 1-2, Laws of Fla. In his letter to the Secretary of State
transmitting his approval of the legislation, the Governor stated, “I simply do not
believe that it is fiscally prudent to employ the additional judges at this time.
However, by signing HB 5301, we will preserve the establishment of these
-2-
the funding due to statewide budget concerns stemming from the Coronavirus
Disease 2019 (COVID-19) pandemic. 5 The Florida Supreme Court asks that the
Legislature again fund those judgeships in the fiscal year 2021/2022 General
Appropriations Act.
The ten new judgeships authorized during the 2020 legislative session but
for which the funding was vetoed were considered to be in existence for purposes
of conducting the analysis in support of this year’s certification opinion. In this
opinion we are certifying the need for one additional circuit court judgeship in the
Fourteenth Judicial Circuit, two additional county court judgeships in Hillsborough
County, and no additional judgeships in the district courts of appeal. We decertify
no district court, circuit court, or county court judgeships.
To make this decision, the Court continues to use a verified objective
weighted caseload methodology as a primary basis for assessing judicial need.6
The objective data are supplemented by judgeship requests submitted by the lower
courts, including descriptions of the impact of various secondary factors. These
secondary factors identified by each chief judge reflect local differences in support
additional judgeships with the hope that they can be funded as the state budget
outlook improves.” Letter from Governor Ron DeSantis to Secretary of State
Laurel M. Lee (June 29, 2020).
5. Ch. 2020-111, § 7, Laws of Fla.
6. Our certification methodology relies primarily on case weights and
calculations of available judge time to determine the need for additional trial court
judges. See Fla. R. Jud. Admin. 2.240.
-3-
of their requests for more judgeships or in support of their requests for this Court
not to decertify judgeships in situations where the objective case weights alone
would indicate excess judicial capacity. Applying the criteria in this two-step
methodology, we conclude that the Fourteenth Judicial Circuit has a demonstrable
need for an additional circuit court judgeship and Hillsborough County has a
demonstrable need for two additional county court judgeships. Considered in
isolation, the two-step analysis also suggested the decertification of two county
court judgeships in Brevard County and one county court judgeship each in
Alachua, Collier, and Monroe counties. However, the Court determines that the
secondary factor analysis, coupled with recent statutory amendments and other
relevant circumstances further explained below, militates against decertification of
any trial court judgeships.
Our evaluation of these matters takes into account developments in the way
our courts perform their duties that are not currently captured by the weighted
caseload methodology. We also consider recently adopted legislation and rule
changes that could have a significant impact.
A number of issues require additional study, review, and consideration
because they portend additional workload or limit our ability to accurately project
judicial need. In particular, the impact of the COVID-19 pandemic in the circuit
and county courts has been substantial. Indeed, the pandemic has placed
-4-
extraordinary strains on our trial courts. In response to the limitations imposed by
the public health crisis, trial courts have been proactive in adapting court
operations, including using technology to conduct proceedings remotely and help
keep the work of the courts progressing. Despite the innovative steps, a significant
increase in pending workload is anticipated as the courts fully return to normal
operations. The additional caseload is attributed to: proceedings, such as jury
trials, in existing cases that necessarily were suspended or delayed to protect public
health and safety; cases the courts anticipate but that are delayed in filing due to
the onset of the pandemic; and new cases stemming from the public health
emergency itself or from pandemic-related economic conditions. As reflected in
the State Courts System’s fiscal year 2021/2022 legislative budget request, the
Trial Court Budget Commission has identified the need for temporary adjudicatory
and case support resources to address this workload. This approach is similar to
the approach used during the foreclosure crisis, in which the court system
requested, and the Legislature appropriated, funding for temporary resources such
as case managers and senior judges to address the mounting caseload. Likewise,
all available existing judicial resources will be needed to contribute to the
pandemic-recovery effort. In these circumstances, we are loath to recommend the
elimination of any judicial positions.
-5-
Another issue requiring consideration, because it influences this Court’s
ability to accurately project judicial need, is the monetary jurisdiction change in
county court. Chapter 2019-58, section 9, Laws of Florida, increased the dollar
amount threshold for the jurisdiction of the county court. The Legislature took a
phased approach to the implementation of this statutory revision. Effective
January 1, 2020, county court monetary jurisdiction increased from an upper limit
of $15,000 to $30,000, and it is scheduled for a second increase to $50,000 on
January 1, 2023. The jurisdictional increase in county court can reasonably be
expected to increase workload in the county courts and decrease workload in the
circuit courts. However, the jurisdictional change largely coincided with the onset
of the COVID-19 pandemic and an associated decrease in overall court filings.
Thus, it is not yet possible to determine precisely how these statutory revisions will
affect workload among the tiers of court.
Similarly, chapter 2020-61, sections 3 and 8, Laws of Florida, transfers
circuit court authority to hear appeals from county court final orders and judgments
in criminal misdemeanor cases and most civil cases to the district courts of appeal.
(The law did not amend all instances of statutory circuit court appellate authority,
and the circuit courts, therefore, will continue to have appellate jurisdiction for
certain administrative decisions and certain county court decisions entered in
noncriminal infraction and other cases.) These changes regarding appellate review
-6-
will affect the respective distribution of judicial workload between the circuit and
appellate courts when the law becomes effective on January 1, 2021.
In addition to the uncertainty surrounding effects of the COVID-19
pandemic and implementation of jurisdictional changes, this Court is reluctant to
decertify judgeships while it is anticipated that the Court will be asked to consider
revisions to the rules governing its certification analysis. The Court directed its
Commission on Trial Court Performance and Accountability to review Florida
Rule of Judicial Administration 2.240, Determination of Need for Additional
Judges. The review included an assessment of the secondary factors influencing
judicial certification to determine if there are areas of inconsistency, overlap, or
disjunction between current criteria in the case-weight formula and the unique
local differences reported by the chief judges in the secondary factors portion of
the evaluation of judicial need. The Commission is expected to file proposed
revisions to rule 2.240(c), Florida Rules of Judicial Administration, to supplement
the secondary factors prescribed in the rule to include, among other proposed
additions, the existence and use of problem-solving courts. The Commission’s
proposed revisions to the secondary factors reflect concerns that trial court judges
have been expressing about a need to review and possibly refine the method for
reporting on the increased numbers and types of problem-solving courts
-7-
throughout the state and the increased number of cases handled by those problem-
solving courts.
Having conducted a quantitative assessment of trial and appellate court
judicial workload and having also considered the various qualitative factors,
workload trends related to the COVID-19 pandemic, and jurisdictional changes,
we certify the need for three additional trial court judgeships in Florida, consisting
of one in circuit court and two in county court, as set forth in the appendix to this
opinion. We certify no need for additional judgeships in the district courts of
appeal. We also recommend no decertification of district court, circuit court, or
county court judgeships.
In addition to the certified need for three trial court judgeships described
above, we respectfully request the Florida Legislature to again fund last year’s ten
authorized judgeships. Those judgeships, along with other resources requested
through a legislative budget request this year, will assist the judicial branch in
meeting demands associated with the pandemic-generated workload and court
jurisdictional changes.
It is so ordered.
CANADY, C.J., and POLSTON, LABARGA, LAWSON, MUÑIZ, COURIEL,
and GROSSHANS, JJ., concur.
Original Proceeding – Certification of Need for Additional Judges
-8-
APPENDIX
Trial Court Need
Circuit Court County Court
Certified Certified
Circuit Judges County Judges
1 0 N/A 0
2 0 N/A 0
3 0 N/A 0
4 0 N/A 0
5 0 N/A 0
6 0 N/A 0
7 0 N/A 0
8 0 N/A 0
9 0 N/A 0
10 0 N/A 0
11 0 N/A 0
12 0 N/A 0
13 0 Hillsborough 2
14 1 N/A 0
15 0 N/A 0
16 0 N/A 0
17 0 N/A 0
18 0 N/A 0
19 0 N/A 0
20 0 N/A 0
Total 1 Total 2
-9- |
4,639,175 | 2020-12-03 16:03:25.948022+00 | null | https://www.floridasupremecourt.org/pre_opinion_content_download/692679 | Supreme Court of Florida
____________
No. SC20-597
____________
IN RE: AMENDMENTS TO FLORIDA RULES OF APPELLATE
PROCEDURE 9.120 AND 9.210.
December 3, 2020
PER CURIAM.
This matter is before the Court for consideration of proposed amendments to
the Florida Rules of Appellate Procedure. We have jurisdiction. See art. V, § 2(a),
Fla. Const.
BACKGROUND
The Florida Bar’s Appellate Court Rules Committee (Committee) has filed a
report proposing amendments to rules 9.120 (Discretionary Proceedings to Review
Decisions of District Courts of Appeal) and 9.210 (Briefs). In addition, the Court
severed the following proposals from In re Amendments to the Florida Rules of
Appellate Procedure—2020 Regular-Cycle Report, 45 Fla. L. Weekly S282 (Fla.
Oct. 29, 2020), for consideration in this case: 9.100 (Original Proceedings), 9.125
(Review of Trial Court Orders and Judgments Certified by the District Courts of
Appeal as Requiring Immediate Resolution by the Supreme Court of Florida),
9.141 (Review Proceedings in Collateral or Postconviction Criminal Cases), 9.142
(Procedures for Review in Death Penalty Cases), 9.225 (Notice of Supplemental
Authority), 9.370 (Amicus Curiae), 9.900(j) (Forms; Notice of Supplemental
Authority), and proposed new rule 9.045 (Form of Documents).
The Committee published its proposals for comment prior to filing them
with the Court and received two comments. Upon consideration of the comments,
the Committee did not alter its proposals. After the Committee filed its report, the
Court republished the proposals for comment; no comments were received.
Having considered the Committee’s report, we adopt the amendments to the
Florida Rules of Appellate Procedure as proposed by the Committee, except for the
proposed amendments to rules 9.225 (Notice of Supplemental Authority) and
9.900(j) (Forms; Notice of Supplemental Authority), which we decline to adopt.
We explain our reasons below, as well as discuss some of the significant rule
amendments.
AMENDMENTS
New rule 9.045 (Form of Documents) sets out the formatting requirements
for all documents filed with an appellate court. Subdivision (a) (Generally) of the
new rule makes clear that the formatting requirements in rule 9.045 are in addition
to those set out in Florida Rule of Judicial Administration 2.520 (Documents). The
-2-
type of fonts permitted in documents filed with a court is changed in subdivision
(b) (Line Spacing, Type Size, and Typeface) of the new rule to either Arial or
Bookman Old Style. Because the new fonts take up more space on a page, page
limits for computer-generated documents throughout the Florida Rules of
Appellate Procedure are replaced with word counts. Page limits for handwritten
and typewritten documents are unchanged. All computer-generated documents
subject to a word count limit are required under subdivision (e) (Certificate of
Compliance) of rule 9.045 to contain a certificate of compliance certifying that the
document is in conformity with all font and word count requirements.
The formatting requirements contained in rules 9.100(l) (Original
Proceedings; General Requirements; Fonts) and 9.210(a)(1)-(3) (Briefs; Generally)
are deleted as duplicative of the requirements contained in new rule 9.045.
Next, subdivision (e) (Accepting or Postponing Decision on Jurisdiction;
Record) of rule 9.120 (Discretionary Proceedings to Review Decisions of District
Courts of Appeal) is amended to shorten the period of time for transmission of the
record from sixty days to twenty-five days. Subdivision (g) (Briefs on Merits) of
the same rule is also amended to extend the period of time for service of the initial
brief from twenty days to thirty-five days after the Court accepts or postpones a
decision on jurisdiction.
-3-
Lastly, we decline to adopt the Committee’s proposed amendments to rules
9.225 (Notice of Supplemental Authority) and 9.900(j) (Forms; Notice of
Supplemental Authority). The Committee proposes amending rule 9.225 and the
corresponding form in rule 9.900(j) to permit the inclusion of argument in a notice
of supplemental authority, as well as the filing of a response by an opposing party.
The Committee did not provide a reasoned explanation for its proposed
amendments, and we are concerned that permitting additional argument outside of
the briefs will have an adverse impact on court resources and appellate
proceedings.
CONCLUSION
Accordingly, we amend the Florida Rules of Appellate Procedure as set
forth in the appendix to this opinion. New language is indicated by underscoring;
deletions are indicated by struck-through type. The comments are offered for
explanation and guidance only and are not adopted as an official part of the rules.
The amendments shall become effective on January 1, 2021, at 12:03 a.m.
It is so ordered.
CANADY, C.J., and POLSTON, LABARGA, LAWSON, MUÑIZ, COURIEL,
and GROSSHANS, JJ., concur.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER THE
EFFECTIVE DATE OF THESE AMENDMENTS.
-4-
Original Proceeding – Florida Rules of Appellate Procedure
Hon. Stephanie Williams Ray, Chair, and Thomas D. Hall, Past Chair, Appellate
Court Rules Committee, Tallahassee, Florida; and Joshua E. Doyle, Executive
Director, and Krys Godwin, Staff Liaison, The Florida Bar, Tallahassee, Florida,
for Petitioner
-5-
Appendix
RULE 9.045. FORM OF DOCUMENTS
(a) Generally. All documents, as defined in Florida Rule of Judicial
Administration 2.520(a), filed with the court shall comply with Florida Rule of
Judicial Administration 2.520 and with this rule. If filed in electronic format,
parties shall file only the electronic version.
(b) Line Spacing, Type Size, and Typeface. The text in documents shall
be black and in distinct type, double-spaced. Text in script or type made in
imitation of handwriting shall not be permitted. Footnotes and quotations may be
single-spaced and shall be in the same size type, with the same spacing between
characters, as the text in the body of the document. Headings and subheadings shall
be at least as large as the document’s text and may be single-spaced. Computer-
generated documents shall be filed in either Arial 14-point font or Bookman Old
Style 14-point font.
(c) Binding. Documents filed in paper format shall not be stapled or
bound.
(d) Signature. All documents filed with the court must be signed as
required by Florida Rule of Judicial Administration 2.515.
(e) Certificate of Compliance. Computer-generated documents subject
to word count limits shall contain a certificate of compliance signed by counsel, or
the party if unrepresented, certifying that the document complies with the
applicable font and word count limit requirements. The certificate shall be
contained in the document immediately following the certificate of service. The
word count shall exclude words in a caption, cover page, table of contents, table of
citations, certificate of compliance, certificate of service, or signature block. The
word count shall include all other words, including words used in headings,
footnotes, and quotations. The person preparing the certificate may rely on the
word count of the word-processing system used to prepare the document.
RULE 9.100. ORIGINAL PROCEEDINGS
(a)-(f) [NO CHANGE]
-6-
(g) Petition. The caption shall contain the name of the court and the name
and designation of all parties on each side. The petition shall not exceed 13,000
words if computer-generated or 50 pages in lengthif handwritten or typewritten and
shall contain:
(1)-(4) [NO CHANGE]
[NO CHANGE]
(h)-(i) [NO CHANGE]
(j) Response. Within the time set by the court, the respondent may serve
a response, which shall not exceed 13,000 words if computer-generated or 50
pages in lengthif handwritten or typewritten and which shall include argument in
support of the response, appropriate citations of authority, and references to the
appropriate pages of the supporting appendices.
(k) Reply. Within 30 days thereafter or such other time set by the court,
the petitioner may serve a reply, which shall not exceed 4,000 words if computer-
generated or 15 pages in lengthif handwritten or typewritten, and supplemental
appendix.
(l ) General Requirements; Fonts. The lettering in all petitions,
responses, and replies filed under this rule shall be black and in distinct type,
double-spaced, with margins no less than 1 inch. Lettering in script or type made in
imitation of handwriting shall not be permitted. Footnotes and quotations may be
single spaced and shall be in the same size type, with the same spacing between
characters, as the text. Computer-generated petitions, responses, and replies shall
be submitted in either Times New Roman 14-point font or Courier New 12-point
font. All computer-generated petitions, responses, and replies shall contain a
certificate of compliance signed by counsel, or the party if unrepresented,
certifying that the petition, response, or reply complies with the font requirements
of this rule. The certificate of compliance shall be contained in the petition,
response, or reply immediately following the certificate of service.
Committee Notes
1977-2010 Amendment. [NO CHANGE]
2010 Note. [NO CHANGE]
-7-
2020 Amendment. Page limits for computer-generated petitions, responses,
and replies were converted to word counts.
Court Commentary
[NO CHANGE]
RULE 9.120. DISCRETIONARY PROCEEDINGS TO REVIEW
DECISIONS OF DISTRICT COURTS OF APPEAL
(a)-(b) [NO CHANGE]
(c) Notice. The notice shall be substantially in the form prescribed by rule
9.900. The caption shall contain the name of the lower tribunal, the name and
designation of at least 1 party on each side, and the case number in the lower
tribunal. The notice shall contain the date of rendition of the order to be reviewed
and the basis for invoking the jurisdiction of the supreme court.
(d) [NO CHANGE]
(e) Accepting or Postponing Decision on Jurisdiction; Record. If the
supreme court accepts or postpones decision on jurisdiction, the court shall so
order and advise the parties and the clerk of the district court of appeal. Within
6025 days thereafter or such other time set by the court, the clerk shall
electronically transmit the record. The clerk shall transmit separate Portable
Document Format (“PDF”) files of:
(1)-(3) [NO CHANGE]
(f) [NO CHANGE]
(g) Briefs on Merits. Within 2035 days of rendition of the order
accepting or postponing decision on jurisdiction, the petitioner shall serve the
initial brief on the merits. Additional briefs, including any briefs on cross-review,
shall be served as prescribed by rule 9.210.
Committee Notes
[NO CHANGE]
-8-
RULE 9.125. REVIEW OF TRIAL COURT ORDERS AND
JUDGMENTS CERTIFIED BY THE DISTRICT COURTS
OF APPEAL AS REQUIRING IMMEDIATE
RESOLUTION BY THE SUPREME COURT OF
FLORIDA
(a)-(d) [NO CHANGE]
(e) Form. The suggestion shall be limited to 5 pagesnot exceed 1,300
words if computer-generated or 5 pages if handwritten or typewritten and shall
contain all of the following elements:
(1)-(4) [NO CHANGE]
(f)-(g) [NO CHANGE]
Committee Notes
1980 Amendment. [NO CHANGE]
2020 Amendment. The page limit for a computer-generated suggestion was
converted to a word count.
RULE 9.141. REVIEW PROCEEDINGS IN COLLATERAL OR
POSTCONVICTION CRIMINAL CASES
(a) [NO CHANGE]
(b) Appeals from Postconviction Proceedings Under Florida Rules of
Criminal Procedure 3.800(a), 3.801, 3.802, 3.850, or 3.853.
(1) [NO CHANGE]
(2) Summary Grant or Denial of All Claims Raised in a Motion
Without Evidentiary Hearing.
(A)-(B) [NO CHANGE]
(C) Briefs or Responses.
-9-
(i) Briefs are not required, but the appellant may serve
an initial brief within 30 days of filing the notice of appeal. The appellee need not
file an answer brief unless directed by the court. The initial brief shall comply with
the word count (if computer-generated) or page limits (if handwritten or
typewritten) set forth in rule 9.210 for initial briefs. The appellant may serve a
reply brief as prescribed by rule 9.210.
(ii) The court may request a response from the
appellee before ruling, regardless of whether the appellant filed an initial brief. The
appellant may serve a reply within 30 days after service of the response. The
response and reply shall not exceedcomply with the word count (if computer-
generated) or page limits (if handwritten or typewritten) set forth in rule 9.210 for
answer briefs and reply briefs.
(D) [NO CHANGE]
(3) [NO CHANGE]
(c)-(d) [NO CHANGE]
Committee Notes
[NO CHANGE]
RULE 9.142. PROCEDURES FOR REVIEW IN DEATH PENALTY
CASES
(a) Procedure in Death Penalty Appeals.
(1) Record.
(A) [NO CHANGE]
(B) The complete record in a death penalty appeal shall
include all items required by rule 9.200 and by any order issued by the supreme
court. In any appeal following the initial direct appeal, the record that is
electronically transmitted shall begin with the most recent mandate issued by the
supreme court, or the most recent filing not already electronically transmitted in a
prior record in the event the preceding appeal was disposed of without a mandate,
and shall exclude any materials already transmitted to the supreme court as the
- 10 -
record in any prior appeal. The clerk of the lower tribunal shall retain a copy of the
complete record when it transmits the record to the supreme court.
(C) [NO CHANGE]
(2)-(5) [NO CHANGE]
(b) [NO CHANGE]
(c) Petitions Seeking Review of Nonfinal Orders in Death Penalty
Postconviction Proceedings.
(1)-(7) [NO CHANGE]
(8) Reply. Within 30 days after service of the response or such
other time set by the court, the petitioner may serve a reply, which shall not exceed
15 pages in length, and supplemental appendix.
(9)-(11) [NO CHANGE]
(d) [NO CHANGE]
Committee Notes
[NO CHANGE]
Criminal Court Steering Committee Note
[NO CHANGE]
RULE 9.210. BRIEFS
(a) Generally. Unless otherwise ordered by the court, the only briefs
permitted to be filed by the parties in any 1 proceeding are the initial brief, the
answer brief, and a reply brief. A cross-reply brief is permitted if a cross-appeal
has been filed or if the respondent identifies issues on cross-review in its brief on
jurisdiction in the supreme court. All briefs required by these rules shall be
prepared as follows:
(1) When not filed in electronic format, briefs shall be printed,
typewritten, or duplicated on opaque, white, unglossed paper. The dimensions of
- 11 -
each page of a brief, regardless of format, shall be 8 1/2 by 11 inches. When filed
in electronic format, parties shall file only the electronic version.
(2) The lettering in briefs shall be black and in distinct type,
double-spaced, with margins no less than 1 inch. Lettering in script or type made in
imitation of handwriting shall not be permitted. Footnotes and quotations may be
single spaced and shall be in the same size type, with the same spacing between
characters, as the text in the body of the brief. Headings and subheadings shall be
at least as large as the brief’s text and may be single-spaced. Computer-generated
briefs shall be filed in either Times New Roman 14–point font or Courier New 12–
point font. All computer-generated briefs shall contain a certificate of compliance
signed by counsel, or the party if unrepresented, certifying that the brief complies
with the font requirements of this rule. The certificate of compliance shall be
contained in the brief immediately following the certificate of service.
(3) Briefs filed in paper format shall not be stapled or bound.
(4) The cover sheet of each brief shall state the name of the court,
the style of the cause, including the case number if assigned, the lower tribunal, the
party on whose behalf the brief is filed, the type of brief, and the name, address,
and e-mail address of the attorney filing the brief.
(52) Computer-generated briefs shall not exceed the word count
limits of this subdivision. Handwritten or typewritten briefs shall not exceed the
page limits of this subdivision. The page limits for briefs shall be as follows:
(A) Briefs on jurisdiction shall not exceed 2,500 words or 10
pages.
(B) Except as provided in subdivisions (a)(52)(C) and
(a)(52)(D) of this rule, the initial and answer briefs shall not exceed 13,000 words
or 50 pages and the reply brief shall not exceed 4,000 words or 15 pages. If a
cross-appeal is filed or the respondent identifies issues on cross-review in its brief
on jurisdiction in the supreme court, the appellee or respondent’s answer/cross-
initial brief shall not exceed 22,000 words or 85 pages, and the appellant or
petitioner’s reply/cross-answer brief shall not exceed 13,000 words or 50 pages,
not more than 4,000 words or 15 pages of which shall be devoted to argument
replying to the answer portion of the appellee or respondent’s answer/cross-initial
brief. Cross-reply briefs shall not exceed 4,000 words or 15 pages.
- 12 -
(C) In an appeal from a judgment of conviction imposing a
sentence of death or from an order ruling after an evidentiary hearing on an initial
postconviction motion filed under Florida Rule of Criminal Procedure 3.851, the
initial and answer briefs shall not exceed 25,000 words or 100 pages and the reply
brief shall not exceed 10,000 words or 35 pages. If a cross-appeal is filed, the
appellee’s answer/cross-initial brief shall not exceed 40,000 words or 150 pages
and the appellant’s reply/cross-answer brief shall not exceed 25,000 words or 100
pages, not more than 10,000 words or 35 pages of which shall be devoted to
argument replying to the answer portion of the appellee’s answer/cross-initial brief.
Cross-reply briefs shall not exceed 10,000 words or 35 pages.
(D) [NO CHANGE]
(E) The cover sheet, the tables of contents and citations, the
certificates of service and compliance, and the signature block for the brief’s
author shall be excluded from the word count and page limits in subdivisions
(a)(52)(A)–(a)(52)(D). For briefs on jurisdiction, the statement of the issues also
shall be excluded from the page limit in subdivision (a)(5)(A). All pages not
excluded from the computation shall be consecutively numbered. The court may
permit longer briefs.
(63) Unless otherwise ordered by the court, an attorney representing
more than 1 party in an appeal may file only 1 initial or answer brief and 1 reply
brief, if authorized, which will include argument as to all of the parties represented
by the attorney in that appeal. A single party responding to more than 1 brief, or
represented by more than 1 attorney, is similarly bound.
(b) Contents of Initial Brief. The initial brief shall contain the following,
in order:
(1)-(3) [NO CHANGE]
(4) a summary of argument, suitably paragraphed, condensing
succinctly, accurately, and clearly the argument actually made in the body of the
brief, which should not be a mere repetition of the headings under which the
argument is arranged, and should seldom exceed 2 and never 5 pages;
(5) [NO CHANGE]
(6) a short conclusion, of not more than 1 page, setting forth the
precise relief sought;
- 13 -
(7)-(8) [NO CHANGE]
(c)-(h) [NO CHANGE]
Committee Notes
1977-1996 Amendment. [NO CHANGE]
2020 Amendment. Page limits for computer-generated briefs were
converted to word counts. Page limits are retained only for briefs that are
handwritten or typewritten.
Court Commentary
[NO CHANGE]
RULE 9.370. AMICUS CURIAE
(a) [NO CHANGE]
(b) Contents and Form. An amicus brief must comply with rule 9.210(b)
but shall omit a statement of the case and facts and may not exceed 5,000 words if
computer-generated or 20 pages if handwritten or typewritten. The cover must
identify the party or parties supported. An amicus brief must include a concise
statement of the identity of the amicus curiae and its interest in the case.
(c) [NO CHANGE]
(d) Notice of Intent to File Amicus Brief in the Supreme Court of
Florida. When a party has invoked the discretionary jurisdiction of the supreme
court, an amicus curiae may file a notice with the court indicating its intent to seek
leave to file an amicus brief on the merits should the court accept jurisdiction. The
notice shall state briefly why the case is of interest to the amicus curiae, but shall
not contain argument. The body of the notice shall not exceed 250 words if
computer-generated or 1 page if handwritten or typewritten.
Committee Notes
[NO CHANGE]
- 14 - |
4,639,176 | 2020-12-03 16:03:26.750623+00 | null | https://www.floridasupremecourt.org/pre_opinion_content_download/692677 | Supreme Court of Florida
____________
No. SC19-884
____________
IN RE: AMENDMENTS TO FLORIDA RULES OF APPELLATE
PROCEDURE 9.120 AND 9.210.
December 3, 2020
PER CURIAM.
The Court has for consideration the supplemental report of The Florida Bar’s
Appellate Court Rules Committee (Committee) proposing amendments to Florida
Rules of Appellate Procedure 9.120 (Discretionary Proceedings to Review
Decisions of District Courts of Appeal) and 9.210 (Briefs). We have jurisdiction.
See art. V, § 2(a), Fla. Const.
Previously, in In re Amendments to Florida Rules of Appellate Procedure
9.120 & 9.210,
284 So. 3d 967
(Fla. 2019), the Court adopted, with modifications,
amendments to rules 9.120 and 9.210 that establish a procedure for respondents to
identify cross-review issues in discretionary review cases through the service of a
“notice of cross-review.” The Court made the following modifications to the
amendments:
A new subdivision (f) titled “Notices of Cross-Review” is
added to rule 9.120 (Discretionary Proceedings to Review Decisions
of District Courts of Appeal). The new subdivision as proposed by
the Committee would have required a respondent who intends to raise
cross-review issues in a discretionary review case to serve a notice of
cross-review within fifteen days of the rendition of this Court’s order
accepting jurisdiction. However, we have modified new subdivision
(f) of the rule to require a notice of cross-review to be served within
five days of the service of a timely filed notice to invoke the Court’s
discretionary jurisdiction. We also have added a requirement that the
notice identify the issue(s) the respondent intends to raise on cross-
review. We modified the new subdivision because we agree with the
Committee’s observation in the report that a notice of cross-review
filed at the jurisdiction determination stage of a discretionary review
case would be beneficial to the Court in deciding whether it should
accept jurisdiction in a case in which a basis exists for the Court to
exercise its discretionary jurisdiction.
Id. at 967
.
Following the issuance of In re Amendments to Florida Rules of Appellate
Procedure 9.120 & 9.210, the Committee moved for rehearing, contending that the
Court’s modifications place respondents “in a quagmire . . . by having to decide
whether to raise cross-review issues before they know the particular jurisdictional
basis and issues petitioners intend to raise and having to do so within just five days
of the notice to invoke.” The Committee also claimed that the five-day period in
which to file a notice of cross-review placed respondents at a significant
disadvantage when a notice to invoke is filed quickly after issuance of a district
court decision, and placed petitioners at a disadvantage in preparing a jurisdictional
brief, as they will be unaware of whether any cross-review issues exist until nearly
-2-
half of the ten-day period in rule 9.120(d) to file a jurisdictional brief has expired.
The Court granted the Committee’s motion, postponed the effective date of the
amendments, and directed the Committee to file a supplemental report addressing
the modified rule amendments.
The Committee has now filed a supplemental report proposing amendments
to rules 9.120 and 9.210 that dispense altogether with the requirement that a
respondent serve a notice of cross-review. The proposed amendments require the
parties to identify in a separate “statement of the issues” section of their
jurisdictional briefs the issues they intend to raise that are independent of those
upon which jurisdiction is sought. The Committee did not publish its proposals for
comment prior to filing them with the Court. After the Committee filed its report,
the Court published the proposals for comment; no comments were received.
Having considered the Committee’s supplemental report, we hereby adopt
the amendments to rules 9.120 and 9.210 as proposed by the Committee. The
amendments to rule 9.120 delete references to the service of a notice of cross-
review from subdivision (d) (Briefs on Jurisdiction), as well as language excluding
certified questions of great public importance from the jurisdictional brief
requirements. Rule 9.120(f) (Notices of Cross-Review) is replaced with a new
subdivision titled “Additional Issues on Review or Cross-Review,” under which a
party who intends to raise issues in this Court independent of those upon which
-3-
jurisdiction is based is required to identify the issues in the statement of the issues
section of his or her jurisdictional brief.
Rule 9.210(a) (Generally) is amended to permit the filing of a cross-reply
brief in cases where a cross-appeal has been filed or a respondent identifies cross-
review issues in his or her brief on jurisdiction. New subdivision (f), titled
“Contents of Briefs on Jurisdiction,” is added to rule 9.210. The new subdivision
identifies the required contents of a jurisdictional brief. It also requires that the
parties identify in the statement of issues section of their jurisdictional briefs the
issues they intend to raise if review is granted that are independent of those upon
which the Court’s jurisdiction is invoked.
Accordingly, Florida Rules of Appellate Procedure 9.120 and 9.210 are
amended as set forth in the appendix to this opinion. New language is indicated by
underscoring; deletions are indicated by struck-through type. The amendments
shall become effective on January 1, 2021, at 12:01 a.m.
It is so ordered.
CANADY, C.J., and POLSTON, LABARGA, LAWSON, MUÑIZ, COURIEL,
and GROSSHANS, JJ., concur.
THE FILING OF A MOTION FOR REHEARING SHALL NOT ALTER THE
EFFECTIVE DATE OF THESE AMENDMENTS.
-4-
Original Proceeding – Florida Rules of Appellate Procedure
Hon. Stephanie Williams Ray, Chair, and Thomas D. Hall, Past Chair, Appellate
Court Rules Committee, Tallahassee, Florida; and Joshua E. Doyle, Executive
Director, and Krys Godwin, Staff Liaison, The Florida Bar, Tallahassee, Florida,
for Petitioner
-5-
Appendix
RULE 9.120. DISCRETIONARY PROCEEDINGS TO REVIEW
DECISIONS OF DISTRICT COURTS OF APPEAL
(a)-(c) [NO CHANGE]
(d) Briefs on Jurisdiction. The petitioner’s brief, with the argument
section limited solely to the issue of the supreme court’s jurisdiction, and
accompanied by an appendix containing only a conformed copy of the decision of
the district court of appeal, shall be served within 10 days of the filing of the notice
to invoke the court’s discretionary jurisdiction or the service of a notice of cross-
review under subdivision (f) of this rule, if one is filed. The respondent’s brief on
jurisdiction shall be served within 30 days after service of petitioner’s brief.
Formal requirements for both briefs are specified in rule 9.210. No reply brief shall
be permitted. If jurisdiction is invoked under rule 9.030(a)(2)(A)(v) (certifications
of questions of great public importance by the district courts of appeal to the
supreme court), no briefs on jurisdiction shall be filed.
(e) [NO CHANGE]
(f) Notices of Cross-Review. Within 5 days of the service of a timely
filed notice to invoke the court’s discretionary jurisdiction, a respondent shall serve
a notice of cross-review if the respondent intends to file a cross-initial brief raising
any issues independent of those upon which the petitioner sought review. The
notice shall identify the issue(s) the respondent intends to raise on cross-
review.Additional Issues on Review or Cross-Review. As specified in rule 9.210,
if the petitioner or respondent intends to raise issues for review in the supreme
court independent of those on which jurisdiction is based, the petitioner or
respondent must identify those issues in the statement of the issues included in
their brief on jurisdiction.
(g) [NO CHANGE]
Committee Notes
[NO CHANGE]
-6-
RULE 9.210. BRIEFS
(a) Generally. In addition to briefs on jurisdiction under rule
9.120(d)Unless otherwise ordered by the court, the only briefs permitted to be filed
by the parties in any 1 proceeding are the initial brief, the answer brief, and a reply
brief, and a cross-reply brief. A cross-reply brief is permitted if a cross-appeal has
been filed or if the respondent identifies issues on cross-review in its brief on
jurisdiction in the supreme court. All briefs required by these rules shall be
prepared as follows:
(1)-(4) [NO CHANGE]
(5) The page limits for briefs shall be as follows:
(A) [NO CHANGE]
(B) Except as provided in subdivisions (a)(5)(C) and
(a)(5)(D) of this rule, the initial and answer briefs shall not exceed 50 pages and
the reply brief shall not exceed 15 pages. If a cross-appeal is filed or a notice of
cross-review is filedthe respondent identifies issues on cross-review in its brief on
jurisdiction in the supreme court, the appellee or respondent’s answer/cross-initial
brief shall not exceed 85 pages, and the appellant or petitioner’s reply/cross-answer
brief shall not exceed 50 pages, not more than 15 of which shall be devoted to
argument replying to the answer portion of the appellee or respondent’s
answer/cross-initial brief. Cross-reply briefs shall not exceed 15 pages.
(C)-(D) [NO CHANGE]
(E) The cover sheet, the tables of contents and citations, the
certificates of service and compliance, and the signature block for the brief’s
author shall be excluded from the page limits in subdivisions (a)(5)(A)–(a)(5)(D).
For briefs on jurisdiction, the statement of the issues also shall be excluded from
the page limit in subdivision (a)(5)(A). All pages not excluded from the
computation shall be consecutively numbered. The court may permit longer briefs.
-7-
(6) [NO CHANGE]
(b) [NO CHANGE]
(c) Contents of Answer Brief. The answer brief shall be prepared in the
same manner as the initial brief, provided that the statement of the case and of the
facts may be omitted, if the corresponding section of the initial brief is deemed
satisfactory. If a cross-appeal has been filed or a notice of cross-review has been
filedthe respondent identifies issues on cross-review in its brief on jurisdiction in
the supreme court, the answer brief shall include the issues presented in the cross-
appeal or cross-review, and argument in support of those issues.
(d)-(e) [NO CHANGE]
(f) Contents of Briefs on Jurisdiction. Briefs on jurisdiction, filed
pursuant to rule 9.120, shall contain a statement of the issues, a statement of the
case and facts, the argument, the conclusion, a table of contents, a table of
citations, a certificate of service, and, for computer-generated briefs, shall also
include a certificate of compliance in the same manner as provided in subdivisions
(a) and (b) of this rule. In the statement of the issues, petitioner shall identify any
issues independent of those on which jurisdiction is invoked that petitioner intends
to raise if the court grants review. Respondent, in its statement of the issues, shall
clearly identify any affirmative issues, independent of those on which jurisdiction
is invoked and independent of those raised by petitioner in its statement of the
issues, that respondent intends to raise on cross-review if the court grants review.
(g) Times for Service of Briefs. The times for serving jurisdiction and
initial briefs are prescribed by rules 9.110, 9.120, 9.130, and 9.140. Unless
otherwise required, the answer brief shall be served within 30 days after service of
the initial brief; the reply brief, if any, shall be served within 30 days after service
of the answer brief; and the cross-reply brief, if any, shall be served within 30 days
thereafter. In any appeal or cross-appeal, if more than 1 initial or answer brief is
authorized, the responsive brief shall be served within 30 days after the last initial
or answer brief was served. If the last authorized initial or answer brief is not
served, the responsive brief shall be served within 30 days after the last authorized
initial or answer brief could have been timely served.
-8-
(gh) Citations. Counsel are requested to use the uniform citation system
prescribed by rule 9.800.
Committee Notes
[NO CHANGE]
Court Commentary
[NO CHANGE]
-9- |
4,639,177 | 2020-12-03 16:03:27.45304+00 | null | https://www.floridasupremecourt.org/pre_opinion_content_download/692674 | Supreme Court of Florida
____________
No. SC18-2149
____________
GERHARD HOJAN,
Appellant,
vs.
STATE OF FLORIDA,
Appellee.
December 3, 2020
PER CURIAM.
Gerhard Hojan appeals two sentences of death imposed during a
resentencing that this Court ordered as a result of Hurst 1 error. We have
jurisdiction. See art. V, § 3(b)(1), Fla. Const. For the reasons below, we affirm.
BACKGROUND
The evidence presented at Hojan’s 2003 trial established that, at
approximately 4 a.m. on the morning of March 11, 2002, Hojan and Jimmy Mickel
entered a Waffle House where the victims, Barbara Nunn, Christina De La Rosa,
1. Hurst v. State,
202 So. 3d 40
(Fla. 2016), receded from in part by State v.
Poole,
297 So. 3d 487
(Fla. 2020).
and Willy Absolu, worked. Hojan v. State (Hojan I),
3 So. 3d 1204
, 1207 (Fla.
2009). The victims recognized and knew Hojan and Mickel because they had
eaten at that Waffle House on prior occasions, Mickel had previously worked
there, and Mickel and Hojan had previously admitted one of the victims to a club
where they worked.
Id.
After eating breakfast, Mickel retrieved a pair of bolt
cutters and went to the employee section of the restaurant, and Hojan ordered
Nunn, De La Rosa, and Absolu into a freezer at gunpoint, shutting them inside.
Id. at 1207-08
. While Mickel cut the locks to the cash stores, Hojan returned to the
freezer three times.
Id. at 1208
. After demanding the victims give him their cell
phones and money, Hojan returned for a third and final time and ordered the
victims to turn around and kneel, shooting each of them.
Id.
Nunn survived and
identified Mickel and Hojan as being involved. Hojan was soon apprehended and
subsequently confessed.
Id.
Hojan’s jury convicted him of two counts of first-degree murder, one count
of attempted first-degree premeditated murder, three counts of armed kidnapping,
and two counts of armed robbery. Id.2 At the penalty phase, Hojan waived his
right to present mitigation evidence.
Id. at 1210
. The jury recommended that
2. Hojan was also convicted of one count of attempted first-degree felony
murder for the shooting of Nunn. However he was not sentenced for this count
because he was sentenced for the attempted premeditated murder of the same
victim. Hojan I,
3 So. 3d at
1208 n.1.
-2-
Hojan be sentenced to death by a vote of nine to three, and the trial court followed
that recommendation and imposed two death sentences for the murders of Absolu
and De La Rosa.
Id. at 1208
. This Court affirmed Hojan’s convictions and
sentences on direct appeal,
id. at 1219
, and the United States Supreme Court
denied certiorari. Hojan v. Florida,
558 U.S. 1052
(2009).
In 2010, Hojan filed his initial motion for postconviction relief pursuant to
Florida Rule of Criminal Procedure 3.851 seeking to vacate his convictions and
sentences of death. Hojan v. State (Hojan II),
212 So. 3d 982
, 988 (Fla. 2017).
The circuit court summarily denied all of Hojan’s claims, and Hojan appealed to
this Court and petitioned for a writ of habeas corpus. Id. at 986, 988. This Court
affirmed the circuit court’s summary denial of Hojan’s rule 3.851 motion, denied
the accompanying habeas petition, but vacated Hojan’s death sentences due to
Hurst error and remanded for a new penalty phase. Id. at 1001.
At the conclusion of his new penalty-phase trial, the resentencing jury voted
twelve to zero to recommend that Hojan be sentenced to death for both of his first-
degree murder convictions. As to count one, the first-degree murder of Absolu, the
jury found that the State proved the following four aggravators beyond a
reasonable doubt: (1) the defendant was previously convicted of another capital
felony or of a felony involving the use or threat of violence to another person; (2)
the first-degree murder was committed while the defendant was engaged, or was an
-3-
accomplice, in the commission of, or an attempt to commit, or flight after
committing or attempting to commit, the crime of armed kidnapping; (3) the first-
degree murder was committed for the purpose of avoiding or preventing a lawful
arrest; and (4) the first-degree murder was especially heinous, atrocious, or cruel. 3
As to count two, the first-degree murder of De La Rosa, the jury found that the
State proved the following five aggravators beyond a reasonable doubt: (1) the
defendant was previously convicted of another capital felony or of a felony
involving the use or threat of violence to another person; (2) the first-degree
murder was committed while the defendant was engaged, or was an accomplice, in
the commission of, or an attempt to commit, or flight after committing or
attempting to commit, the crime of armed kidnapping; (3) the first-degree murder
was committed for the purpose of avoiding or preventing a lawful arrest; (4) the
first-degree murder was especially heinous, atrocious, or cruel; and (5) the first-
degree murder was committed in a cold, calculated, and premeditated manner,
without any pretense of moral or legal justification. 4
3. The jury found that the State failed to prove beyond a reasonable doubt
that the first-degree murder of Absolu was (1) committed for financial gain and (2)
committed in a cold, calculated, and premeditated manner, without any pretense of
moral or legal justification.
4. The jury found that the State failed to prove beyond a reasonable doubt
that the first-degree murder of De La Rosa was committed for financial gain.
-4-
Following the Spencer 5 hearing, the trial court found the same statutory
aggravators as the jury and assigned each aggravator “great weight.” With respect
to both counts, the trial court also found thirty nonstatutory mitigating
circumstances and assigned each of them little weight: (1) the defendant has no
criminal convictions other than the counts in this case; (2) the defendant has had no
disciplinary reports filed against him during his incarceration; (3) under the
circumstances, the defendant is a good father; (4) before his incarceration, the
defendant was a good son; since his incarceration, he has attempted to maintain a
positive relationship with his mother; and his father is deceased; (5) the defendant
has no history of drug/alcohol abuse; (6) before this incident, the defendant was a
good citizen who maintained consistent employment and helped provide for his
family; (7) the defendant has a positive influence on friends and family; (8) the
defendant has maintained positive, ongoing relationships during his incarceration;
(9) the defendant has been respectful in court; (10) defendant was physically and
emotionally abused by his father; (11) the defendant struggled to please his father
and was rejected by his father throughout his childhood; (12) the defendant was
displaced throughout his childhood; his parents sent him to reside with friends and
family members during his childhood; (13) the defendant at age fifteen was sent to
5. Spencer v. State,
615 So. 2d 688
(Fla. 1993).
-5-
live in Miami while his parents remained in Jamaica, and he had limited adult
supervision during this time; (14) the defendant did not complete high school
because he suffered from a foot injury and was unable to drive himself to school;
(15) the defendant’s mother was subservient to his father and did not serve as a
protector for him during his formative years; (16) the defendant had no positive
father figure; (17) the defendant was ridiculed throughout his childhood about his
weight by his father; (18) the defendant had a desire to please his mother and his
father; (19) the defendant was influenced by others; (20) the defendant has a
hobby; he was a passionate kite flyer; (21) the defendant has demonstrated he is
able to continue to build positive relationships while incarcerated; (22) the
defendant was told by his codefendant that “we can’t leave any witnesses”; (23)
the defendant has demonstrated remorse, as reflected in his recorded statement
made within twenty-four hours of the incident, wherein he expressed he “wished
he could take it back”; (24) the defendant has expressed remorse for his actions to
his family and has expressed remorse for the victims’ families; (25) the
defendant’s son suffers from autism and Asperger’s syndrome; the two of them
have a close relationship and his son depends upon him for advice; (26) the
defendant is loved by all his family members and friends; (27) the defendant
obtained his G.E.D. while incarcerated; (28) the defendant cooperated with police
by voluntarily giving a statement and consenting to a search of his vehicle; (29) the
-6-
defendant was diagnosed with and treated for bladder cancer; he is currently under
treatment by Dr. Gupta; and (30) the existence of any other factors in the
defendant’s character, background, or life, or the circumstances of the offense that
would mitigate against the imposition of the death penalty.6
Ultimately, the trial court followed the resentencing jury’s recommendation
and sentenced Hojan to death as to both counts. In its sentencing order, the trial
court considered and weighed the aggravating and mitigating circumstances and
found “the aggravating factors in this case far outweigh the mitigating
circumstances” with respect to both murders. Hojan now appeals his sentences of
death, arguing (1) that the trial court abused its discretion by limiting the scope of
defense counsel’s questioning during voir dire and (2) that his death sentences are
disproportionate.
ANALYSIS
Voir Dire
I. Defense Counsel’s Hypothetical.
Hojan first argues that the trial court improperly limited the scope of voir
dire by restricting his use of a hypothetical question. We review the trial court’s
6. For both counts, the jury also placed what appears to be a “1” in the
“Yes” option of the verdict form, indicating that “a mitigating circumstance or
circumstances was or were established by the greater weight of the evidence.”
-7-
ruling for abuse of discretion. Calloway v. State,
210 So. 3d 1160
, 1178 (Fla.
2017).
During voir dire, defense counsel posed the following question to a
prospective juror: “A guy kills somebody. Not self-defense. Not heat of passion.
Not duress. Meant to do it. Premeditated. Killed an innocent victim. What are
your feelings about the death penalty, only appropriate penalty for a guilty
murderer of that innocent victim?” After the State lodged an objection and the trial
court directed defense counsel to “[r]ephrase it,” an extended sidebar took place
wherein defense counsel argued that he should be allowed to question the
prospective jurors using his hypothetical concerning premeditation. The trial court
again sustained the State’s objection but granted defense counsel’s request to
“make a record” outside of the presence of the jury. After several additional
exchanges with the trial court, defense counsel stated that the ultimate question he
wanted to ask the prospective jurors as a result of his proposed hypothetical was,
“[D]o you believe that in every situation, where a defendant is, has been found
guilty or you would find him guilty of premeditated murder that death is the only
appropriate penalty[?]” Upon receiving this explanation from defense counsel, the
trial court stated, “You know how we get to that question? You ask it.”
Hojan now argues that the trial court abused its discretion by not allowing
defense counsel’s proposed hypothetical. We disagree.
-8-
We have explained that “the purpose of conducting voir dire is to secure an
impartial jury” and that a trial court’s ruling with respect to voir dire “will only be
reversed where a defendant demonstrates the partiality of the jury or an abuse of
discretion by the trial court.” San Martin v. State,
705 So. 2d 1337
, 1344 (Fla.
1997). See also Mendez v. State,
898 So. 2d 1141
, 1143 (Fla. 5th DCA 2005)
(acknowledging that while a trial court has “considerable discretion in determining
the extent of counsel’s examination of prospective jurors,” a trial court nonetheless
abuses its discretion “when it unreasonably limits counsel’s ability to conduct a
meaningful voir dire” (quoting Williams v. State,
424 So. 2d 148
, 149 (Fla. 5th
DCA 1982)); Barker v. Randolph,
239 So. 2d 110
, 112 (Fla. 1st DCA 1970)
(explaining that the trial judge has “wide latitude in the exercise of his discretion
with respect to the qualification of jurors” and that “[i]n exercising that discretion,
he may reasonably control voir dire examination in the interest of orderliness and
in the dispatch of trials”).
Hojan does not allege that his jury was partial, and he has not demonstrated
that the trial court abused its discretion by prohibiting adequate questioning on the
topic that was the subject of defense counsel’s proposed hypothetical. To the
contrary, the record shows that the trial court permitted an alternate inquiry by
defense counsel that was sufficient to allow counsel to assess any juror bias that
would affect the jurors’ ability to impartially decide the case based upon the
-9-
evidence presented at trial and the law. Defense counsel conducted a meaningful
voir dire during which he thoroughly explored the prospective jurors’ feelings
regarding the death penalty, mitigation, and whether they could consider life. For
example, defense counsel asked the prospective jurors if they could think of any
specific instances concerning someone already convicted of first-degree murder
where they would automatically vote for death, if they would automatically give
the death penalty “in a case that involved a robbery,” if they could consider
mitigation and keep an open mind, if hearing victim impact evidence would affect
their weighing process, and repeatedly explained the weighing process,
emphasizing that the death penalty is never required. Accordingly, we find no
abuse of discretion. See Franqui v. State,
699 So. 2d 1312
, 1323 (Fla. 1997)
(concluding that the trial court did not abuse its discretion in directing defense
counsel to ask a question concerning the defendant’s young age as a factor in
deciding whether to impose the death penalty “generically” where the record
reflected that “the trial court left defense counsel with plenty of latitude to discuss
mitigating circumstances with the jurors in the context of the legal instructions that
would be given by the court”); Farina v. State,
679 So. 2d 1151
, 1154 (Fla. 1996)
(holding that the trial court did not improperly restrict the defendant’s voir dire and
explaining that while “defense counsel was restricted from exploring jurors’
attitudes on every potential mitigator, the record shows that the defense, the State,
- 10 -
and the trial court either asked or instructed prospective jurors on numerous
occasions whether they could be fair to [the defendant] and his brother”), receded
from on other grounds by Franqui,
699 So. 2d at 1320
.
Moreover, even if we were to agree with Hojan that the trial court more
broadly ruled that all hypothetical voir dire questions are improper, Hojan still
would not be entitled to relief because any error was harmless beyond a reasonable
doubt. Cf. Gore v. State,
475 So. 2d 1205
, 1207 (Fla. 1985). In Gore, this Court
held that the trial court “should have allowed [defense counsel] to propound
questions to the jury as to their bias or prejudice in recommending a life sentence,”
but that the error was harmless beyond a reasonable doubt, explaining:
The jury was thoroughly questioned in regard to their attitudes toward
the death penalty and whether they felt it should be automatically
imposed or whether they would follow the court’s instructions and
make sure the circumstances were proved to support it before they
would consider it. Gore has not shown that his jury was made up of
one or more persons unalterably in favor of the death penalty or that
any of the juror’s views would prevent or substantially impair the
performance of his duties as a juror in accordance with his
instructions and his oath.
Id. at 1207-08
.
The reasoning from Gore applies here. Despite not being able to ask the
proposed hypothetical, as we have explained above, the record demonstrates that
Hojan’s defense counsel was permitted to explore the prospective jurors’ attitudes
toward the death penalty. Moreover, Hojan has not alleged, let alone shown, that
- 11 -
his jury was made up of one or more jurors unalterably in favor of the death
penalty or that any juror’s views would prevent or substantially impair the
performance of the juror’s duties in accordance with the jury’s instructions and
oath. Accordingly, even assuming the trial court erred, any error was harmless.
See
id. at 1207-08
.
II. The Trial Court’s Other Rulings With Respect to Voir Dire.
Hojan further contends that the trial court improperly restricted voir dire
questioning in three additional respects, namely by (1) ruling it would not instruct
the jury on premeditation even though defense counsel explained that a definition
of heightened premeditation was required for the CCP aggravator, (2) prohibiting
defense counsel from asking the prospective jurors if they understood that the law
is satisfied with a life without parole sentence, and (3) rebuking defense counsel
when he attempted to ask if life imprisonment is a significant enough penalty for
first-degree murder. Hojan’s assertions are without merit, as they are not an
accurate portrayal of the record.
First, although the trial court initially stated it would not instruct the jury on
premeditation, the court allowed defense counsel to read the instruction and
alternatively offered to instruct the jury on first-degree premeditated murder if
defense counsel and Hojan desired. The trial court also gave the standard jury
instruction for the CCP aggravator.
- 12 -
Second, at a hearing on a motion in limine in which the State sought to
prevent the defense from arguing that “the law favors a life sentence,” the trial
court granted the State’s motion but left open the issue of whether the defense
could inform the jurors that “the law is satisfied with a life sentence” because it
“depends upon the phraseology and the way in which [defense counsel] put a
question to the jury.”7 Moreover, defense counsel told the prospective jurors that
the death penalty was never required, telling them at one point that “even if the
aggravating factors outweigh the mitigating circumstances, find no mitigating
circumstances, it is permissible to sentence him to life . . . [b]ecause each and
every one of you are an individual. Each of you have your own moral
compassion.” The trial court also gave the standard jury instruction for mitigating
circumstances and the weighing process, instructing the jurors that, regardless of
the results of each juror’s individual weighing process, “the law neither compels
nor requires you to determine that the defendant should be sentenced to death.”
Third, the trial court did sustain the State’s objection to defense counsel’s
asking prospective jurors if they thought “life in prison is a significant enough
7. In his brief, Hojan does not identify where in the record the trial court
prohibited defense counsel from asking the prospective jurors whether they
understood that the law is satisfied with a life without parole sentence. Our review
of the record shows that during voir dire, the State objected to defense counsel’s
telling the prospective jurors that “[t]he law is satisfied with a life sentence,” but
the transcript does not show that the trial court made a ruling as to that objection.
- 13 -
penalty,” (emphasis added), but allowed counsel to ask the jurors if they thought
“life in prison is a significant penalty.” The record demonstrates that defense
counsel asked the prospective jurors this question and engaged with them on their
views.
Moreover, with respect to all three of Hojan’s additional allegations, our
review of the record shows that Hojan challenged three jurors for cause,
successfully removing one, and peremptorily struck eight jurors. This, in addition
to defense counsel’s thorough exploration of the prospective jurors’ feelings
regarding the death penalty and whether they could consider life, refutes Hojan’s
assertion that the trial court abused its discretion. See Vining v. State,
637 So. 2d 921
, 926 (Fla. 1994) (holding that the trial court did not abuse its discretion in
limiting the scope of questioning during voir dire where “defense counsel was able
to explore the potential jurors’ understanding of the two-part procedure involved
and their ability to follow the law as instructed by the judge in the penalty phase”
and where such questioning “was comprehensive enough to permit defense counsel
to strike several prospective jurors for cause”).
Accordingly, we deny relief as to these additional claims. See Franqui,
699 So. 2d at 1322-23
; Farina,
679 So. 2d at 1154
; Vining,
637 So. 2d at 926
.
- 14 -
Proportionality
Hojan also argues that his death sentences are disproportionate. However,
after oral argument in this case, we receded from the judge-made requirement to
review the comparative proportionality of death sentences as contrary to the
conformity clause of article I, section 17 of the Florida Constitution. See Lawrence
v. State, 45 Fla. L. Weekly S277, S279 (Fla. Oct. 29, 2020). Accordingly, we do
not review the comparative proportionality of Hojan’s death sentences.8
CONCLUSION
For the foregoing reasons, we affirm Hojan’s sentences of death.
It is so ordered.
CANADY, C.J., and POLSTON, LAWSON, MUÑIZ, and COURIEL, JJ., concur.
LABARGA, J., concurs in result with an opinion.
GROSSHANS, J., did not participate.
8. Although we recognize the de novo nature of resentencing, we note that
we previously held Hojan’s death sentences to be proportional. Hojan I,
3 So. 3d at 1219
. We also note that in addition to his proportionality arguments, Hojan
contends that the trial court erred in assigning little weight to the thirty mitigating
circumstances found in his case. However, Hojan fails to advance any argument as
to why we should conclude that the trial court erred in weighing mitigation and has
therefore waived the claim. See Patrick v. State,
104 So. 3d 1046
, 1066 (Fla.
2012) (concluding the appellant’s claim regarding the weight assigned to
mitigation was “without merit” because the appellant did not “allege[] with
specificity which factor should have been given more weight, or the grounds for
his assertion”). Moreover, even if Hojan had properly presented this claim, we
have repeatedly held that the weight assigned to mitigation is “within the sole
discretion of the trial court.”
Id.
- 15 -
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND,
IF FILED, DETERMINED.
LABARGA, J., concurring in result.
In light of this Court’s decision in Lawrence v. State, 45 Fla. L. Weekly
S277 (Fla. Oct. 29, 2020) (receding from proportionality review requirement in
death penalty direct appeal cases), and for the reasons expressed in my dissent in
Lawrence,
id.
at S279-82, I can only concur in the result.
An Appeal from the Circuit Court in and for Broward County,
Paul L. Backman, Judge - Case No 062002CF005900B88810
George Edward Reres of Rereslaw, LLC, Fort Lauderdale, Florida,
for Appellant
Ashley Moody, Attorney General, Tallahassee, Florida, and Lisa-Marie Lerner,
Assistant Attorney General, West Palm Beach, Florida,
for Appellee
- 16 - |
4,639,165 | 2020-12-03 15:21:15.519156+00 | null | http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2020/2020-Ohio-5512.pdf | [Cite as Fayak v. Univ. Hosps., 2020-Ohio-5512.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
AMANDA FAYAK, :
Plaintiff-Appellant, : No. 109279
v. :
UNIVERSITY HOSPITALS, ET AL., :
Defendants-Appellees. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: December 3, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-898337
Appearances:
Stephen W. Gard and David Glenn Phillips, for appellant.
Lewis, Brisbois, Bisgaard & Smith, L.L.P., David A.
Campbell and Donald G. Slezak, for appellees.
SEAN C. GALLAGHER, J.:
Plaintiff-appellant Amanda Fayak (“Fayak”) appeals the trial court’s
decision that granted summary judgment in favor of defendants-appellees
University Hospitals, et al.1 (hereinafter “the defendants”). Upon review, we affirm.
Background
Fayak is a former employee of University Hospitals Police
Department. She was employed from December 2013 until her discharge in June
2016 after an extended leave of absence. The employment application completed by
Fayak includes a provision that reads: “I agree that any claim or lawsuits relating to
my service with University Hospitals or any of its subsidiaries or affiliates must be
filed no more than six (6) months after the date of the employment action that is the
subject of the claim or lawsuit. I waive any statute of limitations to the contrary.”
The employment application was submitted with her typewritten name, which
represented her electronic signature according to the application.
Fayak alleges that from December 2013 through November 2014 and
from March to April 2015 she was subjected to gender discrimination, disparate
treatment, sexual harassment, a hostile work environment, and retaliation and that
this conduct affected her ability to perform her job. Fayak also alleges that she
suffered from stress and anxiety and had panic attacks. She took a medical leave of
1 University Hospitals is misnamed in the complaint and is known as
University Hospitals Health System, Inc. The other defendants-appellants in the
action are Ronald Dziedzicki, Allison Kennedy, Vareie Jaggie, Lt. Philip Rinehardt,
Ante Cacic, Abur-Rahim Nabeeh, Robert Hersey, and Matt Suster.
absence from December 11, 2014, to March 9, 2015, during which time she was
hospitalized or otherwise under the care and treatment of University Hospitals. She
claims that during this time, her private medical information was disclosed to
members of the University Hospitals Police Department without her consent.
Shortly after her return to work, Fayak took a lengthy leave of absence
beginning on April 23, 2015, until her eventual discharge in June 2016. Fayak does
not allege any discriminatory, harassing, or retaliatory conduct occurred after
April 23, 2015. Fayak submitted a form signed by her physician certifying her
inability to work and indicating she would be unable to work for University
Hospitals until July 1, 2015. Despite requests from University Hospitals, Fayak
provided no further documentation to support her continued leave of absence.
University Hospitals terminated her employment via letter on June 28, 2016, for the
stated reason that Fayak was “on an unauthorized/unapproved leave since July 2,
2015” and had “not provided any further information * * * to support a continued
leave of absence.”
Following her discharge, Fayak filed an initial complaint on
September 19, 2016, but subsequently the case was voluntarily dismissed without
prejudice. See Cuyahoga C.P. No. CV-16-869216 (voluntarily dismissed May 31,
2017). On February 2, 2017, Fayak refiled this action against University Hospitals,
two employees of University Hospitals, and several individual members of the
University Hospitals Police Department. The individuals named as defendants in
the refiled action had not been named as defendants in the previous complaint. The
refiled complaint raises claims for “gender discrimination, disparate treatment &
hostile work environment” in violation of R.C. Chapter 4112, “gender
discrimination, sexual harassment & hostile work environment” in violation of R.C.
Chapter 4112, “retaliation & hostile environment based on retaliation” in violation
of R.C. Chapter 4112, invasion of privacy, and intentional infliction of emotional
distress.
The defendants filed a Civ.R. 12(B)(6) motion to dismiss that was
denied by the trial court. Following further proceedings, the defendants filed a
motion for summary judgment. Among other arguments, the defendants argued
that Fayak’s claims raised in the refiled complaint are barred by the six-month
limitations period in her employment application and that the latest possible date
she could allege any wrongdoing based upon her employment was her discharge
date of June 28, 2016. The defendants further argued that Fayak failed to comply
with University Hospitals’ leave policies, that she was terminated for failing to
provide University Hospitals with requested leave documents and extending her
leave beyond University Hospitals’ maximum leave policy, and that Fayak’s claims
were otherwise unsupported by the record or failed as a matter of law.
Fayak filed a brief in opposition in which she described the conduct
underlying her claims. She argued that her claims were not barred by the applicable
limitations period, that her initial complaint had been filed less than six months
after her termination, and that her refiled complaint was filed within the one-year
savings statute. She proceeded to argue the merits of her claims. She did not
challenge the legitimacy of her discharge.
In their reply brief, the defendants claimed that Fayak did not argue
that her termination from employment was unlawful and that no unlawful conduct
was alleged to have occurred later than April 23, 2015. Therefore, the defendants
raised the argument that the original complaint was filed beyond the six-month
limitations period contained in Fayak’s employment application. The defendants
further argued against each of Fayak’s claims. Additionally, the defendants filed a
motion to strike portions of Fayak’s affidavit that was filed in support of her brief in
opposition.
Fayak filed a motion for leave to file a response to the defendants’
reply brief, stating in part that the defendants had asserted a new argument in their
reply that was not set forth in the dispositive motion. The trial court granted this
motion.
On November 7, 2019, the trial court granted the defendants’ motion
for summary judgment. The trial court observed that “Fayak does not dispute the
validity of the limitations period, only the Defendants’ contention that her claims
are untimely under [the contractual] provision.” The trial court proceeded to find
that Fayak’s claims were barred by the six-month contractual limitations period in
her employment application. The trial court recognized that the defendants had first
raised the issue that the original complaint that was filed was untimely in their reply
brief, but found the issue was properly before the court because it had permitted
Fayak to file a surreply brief. The trial court proceeded to find as follows:
All the events that constitute [Fayak’s] claims occurred prior to her
last date of active employment on April 23, 2015, when she began her
medical leave. Therefore, there is no genuine dispute of material fact
that the original complaint filed on September 19, 2016 was well
outside the original six-month limitation period.
* * * Although Fayak has presented evidence that her working
environment caused her stress-related medical leave, she has not
presented evidence that any of the events that occurred prior to
April 23, 2015 was the ultimate cause of her termination.
The Defendants have provided evidence that the cause of
Fayak’s termination was because she failed to provide documentation
to support her continued leave, and that in fact, her leave was
unauthorized as of July 1, 2015. Fayak has not presented any evidence
to demonstrate that this termination occurred for any other reason.
***
Because there are no facts causally connecting Fayak’s
termination to any of the actions that constituted the hostile work
environment or intentional infliction of emotion distress, there is no
genuine dispute of material fact that the events giving rise to Fayak’s
claims all arose prior to April 23, 2015. Therefore, she would need to
have filed her original suit within six months of that date at the latest
to remain within the contractual limitations period. Although neither
party specifically states the date of the invasion of privacy claim, it is
clear from the evidence that this event occurred before her medical
leave began in April 2015, and therefore is barred under the
limitations period.
Having found the contractual limitations period barred the action, the
trial court did not address the merits of any of the claims. The trial court also
deemed moot the motion to strike that had been filed by the defendants. Fayak
timely filed this appeal.
Law and Analysis
Appellate review of summary judgment is de novo, governed by the
standards set forth in Civ.R. 56. Argabrite v. Neer,
149 Ohio St. 3d 349
, 2016-Ohio-
8374,
75 N.E.3d 161
, ¶ 14. Summary judgment is appropriate only when “[1] no
genuine issue of material fact remains to be litigated, [2] the moving party is entitled
to judgment as a matter of law, and [3] viewing the evidence in the light most
favorable to the nonmoving party, reasonable minds can reach a conclusion only in
favor of the moving party.”
Id., citing M.H. v.
Cuyahoga Falls,
134 Ohio St. 3d 65
,
2012-Ohio-5336,
979 N.E.2d 1261
, ¶ 12. Once the moving party has satisfied its
initial burden of identifying specific facts in the record that demonstrate an
entitlement to summary judgment under Civ.R. 56, the nonmoving party has a
reciprocal burden to set forth specific facts showing there is a genuine issue for trial.
Crenshaw v. Cleveland Law Dept., 8th Dist. Cuyahoga No. 108519, 2020-Ohio-921,
¶ 33, citing Dresher v. Burt,
75 Ohio St. 3d 280
, 292-293, 1996-Ohio-107,
662 N.E.2d 264
.
Fayak raises three assignments of error for our review. We begin with
the first and second assignments of error. Under her first assignment of error, Fayak
claims the trial court erred by failing to hold invalid the six-month limitations period
in her employment application. Under her second assignment of error, she argues
that the reasonableness of this provision is a matter for the jury to resolve.
The defendants assert that Fayak did not challenge the validity,
application, or reasonableness of the six-month limitations period at the trial court
level and has waived those arguments on appeal. “A first principle of appellate
jurisdiction is that a party ordinarily may not present an argument on appeal that it
failed to raise below.” State v. Wintermeyer,
158 Ohio St. 3d 513
, 2019-Ohio-5156,
145 N.E.3d 278
, ¶ 10, citing Goldfuss v. Davidson,
79 Ohio St. 3d 116
, 121, 1997-Ohio-
401,
679 N.E.2d 1099
; see also Davis v. Cleveland, 8th Dist. Cuyahoga No. 99187,
2013-Ohio-2914, ¶ 15. Although motions for summary judgment are reviewed de
novo, the parties are not given a second chance to raise arguments that should have
been raised below. Gardi v. Bd. of Edn., 8th Dist. Cuyahoga No. 99414, 2013-Ohio-
3436, ¶ 27, citing Hamper v. Suburban Umpires Assn., 8th Dist. Cuyahoga No.
92505, 2009-Ohio-5376, ¶ 27; see also S.A.S. v. Wellington School, 10th Dist.
Franklin No. 19AP-305, 2020-Ohio-4478, ¶ 39.
Arguably, Fayak has waived the challenges presented. However, we
recognize that Fayak did argue in the trial court that her claims were not barred by
the applicable limitations period. Also, the trial court ultimately found the
limitations period in her employment application barred her claims. Therefore, we
shall afford some leeway and consider whether the six-month limitations period in
the employment application is enforceable against her claims.
Fayak argues that defendants first raised the argument that her
original complaint was not timely filed in their reply brief and that they should not
be permitted to obtain summary judgment by ambush. Although Fayak contends
that she filed a motion to strike the new argument on September 6, 2019, the docket
reflects that she filed a “motion for leave to file a response to defendants’ reply to
their dispositive motion.” In that motion, she requested that the new argument be
stricken from the reply. Rather than striking the new argument, the trial court
exercised its discretion and granted her motion for leave to file a response. The trial
court addressed this in its opinion and found no prejudice occurred because the trial
court granted Fayak’s motion for leave to file a response to the arguments raised in
the reply brief. While it is generally improper to raise a new issue in a reply brief, as
Ohio courts have held: “[W]hen a new argument is raised in a reply, the proper
procedure is to strike the reply or, alternatively, to allow the opposing party to file a
surreply.” Deutsche Bank Natl. Trust Co. v. Ayers, 11th Dist. Portage No. 2019-P-
0094, 2020-Ohio-1332, ¶ 49, citing Hicks v. Cadle Co., 2016-Ohio-4728,
66 N.E.3d 1255
, ¶ 18 (11th Dist.), quoting Baker v. Coast to Coast Manpower, L.L.C., 3d Dist.
Hancock No. 5-11-36, 2012-Ohio-2840, ¶ 35. Therefore, the trial court followed the
correct procedure, all parties had the opportunity to address the issue, and the trial
court was permitted to consider the argument.
On appeal, Fayak challenges the validity of the shortened limitations
period as applied to actions brought pursuant R.C. Chapter 4112. In this case,
Fayak’s application for employment contains a clause under which she agreed that
any claim or lawsuits relating to her service with University Hospitals was required
to be filed “no more than six (6) months after the date of the employment action that
is the subject of the claim or lawsuit.” Fayak argues that this provision is void and
unenforceable. We do not agree.
Under Ohio law, it has been held that “[g]enerally, in the absence of a
controlling statute to the contrary, a provision in a contract may validly limit, as
between the parties, the time for bringing an action on such contract to a period
less than that prescribed in a general statute of limitations provided that the
shorter period shall be a reasonable one.” (Emphasis sic.) Kraly v. Vannewkirk,
69 Ohio St. 3d 627
, 632,
635 N.E.2d 323
(1994), quoting Order of United
Commercial Travelers v. Wolfe,
331 U.S. 586
, 608,
67 S. Ct. 1355
,
91 L. Ed. 1687
(1947); see also Globe Am. Cas. Co. v. Goodman,
41 Ohio App. 2d 231
and 237,
325 N.E.2d 257
(8th Dist.1974). Further, a shortened limitations period contained in an
application for employment can bar claims that are untimely filed. Fry v. FCA US
L.L.C., 2017-Ohio-7005,
143 N.E.3d 1108
(6th Dist.), appeal not allowed, 2018-
Ohio-723,
92 N.E.3d 880
(claims for disability discrimination, wrongful
termination, failure to provide a reasonable accommodation, and intentional
infliction of emotional distress were barred by 180-day limitation period in
employment application). As the defendants argue, courts have held that a six-
month contractual limitations period is enforceable for employment-related claims
and is not inherently unreasonable. See Maxwell v. Univ. Hosps. Health Sys., Inc.,
Cuyahoga C.P. No. CV-15-840036 (Apr. 28, 2017); Terry v. Cent. Transport, Inc.,
N.D. Ohio No. 1:09 CV 2432,
2011 U.S. Dist. LEXIS 83454
, 18 (July 29, 2011);
Hoskins v. DaimlerChrysler Corp., N.D. Ohio No. 3:03cv338, 2005 U.S. Dist.
LEXIS 45418, 13-14 (Mar. 30, 2005); Thurman v. DaimlerChrysler Corp.,
397 F.3d 352
, 357 (6th Cir.2004) (finding a 180-day contractual period of limitations set forth
in a job application was reasonable and barred state law discrimination claims as
well as federal race discrimination claims brought under Section 1981).
Fayak’s argument against the enforcement of the shortened
limitations period relies on federal case law governing claims under Title VII of the
Civil Rights Act of 1964, 42 U.S.C. 2000e, et seq. In Logan v. MGM Grand Detroit
Casino,
939 F.3d 824
(6th Cir.2019), the Sixth Circuit held that “contractual clauses
that purport to shorten the limitation period of Title VII to bring suit are not
enforceable.”
Id. at 833.
Fayak argues that Chapter 4112 of the Ohio Revised Code
is intended to operate in tandem with Title VII and that Logan should be applied to
claims brought pursuant to Title VII as well as R.C. Chapter 4112. In Logan, the
Sixth Circuit recognized that Title VII “creates a uniform, nationwide system” for
resolving claims of employment discrimination and that adopting state-law contract
principles would result in similarly situated plaintiffs in different states having
different rights in the enforcement of “wholly federal claims in federal courts.”
Id. at 832-833.
Logan was limited to Title VII claims and has not been applied to state-
law claims. See Harwood v. N. Am. Bancard L.L.C., E.D.Mich. No. 18-cv-12567,
2020 U.S. Dist. LEXIS 75516
, 34-35 (Apr. 29, 2020) (applying Logan to Title VII
claims, but enforcing shortened limitations period against claims under Michigan’s
Elliot-Larsen Civil Rights Act).
Nonetheless, Fayak argues that the Supreme Court of Ohio has
recognized that the law governing Title VII lawsuits is generally applicable to
lawsuits involving alleged violations of R.C. Chapter 4112. See Hampel v. Food
Ingredients Specialties,
89 Ohio St. 3d 169
, 175, 2000-Ohio-128,
729 N.E.2d 726
);
Little Forest Med. Ctr. v. OCRC,
61 Ohio St. 3d 607
, 609-610,
575 N.E.2d 1164
(1992). However, in Logan, the court distinguished application of a contractual
limitations period when a general statute of limitations is involved, such as under
42 U.S.C. Section 1983, from the limitations periods of Title VII “that requires
application of those statutorily prescribed limitations periods rather than allowing
contractual limitations periods.”
Id. at 834.
As stated in Logan, “[i]n situations
where only a general limitation period applied, such as ERISA and § 1981, we have
allowed the limitation period to be contractually altered.”
Id. at 831.
Therefore,
Logan has no application to Fayak’s claims under Ohio law.
Ohio courts have applied shortened contractual limitations periods to
employment discrimination claims. See Fry at ¶ 12 and 27; Maxwell. Further,
courts in other jurisdictions have held that a six-month limitations period within an
employment application is not unreasonable or against public policy under state
law. See Evans v. Canal St. Brewing Co. L.L.C., E.D.Mich. No. 18-cv-12631,
2019 U.S. Dist. LEXIS 57857
, 15 (Apr. 4, 2019) (Michigan law); Walker v. TA Operating
L.L.C., W.D.Ark. No. 4:14-cv-4055,
2016 U.S. Dist. LEXIS 49647
(Apr. 13, 2016)
(Arkansas law);
Thurman, 397 F.3d at 357-359
(Michigan law); Soltani v. W. & S.
Life Ins. Co.,
258 F.3d 1038
, 1044-1045 (9th Cir.2001) (California law); Taylor v.
W. & S. Life Ins. Co.,
966 F.2d 1188
, 1206 (7th Cir.1992) (Illinois law); Morgan v.
Fed. Express Corp.,
114 F. Supp. 3d 434
, 444 (S.D. Tex.2015) (Texas law); Vega v.
Fed. Express Corp., No. 09 CIV 07637,
2011 U.S. Dist. LEXIS 111531
, (S.D.N.Y.
Sept. 29, 2011) (New York law); Badgett v. Fed. Express Corp.,
378 F. Supp. 2d 613
,
623 (M.D.N.C.2005) (North Carolina law). Likewise, we find that the six-month
limitations period in Fayak’s employment application is reasonable and enforceable
under Ohio law.
Insofar as Fayak attempts to challenge whether she agreed to the
limitations provision in her employment application as well as the language of the
provision, she did not raise these or her related arguments in the trial court. Here,
we apply the “familiar principle of law that a party who does not raise an issue in the
trial court may not ordinarily raise that issue for the first time on appeal.”
Wintermeyer,
158 Ohio St. 3d 513
, 2019-Ohio-5156,
145 N.E.3d 278
, at ¶ 1.
However, we note that in Fry it was found that an application for employment
constituted an offer upon its presentation and that “[w]hen appellant executed the
application, his acceptance of the offer was complete, and the agreement was
formed.”
Id. at ¶ 18.
Fayak does not state in her affidavit that she did not read and
understand the employment application. Although she now claims on appeal that
she did not agree to be bound by the arbitration clause and asserts there is no
evidence as to who typed her name on the employment application, she never
disputed that she submitted the employment application, which in addition to her
typed name that “represent[s] your electronic signature” also provided her social
security number and driver’s license number. Arguably, she was responsible for
reviewing the application and consented to the terms by submitting the online
application with her electronic signature. However, these arguments were not
raised in the trial court.
Fayak’s first and second assignments of error are overruled.
Under her third assignment of error, Fayak argues that there are
genuine issues of material fact as to the date the limitations period began to run and
whether the grounds for her employment termination were pretextual.
Fayak argues that Ohio’s savings statute, R.C. 2305.19, should apply
to her claims because this is a refiled action. However, the individual defendants
were not parties to the 2016 lawsuit, and we agree with the trial court’s
determination that “there is no genuine dispute of material fact that the events
giving rise to Fayak’s claims all arose prior to April 23, 2015.” Therefore, the original
action was untimely.
While Fayak claims that there exist material issues of fact as to the
date the limitations period began to run and whether the grounds for her
termination were pretextual, these issues were not raised in the trial court. Our
review reflects that Fayak was on a 14-month leave of absence prior to her discharge
on June 28, 2016. No adverse conduct is alleged to have occurred during her leave
of absence. The defendants presented evidence to show that Fayak’s leave of
absence was unauthorized as of July 1, 2015 and that she was terminated because
she failed to provide documentation to support her continued leave of absence.
Fayak offered no evidence to demonstrate her termination was for any other reason.
In her brief in opposition to summary judgment, she conceded she was unable to
return to work at the expiration of her leave of absence. However, she provided no
medical documentation to support her unauthorized leave of absence to University
Hospitals. We agree with the trial court that there are no facts causally connecting
Fayak’s termination to any of her claims. We find no genuine issue of material fact
to exist.
We will not consider the remaining arguments that are being raised
for the first time on appeal. We overrule Fayak’s third assignment of error.
Finally, we are mindful that the trial court granted summary
judgment solely for the reason that Fayak’s claims were untimely filed under the
contractual limitations period. We certainly understand the gravity of the claims
that have been raised. However, under Ohio law, the shortened limitations period
is enforceable against Fayak’s claims. The trial court did not consider the merits of
the claims or other issues in ruling on the motion for summary judgment. Issues
raised in summary judgment motions that are not considered by the trial court
should not be determined by an appellate court in the first instance. Meekins v.
Oberlin, 8th Dist. Cuyahoga No. 106060, 2018-Ohio-1308, ¶ 24-26; Ocwen Loan
Servicing, L.L.C. v. McBenttes, 9th Dist. Summit No. 29343, 2019-Ohio-4884, ¶ 8;
Montville Lakes Cluster Homeowners Assn. Phase One v. Montville Lakes
Homeowners Assn., 9th Dist. Medina No. 16CA0082-M, 2017-Ohio-7920, ¶ 17.
“The better practice is to allow the trial court to analyze the evidence in the first
instance.” Browne v. Artex Oil Co.,
158 Ohio St. 3d 398
, 2019-Ohio-4809,
144 N.E.3d 378
, ¶ 18; see also Murphy v. Reynoldsburg,
65 Ohio St. 3d 356
, 360,
1992-Ohio-95,
604 N.E.2d 138
. (“[T]he trial court’s function cannot be replaced by
an ‘independent’ review of an appellate court.”) Therefore, we decline to consider
any arguments that were not addressed by the trial court in the first instance.
Judgment affirmed.
It is ordered that appellees recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the
common pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
__________________________________
SEAN C. GALLAGHER, JUDGE
MARY J. BOYLE., P.J., and
KATHLEEN ANN KEOUGH, J., CONCUR |
4,639,205 | 2020-12-03 16:10:21.405243+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_07263.htm | Van Ryn v Goland (2020 NY Slip Op 07263)
Van Ryn v Goland
2020 NY Slip Op 07263
Decided on December 3, 2020
Appellate Division, Third Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided and Entered: December 3, 2020
530037
[*1]Paul W. Van Ryn, Appellant,
v
Lois Goland, Respondent.
Calendar Date: October 14, 2020
Before: Garry, P.J., Egan Jr., Lynch, Clark and Colangelo, JJ.
Paul W. Van Ryn, Delmar, appellant pro se.
Tully Rinckey PLLC, Albany (Christine F. Redfield of counsel), for respondent.
Garry, P.J.
Appeals (1) from an order of the Supreme Court (Platkin, J.), entered August 27, 2019 in Albany County, which, among other things, denied plaintiff's motion to quash a subpoena duces tecum, and (2) from an order of said court, entered September 18, 2019 in Albany County, which quashed a subpoena ad testificandum issued by plaintiff.
Plaintiff and defendant were divorced in 2009. Their separation agreement, incorporated but not merged into the judgment of divorce, provided that plaintiff would receive a Majauskas share in defendant's pension. Following defendant's 2015 retirement, the parties were unable to agree on the amount that plaintiff should receive, and he commenced this action. In December 2017, after extended negotiations, the parties executed a settlement agreement (hereinafter the 2017 agreement), drafted by defendant's counsel, providing that plaintiff would receive a 50 percent Majauskas share in defendant's pension and setting forth a method for calculating this amount. After both parties had executed the 2017 agreement, plaintiff claimed that the calculation method described therein entitled him to a 66 percent share of the pension. Defendant asserted that the parties' true intent was for plaintiff to receive a 33 percent share and that the language on which plaintiff relied arose from a drafting error by her counsel. Plaintiff moved for an order enforcing his interpretation of the 2017 agreement. Defendant opposed and cross-moved for an order confirming her interpretation.
In November 2018, at the conclusion of oral argument, Supreme Court ruled from the bench that the 2017 agreement was ambiguous and that an evidentiary hearing was required to receive extrinsic evidence germane to the issues of mistake and the parties' intentions, including testimony from the parties and their respective counsel. Thereafter, defendant submitted a proposed subpoena duces tecum (hereinafter the January 2019 subpoena) seeking to compel plaintiff's counsel to testify at the evidentiary hearing and to produce all communications between plaintiff and his counsel related to the 2017 agreement. In January 2019, the court issued a letter decision finding that plaintiff had waived the attorney-client privilege as to these matters, and therefore signed the January 2019 subpoena, with certain limitations. Plaintiff's counsel then withdrew from the representation, and plaintiff — an experienced matrimonial attorney — thereafter represented himself.
As pertinent here, plaintiff thereafter moved for reargument of the November 2018 bench decision, the January 2019 letter decision and the January 2019 subpoena itself. He also moved for orders quashing the January 2019 subpoena and disqualifying defendant's counsel. Defendant opposed these motions.[FN1] The court issued an order (hereinafter the August 2019 order) that partially granted plaintiff's motion for reargument by imposing further limits on the January 2019 subpoena, and denied the remainder of that motion and the other motions. Plaintiff then served Supreme Court with a subpoena ad testificandum (hereinafter the September 2019 subpoena) commanding Supreme Court Justice Richard M. Platkin to appear at the evidentiary hearing as a witness on plaintiff's behalf. Acting sua sponte, the court issued an order (hereinafter the September 2019 order) quashing this subpoena. Plaintiff appeals from the August 2019 and September 2019 orders.
It is well established that no appeal lies from the denial of a motion for reargument (see CPLR 5701 [a] [2] [viii]; Matter of Reed v Annucci, 182 AD3d 883, 884 n [2020], lv denied 35 NY3d 908 [2020], lv dismissed and denied 35 NY3d 1075 [2020]; Budin v Davis, 172 AD3d 1676, 1679 [2019]; Abele Tractor & Equip. Co., Inc. v Schaeffer, 167 AD3d 1256, 1260 [2018]). Where, as here, a court considers the merits of a motion for reargument in the course of denying the motion, this Court may "deem the court to have granted reargument and adhered to its prior decision" and, thus, permit appellate review (Cloke v Findlan, 165 AD3d 1545, 1546-1547 [2018] [internal quotation marks and citation omitted]; see CPLR 5701 [a] [2] [viii]; Rodriguez v Jacoby & Meyers, LLP, 126 AD3d 1183, 1184 [2015], lv denied 25 NY3d 912 [2015]). That procedure is not available here, however; the November 2018 bench decision, the January 2019 letter decision and the January 2019 subpoena, challenged in plaintiff's reargument motion, were not themselves appealable. Significantly, plaintiff moved in this Court in March 2019 for permission to appeal from the same underlying decisions, and this Court denied the motion (2019 NY Slip Op 67811[U] [2019]; see CPLR 5701 [c]). The November 2018 bench decision was not appealable because it was not reduced to an order (see CPLR 5512 [a]; 5701 [a] [2]; [c]; Howell v State of New York, 169 AD3d 1208, 1209 n 1 [2019], lv denied 33 NY3d 907 [2019]; Matter of Marc D. v Fulton County Dept. of Social Servs., 79 AD3d 1534, 1535 [2010]). For similar reasons, no appeal could be taken from Supreme Court's January 2019 letter decision (see Gunn v Palmieri, 86 NY2d 830, 830 [1995]; Matter of Darrow v Darrow, 106 AD3d 1388, 1390 n 5 [2013]). Likewise, the January 2019 subpoena was not appealable (see CPLR 5512 [a]; Matter of Boikess v Aspland, 24 NY2d 136, 138-139 [1969]; Matter of Zelter v Nash, 285 App Div 1214, 1214 [1955]). Accordingly, none of plaintiff's arguments challenging the denial of his motion for reargument are properly before this Court, and they will not be addressed.[FN2]
Further, to the extent that plaintiff's notice of appeal from the August 2019 order purports to seek appellate review of "decisions and orders [that] denied a [m]otion to [s]ettle/[m]otion for [s]ummary [j]udgment interpreting [the 2017 agreement]," our record does not reveal that any such decisions or orders have been issued. Instead, and critically, Supreme Court has not yet decided the parties' motion and cross motion to confirm and enforce their respective interpretations of the 2017 agreement; this determination will not be made until after the evidentiary hearing. As such, plaintiff's arguments regarding the issues raised in the motion and cross motion — including such matters as mistake, bad faith, the manner in which the 2017 agreement should be interpreted and the share of defendant's pension that plaintiff should receive — are premature and will not be addressed. Thus, the only matters that are properly before this Court upon this appeal are whether Supreme Court properly denied plaintiff's motions to quash the January 2019 subpoena and to disqualify defendant's counsel, and whether the court properly quashed the September 2019 subpoena.
Turning first to the denial of plaintiff's motion to quash the January 2019 subpoena, this relief is granted "only where the futility of the process to uncover anything legitimate is inevitable or obvious or where the information sought is utterly irrelevant to any proper inquiry" (Matter of Board of Educ. of the City Sch. Dist. of the City of N.Y. v New York State Dept. of Educ., 182 AD3d 664, 665-666 [2020] [internal quotation marks and citations omitted]). It was plaintiff's burden to establish the existence of such circumstances (see Matter of Kapon v Koch, 23 NY3d 32, 39 [2014]). He sought to do so by arguing that his communications with his former counsel were privileged and that no basis existed to abrogate the privilege. However, a client "who permits his [or her] attorney to testify regarding [a] matter is deemed to have impliedly waived the attorney-client privilege" (Jakobleff v Cerrato, Sweeney & Cohn, 97 AD2d 834, 835 [1983] [internal citation omitted]).
Here, plaintiff's former counsel submitted two sworn affidavits in support of plaintiff's motion for enforcement of the 2017 agreement in which, among other things, he described his opinions and those expressed to him by plaintiff about certain differences between that agreement and the parties' prior negotiations. Plaintiff's former counsel averred that he and plaintiff "immediately recognized the insertion of new . . . language" that differed from the parties' previous negotiations, stated that he advised plaintiff to sign the 2017 agreement, described the reasons expressed by plaintiff for doing so — including the fact that plaintiff would receive a larger share of defendant's pension than had previously been discussed — and denied that he or plaintiff acted in bad faith. We recognize that these communications between plaintiff and his former counsel were privileged, as they were "made for the purpose of obtaining or facilitating legal advice" (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 NY3d 616, 623 [2016]; see CPLR 4503 [a] [1]). We find, however, that plaintiff waived that privilege when he allowed his counsel to act on his behalf by selectively and voluntarily disclosing some of their communications (see Metropolitan Bridge & Scaffolds Corp. v New York City Hous. Auth., 168 AD3d 569, 572 [2019]; Hudson Val. Mar., Inc. v Town of Cortlandt, 30 AD3d 378, 379 [2006]; Jakobleff v Cerrato, Sweeney & Cohn, 97 AD2d at 835).
We further note that "waiver of privilege occurs where a party affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the party asserting the privilege, and application of the privilege would deprive the adversary of vital information" (Deutsche Bank Trust Co. of Ams. v Tri-Links Inv. Trust, 43 AD3d 56, 63-64 [2007]). Here, the statements by plaintiff's former counsel about plaintiff's awareness of the effect of the contested provision and his alleged good faith in executing the 2017 agreement placed the questions of mistake and good faith in issue, revealing that plaintiff "asserted a claim or defense that he intend[ed] to prove by use of the privileged materials" (id. at 64 [internal quotation marks and citations omitted]; see New York TRW Tit. Ins. v Wade's Can. Inn & Cocktail Lounge, 225 AD2d 863, 864 [1996]). Finally, "it cannot be said that the information sought [from plaintiff's former counsel] is utterly irrelevant" (Matter of Board of Educ. of the City Sch. Dist. of the City of N.Y. v New York State Dept. of Educ., 182 AD3d at 666 [internal quotation marks and [*2]citations omitted]). Accordingly, Supreme Court did not err in denying plaintiff's motion to quash the January 2019 subpoena on the ground that plaintiff had waived the attorney-client privilege.[FN3]
Next, plaintiff contends that Supreme Court should have granted his motion to disqualify defendant's counsel. "When considering a motion to disqualify counsel, the court must consider the totality of the circumstances and carefully balance the right of a party to be represented by counsel of his or her choosing against the other party's right to be free from possible prejudice due to the questioned representation" (Lilley v Greene Cent. Sch. Dist., 168 AD3d 1180, 1183 [2019] [internal quotation marks and citations omitted]). First addressing plaintiff's allegation that there is a conflict of interest, "a lawyer shall not represent a client if a reasonable lawyer would conclude that . . . there is a significant risk that the lawyer's professional judgment on behalf of a client will be adversely affected by the lawyer's own financial, business, property or other personal interests" (Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.7 [a] [2]; see Greene v Greene, 47 NY2d 447, 452 [1979]). Plaintiff argues that the interests of defendant and her counsel are adverse and require disqualification, because defendant's counsel is allegedly at risk of personal liability to defendant for malpractice arising out of her acknowledged error in drafting the 2017 agreement. Defendant — an attorney — averred by affidavit that she understood the pertinent principles of ethics and conflict. She stated that her counsel had fully advised her of the alleged drafting error and the potential for a future malpractice claim, that her counsel had recommended that defendant obtain independent legal representation, and that defendant had rejected this advice because she wished to continue to be represented by the counsel of her choice.
Plaintiff asserts that defendant's preference to retain her counsel is immaterial because their alleged conflict of interest is "nonconsentable" (Jay Deitz & Assoc. of Nassau County, Ltd. v Breslow & Walker, LLP, 153 AD3d 503, 505 [2017] [internal quotation marks and citation omitted], lv denied 30 NY3d 907 [2017]; compare Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.7 [b]; Bynum v Camp Bisco, LLC, 151 AD3d 1427, 1429 [2017]). However, we need not determine whether plaintiff is correct in this claim; we agree with Supreme Court that plaintiff failed in the first instance to meet his burden to establish that there is a risk of any significance that defendant and her counsel have adverse interests. Plaintiff's argument that malpractice liability may arise if he prevails in this litigation necessarily leads to the conclusion that defendant and her counsel share an identical interest in advocating for defendant to prevail. Further, plaintiff's assertion that defendant's counsel will have personal liability for an eventual malpractice claim is entirely conjectural, as this can arise only if plaintiff first prevails in this litigation, defendant then prevails in a subsequent malpractice action and, finally, defense counsel's malpractice carrier disclaims coverage for reasons that plaintiff speculates [*3]may occur. Accordingly, plaintiff has not shown "a significant risk" of adversity between the interests of defendant and her counsel, and nothing in the totality of the circumstances calls for the harsh sanction of disqualifying the counsel of defendant's choice (Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.7 [a] [2]; see Biscone v Carnevale, 186 AD2d 942, 943-944 [1992]; compare Greene v Greene, 47 NY2d at 452-453).
We likewise find no merit in plaintiff's assertion that defendant's counsel must be disqualified because her testimony on the issue of bad faith will be required at the evidentiary hearing. "To succeed on a motion to disqualify counsel on the ground that he or she may be called as a witness, the movant has the burden of demonstrating that the testimony of the opposing party's counsel is necessary to his or her case, and that such testimony would be prejudicial to the opposing party" (Baram v Baram, 154 AD3d 912, 913 [2017] [citations omitted]; see Rules of Professional Conduct [22 NYCRR 1200.0] rule 3.7). This rule "provide[s] guidance, not binding authority, for courts in determining whether a party's law firm, at its adversary's instance, should be disqualified during litigation" (S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d 437, 440 [1987]). Here, plaintiff contends that defendant's counsel is the only witness who will be able to testify about certain statements related to the 2017 agreement that were allegedly made to her by plaintiff's former counsel at a December 2017 settlement conference. Under the January 2019 subpoena, however, testimony on this issue will be available from plaintiff's former counsel himself, the source of the remarks; thus, plaintiff has not established that the testimony of defendant's counsel will be "strictly necessary" to his case (id. at 446; compare Baram v Baram, 154 AD3d at 913; Skiff-Murray v Murray, 3 AD3d 610, 611 [2004]). Further, plaintiff has not met the second prong of the test; he has not demonstrated that any "taint or unfairness" toward defendant will result if defendant's counsel testifies about the disputed remarks (S & S Hotel Ventures Ltd. Partnership v 777 S. H. Corp., 69 NY2d at 445; see Levy v 42 Dune Rd., LLC, 162 AD3d 651, 653 [2018]).
Finally, we reject plaintiff's contention that Supreme Court erred in quashing the September 2019 subpoena. Plaintiff asserts that the testimony of Justice Platkin will be required, as he was present at conferences held in December 2017 and May 2018, when certain remarks and representations were allegedly made. However, "[t]he disqualification of [t]rial [j]udges as witnesses is absolute, so far as the trials in which they preside are concerned" (Jerome Prince, Richardson on Evidence § 6-111 [Farrell 11th ed 1995]; see People v Dohring, 59 NY 374, 378 [1874]; Matter of Sheen, 145 Misc 2d 920, 921 [Sur Ct, Bronx County 1989]). A judge shall disqualify himself or herself from presiding over a matter if "the judge's impartiality might reasonably be questioned, including but not limited to instances where . . . the judge has personal knowledge of disputed evidentiary facts concerning the proceeding" (Rules Governing Judicial Conduct [22 NYCRR] § 100.3 [E] [1] [a] [ii]). Here, however, plaintiff did not move for recusal.[FN4] "The mere service of a witness subpoena . . . does not in and of itself disqualify a judge from [*4]continuing to preside over the action. . . . [A] claim that the judge is a material witness must be made in good faith and must be based on fact" (Oakes v Muka, 56 AD3d 1057, 1059 [2008] [internal quotation marks, brackets and citation omitted]). Moreover, "[p]ublic policy encourages the settlement of lawsuits and directs that [j]udges . . . take part in settlement conferences without fear that they may be called to testify about materials or information obtained during these private conferences" (Baghoomian v Basquiat, 167 AD2d 124, 125 [1990]).[FN5]
Here, plaintiff has not established a good faith factual basis for overriding the prohibition against requiring judges to testify in the same matters over which they are presiding, nor has he shown that Justice Platkin must be disqualified to permit his testimony. Plaintiff's former counsel and defendant's counsel also witnessed the disputed events, and plaintiff has not shown that Justice Platkin has any knowledge that was not available to them (compare People v Gentile, 96 AD2d 950, 951-952 [1983]; People v Rodriguez, 14 AD2d 917, 918 [1961]). Considering all of the circumstances, including assurances of impartiality made by Justice Platkin to the parties, we find no error in the September 2019 order quashing the subpoena (see Oakes v Muka, 56 AD3d at 1059; People v Rodriguez, 14 AD2d at 918).
Egan Jr., Lynch, Clark and Colangelo, JJ., concur.
ORDERED that the orders are affirmed, with costs.
Footnotes
Footnote 1: Plaintiff also moved for permission to engage in disclosure, and defendant cross-moved for an order placing maintenance payments in escrow. Supreme Court denied the motion and the cross motion. As plaintiff does not challenge the denial of his disclosure motion upon this appeal, we deem any related issues to be abandoned (see Hockett v City of Ithaca, 149 AD3d 1378, 1380 [2017], lv denied 29 NY3d 916 [2017]).
Footnote 2: We deem any claims related to the portion of Supreme Court's order that partially granted the motion for reargument by further limiting the January 2019 subpoena to be abandoned, as plaintiff did not raise them upon this appeal (see CPLR 5701 [a] [2] [viii]; Matter of Urbach v Farrell, 229 AD2d 275, 277 n 2 [1997], appeal dismissed 90 NY2d 888 [1997], lv denied 90 NY2d 810 [1997]).
Footnote 3: As our determination is based upon the unusual circumstance of the intentional submission by plaintiff's former counsel of sworn affidavits disclosing otherwise-privileged communications, we reject plaintiff's argument that future litigation settlements may be hampered if counsel fear that disclosing their clients' positions during negotiations may waive the privilege.
Footnote 4: Supreme Court noted that plaintiff had expressly disavowed any intent to seek recusal. The court further observed that, before plaintiff served the September 2019 subpoena, it had twice warned plaintiff that to do so would be improper.
Footnote 5: A judge who is not presiding over an action or a proceeding may be found to be competent to testify about his or her observations in a previous matter (see Matter of Sheen, 145 Misc 2d at 921), and this is particularly true when the judge is the only available witness (see People v Perry, 127 Misc 2d 562, 565 [Sup Ct, New York County 1985], affd 148 AD2d 1017 [1989]). |
4,539,363 | 2020-06-05 14:22:31.623147+00 | null | http://wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=263864 |
2020 WI 53
SUPREME COURT OF WISCONSIN
CASE NO.: 2018AP1209-CR
COMPLETE TITLE: State of Wisconsin,
Plaintiff-Respondent,
v.
Mose B. Coffee,
Defendant-Appellant-Petitioner.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at
387 Wis. 2d 673
,
929 N.W.2d 246
PDC No:
2019 WI App 25
- Published
OPINION FILED: June 5, 2020
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: January 21, 2020
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Winnebago
JUDGE: John A. Jorgensen
JUSTICES:
ROGGENSACK, C.J., delivered an opinion of the court, in which
ZEIGLER, J., joined. KELLY, J., filed a concurring opinion.
DALLET, J., filed a dissenting opinion, in which REBECCA GRASSL
BRADLEY, J., joined.
NOT PARTICIPATING:
ANN WALSH BRADLEY, J., withdrew from participation. HAGEDORN,
J., did not participate.
ATTORNEYS:
For the defendant-appellant-petitioner, there were briefs
filed by Frances Colbert, assistant state public defender. There
was an oral argument by Frances Colbert.
For the plaintiff-respondent, there was a brief filed by
John A. Blimling, assistant attorney general; with whom on the
brief was Joshua L. Kaul, attorney general. There was an oral
argument by John A. Blimling.
2020 WI 53
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2018AP1209-CR
(L.C. No. 2017CF542)
STATE OF WISCONSIN : IN SUPREME COURT
State of Wisconsin,
Plaintiff-Respondent,
FILED
v. JUN 5, 2020
Mose B. Coffee, Sheila T. Reiff
Clerk of Supreme Court
Defendant-Appellant-Petitioner.
ROGGENSACK, C.J., delivered an opinion of the court, in which
ZEIGLER, J., joined. KELLY, J., filed a concurring opinion.
DALLET, J., filed a dissenting opinion, in which REBECCA GRASSL
BRADLEY, J., joined.
ANN WALSH BRADLEY, J., withdrew from participation. HAGEDORN,
J., did not participate.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 PATIENCE DRAKE ROGGENSACK, C.J. We review a decision
of the court of appeals1 affirming the circuit court2 denial of
1State v. Coffee,
2019 WI App 25
,
387 Wis. 2d 673
,
929 N.W.2d 245
.
2The Honorable John A. Jorgensen of Winnebago County
presided.
No. 2018AP1209-CR
Mose B. Coffee's motion to suppress evidence obtained from a
search of a vehicle incident to his lawful arrest for Operating
While Intoxicated (OWI) that Coffee argues violated the Fourth
Amendment of the United States Constitution. The court of
appeals reasoned that the lawful arrest for OWI, in and of
itself, supplied a basis to search the passenger compartment,
and, specifically, a bag located behind the driver's seat that
contained marijuana.
¶2 We disagree that the lawful arrest for OWI, in and of
itself, supplied a sufficient basis to search the passenger
compartment of Coffee's vehicle. However, the search was lawful
because police had reasonable suspicion, based on the totality
of the circumstances, that the passenger compartment, and,
specifically, the bag, might contain evidence of OWI.
Accordingly, we affirm the court of appeals.
I. BACKGROUND
¶3 Officer Timothy Skelton works for the Oshkosh Police
Department. On August 30, 2017, at 11:17 p.m., he observed an
automobile driving on a city street that did not have a front
license plate. He instituted a traffic stop, "which was
eventually completed in the parking lot" of a restaurant or bar.
¶4 The automobile parked close to another vehicle.
Skelton testified:
As the vehicle had pulled into the parking lot, there
were other vehicles that were already
parked. . . . [I]n this case the vehicle as it pulled
in pulled in at an angle and very close to a vehicle
that was –- it would be on the driver's side. My
estimation was that it was no more than two feet from
2
No. 2018AP1209-CR
the other vehicle, making it very –- it was very close
to the other vehicle and somewhat at an angle.
Body camera footage shows that Coffee's vehicle was over the
yellow line on the driver's side.
¶5 Skelton explained why he found how the vehicle was
parked noteworthy:
Well, it was the fact that I was performing the
traffic stop and the vehicle continued into the
parking lot. And the way it had parked, the driver
immediately was getting out of his vehicle so it was
almost as if he was –- knew I was behind him and was
getting out quickly.
¶6 Skelton asked the driver, Coffee, to stay in the
vehicle. "When asked how much he had to drink and from where
was he coming, [Coffee] stated he was coming from a friend's
house and that he had not had that much."
¶7 Skelton believed that Coffee was intoxicated.
Coffee's speech was slurred, and his eyes were "very glazed over
and bloodshot." Skelton testified that the "glazed over look in
his eyes" was a sign that Coffee was "possibly impaired by
intoxicants and or other controlled substances." According to
the affidavit supporting the criminal complaint, "Skelton could
smell an odor of intoxicants coming from the vehicle." Skelton
also testified that after he had Coffee "sit down in his car" he
smelled "an odor of intoxicants coming from his person or from
the vehicle." Based on these observations, Skelton decided to
ask Coffee to step out of the vehicle, so he could administer
field sobriety tests.
3
No. 2018AP1209-CR
¶8 As Skelton walked with Coffee to conduct a test, he
realized that he met Coffee a few weeks prior. He recalled that
Coffee had been "very quiet at that time." Yet, Coffee was
presently "very talkative."
¶9 Coffee performed poorly on field sobriety tests. He
exhibited all six clues on the Horizontal Gaze Nystagmus test,
failed to complete the nine-step-walk-and-turn test and sang the
alphabet twice after being instructed to state the alphabet
twice in a row without singing. Skelton then administered a
preliminary breath test, which indicated that Coffee had a
prohibited alcohol level of .14.3
¶10 Skelton arrested Coffee and secured him in the back of
his squad car. Skelton then instructed two other officers at
the scene, Brenden Bonnett and Benjamin Fenhouse, to search the
passenger compartment. Skelton informed the two that Coffee had
been arrested "for operating under the influence of alcoholic
beverages."
¶11 Bonnett testified that "the subject was in custody for
impaired driving." Therefore, "I'd be looking for any substance
in the vehicle that could impair a driver's ability to operate
the motor vehicle safely." He further testified that he was
"looking for any substance, whether that could be prescription
medication, nonprescription medication, alcohol, illegal drugs,
or even up to possibly an inhalant such as Dust-Off –- can of
3 A blood test indicated Coffee's BAC was .17.
4
No. 2018AP1209-CR
Dust-Off I know has been used before also as a substance which
has impaired drivers."
¶12 Bonnett found a cloth bag "right behind the driver's
seat, whereas in the driver could have moved it with his arm
while seated in the driver's seat." "Inside that cloth bag were
two mason jars. Inside the mason jars were flakes of what was
suspected to be marijuana." Bonnett testified that he had to
"dig through the bag" before locating the jars because there
were other items on top that concealed them from sight.4
¶13 After Bonnett found the jars with what appeared to be
flakes of marijuana, Fenhouse searched the trunk of the vehicle.
Fenhouse found an additional 930.7 grams of marijuana and drug
paraphernalia.
¶14 The State charged Coffee with possession with intent
to deliver THC, possession of drug paraphernalia, second-offense
OWI and second-offense OWI with a prohibited alcohol
concentration. Coffee moved to suppress "all evidence obtained"
from the search.
¶15 After a contested hearing, the circuit court concluded
that the search did not violate the Fourth Amendment. The court
found that the search of the bag was permissible because it was
within reach from the driver's seat. The circuit court also
explained, "I'm really not putting much weight on the fact of
4Among these items were many cell phones. Additionally,
the bag also contained little plastic bags, though Bonnett could
not recall on the stand whether he saw the little plastic bags
before he saw the jars. The body camera footage is unclear.
5
No. 2018AP1209-CR
where exactly that bottle was found because it doesn't matter if
the defendant just threw it on top of the bag or to conceal it
pushed it down to the bottom or in the middle. That's easily
done."
¶16 After the circuit court denied Coffee's motion, he
reached a plea agreement with the State. He pled no-contest to
possession with intent to deliver THC and second-offense OWI.
The two other counts were dismissed. After sentencing, Coffee
appealed.
¶17 The court of appeals affirmed. State v. Coffee,
2019 WI App 25
,
387 Wis. 2d 673
,
929 N.W.2d 245
. It stated:
[A]s a matter of law . . . when an officer lawfully
arrests a driver for OWI, even if alcohol is the only
substance detected in relation to the driver, a search
of the interior of the vehicle, including any
containers therein, is lawful because it is reasonable
to believe evidence relevant to the offense of OWI
might be found.
Id., ¶13.
¶18 We granted Coffee's petition for review, which argued
that the court of appeals ignored the particular facts of the
case. Coffee argued that the court applied a bright-line rule,
and therefore, the search was not justified by the totality of
the circumstances. We agree that bright-line rules are
disfavored by the United States Supreme Court in its Fourth
Amendment jurisprudence; however, we affirm because the totality
of the circumstances provided the foundation for concluding that
the search was reasonable.
6
No. 2018AP1209-CR
II. DISCUSSION
A. Standard of Review
¶19 Review of a decision denying a motion to suppress
under the Fourth Amendment presents a question of constitutional
fact. State v. Tullberg,
2014 WI 134
, ¶27,
359 Wis. 2d 421
,
857 N.W.2d 120
. We employ a two-step inquiry when presented with a
question of constitutional fact. State v. Robinson,
2010 WI 80
,
¶22,
327 Wis. 2d 302
,
786 N.W.2d 463
; see also State v.
Dearborn,
2010 WI 84
, ¶13,
327 Wis. 2d 252
,
786 N.W.2d 97
.
¶20 First, we uphold the circuit court's findings unless
they are clearly erroneous. State v. Richter,
2000 WI 58
, ¶26,
235 Wis. 2d 524
,
612 N.W.2d 29
. Second, we independently apply
constitutional principles to the facts. Id.; see also Dearborn,
327 Wis. 2d 252
, ¶13. These principles require an objective
application of the facts, meaning we independently examine the
facts known to the officer at the time of the warrantless
search. We do not analyze what the officer subjectively
believed or what inferences he or she actually drew.
¶21 In the present case, we apply this two-step inquiry to
determine whether the search of the passenger compartment, and,
specifically, the bag, was unreasonable under the Fourth
Amendment.5 The burden is on the State to prove that the search
Article I, § 11 of the Wisconsin Constitution is nearly
5
identical to the Fourth Amendment. We normally interpret
Article I, § 11 consistent with the United States Supreme
Court's interpretation of the Fourth Amendment. E.g., State v.
Dearborn,
2010 WI 84
, ¶¶14–17,
327 Wis. 2d 252
,
786 N.W.2d 97
;
State v. Arias,
2008 WI 84
, ¶20,
311 Wis. 2d 358
, 752
(continued)
7
No. 2018AP1209-CR
was constitutionally permissible because police did not obtain a
warrant prior to searching the vehicle. State v. Johnston,
184 Wis. 2d 794
, 806,
518 N.W.2d 759
(1994) (citing United States v.
Jeffers,
342 U.S. 48
, 51 (1951)); State v. Phillips,
2009 WI App 179
, ¶7,
322 Wis. 2d 576
,
778 N.W.2d 157
.
B. Fourth Amendment Principles
¶22 The Fourth Amendment of the United States Constitution
provides:
The right of the people to be secure in their
persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not be
violated, and no Warrants shall issue, but upon
probable cause, supported by Oath or affirmation, and
particularly describing the place to be searched, and
the persons or things to be seized.
As the text makes clear, "the Fourth Amendment does not
proscribe all state-initiated searches and seizures; it merely
proscribes those which are unreasonable." Tulberg,
359 Wis. 2d 421
, ¶29 (quoting Florida v. Jimeno,
500 U.S. 248
, 250
(1991); see also Riley v. California,
573 U.S. 373
, 381 (2014)
(quoting Brigham City v. Stuart,
547 U.S. 398
, 403 (2006)).
¶23 A search is unreasonable if the individual's privacy
interest in the area searched is not outweighed by "the
promotion of legitimate governmental interests."6 Virginia v.
N.W.2d 748. Coffee has not argued that we should decide this
case under the Wisconsin Constitution, and, therefore, we do not
address Article I, § 11.
6 We have considered the practices of the founding
generation to determine if a search was unreasonable. Virginia
v. Moore,
553 U.S. 164
, 168 (2008) ("In determining whether a
(continued)
8
No. 2018AP1209-CR
Moore,
553 U.S. 164
, 171 (2008) (quoting Wyoming v. Houghton,
526 U.S. 295
, 300 (1999)). If a search was unreasonable,
evidence obtained from it is subject to exclusion. Mapp v.
Ohio,
367 U.S. 643
, 655 (1961).
¶24 "A warrantless search is presumptively unreasonable,"
Tullberg,
359 Wis. 2d 421
, ¶30, because "[w]hen the right of
privacy must reasonably yield to the right of search is, as a
rule, to be decided by a judicial officer, not by a policeman or
Government enforcement agent," Johnson v. United States,
333 U.S. 10
, 14 (1948). "[S]earches conducted outside the judicial
process, without prior approval by judge or magistrate, are per
se unreasonable under the Fourth Amendment——subject only to a
few specifically established and well-delineated exceptions."
Katz v. United States,
389 U.S. 347
, 357 (1967).
¶25 One such exception was announced in Arizona v. Gant,
556 U.S. 332
, 335 (2009): "[C]ircumstances unique to the
automobile context justify a search incident to arrest when it
is reasonable to believe that evidence of the offense of arrest
might be found in the vehicle." Automobiles are movable, making
plausible an automobile's escape from a jurisdiction or
concealment before a warrant can be obtained. Carroll v. United
search or seizure is unreasonable, we begin with history.").
However, "the historical scope of officers' authority to search
vehicles incident to arrest is uncertain." Arizona v. Gant,
556 U.S. 332
, 351 (2009) (Scalia, J., concurring) (citing Thornton
v. United States,
541 U.S. 615
, 629–31 (2004) (Scalia, J.,
concurring in judgment)).
9
No. 2018AP1209-CR
States,
267 U.S. 132
, 151–53 (1925). Therefore, people have a
lower expectation of privacy in an automobile, and the
legitimate governmental interest in a warrantless search is
stronger.7 The legitimate governmental interests, in this case,
are particularly strong given the havoc wreaked by intoxicated
drivers.8 Therefore, if the Gant exception is satisfied, the
search cannot be unreasonable because the exception articulates
a balancing of interests sufficient for this case.
C. Interpretations of Gant
¶26 The Gant exception has generated much discussion. One
issue concerned whether the nature of an offense of arrest, in
7 To further explain, an automobile's "function is
transportation and it seldom serves as one's residence or as the
repository of personal effects. A car has little capacity for
escaping public scrutiny. It travels public thoroughfares where
both its occupants and its contents are in plain view." United
States v. Knotts,
460 U.S. 276
, 281 (1983) (quoting Cardwell v.
Lewis,
417 U.S. 583
, 590 (1974) (plurality)).
Furthermore, police are required to be in "frequent contact
with automobiles" in the course of their duties. South Dakota
v. Opperman,
428 U.S. 364
, 367–68 (1976). "Automobiles, unlike
homes, are subjected to pervasive and continuing governmental
regulation and controls, including periodic inspection and
licensing requirements."
Id. at 368
. "As an everyday
occurrence, police stop and examine vehicles when license plates
or inspection stickers have expired, or if other violations,
such as exhaust fumes or excessive noise, are noted, or if
headlights or other safety equipment are not in proper working
order."
Id.
8 "No one can seriously dispute the magnitude of the drunken
driving problem or the States' interest in eradicating it."
Missouri v. McNeely,
569 U.S. 141
, 160 (2013) (quoting Mich.
Dep't of State Police v. Sitz,
496 U.S. 444
, 451 (1990)).
10
No. 2018AP1209-CR
and of itself, can supply a basis for a search of a passenger
compartment, or whether the search must be analyzed by examining
the totality of the circumstances. The first approach is known
as the "categorical approach," and the second, the
"reasonableness approach."
1. The Categorical Approach
¶27 The categorical approach stems from two quotes in
Gant:
[1.] In many cases, as when a recent occupant is
arrested for a traffic violation, there will be no
reasonable basis to believe the vehicle contains
relevant evidence. But in others, . . . the offense
of arrest will supply a basis for searching the
passenger compartment of an arrestee's vehicle and any
container therein.
. . . .
[2.] Gant was arrested for driving with a suspended
license——an offense for which police could not expect
to find evidence in the passenger compartment of
Gant's car.
Gant,
556 U.S. at
343–44. Interpreting these quotes, a Florida
appellate court was the first to "reason[] that the [United
States] Supreme Court intended to give its imprimatur to a
system of classifying criminal offenses into two distinct
groups: those that 'by [their] nature . . . might yield
physical evidence' and those 'for which there is no physical
evidence.'" United States v. Reagan,
713 F. Supp. 2d 724
, 731
(E.D. Tenn. 2010) (quoting Brown v. State,
24 So. 3d 671
, 678
(Fla. App. 2009)). Under this interpretation of Gant, relevant
evidence of some crimes, such as the possession of a controlled
11
No. 2018AP1209-CR
substance, might be in the passenger compartment of an
automobile. Reagan,
713 F. Supp. 2d at
731 (citing Brown,
24 So. 3d at 677
). However, relevant evidence of other crimes,
such as minor traffic violations, will not be in the passenger
compartment. Reagan,
713 F. Supp. 2d at
731 (citing Brown,
24 So. 3d at 677
). A search of a passenger compartment is
permissible if a recent occupant was arrested for the former;
for the latter, a search is not permissible.
¶28 Following the Florida court's interpretation, some
courts have concluded that OWI is, by its nature, a crime for
which there might be relevant evidence in the passenger
compartment. State v. Cantrell,
233 P.3d 178
, 185 (Idaho 2010)
("Cantrell was arrested for DUI, and the DUI supplied the basis
for the search."); People v. Nottoli,
130 Cal. Rptr. 3d 884
, 902
(2011) ("Reid's arrest for 'being under the influence of a
controlled substance' supplied a reasonable basis for believing
that evidence 'relevant' to that type of offense might be in his
vehicle.").9
9 Compare Cain v. State,
373 S.W.3d 392
, 396–97 (Ark. App.
2010) (reasoning that an arrest for DUI supplied the basis for a
search of an automobile under Gant because "an open container of
alcohol could have been found"), with
id. at 399
(Brown, J.,
dissenting) ("Officers must be put on notice about what is
allowed following Gant, and the majority fails to define these
limitations. Instead, the majority sends the message that
nothing has changed and officers can continue to search a
vehicle incident to a lawful arrest without anything more to
prompt such a search.").
12
No. 2018AP1209-CR
¶29 These courts reason that relevant evidence of an OWI
might be located in the passenger compartment and any container
therein. For example, the court of appeals reasoned in this
case:
Not only could an officer find evidence related to the
offense of OWI, it indeed would not be surprising for
an officer to find such evidence as, for example, a
copy of a credit card receipt showing very recent
purchases of alcoholic drinks at a local bar, a
partially or fully consumed can of beer or bottle of
hard liquor, a prescription drug bottle, or drug
paraphernalia or residue.
Coffee,
387 Wis. 2d 673
, ¶12. The court of appeals also stated:
We need not detail the copious cases across this state
and country in which a driver is arrested for OWI, a
search of the vehicle is conducted, and alcoholic
beverages and/or drugs are found. . . . "It is
certainly logical and reasonable to expect that items
related to alcohol or drug consumption, such as
alcoholic beverage bottles or drug paraphernalia,
might readily be contained in the intoxicated driver's
car."
Id.,
¶12 n.6 (quoting People v. Evans,
133 Cal. Rptr. 3d 323
,
336-37 (2011)).
2. The Reasonableness Approach
¶30 Other courts have interpreted Gant as imposing a
reasonableness approach. Though stated in various terms, the
approach involves "looking at common sense factors and
evaluating the totality of the circumstances" to determine
whether it was reasonable to conclude that evidence of the crime
of the arrest might be found within the vehicle. Reagan,
713 F. Supp. 2d at 728
(quoting United States v. Pruitt,
458 F.3d 477
, 482 (6th Cir. 2006)).
13
No. 2018AP1209-CR
¶31 Courts so interpreting Gant have struggled with the
"quantum of suspicion required." State v. Eversole, 2017-Ohio-
8436, unpublished slip op., ¶23,
2017 WL 5127369
(Ohio Ct. App.
Nov. 6, 2017). Unlike the categorical approach, which does not
utilize facts particular to the case, the reasonableness
approach requires particularization. United States v. Taylor,
49 A.3d 818
, 826 (D.C. Ct. App. 2012).
¶32 Determining the quantum of suspicion required is
difficult for at least three reasons. First, Gant stated the
exception four times, twice using the word "might" and twice
without using "might." Compare Gant,
556 U.S. at 335, 343
("reasonable to believe that evidence of the offense of arrest
might be found in the vehicle"), with
id. at 346, 351
("reasonable to believe the vehicle contains evidence of the
offense of arrest"). Second, "reasonable to believe" is
language sometimes used to describe the quantum of suspicion
necessary for probable cause.10 And third, Gant provides little
explanation of the exception.
¶33 Most courts have concluded that the officer does not
need probable cause to believe evidence of the crime will be
found in the vehicle. Cantrell, 233 P.3d at 183. But see
United States v. Grote,
629 F. Supp. 2d 1201
, 1203 (E.D. Wash.
2009). Otherwise, the Gant exception would be the same as
10Wayne R. LaFave, 2 Search & Seizure § 3.7(d) (5th ed.
updated Oct. 2019) (collecting cases that use "reasonable to
believe" to describe the quantum of suspicion necessary for an
officer to have probable cause).
14
No. 2018AP1209-CR
another simply known as the "automobile exception," and Gant
stated the two exceptions are distinct. United States v.
Vinton,
594 F.3d 14
, 25 (D.C. 2010) (citing Gant,
556 U.S. at 347
).
¶34 Some courts have equated the Gant exception with
reasonable suspicion but others have crafted a standard
somewhere between probable cause and reasonable suspicion.
Compare Taylor v. State [hereinafter Taylor Md.],
137 A.3d 1029
,
1033-34 (Md. 2016) (equating the standard in Gant with
reasonable suspicion) and State v. Ewertz,
305 P.3d 23
, 27–28
(Kan. Ct. App. 2013) (same), with Reagan,
713 F. Supp. 2d at 728
(quoting Pruitt,
458 F.3d at 482
) (noting the standard in Gant
does not require probable cause and stating that a "[r]easonable
belief is established by looking at common sense factors and
evaluating the totality of the circumstances"). At least one
United States Supreme Court justice believes the Gant exception
requires reasonable suspicion. Megginson v. United States,
556 U.S. 1230
, 1230 (2009) (Alito, J., dissenting from a decision to
grant, vacate, and remand) ("This case thus appears to present
an important question regarding the meaning and specificity of
the reasonable suspicion requirement in Gant.").
¶35 Whatever the quantum, courts have considered a variety
of circumstances to determine whether the quantum was
satisfied: Whether the officer observed the driver using an
intoxicant;11 whether the officer observed an intoxicant in plain
11 United States v. Reagan,
713 F. Supp. 2d 724
, 733 n.7
(continued)
15
No. 2018AP1209-CR
view inside the passenger compartment;12 whether an occupant made
a statement indicating that an intoxicant is in the automobile;13
whether the officer smelled an intoxicant emanating from the
passenger compartment;14 whether "the driver was traveling from a
location such as a recreational area or campground where alcohol
is not available unless it is transported in by private
vehicle;"15 whether the occupant made "furtive movements,"
indicating that the occupant might be trying to conceal
evidence;16 whether the occupant evidenced extreme intoxication;17
(E.D. Tenn. 2010).
12
Id.
13Id.; see also United States v. Francis, No. 11-40064-01-
RDR, unpublished slip op.,
2011 WL 5837182
, at *3 (D. Kan. Nov.
21, 2011) (noting the driver made statements indicating she took
medication).
14Reagan,
713 F. Supp. 2d at
733 n.7; see also Francis,
2011 WL 5837182
, at *3.
15Reagan,
713 F. Supp. 2d at
733 n.7; see also State v.
Wilson, No. 1 CA-CR 11-0292, unpublished slip op., ¶19,
2012 WL 1255151
(Ariz. Ct. App. Apr. 12, 2012) ("The police had received
prior tips about suspected drug activity at Appellant's
residence, Johnston had recently entered that residence before
leaving with Appellant in his vehicle . . . .").
16State v. Ewertz,
305 P.3d 23
, 27 (Kan. Ct. App. 2013)
(quoting State v. Julian, No. 105,695, unpublished slip op.,
2012 WL 1759405
, at *5 (Kan. Ct. App. May 11, 2012) (per
curiam), rev'd State v. Julian,
333 P.3d 172
(Kan. 2014),
overruled by State v. James,
349 P.3d 457
(Kan. 2015)).
17Ewertz, 305 P.3d at 28 ("In addition to evidence that the
car Ewertz was driving swerved in its lane and crossed over the
fog line, that Tatro smelled alcohol in the car after he pulled
Ewertz over, that Ewertz failed field sobriety tests, that
Ewertz had glassy and bloodshot eyes, and that Ewertz slurred
(continued)
16
No. 2018AP1209-CR
whether the officer had knowledge of prior unlawful conduct by
an occupant involving an intoxicant in an automobile;18 whether
the officer had knowledge regarding the likelihood of locating
an intoxicant in an automobile driven by an intoxicated person.19
3. Our Approach
¶36 We interpret Gant as imposing the reasonableness
approach. Our conclusion is consistent with the principle that
bright-line rules are disfavored in United States Supreme Court
Fourth Amendment jurisprudence. Myron Moskovitz, A Rule in
Search of A Reason: Empirical Reexamination of Chimel and
Belton,
2002 Wis. L. Rev. 657
, 679. Furthermore, the
her words, there is also evidence that Ewertz admitted to
drinking at least one alcoholic beverage before driving the car.
In light of these specific and articulable facts, as well as any
rational inferences that can be drawn from those facts, we
conclude the district court did not err in finding it was
'reasonable to believe' evidence relevant to the crime of
driving under the influence might be found in Ewertz'
vehicle.").
18United States v. Lopez, No. CR 18-120-BLG-SPW-TJC, slip
op.,
2019 WL 7838283
, at *8 (D. Mont. Dec. 18, 2019) ("Officer
Miner also testified that he knew drugs had been found in a safe
in Lopez's vehicle when Lopez was previously arrested for
driving under the influence of a controlled substance in
Montana. While law enforcement cannot rely on past criminal
history alone to find reasonable suspicion, it can be considered
as part of the totality of the circumstances.").
19Taylor v. State,
137 A.3d 1029
, 1034 (Md. 2016). But see
United States v. Taylor,
49 A.3d 818
, 827 (D.C. Ct. App. 2012)
("'[W]e know too little about Officer [Weber's] experience' to
place much weight upon his conclusory statement that 'typically
someone who is driving under the influence also has an open
container or multiple containers of alcohol in their vehicle.'"
(internal citation omitted)).
17
No. 2018AP1209-CR
categorical approach is analytically difficult. Lastly, the
briefings and result in Gant do not support the categorical
approach.
a. Bright-Line Rules Are Disfavored
¶37 Bright-line rules, such as the categorical approach,
are disfavored in Fourth Amendment United States Supreme Court
jurisprudence. Missouri v. McNeely,
569 U.S. 141
, 158 (2013)
(plurality). This is because a strict application of a bright-
line rule could be used to justify a search even though, under
the particular facts, the search is unreasonable. Reagan,
713 F. Supp. 2d at 732
. Case-by-case analysis is, therefore,
preferred. McNeely,
569 U.S. at 158
. "Numerous police actions
are judged based on fact-intensive, totality of the
circumstances analyses rather than according to categorical
rules, including in situations that are more likely to require
police officers to make difficult split-second judgments."
Id.
(citing Illinois v. Wardlow,
528 U.S. 119
, 123–125 (2000); Ohio
v. Robinette,
519 U.S. 33
, 39–40 (1996); Tennessee v. Garner,
471 U.S. 1
, 8–9 (1985)). Indeed, although, the legitimate
governmental interest in limiting the number of OWIs is
substantial, a plurality in McNeely rejected that this
legitimate governmental interest is so strong as to justify a
bright-line rule permitting warrantless blood draws when an
officer has probable cause to believe that an arrestee is
intoxicated. McNeely,
569 U.S. at 160
.
¶38 Nevertheless, bright-line rules occasionally have been
adopted to provide clear guidance to officers. New York v.
18
No. 2018AP1209-CR
Belton,
453 U.S. 454
, 458 (1981), abrogation recognized by Davis
v. United States,
564 U.S. 229
, 234 (2011). Quoting Professor
LaFave, the Court in Belton explained:
A highly sophisticated set of rules, qualified by all
sorts of ifs, ands, and buts and requiring the drawing
of subtle nuances and hairline distinctions, may be
the sort of heady stuff upon which the facile minds of
lawyers and judges eagerly feed, but they may be
"literally impossible of application by the officer in
the field."
Id.
(quoting Wayne R. LaFave, "Case-by-Case Adjudication" Versus
"Standardized Procedures": The Robinson Dilemma, 1974
S. Ct. Rev. 127, 141).
¶39 However, the Fourth Amendment generally requires
police to obtain a warrant because judges, and not police, are
better trained to determine whether a search will be
unreasonable. See Johnson,
333 U.S. at 14
. "The preference for
warrants is premised on the expectation that magistrates will be
more likely than officers to perceive when justification for a
proposed search is inadequate." Thomas Y. Davies, Recovering
the Original Fourth Amendment,
98 Mich. L. Rev. 547
, 576 (1999).
¶40 "While the desire for a bright-line rule is
understandable, the Fourth Amendment will not tolerate adoption
of an overly broad categorical approach that would dilute the
warrant requirement in a context where significant privacy
interests are at stake." McNeely,
569 U.S. at 158
. Therefore,
the rationale for adopting a bright-line rule permitting a type
of warrantless search cannot be merely that police would benefit
from clear guidance. There has to be some reason that police
19
No. 2018AP1209-CR
need guidance in the same way that there has to be some reason
for police not to obtain a warrant.20
¶41 A bright-line rule might be justified "[w]hen officer
safety or imminent evidence concealment or destruction is at
issue, [because] officers should not have to make fine judgments
in the heat of the moment. But in the context of a general
evidence-gathering search, the state interests that might
justify any overbreadth are far less compelling." Thornton v.
United States,
541 U.S. 615
, 632 (2004) (Scalia, J., concurring
in judgment). Justice Scalia, in his Thornton concurrence,
explained that when an arrestee is secured in the back of a
squad car, a search of the passenger compartment cannot be
justified on the ground that "the arrestee might grab a weapon
or evidentiary item from his car."
Id. at 629
. If the search
is justifiable, it is "simply because the car might contain
evidence relevant to the crime for which he was arrested."
Id.
To him, "[t]his more general sort of evidence-gathering search
[was] not without antecedent."
Id.
His comments are telling
because the majority in Gant purported it was following Justice
Scalia's suggestions from Thornton. Gant,
556 U.S. at 335
.
¶42 In the case before us, Coffee was secured in the back
of a squad car; therefore, the search cannot be justified
For example, in United States v. Robinson,
414 U.S. 218
,
20
235 (1973), the Court concluded that police have authority to
search an arrestee's person and that this authority stems from
the lawful arrest and the need for personal safety of the
officer.
20
No. 2018AP1209-CR
because of concerns over officer safety or imminent evidence
concealment or destruction. If the search was lawful, it must
be because a general evidence-gathering search is permitted
under these circumstances. Police did not need a bright-line
rule under the totality of the circumstances here because they
were not required to make split-second decisions. Thornton,
541 U.S. at 632
(Scalia, J., concurring in judgment).
b. Difficulty of the Categorical Approach
¶43 But even if police needed more guidance, the
categorical approach would not provide it. Some offenses are
not easily categorized, which makes the categorical approach
analytically difficult. "[A]ny attempt to categorize every
criminal offense as being either one that might yield physical
evidence or one for which there is no physical evidence runs
into interpretative problems." Reagan,
713 F. Supp. 2d at 732
.
¶44 For example, a driver could be arrested for making
criminal threats. Evans, 133 Cal. Rptr. 3d at 336. "If the
threat in question was verbal, it is surely unreasonable to
expect evidence related to the crime to be contained in a
vehicle." Id. "But if the threat was made in a text message,
or amplified by means of props or a threatening drawing,
evidence might well be found in the car." Id.
¶45 To give one more example, a driver could be arrested
for battery or assault. Id. "If such crimes were committed
with fists alone, it would generally be unreasonable to expect
evidence of the offense in the arrestee's vehicle; if committed
with a brick or broken bottle, on the other hand, the opposite
21
No. 2018AP1209-CR
might be true." Id. "Even in the case of a fistfight, might it
be reasonable to expect to find blood, or perhaps a broken
fingernail, in the vehicle?" Id. To summarize, a problem with
the categorical approach is that "some offenses of arrest cannot
be meaningfully evaluated without reference to the specific
facts known to the officer." Id. The point of adopting a
bright-line rule is to provide definitive guidance; if that is
not being accomplished, a bright-line rule serves no useful
purpose.
c. The Briefings and Result in Gant
¶46 Lastly, the briefings and result in Gant suggest that
the United States Supreme Court did not create a categorical
approach. Gant involved a traffic stop for driving with a
suspended license in Arizona. Unlike many states, in Arizona,
driving with a suspended license is not a strict liability
offense.21 The State must prove that the driver either knew or
should have known his or her license was suspended.
¶47 In Gant, Arizona admitted, "In most arrests for
traffic-related offenses, the preservation of evidence
justification for a search incident to arrest will not exist."
Pet'r Reply Br. on the Merits, at 26, Gant v. Arizona,
556 U.S. 332
(2009) (No. 07-542). However, Arizona argued:
That is not true in this case. Under Arizona law, a
person is guilty of driving on a suspended license
only if "the driver knew or should have known that the
21 State v. Williams,
698 P.2d 732
, 734 (Ariz. 1985) (en
banc).
22
No. 2018AP1209-CR
license has been suspended." Officer Griffith
testified that "[l]icense paperwork from the court
system" could possibly be found in the vehicle.
Officer Reed testified that it would not be unusual to
find "notification from Motor Vehicle Division that
[Gant's] license has been suspended" or "a citation
for a suspended license that would show that he had
knowledge that his driver's license was suspended" in
the vehicle. Thus, Gant's assertion that the
"officers had no reason to believe that 'evidence
relevant to the crime of arrest might be found' in
[his] car" is inaccurate.
Id.
at 26 n.7 (alterations in original) (internal citations
omitted); see also Pet'r Br. on the Merits, at 6–7, nn.1–2, Gant
v. Arizona,
556 U.S. 332
(2009) (discussing the testimony of the
officers).
¶48 Therefore, if the Gant exception were a categorical
approach, Gant should have permitted the search: the passenger
compartment might have contained relevant evidence of the
offense of arrest. But Gant concluded that the search was
unconstitutional. Gant,
556 U.S. at 351
. Other courts, noting
this potential contradiction, have refused to apply the
categorical approach. People v. Chamberlain,
229 P.3d 1054
,
1057 (Colo. 2010) (en banc); see also Andrew Fois & Lauren
Simmons, Thomas Jefferson's Carriage: Arizona v. Gant's Assault
on the Belton Doctrine, Am. U. Crim. L. Br., Winter 2009, at 4,
22 ("The Court . . . holds that in Gant there is no reason to so
believe . . . [that] the car could contain evidence of the crime
of suspended license. It is reasonable, however, to believe
that the license itself, the car registration, or other evidence
supporting the charge could have been found in the glove
compartment.").
23
No. 2018AP1209-CR
¶49 The only way to interpret Gant as imposing a
categorical approach is to assume that the justices did not
fully analyze the briefs: that is untenable. In combination
with the above, we interpret Gant as imposing the reasonableness
approach.
C. Application
¶50 We conclude that the reasonableness approach is the
correct interpretation of Gant. Here, the totality of
circumstances objectively demonstrates that Skelton had
reasonable suspicion that the passenger compartment, and,
specifically, the bag, might contain relevant evidence of OWI.
Therefore, the search was permissible under the Fourth
Amendment.
¶51 Coffee's counsel admitted at oral argument that "We
are talking about reasonable suspicion." We conclude that is
the correct understanding of the reasonableness approach.
Taylor Md., 137 A.3d at 1030; Ewertz, 305 P.3d at 27–28. First,
the Gant exception cannot require probable cause because then it
would merely repeat the automobile exception. Vinton, 594 F.3d
at 25. Second, one United States Supreme Court justice has
referred to the Gant exception as requiring reasonable
suspicion. Megginson,
556 U.S. at 1230
(Alito, J., dissenting
from a decision to grant, vacate, and remand).
1. The Passenger Compartment
¶52 Skelton had reasonable suspicion that the passenger
compartment might contain relevant evidence of OWI. First,
Skelton testified that when he had Coffee sit in the vehicle, he
24
No. 2018AP1209-CR
smelled "an odor of intoxicants coming from [Coffee's person] or
from the vehicle." Reagan,
713 F. Supp. 2d at
733 n.7.
Although he used a disjunctive "or" to describe where the smell
was coming from, his testimony offers support in favor of
reasonable suspicion. Furthermore, the affidavit does not use
the disjunctive, or. It states that a smell of intoxicants was
coming from the automobile.
¶53 Second, Coffee indicated that he was coming from his
friend's house. Generally, a private residence has alcohol only
if it is brought to the residence. Cf.
id.
Coffee might have
brought the alcohol that he consumed to his friend's house and
have retained some in his vehicle. The facts of this case are
different than, for example, a case where an officer observes a
patron drink at a bar and then immediately get into an
automobile.
Id. at 732
.
¶54 Third, after Skelton initiated the traffic stop Coffee
"continued into the parking lot," which could indicate that
Coffee was hesitant to pull over because he knew there was
something in the automobile that he should not have had. Cf.
Patel v. State,
522 S.E.2d 760
, 761 (Ga. Ct. App. 1999)
(reasoning that the failure to "immediately pull over" can
inform an officer's probable cause determination); United States
v. Gonzalez-Guytan,
419 F. App'x 848
, 849 (10th Cir. 2011)
(same).
¶55 Fourth, Coffee acted strangely upon pulling into the
parking lot because he hastily parked and immediately got out of
his vehicle. Ewertz, 305 P.3d at 27. Coffee's careless parking
25
No. 2018AP1209-CR
and hasty exit from his vehicle could indicate that he was
trying to distance himself from something in the vehicle that he
knew he should not have had. Stated otherwise, his actions
indicated that he did not want to interact with police near his
vehicle, perhaps because he did not want them to discover
something in it.
¶56 Fifth, Skelton had previously interacted with Coffee.
At that prior meeting, Coffee had been quiet, but on this
occasion, was talkative, about a variety of topics. From this,
Skelton could have believed Coffee was nervous because he had
something to hide. Cf. United States v. Vergara-Manzo, No. 13-
10179-EFM, unpublished slip op.,
2014 WL 840722
, at *5 (D. Kan.
Mar. 4, 2014) (reasoning that an occupant being "extremely
talkative" could contribute to an officer's determination to
search the automobile).
¶57 Sixth, Coffee was extremely intoxicated. Ewertz, 305
P.3d at 28. He exhibited all six clues on the Horizontal Gaze
Nystagmus test, failed to complete the nine-step-walk-and-turn
test and sang the alphabet twice after being instructed to state
the alphabet twice in a row without singing. Furthermore,
Coffee's speech was slurred, and his eyes were "very glazed over
and bloodshot." He also parked poorly. He was over the yellow
line on the driver's side. As Justice Scalia explained in his
Thornton concurrence, "it is not illogical to assume that
evidence of a crime is most likely to be found where the suspect
was apprehended." Thornton,
541 U.S. at 630
(Scalia, J.,
concurring in judgment). Similarly, when a person is extremely
26
No. 2018AP1209-CR
intoxicated, it is not illogical to assume intoxicants might be
close by.
¶58 Coffee has two arguments, neither of which cause the
search of the vehicle's passenger compartment to be
unreasonable. First, he argues that Skelton needed to know more
to have reasonable suspicion. Skelton did not observe a bottle
cap or open container nor was he tipped off that Coffee had been
using an intoxicant in the vehicle. But the quantum of
suspicion required is not probable cause: it is reasonable
suspicion. Although Coffee acknowledges that reasonable
suspicion is the correct quantum, his argument is phrased in a
manner that assumes probable cause is necessary.
¶59 Second, Coffee would have us conclude that his privacy
interest outweighs the legitimate governmental interests because
the probative value of evidence that might have been present in
the passenger compartment is minimal, i.e., the primary evidence
of OWI is the result of a blood test. We reject this argument
because the balancing of interests has already been done by the
United States Supreme Court in establishing the Gant exception.
Moreover, other courts have rejected Coffee's argument because
"a DUI trial does not start and end with a breathalyzer report."
Cantrell, 233 P.3d at 185; see also Grote,
629 F. Supp. 2d at 1205
. We agree. Just because the result of a blood test could
be sufficient evidence to secure a conviction does not mean that
it will be. Police do not have the luxury of knowing what will
happen at trial and must collect evidence without the benefit of
27
No. 2018AP1209-CR
hindsight. Police may search for relevant evidence; they are
not required to weigh its probative value.
2. The Bag
¶60 Coffee also argues, "[e]ven if it were reasonable to
search the vehicle, it was not reasonable to believe evidence of
the OWI would be at the bottom of the bag." To explain, Coffee
argues that Skelton did not see a furtive movement that would
have indicated Coffee tried to hide something in the bag.
Therefore, Coffee minimizes the circuit court's finding that
relevant evidence could have "easily" been pushed down because,
Coffee contends, if such an action occurred, it would have been
seen by Skelton.
¶61 Coffee's argument borders on an objection to the
circuit court's findings. Under the applicable standard of
review, we cannot disturb those findings because they are not
clearly erroneous. Richter,
235 Wis. 2d 524
, ¶26. Moreover,
Coffee could have gotten intoxicated at his friend's house and
then put the intoxicant in the bag in order to carry it to his
car. Indeed, the United States Supreme Court has explained,
"[d]uring virtually the entire history of our country——whether
contraband was transported in a horse-drawn carriage, a 1921
roadster, or a modern automobile——it has been assumed that a
lawful search of a vehicle would include a search of any
container that might conceal the object of the search." United
States v. Ross,
456 U.S. 798
, 820 n.26 (1982). "Contraband
goods rarely are strewn across the trunk or floor of a car;
since by their nature such goods must be withheld from public
28
No. 2018AP1209-CR
view, they rarely can be placed in an automobile unless they are
enclosed within some form of container."
Id. at 820
.
¶62 This case is unlike, for example, State v. Hinderman,
No. 2014AP1787-CR, unpublished slip. op. (Wis. Ct. App. Feb. 12,
2015), on which Coffee relied below. Hinderman was arrested for
OWI because she appeared drunk.
Id.,
¶¶2–3. Police searched
her automobile incident to the arrest. Id., ¶4. On the
passenger seat was her purse. Id., ¶3. Police "looked inside
the purse and found a closed, red zippered pouch, approximately
three-by-three inches in length and one-half inch to three
quarters of an inch wide." Id., ¶4. Inside the pouch was drug
paraphernalia and "a clear plastic bag containing marijuana."
Id. The State argued that the search of the pouch was
permissible because it might have contained a one-shot bottle of
alcohol, similar to what is commonly served on passenger jets.
Id., ¶12. In a one-judge opinion, the court of appeals rejected
this argument and concluded that the search violated the Fourth
Amendment. Id., ¶14. Its conclusion rested heavily on a
finding by the circuit court that the pouch was unlikely to
contain a one-shot bottle. Id., ¶12.
¶63 We need not decide whether Hinderman was correct. It
is sufficient to say, Hinderman presented on different facts.
In this case, the bag police searched was significantly larger.
It could have contained regular-sized bottles of alcohol.
Whether police can search a small pouch, on the ground that they
might find a one-shot bottle, or, as the court of appeals
mentioned in this case, a credit card receipt showing very
29
No. 2018AP1209-CR
recent purchases of alcoholic drinks at a local bar, is beyond
the scope of this case.
III. CONCLUSION
¶64 We disagree that the lawful arrest for OWI, in and of
itself, supplied a sufficient basis to search the passenger
compartment of Coffee's vehicle. However, the search was lawful
because police had reasonable suspicion, based on the totality
of the circumstances, that the passenger compartment, and,
specifically, the bag, might contain evidence of OWI.
Accordingly, we affirm the court of appeals.
By the Court.—The decision of the court of appeals is
affirmed.
¶65 ANN WALSH BRADLEY, J., withdrew from participation.
¶66 BRIAN HAGEDORN, J., did not participate.
30
No. 2018AP1209-CR.dk
¶67 DANIEL KELLY, J. (concurring). I concur with the
court's judgment. But I think the court handled Gant1 in a
fashion that brings less rather than more clarity to the law
controlling post-arrest evidence-gathering automobile searches.
The court suggests Gant addressed itself to this question:
"[W]hether the nature of an offense of arrest, in and of itself,
can supply a basis for a search of a passenger compartment, or
whether the search must be analyzed by examining the totality of
the circumstances." Lead op., ¶26. The literature, as well as
judicial opinions, generally refer to the former as the
"categorical approach," and the latter as the "reasonableness
approach." And in so referring, they have contributed to the
court's understanding that Gant created a new analytical
methodology that is taxonomically distinct from the extant
exceptions to the warrant requirement. But the Gant court did
not announce a new analytical model. Instead, it returned to
ancient principles governing searches incident to arrest and
applied them to the automobile context.
¶68 Gant's significance lies in it's effort to fix a
specific jurisprudential problem. The Supreme Court realized
that, after its decision in New York v. Belton,
453 U.S. 454
(1981), abrogation recognized by United States v. Davis,
564 U.S. 229
(2011), police officers started conducting post-arrest
evidence-gathering automobile searches as a matter of course,
and in some quarters such searches were understood as a police
1 Arizona v. Gant,
556 U.S. 332
(2009).
1
No. 2018AP1209-CR.dk
officer's entitlement. See Arizona v. Gant,
556 U.S. 332
, 335
(2009). There is good reason for the explosion of such
searches. Belton held that "when a policeman has made a lawful
custodial arrest of the occupant of an automobile, he may, as a
contemporaneous incident of that arrest, search the passenger
compartment of that automobile."
453 U.S. at 460
(footnotes
omitted). The test seemed pretty clear: Upon arrest of an
automobile's occupant, the police——without any additional
analysis or justification——may perform an evidentiary search of
the automobile.
¶69 Based on law enforcement's response to Belton, the
Gant court had to address two related questions. First, whether
an arrest always allows the police to perform an evidentiary
search of an automobile recently occupied by the arrestee. And
second, if not, whether an arrest can ever——without more——
justify an evidentiary automobile search. The latter question
is the one relevant to this case, but its answer won't make any
sense outside the context of the former.
¶70 The first question arose because automatic authority
for evidence-gathering automobile searches doesn't fit
comfortably with Belton's rationale. The basic substrate of the
Belton court's reasoning comes from Chimel v. California,
395 U.S. 752
(1969), abrogation recognized by Davis v. United
States,
564 U.S. 229
(2011), which addressed protective searches
(as opposed to evidence-gathering searches). The Court observed
that Chimel says
a lawful custodial arrest creates a situation which
justifies the contemporaneous search without a warrant
2
No. 2018AP1209-CR.dk
of the person arrested and of the immediately
surrounding area. Such searches have long been
considered valid because of the need "to remove any
weapons that [the arrestee] might seek to use in order
to resist arrest or effect his escape" and the need to
prevent the concealment or destruction of evidence.
Belton,
453 U.S. at
457 (citing Chimel,
395 U.S. at 763
).
¶71 The Chimel rationale works when the arrestee is still
in the automobile or has ready access to it. But once the
arrestee is immobilized or taken from the scene of the arrest,
Chimel loses its justifying power because the arrestee can no
longer reach any weapons or evidence that might have been in the
automobile. And yet courts have regularly used Belton to
justify searches in those very circumstances. See, e.g., Gant,
556 U.S. at 346
. The Gant court recognized that reading Belton
to authorize such searches would "untether the rule from the
justifications underlying the Chimel exception——a result clearly
incompatible with our statement in Belton that it 'in no way
alters the fundamental principles established in the Chimel case
regarding the basic scope of searches incident to lawful
custodial arrests.'" Gant,
556 U.S. at 343
.
¶72 Gant's answer to the first question, therefore, was
that arresting an automobile's occupant does not always justify
an automobile search. So it returned Belton to its Chimel
moorings by rejecting the unjustifiably broad reading it had
accrued over the years. It held "that the Chimel rationale
authorizes police to search a vehicle incident to a recent
occupant's arrest only when the arrestee is unsecured and within
reaching distance of the passenger compartment at the time of
the search." Gant,
556 U.S. at 343
. That is, Chimel authorizes
3
No. 2018AP1209-CR.dk
police to conduct a protective search of an automobile as an
incident to the arrest of a recent occupant.
¶73 Having held that arrests do not always justify
automobile searches, the Gant court then had to determine
whether they can ever, standing alone, provide a
constitutionally acceptable justification. I believe Gant says
they can. The Supreme Court recognized that the Chimel/Belton
line of reasoning is not the exclusive basis upon which officers
can search an automobile upon arrest of one of its occupants.
It said:
Although it does not follow from Chimel, we also
conclude that circumstances unique to the vehicle
context justify a search incident to a lawful arrest
when it is "reasonable to believe evidence relevant to
the crime of arrest might be found in the vehicle."
Thornton,
541 U.S. at 632
(SCALIA, J., concurring in
judgment).
Gant,
556 U.S. at 343
. Gant's specific holding makes it clear
that Justice Antonin Scalia's Thornton2 concurrence played a
pivotal role in the court's reasoning:
Consistent with the holding in Thornton v. United
States, [] and following the suggestion in Justice
SCALIA's opinion concurring in the judgment in that
case, id. at 632, we also conclude that circumstances
unique to the automobile context justify a search
incident to arrest when it is reasonable to believe
that evidence of the offense of arrest might be found
in the vehicle.
Gant
556 U.S. at 335
(citation omitted); see also
id. at 347
("Unlike the searches permitted by Justice Scalia's opinion
concurring in the judgment in Thornton, which we conclude today
2 Thornton v. United States,
541 U.S. 615
(2004).
4
No. 2018AP1209-CR.dk
are reasonable for purposes of the Fourth Amendment, Ross[3]
allows searches for evidence relevant to offenses other than the
offense of arrest, and the scope of the search authorized is
broader."). So let's consider Justice Scalia's "suggestion."
¶74 Justice Scalia explained that the authority to search
an arrestee without a warrant does not necessarily depend on the
Chimel considerations. Instead, the justification can arise
from the arrest itself: "In United States v. Robinson,
414 U.S. 218
, 235 [] (1973), we held that authority to search an
arrestee's person does not depend on the actual presence of one
of Chimel's two rationales in the particular case; rather, the
fact of arrest alone justifies the search." Thornton,
541 U.S. at 631-32
(Scalia, J., concurring). The Robinson court was
quite explicit on this point:
A custodial arrest of a suspect based on probable
cause is a reasonable intrusion under the Fourth
Amendment; that intrusion being lawful, a search
incident to the arrest requires no additional
justification. It is the fact of the lawful arrest
which establishes the authority to search, and we hold
that in the case of a lawful custodial arrest a full
search of the person is not only an exception to the
warrant requirement of the Fourth Amendment, but is
also a 'reasonable' search under that Amendment.
Robinson,
414 U.S. at 235
.
¶75 Justice Scalia's Thornton concurrence makes it clear
that once the authority to conduct the search exists (by virtue
of the arrest), the only remaining question is its scope. The
scope, he explained, depends on the nature of the search being
3 United States v. Ross,
456 U.S. 798
(1982).
5
No. 2018AP1209-CR.dk
conducted——protective versus evidentiary. Commenting on the
Robinson case, he agreed with the Court's rejection of the
District of Columbia Circuit's conclusion that "any protective
search would have to be limited by the conditions laid down in
Terry[4] for a search upon less than probable cause to arrest."
Robinson,
414 U.S. at 233
. That is, the protective search is
comprehensive, and nothing about the arrest need suggest to the
officer that he is actually in danger or that he might actually
find anything in need of protection.
¶76 An evidentiary search performed after arrest, however,
requires a connection between the offense and the search.
Justice Scalia observed that "in the context of a general
evidence-gathering search, the state interests that might
justify any overbreadth are far less compelling." Thornton,
541 U.S. at 632
(Scalia, J., concurring). Therefore, he concluded,
"I would . . . limit Belton searches to cases where it is
reasonable to believe evidence relevant to the crime of arrest
might be found in the vehicle." Thornton,
541 U.S. at 632
(Scalia, J., concurring). So Justice Scalia's Thornton
concurrence was not about the authority to search, it was about
the scope of the search. When conducting a protective search
consequent upon an arrest, the scope is comprehensive. When
conducting an evidentiary search consequent upon arrest, the
scope is limited to where evidence of the crime might be.
4 Terry v. Ohio,
392 U.S. 1
(1968).
6
No. 2018AP1209-CR.dk
¶77 Where that evidence might be located depends, to a
very large extent, on the nature of the offense of arrest.
There is good reason to believe that Gant considered the
automobile search as a question of scope, as Justice Scalia
plainly did, rather than one of authority, as our court does
today. By way of illustrating the Court's holding, Gant
juxtaposed a few illustrative cases in which the offense of
arrest would not extend the evidentiary search to the automobile
against a few cases in which it would:
[W]e also conclude that circumstances unique to the
vehicle context justify a search incident to a lawful
arrest when it is "reasonable to believe evidence
relevant to the crime of arrest might be found in the
vehicle." Thornton,
541 U.S. at 632
(SCALIA, J.,
concurring in judgment). In many cases, as when a
recent occupant is arrested for a traffic violation,
there will be no reasonable basis to believe the
vehicle contains relevant evidence.[5] But in others,
including Belton and Thornton, the offense of arrest
will supply a basis for searching the passenger
compartment of an arrestee's vehicle and any
containers therein.
Gant,
556 U.S. at 343-44
. Gant did not assess the "totality of
circumstances" in each case to determine whether they indicated
there might be evidence relating to the offense of arrest in the
automobile at issue. It simply noted the type of offense (with
respect to Atwater and Knowles), and called out Belton and
Thornton without any further analysis. Of all the cases cited
in this illustration, Thornton is by far the most important in
judging the fidelity of our conclusion to Gant's paradigm.
See, e.g., Atwater v. Lago Vista,
532 U.S. 318
,
5 324
(2001); Knowles v. Iowa,
525 U.S. 113
, 118 (1998).
7
No. 2018AP1209-CR.dk
¶78 The court says that "[u]nlike the categorical
approach, which does not utilize facts particular to the case,
the reasonableness approach requires particularization." Lead
op., ¶31. If the automobile search in this case may not take
place without particularized suspicion "that the passenger
compartment, and, specifically, the bag, might contain relevant
evidence of OWI," id., ¶50, then Thornton does not belong in
Gant's illustration. In Thornton, there were quite literally no
particularized facts connecting the offense of arrest to Mr.
Thornton's car. The police pulled him over because the license
plate tags on the Chevrolet he was driving were actually issued
to a Ford. Thornton,
541 U.S. at 617
. Mr. Thornton exited his
car, and then consented to the officer's request to search him.
Id.
The search of his person netted several bags of illegal
narcotics.
Id.
The officer promptly arrested Mr. Thornton for
possession of illegal narcotics and placed him in the back seat
of the patrol car, whereupon the protective search justified by
Chimel came to an end.
Id.
Nonetheless, the officer
immediately commenced an evidentiary search of Mr. Thornton's
car, pursuant to which he discovered a handgun (which Mr.
Thornton was not allowed to possess).
Id.
¶79 The search in Thornton, Gant said, was appropriate
because "the offense of arrest . . . suppl[ied] a basis for
searching the passenger compartment of [Mr. Thornton's]
vehicle . . . ." Gant,
556 U.S. at 343
. Conspicuous by its
absence is any mention of factors other than the offense of the
arrest. The opinion said nothing about particularized facts, or
8
No. 2018AP1209-CR.dk
totality of the circumstances, or any of the other phrases the
court uses to explain its holding today. Mr. Thornton was
arrested for drug possession ergo the police could search his
car for evidence. If Gant means what our court says it means,
then the Supreme Court erred pretty remarkably when it pointed
to Thornton as an example of its analysis. Other than the
offense of arrest, neither the Gant nor the Thornton court
identified a single fact suggesting the officer might have found
any evidence in the automobile. Consequently, it must
necessarily be true that the United States Supreme Court
believes that the offense of arrest, without more, can extend
the scope of a post-arrest evidentiary search to an automobile
recently occupied by the arrestee.
¶80 That principle (and its application to Thornton)
leads, almost mechanically, to the conclusion that in this case
the scope of the post-arrest evidentiary search appropriately
encompassed Mr. Coffee's car. In Thornton, the arrestee
possessed illegal drugs on his person, which was an offense
sufficient to bring his car within the scope of the post-arrest
evidentiary search. Here, Mr. Coffee possessed alcohol instead
of narcotics, and he possessed it inside his body instead of in
a plastic baggie inside one of his pockets. These distinctions
appear to have no constitutional significance, nor is any such
distinction on offer. Further, the offense of arrest in this
case is much more directly tied to the automobile than in the
Thornton matter——OWI cannot be committed without the automobile,
whereas possession of illegal narcotics can. Therefore, if
9
No. 2018AP1209-CR.dk
possession of illegal narcotics justifies the scope of search in
Thornton, it perforce justifies the search in this case.6
*
¶81 Aside from my disagreement with the majority's
understanding of Gant, I don't think the "reasonableness" test,
at least the way we have fashioned it, can be correct. The
court says "[t]hough stated in various terms, the
[reasonableness] approach involves 'looking at common sense
factors and evaluating the totality of the circumstances' to
determine whether it was reasonable to conclude that evidence of
the crime of the arrest might be found within the vehicle."
Lead op., ¶30 (quoting United States v. Reagan,
713 F. Supp. 2d 724
, 728 (2010) (quoting United States v. Pruitt,
458 F.3d 477
, 482 (6th Cir. 2006)). Frankly, I don't think
It
6 is theoretically possible that the Wisconsin
Constitution offers greater protection to drivers in Mr.
Coffee's circumstances, but no one has made that argument in
this case. Nor does any provision of our constitution come to
mind that might provide that protection. And if we were
addressing the application of the Gant/Thornton (concurrence)
analysis for the first time to a case such as this, I'm not
certain I would conclude that OWI is an offense of arrest
capable of expanding the scope of the post-arrest evidentiary
search to an automobile. But I believe the Supreme Court's
approval of Thornton authoritatively answers that question, and
this court certainly has no room to disagree. See generally,
State v. Felix,
2012 WI 36
, ¶36,
339 Wis. 2d 670
,
811 N.W.2d 775
("We are bound to follow the United States Supreme Court's
interpretation of the Fourth Amendment that sets the minimum
protections afforded by the federal constitution." (citation
omitted)); and State v. Foster,
2014 WI 131
, ¶57,
360 Wis. 2d 12
,
856 N.W.2d 847
("Our decisions interpreting the
United States Constitution are binding law in Wisconsin until
this court or the United States Supreme Court declares a
different opinion or rule." (quoted source omitted)).
10
No. 2018AP1209-CR.dk
that's actually a test. Saying that we will consider "common
sense factors" and look at the "totality of the circumstances"
is really nothing more than saying we won't be obtuse. It may
be right for us to disfavor "bright-line rules" in the Fourth
Amendment context,7 but this just seems like parameter-free ad-
hockery.
¶82 For all these reasons, I respectfully concur with the
court's judgment.
7 Missouri v. McNeely,
569 U.S. 141
, 158 (2013) ("While the
desire for a bright-line rule is understandable, the Fourth
Amendment will not tolerate adoption of an overly broad
categorical approach that would dilute the warrant requirement
in a context where significant privacy interests are at
stake.").
11
No. 2018AP1209.rfd
¶83 REBECCA FRANK DALLET, J. (dissenting). In Arizona
v. Gant,
556 U.S. 332
, 335 (2009), the United States Supreme
Court announced that the Fourth Amendment1 allows a warrantless
search of a vehicle incident to arrest "when it is reasonable to
believe that evidence of the offense of arrest might be found in
the vehicle."2 I agree with the lead opinion that under Gant,
the search must be analyzed by examining the totality of the
circumstances, a reasonableness approach, as opposed to applying
a categorical approach based solely upon the nature of the crime
of arrest. I part ways with the lead opinion, however, in the
application of the reasonableness approach to the facts and
circumstances of this case. I dissent because it was not
reasonable for Officer Timothy Skelton to believe that Mose B.
Coffee's vehicle contained evidence relevant to his arrest for
operating while intoxicated (OWI). The search of Coffee's
vehicle incident to arrest was therefore unconstitutional.
1 The Fourth Amendment to the United States Constitution
provides the right of citizens to be secure against unreasonable
searches and seizures:
The right of the people to be secure in their persons,
houses, papers, and effects, against unreasonable
searches and seizures, shall not be violated, and no
warrants shall issue, but upon probable cause,
supported by oath or affirmation, and particularly
describing the place to be searched, and the persons
or things to be seized.
U.S. Const. amend. IV.
2 The Gant Court also clarified that a vehicle may be
searched incident to arrest when the arrestee is "within
reaching distance of the passenger compartment at the time of
the search." Arizona v. Gant,
556 U.S. 332
, 351 (2009).
1
No. 2018AP1209.rfd
I. FACTS
¶84 The relevant facts are set forth in both the affidavit
in support of the complaint and the suppression hearing
testimony.
¶85 On August 30, 2017, shortly after 11:15 p.m., Officer
Skelton conducted a traffic stop of Coffee's vehicle for failure
to display a front license plate. "Immediately" after Officer
Skelton turned on his emergency lights, Coffee pulled over into
a parking lot of a bar and parked very close to another vehicle.
According to the testimony of Officer Skelton, upon parking,
Coffee "immediately was getting out of his vehicle so it was
almost as if he was—knew [Officer Skelton] was behind him and
was getting out quickly." Officer Skelton testified to the
following conversation with Coffee as he exited the vehicle: "I
indicated I was performing a traffic stop for the front license
plate and that I wanted him to stay with his vehicle," to which
Coffee "indicated that he had been stopped for that same
occurrence before and that was why he was getting out to show
[Officer Skelton] that he had a warning for it." Officer
Skelton described Coffee as "somewhat upset" about being stopped
again for failing to have a front license plate.
¶86 Officer Skelton observed that Coffee had a distinct
slur to his speech. He instructed Coffee to "sit down in his
car." As he approached Coffee, Officer Skelton "could smell an
odor of intoxicants coming from his person or from the vehicle."
He also noticed that Coffee's eyes were glazed over and
bloodshot, "consistent with the odor—-the strong odor of
2
No. 2018AP1209.rfd
intoxicants." The body camera footage showed that during
Officer Skelton's conversation with Coffee, Coffee was seated in
the driver's seat with the front door open and his legs outside
of the vehicle, while Officer Skelton stood several feet away.
When asked where he was coming from, Coffee responded that he
had been at a friend's house where he "had not had that much" to
drink.
¶87 Officer Skelton asked Coffee to step out of his
vehicle in order to complete some field sobriety tests "[d]ue to
the level of odors and [his] observations of [] Coffee." At
this point, Officer Skelton realized that he had met Coffee a
couple weeks earlier. Officer Skelton noticed that Coffee was
"very talkative" compared to the previous occasion where Coffee
had been "very quiet." While Coffee was performing the field
sobriety tests with Officer Skelton, several other officers
arrived on the scene.
¶88 Officer Skelton testified that he believed Coffee was
operating a motor vehicle while intoxicated: "[b]ased off my
observations of his person, the conversations I had with him,
the odor of intoxicants, the slurred speech, the field sobriety
tests that we did." On re-direct examination, Officer Skelton
reiterated that he had arrested Coffee based upon a "culmination
of my observations of his person, field sobriety tests, and
general odor that was coming from his person."
¶89 Officer Skelton stated that he informed the other
officers on scene, Officers Benjamin Fenhouse and Brenden
3
No. 2018AP1209.rfd
Bonnett, that Coffee had been arrested for "operating under the
influence of alcoholic beverages."
¶90 Both Officer Bonnett and Officer Fenhouse testified
that they were tasked with searching Coffee's two-door vehicle.
When asked what Officer Skelton told him about the nature of the
search, Officer Bonnett testified:
A.: I recall knowing the subject was in custody for
impaired driving and conducted my search relevant to
that.
Q.: And when you say you conducted your search
relevant to that, what do you mean?
A.: I'd be looking for any substance in the vehicle
that could impair a driver's ability to operate the
motor vehicle safely.
¶91 When questioned about whether there was any smell of
alcohol emanating from the vehicle, Officer Bonnett testified:
Q.: So upon your initially opening the door, your
police report doesn't mention any smells. Did you
smell any alcohol?
A.: I don't recall smelling any alcohol.
Officer Bonnett did not mention any smells of other intoxicants.
¶92 Officer Bonnett searched the driver-side front seat
while Officer Fenhouse searched the passenger-side front seat.
Neither officer found any evidence of open intoxicants. Officer
Bonnett subsequently searched behind the driver's seat, where he
found a cloth bag "full of stuff," including "wires, cables, and
phones." Officer Bonnett testified that he looked through the
bag "for any evidence which would impair a driver's ability to
operate a motor vehicle." After "dig[ging] through the bag" for
over a minute, Officer Bonnett found two mason jars that had
4
No. 2018AP1209.rfd
"flakes of what was suspected to be marijuana." Upon discovery
of the mason jars, Officer Bonnett and Officer Fenhouse searched
the trunk portion of the vehicle and found roughly two pounds of
marijuana, along with drug paraphernalia.
II. ANALYSIS
¶93 The lead opinion concludes that "Skelton had
reasonable suspicion that the passenger compartment might
contain relevant evidence of OWI" for six reasons. Lead op.,
¶¶52-57.3 As illustrated below, neither the lead opinion's
reasons nor its conclusions are supported by the facts in the
record.
¶94 First, the lead opinion asserts that Officer Skelton
could smell an odor of intoxicants coming from the vehicle, and
therefore there was reason to believe intoxicants would be found
in the vehicle. Lead op., ¶52. The lead opinion reads a
statement in the affidavit attached to the complaint out of
context and insinuates that the smell of intoxicants emanated
from the vehicle separate and apart from Coffee's person.
However, the full record indicates that Officer Skelton did not
articulate any particularized reason to believe the smell of
alcohol emanated from the vehicle. As Officer Skelton's
testimony and the body camera footage clarifies, he "could smell
an odor of intoxicants coming from the vehicle" when Coffee was
The parties do not dispute that if the search of the bag
3
in Coffee's backseat is upheld, the subsequent search of the
trunk cannot be legally challenged. At oral argument, defense
counsel clarified that Coffee was not independently challenging
the search of the trunk.
5
No. 2018AP1209.rfd
seated in it. During the suppression hearing, Officer Skelton
described the odor in the following ways:
"I believe at that point I had him sit down in
his car and I could smell an odor of intoxicants
coming from his person or from the vehicle."
"Due to the level of odors and my observations of
Mr. Coffee, I asked him to step out to do field
sobriety tests."
A "general odor that was coming from his person."
"Based off my observations of his person, the
conversations I had with him, the odor of
intoxicants, the slurred speech, the field
sobriety tests that we did, I believed he was
operating a motor vehicle under the influence of
intoxicants."4
As the body camera footage shows, Officer Skelton remained
several feet away from the vehicle while Coffee was seated in
the driver's seat with the door open and legs partly outside.
Officer Skelton had no occasion to assess whether the vehicle
independently had an odor of intoxicants.
¶95 Additionally, Officer Bonnett testified he did not
smell any alcohol coming from the vehicle, which he searched
while Coffee was in Officer Skelton's squad car. Officer
Bonnett also did not mention the smell of any other intoxicants.
Viewing the record in full, the claim that there was a reason to
believe alcohol might be found in the vehicle because it smelled
of intoxicants is unsupported.
4Additionally, as evidenced in the body camera footage,
Officer Skelton told Coffee to exit the vehicle and perform
field sobriety tests because "I can smell it on ya."
6
No. 2018AP1209.rfd
¶96 Second, the lead opinion asserts that Coffee's
statement that he was coming from a friend's house provided a
reason to believe that alcohol might be found in the vehicle.
The lead opinion's logic is that "a private residence has
alcohol only if it is brought to the residence" and therefore
Coffee "might have brought the alcohol that he consumed to his
friend's house and have retained some in his vehicle." Lead
op., ¶53. The only authority cited is a footnote from United
States v. Reagan,
713 F. Supp. 2d 724
(E.D. Tenn. 2010), a
federal case upholding the suppression of evidence seized from a
vehicle during a search incident to arrest. The footnote
follows the magistrate judge's conclusion that a search of a
vehicle under Gant requires "a particularized and articulable
reason to believe that evidence of [OWI] is contained inside."
Id. at 733
. The footnote reads:
Many different facts may provide a law enforcement
officer with reason to believe that evidence of [OWI]
is located inside the passenger compartment of a
vehicle. Examples include observations of the driver
drinking while driving, observations of an open
container of alcohol in plain view inside the
passenger compartment, statements made by the
occupants of the vehicle indicating that an open
container is in the passenger compartment, the smell
of alcohol emanating from within the passenger
compartment, or indications that the driver was
traveling from a location such as a recreational area
or campground where alcohol is not available unless it
is transported in by private vehicle.
Id.
at 733 n.7. The Reagan court determined that the vehicle's
location in a recreational area did not support a search when
the ranger did not articulate any particularized reason why he
believed the vehicle provided evidence of OWI.
Id. at 733-34
.
7
No. 2018AP1209.rfd
The lead opinion provides no authority for the more attenuated
proposition that if a person arrested for OWI is driving from a
friend's house, police will have a reason to believe there is
evidence of OWI in their vehicle.
¶97 Third, the lead opinion misconstrues the statement
that Coffee "continued into the parking lot" to signify that
"Coffee was hesitant to pull over because he knew there was
something in the automobile that he should not have had." Lead
op., ¶54. This interpretation directly contradicts the evidence
in the record which indicates Coffee immediately pulled over.
Officer Skelton was asked point blank:
Q.: Okay. So safe to say that immediately upon
turning on your emergency lights [Coffee] pulled into
the parking lot?
A.: Correct.
The facts of record clearly show Coffee was not hesitant to pull
over. Therefore, this factor can not support the search of
Coffee's vehicle.
¶98 Fourth, the lead opinion claims that "Coffee's
careless parking and hasty exit from his vehicle could indicate
that he was trying to distance himself from something in the
vehicle that he knew he should not have had." Lead op., ¶55.
The lead opinion ignores Officer Skelton's testimony that Coffee
"indicated that he had been stopped for that same [front license
plate violation] before and that was why he was getting out to
show [him] that he had a warning for it." Coffee's careless
parking and hasty exit from the vehicle fails to provide any
8
No. 2018AP1209.rfd
particular reason to believe that alcohol might be found in his
vehicle.
¶99 Fifth, the lead opinion states that because Coffee was
more talkative than he had been during one past interaction with
Officer Skelton, "Skelton could have believed Coffee was nervous
because he had something to hide." Lead op., ¶56 (emphasis
added). Officer Skelton described Coffee as talkative while
they "were walking over to the area . . . to do the field
tests." The record of the past interaction consists of one
statement that Coffee "had picked up an individual from a
hospital from an accident," and had been "very quiet at that
time."
¶100 The lead opinion uses the term "could have believed"
because there is no evidence that Officer Skelton believed that
Coffee's talkativeness equated to nervousness. Officer Skelton
never characterized Coffee as nervous, and the State never
argued that Coffee's nervousness formed a basis for the search.
While a suspect's nervousness could be a factor to consider in
other cases, see, e.g., State v. Morgan,
197 Wis. 2d 200
, 214-
15,
539 N.W.2d 887
(1995), this court is bound by the facts in
the record. Coffee was never described as nervous, and
therefore it could not be a factor that formed the basis for
Officer Skelton's search of Coffee's vehicle.
¶101 Finally, the lead opinion justifies its conclusion
based on Coffee's state of "extreme[] intoxicat[ion]." Lead
op., ¶57. As support, the lead opinion cites to a court of
appeals case from Kansas involving the search of a vehicle based
9
No. 2018AP1209.rfd
in part on an odor of intoxicant emanating from the vehicle.
See State v. Ewertz,
305 P.3d 23
, 28 (Kan. Ct. App. 2013). As
discussed earlier, supra ¶¶94-95, there is no indication in the
record that an odor of intoxicants was emanating from the
vehicle.
¶102 Of greater concern is the catchall statement that
"when a person is extremely intoxicated, it is not illogical to
assume intoxicants could be close by." Lead op., ¶57. A
finding of "extreme intoxication" invites police to always
search a vehicle after an OWI arrest, despite the absence of any
facts indicating there might be evidence of OWI in a particular
vehicle. United States v. Taylor,
49 A.3d 818
(D.C. 2012),
illustrates the distinction between the lead opinion's broad
statement and the particularization required when discussing
whether it is reasonable to believe evidence of OWI will be
found in a vehicle.
¶103 In Taylor, the defendant rear-ended a vehicle occupied
by three Deputy United States Marshals.
Id. at 820
. After
arresting the defendant for driving under the influence,
officers searched the truck and found a loaded handgun.
Id.
The trial court suppressed the evidence as the fruits of an
unlawful search.
Id. at 821
.
¶104 In upholding suppression of the evidence, the Taylor
court addressed Gant and discussed how the principles "apply to
this arrest for driving under the influence."
Id. at 826
. The
Taylor court reasoned:
Whenever probable cause exists to effect an arrest for
DUI, there will be evidence that the individual in
10
No. 2018AP1209.rfd
question is intoxicated, has been drinking recently,
and has been driving despite being (and perhaps while
becoming) inebriated. In this case, the police
certainly had reason to believe (indeed, they had
probable cause to conclude) that Taylor was drunk.
The smell of alcohol was on his breath, he was swaying
back and forth, he had lost control of his vehicle,
and he had urinated on a nearby tree. The breath test
showed a blood alcohol content of .161. This evidence
gave ample reason to believe that Mr. Taylor had
consumed alcohol. But there was nothing in
particular——no tell-tale sign——to suggest that he had
been drinking in his vehicle.
It was, of course, possible that evidence of drinking—
such as empty or partially full containers of alcohol—
would be found in the vehicle, just as it is possible
that such evidence may be found in any vehicle driven
by an intoxicated individual. But the question
under . . . Gant is whether it is reasonable to
believe that such evidence might be found in this
specific vehicle. The suspicion must be
particularized.
Id.
(emphasis added).
¶105 This case lacks particular facts to suggest that
alcohol might be found in Coffee's vehicle. There were signs
that Coffee was intoxicated, but the State cannot rely solely on
those facts to search his vehicle. The specific facts giving
rise to the conclusion that Coffee was intoxicated "did not make
it any more likely that he had been drinking in the vehicle."
Id. at 827
.
¶106 Although there was no such evidence here, there are
factual circumstances which would support the search of a
vehicle incident to an arrest for OWI. For example, if police
observed, or were informed, that a suspect was consuming alcohol
while driving or just before driving. See, e.g., City of West
Bend v. Willie, No. 2018AP151, unpublished slip op., ¶1 (Wis.
11
No. 2018AP1209.rfd
Ct. App. Aug. 15, 2018) (noting that the police received "a
report from the manager of Wendy's that Willie and his passenger
had open beers in their vehicle"); State v. Relyea, 2014AP2860-
CR, unpublished slip op., ¶3 (Wis. Ct. App. Jun. 18, 2015) ("The
officer saw that Relyea was 'guzzling' from what appeared to be
a bottle of 'microbrew' beer."). Other circumstances include
where an officer observes evidence of drinking or an attempt to
hide something in the vehicle. See, e.g., State v. Bons,
2007 WI App 124
, ¶15,
301 Wis. 2d 227
,
731 N.W.2d 367
(unusual
behavior "coupled with the presence of the shot glass on the
console, gave [the officer] reasonable suspicion that Bons had
been committing or was about to commit a crime involving
alcohol"). None of these factual circumstances were present in
this case.
III. CONCLUSION
¶107 I agree with the lead opinion that Gant,
556 U.S. 332
,
requires a reasonableness approach to a search incident to
arrest based upon the totality of the circumstances. However,
in this case, Officer Skelton did not have any particular reason
to believe that Coffee's vehicle might contain evidence relevant
to his arrest for OWI. The search of Coffee's vehicle incident
to arrest was therefore unconstitutional and the evidence should
have been suppressed.
¶108 For the foregoing reasons, I respectfully dissent.
¶109 I am authorized to state that Justice REBECCA GRASSL
BRADLEY joins this dissent.
12
No. 2018AP1209.rfd |
4,513,416 | 2020-03-06 11:12:02.021591+00 | null | http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=36281&Index=%5c%5coca%2dpsql12%2ecourts%2estate%2etx%2eus%5cTamesIndexes%5ccoa06%5cOpinion | In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-19-00063-CV
REVERSE MORTGAGE FUNDING, LLC, Appellant
V.
CARLA NAGLE BLEVINS ROBERTSON, Appellee
On Appeal from the 115th District Court
Marion County, Texas
Trial Court No. 1900039
Before Morriss, C.J., Burgess and Stevens, JJ.
Opinion by Justice Burgess
OPINION
The trial court entered a default judgment against Reverse Mortgage Funding, LLC (RMF),
after it failed to timely answer a lawsuit filed against it by Carla Nagle Blevins Robertson. RMF
filed a motion for new trial that was overruled by operation of law. RMF appeals. Because we
find that RMF failed to establish a prima facie meritorious defense to Robertson’s lawsuit, we
affirm the trial court’s judgment.
I. Factual and Procedural Background
In 1995, Richard R. Nagle executed a will in which he left his “real property located at
1201 Pinehill Drive” in Jefferson to his wife, Katie Maurine Nagle, “to be used, occupied and
enjoyed by her for and during her natural life.” According to the will, this property was to vest in
Nagle’s daughters, Carla (Blevins) Robertson and Julie Hamm, on Katie’s death. In 2008,
following Nagle’s death in 2005, Katie entered into a reverse mortgage loan agreement in the
amount of $131,250.00 with the predecessor in interest to RMF, 1 secured by a deed of trust on the
real property and improvements located at 1201 Pine Hill Drive in Jefferson, Marion County,
Texas (the Property).
In a suit to quiet title to the Property filed on March 19, 2019, Robertson alleged that
Katie’s life estate in the Property terminated when she died in March 2019. Robertson claimed
that because Katie only owned a life estate in the Property, she lacked authority to enter into the
1
The deed of trust was executed in favor of James B. Nutter & Company and was assigned to RMF on March 1, 2018.
The initial deed of trust granted James B. Nutter & Co. a lien on the Property to secure payment of the note. Katie
executed a second deed of trust, granting a lien on the Property to the Secretary of Housing and Urban Development
to secure payment on the note. Both deeds were executed on November 12, 2008, and both were filed for record in
the real property records of Marion County, Texas.
2
reverse mortgage loan agreement. When RMF did not timely answer the lawsuit, the trial court
entered a default judgment in favor of Robertson finding that
Robertson is the owner in fee simple of the house and lot(s) located at 1201 Pinehill
Drive . . . by virtue of the testate passage of same from her father, Richard R. Nagle,
to her and her now deceased sister in a will probated in Marion County, Texas[,]
on November 14, 2005[,] and recorded in Volume J-3 Page 144 et seq in probate
Cause Number P006038.
The trial court further determined that “Katie Maurine Nagle acquired no ownership interest in
said property and only acquired a life estate in said property which terminated on her death” and
that the deeds of trust dated November 12, 2008, “are void and shall be released since the
‘borrower’ in said documents was Katie Maurine Nagle who was not ‘lawfully seised’ of the
property as covenanted in the deeds of trust.” On May 6, 2019, RMF filed a motion for new trial
that was overruled by operation of law. 2 See TEX. R. CIV. P. 329b(c).
II. Analysis
We review the trial court’s denial of a motion for new trial for an abuse of discretion.
Action Powersports, Inc. v. 1STEL, Inc.,
500 S.W.3d 632
, 639 (Tex. App.—Texarkana 2016, no
pet.) (citing Director, State Employees Workers’ Compensation Div. v. Evans,
889 S.W.2d 266
,
268 (Tex.1994)). Following the entry of a default judgment, the defaulting party is entitled to a
new trial when
(1) the failure of the defendant to answer before judgment was not intentional, or
the result of conscious indifference on his part, but was due to a mistake or an
accident; provided (2) the motion for a new trial sets up a meritorious defense; and
(3) is filed at a time when the granting thereof will occasion no delay or otherwise
work an injury to the plaintiff.
2
The trial court held a hearing on the motion for new trial on May 30, 2019. At the conclusion of the hearing, the trial
court announced its intention to deny the motion for new trial, but it did not enter a written order.
3
Bank One, Tex., N.A. v. Moody,
830 S.W.2d 81
, 82–83 (Tex. 1992) (citing Craddock v. Sunshine
Bus Lines,
133 S.W.2d 124
, 126 (Tex. 1939)). It is undisputed that RMF’s failure to answer was
not intentional and that the granting of a motion for new trial would not have occasioned delay or
otherwise worked an injury to Robertson. The dispositive question is whether RMF set up a
meritorious defense.
To determine if RMF set up a meritorious defense, we look to the facts alleged in RMF’s
motion and supporting affidavit, regardless of whether those facts are controverted. See Dir., State
Employees Workers’ Comp. Div. v. Evans,
889 S.W.2d 266
, 270 (Tex. 1994). “The motion must
allege facts which in law would constitute a defense to the cause of action asserted by the plaintiff
and must be supported by affidavits or other evidence proving prima facie that the defendant has
such meritorious defense.” Estate of Pollack v. McMurrey,
858 S.W.2d 388
, 392 (Tex. 1993)
(quoting Ivy v. Carrell,
407 S.W.2d 212
, 214 (Tex. 1966)). If proven, a meritorious defense would
cause a different—although not necessarily opposite—result on retrial. Comanche Nation v. Fox,
128 S.W.3d 745
, 751 (Tex. App.—Austin 2004, no pet.). The trial court is not permitted, however,
to try the defensive issues in deciding whether to set aside the default judgment. Estate of
Pollack, 858 S.W.2d at 392
. The existence of a meritorious defense is thus a “legal question[] for which
the no-contrary-evidence rule was established in Guar. Bank v. Thompson,
632 S.W.2d 338
, 339
(Tex. 1982).” George v. Smith, No. 06-01-00019-CV,
2002 WL 91355
, at *4 n.2 (Tex. App.—
Texarkana Jan. 25, 2002, no pet.) (mem. op.).
In its motion for new trial, RMF alleged: (1) “Defendant has meritorious defenses to
Plaintiff’s claims because it is a bona fide mortgagee,” (2) “Even if Plaintiff’s allegations regarding
4
Ms. Nagle’s interest in the Property [are true], which Defendant does not admit, Defendant is
protected as a bona fide mortgagee,” (3) “Ms. Nagle signed a deed of trust for a reverse mortgage
on November 12, 2008[,] in favor of James B. Nutter & Company,” (4) “The deed of trust lien was
subsequently transferred to Defendant,” (5) “An Assignment of Mortgage/Deed of Trust dated
March 1, 2018[,] was recorded in the official property records for Marion County, Texas[,] in
Volume 976, Page 418,” (6) “Defendant had no actual knowledge of the probate records, nor did
it have constructive notice,” and (7) “Defendant has a good faith defense to Plaintiff’s claims that
it is a bona fide mortgagee and holds a valid, enforceable lien on the Property.”
“Under section 13.001 [of the Texas Property Code], a lender can be a bona fide mortgagee,
if the lender takes a lien in good faith, for valuable consideration, and without actual or constructive
notice of outstanding claims.” Noble Mortg. & Invs., LLC v. D & M Vision Invs., LLC,
340 S.W.3d 65
, 76 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing Houston First Am. Sav. v. Musick,
650 S.W.2d 764
, 769 (Tex. 1983)). “A bona fide mortgagee is entitled to the same protections as
a bona fide purchaser.” 3
Id. (citing Graves
v. Guar. Bond State Bank,
161 S.W.2d 118
, 120 (Tex.
App.—Texarkana 1942, no writ)).
Noticeably absent from RMF’s factual allegations in its motion for new trial are any
allegations supporting RMF’s claim that it did not have actual knowledge of Robertson’s claim to
the Property. It is evident that RMF was unaware of Robertson’s ownership interest in the Property
at the time the mortgage was executed and at the time it purchased the mortgage. If RMF had such
3
Although status as a bona fide purchaser is an affirmative defense in a title dispute, “[t]o receive this special
protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest.”
Madison v. Gordon,
39 S.W.3d 604
, 606 (Tex. 2001).
5
knowledge, it would not have purchased the mortgage. Yet, “in legal parlance, actual knowledge
embraces those things of which the one sought to be charged has express information, and likewise
those things which a reasonably diligent inquiry and exercise of the means of information at hand
would have disclosed.” Champlin Oil & Ref. Co. v. Chastain,
403 S.W.2d 376
, 388 (Tex. 1965)
(quoting Hexter v. Pratt,
10 S.W.2d 692
, 693 (Tex. Comm’n App. 1928, judgm’t adopted)
(“Where there is a duty of finding out and knowing, negligent ignorance has the same effect in law
as actual knowledge.”)). RMF failed to allege any facts in its motion for new trial in support of its
conclusory statement that it lacked actual knowledge of Robertson’s claim.
Likewise, RMF’s motion for new trial is devoid of factual allegations supporting its claim
that it did not have constructive notice of Nagle’s will. See, e.g., Sw. Title Ins. Co. v. Woods,
449 S.W.2d 773
, 774 (Tex. 1970) (holding that recorded instrument not in chain of title does not
establish constructive notice); Hue Nguyen v. Chapa,
305 S.W.3d 316
, 323 (Tex. App.—Houston
[14th Dist.] 2009, pet. denied) (holding that unrecorded conveyance of interest in real property is
void as to subsequent purchaser who purchases property for valuable consideration without
notice).
To claim the status of a bona fide mortgagee, RMF was bound to support its conclusory
statements that it had no actual or constructive notice of Robertson’s claim to the Property with
verified allegations of fact. See Estate of
Pollack, 858 S.W.2d at 392
. Because no such allegations
appear in RMF’s motion for new trial, it failed to establish a prima facie meritorious defense.
6
We, therefore, affirm the trial court’s judgment.
Ralph K. Burgess
Justice
Date Submitted: November 18, 2019
Date Decided: January 3, 2020
SUPPLEMENTAL MEMORANDUM OPINION
On November 25, 2019, we issued an opinion affirming the trial court’s judgment in this
matter. On December 10, 2019, Reverse Mortgage Funding, LLC (Reverse Mortgage), filed a
motion for rehearing. While we ultimately overruled the motion for rehearing, on January 3, 2020,
we withdrew our opinion dated November 25, 2019, and issued a new opinion further explaining
our rationale for affirming the trial court’s judgment. On January 21, 2020, Reverse Mortgage
filed a second motion for rehearing stemming from our January 3, 2020, opinion. We overruled
Reverse Mortgage’s second motion for rehearing. Then on February 24, 2020, the parties filed a
joint motion stating that they had reached a settlement of their disputes, asking that we withdraw
our January 3, 2020, opinion, and seeking to have the appeal dismissed.
We grant that part of the parties’ joint motion seeking to dismiss the appeal. However, we
deny the portion of the motion asking that we withdraw our January 3, 2020, opinion. See TEX.
7
R. APP. P. 42.1(c). “A settlement does not automatically require the vacating of a court of appeals’
opinion—either by [the Supreme Court of Texas] or by the intermediate appellate court.” Houston
Cable TV, Inc. v. Inwood W. Civic Ass’n,
860 S.W.2d 72
, 73 (Tex. 1993) (per curiam). Because
“courts are endowed with a public purpose,” “a private agreement between litigants should not
operate to vacate a court’s writing on matters of public importance.”
Id. We have
determined that
our January 3, 2020, opinion addresses matters of public importance; consequently, the opinion
will not be withdrawn.
We vacate our January 3, 2020, judgment, dismiss the appeal, and, in keeping with the
parties’ request, order that Reverse Mortgage bear the costs of this appeal.
Ralph K. Burgess
Justice
Date Decided: March 5, 2020
8 |
4,489,896 | 2020-01-17 22:02:05.414394+00 | Littleton | null | OPINION.
Littleton :
The Commissioner determined a deficiency of $3,591.24 income and profits tax for 1921. This resulted from the disallowance of deductions taken by petitioner of the amount of fines imposed by the State of blew York upon petitioner and its president for criminal violations, and the cost of legal services in defense thereof.
The facts are embodied in the following agreed statement:
1. The petitioner is a New York Corporation, with its principal office at Johnson Avenue and Newton Creek, Brooklyn, New York, and during the taxable year 1921 was engaged in the business of dealing in and selling masons’ building materials, to contractors and builders.
2. The petitioner duly filed an income and profits tax return for the calendar year 1921.
3. In computing the tax, the petitioner deducted as ordinary and necessary expenses, incurred in the carrying on of its business, among other deductions, sums totaling $7,510, the details of which are set out in paragraphs 8, 9 and 10, infra.
4. That in the deficiency letter dated May 22, 1926, the Commissioner of Internal Revenue stated that he had disallowed as deductions for ordinary business expenses the said sums totaling $7,510, and determined that there was a deficiency of $3,591.26.
5. That thereafter, and within the time allowed by law, the petitioner duly appealed to this Board from said determination, and duly filed its petition and amended petition with the Clerk of the Board.
6. The petitioner in 1920 was a member of an association of building material dealers, and the petitioner and other such dealers entered into an agreement to fix the prices at which building materials were to be sold to contractors and builders.
7. That the petitioner thereupon continued to carry on its business and pursuant to the terms of said agreement sold building materials to contractors and builders at prices fixed pursuant to said agreement.
8. That for its participation in said price-fixing agreement, the petitioner, on February 9, 1921, was indicted for violation of Section 341 of the General Business Law of the State of New York; that the petitioner pleaded guilty to said indictment, and on May 25, 1921, was ordered by the New York Supreme *102Court to pay a fine of $2,500; that on May 25, 1921, the petitioner paid said fine to the Clerk of the Supreme Court of New York County and was duly discharged by said Court.
9. That for his participation in said price-fixing agreement, Cornelius A. McGuire, president of petitioner corporation was on January 28, 1921, indicted for violation of Section 580 of the Penal Law of the State of New York; that said C. A. McGuire pleaded guilty to said indictment and on May 25, 1921, was ordered by the New York Supreme Court to pay a fine of $450, and $60 as costs’; that on May 25th, 1921, the petitioner paid said fine and costs to the Clerk of the Supreme Court of New York County, and the said C. A. McGuire was thereupon discharged.
10. That upon being indicted, the petitioner retained the law firm of Holmes & Bernstein of 44 Court Street, Brooklyn, New York, to defend it, and to defend C. A. McGuire, as its President, and agreed to pay said firm the sum of $4,500 for such defense.
11. The said firm of Holmes & Bernstein did conduct such defense and in 1921, the petitioner paid said sum of $4,500 in full to the firm of Holmes & Bernstein.
The petitioner contends that the fines and counsel fees are deductible under the Revenue Act of 1921, section 234 (a) (1), as “ ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” The amounts were paid as the result of petitioner’s participation in a price-fixing agreement with other dealers in building materials, such agreement being a misdemeanor under section 341 of the General Business Law of New York. In urging that the expenses in question are deductible, the argument is advanced that, since the income which arose therefrom is taxable, expenditures made as a result of the production of this income are necessarily deductible in order to arrive at net taxable income. But is this true? We think not. What is income is controlled by the Constitution, whereas the deductions which may be made therefrom in order to arrive at net taxable income are statutory concepts. Chicago, Rock Island & Pacific Railway Co., 13 B. T. A. 988. And here certain statements made by Mr. Justice Holmes in United States v. Sullivan, 274 U. S. 259, seem particularly pertinent. The court was considering the question of the return to be filed by an individual engaged in the bootlegging business and in answer to a similar contention as here advanced with respect to deductions said:
It is urged that if a return were made the defendant would be entitled to deduct illegal expenses such as bribery. This by no means follows but it will be time enough to consider the question when a taxpayer has the temerity to raise it.
Our question then is to be decided on the, basis of whether the items under consideration are ordinary and necessary expenses of carrying on the business in which petitioner was engaged and not *103on the basis of whether income resulted on account of the activities of the petitioner for which the expenditures were made. And even if we should concede that, since the amounts in question were required to be paid, they therefore constituted necessary expenses in carrying on petitioner’s business as contemplated by the provision before us — though the foregoing is not free from doubt, we are faced with the proposition that being necessary is not sufficient; they must be both ordinary and necessary. And in Illinois Merchants Trust Co., Executor, 4 B. T. A. 103, we quoted with approval the definition of “ordinary” from Webster’s New International Dictionary, as follows: “ (1) According to established order; methodical; settled; regular; (2) Common; customary; usual.” The petitioner was engaged in the business of dealing in and selling building materials, a commonly accepted legitimate business. And certainly it would be imputing to concerns of this character something which we would not do to say that it is “ customary,” “ common,” “ usual,” etc., for them to violate State or Federal statutes and incur fines in order to carry on their business. But we do not think that illegal price-fixing is a “ necessary element ” of carrying on the business in which petitioner is engaged. Essentially, the case at bar is not unlike that before us in Columbus Bread Co., 4 B. T. A. 1126, wherein we held that an amount paid by a taxpayer on account of a fine, penalty and court costs for violating the antitrust law of a State, and attorneys’ fees incident to the defense of the taxpayer against an indictment for such violation, were not deductible as ordinary and necessary expenses of carrying on the taxpayer’s business.
Reviewed by the Board.
Judgment will be entered for the respondent. |
4,489,874 | 2020-01-17 22:02:04.616531+00 | Fossan | null | *914 OPINION.
VáN FossaN:
The fundamental question for solution in this proceeding is whether or not the decedent transferred a material part of his property by an irrevocable deed of trust in contemplation of death within the intendment of section 302(c) of the Revenue Act of 1924.
Section 302 of the Revenue Act of 1924 provides that the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money’s worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death * ⅜ *.
There is no contention on the part of the respondent that the trust deed in question was intended to take effect in possession or enjoyment after the death of the settlor. The transfer of the property was, however, in the nature of a final disposition or distribution thereof. Under the terms of the quoted section of the statute the *915transfer, having been made within two years prior to the death of the decedent, is to be deemed to have been made in contemplation of death, unless the contrary is shown. This presumption shifts the burden of proof to the taxpayer, but rigorous rules as to the proof required to rebut the presumption are not to be applied. Myer v. United States, 60 Ct. Cls. 474; Anna L. Stark Lavelle, Executrix, 8 B. T. A. 1150, 1156. If the preponderance of the evidence leads to the conclusion that a present apprehension that death was near at hand was not the animating and inducing cause of the transfer, then the presumption is rebutted and the value of the corpus of the estate should not be included in the gross estate. Phillip C. Starck, Executor, 3 B. T. A. 514; Spencer Borden, Executor, 6 B. T. A. 255; Anna L. Stark Lavelle, Executrix, supra; Rea v. Heiner, 6 Fed. (2d) 389.
In the present proceeding, the decedent was about 61 years of age when he made the transfer in question. He was suffering from a disease which ultimately might cause his death. As a matter of fact this disease was the inducing cause of the cerebral hemorrhage which resulted in decedent’s death. The respondent maintains that because of the existence and character of the disease and because two days after the execution of the trust deed the decedent executed his will, therefore, it must be concluded that the transfer of property in question was, as a matter of fact, made in contemplation of death. The facts show, however, that at the time the trust deed was executed the decedent’s physical condition was not markedly different from what it had been during the six years prior to the execution of the trust deed and that at that time the decedent was contemplating a trip to Germany. It may be inferred properly, therefore, that the execution of the will was merely the act of a prudent man who was putting his house in order before going abroad.
The decedent had been told by his physicians that notwithstanding the fact that he had arteriosclerosis he would live many years if he took proper care of himself and did not become excited. He was a nervous, excitable man who was easily annoyed. It would be natural and prudent for him, therefore, to endeavor to rid himself of all possible causes of annoyance and excitement. Since his first attack in 1917 he had never expressed nor exhibited any fear that death was at hand. On the contrary, the evidence shows that he was looking-forward into the future with the expectation of a continuance of life. He had a will to recover his health so that he could go to China and he actually planned and made a trip to Germany contemporaneously with the transfer in question.
In our opinion the facts show that the decedent executed the trust deed as a means of promoting the recovery of his health, rather than because of any present apprehension that his death was immediately *916imminent. We therefore reach the conclusion that the petitioner has rebutted the presumption that the irrevocable deed of trust was executed and delivered in contemplation of death.
Decision will be entered under Rule 50. |
4,489,876 | 2020-01-17 22:02:04.673738+00 | Trammell | null | *925OPINION.
Trammell:
There is only one issue presented for decision here, namely, whether the petitioners are entitled to a deduction of $9,900 from gross income for 1922 on account of an investment by the decedent in certain corporate stocks purchased in 1920 having become worthless in the taxable year.
The Revenue Act of 1921 provides as follows:
Seo. 214 (a) That in computing net income there shall be allowed as deductions:
*******
(5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business. * ⅜ *.
The record before us contains no suggestion that the decedent did not at some time suffer a loss in the amount claimed, or that the loss was compensated for by insurance or otherwise. Nor is it contended that the loss was not incurred in connection with a transaction entered into for profit. The sole question is whether or not the loss was sustained in the taxable year; that is to say, whether or not the stock of the engine company, purchased by the decedent in 1920 for $9,900, became worthless in 1922.
As shown by the deficiency letter, the respondent disallowed the deduction claimed on the ground “ that the transaction in 1922 relative to stock in the Midwest Engine Company was a reorganization and no loss may be claimed on this stock until sold or otherwise disposed of.” We have no other information respecting the contentions of the respondent in this case, since no brief has been filed in his behalf.
If it is the position of the respondent that the transaction in 1922, by which the decedent exchanged his shares of preferred stock in the Midwest Engine Co. for shares of common stock in the Midwest Engine Corporation, constituted a reorganization and therefore under section 202 of the Revenue Act of 1921, no loss may be recognized until the stock is sold or otherwise disposed of, it is our opinion that such position is untenable, for the reason that the loss claimed by the petitioners is not claimed as having resulted from the exchange.
*926The decedent in 1920 purchased preferred stock in the Midwest Engine Co. for $9,900. The corporation had serious financial difficulties in the latter part of 1920, which continued through 1921. At the end of 1921 the stock was not worthless, although undoubtedly there had occurred a pronounced shrinkage in its value. On January 9, 1922, a plan, of reorganization was instituted. Under this plan a new corporation, known as the Midwest Engine Corporation, was organized, to which was conveyed all the assets of the two prior companies. The creditors of the old companies received preferred stock of the new corporation, and the preferred stockholders of the old companies received no-par value common stock, share for share, of the new corporation. Additional working capital in the amount of $1,000,000 was provided for by the issuance and sale of bonds of the new corporation.
At the time the reorganization was completed in 1922, the no-par value common stock of the new corporation for which the decedent had exchanged his preferred stock of the old company could not be said to be worthless, although its value was then more or less problematical. However, the evidence shows that prior to the close of 3922 the common stock of the new corporation had become entirely worthless. It was then apparent that the assets of the corporation would not be sufficient to pay the claims of the general creditors, and that there would be nothing left for distribution among the common stockholders. The operation of the company was continued until 1924, when it went into the hands of a receiver. Liquidation was finally completed in 1925. The bondholders received less than 10 per cent of the face value^ of their bonds, and the common stockholders recovered nothing whatever.
It is well settled that a taxpayer may deduct a loss on .account of his investment in the capital stock of a corporation having become worthless without waiting until the corporation has completed the sale of its assets and liquidated its business through a receivership or otherwise. J. J. Melick, 6 B. T. A. 70. As we said in Remington Typewriter Co., 4 B. T. A. 880, p. 888, “ The fact that the shell of a worthless corporation continues in business is no bar to the deduction of an investment in that corporation’s stock when all facts clearly indicate the stock to be worthless.”
From a consideration of the evidence before us, we are convinced that the decedent’s investment of $9,900 in the common stock of the Midwest Engine Corporation became wholly worthless within the taxable year 1922, and the petitioners are therefore entitled to a deduction of said amount from gross income for said j-ear. The deficiency should be recomputed accordingly.
Judgment will he entered under Rule 50. |
4,489,878 | 2020-01-17 22:02:04.738598+00 | Murdock | null | *930OPINION.
Murdock:
The Revenue Act of 1921, in section 250 (d), contained a provision that the taxes due under any return made under prior income, excess-profits or war-profits tax acts should be determined and assessed within five years after the return was filed unless both the Commissioner and the taxpayer had consented in writing to a later determination, assessment and collection of the tax, and no suit or proceeding for the collection of any such taxes should be begun after the expiration of five years after the date when such return was filed. The Revenue Act of 1924, in section 277 (a) (2), contained a similar provision. It also provided in section 278 (d) that where the assessment of the tax was made within the period prescribed, such tax might be collected by distraint or by a proceeding in court within six years of the assessment of the tax. It was held, however, in United States v. Russell, 278 U. S. 181, that where the assessment of the tax was made prior to June 2, 1924, the day on which the Revenue Act of 1924 was approved, the 6-year period mentioned for collection would not apply. In the present case the return was filed on March 27,1918. The 5-year period therefore expired on March 27, 1923. There is no suggestion in this case that the return was false or fraudulent and the Commissioner has not shown the existence of any exception which would remove the case from the 5-year operation of the statute. Farmers Feed Co., 10 B. T. A. 1069. Of course, no suit or proceeding for the collection of the tax was begun in time. Therefore, when the Commissioner made his final determination on December 19, 1925, he was making that determination more than five years after the return was filed and the collection of the deficiency asserted by him was then barred, and we therefore hold that there is no deficiency.
Counsel for the petitioner contends that a favorable decision upon the merits of this case would result in a refund to the petitioner, and we therefore will consider the question of whether the distribution, *931or any part thereof, received in 1917 was from earnings or profits accrued since March 1, 1913. The petitioner offered in evidence certain documents relating to the proceeding on our docket at number 7888, entitled Trustees for Ohio & Big Sandy Coal Company, United Thacker Coal Company, and Federal Gas, Oil & Coal Company, Petitioners, v. Commissioner of Internal Revenue, Respondent. Our decision of that case was published in 15 B. T. A. 273. One of the issues in that proceeding was the March 1, 1913, value of the coal lands sold by the United Thacker Coal Co. on September 17, 1917, the same property which is involved in this proceeding. The petitioner contends that the papers which he has offered in evidence show that the net income of the United Thacker Coal Co. for the period from April 30 to December 20, 1917, was $405,949.09. She then subtracts the taxes of the company for the year 1917 to arrive at the amount of $351,398.81 as the balance available for the recoupment of previous losses, and contends that, since the surplus deficit from 1904 until April 30,1917, was $883,862.92, or at least an amount in excess of $351,398.81, the company had no earnings or profits accrued since March 1, 1913, and in fact had no undivided profits or surplus from which it could make a distribution within the meaning of section 31 of the Kevenue Act of 1917, which added the section in question to the Act of September 8, 1916. In this method of computation the petitioner loses sight of the fact that in the computation approved by the Beard in the Big Sandy case, the profit from the sale of the coal land was determined by the use of March 1, 1913, value, which the Board assumed was greater than cost.
This method was proper under the statute permitting the use of such value for the determination of the profit from the transaction which the corporation should report as income for the year in which the sale took place, which was the problem before the Board in the Big Sandy case. But we are not now concerned with this profit nor are we concerned with the net income of the corporation for the year 1917 which it should have reported in that year for income-tax purposes. We are here concerned with the question of whether or not on December 22,1917, the company had any undivided profits or surplus which consisted of earnings or profits accrued since March 1, 1913. The petitioner contends that at the time of the distribution, the company had no surplus or undivided profits of any kind. The facts in evidence fail to support this contention, as is demonstrated by a proper computation to arrive at the correct surplus, if any, of the corporation on December 22, 1917. In such computation the profit from the sale of property determined by the use of March 1, 1913, value which was in excess of cost, should not be used alone to offset deficits which occurred both before -and after March 1, 1913, because the statute contains no provision for the use of March 1, 1913, value *932in this connection. On the contrary, the profit from the sale in 1917 which should be used to offset operating deficits occurring both before and after March 1,1913, in computing the correct surplus of the company on December 22, 1917, should be determined by using the cost of the property sold. In this way only can we determine whether or not on December 22, 1917, the corporation had any surplus or undivided profits available for the payment of dividends.
We can not make such a computation in the present case because we do not know the cost of the property sold. For example, if it had cost only $2,000,000, the correct book profit from the sale which should be used in wiping out all past operating deficits would be far more than sufficient for the purpose. Thus, so far as the record discloses, the company might have had a book surplus on December 22, 1917, of several million dollars after wiping out all past operating deficits, and the question then is whether any part of this surplus represents income or profits accrued since March 1, 1913.
When the company sold a part of its property on September 17, 1917, it feceived $735,300 in excess of the sum of the expenses of the sale plus the March 1, 1913, value of the property as determined by this Board in the Big Sandy case. Also, we know that from March 1,1913, to December 22,1917,- the company received small amounts of income which could probably be determined from the evidence. All of this income, however, and all of the $735,300 above mentioned, might represent income or profits of the company accrued since March 1, 1913, not needed to wipe out past operating deficits and thus would be taxable as dividends in the hands of the distributees. In the present case we do not know the total number of shares of the United Thacker Coal Co. outstanding at the time of the distribution and with respect to which the distribution in question was made, nor do we know the number of these shares owned by the petitioner, although in the companion case to this one we do know the number of shares owned by Luther Kountze, but there again we do not know the total shares of the stock outstanding.
If either the petitioner in this case or the petitioner in the companion case of Executor of Luther Kountze, 17 B. T. A. 956, made a proper allegation in regard to the capital stock of the United Thacker Coal Co. outstanding at the time of the distribution, at any rate the respondent has admitted no such allegation and there is no proof of this fact, although there is proof of the number of shares originally issued by this company. Consequently, we are unable to tell what amount the Commissioner has used as representing the income and profits of the company accrued since March 1, 1913, and we can not say that he erred in his determination that the sum of $54,695.39 received by the petitioner was taxable as a dividend.
*933In passing we might also point out that, as the company was on a cash receipts basis, we see no justification for the petitioner, in her computation of the 1917 income available for the recoupment of the previous losses, subtracting income and profits taxes for the year 1917.
Reviewed by the Board.
Judgment of no deficiency tuill be entered.
Green did not participate. |
4,489,879 | 2020-01-17 22:02:04.770205+00 | Milliken | null | *95OPINION.
Milliken :
In Pennsylvania a married woman may contract with her husband and may enter into a contract of partnership with him. At the hearing, counsel for respondent conceded this. See also Thomas F. Kelley, 9 B. T. A. 834.
*96This leaves for consideration whether or not Yinnie M. Newell was a partner of the petitioner during the taxable years and, if so, what effect, if any, did the failure to comply with the Pennsylvania acts requiring- registration of the names of the real owners of a business conducted under an assumed or fictitious name have.
We have had before us a number of cases involving partnerships between husband and wife, and partnerships between other persons. No rigid rules can be laid down as to the requirements to establish the relationship. Ordinarily where two or more persons associate themselves together for a common undertaking for profit, and share in the profits or losses, a partnership results. It is not necessary to constitute the relation that a person should contribute capital, or render services, and we have held in several cases that a husband may constitute his wife a partner by giving her an interest in the business. In the instant case, the uncontradicted evidence is that petitioner gave his wife a one-half interest in his business at the time of their marriage in 1905 and it is uncontradicted that the arrangement has continued ever since.
The evidence of the bank’s attitude, that of the paper supply representative, and Mrs. Newell’s refusal to permit a sale of the stationery store, is strongly corroborative of petitioner’s contention. Undoubtedly one-half of the surplus profits deposited in the joint account belonged to Mrs. Newell, and when this was reinvested in the business in the purchase of a building, machinery, and supplies, this was a contribution of capital by her, no matter what the books showed, as it is nowhere contended that it was a loan or a gift.
In the case of Thomas F. Kelley, supra, a Pennsylvania case, Kelley and his wife were engaged in the job printing business under an oral agreement that they were to have an equal interest in the business. Both contributed a small amount of capital and rendered services. From the accumulated profits they purchased and operated a grocery business, and from the profits of both they became the owners of a one-fourth interest in the Lucas Coal Co., and it was held that one-half of the earnings from the interest in the coal company belonged to the wife and was not taxable to the husband.
Other Pennsylvania cases are Wm. W. Parshall, 7 B. T. A. 318, and James R. Cray, 7 B. T. A. 322, in both of which the husbands transferred to their wives by oral agreement their interests in a partnership conducted under the name of the Puritan Supply Co. and both were held to be valid by this Board. In the former, we distinguished between a transfer or assignment of income derived from a partnership as in Mitchell v. Bowers, 15 Fed. (2d) 287, and a transfer of the partnership interest itself.
*97In B. M. Phelps, 13 B. T. A. 1248, members of a partnership took their wives in as partners, and in upholding the agreement we said:
The respondent denied the existence of a partnership between the petitioners and their wives, apparently upon the ground that there were no written articles of copartnership; that the wives contributed no capital or services to the partnership; and that the scheme was only for the purpose of reducing surtax.
We think that the evidence actually shows an agreement of partnership between the petitioners and their wives on or about July 1, 1919, whereby the wives of the petitioners were taken into the business as equal partners with the petitioners. On that date a new partnership was formed, composed of four individuals, each having a one-fourth interest therein. The claim of the respondent that the wives contributed no capital to the partnership does not disprove the fact that a partnership agreement was entered into. Persons are often made members of a partnership without themselves contributing anything to the partnership originally. The members of a partnership may set over to a person to be taken in as a partner a percentage of their own interests in the partnership. This is what was done in this ease. Each of the petitioners gave to his wife one-half of his capital in the business. Prom that time on each of the petitioners had capital invested in the business. It is immaterial that they furnished no services to the partnership and received no salaries from the partnership. If the petitioners furnishing the services were willing that the other members of the partnership furnish no services, yet share equally with them in the profits of the business, there is no provision of law to prevent them from doing so. Although proof that persons claiming to be members of a partnership furnished no capital and contributed no services to the partnership might tend to prove that no partnership agreement was entered into, proof of such facts becomes immaterial when all members of the partnership agree that a partnership contract was entered into.
Nor do we think it is material that the apparent object of the reorganization of the partnership in 1919 was for the purpose of reducing surtaxes payable by the petitioners. Clearly, taxpayers have the right to change their form of organization and their methods of doing business in any way they may see fit so long as they keep within the law.
See, also, R. A. Bartley, 4 B. T. A. 874; Elihu Clement Wilson, 11 B. T. A. 963; H. T. Loper, 12 B. T. A. 164; R. C. McKnight, 13 B. T. A. 885.
At the hearing counsel for respondent objected to all evidence tending to establish a partnership between petitioner and his wife unless it was shown that the Pennsylvania laws requiring registration of owners of business had been complied with, on the ground that business as a partnership could not be conducted legally without compliance with these laws. We had this question before us in the cases of William W. Parshall, 7 B. T. A. 318, and James B. Cray, 7 B. T. A. 322, and held that the failure to register names and owners of a business did not affect the status of the partnership and was merely a rule of procedure or practice in court which prevented the bringing of suits or actions in some cases, and prevented the offenders *98from using certain defenses such as misjoinder or nonjoinder of parties.
We have examined the Acts of 1851,1917, and 1921 relative thereto again, and the cases cited by both parties, and find no reason to change our former opinion. Even though said acts may not have been complied with, there is nothing in any of them that would forfeit the rights or interest of Mrs. Newell in the business of John T. Newell, and make it the property or income of the petitioner. In Commissioner v. Barnes, 30 Fed. (2d) 289, the Circuit Court of Appeals, Third Circuit, affirmed the decision of this Board, 7 B. T. A. 924, holding that gifts of interest in a Pennsylvania partnership by husbands to their wives were bona fide and not to be invalidated by failure to comply with the “ Fictitious Names Act” of the state law, and the income from such gifts was taxable to the wives.
We conclude that there was a partnership between John T. Newell and his wife, Vinnie M. Newell, during the years 1922, 1923 and 1926, in the business operated as John T. Newell and that each should return and be taxed on one-half of the profits thereof.
Judgment will be entered wnder Rule 60. |
4,489,881 | 2020-01-17 22:02:04.844725+00 | Fossan | null | *953OPINION.
Van Fossan:
At the hearing petitioner moved for judgment by default, basing his motion on the alleged error of the Board in granting respondent additional time to answer.
Without pausing to discuss the several arguments advanced by petitioner in support of this motion, we are of the opinion that the motion should be and it hereby is denied.
With respect to the petitioner’s first assignment of error, namely, as to the amount of credit allowed by respondent because of earned net income, we are of the opinion that the respondent’s method of calculating the amount to be allowed under the provisions of the Revenue Act of 1924 is correct. The applicable provisions of the statute are contained in sections 209, 210, and 216 thereof. Paragraph (2) of section 209(a) provides that the term “earned income *954deductions” means such deductions as are allowed by section 214 for the purpose of computing net income, and are properly allocable to or chargeable against earned income.
Section 209 further provides, in part, as follows:
(a) Por the purposes of this section—
s\t * ⅛ ⅝ * ⅜ *
(3) The term “earned net income” means the excess of the amount of the earned income over the sum of the earned income deductions. If the taxpayer’s net income is not more than $5,000, his entire net income shall be considered to be earned net income, and if his net income is more than $5,000, his earned net income shall not be considered to be less than $5,000. In no case shall the earned net income be considered to be more th,an $10,000.
(b) In the case of an individual the tax shall, in addition to the credits provided in section 222, be credited with 25 per centum of the amount of tax which would be payable if his earned net income constituted his entire net income; but in no case shall the credit allowed under this subdivision exceed 25 per centum of his tax under section 210.
Section 210 (a) is as follows:
In lieu of the tax imposed by section 210 of the Revenue Act of 1921, there shall be levied, collected and paid for each taxable year upon the net income of every individual (except as provided in subdivision (b) of this section) a normal tax of 6 per centum of the amount of the net income in excess of the credits provided in section 216, except that in the case of a citizen or resident of the United States the rate upon the first $4,000 of such excess amount shall be 2 per centum, and upon the next $4,000 of such excess amount shall be 4 per centum ⅜ * ⅜.
Section 216, referred to in section 210(a), provides, among other things, that for the purposes of normal tax only there shall be allowed a credit of $2,500 in the case of the head of a family living with husband or wife and a credit of $400 for each person dependent upon and receiving his chief support from the taxpayer within the terms of the section.
The petitioner’s actual earned net income was considerably in excess of $10,000. He is therefore entitled to a credit of 25 per cent of the tax on a maximum earned net income of $10,000, pursuant to section 209(a)(3) and (b). He argues that because paragraph (2) of section 209(a) defines “earned income deductions” as such deductions as are allowed by section 214 for the purpose of computing net income, therefore, in computing the amount of tax on earned net income to be credited under section 209 (b), it is improper to deduct from the maximum earned net income of $10,000 the amount of credits provided in section 216 (c) and (d). In our opinion the provisions of the statute do not sustain the petitioner’s position.
Section 209(b) provides that an individual’s tax shall “be credited with 25 per centum of the amount of tax which would be pay*955able if bis earned net income constituted his entire net income.” Therefore, in the instant proceeding the credit of 25 per cent of the amount of tax on $10,000 of earned net income is to be computed as if the maximum earned net income of $10,000 constituted the petitioner’s entire net income for the year 1924. Under section 210(a) the normal tax is to be levied, collected and paid on the amount of net income of each individual “ in excess of the credits provided in section 216.” We are, therefore, of the opinion that the respondent’s method of calculating the credit to be allowed pursuant to the provisions of section 209 (a) (3) and (b) is not erroneous.
The petitioner’s second assignment of error raises the question whether or not the cost of repairs to his house at 13 East Lenox Street, Chevy Chase, Md., was an ordinary and necessary expense paid or incurred “ in carrying on any trade or business.”
The phrase “ trade or business ” has been construed by this Board in various decisions involving its interpretation as used in several connections in the revenue acts. In the case of Thomas F. Sheridan, 4 B. T. A. 1299, we referred with approval to the definition of “ trade or business ” given in Bouvier’s Law Dictionary as “ that which occupies the time, attention, and labor of men for the purpose of a livelihood and profit.” The Sheridan case involved the interpretation of the term “ trade or business ” as used in section 214(a) (4) of the Bevenue Act of 1918, but in the case of Albert M. Briggs, 7 B. T. A. 409, 412, we said that Bouvier’s definition was equally applicable to that term as used in section 214(a) (1) of the Act of 1918. It is also applicable to the term “ trade or business ” as used in section 214(a) (1) of the Bevenue Act of 1924. See, also, Ignaz Schwinn, 9 B. T. A. 1304, 1308.
It is apparent from the facts that petitioner occupied his house at 13 East Lenox Street, Chevy Chase, Md., as a residence for himself and his family. He was not in the business of renting the house. He lived in it and rented it only occasionally. This occasional rental -was a mere by-product of petitioner’s ownership and occupancy. The mere fact that he wanted to sell the house or rent it, when and if he could, does not make the possible rental or sale of it a trade or business within the contemplation of the statute here involved. The deduction of the cost of the repairs in question, therefore, is not permissible under the statute.
Beviewed by the Board.
Decision will be entered for the respondent. |
4,605,752 | 2020-11-20 19:37:01.589092+00 | null | null | ESTATE OF THEODORE EBERT, JR., DECEASED, EDITH H. EBERT, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Ebert v. Commissioner
Docket No. 74351.
United States Board of Tax Appeals
37 B.T.A. 186; 1938 BTA LEXIS 1076;
January 25, 1938, Promulgated
*1076 A taxpayer exchanged a piece of real estate subject to a mortgage. He received in exchange a second mortgage on the real estate transferred and another piece of real estate subject to a mortgage. The existing mortgages were not assumed by the new owners. Held, following Brons Hotels, Inc.,34 B.T.A. 376">34 B.T.A. 376, that the entire profit is recognized since sections 122(b)( ) and (c)(1) do not apply.
Edith H. Ebert, Executrix, pro se.
C. C. Holmes, Esq., and E. C. Webber, Esq., for the respondent.
MURDOCK
*186 OPINION.
MURDOCK: The Commissioner determined a deficiency of $1,568.06 in the income tax of Theodore Ebert, Jr., for the year 1930. The only issue presented for decision is whether the gain of $24,367.23, realized by Ebert from an exchange of real property should be recognized in full, as contended by the respondent, to the extent of $13,367.23, as reported by Ebert in his return, or only to the extent of $10,367.23, as contended by the petitioner in her brief. The facts have been stipulated so that no findings of fact are necessary.
*187 Ebert acquired a property on Diversey Parkway, Chicago, Illinois, *1077 on April 29, 1922. He placed a mortgage of $45,000 on that property on July 11, 1929. The depreciated cost of the property to him on January 2, 1930, was $37,632.77. The fair market value of the property on that date was $65,000. The mortgage was still outstanding. He exchanged the property on January 2, 1930, for another on Greenview Avenue, Chicago, Illinois. The fair market value of the Greenview property at the time of the exchange was $30,000. There was a mortgage of $16,000 on it at that time. The properties were exchanged subject to the two then existing mortgages. Ebert received in the exchange, as additional consideration for the property which he transferred, a second mortgage on that property in the amount of $6,000. The stipulation is that the second mortgage had a fair market value of $3,000 at the time received by Ebert. Ebert, on his income tax return filed with the collector of internal revenue at Chicago, reported a profit of $13,367.23 from the exchange. The Commissioner, in determining the deficiency, included in income a profit of $32,000 from the transaction.
The parties are now in agreement that the profit realized from the exchange was $24,367.23. *1078 The following is a computation of that profit:
Amount realized:
Fair market value of property received$30,000.00
Less mortgage on that property16,000.00
14,000.00
Fair market value of second mortgage received3,000.00
Mortgage on property transferred by Ebert45,000.00
62,000.00
Less basis of property transferred37,632.77
Profit realized24,367.23
The controversy arises over how much of that profit is recognized for income tax purposes in 1930. The petitioner contends that it may be recognized only to the extent of $10,367.23 under sections 112(b)( ) and (c)( ) of the Revenue Act of 1928. The $10,367.23 consists of $3,000, the fair market value of the second mortgage, and $7,367.23, the difference between $45,000, the mortgage on the Diversey Parkway property, and $37,632.77, Ebert's basis for gain or loss on that property. She concedes that this $10,367.23 was "other property or money" within the meaning of section 112(c)( ). If, as she concedes, a part of the benefit which the petitioner received from transferring the Diversey Parkway property subject to the mortgage of $45,000 was "other property or money," it is difficult to understand*1079 how the remainder would differ.
*188 The Commissioner contends that the entire profit of $24,367.23 must be recognized as income of 1930; Ebert placed the mortgage of $45,000 on the property, received the proceeds, and at that time derived the benefits from the use of that money; since he transferred the property subject to the mortgage and the property was worth $65,000 at the date of the transfer it is reasonable to conclude that he thereby relieved himself of the necessity of repaying the $45,000; this was equivalent for income tax purposes to the receipt of property worth $45,000; in addition, he received for his property a second mortgage worth $3,000 and an equity in another property, which equity was worth $14,000; thus the total amount realized was $62,000, which exceeded the basis for gain or loss by $24,367.23; the profit was real and in no sense fictitious, so there is good reason to recognize all of the profit realized. He relies upon the decision of the Board in the case of .
The Board pointed out in that case that unless the entire profit were recognized a portion of the profit would forever escape tax. The*1080 petitioner attempts to distinguish the cases because there the mortgages were assumed by the new owners of the properties, whereas here the properties were exchanged subject to the mortgage without assumption of those mortgages by the new owners. The petitioner, however, fails to show how this difference in the facts serves to distinguish the cases. Although the Board, in deciding the Brons Hotels, Inc., case, mentioned and relied upon the fact that the transferee had assumed the payment of the mortgage on the transferred property, nevertheless the real reason for the decision was the statutory difficulties standing in the way of the petitioner's argument that a part of the profit should not be recognized. Those same difficulties stand in the way of the petitioner's argument in this case.
This can be easily demonstrated by accepting the petitioner's contention for the purpose of illustration. She concedes that a profit of $24,367.23 was realized, but she would recognize only $10,367.23 of it in computing income for 1930. Under that theory the property received in the exchange would take the same basis for gain or loss as the property exchanged, decreased in the amount of*1081 any money received and increased in the amount of gain that was recognized upon the first exchange. Sec. 113(a)(6). No money was received, but perhaps the second mortgage should be treated as the equivalent of money to the extent of $3,000, its fair market value. The basis of the property exchanged was $37,632.77. If it should be decreased by the $3,000, it would then be $34,632.77. That amount would be increased by the amount of gain recognized on the first transfer, to wit, $10,367.23. Thus the basis for gain or loss applicable to the property received in the exchange would be $45,000. That property consisted *189 of a second mortgage worth $3,000 and a piece of real estate worth $30,000 subject to a mortgage of $16,000. Assume a prompt disposition of this property for its fair market value. Three thousand dollars is received for the second mortgage and the real estate is sold for $14,000 subject to the $16,000 mortgage. Suppose further that shortly after this sale the purchaser pays off the mortgage of $16,000. On that sale the seller received $17,000 in cash for property having a basis of $45,000, and thus, for income tax purposes, realized a loss of $28,000. *1082 Going back now and looking at the entire transaction, it is apparent that a profit of $24,367.23 was realized, yet, for income tax purposes, a gain of $10,367.23 and a loss of $28,000 have been reported. The loss reported exceeded the gain by $17,632.77 on transactions which clearly resulted in a profit of $24,367.23.
How could such an absurd result be avoided? The nonrecognition provisions were not intended to exempt profits from tax but merely to postpone the tax until later when the property received might be disposed of and the balance of the profit consolidated and recognized. . Since $14,000 of the gain realized on the first exchange was not recognized for tax purposes under the petitioner's theory, and since the property received in the exchange was worth only $17,000, it is apparent that in some way the basis for gain or loss on the property received would have to be reduced to $3,000 in order that a gain of $14,000 might be recognized upon the subsequent disposition of the property received in the first exchange. However, there are no provisions in the revenue act for reducing the basis to $3,000. *1083 The result would be only more absurd if no gain whatsoever were recognized on the first transaction.
We pointed out in the Brons Hotels, Inc., case that such absurd results were never intended by Congress, and in order to avoid an interpretation permitting them it is necessary to recognize all of the gain from the first exchange at the time it is realized. In principle the Brons Hotels, Inc., case and this one are not distinguishable. Following the decision in the Brons Hotels, Inc., case, we hold that the entire profit of $24,367.23 must be recognized as income of 1930. Cf. ; certiorari denied, ; ; . Possibly contra , affirming .
Decision will be entered under Rule 50. |
4,489,897 | 2020-01-17 22:02:05.420533+00 | Murdock | null | MuRdock,
concurring: While, if it were shown that expenses such as these fines were ordinary and necessary in the trade or business, they could be deducted, yet, in this case, it has not been shown that these fines were ordinary and necessary expenses of the petitioner’s business. |
4,489,898 | 2020-01-17 22:02:05.427262+00 | Sternhageu | null | SteRNHageu,
dissenting: Since the state statute prohibits this agreement, the fines and punishments must be taken as contemplated by it, Armour Packing Co. v. United States, 209 U. S. 56; Northern Pacific Ry. v. Wall, 241 U. S. 87; and if the agreement itself and its performance may be regarded as ordinary and necessary incidents of petitioner’s business, the costs of its performance and expenses *104resulting from it are among the expenses of the business. If agreements such as this were not unlawful, as would be true in Delaware and perhaps other states, the expenses which they involve would be among those ordinary and necessary business expenses which serve to reduce income. See Independent Brewing Co., 4 B. T. A. 870; California Brewing Association, 5 B. T. A. 347; Richmond Hosiery Mills, 6 B. T. A. 1247; H. A. Allen, 7 B. T. A. 1256; George Ringler & Co., 10 B. T. A. 1134; George M. Cohan, 11 B. T. A. 734; Sam Harris, 11 B. T. A. 871; G. C. M. 1627, VI C. B. 61.
The expenses of defending a civil suit growing directly out of a taxpayer’s business, such as by a partner for accounting, by a patient of a physician for alleged malpractice, by an injured person for damages, or by an alleged patentee for damages for infringement, have been held by the United States Supreme Court to be deductible in Kornhauser v. United States, 276 U. S. 145.
Thus it develops that the crucial question is whether the expenses here are deprived of deductibility because they were brought about by business conduct which the State of New York declares to be a crime. If so, it seems to me it must be by reading a qualification into the taxing statute by implication, since the explicit language is not restricted and makes no distinction between expenses growing out of crime and those which do not. When we seek for a reason to restrict the deductions, it seems to rest in the idea that an outlawed act can not involve an ordinary and necessary expense — that it is incongruous and repulsive to regard it as a business incident, and that such an argument should not be entertained. Essentially, the idea is that the express statutory deduction is narrowed by an assumed public policy to exclude such expenses. This Board has in several cases applied that view by saying that, as to individuals the expense was “ personal ” and hence expressly deprived of deduction by section 215, or that it was not proximately related to the business, or that it was not ordinary and necessary.1 But none of these things can be said of these expenses. They were corporate and not personal, were directly related to the business and were no doubt substantially responsible for profit, and unless we are to adopt an esoteric significance for words of common speech, they were ordinary and necessary to the business of earning such profits. I am not apprised of any overwhelming Federal public policy which takes them from the statutory category of deductions applied in determining net income and I have no reluctance in saying, as the facts *105sufficiently show, that it was ordinary for this petitioner to violate the statute or incur the fine in order to carry on its business. We can not ignore the fact, no matter how heartily we may disapprove it.
The revenue act was not contrived as an arm of the law to enforce State criminal statutes by augmenting the punishment which the State inflicts. In some instances, where Congress sought to use a taxing act to accomplish a nontaxing purpose, the attempt has failed. Hill v. Wallace, 259 U. S. 44; Bailey v. Drexel Furniture Co., 259 U. S. 20. Cf. Lipke v. Lederer, 259 U. S. 557. And there is added reason for such a rule in respect of a local statute growing out of the economic policy of a State.
The statute was expressly designed to tax net income, irrespective of source. This has been held to permit a tax on income from prohibited occupations, United States v. Yuginovich,, 256 U. S. 450; United States v. Stafoff, 260 U. S. 477; United States v. Sullivan, 274 U. S. 259. While it is true that in the Sullivan case the court intimates a question as to the deductibility of bribes,* this falls short of authorizing a construction of the statute by which the tax would fall on something in excess of the net income expressly defined as the object of the levy. It is not necessary to consider whether Congress, had it so chosen, might have excluded these expenses from deductions, or imposed the tax upon a specially defined net income in respect of businesses founded on unlawful acts. See Steinberg v. United States, 14 Fed. (2d) 564. Sufficient that here Congress did not do so, but taxed only the net income which remained after deducting all ordinary and necessary expenses of carrying on the business. It did not shape its definition of income variously to conform to the different laws of the several States, Burk Waggoner v. Hopkins, 269 U. S. 110; Weiss v. Wiener, 279 U. S. 333; Eagan Estate, 17 B. T. A. 694. In my opinion, the entire amount of $7,510 was deductible.
Makquette agrees with this dissent.
Sarah Backer, 1 B. T. A. 214; Norvin R. Lindheim, 2 B. T. A. 229; John Stephens, 2 B. T. A. 724; Columhus Bread Co., 4 B. T. A. 1126; Great Northern Ry. Co., 8 B. T. A. 225; Wolf Manufacturing Co., 10 B. T. A. 1161; George L. Rickard, 12 B. T. A. 836; Atlantic Terra Cotta Co., 13 B. T. A. 1289. |
4,489,910 | 2020-01-17 22:02:05.81103+00 | Littleton | null | *112OPINION.
Littleton:
The question presented here is whether or not the sale of Bailey’s half interest in the partnership of Bailey and Collins was an installment sale under section 212 (d) of the Revenue Act of 1926. In order to determine this question it is first necessary to determine in what taxable period or year the sale was made, and, second, whether or not the payments during that year or taxable period exceed one-fourth of the purchase price.
Three requisites are necessary to constitute or create a simple contract such as the one here involved, viz., (1) parties having legal capacity; (2) mutual assent to its terms, and (3) an agreed valid consideration. There is no doubt of the first and third requirements, and none as to the second except as to the time it occurred.
*113In Ide v. Leiser, 24 Pac. 695; 10 Mont. 5, will be found an interesting and instructive opinion on (1) a sale of lands; (2) an agreement to sell lands; and (3) wliat is popularly called an “option.” There, an option had been given supported by no consideration. The court held that it had no validity as an option, but was good as an offer to sell and a valid contract resulted if accepted before withdrawal. Alter discussing the various kinds of sales, offers, and options, the court said in part:
Examine the two options granted in the case before us. L. sold I. an option for 10 days from September 24th for one dollar. 1-Ie then gives an option for another 10 days from October 3d, for what? For nothing. L. transfers this option, this incorporeal valuable something, for nothing. The transfer of the option was nudum pactum, and void. But, the point just discussed being conceded, appellant still contends that this second instrument or option was a continuing offer to sell, at a given price, and was accepted by the respondent before retracted, and that such acceptance, evidenced by, and accompanied with, the tender of the price, and demand for a deed, constitute an agreement to sell land, which may be enforced in equity. We leave behind now our views of options, and consideration therefor, and meet a wholly different proposition.
Reading the two instruments together we find that on October 3d L. extended to I. an offer to sell his lands at the price of $1,000. There was no consideration for the offer, and it could have been nullified by L. at any time by withdrawal. But it was accepted by I., while outstanding, the price tendered, and deed demanded. It must be plain from the previous discussion that we do not hold the offer, when made, or at any moment before acceptance, was a sale of lands, an agreement to sell lands, or an option. But upon acceptance and tender was not a contract completed? If one person offers to another to sell his property for a named price, and while the offer is unre-tracted the other accepts, tenders the money, and demands the property, that is a sale. The proposition is elementary. The property belongs to the vendee, and the money to the vendor. Such is precisely the situation of the parties herein. L. offered to sell for $1,000, I. accepted, tendered the price, and demanded the property. Every element of a contract was present, parties, subject-matter, consideration, meeting of the minds, and mutuality. And as to the matter of mutuality we are now beyond the defective option. We have simply an offer at a price, acceptance, payment or tender, and demand. That this was a valid contract we cannot for a moment doubt. In discussing a transaction of this nature, in Gordon v. Darnell, 5 Colo. 304, Beck, C. J., in one of his clear opinions, says: “Its legal effect is that of a continuing offer to sell, which is capable of being converted into a valid contract by a tendor of the purchase money, or performance of its conditions, whatever they may be, within the time stated, and before the seller withdraws the offer to sell,” Lukton, Jr., in Bradford v. Foster, 87 Tenn. 8, 9 S. W. Rep. 195, says: “Before acceptance, such an agreement can be regarded only as an offer in writing to sell upon specified terms the lands referred to. Such an offer, if based upon no consideration, could be withdrawn by the seller at any time before acceptance. It is the acceptance while outstanding which gives an option, not given upon a consideration, vitality.” In Railroad Co. *114v. Bartlett, 3 Cush., 227, we find the following, by Fletcher, J.: “In the present case, though the writing signed by the defendants was but an offer, and an offer that might be revoked, yet while it remained in force and uu-revoked it was a continuing offer during the time limited for acceptance, and during the whole of that time it was an offer every instant; but as soon as it was accepted it ceased to be an oiler merely, and then ripened into a contract.”
The case of Davidson & Case Lumber Co. v. Motter, 14 Fed. (2d) 137, was an income and profits-tax case and .involved the question ox in what year a sale ivas made. The facts are stated in the opinion, where the court said:
II. We come now to the sale of real estate by the corporation. Was this sale for the purpose of assessing income or profit taxes under the act of 1918 made in the year 1919 or the year 1920?
A contract of sale by the corporation of certain real estate on which it had operated a lumber yard was made to solvent purchasers, able to pay at any time, on November 20, 1919. At that time $10,000 was paid in cash and a contract in writing was entered into between the corporation and the purchasers, conditioned alone on the title being found satisfactory to the purchasers. Some time in the month of December, 1919, the purchasers, having examined the title, removed this condition from the contract by advising the corporation the title to the property was satisfactory to them, and the contract of sale was thus made absolute. The contract provided for the payment of the remainder of the purchase price, $100,000, on June 1, 1920, and that conveyance should be delivered by the corporation to the purchasers at this time. Also the corporation, not being able to remove its business from the property, agreed to pay one-half the taxes for the year 1920 as a consideration for being permitted to remain on the premises. However, the dominion, control, burdens, and benefits of the property were passed to the purchasers in the year 1919 at the time the contract of sale was made absolute. The Revenue Act provides, in regard to the assessment of property under such conditions, as follows:
“ Sec. 213 (a) That for the purposes of this title * * * the term ‘ gross income ’ includes gains, profits, and income derived from * * * sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property.” Comp. St. Ann. Supp. 1919, § 6336 % f£-
The question is, who owned this property in the latter days of the year 1919? As the right of the corporation to compel compliance with the terms of the contract was by the contract made dependent on the corporation delivering a good title to the purchaser, the contract remained conditional and dependent until the title had been examined and approved by the purchasers. As the corporation was notified this condition was met in the month of December, 1919, thereafter the conditional contract of sale became absolute in its terms, and any loss to the property or any benefits or advantage accruing thereto was the loss or oenefit of the purchasers. To this end come not only the adjudicated cases on the question but the very reason of the thing itself. The Supreme Court of this state in Gordon v. Munn, 87 Kan. 624, 125 P. I., Ann. Gas. 1914 A. 783, said :
“ The purchaser of land in possession under an agreement for a conveyance is considered the owner in equity, subject to the payment of the purchase money, and the vendor is treated as the trustee of the legal title. * * * The fact that possession was not transferred in this instance may be accounted for by the relationship of the parties. ”
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*115As the contract for the sale of the property, fixing the terms of the sale made, the amount of the purchase price to be paid, and all other of its terms, including the present payment of $10,000, was performed in the year 1919, the amount of profits taxable must have been determined as of that year as readily and absolutely as of the date the conveyance was delivered and the deferred payment made. I therefore find as a fact the sale of the real estate in this case, while not perfected by conveyance and full payment of the purchase price until June, 1920, was made in the year 1919, as contended by the plaintiff in this case, and that the profit made in the transaction should have been included in the income and excess profits taxes of the corporation for the year 1919.
In H. F. McCreery, 4 B. T. A. 967, a sale of the taxpayer’s interest in a partnership was agreed upon in 1919, but the price to be paid was not finally settled until 1921 and it was held that the sale was made in 1919. The Board said:
The last issue to be considered concerns the Commissioner’s action in holding that the sale of the partnership’s assets and businesses constituted a completed transaction for the year 1919, and that any gain or loss realized therefrom should be reflected in the partnership net income for that year. The petitioners contend that since there was no determination within the year 1919 of the actual amount to be paid by the purchaser for the partnership assets and businesses, and that final payment was not made by the purchaser until December, 1921, the sale was not completed until the year 1921, and any gain or loss resulting therefrom should be reflected in the partnership net income for the latter year. The books of the partnership were maintained upon the accrual basis. According to the terms of the sale contract, the purchaser, on May 1, 1919, took possession of the business and of all offices, and thereafter the partners conducted the businesses for the account of the purchaser. The transaction was completed so far as the partnership was concerned and, in the event of the purchaser’s failure to make payment according to the terms of the contract, the partnership could not have repossessed the properties, but would have been limited to an action to enforce payment under the contract to pay. It appears that it was not until some time later than the year 1919 that the specific amount to be paid by the purchaser for the partnership assets and businesses was determined. But, all circumstances considered, we do not think this fact sufficient to justify the postponement until a later year of the accounting for the gain or loss realized from the sale. The sale was consummated in the year 1919; the liability of the purchaser to pay the purchase price arose in that year; and, in our opinion, whatever gain or loss resulted from the sale accrued to the partnership in the same year. * * *
A similar case is Parish-Watson Co., 2 B. T. A. 851, where the Board said:
The second question presented is whether the profits arising from the sale of certain art objects to one Morton F. Plant, as set forth in the findings of fact, were income to the taxpayer in the year 1918 or in the year 1919. The Commissioner contends that they were income for the year 1918. In its petition the taxpayer raised the point that the sale was one on the installment plan and that the profits arising therefrom should be allocated to the several payments. It abandoned that contention, however, at the hearing. It reported the profits in question as income for the year 1919 and now contends that *116they were in fact income for that year. The amount of the profits involved is conceded to have been $61,268.75.
We are of the opinion, upon consideration of the evidence presented, that the position of the Commissioner as to this point is correct and should be approved.. The transaction was clearly a sale of merchandise in the year 1918. The art objects were delivered to Plant and the terms of purchase were communicated to him in writing. On May 8, 1918, he wrote to the taxpayer that “ I beg hereby to confirm the purchase,” and contracted to pay certain amounts of money at certain specified dates in accordance with the proposition made to him by the taxpayer. The transaction was completed so far as the taxpayer was concerned, and, in the event of Plant’s failure to make payment, as set forth in his letter of May 8, 1918, the taxpayer could not have repossessed the art objects, but would have been limited to an action to enforce payment under the contract to pay. The transaction was a completed sale in the year 1918, and, as the taxpayer kept its books of account on the accrual basis, the sale price was properly accruable in that year. We hold, therefore, that the profits arising from the sale in question were income to the taxpayer in the year 1918.
In the instant case Bailey received $1,000 on account of the signing of the original contract November 26, 1921, and from that date had nothing more to do with the management or conduct of the business. He stepped out and so far as was necessary Trimble, the purchaser, stepped in. Collins, the remaining partner, ran the business and frequently consulted Trimble prior to January 1, 1922, as to its policy and Trimble obligated himself to the extent of $50,000 on bank paper of the firm, which, had there been no sale, Bailey would have had to assume. It seems to us that no matter whether we consider the original contract and succeeding negotiations a sale, an agreement for a sale, an option, or an offer, that the sale was complete when Bailey wrote Trimble on December 31, 1921, that the redrafted contract was satisfactory and had Collins telegraph Trimble to the same effect and at the same time drew on Trimble for $24,000 as per their agreement. This draft was to all intents and purposes cashed by Collins and over $700 of the proceeds were used that day to extinguish Bailey’s debt to his old firm. It was the purpose of all the parties to close the transaction as of December' 31, 1921, and the action of Bailey constituted a mutual assent and a binding contract of sale prior to the signing of the final papers on January 5,1922. Bailey had no interest of any kind after December 31, 1921. The reference by Bailey in his acceptance to the time he was to remain out of competitive business was not a part of the original contract and was not in the final contract. It was a part of a supplemental agreement and formed no part of the contract of sale and was no real dissent in the light of Bailey’s other acts. The only difference between the original contract of November 26, 1921, and the final one of January 5, 1922, was the elimination of the laundry stock from the consideration, and the purpose of the supplemental contract was to put it back again under certain conditions.
*117The signing of the papers and delivery of the note on January 5, 1922, was merely the formal execution and reduction to written evidence of the terms of the sale made in 1921, and which had been carried out to the extent of Bailey’s retirement from the business November 26, 1921, and his collection of $24,000 on account of the purchase price, on the same day he wrote Trimble the contracts were “ O. K.” Old Farmers' Oil Co., 12 B. T. A. 203; Pacheco Creek Orchard Co., 12 B. T. A. 1358.
It remains to consider the amount of the initial payment, which is the sum of all payments made during the taxable period in which the sale was made. The original agreement of November 26, 1921, provided for the payment of $1,000 on the purchase price and was paid upon the signing of the agreement. It was further provided in the agreement that, in the event that Trimble was unable to carry out his part of the agreement, Bailey should retain the $1,000 as liquidated damages. There was no provision of any kind for the return of the $1,000 to Trimble in any event or upon any condition. Upon its payment to Bailey it became his absolute property on one ground or the other and was a payment made in 1921. Cf. John Derschug, 15 B. T. A. 306. By agreement of the parties, Bailey was to collect and be paid $24,000 by draft on December 31, 1921, and this was to be considered as cash. To all intents and purposes, it was cash and practically the same as if Trimble had sent Bailey his check and Bailey had deposited the check as a cash item in bank and had not checked it out for several days after. We consider the payment of $24,000 to have been made and received December 31, 1921.
The Board had a somewhat similar question before it in John Griffiths, 15 B. T. A. 252, where the stockholders of a large contracting firm agreed that, instead of having surety companies go on the company’s contract bonds, they would go on the bonds in their individual capacities and divide the premiums they would have had to pay a bonding company. The premiums were divided according to their stockholdings and were credited on the books when the bonds were given, but in the case of John Griffiths were not collected in cash until a subsequent year. The question was whether they were taxable in the year when credited, or in that in which received in cash. The Board held they were taxable in the year when credited. The Board said:
There is no testimony, however, to the effect that the petitioner did not consider the amounts taxable because they were not received in cash.
On the other hand, the theory of the petitioner’s case is that the amounts were taxable before received in cash and it is not contended that he should have waited until he withdrew the cash before reporting them in his income. *118Under the evidence he clearly could have received the entire amount in cash in 1919 if he had desired. All that he had to do was to take it.
So in this proceeding all Bailey had to do was to ask for it and the actual cash or a check would have been given him on December 31,1921. John A. Brander, 3 B. T. A. 231.
In Albert J. Sullivan, 16 B. T. A. 1347, the Board held that interest credited to the personal account of petitioner on the books of the corporation of which he was a stockholder was constructively received where the financial condition of the debtor during the taxable years was such that the amounts credited could have been paid.
In Marian Otis Chandler, 16 B. T. A. 1248, a number of cases are reviewed and the deduction drawn that, if the funds are available, subject to demand of taxpayer, and debtor is able to pay, and taxpayer merely omits to take possession of what is his, this constitutes a receipt of taxable income.
It results that the sale was made in 1921, that the initial payment during that year was $25,000 which is less than one-fourth of the purchase price of $200,000, and that the sale was an installment sale and petitioners’ income therefrom should be computed on the installment basis.
Judgment will be entered wider Rule BO. |
4,639,206 | 2020-12-03 16:10:21.726161+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_07252.htm | People v Rahaman (2020 NY Slip Op 07252)
People v Rahaman
2020 NY Slip Op 07252
Decided on December 3, 2020
Appellate Division, Third Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided and Entered: December 3, 2020
112022
[*1]The People of the State of New York, Respondent,
v
Cendno Rahaman, Appellant.
Calendar Date: October 13, 2020
Before: Egan Jr., J.P., Mulvey, Aarons and Pritzker, JJ.
Steven M. Sharp, Albany, for appellant.
Karen A. Heggen, District Attorney, Ballston Spa (Gordon W. Eddy of counsel), for respondent.
Aarons, J.
Appeal from a judgment of the County Court of Saratoga County (Murphy III, J.), rendered August 2, 2019, upon a verdict convicting defendant of the crimes of attempted assault in the first degree (three counts), assault in the second degree, attempted murder in the second degree and tampering with physical evidence.
While the victim was out late with his girlfriend and his friend one night in August 2018, they encountered defendant and became involved in a verbal altercation. The verbal altercation subsequently escalated to a physical one. Defendant swung a knife at the girlfriend and the friend, but he missed striking them. Defendant, however, stabbed the victim in the head and wrist. Defendant was thereafter charged with multiple crimes in connection with this incident. Following a jury trial, defendant was convicted of three counts of attempted assault in the first degree (counts 1, 2 and 4), assault in the second degree (count 6), attempted murder in the second degree (count 5) and tampering with physical evidence (count 7). County Court sentenced defendant to a term of imprisonment followed by a period of postrelease supervision. Defendant appeals.
Defendant argues that the verdict convicting him of attempted murder in the second degree, the three counts of attempted assault in the first degree and tampering with physical evidence was not based upon legally sufficient evidence or, in the alternative, was against the weight of the evidence. To the extent that defendant directs his legal sufficiency argument at the three counts of attempted assault in the first degree, he failed to preserve it because he only made a general motion to dismiss with respect to these specific counts (see People v Splunge, 159 AD3d 1136, 1136 [2018]; People v Stacconi, 151 AD3d 1395, 1396 [2017]). Although defendant did make a specific motion as to the counts of attempted murder in the second degree and tampering with physical evidence, he failed to renew his motion at the close of all proof. Accordingly, defendant's legal sufficiency argument is also unpreserved as to these counts (see People v Sloley, 179 AD3d 1308, 1309 n 2 [2020], lv denied 35 NY3d 974 [2020]; People v Hilton, 166 AD3d 1316, 1317 [2018], lv denied 32 NY3d 1205 [2019]), and we decline defendant's request to exercise our interest of justice jurisdiction (see People v Lucas, 25 AD3d 822, 823 [2006], lv denied 6 NY3d 815 [2006]).
Regarding defendant's weight of the evidence claim, where, as here, a contrary result would not have been unreasonable, we "weigh the relative probative force of conflicting testimony and the relative strength of conflicting inferences that may be drawn from the testimony to determine if the verdict is supported by the weight of the evidence" (People v Wilson, 164 AD3d 1012, 1014 [2018]; see People v Mamadou, 172 AD3d 1524, 1524 [2019], lv denied 33 NY3d 1106 [2019]; People v Arhin, 165 AD3d 1487, 1488 [2018]). When undertaking a weight of the evidence analysis, we view the evidence in a neutral light and defer to the jury's assessment of the credibility of the witnesses (see People v Benjamin, 183 AD3d 1125, 1128 [2020]; People v Gill, 168 AD3d 1140, 1140-1141 [2019]). That said, defendant premises his weight of the evidence claim on the basis that the proof failed to show that he possessed the requisite intent to commit the challenged crimes. "Criminal intent may be inferred from the totality of the circumstances or from the natural and probable consequences of the defendant's conduct" (People v Conway, 179 AD3d 1218, 1219 [2020] [internal quotation marks, ellipsis, brackets and citations omitted], lv denied 35 NY3d 941 [2020]; see People v Pine, 126 AD3d 1112, 1114 [2015], lv denied 27 NY3d 1004 [2016]).
As to the conviction for attempted murder in the second degree, the trial evidence establishes that, after the victim tripped and fell while trying to run away from defendant, defendant got on top of him with a knife. According to the victim, defendant began "stabbing and swing[ing] at [his] head" with [*2]the knife. This attack did not stop even after the victim's friend hit defendant on the head with a bottle. The victim stated that he was "fighting for [his] life" but was eventually able to escape. The victim was "bleeding a lot" and he was treated at the hospital for his injuries. A surgeon testified that the victim had "active bleeding" from one of the head lacerations that required the blood vessel to be tied off. The surgeon further explained that if the blood vessel was not tied off, it would continue to bleed to the point where the victim could go into shock. Although defendant contends that the victim's injuries were minor, "[t]he absence of a long-term serious injury to a victim does not preclude the finding of life-threatening actions by a defendant" (People v Ryder, 146 AD3d 1022, 1024 [2017], lv denied 29 NY3d 1086 [2017]). Viewing the testimonial evidence, as well as the videos and photographs, in a neutral light, the conviction for attempted murder in second degree was supported by the weight of the evidence (see Penal Law §§ 110.00, 125.25 [1]; People v Greenfield, 167 AD3d 1060, 1062 [2018], lv denied 32 NY3d 1204 [2019]; People v Salce, 124 AD3d 923, 925-926 [2015], lv denied 25 NY3d 1207 [2015]).
The convictions for the three counts of attempted assault in the first degree likewise were not against the weight of the evidence (see Penal Law §§ 110.00, 120.10 [1]; People v Gill, 168 AD3d at 1142; People v Andrews, 78 AD3d 1229, 1230-1231 [2010], lv denied 16 NY3d 827 [2011]). In addition to the foregoing proof with respect to the attack on the victim, the record discloses that defendant swung the knife at the friend's midsection. The friend stated that defendant "took a good swing" at him and that defendant came within three inches of striking him. The record also discloses that defendant chased the girlfriend and swung the knife at her while she was cornered in a vestibule area of a bar. The girlfriend stated that the knife came "[v]ery close" to her head. Taking into account that intent may be inferred by the manner in which defendant used the knife (see People v Lewis, 46 AD3d 943, 945 [2007]), defendant's argument with respect to the convictions for these three counts is without merit.
Regarding the conviction for tampering with physical evidence, the record indicates that defendant, as he fled the scene, threw the knife below street level in a dark vestibule and that it was eventually discovered with the aid of a flashlight. Viewing the evidence in a neutral light and the conflicting inferences that may be drawn therefrom, we cannot say that the conviction for tampering with physical evidence was against the weight of the evidence (see Penal Law § 215.40 [2]; People v Maull, 167 AD3d 1465, 1466 [2018], lvs denied 33 NY3d 948, 951 [2019]; People v Neulander, 162 AD3d 1763, 1764-1765 [2018], affd 34 NY3d 110 [2019]; People v Whitehead, 119 AD3d 1080, 1081 [2014], lv denied 24 NY3d 1048 [2014]).
Defendant maintains that he was extremely intoxicated at the time of the incident at issue and, therefore, he lacked the requisite intent to commit the challenged crimes. There was evidence as to how much alcohol defendant had consumed prior to the altercation, as well as conflicting evidence regarding defendant's level of intoxication at the time of the altercation. The jury heard this evidence and apparently found that defendant's intoxication did not negate the element of intent. Because we see no basis to disturb the jury's finding in this regard, defendant's argument is unpersuasive (see People v Oshintayo, 163 AD3d 1353, 1356-1357 [2018], lv denied 32 NY3d 1006 [2018]; People v Shuler, 100 AD3d 1041, 1043 [2012], lv denied 20 NY3d 988 [2012]).
Defendant also argues that the audio portion from the body camera video of the responding police officers should have been excluded as inadmissible hearsay. We disagree. The statements made in the video were not being offered for their truth but to explain what the police officers did and did not do as part of their investigation into the incident at issue (see People v McCottery, 90 AD3d 1323, 1325 [2011], lv denied 19 NY3d 975 [2012]; People v Carney, 18 AD3d 242, 243 [2005], lv denied 5 NY3d 882 [2005]). In addition, County Court, on multiple occasions, provided the jury with a limiting instruction (see People v McCottery, 90 AD3d at 1325; People v Davis, 23 AD3d 833, 835 [2005], lv denied 6 NY3d 811 [2006]). Accordingly, reversal is not warranted on this basis (see People v Gregory, 78 AD3d 1246, 1246-1247 [2010], lv denied 16 NY3d 831 [2011]). Furthermore, even if the court erred in admitting the audio portion from the video, any error was harmless (see generally People v Crimmins, 36 NY2d 230, 241-242 [1975]).
Defendant contends that County Court failed to conduct a further inquiry to determine whether the jury foreperson was grossly unqualified to serve. "To decide whether a juror is grossly unqualified, the trial court must conduct a probing and tactful inquiry and exercise its discretion to determine whether the context of the entire colloquy reveals an obviously partial state of mind and convincingly demonstrates that the sworn juror cannot render an impartial verdict" (People v Crider, 176 AD3d 1499, 1500 [2019] [internal quotation marks, brackets and citations omitted], lv denied 34 NY3d 1157 [2020]; see People v Green, 127 AD3d 1473, 1474-1475 [2015], lvs denied 27 NY3d 965, 969 [2016]). We defer to the trial court's determination regarding whether a juror is grossly unqualified in view of its superior position to assess the partiality of a juror (see People v Kuzdzal, 31 NY3d 478, 483 [2018]; People v Montes, 178 AD3d 1283, 1288 [2019], lv denied 34 NY3d 1161 [2020]; People v Leader, 285 AD2d 823, 824 [2001], lvs denied 97 NY2d 756, 758 [2002]).
After summations, but prior to when County Court charged the jury, juror No. 116 stated, "I wonder once all of this is over if we will see the sentencing on the news. I don't want to have gone through all of this and not know what happened." Juror No. 116 was subsequently discharged. County Court then individually questioned each juror. When the court asked the foreperson whether she had heard a remark by juror No. 116, the foreperson responded, "Not that I recall." The foreperson further responded that nothing that any of the jurors have said had caused her to form an opinion about defendant's guilt and that she has followed, and could continue to follow, the court's instructions about not discussing the case during the trial. After the court questioned all of the jurors, defendant requested a mistrial or, alternatively, for a further inquiry of the foreperson. The request stemmed from a perceived discrepancy between the foreperson's answer that she did not recall a remark by juror No. 116 and juror No. 7's answer that the foreperson had made a comment in response to juror No. 116's remark. The court, however, found that the jurors provided truthful responses and took the foreperson's word at face value that she did not recall any comment by juror No. 116. Given that the record discloses that the court conducted a probing and tactful inquiry (see People v Robinson, 121 AD3d 1179, 1181 [2014]) and deferring to its credibility determination that the foreperson could remain [*3]impartial and did not hear juror No. 116's remark (see People v Green, 127 AD3d at 1475), the court did not err in denying defendant's request for a mistrial.[FN1]
Defendant argues that the imposed sentence was harsh and excessive.[FN2] He was sentenced to concurrent terms of imprisonment, the greatest of which was 25 years, to be followed by five years of postrelease supervision, for the convictions of attempted assault in the first degree (count 4), attempted murder in the second degree (count 5), assault in the second degree (count 6) — charges that relate to the attack on the victim — and tampering with physical evidence (count 7). The sentences for these counts were to run consecutively to the sentence of seven years, to be followed by five years of postrelease supervision, which was imposed for the conviction of attempted assault in the first degree (count 1) — a charge relating to the attack on the friend. Defendant was also sentenced to another consecutive term of imprisonment of eight years, to be followed by five years of postrelease supervision, for the conviction of attempted assault in the first degree (count 2), which relates to the attack on the girlfriend. After consideration of all the relevant factors and the circumstances of this case, we deem it appropriate to reduce the 40-year aggregate sentence in the interest of justice by directing that all sentences run concurrently to each other (see CPL 470.15 [6] [b]; People v Anderson, 149 AD3d 1407, 1416 [2017], lv denied 30 NY3d 947 [2017]; People v Collazo, 45 AD3d 899, 901 [2007], lv denied 9 NY3d 1032 [2008]; People v Smith, 309 AD2d 1081, 1083 [2003]; People v Sheppard, 273 AD2d 498, 500 [2000], lv denied 95 NY2d 908 [2000]; see generally People v Delgado, 80 NY2d 780, 783 [1992]). Defendant's remaining contentions have been examined and are without merit.
Egan Jr., J.P., Mulvey and Pritzker, JJ., concur.
ORDERED that the judgment is modified, as a matter of discretion in the interest of justice, by directing that all sentences imposed upon defendant run concurrently to one another, and, as so modified, affirmed.
Footnotes
Footnote 1: Contrary to the People's claim, the argument is preserved inasmuch as defendant moved for a mistrial upon the completion of the individual questioning of all jurors — i.e., after juror No. 7 gave a response about the foreperson and at a time when County Court still could have taken action (see CPL 470.05 [2]).
Footnote 2: Defendant's claim that he was punished for exercising his right to a trial because the imposed sentence greatly exceeded what was offered in a plea offer is unpreserved for review (see People v Hurley, 75 NY2d 887, 888 [1990]). |
4,639,207 | 2020-12-03 16:10:22.127497+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_07251.htm | People v Jackson (2020 NY Slip Op 07251)
People v Jackson
2020 NY Slip Op 07251
Decided on December 3, 2020
Appellate Division, Third Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided and Entered: December 3, 2020
111147
[*1]The People of the State of New York, Respondent,
v
Bobby Jackson, Appellant.
Calendar Date: October 21, 2020
Before: Egan Jr., J.P., Mulvey, Aarons, Pritzker and Colangelo, JJ.
Theresa M. Suozzi, Saratoga Springs, for appellant.
Andrew J. Wylie, District Attorney, Plattsburgh (Rebecca L. Fox of counsel), for respondent.
Mulvey, J.
Appeal from a judgment of the County Court of Clinton County (Favreau, J.), rendered December 7, 2018, upon a verdict convicting defendant of the crime of criminal possession of a controlled substance in the third degree (two counts).
Defendant was charged by indictment with two counts of criminal possession of a controlled substance in the third degree. County Court denied defendant's pretrial motion to, among other things, suppress all physical evidence attributable to a search of defendant's person that was conducted pursuant to a search warrant. Following a trial, defendant was convicted of both counts. The court sentenced him, as a second felony drug offender, to two concurrent prison terms of nine years followed by three years of postrelease supervision, plus a fine. Defendant appeals.
County Court did not err in denying defendant's suppression motion, because the search warrant was supported by probable cause. Probable cause for a search warrant "may be supplied, in whole or in part, by hearsay information, provided that it satisfies the two-part Aguilar-Spinelli test requiring a showing that the informant is reliable and has a basis of knowledge for the information imparted" (People v Bahr, 35 AD3d 909, 910 [2006] [internal quotation marks, brackets and citations omitted], lv denied 8 NY3d 919 [2007]; see People v Griminger, 71 NY2d 635, 639 [1988]). "The People must produce a confidential informant for an ex parte hearing upon defendant's request where, as here, they rely on the statements of the confidential informant to establish probable cause" (People v Givans, 170 AD3d 1638, 1639 [2019] [citations omitted]; see People v Kirkley, 172 AD3d 1541, 1542 [2019], lv denied 33 NY3d 1106 [2019]). "The purpose of the Darden hearing is to verify the truthfulness of the police witness's testimony about his or her dealing with a known informant by ensuring that the informant exists and that he or she provided the police with information about the specified criminal activity" (People v Givans, 170 AD3d at 1639 [internal quotation marks and citations omitted]; see People v Matthews, 159 AD3d 1043, 1044 [2018]).
A confidential informant (hereinafter CI) appeared at the Darden hearing, thereby establishing his or her existence, and testified to providing evidence to the police that was consistent with information that was included in the search warrant application. In the application, a police officer attested that the information supplied by this CI was confirmed by an investigation conducted by police officers, including that two other CIs provided corroborative information regarding having purchased drugs in a similar manner and location, near defendant's vehicle and from a person matching defendant's general description. Thus, in addition to the officer's attestation that the first CI had provided credible information to the police in the past, information gleaned from the police investigation established that the first CI was reliable (see People v Mabeus, 63 AD3d 1447, 1450-1452 [2009]; People v Tocci, 52 AD3d 541, 541-542 [2008], lv denied 11 NY3d 858 [2008]). The application also revealed that the CI recently participated in a controlled drug buy involving defendant and one of his dealers, thereby establishing the CI's basis of knowledge, which was further elucidated during the Darden hearing. Additionally, the search warrant application included information about the movements of defendant's vehicle, as shown through GPS tracking of the vehicle pursuant to a separate warrant. These details, along with explanations from police officers comparing defendant's movements to those typical of narcotics traffickers, buttressed the CI's information that defendant would be returning to Clinton County with drugs on or about the date that the warrant was issued. Accordingly, County Court properly denied defendant's motion to suppress the physical evidence as the search warrant was supported by probable cause (see People v Bahr, 35 AD3d at 911).
To the extent that defendant complains that he was improperly subjected to a strip search, his argument is without merit. "[A] strip search must be founded on a reasonable suspicion that the arrestee is concealing evidence underneath clothing and the search must be conducted in a reasonable manner" (People v Turner, 178 AD3d 70, 75 [2019] [internal quotation marks and citations omitted]). Inasmuch as the police obtained a search warrant that allowed for separate searches of the vehicle and defendant's person, the unsuccessful search for contraband in the vehicle did not preclude a search of defendant himself. Defendant asserts that, because nothing was found when a police officer searched him at the side of the road following a stop of his vehicle, no further search was permissible. However, the roadside pat down was not completed due to defendant squirming and withdrawing his consent to the search once the officer reached defendant's waistband.[FN1] Although the police officer had the authority to continue the search based on the warrant, a full search on the side of the road in January would not have been reasonable or appropriate, especially considering that defendant was wearing multiple layers of clothing. The police were justified in detaining defendant for the purpose of transporting him to the police station to execute the search warrant in a private room, with male officers present, and handcuffing him during the transport for officer safety and to comply with police department procedures. Whereas a strip search may be conducted without a warrant where the police have reasonable suspicion that contraband may be concealed under clothing, here the police had obtained a warrant, based on probable cause, that permitted a search of defendant's person; the warrant, together with the circumstances, authorized a strip search (see People v Hall, 10 NY3d 303, 310-311 [2008], cert denied 555 US 938 [2008]; People v Hunter, 73 AD3d 1279, 1280-1281 [2010]).[FN2]
The jury's verdict was supported by legally sufficient evidence and was not against the weight of the evidence. "When considering a challenge to the legal sufficiency of the evidence, [this Court] view[s] the evidence in the light most favorable to the People and evaluate[s] whether there is any valid line of reasoning and permissible inferences which could lead a rational person to the conclusion reached by the jury on the basis of the evidence at trial and as a matter of law satisfy the proof and burden requirements for every element of the crime charged" (People v Hernandez, 180 AD3d 1234, 1235 [2020] [internal quotation marks and citations omitted], lv denied 35 NY3d 993 [2020]; see People v Bleakley, 69 NY2d 490, 495 [1987]). "In contrast, when undertaking a weight of the evidence review, we must first determine whether, based on all the credible evidence, a different finding would not have been unreasonable and, if not, then weigh the relative probative force of conflicting testimony and the relative strength of conflicting inferences that may be drawn from the testimony to determine if the [*2]verdict is supported by the weight of the evidence" (People v Hernandez, 180 AD3d at 1235 [internal quotation marks, brackets and citations omitted]; see People v Saylor, 173 AD3d 1489, 1490 [2019]). In assessing the weight of the evidence, this Court must view the evidence in a "neutral light and accord[] deference to the jury's superior opportunity to assess witness credibility" (People v Warrington, 155 AD3d 1450, 1452 [2017]).
As to the first count of criminal possession of a controlled substance in the third degree, a person is guilty "when he [or she] knowingly and unlawfully possesses . . . a narcotic drug with intent to sell it" (Penal Law § 220.16 [1]). As to the second count of the same crime for which defendant was convicted, a person is guilty "when he [or she] knowingly and unlawfully possesses . . . one or more preparations, compounds, mixtures or substances containing a narcotic drug and said preparations, compounds, mixtures or substances are of an aggregate weight of one-half ounce or more" (Penal Law § 220.16 [12]).
Defendant does not challenge the evidence establishing that the item recovered by police from the floor of the police station contained cocaine — a narcotic drug — with an aggregate weight greater than one-half ounce. Further, "the manner in which the cocaine was packaged, coupled with its weight and substantial street value, permitted a rational inference that defendant possessed the cocaine with the intent to sell" (People v Wheeler, 159 AD3d 1138, 1140 [2018], lv denied 31 NY3d 1123 [2018]). Defendant instead argues that there was no proof that he possessed the cocaine. We disagree. Three police officers each testified that, as defendant sat down to remove his outer pants during the strip search (despite being told to stand while removing his clothing), they heard a noise like a thud and then noticed a black item on the floor under the bench where defendant was sitting. That item consisted of cocaine in vacuum-sealed bags, which were then wrapped together in electrical tape. Each officer testified that the item was not on the floor prior to the search. Moreover, a video of the search — played to the jury first in its normal form and speed, then zoomed in and freeze-framed — depicts what appears to be the item falling from the back of defendant's pants as he begins removing them. Viewing the evidence in the light most favorable to the People, defendant's convictions are supported by legally sufficient evidence (see People v Sanders, 185 AD3d 1280, 1286 [2020], lv denied ___ NY3d ___ [Oct. 30, 2020]; People v Pope, 96 AD3d 1231, 1234 [2012], lv denied 20 NY3d 1064 [2013]). Although a different verdict would not have been unreasonable, as the officers testified that they did not directly see the item fall from defendant's person, we conclude, after viewing the evidence in a neutral light and deferring to the jury's credibility findings, that the verdict is not against the weight of the evidence (see People v Hilton, 185 AD3d 1147, 1149 [2020], lv denied 35 NY3d 1095 [2020]; People v Sanders, 185 AD3d at 1286; People v Pierre, 162 AD3d 1325, 1327 [2018], lv denied 32 NY3d 1007 [2018]).
Finally, considering the amount of cocaine that defendant possessed with the intent to sell it, along with his lengthy criminal history spanning numerous states, we will not disturb the sentence (see People v Brown, 169 AD3d 1258, 1260 [2019], lv denied 33 NY3d 1029 [2019]). However, we note that defendant was sentenced as a second felony drug offender rather than — as stated by County Court and reflected in court documents — a second felony offender (see Penal Law § 70.70 [1] [b]; compare Penal Law § 70.70 [3] [b] [i], with Penal Law § 70.06 [2], [3] [b]; [4] [b]). Accordingly, we direct County Court [*3]to issue an amended certificate of conviction and uniform sentence and commitment form reflecting the correct status (see People v Sanders, 185 AD3d at 1287-1288). Defendant's remaining contentions have been reviewed and found to be without merit.
Egan Jr., J.P., Aarons, Pritzker and Colangelo, JJ., concur.
ORDERED that the judgment is affirmed, and matter remitted for entry of an amended uniform sentence and commitment form and an amended certificate of conviction.
Footnotes
Footnote 1: Defendant had provided consent to a search before he was informed that the police had obtained a search warrant.
Footnote 2: Although defendant complains that he was subjected to a visual body cavity search, the police were justified in conducting such a search once contraband fell out of defendant's pants, as it became more likely that he would be concealing other contraband on or in his body. Even so, because no additional contraband was found during the visual body cavity search, there was nothing that could have been suppressed as a result of that search. |
4,639,208 | 2020-12-03 16:10:22.431514+00 | null | http://www.courts.state.ny.us/reporter/3dseries/2020/2020_07250.htm | People v Holtslander (2020 NY Slip Op 07250)
People v Holtslander
2020 NY Slip Op 07250
Decided on December 3, 2020
Appellate Division, Third Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided and Entered: December 3, 2020
110888
[*1]The People of the State of New York, Respondent,
v
William A. Holtslander, Appellant.
Calendar Date: October 13, 2020
Before: Egan Jr., J.P., Mulvey, Aarons, Pritzker and Reynolds Fitzgerald, JJ.
Jackson Bergman, LLP, Binghamton (Michael A. Garzo Jr. of counsel), for appellant.
John M. Muehl, District Attorney, Cooperstown (Michael F. Getman of counsel), for respondent.
Mulvey, J.
Appeal from a judgment of the County Court of Otsego County (Lambert, J.), rendered December 17, 2018, upon a verdict convicting defendant of the crime of sexual abuse in the first degree.
Defendant was charged by indictment with 13 counts of sexual abuse in the first degree for allegedly sexually abusing the victim from October 2014 to October 2015, when she was six to seven years old. Prior to trial, County Court rendered a Molineux ruling that the victim could testify regarding previous, ongoing uncharged sexual conduct by defendant, with a limiting instruction to be given upon introduction of that evidence. Immediately before the trial began, defendant moved to vacate the court's ruling, arguing for the first time that counts 2 through 13 should be dismissed as duplicitous based on the testimony presented to the grand jury.[FN1] The court denied the motion. During trial, defendant twice unsuccessfully renewed his motion to dismiss counts 2 through 13.
Following the jury trial, defendant was convicted as charged. Defendant moved to set aside the verdict based on the legal insufficiency of the evidence and that the trial testimony rendered the charges duplicitous. County Court denied the motion as to count 1, but granted the motion as to the other counts, dismissing them as duplicitous. Thereafter, the court sentenced defendant to a prison term of seven years, followed by 10 years of postrelease supervision. Defendant appeals.
We reverse. The parties agree that County Court properly dismissed counts 2 through 13 as duplicitous,[FN2] but disagree regarding whether the dismissal should have occurred earlier and, if so, the effect of the late dismissal. "A count in an indictment is duplicitous and, therefore, defective where it charges more than one crime" (People v Black, 65 AD3d 811, 813 [2009] [citations omitted], lv denied 13 NY3d 905 [2009]; see also CPL 200.30 [1]; People v Dalton, 27 AD3d 779, 781 [2006], lvs denied 7 NY3d 754, 811 [2006]). "Where a crime is completed by a discrete act, and where a count in the indictment is based on the repeated occurrence of that act over a course of time, the count includes more than a single offense and is duplicitous. Even if a count is valid on its face, it is nonetheless duplicitous where the evidence presented to the grand jury or at trial makes plain that multiple acts occurred during the relevant time period, rendering it nearly impossible to determine the particular act upon which the jury reached its verdict" (People v Black, 65 AD3d at 813 [internal quotation marks and citations omitted]; see People v Raymo, 19 AD3d 727, 729 [2005], lv denied 5 NY3d 793 [2005]; People v Levandowski, 8 AD3d 898, 899-900 [2004]).
Count 1 of the indictment referred to conduct that occurred "on or about" October 17, 2014, whereas counts 2 through 13 referred to conduct that occurred, respectively, "in or about" each of the subsequent 12 months. Prior to the commencement of the trial, defendant argued that, in reviewing the grand jury testimony, it was impossible to differentiate the alleged conduct to decipher which acts would apply to which counts. The victim testified to the grand jury that she specifically recalled defendant touching her inappropriately on October 17, 2014, the same date referred to in count 1 of the indictment, because that was the day that her father was arrested in her presence. Regarding the remaining counts, the victim stated that the alleged conduct happened "many times" when she was at defendant's house, "mostly all the times I went to see him," and "mostly every time." The victim's stepmother testified to the grand jury that, from 2014 until October 2015, the victim was at defendant's house at least once per month and sometimes weekly. Based on this grand jury testimony, "there is no way to match defendant's alleged acts with specific counts of the indictment" (People v Black, 65 AD3d at 814). Although the victim testified to the grand jury that the alleged acts occurred almost every time that she was at defendant's house, without more detail this does not preclude the possibility that the conduct could have occurred more than one time, or not at all, in each one-month period referenced by counts 2 through 13. Thus, County Court erred in denying defendant's pretrial motion to dismiss counts 2 through 13 of the indictment as duplicitous (see People v Keindl, 68 NY2d 410, 418-421 [1986]; People v Madsen, 168 AD3d 1134, 1138-1139 [2019]; People v Black, 65 AD3d at 813-814; People v Levandowski, 8 AD3d at 899-900).
When considered in conjunction with defendant's Molineux argument, we cannot conclude that the failure to dismiss those counts pretrial was harmless. Rather than hearing evidence related to one count addressing a single instance of sexual contact on a single day, the direct evidence addressed 12 additional incidents of sexual conduct occurring throughout the ensuing year. Moreover, in its Molineux ruling, County Court permitted evidence of uncharged crimes — namely, that the same type of sexual contact occurred beginning when the victim was five years old and continued mostly every time she was at defendant's residence, which at times was weekly — based on the victim's young age and inability to pinpoint dates on which the abuse occurred, except for the incident in count 1 that was memorable as it occurred on the same day as her father's arrest. In seeking the admission of this testimony, the People consistently argued that the testimony regarding uncharged crimes was necessary to prove counts 2 through 13, as the victim could not, and could not be expected to, furnish specific dates for those alleged incidents.
"[U]nder . . . Molineux jurisprudence, we begin with the premise that uncharged crimes are inadmissible and, from there, carve out exceptions" (People v Resek, 3 NY3d 385, 390 [2004]). The proffered Molineux evidence was not necessary to resolve any ambiguity as to count 1, and thus was beyond the Molineux exception for background information as provided by County Court in its ruling (see People v Leonard, 29 NY3d 1, 7-8 [2017]; People v Resek, 3 NY3d at 390; People v Lewis, 69 NY2d 321, 327 [1987]; compare People v Shofkom, 63 AD3d 1286, 1287-1288 [2009], lv denied 13 NY3d 799 [2009], appeal dismissed 13 NY3d 933 [2010]). If the court had dismissed counts 2 through 13 as duplicitous prior to the People's presentation of their case-in-chief, that likely would have changed the court's calculus as to the admission of the victim's testimony regarding uncharged crimes — including whether to allow testimony regarding the incidents referred to in those dismissed counts, which would no longer be direct evidence of charged crimes. Even if the testimony regarding the uncharged criminal [*2]conduct was permissible for a nonpropensity purpose, its prejudicial nature outweighed the minimal probative value that may be attributed to it as to count 1 (see People v Leonard, 29 NY3d at 8; People v Lewis, 69 NY2d at 328). While in some circumstances the undue prejudice resulting from Molineux evidence may be mitigated by a limiting instruction, here such an instruction was only provided once in the final charge to the jury, and not at the time of the victim's testimony, despite County Court having indicated that those instructions would be provided at the time that such evidence was admitted (compare People v Ramsaran, 154 AD3d 1051, 1055 [2017], lv denied 30 NY3d 1063 [2017]; People v Shofkom, 63 AD3d at 1288).
Regarding the cumulative effect of these nonconstitutional errors, as no physical evidence was presented at trial, the evidence "was not overwhelming, as it turned, primarily, on an assessment of the credibility of the complainant and defendant" (People v Tarantola, 178 AD2d 768, 770 [1991], lv denied 79 NY2d 954 [1992]; see People v Levandowski, 8 AD3d at 901). Further, the complainant's testimony may have been bolstered by the admission of her testimony concerning numerous uncharged incidents of sexual abuse by defendant. We cannot say that there was no significant probability that the jury would have acquitted defendant on the surviving count if the victim's testimony was limited to the conduct alleged in count 1 (see People v Mink, 267 AD2d 501, 504 [1999], lv denied 94 NY2d 950 [2000]; compare People v Story, 176 AD2d 1080, 1081 [1991], lv denied 79 NY2d 864 [1992]; People v Smyers, 167 AD2d 773, 775-776 [1990], lv denied 77 NY2d 967 [1991]; People v Townsend, 134 AD2d 730, 731 [1987], lv denied 71 NY2d 903 [1988]). Because the victim's testimony was the principal evidence of the crime, and her cumulation of defendant's uncharged criminal acts likely seriously prejudiced defendant in the eyes of the jury, the admission of the Molineux evidence was an error that cannot be qualified as harmless, especially when viewed in conjunction with County Court's denial of defendant's pretrial motion to dismiss counts 2 through 13 (see People v Leonard, 29 NY3d at 8; People v Lewis, 69 NY2d at 328). As the errors were not harmless, defendant was deprived of a fair trial. Accordingly, we reverse the conviction and remit for a new trial on count 1.
Egan Jr., J.P., Aarons, Pritzker and Reynolds Fitzgerald, JJ., concur.
ORDERED that the judgment is reversed, on the law, and matter remitted to the County Court of Otsego County for a new trial on count 1 of the indictment.
Footnotes
Footnote 1: Defendant had recently received the grand jury transcripts as Rosario material.
Footnote 2: The People now concede that County Court was required to dismiss those counts as duplicitous and they have not sought permission to re-present any appropriate, non-duplicitous charges to another grand jury (cf. People v Madsen, 168 AD3d 1134, 1139 [2019]; People v Levandowski, 8 AD3d 898, 899-900 [2004]). |
4,597,737 | 2020-11-20 19:19:49.281382+00 | null | null | HARRY E. LANSING and JEAN A. LANSING, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Lansing v. Commissioner
Docket No. 752-74
United States Tax Court
T.C. Memo 1976-313; 1976 Tax Ct. Memo LEXIS 91; 35 T.C.M. (CCH) 1421; T.C.M. (RIA) 760313;
October 5, 1976, Filed
Harry E. Lansing and Jean A. Lansing, pro se.
Peter M. Ritteman and Virginia M. Tomasulo, for the respondent.
WILBUR
MEMORANDUM FINDINGS OF FACT AND OPINION
WILBUR, Judge: Respondent has determined deficiencies in the petitioners' Federal income tax as follows:
YearAmount
1968$ 2,681.09
196912,706.68
19708,096.04
Due to concessions by the parties, the following issues remain for decision:
1. Whether the pension trust created pursuant to section 401(a)1 by petitioners' wholly-owned Subchapter S corporation has sufficient economic reality to be recognized for tax purposes.
2. Whether petitioners incurred interest expense in the amounts of $2,080 and $1,000 in 1969 and 1970, respectively.
3. Whether petitioners have adequately substantiated travel expenses; and
4. Whether expenses incurred in 1969 and 1970 in connection with an automobile owned by the corporation are deductible in excess of the amount allowed*94 by respondent.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners, Harry E. Lansing and Jean A. Lansing, husband and wife, resided in East Lansing, Michigan, at the time the petition was filed in this case. Petitioners filed joint Federal income tax returns for the years in issue with the district director of internal revenue at Cincinnati, Ohio.
Petitioners owned and operated a music store under the name of Campus Music Shop near Michigan State University. In 1964 petitioners began publishing and selling college course outlines for the use of the University students. Eventually, petitioners prepared, published and sold 50 different outlines.
In order to facilitate preparation, publication and sale of the outlines petitioners in 1965 organized a corporation under the laws of the state of Michigan known as Beagle Enterprises, Inc., (Beagle or the corporation). Beagle issued 500 shares of capital stock to each petitioner. At all times during the corporation's existence, 2 petitioners were the sole stockholders and the sole employees. Harry E. Lansing was the corporation's president and Jean A. Lansing was the secretary-treasurer. *95
On April 1, 1965 Beagle elected to be treated as a small business corporation for income tax purposes. In 1966 Beagle executed a trust agreement creating the Beagle Enterprises, Inc. Employees Pension Trust (the Trust) and designating petitioners as trustees. Petitioners as trustees were notified on December 14, 1966, that the Trust was a qualified trust under section 401(a) and exempt from income tax under section 501. On March 29, 1972, the exemption of the Trust was revoked retroactively as of the date of the initial favorable qualification.
The trust agreement directed the trustees to use the funds of the Trust for contracts on the lives of the participants and also to make deposits into an auxiliary fund. Under the agreement the auxiliary fund was to be used to purchase "additional" annuities at retirement to provide (when added to the basic annuity purchased on behalf of the employee during his working years) the retirement benefits provided for by the plan. A terminated employee was provided "a fully vested interest in each contract issued and in effect for his benefit" but it was specifically*96 provided that "in no event shall such terminated Participant have any vested interest in the Auxiliary Fund." No contributions were required from the employees.
Annuity contracts were purchased from Equitable Life Assurance Society of America, (Equitable). Premium payments on the annuity contracts were made to Equitable as follows:
1966by trust$7,189.89
1967by employer1,270.16
1968by employer7,189.89
1969by trust4,945.70
In 1970 the Trustees cancelled the annuity contracts and the Trust received the cash surrender value of $9,778.69. After the cancellation of the annuity contracts, which resulted in a loss of $10,816.95, the auxiliary fund was the only funding medium of the Trust and an actuary was engaged to determine the amounts required to be paid into the Trust.
The Trust also contained the following provisions relating to the investments, management, and accounting of the funds of the Trust:
15.3 * * * The Trustees are further authorized and empowered to invest any and all funds in the Auxiliary Fund in any manner as an ordinary prudent investor which is acceptable to the Internal Revenue Service for the investment of qualified*97 pension trust funds, or to enter into the Auxiliary Fund agreement with the issuing insurance company for the placing of such funds at interest with the insurer.
* * *
15.8 The Trustees shall keep minutes of their proceedings and complete records of the administration of the Trust, which minutes and records may be examined at any reasonable time on behalf of the Employer by any officer or employee (not necessarily as defined in Article II) designated in writing by the Employer. The Trustees shall make available to the Participants, Retired Participants and Terminated Participants and to their Beneficiaries, for examination at any reasonable time, such records as pertain to the person examining.
15.9 Within 90 days following the close of the fiscal year of the Trust, the Trustees shall furnish the Employer a written statement of account and the Employer shall promptly notify the Trustees in writing of its approval or disapproval thereof. Failure by the Employer to disapprove within 90 days after receipt of any such statement shall be considered an approval thereof. The approval by the Employer of any statement of account shall be binding, as to all matters embraced in*98 the statement, on all parties to this agreement and on all Participants, Retired Participants, and Terminated Participants, to the same extent as if the account of the Trustees had been settled by judgment or decree in an action for a judicial settlement of their accounts in a court of competent jurisdiction in which the Trustees, the Employer and all persons having or claiming any interest in the trust fund were parties; provided, however, that nothing herein contained shall deprive the Trustees of their right to have their accounts judicially settled if they so desire.
15.10 The Trustees shall use ordinary care and reasonable diligence in the exercise of their powers and the performance of their duties hereunder.
* * *
18.4 It is understood that no part of the corpus of income hereunder shall ever be used or diverted to purposes other than for the exclusive benefit for participants, Retired Participants, and Terminated Participants, or their Beneficiaries.
A checking account was maintained in the First National Bank of East Lansing (First National) in the name of "Beagle Enterprises, Inc., Employees Pension Trust, Harry and Jean Lansing." Additionally, a savings account*99 was maintained at East Lansing Savings and Loan Association (the Savings and Loan) under the name "Beagle Enterprises, Inc. Employees Pension Fund."
Funds of Beagle and the Trust were extensively commingled in the savings account of the Trust from which large withdrawals were made on several occasions of funds allegedly belonging to Beagle. However, the statements of the savings account do not specifically identify the funds belonging to Beagle, funds that represent current contributions to the Trust by Beagle, or funds belonging to the Trust from previous contributions.
Beagle maintained no financial records of its own, and such financial records pertaining to Beagle that are available are incorporated in the financial journal of Campus Music Shop. These financial records contain no information concerning the deductions Beagle, Inc., claimed for contributions to the Trust. Substantiation of the deductions rests primarily on efforts to correlate entries in the statements of the savings account with third party payments by Beagle and a series of notes and unrecorded mortgages underlying the following bewildering series of transactions.
Petitioners in their individual capacity*100 purchased a lot in Whitehills Estate (the Whitehills lot) in East Lansing for $13,500. Checks dated December 29, 1966 and December 30, 1966 in the amounts of $2,000 and $1,500, respectively, were drawn to the order of Whitehills Development Company (Development Company) on account of the Trust in partial payment for the Whitehills lot. In 1966, petitioners also paid $7,000 to the Development Company that they had borrowed from the Trust, bringing the total payments in 1966 to $10,500. During 1967 the Trust paid an additional $3,000 to the Development Company for the Whitehills lot, paying off the $13,500 that petitioners paid for their lot.
On March 15, 1967, petitioners executed a mortgage (described therein as a "temporary indenture") on the Whitehills lot to the trust to secure repayment at 7 percent in 1 year or on demand of the $10,500 advanced in 1966.3 The mortgage was not recorded. Subsequently, a warranty deed dated May 11, 1967 was executed by the Development Company conveying the Whitehills lot to petitioners. The deed was recorded on May 22, 1967. A promissory note dated March 15, 1968, was at some point in time executed by petitioners to the Trust for $13,500*101 which incorporated the $10,500 withdrawal in 1966 and the $3,000 advance from the Trust in 1967.
In 1968 petitioner commenced construction of a building for use as a personal residence and as an office for Beagle on the Whitehills lot. A number of direct or indirect withdrawals of funds ostensibly belonging to the Trust were made in order to complete construction of the Whitehall property, represented by the following:
August 9, 1968$ 650
December 16, 19686,000 4
March 12, 19695,700 5
April 9, 196913,300 , 6
May 10, 196911,500 , 7
August 5, 1969300 ,
March 24, 197011,000
*102 Petitioners executed a contract to sell their residence on Hagadorn Road (the Hagadorn property) to John Shrank for $27,500 on September 15, 1969. Five thousand dollars was paid at the time the contract was signed and the balance with interest was payable in installments of $200 each. Petitioners were to convey the title to the Hagadorn property only upon performance of the purchaser's covenants. The Shrank land contract was not recorded.
At the time of the Shrank contract petitioners had an unpaid balance on a loan from the Savings and Loan secured by a first mortgage on the Hagadorn Road property. For a consideration of $22,500 petitioners executed and assigned a second mortgage on the Hagadorn Road property to the Trust on September 15, 1969. Neither the second mortgage nor the assignment of mortgage was recorded. The Shrank contract was also assigned to the Trust pursuant to an undated instrument executed by petitioners.
On March 15, 1970, petitioners executed a promissory note in the amount of $30,353 with 7 percent interest to the Trust. This note was secured by a second mortgage on the Whitehills lot. The second mortgage was not recorded. The first mortgage on*103 the Whitehills lot was held by First National to secure repayment of $60,000 and was recorded on June 23, 1969. The second mortgage to the Trust which secured cured the $30,353 note was superseded by a second mortgage executed on March 15, 1971, to secure repayment of $43,977.71 at 7 percent interest. This mortgage was also not recorded.
In 1973 petitioners sold the Whitehills property to F. Jerome and Judith A. Corr. A promissory note dated October 24, 1973, was executed by the Corrs to the petitioners in the amount of $76,484.82 at 8 percent interest. This note was secured by a second mortgage.The Corr note and mortgage were assigned to the Trust by petitioners on November 20, 1973. The assignment was recorded on January 2, 1974.
Beagle wrote a series of checks on its corporate account during 1969 and 1970 for goods supplied and services rendered in the construction and furnishing of their residence in the Whitehills Estates. At some point in time notes were executed from petitioners to the Trust reflecting their theory that these involved constructive payments of deductible pension fund contributions by Beagle to the Trust and miscellaneous loans to petitioners.
In March*104 1968 petitioners expended $717.88 on a trip to Florida. Petitioners also made a trip to New York City in September 1968 for which $514.95 was expended. The expenses incurred in connection with the New York City trip included $100 for expenses of petitioners' daughter who was a member of the board of directors of Beagle. No business appointments were scheduled prior to the trips.
Petitioners owned an automobile which was not used for business purposes. Beagle also owned an automobile which was used for various business purposes.In addition, the Beagle car provided transportation for petitioners from their residence to the Campus Music Shop. On occasion, petitioners would use the Beagle car to transport outlines which were produced at their residence to the shop. Although petitioners deducted all expenses related to the Beagle car, respondent allowed only 75 percent of the amount claimed as business related.
OPINION
The primary issue for decision in this case is whether the Trust had sufficient economic reality to be recognized under the tax law. 8 The trust was established in conjunction with a pension plan which initially received approval as a qualified plan under section*105 401(a). Respondent contends that the petitioners, who were the sole shareholders and officers of the creator corporation as well as the sole beneficiaries and trustees of the Trust, dealt with the Trust res in a manner which deprived the Trust of any economic reality for Federal tax purposes.Consequently, respondent concludes that since no Trust cognizable under the tax laws was created, Beagle, the creator of the alleged Trust, is not entitled to any deductions for contributions pursuant to the plan. 9 We agree with respondent.
*106 The Federal tax consequences we confront do not depend on the paper edifice erected, but on whether that edifice corresponds with economic reality--whether there has been a substantial change in economic ownership. Burde v. Commissioner,352 F. 2d 995 (2nd Cir. 1965), affg. 43 T.C. 252">43 T.C. 252 (1964); Irvine K. Furman,45 T.C. 360">45 T.C. 360 (1966), affd. per curiam 381 F. 2d 22 (5th Cir. 1967). We believe that the petitioners, when all the circumstances of this case are considered in context, should be treated as the owners of the trust property, and that for Federal tax purposes the Trust, having no economic reality, was a nullity. 10
*107 Where the management, ownership and control of several related entities is in the hands of one person, the Courts carefully scrutinize the relationship of the various entities to ensure that the substance of the transactions--measured by the actual conduct of the parties--accords with the form in which they are cast. We are not here confronted with a case where, although the employees, shareholders, officers, trustees, and beneficiaries are identical, the activities peculiar to each capacity can be isolated and have been conducted in accordance with the duties imposed on the specific role. In the instant case, petitioners' activities could not be segregated as to the various roles. For instance, we cannot discern at which points petitioners acted as trustees, as officers of the creator corporation, as employees, or as beneficiaries of the Trust. Petitioners freely and consistently dealt with the "trust" property as their own and as a matter of economic reality, there was no separation of legal title from beneficial enjoyment.11
*108 Petitioners' enjoyment of the Trust property was not delayed until retirement as contemplated by the pension plan. Instead, the Trust res was used for their immediate personal benefit both as officers of the creator corporation and as individuals. Petitioners drew checks on the Trust checking account to purchase a lot in their individual capacity. Petitioners used Trust funds to pay costs for the construction of a combined personal residence and office. On other occasions petitioners used corporate funds to construct their personal residence, contending that those funds, or at least some portion of them, were contributions to the Trust and loans to the beneficiary. 12
*109 If secured, these "loans" were secured by junior unrecorded mortgages. Petitioners did assign one note and a second mortgage securing the note to the Trust and did record the assignment in 1974, 2 years after the qualification of the plan and Trust was revoked.
Petitioners rely on Rev. Rul. 65-178, 2 C.B. 94">1965-2 C.B. 94, 124 as modified by Rev. Rul. 67-288, 2 C.B. 151">1967-2 C.B. 151 as authorizing the alleged loans. Even if the Trust had any economic reality, the loans to petitioners as participants in the plan would not have been within the scope of respondent's rulings. Together those rulings permit loans from a pension trust to participants in excess of their vested interests but only if the loans are adequately secured, bear a reasonable rate of interest, and are repaid within a specified period of time. The loans in this case were evidenced for the most part by unsecured promissory notes executed at some point in time. Additionally, the notes required repayment within specified periods but were not actually repaid in cash when due. Rather, new notes were executed bearing the same interest rate.
In addition, funds of the Trust and the creator corporation were*110 commingled in the Trust savings account. Although petitioners contend that they could identify ownership of the amounts deposited to and withdrawn from the Trust savings account, no books reflecting Trust receipts or expenditures were maintained nor did the corporation keep a record of required contributions. 13
*111 At one point petitioners conceded no separate records were kept by Beagle, Inc., and that "the contributions to the auxiliary fund we kept track of by those notes,". At another point petitioners, again conceding lack of contributions records by Beagle, Inc., stated that Beagle's records of contributions were the corporate income tax returns themselves. As concerns the Trust records, petitioners conceded that the Trust "didn't have a journal as such" 14 and stated that the amounts "to be put in the fund each year can be checked from the 990-P's." These explanations were offered when petitioners' attempts to recall past events from the savings account statements of the Trust proved clearly futile. 15 Petitioners simply regarded the Trust fund money as their own, stating at one point that "We were the only ones involved at either end * * *". For this reason they dealt with Trust fund money as their own property, and never exercised any fiduciary responsibilities with regard to the trust corpus. Based on the entire record, we hold that the Trust lacked economic reality and was a nullity for tax purposes.
*112 Several secondary issues remain for our consideration. The first is whether petitioners incurred interest expense in the amounts of $2080 and $1000 in 1969 and 1970, respectively. The 1969 interest claim is composed in part of 7 percent interest on a note in the amount of $13,500 executed by petitioners to the Trust in 1968. 16 The remaining amount for 1969 and the entire amount claimed in 1970 is attributable to payments on a land contract assigned to the Trust in conjunction with a mortgage executed by petitioners.
Since we have determined that the Trust lacked economic reality for Federal income tax purposes, petitioners could not pay any amounts to the Trust. If any interest was paid, it was paid to the corporation. However, petitioners have failed to prove that any interest was paid.
Petitioners rely solely on the records of deposit to the Trust savings account to prove that interest was paid on an existing indebtedness. Although the records clearly indicate that deposits were made*113 to the account, it is impossible for us to determine what amounts, if any, constituted repayments on loans and the amount of interest thereon as contrasted to payments from Beagle. Consequently, petitioners are not entitled to deduct any amounts as interest.
Petitioners also claim a deduction for traveling expenses under section 162. Petitioners contend that the trip to Florida was motivated by a desire to expand the outline publishing business and that the trip to New York was designed to establish buying agreements directly with manufacturers. In addition, petitioners contend that a board of directors meeting was held during the course of their New York trip.
Section 162 provides a deduction for ordinary and necessary business expenses including traveling expenses while away from home on business. The taxpayer must prove that the expenditure was related primarily to business rather than personal reasons. Vaughn v. Chapman,48 T.C. 358">48 T.C. 358 (1967); James Schulz,16 T.C. 401">16 T.C. 401 (1951).
Moreover, to qualify for a deduction for traveling expenses, the taxpayer*114 must also fulfill the stringent substantiation requirements of section 274. Section 274 requires that the amount, time and place, and business purpose of the expenditure be proved by adequate record or by evidence corroborating the taxpayer's own statement.
With respect to travel, the amount to be proven is the amount of each separate expenditure except that the daily costs may be aggregated in reasonable categories. Section 1.274-5(b)(2)(i), Income Tax Regs. The time requirement contemplates evidence of departure and return dates as well as number of days away from home spent on business. Section 1.274-5(b)(2)(ii), Income Tax Regs.
The parties have stipulated that petitioners expended $717.88 and $514.95 on travel to Florida and New York City, respectively. However, no evidence was presented to identify either individual expenditures or aggregate expenditures (such as meals, lodging and transportation) included in those amounts. No evidence regarding specific departure or return dates was presented. Moreover, the only evidence regarding the business nature of the trips was the vague and uncorroborated testimony of petitioner*115 Harry E. Lansing. That testimony consisted of general statements that petitioners met with various manufacturers but Harry Lansing failed to identify any particular persons or business meetings. Additionally, the testimony alluded to a board of directors meeting but neither testimony regarding the substance of the meeting nor any supporting documentary evidence was produced.
Petitioners have thus failed to fulfill any of the substantiation requirements of section 274. Consequently, they are not entitled to a deduction for travel expenses in excess of that allowed by respondent.
The final issue remaining for our decision is whether expenses incurred in connection with a corporate car are fully deductible.
Operating expenses of automobiles used in a business are clearly deductible under section 162. Section 1.162-1(a), Income Tax Regs. However, as with all deductions for business expenses, petitioners must prove that the expenditure was primarily business related. Vaughn V. Chapman,supra; James Schulz,supra.
Although the*116 corporately-owned automobile was used primarily in the business, it was not exclusively so used. Petitioners admittedly used the car to commute from their home to the business. Since commuting expenses are not deductible, expenses incurred in connection with the corporate car which were attributable to commuter use are not deductible. Section 1.162-2(e), Income Tax Regs.
Petitioners have failed to produce evidence that commuting and personal use of the car accounted for less than 25 percent of the expenses. Consequently, we sustain respondent's determination that only 75 percent of the operating expenses of the corporate car is deductible.
Decision will be entered under Rule 155.
Footnotes |
4,489,911 | 2020-01-17 22:02:05.843222+00 | Smith | null | *1054OPINION.
Smith :
The only questions presented by this proceeding are:
(1) Whether an amount of $32,700 representing the share of the decedent, William Blodget, in the so-called “ good will ” of the firm of Blodget & Co., bankers of Boston, should be included in the gross estate of William Blodget, the decedent; and
(2) Whether' there should also be included in the gross estate $225,000 alleged by the petitioners to represent gifts made by the decedent to William Power Blodget, decedent’s son, and to Fanny H. Blodget, decedent’s wife, claimed by the respondent to be a part of the capital of the decedent in the firm of Blodget & Co., at the date of his death.
The partnership articles of Blodget & Co. place the good will, in case the partnership should terminate for any cause, in three of the partners, William Blodget, Charles E. Ober, and B,. H. Carleton. The other partners had no share in the good will. The decedent in his will dated December 28, 1922, includes among the assets of his estate the good will of the business of the firm now known as Blodget & Co.
As we construe the articles of partnership in force at the date of the death of the decedent, it was the contemplation of the three partners in whom the good will of the firm vested that upon the death of one the good will should vest in the other two. This was (he construction placed upon the articles by the petitioners herein and the other members of the firm of Blodget & Co. The interest of Blodget alone in that good will had no monetary value. The decedent did not attempt to bequeath his interest in the good will of the partnership to the other partners. The estate of William Blodget never realized anything for the interest of the decedent in the good will of Blodget & Co. Upon the record, we find that William Blodget’s interest in the good will of the firm of Blodget & Co. had no cash value at the date of his death. The contention of the petitioners upon this point is therefore sustained.
*1055The determination of the respondent with respect to the $225,000 involved in alleged gifts made by William Blodget to his son and wife in 1919 appears to have been made without a knowledge of the facts in the case. The evidence of record shows that William Blodget made actual gifts of $125,000 and $100,000 in 1919 to his son and wife, respectively. From January 1, 1920, they received interest upon this money and returned such interest as a part of their taxable incomes. One of the members of Blodget & Co. testified that the $125,000 and $100,000 left with the firm at interest could have been withdrawn by the donees at any time they wished.
The reason for the creation of a trust in favor of Fanny H. Blodget with respect to the $100,000 on June 6, 1921, is not' apparent. It appears that on that day the deposit standing to the credit of Mrs. F. H. Blodget was transferred to William Bower Blodget, the son, as trustee for Fanny H. Blodget and that at or about that time William Power Blodget executed agreements whereby he thereafter held the money as trustee for Fanny H. Blodget, subject to certain other obligations of Blodget & Co. These agreements, however, in no way served to revest in William Blodget the amounts that he had given to his son and wife in 1919.
The inclusion of the $225,000 in the gross estate by the respondent was predicated upon the view that this money constituted a part of the capital of William Blodget up to the date of his death. The evidence conclusively shows that the amount in question was not a part of the capital of William Blodget from and after January 1, 1920. The contention of the petitioners upon this point is therefore sustained.
Judgment will be entered wnder Bule 50. |
4,489,907 | 2020-01-17 22:02:05.69963+00 | Trammell | null | MEMORANDUM OPINION.
Trammell :
This is a proceeding for the redetermination of a deficiency in income tax for the year 1925 in the amount of $1,050.43. In his pleading, the petitioner assigned as error (1) that the respondent failed correctly to determine his true taxable gain for the year in question, (2) that the respondent erred in disallowing deductions for “ traveling expense ” in the amount of $200 and “ auto expense ” in the amount of $865, and (3) that the respondent should have taken into consideration, in computing taxable gain, an “ actual loss ” sustained by the petitioner during the year 1924.
At the hearing, petitioner abandoned his contentions with respect to deductions for “ traveling expense ” and auto expense,” and no evidence was offered in reference to the 1924 loss. This leaves for consideration here only the first issue, which calls in question the correctness of the respondent’s action in adding to the petitioner’s taxable income profits from the sale of real estate in Florida, claimed *1045by the petitioner’s wife as her separate income and so reported in her individual return.
The petitioner and his wife removed to Florida in 1924, and resided in that State during the taxable year 1925. The petitioner acquired certain real estate in which his wife claimed no separate interest. His wife purchased with her own funds certain, other real estate, in which the petitioner claimed no interest. Still other parcels of real'estate were purchased with funds contributed by both, and in which each owned a one-half interest. The petitioner reported in his individual return all profits derived from the sale of the property claimed separately by him and one-half of the profits from the sale of the property acquired with the funds contributed by both. His wife made an individual return in which she reported income on the same basis. In computing the deficiency here involved, the respondent included in the petitioner’s income “ profit from the sale of real estate $11,856.23 ” 'as representing that part of the profits reported by the petitioner’s wife.
It is not clear from the record whether said amount of $11,856.23, added to the petitioner’s income by the respondent, comprises only one-half of the profit reported by the wife from the sale of property purchased in part with her funds, or whether it includes also the profit reported by her from the sale of real estate for the purchase of which she furnished the entire funds. No briefs were filed, and the only information we have respecting the respondent’s contention or position in this case is contained in the statement attached to the deficiency letter, as follows:
It is contended, in view of tile absence of any partnership laws between husband and wife appearing on tbe Florida statutes, that you did not have a prerogative to file separate returns, therefore, the entire amount of profit realized from the sale of real estate has been included in your return.
We think that the evidence, however, supports the finding that no part of the profit from the real estate involved in this proceeding, which was reported in the return of petitioner’s wife, belonged to the petitioner. It was either from the property owned by the wife or from property in which she had a half interest.
Under the laws of Florida, a married woman may invest her separate estate in a commercial enterprise or in real estate, and the resulting property is her separate estate. The income therefrom, when reported in her individual return, may not thereafter be taxed to the husband. Jerry Galatis, 8 B. T. A. 213, and authorities cited. It is, therefore, not necessary for us to decide the question as to whether the petitioner and his wife were partners under the laws of Florida.
The precise question presented in the instant case was considered and decided by us in Jerry Galatis, supra, and on authority of that *1046decision we hold here that the property purchased solely with the funds of the petitioner’s wife, as well as the one-half interest acquired in other property in part with her funds, together with the profit derived from the sale of such property, constituted her separate estate. The income, therefore, was properly reported in her individual return, and may not be taxed to her husband, the petitioner herein. The deficiency will be redetermined accordingly.
Judgment will he entered under Rule 50. |
4,639,202 | 2020-12-03 16:04:43.890746+00 | null | http://www.in.gov/judiciary/opinions/pdf/12032001lkw.pdf | MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Dec 03 2020, 8:51 am
court except for the purpose of establishing CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
APPELLANT PRO SE ATTORNEYS FOR APPELLEE
Nathan Hummel Curtis T. Hill, Jr.
Westville, Indiana Attorney General of Indiana
Sierra A. Murray
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Nathan Hummel, December 3, 2020
Appellant-Defendant, Court of Appeals Case No.
20A-CR-1316
v. Appeal from the Starke Circuit
Court
State of Indiana, The Honorable Kim Hall, Judge
Appellee-Plaintiff Trial Court Cause No.
75C01-1112-FA-15
Weissmann, Judge.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1316 | December 3, 2020 Page 1 of 5
[1] Nathan Hummel claims a deal is a deal. He asks this Court to enforce the trial
court’s alleged promise to modify his sentence if he completed a drug recovery
program. He also claims the State agreed to a modification. Finding the trial
court never promised a specific outcome and the State never agreed to it, we
affirm the trial court’s refusal to modify Hummel’s sentence.
Facts
[2] In 2012, Hummel and the State negotiated a plea agreement under which
Hummel pleaded guilty to Dealing in a Narcotic Drug, Robbery, and Aiding,
Inducing or Causing Robbery—all Class B felonies—and to Disarming an
Officer, a Class C felony. The trial court sentenced Hummel to 25 years in the
Indiana Department of Correction, as specified in the plea agreement.
[3] Seven years later, Hummel requested the trial court modify his sentence by
recommending his placement in IDOC’s Recovery While Incarcerated (RWI)
program. The State did not object, and the trial court granted Hummel’s
request. After Hummel completed the program, he filed a petition to modify
his sentence, which could not be changed without the State’s permission.
[4] In that petition, Hummel alleged the State, by agreeing to modify Hummel’s
sentence to include the RWI recommendation, had consented implicitly to a
further modification after Hummel’s successful completion of the program.
Appellant’s App. Vol. II p. 22. The State disagreed, contending its consent to
allow Hummel to attend RWI did not constitute agreement to reduce his
sentence once he completed the program. Id. at 24. The court could not modify
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1316 | December 3, 2020 Page 2 of 5
Hummel’s sentence without the State’s consent, and thus the court denied the
petition for modification. Id. at 25.
[5] Hummel filed a motion to correct error, claiming the court promised to modify
Hummel’s sentence after his successful completion of RWI. Id. at 26.
According to Hummel, the State agreed at the RWI modification hearing that it
would not object to a post-RWI modification. Id. at 26. The trial court denied
the motion to correct error, finding Hummel’s assertions to be inaccurate. Id. at
26. Instead, the trial court reiterated that it promised only to consider a
sentence modification, not to grant one. Id. at 27. Moreover, the State never
agreed to a modification, which was a prerequisite to the court granting one.
Finding no error in the court’s decision, we affirm.
Discussion and Decision
[6] Hummel’s chief complaint on appeal is that both the State and the trial court
reneged on their promises of a sentencing modification after his completion of
RWI. A trial court’s decision regarding a sentencing modification is reviewed
for an abuse of discretion. Gardiner v. State,
928 N.E.2d 194
, 196 (Ind. 2010).
The trial court commits an abuse of discretion when it misinterprets the law or
its decision is clearly against the logic and effect of the facts and circumstances.
Heaton v. State,
984 N.E.2d 614
, 616 (Ind. 2013).
[7] No abuse of discretion occurred here. As for any notion that the prosecutor
and trial court reneged on promises to Hummel, Hummel misinterprets the
Record. The transcript of the hearing on Hummel’s request for RWI placement
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1316 | December 3, 2020 Page 3 of 5
shows only that the State did not object to modifying Hummel’s sentence to
include a recommendation for RWI. Tr. Vol. II p. 4. The prosecutor made no
further promises. Nor did the trial court, which merely commented:
And then, so, I’m making sure the Prosecutor understands my
understanding of this modification.
If I grant this request then we will change the sentencing order and that
will be sent off to the DOC, specifically, Westville, and presumably,
although it’s not an order, I don’t have the authority to order them to
place Mr. Hummel in any certain program within the walls of the DOC,
but one would assume that they will, and that whenever, assuming that
he does successfully complete the program, what a judge is saying to a
defendant is that the court will consider a modification after the
successful completion of . . . Recovery While Incarcerated . . . [W]e’ll
make these changes, send it off to them(,) and they’ll probably put Mr.
Hummel into one of their programs and Mr. Hummel will probably
successfully complete that, at some point, and then the Court definitely
will consider a modification, at that time, and for what it’s worth, the
Court will probably modify his sentence, because we usually do, after
completion of the substance abuse treatment program, inside the
DOC . . .
And I’m again making the record clear that this was an original
prosecution that was resolved by a plea agreement which is right here in
black and white but the State has agreed today with the Defendant to
give the Court the authority to accept their agreement and have (RWI)
put into the sentencing order.
Tr. Vol. II pp. 5-6.
[8] Contrary to Hummel’s assertions, the trial court made no promises for a future
reduction in sentence. The trial court merely suggested the strong possibility of
a sentencing modification if Hummel were to complete RWI successfully. The
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1316 | December 3, 2020 Page 4 of 5
State never agreed to a post-RWI sentencing modification. It merely consented
to modifying Hummel’s sentence to include the recommendation for RWI.
Hummel received what he was promised: an opportunity to participate in RWI.
[9] The court was without authority to modify Hummel’s sentence without the
State’s consent because, among other things, Hummel was sentenced under the
terms of a plea agreement. The trial court did not abuse its discretion when it
denied Hummel’s request for a sentence modification that the court was
without authority to grant.
[10] As no promises for a sentencing reduction after Hummel’s completion of RWI
were made, none were broken. Hummel received the deal he bargained for—
just not the deal he desired.
[11] We affirm the judgment of the trial court.
Mathias, J., and Altice, J., concur.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1316 | December 3, 2020 Page 5 of 5 |
4,513,418 | 2020-03-06 13:01:31.656708+00 | null | https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2019cv1624-47-0 | In the United States Court of Federal Claims
No. 19-1624C
Filed: February 19, 2020
Redacted Version Issued for Publication: March 5, 2020 1
* * * * * * * * * * * * * * * * * * * *
*
MCI DIAGNOSTIC CENTER, LLC,
*
Protestor, *
*
v. *
*
UNITED STATES,
*
Pre-Award Bid Protest; Cancellation;
*
Defendant, Motion to Dismiss; Lack of Subject-
*
Matter Jurisdiction; Standing.
v. *
LABORATORY CORPORATION OF *
AMERICA, *
*
*
Defendant-Intervenor. *
*
* * * * * * * * * * * * * * * * * * * *
Jonathan D. Perrone, Whitcomb, Selinsky, PC, Denver, CO, for protestor.
Isaac B. Rosenberg, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, Washington, D.C., for defendant. With him was
Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Robert E.
Kirschman, Jr., Director, Commercial Litigation Branch, and Joseph H. Hunt, Assistant
Attorney General, Civil Division. Of counsel was Natica C. Neely, Staff Attorney, United
States Department of Veterans Affairs, Office of General Counsel, District Contracting
National Practice Group, Washington, D.C.
William M. Jack, Kelley Drye & Warren LLP, Washington, D.C., for intervenor.
With him was Elizabeth C. Johnson and Amba M. Datta, Kelley Drye & Warren LLP,
Washington, D.C.
1This Opinion was issued under seal on February 19, 2020. The parties were asked to
propose redactions prior to public release of the Opinion. This Opinion is issued with
some of the redactions that the parties proposed in response to the court’s request. Words
which are redacted are reflected with the notation: “[redacted].”
OPINION
HORN, J.
Protestor, MCI Diagnostic Center, LLC (MCI), challenges the cancellation of
Solicitation No. 36C25619Q1507 (the Solicitation) for laboratory reference testing, issued
by the United States Department of Veterans Affairs (VA) for the Michael E. DeBakey VA
Medical Center (MEDVAMC), located in Houston, Texas. Protestor asserts that the
Solicitation was canceled after the VA improperly evaluated its proposal, and that
protestor would have had a substantial chance of award had the VA not improperly done
so. Specifically, protestor disputes the evaluation of its proposal by MEDVAMC’s
Management and Program Analyst, Peter Basten, who was the individual identified in the
record who ultimately requested that the contracting officer cancel the Solicitation.
Protestor asserts in its motion for judgment on the administrative record that defendant’s
“evaluation was arbitrary and capricious, an abuse of discretion, lacking rational basis, or
otherwise contrary to the law.” Defendant and intervenor, Laboratory Corporation of
America (LabCorp), move to dismiss protestor’s bid protest for lack of subject-matter
jurisdiction, and also cross-move for judgment on the administrative record.
FINDINGS OF FACT
The Existing Blanket Purchase Agreement
The parties have stipulated that the Michael E. DeBakey VA Medical Center
(MEDVAMC) is located in Houston, Texas, within VISN 16 [Veteran Integrated Service
Network 16], one of the “18 geographically-based” VISNs. The parties further stipulated
that “[i]n August 2017, VISN 16 established a blanket purchase agreement (BPA) with
LabCorp—under LabCorp’s Federal Supply Schedule 66 (Scientific Equipment and
Services) contract administered by the General Services Administration—for the
provision of reference laboratory testing and analysis services to VHA [Veterans Health
Administration] facilities throughout VISN 16.” The Blanket Purchase Agreement, BPA
No. VA256-17-A-0016 (BPA), states:
Pursuant to the Federal Supply Schedule (FSS) and FSS Contract Clause
I-FSS-646, it is the intent of the Department of Veterans Affairs, South
Central VA Health Care Network, hereafter called VISN 16, to establish a
Blanket Purchase Agreement (BPA) for medical laboratory testing and
analysis services. The purpose of this BPA is to standardize the referral
laboratory services for all medical centers and outpatient clinics in VISN 16
and to decrease the costs associated with referral laboratory testing and
analysis. This BPA will increase the laboratory’s ability to support patient
care by providing access to tests that due to cost of reagents, equipment,
and low volume are not performed within the VA Medical Centers. . . . The
Contractor shall adhere to the following terms of the BPA exclusively with
the VISN 16 VA Medical Centers (VAMC’s) and Outpatient Clinics listed
below.
2
(capitalization in original). In addition to Houston, Texas, which is where MEDVAMC is
located, the BPA covers VAMC’s and outpatient clinics in Alabama, Arkansas, Florida,
Louisiana, and Mississippi.
Section I.2 of the BPA, titled: “ORDERS,” states:
The award of the BPA will not result in a binding contract nor will it obligate
funds. Government is obligated only to the extent of authorized orders
actually issued under the BPA by authorized individuals. Any order awarded
against the BPA will be binding and the language, terms and conditions
(including modifications) in the BPA will flow down to any individual order
awarded. In the event of inconsistency between the provisions of the BPA
and the contractors invoice, the provisions of this BPA will take precedence.
(capitalization and emphasis in original). Section I.3 of the BPA, titled: “PRICES AND
TERMS,” states:
VISN 16 shall provide a list of referral tests performed and estimated volume
of those tests (Attachment B) for VISN 16 facilities. The Government
estimates the volumes listed in the attached spreadsheet per facility, but
does not guarantee volumes as listed; they are ESTIMATES ONLY. Pricing
shall be a firm fixed price per test. The Attachment C contains combined
volumes for all VISN 16 facilities. VISN 16 reserves the rights to modify the
BPA based on estimated usage provided by the VAMC’s as they
increase/decrease their volume/usage or as new testing methods or tests
are added to the medical community and referral testing service provider’s
menu.
(capitalization and emphasis in original). Section I.4 of the BPA, titled: “TERM OF
AGREEMENT,” states that “[t]his is a single award, firm-fixed price BPA effective August
1, 2017 through July 31, 2018 with four, one-year options and shall be effective for the
term of the FSS Contract including additional FSS extensions.” (capitalization and
emphasis in original).
Attached to the BPA is a table of approximately 1,500 laboratory tests and
services, with corresponding codes and prices. Above the table, the BPA states:
“Contractor: Laboratory Corporation of America (LabCorp)” and “V16 BPA#: VA256-17-
A-0016.” In total, the table contains the following ten columns: (1) “Offeror Test Code;”
(2) “CPT Code(s);” (3) “Test Name;” (4) “Estimated Annual Volume;” (5) “On FSS
contract (indicate Y or N);” (6) “BPA Price/Test;” (7) “Annual BPA Estimated Cost;”
(8) “FSS Price/Test;” (9) “Annual FSS Estimated Cost;” and (10) “Cost Savings/Cost
Avoidance.” (emphasis in original). At the end of the table, the “Total Annual Estimated
Cost” is listed as $2,506,640.69. (emphasis in original). The table also provides that the
total estimated cost, if the BPA were to be extended until July 31, 2022, would be
$12,533,203.45.
3
As discussed above, the BPA states that “[t]he award of the BPA will not result in
a binding contract,” and that the “[g]overnment is obligated only to the extent of authorized
orders actually issued under the BPA.” The parties have stipulated that “[i]n October 2018,
pursuant to the VISN 16 BPA, the VA issued a task order to LabCorp to provide reference
laboratory testing and analysis services to MEDVAMC for the period [of] October 1, 2018,
to September 30, 2019 (FY 2019).” The Standard Form 1449 for the October 2018 Task
Order references the BPA contract number, VA256-17-A-0016. The October 2018 Task
Order states, under the “ITEM INFORMATION” heading, the following information:
(capitalization and emphasis in original). The October 2018 Task Order does not,
however, state which laboratory tests and services are associated with the Task Order,
or to which VA Medical Center within VISN 16 the Task Order is directed.
Pre-Solicitation Actions by MEDVAMC
The parties have stipulated that
[o]n April 25, 2019, an independent government cost estimate (IGCE) was
prepared by Peter Basten (a management and program analyst for
MEDVAMC’s Diagnostic & Therapeutic Care Line), which set out the
anticipated cost of procuring anatomic pathology laboratory testing services
for MEDVAMC over a five-year period beginning October 1, 2019, and
ending September 30, 2024.
The IGCE in the administrative record for the Solicitation at issue contains 611 line-items
of laboratory test and services, “some of which,” the parties stipulated, “overlap with the
approximately 1,500 reference laboratory testing and analysis services included in the
VISN 16 BPA with LabCorp.” 2 The IGCE consists of the following seven columns: (1)
“Test # &/or Code;” (2) “CPT Code;” (3) “Description/Part Number (Test Name);” (4)
“Est. Qty;” (5) “Unit;” (6) “Price;” and (7) “Extended Amount.” (emphasis in original). On
the last page of the IGCE, under the “Extended Amount” column, it states that the “Total
Cost of Base Period” equals $597,830.75, and the “Grand Total Cost of Base + 4
Option Periods” equals $2,989,153.75. (emphasis in original). At the bottom of the last
page of the IGCE, Peter Basten, a Management & Program Analyst for the Michael E.
DeBakey VA Medical Center, is identified as the point of contact. Also included at the end
2 Some of the line-items of laboratory tests and services in the IGCE appear to be
duplicates of each other.
4
of the IGCE are the following two comments: “Base year needs to be about $600K,” and
“[e]ach of the option years should be appoximately [sic] the same cost and usage (minimal
fluctuation).” Under the heading labeled: “Check block(s) below that describe the basis
for the IGCE,” the blocks for “Informal Vendor Quotes,” and “Prior Bills of Material” are
checked. (capitalization and emphasis in original).
On April 30, 2019, Mr. Basten completed a Market Research Worksheet, which
states:
Statement of Need: The Michael E. DeBakey VA Medical Center
(MEDVAMC) is pursuing a contract with a base year with four one-year
options and an emergency six-month extension at the end of the last option
year for anatomic pathology laboratory testing with Arup Laboratories.[3]
The contractor must be certified by the College of American Pathologists
(CAP), perform testing in accordance with Clinical Laboratory Improvement
Amendments (CLIA) and provide all the tests listed in the Statement of
Work.
(capitalization in original). The Market Research Worksheet also answers the question:
“Has the requirement been purchased by the Department of Veterans Affairs (VA)
previously?” in the negative. Under the Section 1.b.(iii) of the Market Research
Worksheet, the following instruction was provided to those filling out the Market Research
Worksheet:
If you are aware of existing contractual vehicles that can be utilized for the
requirement, list applicable contracts and their contract numbers. Note: VA
must set aside procurements for competition among veteran-owned small
businesses “if a Contracting Officer has a reasonable expectation that two
or more small businesses owned and controlled by veterans will submit
offers and that the award can be made at a fair and reasonable price that
offers the best value to the United States.” Please search the Vendor
Information Pages (VIP) database by applicable North American Industry
Classification System (NAICS) codes to determine if two or more veteran-
owned small businesses (SDVOSBs) or veteran-owned small
businesses (VOSBs) can provide the item/service. See the list of existing
contract vehicles below.
3 Associated Regional and University Pathologists Laboratories, Inc. (ARUP
Laboratories), is mentioned by the VA multiple times throughout the administrative record
in relation to the Solicitation at issue in the above-captioned bid protest. As discussed
below, however, ARUP Laboratories was not mentioned in the actual Solicitation
document, did not submit a proposal to the Solicitation, was not awarded any contract in
relation to this Solicitation, and does not appear to be related to any party involved in this
litigation. Moreover, the VA is inconsistent in when it capitalizes “ARUP,” or uses lower
case references to “Arup.”
5
(capitalization and emphasis in original). Under this instruction, the following information
was provided:
Contract Vehicle: Arup Laboratories, Inc.
Contract Number: FSS Contract #:V797P-7211A (vendor is in the
process of establishing a new FSS because
this one expires 8/14/2019)
(emphasis in original). Section 3.f.(i) of the Market Research Worksheet states: “[B]ased
off of research and input from Pathologists on staff at the MEDVAMC Arup Laboratories
offered the most comprehensive listing of tests and meet all applicable regulations [sic].”
The parties have stipulated that “[o]n May 1, 2019, Mr. Basten submitted a formal
requisition request (No. 580-20-1-426-0007) to VISN 16’s network contracting office
(NCO 16) to procure anatomic pathology laboratory testing services for MEDVAMC from
ARUP.” The requisition request in the administrative record, dated May 1, 2019, indicates
a total cost of $597,830.75, and lists the vendor as “ARUP LABORATORIES, INC.”
(capitalization in original).
The parties have stipulated that “[o]n August 9, 2019, the VA issued a [S]ources-
[S]ought [N]otice/[R]equest for [I]nformation on the Federal Business Opportunities
website, FBO.gov.” The Sources Sought Notice/Request for Information No.
36C25619Q1353 in the administrative record (hereinafter, the RFI) lists the point of
contact for MEDVAMC as contracting officer Kenny Holestin. The RFI states:
The Michael E. DeBakey VA Medical Center (MEDVAMC) is pursuing a
contract with a base year with four one-year options and an emergency six-
month extension at the end of the last option year for anatomic pathology
laboratory testing with Arup Laboratories. The Contractor must be certified
by the College of American Pathologists (CAP) and perform testing in
accordance with Clinical Laboratory Improvement Amendments (CLIA).
BACKGROUND: Pathology and Laboratory Medicine tests are critical to
patient care by providing objective data regarding disease states in patients
to guide diagnosis and treatment. Modern medicine is not possible without
timely and accurate testing from Pathology and Laboratory Medicine. As
such, the Laboratory functions 24 hours a day, 365 days per year to support
the clinical mission to service our Veteran patients.
Laboratory Tests are requested by the Veterans’ attending Physician who
has the authority to prescribe the method of treatment to best satisfy the
medical condition of his/her patient. The vast majority of tests are performed
in our own laboratory. A subset of tests are performed as send out tests,
mainly due to the fact that if a test is not commonly used it is more
6
economical to send out rather to [sic] establish and validate it continuously
in our own laboratory. In certain cases tests depend on proprietary
technology and can only be performed at a specific outside laboratory.
As the Chief of PLMS [Pathology and Laboratory Medicine Services] it is
my responsibility to evaluate providers of send out testing. Testing is
performed in Clinical Laboratory Improvement Amendments (CLIA)/The
College of American Pathologists (CAP) certified laboratories. For each test
the performance in terms of analytical sensitivity, linearity, reproducibility
and analytical range is assessed. Clinical factors are assessed and for
some test(s) rapid turnaround is critical in order to allow clinical staff to make
treatment decisions in a clinically relevant timeframe. In certain
circumstances this requires testing to be available 24 hours a day, 365 days
a year. In addition, the method of transmitting results is evaluated for
timeliness, adherence to patient privacy regulations and ease of use.
SCOPE: The MEDVAMC is requesting referral anatomic pathology
laboratory testing from Arup Laboratories for the tests listed in the workbook
titled “Anatomic Pathology Comprehensive Test List” included with the
contracting packet.
The contractor shall provide and ensure safe, secure, and careful handling
of the patient samples and the reporting of results in accordance with
established guidelines from the Department of Veterans Affairs Handbook
6500, the College of American Pathologists (CAP), the Joint Commission
on Accreditation of Health Care Organizations (JCAHO), guidelines
established by VA Laboratory Service or as required to follow the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) during
transportation.
PERIOD OF PERFORMANCE:
Base Period: Oct. 1, 2019 to Sept. 30, 2020 with a cost of $597,830.75
Option Year 1: Oct. 1, 2020 to Sept. 30, 2021 with a cost of $597,830.75
Option Year 2: Oct. 1, 2021 to Sept. 30, 2022 with a cost of $597,830.75
Option Year 3: Oct. 1, 2022 to Sept. 30, 2023 with a cost of $597,830.75
Option Year 4: Oct. 1, 2023 to Sept. 30, 2024 with a cost of $597,830.75
Grand Total Cos [sic] of $2,989,153.75
GOVERNMENT’S RESPONSIBILITY: The send out laboratory personnel
at the MEDVAMC will affix a label containing the patient’s full name and full
social security number to the specimen’s container in order to ensure
integrity of the information, place the specimen (that is being sent for
processing) in a sealed tamper evident container and ship via UPS.
See attached document that has list of needed lab tests.
7
(capitalization in original). The base period and option year costs listed in the above-
quoted text are the same as those which were established by the IGCE, discussed above.
Attached to the RFI is a table with 611 line-items of laboratory tests and services. The
table consists of the following four columns: (1) “Mnemonic;” (2) “Test # &/or Code;” (3)
“CPT Code(s);” and (4) “Test Name.” (emphasis in original).
Under the heading titled: “REQUESTED RESPONSES,” the RFI states:
The intent of this Request for Information is to establish sources to define
the procurement strategy (e.g [sic] set-aside, sole source, unrestricted) for
a solicitation that VA intends to post soon. Interested contractors are
requested to respond in accordance with the following:
1. Please respond to this RFI if you can provide the exact brand name
products listed in the table in the background section above. In the response
please cite your business size status.
a. If you have an existing GSA or VA, Federal Supply Schedule
contract, please include the contract details in your response.
b. DISTRIBUTORS: You must provide proof that you are an
authorized distributor. VA does not accept grey market items.
2. Please respond to this RFI if you can provide supplies that may be
determined EQUIVALENT to the products listed in the table in the
background section above. Please provide details on the proposed
EQUIVALENT products such as Manufacturer Name, Part Number, and
Description.
a. If you have an existing GSA or VA, Federal Supply Schedule
contract, please include the contract details in your response.
b. DISTRIBUTORS: You must provide proof that you are an
authorized distributor. VA does not accept grey market items.
3. Please note that VA is particularly interested in determining the availability
of Small Business Manufacturers. If your company is a small business
manufacturer of potentially equivalent items, please respond to this RFI.
4. Vendors are requested to submit estimated market research pricing with
their responses. The estimated pricing will be considered when determining
the procurement strategy for the future solicitation. (e.g. if CO [contracting
officer] determines that capable small businesses cannot provide fair and
reasonable pricing, then the solicitation will not be set-aside).
8
5. Please note that if no responses to this notice are received, from either
authorized distributors of the cited brand name nor from manufacturers
marketing a potentially equivalent brand, then this action will be sole
sourced to the manufacturer cited in the Background section above.
(capitalization and emphasis in original).
On August 12, 2019, the Senior Contract Manager for protestor MCI, Kathleen
Henderson, sent an email to contracting officer Kenny Holestin, regarding the RFI’s
mention of ARUP Laboratories:
The purpose of this email is to inquire about the Sources Sought Notice
36C25619Q1353 posted on FBO on 9 August 2019. In reading the RFI,
there are numerous times were [sic] you refer to “ARUP,” a large business
that appears to be the incumbent. Specifically, the RFI states, “SCOPE: The
MEDVAMC is requesting referral anatomic pathology laboratory testing
from Arup Laboratories for the tests listed in the workbook titled ‘Anatomic
Pathology Comprehensive Test List’ included with the contracting packet.”
Could you please clarify if this is a sources sought or an intent to sole
source?
(capitalization in original). That same day, Mr. Holestin responded:
It is serving both. It is a sources sought to see if anyone else can provide
the work the VAMC needs. If not we intent [sic] to sole source to the
company who has informed us they can do the work. If your company is
capable of fulfilling the VAMC’s need within the statement of Work then
please respond that you can. At that point we will determine who has
responded and move forward with a competitive solicitation.
(capitalization in original).
On August 14, 2019, in an email sent by Kathleen Henderson, MCI submitted a
response to the RFI. The body of Ms. Henderson’s email states:
Mr. Holestin,
In response to the Sources Sought Notice, Solicitation 36C25619Q1353,
Laboratory Testing, MCI, an interested SDVOSB [Service-Disabled
Veteran-Owned Small Business], respectfully submits MCI RFI Response
(to include estimated market prices), Capability Statement.
(capitalization in original). The MCI email from Ms. Henderson further states:
9
MCI Capability Statement addresses MCI’s capability to provide Anatomic
and Pathology Laboratory Testing; included in this email is
• MCI RFI Response (to include estimated market prices)
• MCI Capability Statement
• SDVOSB Certification (registered with the Department of
Veterans Affairs Center for Veterans Enterprise VetBiz
Registry located at https://www.vip.vetbiz.va.gov/)
• CAP Accreditation
• CLIA Accreditation
(capitalization in original). The Capability Statement provided in MCI’s response to the
RFI states:
MCI Diagnostic Center established in 1998, is a verified Service Disabled
Veteran Owned Small Business/Veteran Owned Small Business
(SDVOSB/VOSB) and accredited CAP and CLIA National Reference
Laboratory capable of performing Laboratory Testing in support of the
Michael E. DeBakey VA Medical Center (MEDVAMC) as evidenced by the
following:
Accredited Facility(ies): MCI has the necessary CAP and CLIA accredited
facility(ies) and synergistic partnerships (local service agreements,
subcontracts, etc.) with accredited laboratories to comply with the
performance requirements. Visit www.mcidiagnostics.com for virtual tour of
MCI Laboratory.
Vendor Agreements/Partnerships: MCI has ample vendor resources to
meet the anatomic and pathology Laboratory Testing requirements with the
ability to obtain additional resources (e.g., supplies) as necessary through
strategic partnerships and vendor agreements.
Personnel Expertise: MCI has the necessary board-certified pathologists,
technical skills and personnel expertise to meet Laboratory Testing
requirements in support of MEDVAMC and VA Network Contracting Office
(NCO) 16.
Technical Equipment and Instrumentation: MCI is equipped with a
Laboratory Information System (LIS) capable of’ [sic] transmitting secure
test results/reports and providing electronic ordering via secure online web
portal. MCI is also equipped with all equipment and instrumentation required
for complete laboratory testing/specimen analysis configured to meet
requirements.
Courier Services: MCI has established agreements with professional
specimen courier services with proven records of reliability and
accountability for deliveries to ensure integrity of the specimen.
10
(capitalization and emphasis in original). Under the “SOCIO-ECONOMIC STATUS”
heading in MCI’s Capability Statement, MCI’s response to the RFI states: “Verified
SDVOSB/VOSB,” “[c]ertified SBA HUBZone,” and “Minority-Owned, Disadvantage [sic]
Business Enterprise.” (capitalization and emphasis in original). Under the
“ACCREDITATIONS & CERTIFICATIONS” heading of the Capability Statement, MCI’s
response states: “College of American Pathologist (CAP),” “Clinical Laboratory
Improvement Amendment (CLIA),” “Clinical and Laboratory Standards Institute (CLSI),”
and “COLA Accreditation.” (capitalization and emphasis in original). Under the
“DIFFERENTIATORS” heading, MCI’s response states: “Established, strategic
partnerships and local service agreements with vendors and suppliers of T-Spot kits,”
“ISO 15189-compliant for Clinical Medical Laboratory Services,” “[w]eb-based client
portal for online test and supply ordering,” “[a]dvanced, state of the art lab technology
such as handsfree processing and barcode driven protocols,” and “[v]olume-based price
discounts.” (capitalization and emphasis in original). Under the “CURRENT AND PAST
PERFORMANCE” heading of the Capability Statement, the response states: “Army
National Guard,” “Air Force National Guard,” “USDA [United States Department of
Agriculture] Job Corps,” “Mississippi State Department of Human Services,” and “Army
Corps of Engineers.” (capitalization and emphasis in original).
MCI’s response to the RFI also includes a page which responds to some of the
statements in the RFI under the “REQUESTED RESPONSES” heading, quoted above:
In response to the Sources Sought 36C25619Q1353, Testing, MCI
Diagnostic Center, LLC (“MCI”) submits the requested information as
follows:
1. Please respond to this RFI if you can provide the exact brand name
products listed in the table in the background section above. In the response
please cite your business size status.
a. If you have an existing GSA or VA, Federal Supply
Schedule contract, please include the contract details in your
response.
#1 MCI Response: MCI can provide the anatomic and pathology tests
identified in the RFI. MCI is a certified Service-Disabled Veteran-Owned
Small Business (SDVOSB).
2. Please respond to this RFI if you can provide supplies that may be
determined EQUIVALENT to the products listed in the table in the
background section above. Please provide details on the proposed
EQUIVALENT products such as Manufacturer Name, Part Number, and
Description.
11
a. If you have an existing GSA or VA, Federal Supply
Schedule contract, please include the contract details in your
response.
#2 MCI Response: See #1 Response.
3. Please note that VA is particularly interested in determining the
availability of Small Business Manufacturers. If your company is a small
business manufacturer of potentially equivalent items, please respond to
this RFI.
#3 MCI Response: MCI is a certified SDVOSB, HUBZone small business
capable of providing the requested anatomic and pathology laboratory tests
identified in the RFI.t [sic]
4. Vendors are requested to submit estimated market research pricing with
their responses. The estimated pricing will be considered when determining
the procurement strategy for the future solicitation. (e.g. if CO determines
that capable small businesses cannot provide fair and reasonable pricing,
then the solicitation will not be set-aside).
#4 MCI Response: For market research, MCI submits our estimated test
prices under separate attachment. The RFI did not provide quantities so
MCI is unable to determine the overall estimated price.
5. Please note that if no responses to this notice are received, from either
authorized distributors of the cited brand name nor from manufacturers
marketing a potentially equivalent brand, then this action will be sole
sourced to the manufacturer cited in the Background section above.
#5 MCI Response: MCI submits our response to this notice as a fully
capable, certified SDVOSB with fair market pricing for the Laboratory
Testing, and contends that the manufacturer (ARUP) cited in the
Background section is not the only responsible source capable of
performing this requirement.
(capitalization and emphasis in original). MCI’s response to the RFI also includes a list of
laboratory tests and services which the parties have stipulated is “the requested schedule
of its [MCI’s] estimated prices for each of the anatomic pathology laboratory testing
services to be provided under an awarded contact [sic].”
The administrative record also includes an RFI response from another Service-
Disabled Veteran-Owned Small Business, [redacted]. The parties have stipulated that
“[redacted]’s response identified the company as an SDVOSB . . . and included the
requested schedule of its estimated prices for each of the anatomic pathology laboratory
testing services to be provided under an awarded contact [sic].” In addition, the parties
12
have stipulated that a “third SDVOSB, [redacted], also timely responded” to the RFI,
although [redacted] did not ultimately respond to the Solicitation.
The parties have stipulated that on “August 21, 2019, contracting officer Kenny
Holestin prepared a market research report finding that ‘the rule of two [in 38 U.S.C.
§ 8127(d)] ha[d] been met,’ based on a search of the VA’s Vendor Information Pages
(VIP) database and the three responses he received from SDVOSBs to the sources-
sought notice/request for information.” (alterations in original). Under the “Requirement
Title” heading, which is the heading for the entire Market Research Report, the Market
Research Report states: “ARUP Reference Laboratory Testing 580-20-1-426-0007.”
(emphasis in original). Section 5 of the Market Research Report states:
Market Research Findings: On August 9, 2019 an [sic] sources sought was
posted to FBO.gov with a closing date of August 23, 2019. The intent of the
sources sought was to determine who could provide brand name lab testing
to fit the VAMC’s need. Upon closing of the sources sought, three SDVOB
[sic] responded stated they are able to provide the needed testing. (MCI,
[redacted], & [redacted]). Upon review of the VIP search all three vendors
are confirmed SDOVSB’s [sic]. With the above stated the rule of two has
been met, a RFQ will be set a side [sic] for SDVOSB.
In Section 7, the Market Research Report indicates a “Market Price” of $597,830.75.
On September 4, 2019, contracting officer Kenny Holestin and senior contract
manager for MCI, Kathleen Henderson, exchanged email correspondence. Mr. Holestin
asked: “If you are awarded a contract for Oct [sic] 1, 2019. [sic] How long before you can
start taking our lab tests in for processing?” Ms. Henderson responded: “If awarded prior
to October 1, and we could complete our kick-off call, onboarding and supply request, We
[sic] would be able to perform laboratory testing October 1, 2019.” Mr. Holestin replied:
“That’s problem [sic] we can’t award prior to Oct [sic] 1, because of funding in the new
year.” Ms. Henderson replied: “[T]hat’s not a problem! We can start October 1, 2019.
[T]he laboratory is ready to receive samples any day, we just need to overnight shipping
label and then start the training and kick-off call.” The administrative record contains no
further correspondence between Mr. Holestin and Ms. Henderson.
Solicitation No. 36C25619Q1507
The parties have stipulated that “[o]n September 12, 2019, the VA posted
Solicitation No. 36C25619Q1507 (Solicitation or RFQ) to FBO.gov, inviting quotations
from SDVOSBs to provide anatomic pathology laboratory testing services to MEDVAMC
beginning on October 1, 2019.” Under the heading titled: “Statement of Work,” the
Solicitation provides that the following criteria “shall” be met:
a. Contractor shall provide a written response addressing each of the
minimum requirements of the solicitation. Appropriate supporting
13
documentation and/or shall [sic] be submitted to demonstrate ability to meet
or exceed the minimum requirements of this solicitation.
b. Contractor shall provide a copy of their current CLIA Certificate of
Accreditation containing the appropriate specialties/subspecialties to
indicate federal certification of compliance with CLIA requirements.
c. Contractor shall provide a copy of their current CAP Accreditation
Certificate.
d. Contractor shall provide a copy of their current CAP Test Activity Menu
reflective of all tests they are currently accredited to perform demonstrating
laboratory’s ability to perform the tests.
e. Contractor shall provide written documentation proving that they have
successfully completed method performance validation &/or verification
studies as appropriate for any 10 tests (listed within the attached item list)
signed by the Laboratory Director.
f. Contractor shall provide a copy of their standard test catalog (electronic
format preferred) of all reference laboratory testing services available.
At a minimum the test catalog shall include:
• Ordering Code (contractor’s identification code)
• LOINC Code (Logical Observation Identifier Names and Codes)
• CPT Code
• Test Name/Synonyms
• Test Methodology
• Specimen Types
• Specimen collection and handling requirements
• Test result interpretation or interpretive remarks
• Maximum Turnaround Time (TAT), excluding time required for repeat
assay. For those tests offered on a STAT basis, TAT should be listed
separately.
• Assay schedule- must state “MWF” for tests set up Monday, Wednesday
and Friday; “MTWTF” for Monday through Friday; “TT” for Tuesday and
14
Thursday; “Daily” for every day.
• Assay Method
• Reference Ranges
g. Sample patient report format for the same 10 tests that were submitted
for line item “e” demonstrating all required report elements are listed.
• Each test report shall include as a minimum: Patients name and
identification number (social security number)[,] Physician’s name (if
supplied)[,] Test Accession Number assigned by facility[,] Facility name[,]
Patients location clinic/ward (if supplied)[,] Date/Time specimen received in
reference lab[,] Test ordered[,] Date/Time of specimen collection (if
available)[,] Date test completed[,] Test result[,] Flagged abnormal[,]
Reference range[,] Testing laboratory specimen number[,] Name, address
and CLIA number of Contractor testing facility[,] Type of specimen[,] Any
additional comments related to test provided by submitting labs[,] Any other
information the laboratory has that may indicate a questionable validity of
test results[,] Unsatisfactory specimen shall be reported with regard to its
unsuitability for testing
h. Contractor shall provide a copy of their laboratory’s standard operating
procedure (SOP) for performance of proficiency testing surveys and the
performance of alternative performance assessments.
i. Contractor shall provide a copy of their results of external or alternative
performance assessments for the same 10 tests that were submitted for line
item “e & g”.
j. Contractors shall provide Past Performance information for three
contracts (two must be from VA Medical Centers outside VISN 16)
performed within the last five years with similar scope and complexity as
this effort. The attached Past Performance questionnaire shall be used.
Please have each reference complete the form and return it directly to insert
CO name.
k. Contractor shall provide written attestation that they have successfully
completed the method performance validation &/or verification studies for
all of the tests listed within the item list.
• See attached item list to input your pricing.
(capitalization and emphasis in original).
15
Attached to the Solicitation is a table with 611 line-items of laboratory tests and
services (the Solicitation Table). The parties have stipulated that the Solicitation Table
was “adapted from the April 2019 IGCE.” Unlike the April 2019 IGCE, however, this table
in the Solicitation does not include columns for “Price,” or “Extended Amount,” although
it does contain the same two comments that were included at the bottom of the IGCE,
which state: “Base year needs to be about $600K,” and “Each of the option years should
be appoximately [sic] the same cost and usage (minimal fluctuation).”
Section E.1 of the Solicitation, which incorporates FAR § 52.212-1 (2018), states:
“[a]s a minimum, offers must show . . . [a] technical description of the items being offered
in sufficient detail to evaluate compliance with the requirements in the solicitation. This
may include product literature, or other documents, if necessary.”
Id. The FAR
at
§ 52.212-1(b)(11) states that “[o]ffers that fail to furnish required representations or
information, or reject the terms and conditions of the solicitation may be excluded from
consideration.”
Id. The FAR
at § 52.212-1(g) states:
(g) Contract award (not applicable to Invitation for Bids). The Government
intends to evaluate offers and award a contract without discussions with
offerors. Therefore, the offeror’s initial offer should contain the offeror’s best
terms from a price and technical standpoint. However, the Government
reserves the right to conduct discussions if later determined by the
Contracting Officer to be necessary. The Government may reject any or all
offers if such action is in the public interest; accept other than the lowest
offer; and waive informalities and minor irregularities in offers received.
Id. (emphasis in
original).
Section E.2 of the Solicitation, which incorporates FAR § 52.212-2 (2018), states:
(a) The Government will award a contract resulting from this solicitation to
the responsible offeror whose offer conforming to the solicitation will be
most advantageous to the Government, price and other factors considered.
The following factors shall be used to evaluate offers:
Price, Technical and past performance, when combined equal 100%[.]
The parties further stipulated that “[t]he Solicitation required offerors to submit their
quotations to Mr. Holestin by September 20, 2019,” and that “[t]he Solicitation identified
Reuben A. Zepeda as the contracting officer” for the Solicitation.
MCI’s Proposal
The parties have stipulated that “[o]n September 20, 2019, the VA received two
responses to the Solicitation: one from [redacted] and another from MCI,” and that “[b]oth
[redacted] and MCI quoted total pricing below the total pricing projected by the IGCE.” As
indicated above, the third company which had responded to the RFI, [redacted], did not
16
submit a response to the Solicitation. Under the “INTRODUCTION” heading, MCI’s
proposal states:
MCI Diagnostic Center, LLC (“MCI”) submits our response to the Request
for Quote, Laboratory Testing. [sic] in support of Department of Veterans
Affairs. Founded in 1998, MCI has a proven track record of providing
excellent strategic management, and laboratory services to a wide range of
federal, state, and commercial businesses. As a certified Service-Disabled
Veteran-Owned Small Business (SDVOSB) and certified Historically
Underutilized Business Zone (HUBZone) we create exceptional value for
our clients not only through implementation of industry-wide best healthcare
laboratory practices but also for meeting DoD small business goals. MCI
has been awarded many accreditations recognizing our standard of
excellence and commitment to provide the best services to the veterans we
serve.
(capitalization and emphasis in original). Under the heading titled: “FACTOR 1 –
TECHNICAL,” MCI’s proposal states:
It is MCI’s intent to bring quality testing for Laboratory Testing and technical
expertise to support the contract. MCI is committed to the provision of high-
quality patient care delivered by experienced, qualified healthcare
providers. MCI will provide the requisite technical expertise for performing
laboratory testing., [sic] as requested.
(capitalization and emphasis in original). Under the heading titled: “SCOPE OF
SERVICE,” MCI’s proposal states:
MCI will provide all labor, transportation/courier of specimens,
management, supplies, materials, customized forms, equipment,
administration, consultative services, and reporting of specimen test results
necessary to meet the performance requirements.
(capitalization and emphasis in original). Under the heading titled: “CONTRACT
STANDARDS FOR LABORATORY TESTING,” MCI’s proposal states that “MCI will
provide Laboratory Testing our [sic] qualified laboratory partners and will continue to
actively participate in various study of laboratory testing, with a goal of enhancing clinical
patient care.” (capitalization and emphasis in original). MCI’s proposal also states that
“MCI will provide all equipment, materials, and supplies necessary to perform laboratory
testing.” Under the heading titled: “LICENSING AND ACCREDITATION,” MCI’s proposal
states:
MCI holds accreditation certificates and licenses and manufactures
agreement [sic] required for this contract and comply with all applicable
industry standards, Federal, State and local laws necessary for
performance of this contract. MCI Laboratory is certified as meeting the
17
Clinical Laboratory Improvement Act (CLIA), we are inspected and
accredited by the Laboratory Accreditation Program (LAP) from the College
of American Pathologists (CAP) and the Commission of Office Laboratory
Accreditation (COLA) with deemed status from the Center for Medicare and
Medicaid Services (CMS), and other state regulatory agencies as mandated
by federal and state statutes. In addition, to visually survey our laboratory,
please go to www.mcidiagnostics.com for “A Virtual Tour of Our Lab.”
MCI included the following certificates as attachments of our proposal:
Attachment #1 – College of American Pathologists (CAP)
Attachment #2 – Clinical Laboratory Improvement Amendments (CLIA)
Attachment #3 – Commission on Office Laboratory Accreditation (COLA)
(capitalization and emphasis in original). MCI’s CLIA Certificate of Accreditation indicates
the following lab certifications and associated effective dates:
In total, MCI’s proposal includes three tables of laboratory tests and services. One
table (the MCI Cost Proposal Table) contains 611 line-items of laboratory tests and
services which appear to be the same the laboratory tests and services provided in the
Solicitation Table. 4 Like the Solicitation Table, the MCI Cost Proposal Table appears to
be adapted from the IGCE, in that it states “INDEPENDENT GOVERNMENT COST
ESTIMATE” immediately above the table, contains the date, “4/25/2019” immediately
below the table, and includes the same two comments in that were in the IGCE: “Base
year needs to be about $600K,” and “[e]ach of the option years should be appoximately
[sic] the same cost and usage (minimal fluctuation).” The MCI Cost Proposal Table,
however, also includes two additional columns in addition to the five which are in the
Solicitation Table. The two columns are titled, respectively: “MCI $” and “Total MCI $.”
(emphasis in original). The values in the “Total MCI $” column are found by multiplying
4 In their submissions to this court, there is no indication from the parties that there is a
difference between the laboratory tests and services listed in the Solicitation Table and
the MCI Cost Proposal Table, although Mr. Basten, who, as discussed below, conducted
the evaluation of MCI’s proposal, identified that the order of the laboratory tests and
services in in the MCI Cost Proposal Table differed from the Solicitation Table.
18
the amount listed in the associated “MCI $” column by the amount listed in the associated
“Est. Qty” column. (emphasis in original). The bottom of the MCI Cost Proposal Table
lists a “Total Cost of Base Period” equal to $[redacted], and a “Grand Total Cost of
Base + 4 Option Periods” equal to $[redacted]. (emphasis in original).
MCI’s proposal contains a second table, also consisting of 611 line-items of
laboratory tests and services (the PS-TNT Table). In the PS-TNT Table, MCI proposes
its “Production Schedule,” and “Turnaround Times” for each laboratory test and service
listed. In the “Production Schedule” column, it lists, for example, “M-W-Th-F,” indicating
that that MCI proposes to perform the associated test on any given Monday, Wednesday,
Thursday or Friday. In the “Turnaround Times” column, it lists, for example, “5 - 7 Days,”
to indicate that MCI proposes to provide the results of a given test in such a timeframe.
Under the heading titled: “CAP TEST ACTIVICITY [sic] MENU,” MCI’s proposal
provides a third table which consists of 211 CAP-certified test activities (the CAP Test
Activity Menu). (capitalization and emphasis in original). Immediately above the CAP Test
Activity Menu, the following information is provided:
MCI Diagnostic Center, LLC (CAP# 8871920)
Core Laboratory (Section ID: 1858271) -
Activities
The CAP Test Activity Menu includes each listed test activity’s respective discipline and
subdiscipline. The following nine disciplines provided in the Test Activity Menu are:
“Anatomic Pathology,” “Chemistry,” “Cytopathology,” “Hematology,” “Histocompatibility
Testing,” “Immunology,” “Microbiology,” “Transfusion Medicine/Blood Bank,” and
Urinalysis.” The following twenty subdisciplines provided in the Test Activity Menu are:
“Anatomic Pathology Processing,” “Autopsy Pathology,” “Blood Gases,” “Chemistry,”
“Special Chemistry,” “Toxicology,” “Cytology Processing,” “Cytology Screening,”
“Coagulation,” “Hematology,” “HLA Serology,” “Immunology,” “Bacteriology,” “Molecular
Microbiology,” “Mycobacteriology,” “Mycology,” “Parasitology,” “Virology,”
“Immunohematology,” and “Urinalysis.”
Under the heading titled: “LABORATORY REPORTS,” MCI’s proposal states:
Each test report will include, at minimum, the following information:
• Patient’s name and/or identification number
• Physician’s name, if provided
• Medical record number or laboratory accession number
• Submitting facility name
• Patient’s location (clinic/ward)
• Test ordered;
• Date/time specimen was collected
• Date/time test completed;
19
• Date of birth;
• Social security number or a second identifier;
• Gender
• Test result;
• Reference intervals/ranges;
• Toxic and therapeutic ranges, as applicable;
• Flagged abnormal test results;
• Reference laboratory specimen number;
• Testing Laboratory name, address & CLIA number
• Type of specimen
• Any other information the laboratory has that may indicate
a questionable validity of test results;
• Unsatisfactory specimens will be reported with
documentation supporting its unsuitability for testing;
• Critical results addressed; and,
• Reasons for test request rejection, if rejected laboratory
will notify facility within 24 hours of receipt of specimen.
(capitalization and emphasis in original).
MCI’s proposal also includes ten sample patient reports. For instance, the sample
patient report for the test, Thyroglobulin, provides the following information:
20
In the attachment titled: “VALIDATION & VERIFICATION REPORT,” MCI’s
proposal includes “Antibody Validation Log[s]” for the same ten tests for which it provided
sample test reports. (capitalization and emphasis in original). For example, the Antibody
Validation Log for the above test, Thyroglobulin, provides as follows:
21
In the attachment titled: “PROFICIENCY TESTING SOP [Standard Operating
Procedure],” MCI’s proposal provides the following:
PURPOSE:_
The Laboratory maintains enrollment and participation in Proficiency
Testing (PT) programs for all regulated analytes.
POLICY:
The Proficiency Testing program can be provided by the College of
American Pathologists (CAP) or American Proficiency Institute (API) and
should be of similar complexity to the testing performed in the laboratory.
All results and paperwork generated from proficiency testing will be
reviewed by the laboratory director or designee and returned in a timely
manner. All graded results will be evaluated with corrective actions
implemented for unsatisfactory results. Documentation of these testings’
[sic] and reviews will be maintained for at least two years.
PROCEDURES:
Enrollment will be established and maintained periodically for all regulated
analytes that are tested in the Laboratory and any additions that may occur.
Each of the regulated analytes will have the PT performed internally and
appropriately by rotating testing personnel and those personnel will sign the
provided attestation pages signifying that they have performed the testing
in parallel manner to live patent sample testing with results being returned
promptly to the PT institute for grading. These results will be submitted to
the grading institute without outside communication of the testing or the
results and will not be referred to another laboratory.
Graded results will be reviewed by the involved testing personnel, the
Laboratory Supervisor, the Technical Supervisor and the Laboratory
Director. All unsatisfactory grades received by the Laboratory will be
identified and investigated by the appropriate Laboratory personnel.
Remediation will involve identifying the issue to have caused the
unsatisfactory results, implementing appropriate corrective action in a
timely manner, and analyzing the effect, if any, that would impact patients
sample testing. If lack of training causes the PT failure, additional training
will be assigned for those testing personnel by experienced testing
personnel. If equipment failure causes the PT failure, internal maintenance
will take place or external service will be scheduled. If the procedures stated
by the manufactures [sic] and maintained in the instrument testing policies
were not followed correctly, testing personnel will be re-trained until
competency is satisfactory. If calibrations or quality control results being
outside of the acceptable range causes the PT failure, the quality control
policies will be reviewed and improved. If there is an impact on patient
testing determined, corrective actions will be implemented. Consultation will
be sought for remedies of the causes of the PT failures. All corrective
actions taken will be documented and reviewed by the Laboratory Director.
If CAP requires a cease testing of any analytes due to PT failures, the
testing will not be performed in the Laboratory for a minimum of six months
22
and the laboratory will demonstrate at least two consecutive satisfactory PT
testing events and receive approval from the CAP to resume testing. MCI
will not receive any PT from any other laboratory and will notify CMS of any
such occurrence.
When PT results are returned un-graded, the Laboratory will perform a self-
evaluation with the provided target results and allowable range from the PT
institute for self-determination of accuracy. The PT results could be returned
un-graded if there weren’t enough participation of peer groups, there was
no consensus among the participating peer groups, or if the Laboratory
failed to provide the PT results from lack of inventory, oversight, or
submitting after the due date.
For laboratory testing of regulated analytes that are not offered PT
programs, an external split-specimen study will occur. At least five
specimens will be tested and referenced out for comparison results
periodically.
(capitalization and emphasis in original).
MCI’s proposal also includes an Attestation Form, which states:
Attestation Statement
The validation testing activities are based on the CLIA Regulations that
became effective on April 24, 2003 (42 CFR Part 493). The official CLIA
program provisions contained in relevant law, regulations and rulings have
been reviewed for a comprehensive description of the requirements
pertaining to performance specification verification.
• Data collected by Laboratory Personnel has been organized into output
tables based on the minimum guidelines specified by CLIA.
• Laboratory Personnel have obtained previously tested patient specimens,
that are within the indications as listed on the method manufacturer’s
package insert.
• Results are expressed in terms of imprecision.
• An equal number of known positive patient specimens and known negative
patient specimens from the laboratory’s current method were tested.
• We identified TP (true positive), FP (false positive), TN (true negative) and
FN (false negative) for the new method compared to the current method
allowing for calculation of overall percent agreement, positive percent
agreement, negative percent agreement, negative predicative value and
positive predicative value.
• Overall percent agreement, positive percent agreement and negative
percent agreement and predictive values have been calculated and are
concordant.
• External results Performance assessment will be performed and our
subcontractors have external data that could be provided upon request.
23
MCI provides attestation that we fully meet the requirements as being
accredited by the College of American Pathology (CAP) and Certified
by (CLIA) see attachments to run all the listed test [sic], We [sic] have
successfully completed the method performance validation and/or
verification on a [sic] many of the test [sic] listed. Our Partner
laboratories that we work with have been validated on all of the testing
that we currently are not.
(capitalization and emphasis in original). MCI’s Attestation Form is signed by its
Laboratory Director, Sherrita Wilson, M.D., and three “Testing Personnel.” (capitalization
in original).
Finally, MCI provides information on past performance. MCI’s proposal states:
MCI submits recent and relevant contracts for the same or similar items and
other references (including contract numbers, point of contact with
telephone numbers and other relevant information in accordance with FAR
52.212-1(b)(10):
Contract Number #1: W912JB-18-P-0079, Michigan Army National
Guard
a. Description/Scope of Services: Medical laboratory testing
and analysis services in support of Army National Guard,
State of Michigan. Scope includes providing personnel,
equipment, supplies, and administration necessary to perform
medical laboratory testing services.
b. Period of Performance: 09/26/2018 – 09/25/2019
c. Contract Price: $59,482.00
...
g. How pervious effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform reference laboratory testing
services for the Michigan Army National Guard. This includes
courier services, providing supplies and equipment, and
performing pre-analytic, analytic, and post-analytic laboratory
testing services.
Contract Number #2: 1282A7-18-A-0009, USDA Forest Services, Job
Corps Center
a. Description/Scope of Services: Blanket Purchase
24
Agreement (BPA) for medical laboratory testing and analysis
services in support of USDA Forest Service, Job Corps Center
(25 locations). Scope includes providing personnel,
equipment, supplies, and administration necessary to perform
medical laboratory testing services.
b. Period of Performance: 09/24/2018 – 09/22/2023
c. Contract Price: $250,000.00 (maximum of BPA)
...
f. How previous effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform reference laboratory testing
services for the USDA Forest Services Job Corps Centers.
This include courier services, providing supplies and
equipment, and performing pre-analytic, analytic, and post-
analytic laboratory testing services.
Contract Number #3: W912EE-18-P-0077, US Army Corps of Engineer,
Vicksburg, MS, District Headquarters
a. Description/Scope of Services: Medical laboratory testing
and analysis services in support of US Army Corps of
Engineer, District Headquarters. Scope includes providing
personnel, equipment, supplies, and administration
necessary to perform medical laboratory testing services.
b. Period of Performance: 10/01/2018 – 09/30/2023
c. Contract Price: $50,000
...
f. How previous effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform select lab testing services for
the MVK Vicksburg, MS location. This includes courier
services, providing supplies and equipment, and performing
pre-analytic, analytic, and post-analytic laboratory testing
services.
(emphasis in original).
25
Cancellation of the Solicitation
On September 25, 2019, Peter Basten, the Program Analyst for the Michael E.
DeBakey VA Medical Center, who had developed the pre-Solicitation documents, and
who, as discussed below, conducted an evaluation of MCI’s proposal, sent an email to
contracting officer Kenny Holestin, stating: “Please cancel the ARUP laboratory reference
contracting packet with a funding document of 580-20-1-426-0007.” 5 That same day,
September 25, 2019, Mr. Holestin emailed MCI’s Director of Operations, Colleen Payne,
that the “requirement has been canceled.”6
5 This is another example of the VA referencing ARUP Laboratories during the
procurement process.
6 In an email to Mr. Holestin, also on September 25, 2019, MCI’s Director of Operations,
Ms. Payne, responded: “This is the 3rd solicitation that has been canceled this week
because we won it! I can’t keep fighting, when the entire system is against any small
business and still Quest and everyone is allowed to continue to hurt a veteran company.”
Also on September 25, 2019, Ms. Payne sent an email to Alan Swygert, Director of VHA
Vendor Relations, stating:
Do you have time for a call today?
Most importantly is the email from yesterday, there [sic] wanting to exclude
out of the SDVOSB set aside, and it’s being conducted without all the
information.
We’re once again bringing in more equipment to accommodate this award
and now the [sic] Quest sent another letter Monday, stating we’re not
authorized they believe we’re not again a supplier. . . .
VISN 16 is making decisions on 4 $150 k simplified acquisitions. We
continue to do everything right and just want to serve and continue to serve
our veterans.
(capitalization in original). Later on September 25, 2019, Mr. Swygert responded that he
was “in the middle of meeting with the VISN 16 Contracting Staff and the National Director
of Laboratory Service.” On September 26, 2019, Ms. Payne again emailed Mr. Swygert,
stating: “I would like to know what happen [sic] with the Meeting with VISN16 yesterday!
. . . They cancelled all the solicitations and there were not just 2 SDVOSB’s there were
more, and NOW once again we have spent another 70K and no solicitation. No award
and no contract.” (capitalization in original). Then, on September 26, 2019, Mr. Swygert
responded:
As far as the actions being taken by our local and VISN Procurement
Professionals now, I think the better description (visit-wise and from a
solicitation-perspective) might be that they’re merely delaying their efforts
26
Also on September 26, 2019, in an internal email from Peter Basten to Kenny
Holestin, Mr. Basten wrote:
Attached is my review [of MCI’s and [redacted]’s proposals] and formal
reply. I would like to point out a couple of interesting observations:
• The responses provided are very similar and the verbiage
in the Attestation Statement provided with both
submissions is identical.
• The production schedule and turnaround time for both labs
is the same.
• Both of their pricing tables in the exact same order and not
in the order that we provided.
Attached to Mr. Basten’s email are his evaluations of both MCI’s and [redacted]’s
proposals. Both evaluations respond in bullet-point form to the requirements in the
in an attempt to facilitate a WIN-WIN-WIN solution for all stakeholders.
With that said, I, too echo the sentiment of our Contracting Officials and
apologize for any inconvenience that these actions may have caused you.
But, unfortunately, these RFQs were canceled due to the significant
anomalies discovered with the solicitations. . . .
Per our previous conversation, I’m still formulating a team of Clinical Subject
Matter Experts (to include the VA Director of Laboratory Services and the
Integrated Product Team Leads for Laboratory Services) to physically
examine your capabilities and discuss any concerns/issues (from both
perspectives).
However, these clinical professionals are not available until late October but
are committed to visiting your facility and conversing with your clinical
experts.
(capitalization in original). No further information was provided to MCI regarding the
reason for the cancellation. The court notes, however, that in the above-quoted
correspondence, Ms. Payne appears to attribute certain questionable conduct on the part
of Quest Diagnostics, Inc., a nation-wide laboratory test and service provider. Protestor’s
original complaint included allegations against Quest Diagnostics, Inc. Protestor’s
amended complaint, however, removed any mention of Quest Diagnostics, Inc., as well
as any allegations that could be construed as bad faith on the part of the VA. The court
also notes that, although Ms. Payne mentions additional solicitations in the above
correspondence, the administrative record, as well as the parties’ submissions to this
court, do not involve any solicitation other than Solicitation No. 36C25619Q1507, the
Solicitation at issue in the above-captioned bid protest.
27
Statement of Work section of the Solicitation, discussed above. Mr. Basten’s evaluation
of MCI’s proposal states:
MCI Diagnostic Center: After analyzing the RFQ and research done on
their website; several question [sic] & concerns arise related to integrity of
services provided and the ability of MCI to provide them. Below is a detailed
breakdown:
• Section B.2 Statement of Work: a. Contractor shall provide a
written response addressing each of the minimum
requirements of the solicitation. Appropriate supporting
documentation and/or [sic] shall be submitted to
demonstrate ability to meet or exceed the minimum
requirements of this solicitation.
• Section B.2 Statement of Work: b. Contractor shall provide a
copy of their current CLIA Certificate of Accreditation
containing the appropriate specialties/subspecialties to
indicate federal certification of compliance with CLIA
requirements.
o Molecular Pathology not identified on CLIA
certificate
o Anatomic Pathology not identified on CLIA
certificate
• Section B.2 Statement of Work: c. Contractor shall provide a
copy of their current CAP Accreditation Certificate.
o CAP Accreditation Certificate provided however
based on Test Activity Menu provided MCI is not
CAP certified to perform all of the tests required in
this RFQ. Not CAP Accredited for Molecular
Pathology.
• Section B.2 Statement of Work: d. Contractor shall provide a
copy of their current CAP Test Activity Menu reflective of all
tests they are currently accredited to perform demonstrating
laboratory’s ability to perform the tests.
o CAP Test Activity Menu does not include all of the
required testing.
• Section B.2 Statement of Work: f. Contractor shall provide a
copy of their standard test catalog (electronic format
preferred) of all reference laboratory testing services
available.
o In the RFQ response MCI provides the secure link
to website Link:
https://www.mcidiagnostics.com
o The test directory contains an extensive test listing
however the following required elements are not
provided:
28
LOINC codes
Synonyms
Test methodology
Maximum turnaround time
Assay schedule
Reference ranges
o Test ID for tests in the MCI test directory does not
match Test ID provided in the price schedule
o Not all RFQ required tests are in the MCI test
directory
• Section B.2 Statement of Work: g. Sample patient report format for
the same 10 tests that were submitted for line item “e”
demonstrating all required report elements are listed.
o Sample reports provided do not contain both the VA
Accession number and MCI Accession number
• Section B.2 Statement of Work: h. Contractor shall provide a copy
of their laboratory’s standard operating procedure (SOP) for
performance of proficiency testing surveys and the performance of
alternative performance assessments.
o A copy of the required procedure was provided however
section addressing performance of alternative
performance assessments does not meet CAP
requirements.
• Section B.2 Statement of Work: i. Contractor shall provide a copy
of their results of external or alternative performance assessments
for the same 10 tests that were submitted for line item “e & g”.
o Information not provided
• Section B.2 Statement of Work: k. Contractor shall provide written
attestation that they have successfully completed the method
performance validation &/or verification studies for all of the tests
listed within the item list.
o Although MCI attests the following “we have successfully
completed the method performance validation and/or
verification on a many of the test listed. Our Partner
laboratories that we work with have been validated on all
the testing that we currently are not”, they are not CAP
accredited to perform all of the tests required.
• Additional Concerns
o Page 9 refers to laboratory partners (how much of the work
are they doing)
o Website test directory contains many tests for which MCI
is not CAP accredited to perform
o Difficulty navigating on line test menu
o Inconsistent information
o Unable to determine what percentage of the work MCI will
be performing and no information provided regarding
29
subcontracting or a subcontracting plan
o Not enough information to determine what tests were
performed for pervious contracts.
Based on the information provided in response to the RFQ and from
MCI’s website; MCI did not meet all the technical requirements in the
RFQ. The MCI quotation is technically unacceptable.
(capitalization and emphasis in original). The parties also have stipulated that, similar to
the evaluation of MCI’s proposal, Mr. Basten’s “formal technical evaluation document
identified numerous deficiencies in [redacted]’s quotation, spanning multiple
requirements expressed in the Solicitation.” Although Mr. Basten’s evaluation of the two
companies’ proposals were similar in a number of respects, Mr. Basten also identified
deficiencies in [redacted]’s proposal that he did not identify for MCI’s poroposal. 7
Although contracting officer Kenny Holestin emailed MCI and [redacted] on
September 25, 2019 informing them that the Solicitation had been canceled, the
Solicitation was not officially canceled until October 10, 2019. On October 10, 2019, an
amendment to the Solicitation was completed and issued by Reuben Zepeda, a
contracting supervisor for the VA. The subject of the amendment states: “Solicitation
36C25619Q1507 has been CANCELED.” (capitalization in original).
Procedural History
After the cancellation, MCI filed the above-captioned bid protest in the United
States Court of Federal Claims, challenging the cancellation of Solicitation No.
36C25619Q1507. In its original complaint, protestor argued “[t]he VA has offered no
justification, let alone a rational one, for cancelling the Solicitation.” The original complaint
contained one Count, titled: “The VA’s Decision to Cancel the Solicitation was
Arbitrary and Capricious, Lacked Rational Basis, and Violated Federal
Procurement Regulation and Law.” (capitalization and emphasis in original). In Count
I, protestor asserted that “MCI submitted pricing was substantially lower than that
expressed in the Solicitation’s accompanying documents.” (emphasis in original). MCI’s
original complaint also alleged that “[u]pon information and belief, a representative from
Quest Diagnostics communicated with the contracting officer responsible for the
Solicitation regarding the substance of the Solicitation,” and that “the VA cancelled the
Solicitation because the VA recognized (1) that setting-aside the Solicitation had
disturbed long-standing relationships with the national laboratory-services companies,
and/or (2) that MCI’s pricing could be beat by non-SDVOSB concerns, should the
Solicitation be cancelled and reissued ‘full and open’ rather than restricted.”
7 For instance, Mr. Basten’s evaluation for [redacted] states that [redacted] “is not
accredited, at this time, to perform any of the tests that were required by this RFQ,” and
“[s]erious staffing concerns exist to due to the number of employees.”
30
This court granted a motion to intervene filed by LabCorp. Thereafter, the
administrative record was filed. Subsequently, protestor filed an amended complaint.
Protestor’s amended complaint removed any allegations that could have otherwise been
construed as bad faith on the part of the VA. The amended complaint also removed any
mention of Quest Diagnostics, Inc. In the amended complaint, protestor asserts that the
technical evaluation “was based in technicalities and formalities, and such improper and
erroneous evaluations appear to be the ostensible basis for the cancellation. Therefore,
the VA’s actions were arbitrary and capricious, lacked rational basis, and violated federal
procurement regulation and law.” In the “CONCLUSION” section of protestor’s amended
complaint, MCI
respectfully requests that this Court:
A. Declare the VA’s decision to cancel the Solicitation to be arbitrary and
capricious and in violation of the FAR;
B. Instruct the VA to reopen the Solicitation and evaluate MCI’s offer in a
fair, non-arbitrary fashion, in accordance with the FAR and the stated
requirements of the Solicitation;
C. Order the VA to pay MCI damages in the amount of its bid preparation
and proposal costs; and
D. Award any other monetary and injunctive relief the Court determines is
appropriate.
(capitalization and emphasis in original).
Based on the schedule agreed to by the parties, protestor filed a motion for
judgment on the administrative record, which challenged Mr. Basten’s evaluation of
protestor MCI’s proposal. Defendant and intervenor then each filed a combined motion to
dismiss the protest for lack of subject-matter jurisdiction, cross-motion for judgment on
the administrative record, and further responses and replies were exchanged.
DISCUSSION
Defendant first moves to dismiss the above-captioned bid protest under Rule
12(b)(1) (2019) of the Rules of the United States Court of Federal Claims (RCFC),
asserting that the United States Court of Federal Claims lacks subject-matter jurisdiction
to review an objection to the cancellation of a solicitation for which protestor has not
alleged that the government has violated any specific statute or regulation. It is well
established that “‘subject-matter jurisdiction, because it involves a court’s power to hear
a case, can never be forfeited or waived.’” Arbaugh v. Y & H Corp.,
546 U.S. 500
, 514
(2006) (quoting United States v. Cotton,
535 U.S. 625
, 630 (2002)). “[F]ederal courts have
an independent obligation to ensure that they do not exceed the scope of their jurisdiction,
and therefore they must raise and decide jurisdictional questions that the parties either
overlook or elect not to press.” Henderson ex rel. Henderson v. Shinseki,
562 U.S. 428
(2011); see also Hertz Corp. v. Friend,
559 U.S. 77
, 94 (2010) (“Courts have an
independent obligation to determine whether subject-matter jurisdiction exists, even when
31
no party challenges it.” (citing Arbaugh v. Y & H
Corp., 546 U.S. at 514
)); Special Devices,
Inc. v. OEA, Inc.,
269 F.3d 1340
, 1342 (Fed. Cir. 2001) (“[A] court has a duty to inquire
into its jurisdiction to hear and decide a case.” (citing Johannsen v. Pay Less Drug Stores
N.W., Inc.,
918 F.2d 160
, 161 (Fed. Cir. 1990))); View Eng’g, Inc. v. Robotic Vision Sys.,
Inc.,
115 F.3d 962
, 963 (Fed. Cir. 1997) (“[C]ourts must always look to their jurisdiction,
whether the parties raise the issue or not.”). “The objection that a federal court lacks
subject-matter jurisdiction . . . may be raised by a party, or by a court on its own initiative,
at any stage in the litigation, even after trial and the entry of judgment.” Arbaugh v. Y & H
Corp., 546 U.S. at 506
; see also Hymas v. United States,
810 F.3d 1312
, 1317 (Fed. Cir.
2016) (explaining that a federal court must satisfy itself of its jurisdiction over the subject-
matter before it considers the merits of a case); Cent. Pines Land Co., L.L.C. v. United
States,
697 F.3d 1360
, 1364 n.1 (Fed. Cir. 2012) (“An objection to a court's subject matter
jurisdiction can be raised by any party or the court at any stage of litigation, including after
trial and the entry of judgment.” (citing Arbaugh v. Y & H
Corp., 546 U.S. at 506
)); Rick’s
Mushroom Serv., Inc. v. United States,
521 F.3d 1338
, 1346 (Fed. Cir. 2008) (“[A]ny party
may challenge, or the court may raise sua sponte, subject matter jurisdiction at any time.”
(citing Arbaugh v. Y & H
Corp., 546 U.S. at 506
; Folden v. United States,
379 F.3d 1344
,
1354 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir. 2004), cert. denied,
545 U.S. 1127
(2005); and Fanning, Phillips & Molnar v. West,
160 F.3d 717
, 720 (Fed. Cir. 1998)));
Pikulin v. United States,
97 Fed. Cl. 71
, 76, appeal dismissed, 425 F. App’x 902 (Fed. Cir.
2011). In fact, “[s]ubject matter jurisdiction is an inquiry that this court must raise sua
sponte, even where . . . neither party has raised this issue.” Metabolite Labs., Inc. v. Lab.
Corp. of Am. Holdings,
370 F.3d 1354
, 1369 (Fed. Cir.) (citing Textile Prods., Inc. v. Mead
Corp.,
134 F.3d 1481
, 1485 (Fed. Cir.), reh’g denied and en banc suggestion declined
(Fed. Cir.), cert. denied,
525 U.S. 826
(1998)), reh’g and reh’g en banc denied (Fed. Cir.
2004), cert. granted in part sub. nom Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc.,
546 U.S. 975
(2005), cert. dismissed as improvidently granted,
548 U.S. 124
(2006)).
This court has jurisdiction to hear bid protests pursuant to 28 U.S.C. § 1491(b)(1)
(2018) of the Tucker Act, which provides that this court has
jurisdiction to render judgment on an action by an interested party objecting
to a solicitation by a Federal agency for bids or proposals for a proposed
contract or to a proposed award or the award of a contract or any alleged
violation of statute or regulation in connection with a procurement or a
proposed procurement.
28 U.S.C. § 1491(b)(1); see also Weeks Marine, Inc. v. United States,
575 F.3d 1352
,
1359 (Fed. Cir. 2009). The Administrative Dispute Resolution Act of 1996 (ADRA),
codified at 28 U.S.C. § 1491(b)(1)–(4), amended the Tucker Act to establish a statutory
basis for bid protests in the United States Court of Federal Claims. See Impresa
Construzioni Geom. Domenico Garufi v. United States,
238 F.3d 1324
, 1330–32 (Fed.
Cir. 2001).
Defendant in the above-captioned bid protest asserts that 28 U.S.C. § 1491(b)(1)
“confers the Court with only limited jurisdiction to consider a protestor’s ‘object[ions] to’ (i)
‘a solicitation by a Federal agency,’ (ii) ‘a proposed award or the award of a contract,’ or
32
(iii) ‘any alleged violation of a statute or regulation in connection with a procurement or a
proposed procurement.’” (quoting 28 U.S.C. § 1491(b)(1)). Defendant further argues that
“[h]ere, MCI challenges only the VA’s decision to cancel the solicitation . . . and the protest
of a cancellation is not an ‘objecti[on] to a solicitation . . . for bids or proposals for a
proposed contract or to a proposed award or the award of a contract.’” (second alteration
and second ellipses in original) (emphasis in original) (quoting MORI Assocs., Inc. v.
United States,
102 Fed. Cl. 503
, 523 (2011) (quoting 28 U.S.C. § 1491(b)(1))). Defendant
argues that MCI’s protest of the cancellation must meet section 1491(b)(1)’s third prong,
an “’alleged violation of a statute or regulation in connection with a procurement or
proposed procurement.’” (quoting 28 U.S.C. § 1491(b)(1)) (citing Tenica & Assocs., LLC
v. United States,
123 Fed. Cl. 166
, 172-73 (2015); Savantage Fin. Servs., Inc. v. United
States,
123 Fed. Cl. 7
, 33-34 (2015), aff’d, 688 F. App’x 366 (Fed. Cir. 2016)). Finally,
defendant asserts that “[a]lthough MCI variously asserts that the cancellation ‘violated
federal procurement regulation and law,’ MCI never identifies what law or regulation the
VA allegedly ‘violated.’” (internal references omitted). Protestor’s filings, including its
responsive ones, focus only on Mr. Basten’s evaluation of its proposal and are void of
any jurisdictional arguments or counter-arguments.
The United States Court of Appeals for the Federal Circuit’s ruling in Resource
Conservation Group, LLC v. United States discusses this court’s bid protest jurisdiction.
See Resource Conservation Grp., LLC v. United States,
597 F.3d 1238
, 1242–47 (Fed.
Cir. 2010). The issue in Resource Conservation Group was whether the United States
Court of Federal Claims had jurisdiction to hear a protest of the government’s solicitation
of bids to lease property owned by the United States Naval Academy. The Federal Circuit
found that the protestor lacked jurisdiction under the ADRA because the leasing of land
did not constitute a “procurement.” Resource Conservation Grp., LLC v. United
States, 597 F.3d at 1242
(quoting Southfork Sys., Inc. v. United States,
141 F.3d 1124
, 1132
(Fed. Cir. 1998)). The court also found, however, that the United States Court of Federal
Claims had jurisdiction by other means, holding that the enactment of the ADRA did not
remove any pre-ADRA-established jurisdiction of the United States Court of Federal
Claims. See
id. The Federal
Circuit looked to the legislative history of the ADRA,
concluding that “Congress did not intend to alter or restrict the Court of Federal Claims’
existing jurisdiction in cases not covered by the new statute.” Resource Conservation
Grp., LLC v. United
States, 597 F.3d at 1246
. This included the United States Court of
Federal Claims’ pre-ADRA jurisdiction to hear nonprocurement-based protests based on
“‘an implied contract to have the involved bids fairly and honestly considered.’” Resource
Conservation Grp., LLC v. United
States, 597 F.3d at 1246
(quoting Southfork Sys., Inc.
v. United
States, 141 F.3d at 1132
).
Defendant in the above-captioned bid protest questions this court’s ability hear
protestor’s challenge of the VA’s cancellation of the solicitation to procure laboratory
testing and services for the Michael E. DeBakey VA Medical Center. As stated by a Judge
of the United States Court of Federal Claims in MORI Associates, Inc. v. United
States, 102 Fed. Cl. at 522
, “prior to the passage of the ADRA it was settled law that our court
had jurisdiction over bid protests seeking to enjoin the arbitrary cancellation of
solicitations, as an alleged breach of the implied contract to fairly and honestly consider
33
bids.” MORI Assocs., Inc. v. United
States, 102 Fed. Cl. at 522
(citing Parcel 49C Ltd.
P’ship v. United States,
31 F.3d 1147
, 1152–54 (Fed. Cir. 1994)). The court in MORI
Associates further held that “the FAR section 1.602–2(b) requirement that contracting
officers shall ‘[e]nsure that contractors receive impartial, fair and equitable treatment’ is,
among other things, the codification of the government’s duty, previously implicit, to fairly
and honestly consider bids.” MORI Assocs., Inc. v. United
States, 102 Fed. Cl. at 523
(quoting FAR § 1.602–2(b)). The court, therefore, found that it had jurisdiction over an
alleged arbitrary cancellation of a procurement under the third prong of 28 U.S.C.
§ 1491(b)(1) by way of the pre-ADRA established implied contract to fairly and honestly
consider bids, which the court found now “expressly resides” in FAR § 1.602–2(b). See
MORI Assocs., Inc. v. United
States, 102 Fed. Cl. at 524
.
As discussed above, the Federal Circuit held in Resource Conservation Group that
the ADRA did not abrogate any previously established bid protest jurisdiction enjoyed by
this court. Although the Federal Circuit’s holding in Resource Conservation Group
concerned this court’s surviving, post-ADRA jurisdiction to hear nonprocurement-based
bid protests, the court reasoned that
it seems quite unlikely that Congress would intend that statute [28 U.S.C.
§ 1491(b)(1)] to deny a pre-existing remedy without providing a remedy
under the new statute. See e.g., Davis v. Passman,
442 U.S. 228
, 247,
99 S. Ct. 2264
,
60 L. Ed. 2d 846
(1979) (holding that by enacting an
amendment to the Civil Rights Act of 1964 which protects federal
employees from discrimination, Congress did not intend to foreclose pre-
existing alternative remedies available to those expressly unprotected by
the statute).
Resource Conservation Grp., LLC v. United
States, 597 F.3d at 1246
; see also Def. Tech.,
Inc. v. United States,
99 Fed. Cl. 103
, 114–15 (2011) (finding that this court had
jurisdiction over the cancellation of a procurement solicitation); FFTF Restoration Co.,
LLC v. United States,
86 Fed. Cl. 226
, 236–240 (2009). It is, therefore, consistent with
Resource Conservation Group to hold that this court continues to have jurisdiction over
alleged arbitrary cancellations of procurement solicitations. Moreover, given this court’s
pre-ADRA jurisdiction to address procurement cancellation issues, it follows that whether
or not protestor alleges the violation of a specific statute or regulation, this court continues
to be able to address cancellation issues. See B & B Med. Servs., Inc. v. United States,
114 Fed. Cl. 658
, 660 (2014) (“Given our long history of entertaining such [arbitrary
procurement cancellation] protests, the Court does not find subject-matter jurisdiction to
be absent merely because the particular regulation that is violated by arbitrary
cancellation is absent from the complaint.”). Defendant’s motion to dismiss for lack of
subject-matter jurisdiction on the mere grounds that the Solicitation was canceled is
denied.
34
Defendant and intervenor next move to dismiss protestor’s complaint, also
pursuant to RCFC 12(b)(1), asserting that protestor lacks standing. 8 Defendant argues
that protestor did not have a substantial chance to be awarded the contract, and,
therefore, is not an interested party, because protestor’s “response to the solicitation was
incomplete, nonresponsive, or otherwise noncompliant with the material terms of the
solicitation.” As discussed below, defendant’s motion to dismiss highlights multiple
instances in which MCI’s proposal was allegedly incomplete. Included in defendant’s
argument are allegations that protestor did not demonstrate that protestor is appropriately
certified to perform all of the laboratory tests and services required by the Solicitation. All
of the instances highlighted by defendant are consistent with Mr. Basten’s evaluation of
MCI’s proposal, which ultimately determined that MCI’s proposal was technically
unacceptable. As discussed above, however, protestor does not respond to any of
defendant or intervenor’s jurisdictional arguments, including standing, although in
protestor’s motion for judgment on the administrative record, protestor does respond to
the merits of Mr. Basten’s evaluation.
The Tucker Act, as amended by the ADRA, grants the United States Court of
Federal Claims “jurisdiction to render judgment on an action by an interested party
objecting to a solicitation by a Federal agency for bids or proposals for a proposed
contract or to a proposed award or the award of a contract or any alleged violation of
statute or regulation in connection with a procurement or a proposed procurement.” 28
U.S.C. § 1491(a)(1). In order to have standing to sue as an “interested party” under this
provision, a disappointed bidder must show that it suffered competitive injury or was
“prejudiced” by the alleged error in the procurement process. See Todd Constr., L.P. v.
United States,
656 F.3d 1306
, 1315 (Fed. Cir. 2011) (To prevail, a bid protester must first
“‘show that it was prejudiced by a significant error’ (i.e., ‘that but for the error, it would
have had a substantial chance of securing the contract).’” (quoting Labatt Food Serv., Inc.
v. United States,
577 F.3d 1375
, 1378, 1380 (Fed. Cir. 2009)); Blue & Gold Fleet, L.P. v.
United
States, 492 F.3d at 1317
; see also Sci. Applications Int’l Corp. v. United States,
108 Fed. Cl. 235
, 281 (2012); Linc Gov’t Servs., LLC v. United States,
96 Fed. Cl. 672
,
693 (2010) (“In order to establish standing to sue, the plaintiff in a bid protest has always
needed to demonstrate that it suffered competitive injury, or ‘prejudice,’ as a result of the
allegedly unlawful agency decisions.” (citing Rex Serv. Corp. v. United
States, 448 F.3d at 1308
; Statistica, Inc. v. Christopher,
102 F.3d 1577
, 1580–81 (Fed. Cir. 1996); Vulcan
Eng’g Co. v. United States,
16 Cl. Ct. 84
, 88 (1988); Morgan Bus. Assocs., Inc. v. United
States,
223 Ct. Cl. 325
, 332 (1980))). In order to establish what one Judge on this court
has called “allegational prejudice” for the purposes of standing, the bidder must show that
there was a “substantial chance” it would have received the contract award, but for the
alleged procurement error. See Linc Gov’t Servs., LLC v. United
States, 96 Fed. Cl. at 675
; Hyperion, Inc. v. United States,
115 Fed. Cl. 541
, 550 (2014) (“The government
acknowledges that proving prejudice for purposes of standing merely requires
“allegational prejudice,” as contrasted to prejudice on the merits . . . .”); Bannum, Inc. v.
United States,
115 Fed. Cl. 148
, 153 (2014); see also Bannum, Inc. v. United States, 404
8 Regarding protestor’s standing, the arguments in intervenor’s motion to dismiss largely
track defendant’s arguments.
35 F.3d 1346
, 1358 (Fed. Cir. 2005); Galen Med. Assocs., Inc. v. United States,
369 F.3d 1324
, 1331 (Fed. Cir.), reh’g denied (Fed. Cir. 2004); Info. Tech. & Applications Corp. v.
United States,
316 F.3d 1312
, 1319 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.
2003); Statistica, Inc. v.
Christopher, 102 F.3d at 1581
; Archura LLC v. United States,
112 Fed. Cl. 487
, 497 (2013); Lab. Corp. of Am. v. United States,
108 Fed. Cl. 549
, 557
(2012). Because standing is a jurisdictional issue, this showing of prejudice is a threshold
issue. See Corus Grp. PLC. v. Int’l Trade Comm'n,
352 F.3d 1351
, 1357 (Fed. Cir. 2003);
Myers Investigative & Sec. Servs., Inc. v. United States,
275 F.3d 1366
, 1370 (Fed. Cir.
2002). “A bidder submitting a nonresponsive bid has no standing to protest an award,
because it has no chance of receiving the award.” A & D Fire Protection, Inc. v. United
States,
72 Fed. Cl. 126
, 138 (2006); see also Dismas Charities, Inc. v. United States,
75 Fed. Cl. 59
, 61 (2007) (“[A] Final Proposal Revision that does not conform to the
solicitation requirements is technically unacceptable and cannot be considered for award
. . . .”); CHE Consulting, Inc. v. United States,
47 Fed. Cl. 331
, 337 (2000) (“A
nonresponsive bidder is not an interested party.”); Ryan Co. v. United States,
43 Fed. Cl. 646
, 657 (1999) (“[T]he phrase ‘interested party,’ as used in 28 U.S.C. § 1491(b), does
not include a bidder, such as [protestor], determined to be nonresponsive, whose only
chance of winning a contract is in a resolicitation.”).
As explained by the United States Court of Federal Claims in Digitalis Education
Solutions, Inc. v. United States:
Only an “interested party” has standing to challenge a contract award. Rex
Serv. Corp. v. United States,
448 F.3d 1305
, 1307 (Fed. Cir. 2006). An
interested party is an actual or prospective bidder whose direct economic
interest would be affected by the award of the contract.
Id. Thus, a
party
must show that it is 1) an actual or prospective bidder and 2) that it has a
direct economic interest. “[I]n order to be eligible to protest, one who has
not actually submitted an offer must be expecting to submit an offer prior to
the closing date of the solicitation.” MCI Telecomms. Corp. v. United States,
878 F.2d 362
, 365 (Fed. Cir. 1989). To prove a direct economic interest, a
party must show that it had a “substantial chance” of winning the contract.
Rex
Serv., 448 F.3d at 1308
.
Digitalis Educ. Solutions, Inc. v. United States,
664 F.3d 1380
, 1384 (Fed. Cir. 2012); see
also Am. Fed’n of Gov't Emps. v. United States,
258 F.3d 1294
, 1302 (Fed. Cir. 2001),
cert. denied,
534 U.S. 113
(2002); Centech Grp., Inc. v. United States,
78 Fed. Cl. 496
,
503-504 (2007).
In the context of a pre-award bid protest which challenges the terms of the
solicitation, the United States Court of Appeals for the Federal Circuit has determined that
to show the requisite “direct economic interest,” and, therefore, to be an “interested party”
under the Tucker Act, the protestor has to have suffered a “‘non-trivial competitive injury
which can be redressed by judicial relief.’” See Orion Tech., Inc. v. United States,
704 F.3d 1344
, 1348 (Fed. Cir. 2013) (quoting Weeks Marine, Inc. v. United
States, 575 F.3d at 1362
–63); see also CGI Fed. Inc. v. United States,
779 F.3d 1346
, 1348 (Fed. Cir.
2018); COMINT Sys. Corp. v. United
States, 700 F.3d at 1383
n.7 (“[I]n Weeks Marine
this court specifically held that the ‘non-trivial competitive injury’ standard was applicable
36
to ‘a pre-award protest.’” (quoting Weeks Marine, Inc. v. United
States, 575 F.3d at 1362
))
(emphasis in original); MVS USA, Inc. v. United States,
111 Fed. Cl. 639
, 647 (2013);
Miles Constr., LLC v. United
States, 108 Fed. Cl. at 797
. This is a lower standard than
the “substantial chance” standard used in post-award bid protests, but still requires a
“showing of some prejudice.” Orion Tech., Inc. v. United
States, 704 F.3d at 1348-49
(quoting Weeks Marine, Inc. v. United
States, 575 F.3d at 1362
) (emphasis in original).
This lower standard does not apply, however, to post-proposal, pre-award bid protests
that are “not challenging the terms of the solicitation, as was the case in Weeks Marine.”
Orion Tech., Inc. v. United
States, 704 F.3d at 1349
. In such cases, the “substantial
chance” standard still applies. See
id. at 1348-49.
Defendant in the above-captioned bid protest asserts that protestor has not
demonstrated that it was CAP certified to perform all of the Solicitation’s required tests
and services, a deficiency identified in Mr. Basten’s evaluation. Mr. Basten included in his
evaluation that protestor was “[n]ot CAP Accredited for Molecular Pathology.”
(capitalization in original). Protestor does not appear to dispute this deficiency in its
submissions to the court. Indeed, protestor “concedes that it will require some
subcontracting to perform specialized tests.” Specifically, in a response to the court’s
Order for the parties to provide supplemental briefing regarding protestor’s CAP
accreditations, protestor concedes that protestor “will need to subcontract approximately
74 tests, three of which have the potential of triggering one (or more) of 52 additional
tests, totaling 126 line-items” of the 611 line-items in the Solicitation’s list of required
laboratory tests and services. Protestor further concedes that it cannot perform these
tests and services because “MCI is not CAP certified to perform molecular pathology
testing.”
In protestor’s submissions to the court, protestor argues that it intended to use
subcontractors to perform the laboratory tests and services it could not personally
perform. Protestor’s mention of its contemplated use of subcontractors in its proposal,
however, is scant. In one section of the proposal, protestor states, confusingly, that “MCI
will provide Laboratory Testing our [sic] qualified laboratory partners and will continue to
actively participate in various study of laboratory testing, with a goal of enhancing clinical
patient care.” In addition, protestor’s “Attestation Form,” 9 which was attached to its
proposal, states that MCI’s “[p]artner laboratories that we work with have been
validated on all of the testing that we currently are not.” (emphasis in original). Such
is the extent of the proposal’s discussion of protestor’s intent to rely on subcontractors to
fulfill the Solicitation’s requirements. Importantly, the proposal is absent of any
subcontractor names or subcontractor certifications by CLIA or CAP. MCI’s proposal is
also silent on how many, and which, laboratory tests or services protestor was intending
to subcontract out, at what cost, the intended subcontractor(s) assay schedules and
9The Attestation Form attached to protestor’s proposal appears to be in response to the
Solicitation’s instruction in subsection (k) of the Statement of Work, which states:
k. Contractor shall provide written attestation that they have successfully
completed the method performance validation &/or verification studies for
all of the tests listed within the item list.
37
turnaround times—all information required of the offeror by the terms of the Solicitation.
Protestor argues that it was not required to provide any subcontractor information.
Although the Solicitation does not explicitly require the submission of subcontractor
information, the Statement of Work in the Solicitation instructs that “[a]ppropriate
supporting documentation . . . shall be submitted to demonstrate [the] ability to meet or
exceed the minimum requirements of this solicitation.” At the minimum, the Solicitation
required the offeror to demonstrate that it is properly certified to perform, and could
perform, all 611 line-items of laboratory tests and services listed in the Solicitation. To
that end, the Solicitation required that the offeror produce, among other items, its CLIA
Certificate, CAP Certificate and CAP Test Activity Menu. If an offeror could not perform
all of the required tests and services, it follows that in order to demonstrate that the
“minimum requirements” have been met, the “[a]ppropriate supporting documentation”
would necessarily include documentation that the intended subcontractors were properly
certified to perform the laboratory tests and services that the offeror could not perform.
This would include, among other items, the subcontractor’s CLIA Certificate, CAP
Certificate, and CAP Test Activity Menu. Protestor concedes that it is not properly certified
to perform all of the Solicitation’s laboratory tests and services, and that it required the
use of subcontractors to do so. Protestor, however, failed to produce relevant information
on the subcontractor or subcontractors it intended to use, including their names, CLIA
Certificates, CAP Certificates, and CAP Test Activity Menus. Protestor, therefore, failed
to provide the “[a]ppropriate supporting documentation” to demonstrate that it could meet
the minimum requirements of the Solicitation. Protestor’s proposal, therefore, is
technically unacceptable.
Protestor’s concession, discussed above, that it is “not CAP certified to perform
molecular pathology testing,” and, therefore, is unable to personally perform 126 of the
611 line-item laboratory tests and services, is also inconsistent with the Solicitation’s
requirements in subsection (d) of the Statement of Work, which states that the offeror
“shall provide a copy of their current CAP Test Activity Menu reflective of all tests they
are currently accredited to perform demonstrating laboratory’s ability to perform the tests.”
(emphasis added). Protestor’s CAP Test Activity Menu provides numerous other
disciplines, including, for example, “Anatomic Pathology,” “Cytopathology,” and
“Immunology,” but does not include a discipline in Molecular Pathology. See generally
College of American Pathologists, CAP Accreditation Checklists—2019 Edition, available
at https://documents.cap.org/documents/2019-CAP-accreditation-checklist-summary.pdf
(last visited Feb. 19, 2020) (providing all CAP Accreditation Checklists for all other
disciplines listed in protestor’s CAP Test Activity Menu). The court notes that, as indicated
in the CAP Accreditation Checklists cited above, CAP indeed provides an accreditation
in Molecular Pathology. See
id. Protestor’s proposal,
therefore, did not “demonstrat[e]”
protestor’s “ability to perform the tests” required of the Solicitation, because protestor’s
CAP Test Activity Menu did not include Molecular Pathology as a discipline, or otherwise
demonstrate it could perform such laboratory tests and services involving Molecular
Pathology. 10
10In protestor’s submissions to the court, protestor asserts that Mr. Basten’s evaluation
was technically inaccurate in a number of respects. In defendant’s submissions to the
38
Defendant next argues that “although the solicitation required MCI to ‘provide a
copy of [its] standard test catalog’ as part of its quotation . . . MCI provided only a link to
its website . . . a deficiency highlighted by the technical evaluator.” (alteration in original)
(emphasis in original) (internal references omitted). Subsection (f) of the Solicitation’s
Statement of Work states that the “[c]ontractor shall provide a copy of their standard test
catalog (electronic format preferred) of all the reference laboratory testing services
available.” Protestor’s response to the Solicitation did not include an electronic copy of its
standard test catalog. Instead, protestor’s response states, under the heading “TEST
DIRECTORY:”
The test catalog is available on the MCI LIS allowing authorized users
access to view the test catalog at any time. The test catalog is compliant
with regulatory requirements of the College of American Pathologists as
evidenced by MCI’s CAP accreditation.
Secure link to the Website – Test Director [sic] Page.
Link: https://www.mcidiagnostics.com
(capitalization and emphasis in original). Regarding protestor’s standard test catalog, Mr.
Basten’s evaluation states:
• Section B.2 Statement of Work: f. Contractor shall provide a
copy of their standard test catalog (electronic format
preferred) of all reference laboratory testing services
available.
o In the RFQ response MCI provides the secure link
to website Link:
https://www.mcidiagnostics.com
(emphasis in original).
In protestor’s submissions to this court, protestor provides no explanation for
including only the link to its standard test catalog in its proposal. As an initial matter, the
court notes that an offeror’s provision of information by website link is not equivalent to
submitting such information as a physical or electronic enclosure to a proposal. Unlike a
court, defendant concedes that Mr. Basten committed an error in his evaluation relating
to the pathology specialties displayed on MCI’s CLIA certificate. The court notes that
although this procurement process was not totally error-free, as indicated by this error in
Mr. Basten’s evaluation, as well as the VA’s continual reference to ARUP Laboratories,
nevertheless, protestor’s proposal was properly found by the agency to be technically
unacceptable. Among other reasons, protestor’s proposal did not demonstrate that
protestor was properly certified to perform all of the laboratory tests and services required
by the Solicitation, and the proposal did not include appropriate documentation to
demonstrate that MCI’s intended subcontractors, if they were to be used by MCI, were
properly certified to perform the tests that protestor personally could not.
39
physical submission, a website is a dynamic source of information which can be altered
by the posting entity, or, if not secure, by others. Conversely, similar to a physical
submission, an electronic submission submitted in PDF form cannot be altered after the
offeror submits it to the agency. In this instance, the protestor presumably could have
changed the website after the protestor submitted its proposal to the VA, or even after the
deadline to submit proposals. Moreover, as this court has previously held, the government
is “not required to search for additional information to assist” a protestor if it “fail[s] to
include th[e] information in the correct portion of its proposal.” IBM Corp. v. United States,
101 Fed. Cl. 746
, 758 (2011). As indicated above, however, the court notes that the
Solicitation did not explicitly mandate a specific method of transmission for the offeror’s
standard test catalog, as the Solicitation stated only that electronic format was “preferred.”
Defendant next asserts, as did Mr. Basten’s evaluation, that protestor’s online test
catalog was deficient for a number of reasons, including that “[n]ot all RFQ required tests
are in the MCI test directory.” As discussed above, protestor does not appear to dispute
this deficiency. Protestor argues, in response to Mr. Basten’s evaluation, that
MCI’s electronic test directory contains over 2000 tests. However, for the
tests MCI cannot perform in house, subcontracting will indeed be required.
The Evaluator does not list the number of tests that MCI cannot purportedly
perform, only that “not all of the RFQ required tests” are in MCI’s directory.
This is the same repeated allegation – that MCI cannot perform the entirety
of the contract on its own. But this is not required by the FAR or the stated
terms of the Solicitation; rather, 13 C.F.R. [§] 125.6(a)(2)(i) permits MCI to
subcontract up to half to the entire contract value – or approximately
$[redacted] per year – to non-similarly-situated laboratories.
(footnote omitted) (internal references omitted).
After reviewing what is currently displayed on protestor’s online test catalog, it
appears that not all of the 611 line-items of laboratory tests and services required by the
Solicitation are currently listed. See MCI Diagnostic Center, Laboratory Test Directory,
available at http://www.mcidiagnostics.com/test-directory (last visited Feb. 19, 2020).
Moreover, as discussed above, protestor’s admission that it cannot personally perform
126 of the 611 line-item laboratory tests and services required by the Solicitation, and
protestor’s failure to provide appropriate subcontractor information, renders protestor’s
proposal technically unacceptable. Moreover, protestor’s argument that “13 C.F.R.
[§] 125.6(a)(2)(i) permits MCI to subcontract up to half to the entire contract value – or
approximately $[redacted] per year – to non-similarly-situated laboratories,” does not
respond to the issue of whether, regardless of the number of tests protestor intended to
subcontract, the appropriate documentation for subcontractors, including who the
subcontractors were going to be and whether those subcontractors had the required
capacity and certifications to perform the required laboratory tests or services, was
40
provided in MCI’s response to the Solicitation. 11 Finally, protestor’s argument that Mr.
Basten failed to identify which tests protestor could not perform, does not abdicate
protestor’s burden to demonstrate its ability to meet the published requirements of the
Solicitation.
Defendant further asserts that protestor’s proposal was deficient for a number of
other reasons. These deficiencies highlighted by defendant in its submissions to this court
are consistent with Mr. Basten’s evaluation of protestor’s proposal. For example, Mr.
Basten’s evaluation states that, for the laboratory tests and services that were listed in
protestor’s online standard test catalog, “the following required elements are not
provided:” “LOINC codes;” “[s]ynonyms;” “[t]est methodology;” “[m]aximum turnaround
time;” “[a]ssay schedules;” and “[r]eference ranges.”
The Solicitation in subsection (f) of the Statement Work states:
f. Contractor shall provide a copy of their standard test catalog (electronic
format preferred) of all reference laboratory testing services available.
At a minimum the test catalog shall include:
• Ordering Code (contractor’s identification code)
• LOINC Code (Logical Observation Identifier Names and Codes)
• CPT Code
• Test Name/Synonyms
• Test Methodology
• Specimen Types
• Specimen collection and handling requirements
• Test result interpretation or interpretive remarks
• Maximum Turnaround Time (TAT), excluding time required for repeat
assay. For those tests offered on a STAT basis, TAT should be listed
separately.
• Assay schedule- must state “MWF” for tests set up Monday, Wednesday
11 The regulation at 13 C.F.R. § 125.6(a)(2)(i) (2019) states that in order to awarded an
SDVOSB contract, “a small business concern must agree that . . . [i]n the case of a
contract for supplies or products (other than from a nonmanufacturer of such supplies), it
will not pay more than 50% of the amount paid by the government to it to firms that are
not similarly situated.”
Id. 41 and
Friday; “MTWTF” for Monday through Friday; “TT” for Tuesday and
Thursday; “Daily” for every day.
• Assay Method
• Reference Ranges
(emphasis added).
As discussed above, protestor provided only a link to its website, and did not
provide a copy of its standard test catalog with its proposal. Nor has protestor submitted
a contemporaneous to its proposal copy of its standard test catalog for the court’s current
review. The court, therefore, as discussed above, is unable to reliably verify whether, at
the time of protestor’s submission, protestor’s online test catalog included the missing
information identified by Mr. Basten and raised by defendant. Moreover, regarding
LOINCs, 12 the court has found no reference to such codes in what is currently displayed
on protestor’s online standard test catalog. Therefore, unless protestor removed the
LOINCs for each test and service in its online standard test catalog after protestor
submitted its proposal, protestor’s proposal did not follow the Solicitation’s instructions
regarding the required LOINCs.
Protestor argues that its proposal “expressly addressed LOINC codes,” citing to
the portion of its proposal which states that protestor has the “Information Technology
Expertise for questions or issues regarding LOINC and test codes, reports and website
assistance.” (capitalization in original). Protestor’s inclusion of this statement in its
proposal, however, is not equivalent to providing the LOINC codes for each test in its
standard test catalog, as was required by the Solicitation.
12 According to defendant:
Logical Observation Identified Names and Codes (LOINC®) “is a common
language . . . for identifying health measurements, observations, and
documents.” LOINC.org, What LOINC is, https://loinc.org/get-started/what-
loinc-is/ (last visited Dec. 18, 2019). LOINC aims “to provide a definitive
standard for identifying clinical information in electronic reports” by
furnishing “a set of universal names and ID codes for . . . laboratory and
clinical test results in the context of existing” data-transfer protocols.
LOINC.org, FAQ: LOINC Basics, https://loinc.org/faq/basics/ (last visited
Dec. 18, 2019). Simply put, LOINC ensures that different electronic medical
systems can readily share critical information and, by extension, that
different providers in the chain of care have access to that information.
(ellipses in original) (internal references omitted).
42
Mr. Basten also identified that protestor’s online standard test catalog omitted test
synonyms. 13 The Solicitation states that, “[a]t a minimum the test catalog shall include . . .
Test Name/Synonyms.” The standard test catalog currently displayed on protestor’s
website includes a name for each laboratory test and service, but only includes synonyms
for some of the laboratory tests and services. Protestor argues:
The Solicitation’s Statement of Work requires the offeror to provide “Test
Name/Synonyms”. The “slash” between the terms “Name” and “Synonyms”
indicates that this requirement is an “or” not an “and.” The requirement is
an “or” because not every test name has synonyms. Therefore, MCI need
not provide synonyms in every instance.
(internal reference omitted).
Defendant argues that, consistent with the United States Court of Appeals for the
Federal Circuit’s holding in Blue and Gold Fleet, L.P. v. United States,
492 F.3d 1308
(Fed. Cir. 2007), “MCI has waived its theory that the solicitation made the inclusion of
synonyms optional by using a ‘“slash” between the terms “Name” and “Synonyms.”’” In
Blue and Gold Fleet, which was a pre-award bid protest, the Federal Circuit employed the
“doctrine of patent ambiguity” in interpreting the terms of a solicitation. See Blue and Gold
Fleet, L.P. v. United
States, 492 F.3d at 1313
; see also Stratos Mobile Networks USA,
LLC v. United States,
213 F.3d 1375
, 1381 (Fed. Cir. 2000) (“A patent ambiguity is
present when the contract contains facially inconsistent provisions that would place a
reasonable contractor on notice and prompt the contractor to rectify the inconsistency by
inquiring of the appropriate parties.”) The court in Blue and Gold Fleet found that “‘[t]he
doctrine of patent ambiguity is an exception to the general rule of contra proferentem,
which courts use to construe ambiguities against the drafter.’” Blue and Gold Fleet, L.P.
v. United
States, 492 F.3d at 1313
(quoting E.L. Hamm & Assocs., Inc. v. England,
379 F.3d 1334
, 1342 (Fed. Cir. 2004)); see also HPI/GSA 3C, LLC v. United States,
364 F.3d 1327
, 1334 (Fed. Cir. 2004) (“The general rule is contra proferentem, which requires
ambiguities in a document to be resolved against the drafter.”); Triax Pac., Inc. v. West,
13 According to defendant:
Test synonyms consist of variations on commonly-used, qualitative test
descriptions, which help doctors of different backgrounds and experience
choose the right test for a given application. See generally Elissa
Passiment, et al., Decoding Laboratory Test Names: A Major Challenge to
Appropriate Patient Care, 28 J. General Internal Medicine 453 (2013),
available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3579985/ (last
visited Dec. 18, 2019). Synonyms can also help laboratory personnel
validate results from one test by identifying other “synonymous” tests that
use a different methodology. See pp. 29-34 (discussing alternative
performance assessments).
(internal references omitted).
43
130 F.3d 1469
, 1475 (Fed. Cir. 1997) (“More subtle ambiguities are deemed latent and
are accorded an interpretation favorable to the contractor under the doctrine of contra
proferentem.”); T.W. Laquay Marine, LLC v. United States,
127 Fed. Cl. 748
, 762 (2016)
(“A latent ambiguity should be construed against the Government in accordance with the
recognized contract interpretation principle of contra proferentum.”).
According to the United States Supreme Court, “as between two reasonable and
practical constructions of an ambiguous contractual provision . . . . the provision should
be construed less favorably to that party which selected the contractual language.” United
States v. Seckinger,
397 U.S. 203
, 216, reh’g denied,
397 U.S. 1031
(1970). This doctrine
of contra proferentem “‘pushes the drafters toward improving contractual forms and it
saves contractors from hidden traps not of their own making.’” Fry Commc’ns, Inc. v.
United States,
22 Cl. Ct. 497
, 503 (1991) (quoting Sturm v. United States,
190 Ct. Cl. 691
,
697,
421 F.2d 723
, 727 (1970)). Similarly, according to the United States Court of Appeals
for the Federal Circuit: “When a dispute arises as to the interpretation of a contract and
the contractor’s interpretation is reasonable, we apply the rule of contra proferentem,
which requires that ambiguous or unclear terms that are subject to more than one
reasonable interpretation be construed against the party who drafted the document.”
Turner Constr. Co. v. United States,
367 F.3d 1319
, 1321 (Fed. Cir. 2004) (citing United
States v. Turner Constr. Co.,
819 F.2d 283
, 286 (Fed. Cir. 1987)); see also States Roofing
Corp. v. Winter,
587 F.3d 1364
, 1372 (Fed. Cir. 2009); Gardiner, Kamya & Assocs. v.
Jackson, 467 F.3d at 1352
; HPI/GSA-3C, LLC v.
Perry, 364 F.3d at 1334
(Fed. Cir. 2004).
The Federal Circuit in Blue and Gold Fleet further held that “[u]nder the doctrine,
where a government solicitation contains a patent ambiguity, the government contractor
has ‘a duty to seek clarification from the government, and its failure to do so precludes
acceptance of its interpretation’ in a subsequent action against the government.” Blue
and Gold Fleet, L.P. v. United
States, 492 F.3d at 1313
(quoting Stratos Mobile Networks
USA, LLC v. United
States, 213 F.3d at 1381
(quoting Statistica, Inc. v. Christopher,
102 F.3d 1577
, 1582 (Fed. Cir. 1996))); see also Premier Office Complex of Parma, LLC v.
United States,
134 Fed. Cl. 83
, 88 (2017) (“A patent ambiguity is one that is ‘obvious,
gross, [or] glaring.’” (alteration in original) (quoting H & M Moving, Inc. v. United States,
499 F.2d 660
, 671,
204 Ct. Cl. 696
, 716 (1974))); West Bay Builders, Inc. v. United States,
85 Fed. Cl. 1
, 15 (2008) (“A patent ambiguity is one that is obvious, gross, glaring, so that
[the] plaintiff contractor had a duty to inquire about it at the start.”) (alteration in original)
(internal quotation marks omitted).
Protestor in the above-captioned bid protest did not put forth any argument
addressing whether the Solicitation’s requirement to include “Name/Synonyms” in its
standard test catalog constitutes a patent ambiguity. Nevertheless, the court finds that it
does not constitute a patent ambiguity because it does not cause the Solicitation to
contain “facially inconsistent provisions.” See Stratos Mobile Networks USA, LLC v.
United
States, 213 F.3d at 1381
, nor was it glaringly wrong when MCI submitted its
proposal. The requirement to include “Name/Synonyms” instead is a latent ambiguity, and
as such, the “general rule of contra proferentem” applies, “which courts use to construe
ambiguities against the drafter.” See Blue and Gold Fleet, L.P. v. United States,
492 F.3d 44
at 1313. Construing the ambiguity against defendant in the above-captioned bid protest,
the court reads the Solicitation’s instruction to include synonyms to be considered
optional, and protestor’s standard test catalog currently displayed on its website to be
sufficient to meet the requirements of the Solicitation in this particular regard.
As discussed above, defendant and Mr. Basten also point out that the standard
test catalog on protestor’s website is missing other items required by the
Solicitation relating to “[t]est methodology,” 14 “[m]aximum turnaround time,” 15 “[a]ssay
14 According to defendant:
Test methodology, as the term implies, concerns the manner in which a
laboratory assesses and/or measures the analyte of interest to the clinician
ordering the test. There may be multiple testing methodologies for the same
analyte, which rely on different biological, chemical, or physical principles,
and which vary in complexity, speed, and/or reliability. Consequently,
depending on the clinical circumstances, one methodology may be better
suited than another methodology for testing the same analyte. See
generally Robert L. Schmidt & Rachel E. Factor, Understanding Sources of
Bias in Diagnostic Accuracy Studies, 137 Archives of Pathology &
Laboratory Medicine 558, 560 (2013), available at
https://www.archivesofpathology.org/doi/pdf/10.5858/arpa.2012-0198-RA
(last visited Dec. 18, 2019) (“[D]ifferences in methodology can lead to
different outcomes[.]”).
(footnote omitted) (internal references omitted).
15 According to defendant:
Maximum turnaround time, as that term implies, generally concerns the
longest anticipated interval (e.g., hours, days, weeks) between the testing
laboratory’s receipt of the specimen and the laboratory’s reporting of results.
See McGraw-Hill Dictionary of Scientific & Technical Terms 1677 (2d ed.
1978) (defining “turnaround time”). As explained above, tests for the same
analyte may have different turnaround times depending on the methodology
used (as well as the testing laboratory’s resources). Doctors may choose
one test over another when proper care demands a shorter turnaround time,
or instead may choose to prioritize accuracy over immediacy. See generally
Robert C. Hawkins, Laboratory Turnaround Time, 28 Clinical Biochemist
Revs. 179, 179 (2007), available at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2282400/pdf/cbr28_4p179.
pdf (last visited Dec. 18, 2019) (“[T]imeliness is perhaps the most important
to the clinician, who may be prepared to sacrifice analytical quality for faster
turnaround time.”).
(internal references omitted).
45
schedule,” 16 and “[r]eference ranges.” 17 These deficiencies identified by Mr. Basten are
consistent with the court’s review of protestor’s standard test catalog currently displayed
on its website. Similar to the LOINC and test name/synonyms requirements, each of these
items were listed the Solicitation’s minimum requirements to be included in an offeror’s
standard test catalog, pursuant to subsection (f) of the Statement of Work. The court is
not able to verify whether the required information was on the website version of
protestor’s standard test catalog when protestor submitted its proposal, but reference to
these items do not appear on the website now. The court, therefore, finds that protestor
did not follow the Solicitation’s instructions with regard to providing the test methodology,
maximum turnaround times, assay schedules and reference ranges in its online standard
test catalog. The court notes that one of the tables attached to protestor’s proposal
included the turnaround times and assay schedules for each of the 611 line-item
laboratory tests and services requested by the solicitation. Nevertheless, the Solicitation
required these elements to be included with protestor’s standard test catalog which, as
protestor states, “contains over 2000 tests.” Therefore, because protestor did not provide
turnaround times and assay schedules for each test and service in its online standard test
catalog, protestor’s proposal does not comply with the Solicitation’s instructions.
Mr. Basten’s evaluation also indicated that “MCI’s sample patient reports did not
include each of two required identifiers: ‘the VA [a]ccession number and [the] MCI
[a]ccession number[.]’” (alteration in original). Subsection (g) of the Statement of Work of
the Solicitation required:
16 According to defendant:
The assay schedule defines when a testing laboratory will perform a
particular test. The assay schedule is often stated in days of the week.
Depending on a laboratory’s resources, or the test methodology involved, a
laboratory may not perform every assay every day of the week.
Consequently, knowing when the laboratory will perform a particular assay
can also inform the clinician’s selection of one test over another.
(footnote omitted) (internal references omitted).
17 According to defendant:
[R]eference ranges convey the interval of values within the normal range
for a particular test. They “are the most common decision support tool used
for interpretation of numerical pathology reports.” Graham Jones & Anthony
Barker, Reference Intervals, 29 Clinical Biochemist Revs. S93, S93 (2008),
available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2556592/pdf/c
br29_s_pgs93.pdf (last visited Dec. 18, 2019). Reference ranges for a
particular analyte may vary depending on the test methodology used. See
id. at S94.
It is therefore imperative that clinicians know what reference
range to expect when they order a test.
(internal references omitted).
46
g. Sample patient report format for the same 10 tests that were submitted
for line item “e” demonstrating all required report elements are listed.
• Each test report shall include as a minimum: Patients name and
identification number (social security number)[,] Physician’s name (if
supplied)[,] Test Accession Number assigned by facility[,] Facility name[,]
Patients location clinic/ward (if supplied)[,] Date/Time specimen received in
reference lab[,] Test ordered[,] Date/time of specimen collection (if
available)[,] Date test completed[,] Test result[,] Flagged abnormal[,]
Reference range[,] Testing laboratory specimen number[,] Name, address
and CLIA number of Contractor testing facility[,] Type of specimen[,] Any
additional comments related to test provided by submitting labs[.] Any other
information the laboratory has that may indicate a questionable validity of
test results[.] Unsatisfactory specimen shall be reported with regard to its
unsuitability for testing[.]
(emphasis added). One of the ten sample test reports from protestor’s proposal provides
the following information:
47
As indicated by the excerpt included immediately above, the sample report
contains only one “Accession” number. (capitalization in original). It is not clear whether
the number is intended to be the “Test Accession Number assigned by the facility,” or the
“Testing laboratory specimen number,” each of which were required by the Solicitation.
(capitalization in original). Nevertheless, the fact that there are not two numbers that could
match these two required items, indicates that protestor’s proposal is not compliant with
the Solicitation’s instructions.
Defendant next asserts that Mr. Basten’s evaluation properly found that “MCI’s
quotation altogether omitted ‘a copy of their results of external or alternative performance
assessments for the 10 tests’ reflected in its sample patient reports.” In protestor’s
submissions to this court, protestor disputes this conclusion by Mr. Basten, citing to its
production of ten “Antibody Validation Log[s]” for the same ten tests for which it provided
sample test reports. Protestor’s production of the Validation Logs, however, appear to be
in response to a separate requirement of the Solicitation. Subsection (e) of the
Solicitation’s Statement of Work states that the “[c]ontractor shall provide written
documentation proving that they have successfully completed method performance
validation &/or verification studies as appropriate for any 10 tests (listed within the
attached item list) signed by the Laboratory Director.” To that effect, protestor’s proposal
includes an attachment titled: “VALIDATION & VERIFICATION REPORT,” which
includes ten “Antibody Validation Log[s]” for the same ten tests for which protestor
provided sample reports for in its proposal. (capitalization and emphasis in original). For
example, protestor’s Antibody Validation Log for Thyroglobulin provides as follows:
48
The Solicitation in subsection (i) of the Statement of Work, however, additionally requires
that the “[c]ontractor shall provide a copy of their results of external or alternative
performance assessments for the same 10 tests that were submitted for line item[s] ‘e &
g.’” Protestor’s proposal includes no additional submission which conforms to this
instruction in subsection (i). Protestor’s proposal, therefore, was incomplete and not in
compliance with the Solicitation in that regard.
Defendant also asserts that “MCI’s quotation materially altered a specific
attestation required by the solicitation.” In subsection (k) of the Statement of Work, the
Solicitation states that the “[c]ontractor shall provide written attestation that they have
successfully completed the method performance validation &/or verification studies for all
of the tests listed within the item list.” Protestor’s proposal includes an “Attestation
Statement,” which states:
MCI provides attestation that we fully meet the requirements as being
accredited by the College of American Pathology (CAP) and Certified
49
by (CLIA) see attachments to run all the listed test, [sic] We [sic] have
successfully completed the method performance validation and/or
verification on a [sic] many of the test [sic] listed. Our Partner
laboratories that we work with have been validated on all of the testing
that we currently are not.
(capitalization and emphasis in original). The court finds that, by attesting only to having
completed performance validation and/or verification for “many of the test[s] listed,”
protestor has failed to conform to the Solicitation’s instruction that the offeror “shall
provide written attestation that they have successfully completed the method performance
validation &/or verification studies for all of the tests listed within the item list.” (emphasis
omitted). Moreover, protestor statement that “[o]ur [p]artner laboratories that we work with
have been validated on all of the testing that we currently are not,” confirms that protestor
has not completed performance validation and/or verification for all of the required
laboratory tests and services, and appears to be a vague reference to its possible
unidentified subcontractors. (emphasis omitted).
Finally, defendant argues that “MCI’s quotation was not responsive to the
solicitation’s past performance requirement.” Subsection (j) of the Solicitation’s Statement
of Work reads:
j. Contractors shall provide Past Performance information for three
contracts (two must be from VA Medical Centers outside VISN 16)
performed within the last five years with similar scope and complexity as
this effort. The attached Past Performance questionnaire shall be used.
Please have each reference complete the form and return it directly to insert
CO name.[18]
Protestor’s proposal provided the following information regarding past
performances:
MCI submits recent and relevant contracts for the same or similar items and
other references (including contract numbers, point of contact with
telephone numbers and other relevant information in accordance with FAR
52.212-1(b)(10):
Contract Number #1: W912JB-18-P-0079, Michigan Army National
Guard
a. Description/Scope of Services: Medical laboratory testing
and analysis services in support of Army National Guard,
State of Michigan. Scope includes providing personnel,
18 Although the above-quoted text refers to an “attached Past Performance
questionnaire,” no such document was attached to the Solicitation in the administrative
record before the court.
50
equipment, supplies, and administration necessary to perform
medical laboratory testing services.
b. Period of Performance: 09/26/2018 – 09/25/2019
c. Contract Price: $59,482.00
...
g. How pervious effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform reference laboratory testing
services for the Michigan Army National Guard. This includes
courier services, providing supplies and equipment, and
performing pre-analytic, analytic, and post-analytic laboratory
testing services.
Contract Number #2: 1282A7-18-A-0009, USDA Forest Services, Job
Corps Center
a. Description/Scope of Services: Blanket Purchase
Agreement (BPA) for medical laboratory testing and analysis
services in support of USDA Forest Service, Job Corps Center
(25 locations). Scope includes providing personnel,
equipment, supplies, and administration necessary to perform
medical laboratory testing services.
b. Period of Performance: 09/24/2018 – 09/22/2023
c. Contract Price: $250,000.00 (maximum of BPA)
...
f. How previous effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform reference laboratory testing
services for the USDA Forest Services Job Corps Centers.
This include courier services, providing supplies and
equipment, and performing pre-analytic, analytic, and post-
analytic laboratory testing services.
Contract Number #3: W912EE-18-P-0077, US Army Corps of Engineer,
Vicksburg, MS, District Headquarters
a. Description/Scope of Services: Medical laboratory testing
and analysis services in support of US Army Corps of
51
Engineer, District Headquarters. Scope includes providing
personnel, equipment, supplies, and administration
necessary to perform medical laboratory testing services.
b. Period of Performance: 10/01/2018 – 09/30/2023
c. Contract Price: $50,000
...
f. How previous effort is similar in scope and magnitude to
those specified in this requirement: This effort is similar in
scope and magnitude to those specified in this requirement as
MCI provides all personnel, supervision, services, and
supplies necessary to perform select lab testing services for
the MVK Vicksburg, MS location. This includes courier
services, providing supplies and equipment, and performing
pre-analytic, analytic, and post-analytic laboratory testing
services.
(emphasis in original).
The court also notes that in Mr. Basten’s evaluation of protestor’s proposal, he
states that there was “[n]ot enough information to determine what tests were performed
for previous contracts.” In protestor’s motion for judgment on the administrative record,
protestor responds to Mr. Basten’s evaluation on this issue, stating that “[t]he stated terms
of the Solicitation do not require that MCI provide a detailed test listing for each of its
previous contracts.” Protestor also cites to Section E.1 of the Solicitation, which
incorporated FAR § 52.212-1, and which states in relevant part that, “[a]s a minimum,
offers must show . . . [p]ast performance information, when included as an evaluation
factor, to include recent and relevant contracts for the same or similar items and other
references (including contract numbers, points of contact with telephone numbers and
other relevant information).”
The Solicitation required that two of the three previous contracts provided by an
offeror’s proposal were to have been with VA Medical Centers outside of VISN 16.
Protestor’s proposal, however, only included past performance information for contracts
with (1) the Michigan Army National Guard, (2) the United States Department of
Agriculture, Forest Service, and (3) the US Army Corps of Engineers. None of these
contracts were with a VA Medical Center, let alone a VA Medical Center outside of VISN
16. Therefore, while protestor is correct that the Solicitation did not require protestor to
provide lists of laboratory tests and services performed in its previous contracts, the
previous contracts that protestor provided as past performance examples are not
consistent with the requirements of the Solicitation. Moreover, protestor, in relying on the
part of the Solicitation that incorporates FAR § 52.212-1, fails to consider that the
Solicitation’s instructions in the Statement of Work required a more specific response from
offerors, namely, previous contracts with VA Medical Centers outside of VISN 16. The
Solicitation, therefore, requires more than the minimum response required by FAR
52
§ 52.212-1.
In sum, protestor’s proposal is deficient in a number of respects. Most importantly,
protestor is unable to personally perform all of the laboratory tests required by the
solicitation because, as protestor now admits, it is not CAP accredited in Molecular
Pathology and therefore cannot perform 127 of the 611 line-items of laboratory test and
services required by the Solicitation. Although protestor’s proposal makes passing
reference that it may subcontract out these laboratory tests and services that it could not
perform itself to its allegedly qualified partners, the proposal was wholly absent as to the
names and appropriate certifications of the subcontractor or subcontractors it intended to
use, and which tests it intended to subcontract out. Moreover, it was only during the
course of this litigation that protestor identified how many tests it could not perform, as
this information was not included in protestor’s proposal. Given that the Solicitation
required that the offeror demonstrate that it could perform all of the required tests,
protestor’s proposal did not meet the minimum requirements of the Solicitation, and
therefore protestor’s proposal was nonresponsive to the Solicitation, and protestor did not
have a substantial chance of award. See A & D Fire Protection, Inc. v. United
States, 72 Fed. Cl. at 138
(“A bidder submitting a nonresponsive bid has no standing to protest an
award, because it has no chance of receiving the award.”); Ryan Co. v. United
States, 43 Fed. Cl. at 657
(“[T]he phrase ‘interested party,’ as used in 28 U.S.C. § 1491(b), does
not include a bidder . . . determined to be nonresponsive.”); see also Digitalis Educ.
Solutions, Inc. v. United States,
664 F.3d 1380
(“Only an interested party has standing to
challenge a contract award.” (internal quotation marks omitted)); Rex Serv. Corp. v.
United
States, 448 F.3d at 1307
(“To prove a direct economic interest, a party must show
that it had a substantial chance of winning the contract.” (internal quotation marks
omitted)). Therefore, based on the findings and discussion above, protestor’s complaint
is dismissed for lack of standing.
CONCLUSION
For the foregoing reasons, defendant’s and intervenor’s respective motions to
dismiss for lack of subject-matter jurisdiction are GRANTED based on protestor’s lack of
standing. Protestor’s complaint is DISMISSED. The Clerk of the Court shall enter
JUDGMENT consistent with this Opinion.
IT IS SO ORDERED.
s/Marian Blank Horn
MARIAN BLANK HORN
Judge
53 |
4,513,420 | 2020-03-06 13:02:36.402549+00 | null | http://www.jud.ct.gov/external/supapp/Cases/AROcr/CR334/334CR11.pdf | ***********************************************
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GEORGE R. DICKERSON v. CITY
OF STAMFORD ET AL.
(SC 20244)
Robinson, C. J., and Palmer, McDonald, D’Auria,
Mullins, Kahn and Ecker, Js.
Syllabus
The named defendant, the city of Stamford, appealed from the decision of
the Compensation Review Board, which vacated the Workers’ Compen-
sation Commissioner’s dismissal of the plaintiff’s claim for benefits
under the statute (§ 7-433c) governing compensation for municipal
police officers or firefighters with hypertension or heart disease. In
2000, while employed as a police officer with the Stamford Police Depart-
ment, the plaintiff was diagnosed with hypertension, and, in 2004, the
commissioner concluded that the plaintiff’s hypertension was compensa-
ble under § 7-433c. The plaintiff retired from the police department in
2004, and, in 2014, he suffered a myocardial infarction as a result of
coronary artery disease. The plaintiff then filed a claim under § 7-433c for
compensation for his coronary artery disease and myocardial infarction,
asserting that these events or conditions were the sequelae of his com-
pensable claim for hypertension. The commissioner concluded that
hypertension and heart disease are two separate diseases for purposes
of § 7-433c and that the plaintiff failed to file a notice of new claim
within one year of his diagnosis of heart disease, in accordance with
the notice provisions of the Workers’ Compensation Act (§ 31-275 et
seq.), and dismissed his claim. The plaintiff appealed from the commis-
sioner’s decision to the board, which vacated the commissioner’s deci-
sion, concluding that a cardiac event that occurs subsequent to an initial,
compensable injury under § 7-433c need not be deemed a new injury
and that to require a new notice of claim for a subsequent manifestation
of a compensable injury would be inconsistent with the way in which
workers’ compensation claims have been previously handled under the
act. The board remanded the case to the commissioner to make indepen-
dent factual findings with respect to whether the plaintiff’s heart disease
was caused by his hypertension or constituted a new injury. On the
city’s appeal from the decision of the board, held:
1. Contrary to the city’s claim, the plaintiff satisfied the jurisdictional prereq-
uisites of § 7-433c and was not required to file notice of new claim
in order to pursue benefits under § 7-433c for his heart disease, and,
accordingly, this court upheld the board’s decision to vacate the commis-
sioner’s dismissal of the plaintiff’s claim for benefits on the basis of the
plaintiff’s failure to file a notice of new claim; this court adopted the
reasoning and result of the companion case of Coughlin v. Stamford
Fire Dept. (334 Conn. ), in which this court held that, when a plaintiff
has a compensable claim for hypertension under § 7-433c, he also may
be eligible for benefits for subsequent heart disease if the heart disease
is causally related to the hypertension.
2. This court determined that a claimant who suffers a compensable primary
injury may also be compensated for a subsequent injury under § 7-
433c when the subsequent injury is the direct and natural result of
the compensable primary injury, and whether a sufficient nexus of
proximate cause exists between the two injuries requires a workers’
compensation commissioner to use a substantial factor causation stan-
dard; accordingly, because the commissioner in the present case dis-
missed the plaintiff’s claim for benefits without making an independent
factual finding as to causation, this court directed that, on remand, the
commissioner shall determine whether the plaintiff’s hypertension was
a substantial factor in the development of his heart disease.
Argued November 12, 2019—officially released March 10, 2020
Procedural History
Appeal from the decision of the Workers’ Compensa-
tion Commissioner for the Seventh District dismissing
the plaintiff’s claim for certain workers’ compensation
benefits, brought to the Compensation Review Board,
which vacated the commissioner’s decision and
remanded the case for further proceedings, and the
defendants appealed. Affirmed; further proceedings.
Scott Wilson Williams, for the appellants (defend-
ants).
Andrew J. Morrissey, for the appellee (plaintiff).
Opinion
KAHN, J. The named defendant, the city of Stamford,1
appeals2 from the decision of the Compensation Review
Board (board), which vacated the decision of the Work-
ers’ Compensation Commissioner for the Seventh Dis-
trict (commissioner) dismissing the claim for benefits
that the plaintiff, George R. Dickerson, brought pursu-
ant to General Statutes § 7-433c (a).3 Dickerson v. Stam-
ford, No. 6215, CRB 7-17-8 (September 12, 2018). On
appeal, the defendant asserts that the board incorrectly
determined that the commissioner had jurisdiction over
the plaintiff’s claim because, at the time of his diagnosis
and disability, the plaintiff had retired and was no longer
a uniformed member of the Stamford Police Depart-
ment (department). Furthermore, the defendant asserts
that a claim for a new injury of heart disease cannot
be established on the basis of its causal relationship to
the plaintiff’s initial compensable claim for hyperten-
sion because § 7-433c mandates that hypertension and
heart disease be treated as separate and distinct injur-
ies. Therefore, the defendant claims, the plaintiff was
required to give a separate, timely notice of his heart
disease claim within one year of his diagnosis. The
plaintiff responds that the jurisdictional prerequisites
of § 7-433c were met and that his heart disease claim
was timely because it flowed from his compensable
claim for hypertension, and neither a plain reading of
§ 7-433c nor this court’s interpretation of that statute
requires hypertension and heart disease to be treated
as separate diseases when they are causally related.
Finally, the defendant argues that, even if the plaintiff
met the jurisdictional prerequisites and his claim for
heart disease was timely, the plaintiff’s hypertension
must be the sole contributing factor to his heart disease
for the latter claim to be eligible for benefits. The plain-
tiff responds that the long-standing substantial factor
standard that applies to subsequent injury claims
brought under the Workers’ Compensation Act (act),
General Statutes § 31-275 et seq., also applies to his
claim. We agree with the plaintiff and, accordingly,
affirm the decision of the board.
The record reveals the following undisputed facts
and procedural history. The plaintiff became a regular
member of the department in 1984.4 While employed
as a police officer, the plaintiff was diagnosed with
hypertension on July 17, 2000, and filed a timely claim
for benefits pursuant to § 7-433c. The commissioner, in
an October 7, 2004 finding and award on that claim,
concluded that the plaintiff’s hypertension was compen-
sable and awarded a 40 percent permanent partial dis-
ability. The plaintiff retired from the department in 2004.
On September 4, 2014, the plaintiff suffered an infe-
rior wall myocardial infarction as a result of coronary
artery disease and underwent an emergency angioplasty
with a stent placement in his right coronary artery.
The plaintiff then filed a heart disease claim, seeking
compensation for both his coronary artery disease and
myocardial infarction. In doing so, the plaintiff asserted
that these diagnoses were the sequelae of his compensa-
ble claim for hypertension. Following a hearing on the
heart disease claim, the commissioner issued an
amended finding and dismissal dated August 28, 2017.5
The commissioner, relying on this court’s decision in
Holston v. New Haven Police Dept.,
323 Conn. 607
,
149 A.3d 165
(2016), determined that hypertension and heart
disease are two separate diseases for the purpose of
§ 7-433c and that the plaintiff failed to file a notice of
new claim within one year of his diagnosis of heart
disease in accordance with the notice provisions of
the act. Accordingly, the commissioner found that the
plaintiff was not entitled to benefits for heart disease
and dismissed his claim. The plaintiff appealed from
that decision to the board.
In its decision, the board stated that it ‘‘[did] not
believe [that] a cardiac event that occurred at a later
date from an initial compensable injury [pursuant to
§ 7-433c] must, as a matter of law, be deemed a new
injury.’’ (Emphasis in original; internal quotation marks
omitted.) The board observed that this court has consis-
tently held that § 7-433c ‘‘provides for the administra-
tion of benefits in the same amount and the same man-
ner as that provided under [the act],’’ and ‘‘to require
a future manifestation of a compensable injury to
require a new notice of claim . . . would be inconsis-
tent with the way [workers’ compensation] claims have
been handled since the inception of the [act].’’ (Internal
quotation marks omitted.) Accordingly, because the
commissioner did not present independent factual find-
ings related to whether the plaintiff’s heart disease was
caused by his hypertension or constituted a new injury,
the board vacated the commissioner’s amended finding
and dismissal and remanded the case for further pro-
ceedings. See footnote 6 of this opinion. This appeal
followed.
I
STANDARD OF REVIEW
‘‘The principles that govern our standard of review
in workers’ compensation appeals are well established.
The conclusions drawn by [the commissioner] from
the facts found must stand unless they result from an
incorrect application of the law to the subordinate facts
or from an inference illegally or unreasonably drawn
from them. . . . [Moreover, it] is well established that
[a]lthough not dispositive, we accord great weight to
the construction given to the workers’ compensation
statutes by the commissioner and [the] board. . . .
Cases that present pure questions of law, however,
invoke a broader standard of review than is ordinarily
involved in deciding whether, in light of the evidence,
the agency has acted unreasonably, arbitrarily, illegally
or in abuse of its discretion. . . . We have determined,
therefore, that the traditional deference accorded to an
agency’s interpretation of a statutory term is unwar-
ranted when the construction of a statute . . . has not
previously been subjected to judicial scrutiny [or to]
. . . a governmental agency’s time-tested interpreta-
tion . . . .’’ (Footnote omitted; internal quotation
marks omitted.) Holston v. New Haven Police
Dept., supra
,
323 Conn. 611
–13. In addition, ‘‘we are mindful
of the proposition that all workers’ compensation legis-
lation, because of its remedial nature, should be broadly
construed in favor of disabled employees. . . . This
proposition applies as well to the provisions of [§] 7-
433c . . . because the measurement of the benefits to
which a § 7-433c claimant is entitled is identical to the
benefits that may be awarded to a [claimant] under
. . . [the act]. . . . We also recognize, however, that
the filing of a timely notice of claim is a condition
precedent to liability and a jurisdictional requirement
that cannot be waived.’’ (Internal quotation marks omit-
ted.)
Id., 613. II
JURISDICTION AND TIMELINESS
We first consider the defendant’s claims that the
plaintiff did not meet the jurisdictional prerequisites of
§ 7-433c because he was retired when he pursued his
claim for heart disease and that the plaintiff failed to
give timely, separate notice of his heart disease claim.
In Coughlin v. Stamford Fire Dept., 334 Conn. ,
A.3d (2020), which we also decide today, we held
that, when a plaintiff has a compensable claim for
hypertension under § 7-433c, the plaintiff may also be
eligible for benefits for subsequent heart disease if, as
required by the act, the plaintiff’s heart disease is caus-
ally related to his hypertension. We adopt the reasoning
and result of that decision herein and, therefore, con-
clude that the plaintiff met the jurisdictional prerequi-
sites of § 7-433c. We hold that the plaintiff was not
required to file a notice of new claim in order to pursue
benefits for his heart disease.
III
CAUSATION
We next turn to the defendant’s contention that the
plaintiff’s hypertension must be the sole contributing
factor to his heart disease for the plaintiff to be eligible
for benefits. ‘‘[O]nce § 7-433c coverage is established,
the measurement of the plaintiff’s benefits under this
statute is identical to the benefits that may be awarded
to a plaintiff under [the act].’’ Felia v. Westport,
214 Conn. 181
, 185,
571 A.2d 89
(1990); see also Lambert
v. Bridgeport,
204 Conn. 563
, 566,
529 A.2d 184
(1987).
Under the act, a claimant, having suffered a compensa-
ble primary injury during the course of his employment,
may also be compensated for a subsequent injury when
the subsequent injury is ‘‘the direct and natural result
of a compensable primary injury.’’ (Internal quotation
marks omitted.) Sapko v. State,
305 Conn. 360
, 378–80,
44 A.3d 827
(2012).
Whether a sufficient nexus of proximate cause exists
between the two injuries for the subsequent injury to
be compensable requires commissioners to use a ‘‘sub-
stantial factor’’ causation standard. See, e.g., Birnie v.
Electric Boat Corp.,
288 Conn. 392
, 408–409,
953 A.2d 28
(2008). This court has construed the requirement to
mean that there must exist ‘‘some causal connection’’
between the two injuries. (Emphasis omitted; internal
quotation marks omitted.)
Id., 410. ‘‘It
has been deter-
mined that the substantial factor standard is met if the
employment materially or essentially contributes to
bring about an injury . . . . The term substantial, how-
ever, does not connote that the employment must be
the major contributing factor in bringing about the
injury . . . [or] that the employment must be the sole
contributing factor in development of an injury. . . .
[T]he substantial factor causation standard simply
requires that the employment, or the risks incidental
thereto, contribute to the development of the injury
in more than a de minimis way.’’ (Citations omitted;
emphasis altered; internal quotation marks omitted.)
Id., 412–13; see
also Filosi v. Electric Boat Corp.,
330 Conn. 231
, 244–45,
193 A.3d 33
(2018).
In interpreting the act, this court has previously noted
that, ‘‘[u]nless causation under the facts is a matter of
common knowledge, the plaintiff has the burden of
introducing expert testimony to establish a causal link
between the compensable workplace injury and the
subsequent injury.’’ Sapko v.
State, supra
,
305 Conn. 386
. ‘‘When . . . it is unclear whether an employee’s
[subsequent injury] is causally related to a compensable
injury, it is necessary to rely on expert medical opinion.
. . . Unless the medical testimony by itself establishes
a causal relation, or unless it establishes a causal rela-
tion when it is considered along with other evidence,
the commissioner cannot reasonably conclude that the
[subsequent injury] is causally related to the employee’s
employment.’’ (Citation omitted; internal quotation
marks omitted.) Marandino v. Prometheus Pharmacy,
294 Conn. 564
, 591–92,
986 A.2d 1023
(2010).
In the present case, the commissioner dismissed the
plaintiff’s claim without making an independent factual
finding as to whether the plaintiff’s hypertension was
a substantial factor in the development of his heart
disease. On appeal, the board remanded the case to the
commissioner for further proceedings, noting that, ‘‘[i]n
matters [in which] it is not definitive whether a plain-
tiff’s cardiac ailment is the manifestation of a prior
injury or a new injury, the commissioner must reach a
factual determination on the issue prior to proceeding
forward.’’6 We conclude that, on remand, the commis-
sioner shall determine whether the plaintiff’s hyperten-
sion was a substantial factor in his subsequent develop-
ment of heart disease.
The decision of the Compensation Review Board is
affirmed and the case is remanded to the board with
direction to remand the case to the commissioner for
further proceedings in accordance with this opinion.
In this opinion the other justices concurred.
1
PMA Management Corporation of New England, a third-party administra-
tor for the city of Stamford, is a defendant in the present case and joined
in this appeal. In the interest of clarity, we hereinafter refer to the city of
Stamford as the defendant.
2
The defendant appealed from the decision of the Compensation Review
Board to the Appellate Court, and we transferred the appeal to this court
pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.
3
General Statutes § 7-433c (a) provides: ‘‘Notwithstanding any provision
of chapter 568 or any other general statute, charter, special act or ordinance
to the contrary, in the event a uniformed member of a paid municipal fire
department or a regular member of a paid municipal police department who
successfully passed a physical examination on entry into such service, which
examination failed to reveal any evidence of hypertension or heart disease,
suffers either off duty or on duty any condition or impairment of health
caused by hypertension or heart disease resulting in his death or his tempo-
rary or permanent, total or partial disability, he or his dependents, as the
case may be, shall receive from his municipal employer compensation and
medical care in the same amount and the same manner as that provided
under chapter 568 if such death or disability was caused by a personal injury
which arose out of and in the course of his employment and was suffered
in the line of duty and within the scope of his employment, and from the
municipal or state retirement system under which he is covered, he or his
dependents, as the case may be, shall receive the same retirement or survivor
benefits which would be paid under said system if such death or disability
was caused by a personal injury which arose out of and in the course of
his employment, and was suffered in the line of duty and within the scope
of his employment. If successful passage of such a physical examination
was, at the time of his employment, required as a condition for such employ-
ment, no proof or record of such examination shall be required as evidence
in the maintenance of a claim under this section or under such municipal
or state retirement systems. The benefits provided by this section shall be
in lieu of any other benefits which such policeman or fireman or his depen-
dents may be entitled to receive from his municipal employer under the
provisions of chapter 568 or the municipal or state retirement system under
which he is covered, except as provided by this section, as a result of any
condition or impairment of health caused by hypertension or heart disease
resulting in his death or his temporary or permanent, total or partial disabil-
ity. As used in this section, ‘municipal employer’ has the same meaning as
provided in section 7-467.’’
4
General Statutes § 7-433c (b) provides in relevant part that ‘‘those persons
who began employment on or after July 1, 1996, shall not be eligible for
any benefits pursuant to this section.’’ In the present case, it is undisputed
that the plaintiff was hired in 1984.
5
The plaintiff filed a motion to correct the initial finding and dismissal,
dated August 17, 2017, seeking the omission of any references to Staurovsky
v. Milford Police Dept.,
164 Conn. App. 182
,
134 A.3d 1263
(2016), appeal
dismissed,
324 Conn. 693
,
154 A.3d 525
(2017), which the plaintiff claimed had
not been an issue for consideration at the formal hearing. The commissioner
granted the motion, resulting in the amended finding and dismissal.
6
The commissioner noted that the parties stipulated to a number of facts,
including that the plaintiff’s long-standing hypertension was a significant
contributing factor in his development of coronary artery disease that ulti-
mately resulted in his myocardial infarction. The plaintiff also submitted,
and the commissioner admitted into evidence as full exhibits, two letters
from the plaintiff’s treating physician, Steven H. Kunkes. Neither party,
however, challenged the board’s decision to remand the case to the commis-
sioner for further proceedings, and, therefore, we affirm the decision of the
board without intimating a view on how the issue of causation is to be
resolved by the commissioner on remand. |
4,639,203 | 2020-12-03 16:04:44.499316+00 | null | http://www.in.gov/judiciary/opinions/pdf/12032002jsk.pdf | MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Dec 03 2020, 8:42 am
court except for the purpose of establishing CLERK
Indiana Supreme Court
the defense of res judicata, collateral Court of Appeals
and Tax Court
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Victoria Bailey Casanova Curtis T. Hill, Jr.
Casanova Legal Services, LLC Attorney General of Indiana
Indianapolis, Indiana Catherine E. Brizzi
Deputy Attorney General
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Matthew Powell, December 3, 2020
Appellant-Defendant, Court of Appeals Case No.
20A-CR-1371
v. Appeal from the
Fayette Superior Court
State of Indiana, The Honorable
Appellee-Plaintiff. Hubert Branstetter, Jr., Special
Judge
Trial Court Cause No.
21D01-1904-F3-278
Kirsch, Judge.
[1] After Matthew Powell (“Powell”) entered an open plea agreement with the
State, the trial court sentenced him to eight years for Level 4 felony dealing in
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 1 of 13
methamphetamine 1 and enhanced that sentence by seven years because of
Powell’s habitual offender status,2 yielding an aggregate sentence of fifteen
years. Powell raises two issues on appeal, which we restate as:
I. Whether the trial court abused its discretion by failing to cite
Powell’s guilty plea as a mitigating factor; and
II. Whether Powell’s fifteen-year aggregate sentence is
inappropriate considering the nature of his offense and his
character.
[2] We affirm.
Facts and Procedural History
[3] On April 15, 2019, an officer observed Powell driving away from a residence.
Appellant’s App. Vol. II at 41. The officer was aware that Powell was an habitual
traffic offender, so he alerted other patrol units of Powell’s location and vehicle
description. Id. Officers located Powell and conducted a traffic stop; they
searched Powell and his vehicle. Id. Officers located a plastic medication
container that held two Suboxone pills and 1.5 grams of methamphetamine in
Powell’s coat pocket. Id. Powell stated, “[T]hat meth isn’t mine. I just picked
it up and was taking it to somebody.” Id. Officers also found a plastic bottle
1
See
Ind. Code § 35-48-4-1
.1(a)(2).
2
See
Ind. Code § 35-50-2-8
(i)(1).
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 2 of 13
that contained nineteen empty niacin capsules, which they believed were used
to store and transport drugs.
Id.
[4] On April 16, 2019, the State charged Powell with Level 4 felony dealing in
methamphetamine, Level 6 felony possession of methamphetamine, Level 5
felony operating a motor vehicle after forfeiture of license for life, and Class A
misdemeanor possession of a controlled substance. Appellant’s App. Vol. II at 36.
On April 26, 2019, the State amended the information to allege that Powell was
an habitual offender.
Id. at 16
. Powell had charges pending in two other cases
under cause number 21C01-1707-F5-546 (“Cause 546”) and cause number
21C01-1511-F5-893 (“Cause 893”). Appellant’s Conf. App. Vol. II at 53. Under
Cause 546, Powell had pending charges for Level 5 felony possession of
methamphetamine, Level 6 felony maintaining a common nuisance, Class C
misdemeanor possession of paraphernalia, and an alleged habitual offender
status.
Id.
Under Cause 893, Powell had pending charges for aiding, inducing,
or causing dealing in a narcotic drug and an alleged habitual offender status.
Id.
[5] Powell entered a plea agreement that called for him to plead guilty to Level 4
felony dealing in methamphetamine and to being an habitual offender and, in
turn, the State would dismiss Powell’s charges for Level 6 felony possession of
methamphetamine, Level 5 felony operating a motor vehicle after forfeiture of
license for life, and Class A misdemeanor possession of a controlled substance.
Appellant’s App. Vol. II at 47. Under the agreement, Powell also pleaded guilty
to possession of methamphetamine under Cause 546 and aiding, inducing, or
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 3 of 13
causing dealing in a narcotic drug under Cause 893.
Id.
Thus, the State agreed
to dismiss the remaining charges in Cause 546 for Level 6 felony maintaining a
common nuisance, Class C misdemeanor possession of paraphernalia, and the
alleged habitual offender status and to dismiss the habitual offender charge in
Cause 893.
Id.
The plea agreement left the sentence to the trial court’s
discretion.
Id.
[6] The trial court accepted the plea agreement. Tr. Vol. II at 26. It imposed an
eight-year sentence for Level 4 dealing in methamphetamine and enhanced the
sentence by seven years because of Powell’s habitual offender status, all to be
served in the Indiana Department of Correction (“DOC”).
Id. at 26-27
. The
trial court found Powell’s criminal record as an aggravating factor, noting that
he had “at least 15 prior convictions.”
Id. at 26
. It found no mitigating factors.
Id.
Powell now appeals. We will provide additional facts as necessary.
Discussion and Decision
I. Abuse of Discretion
[7] Powell claims the trial court abused its discretion in failing to cite his guilty plea
as a mitigating factor. Sentencing is left to the discretion of the trial court, and
an appellate court reviews its decisions only for an abuse of that discretion.
Singh v. State,
40 N.E.3d 981
, 987 (Ind. Ct. App. 2015), trans. denied. An abuse
of discretion occurs if the decision is clearly against the logic and effect of the
facts and circumstances before the trial court.
Id.
The finding of mitigating
circumstances falls within the trial court’s discretion. Anglemyer v. State, 868
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 4 of
13 N.E.2d 482
, 490 (Ind. 2007), clarified on reh’g,
875 N.E.2d 218
(2007). The trial
court is not obligated to find a circumstance to be mitigating merely because it
is advanced by the defendant. Id. at 493. The trial court is also not required to
give the same weight to mitigating circumstances as does the defendant. Id. at
494.
[8] An allegation that the trial court failed to identify or find a mitigating factor
requires the defendant to show that the mitigating factor is both significant and
clearly supported by the evidence. Id. at 493. Further, if the trial court does not
find the existence of a mitigating factor, is it not obligated to explain why it has
found that the factor does not exist. Id. A trial court abuses its discretion only
if “the record does not support the reasons, or the sentencing statement omits
reasons that are clearly supported by the record and advanced for consideration,
or the reasons given are improper as a matter of law.” Baumholser v. State,
62 N.E.3d 411
, 416 (Ind. Ct. App. 2016) (quoting Anglemyer, 868 N.E.2d at 490),
trans. denied.
[9] Powell is correct that as a general rule, a defendant who pleads guilty is entitled
to some mitigating weight for the guilty plea:
Our courts have long held that a defendant who pleads guilty
deserves to have some mitigating weight extended to the guilty
plea in return. A guilty plea demonstrates a defendant’s
acceptance of responsibility for the crime and at least partially
confirms the mitigating evidence regarding his character. Scheckel
v. State,
655 N.E.2d 506
, 511 (Ind. 1995); see also Williams v. State,
430 N.E.2d 759
, 764 (Ind.1982) (“[A] defendant who willingly
enters a plea of guilty has extended a substantial benefit to the
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 5 of 13
state and deserves to have a substantial benefit extended to him
in return.”).
Cotto v. State,
829 N.E.2d 520
, 525 (Ind. 2005) (some internal citations omitted).
[10] However, whether a trial court should cite a guilty plea as a mitigating factor
“is necessarily fact sensitive, and not every plea of guilty is a significant
mitigating circumstance that must be credited by a trial court.” Cherry v. State,
772 N.E.2d 433
, 436-37 (Ind. Ct. App. 2002) (quoting Trueblood v. State,
715 N.E.2d 1242
, 1257 (Ind. 1999)), trans. denied. “For example, a guilty plea may
not be significantly mitigating when it does not demonstrate the defendant’s
acceptance of responsibility, or when the defendant receives a substantial benefit in
return for the plea.” Smith v. State,
908 N.E.2d 1251
, 1254 (Ind. Ct. App. 2009)
(quoting Anglemyer,
875 N.E.2d at 221
) (emphasis added).
[11] Powell acknowledges that a guilty plea is not necessarily entitled to mitigating
weight if a defendant receives a substantial benefit from the guilty plea, but he
argues that he did not receive a substantial benefit from the guilty plea. First,
he contends that he received no benefit from the dismissal of the Level 6 felony
possession of methamphetamine charge because he could not have been
convicted of both possession of methamphetamine and dealing in
methamphetamine because the possession offense was a lesser included offense
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 6 of 13
of the dealing charge.3 Powell then acknowledges that he received “some
limited benefit from the plea agreement” but contends this benefit was not
substantial, so the trial court abused its discretion in not citing his guilty plea as
a mitigating factor. Appellant’s Br. at 13.
[12] Here, Powell received a significant benefit from the guilty plea through the
dismissal of the charges for Level 5 felony operating a motor vehicle after
forfeiture of license for life and Class A misdemeanor possession of a controlled
substance. As Powell acknowledges, he could have received a sentence
between two years and eight years for Level 5 felony operating a motor vehicle
after forfeiture of license for life. See
Ind. Code § 35-50-2-6
. He also admits that
he could have received a one-year sentence for Class A misdemeanor
possession of a controlled substance. See
Ind. Code § 35-50-3-2
. What Powell
fails to acknowledge is that the plea agreement dismissed charges in Cause 546
and Cause 893, including charges for Level 6 felony maintaining a common
nuisance and Class C misdemeanor possession of paraphernalia. Appellant’s
App. Vol. II at 47. Thus, Powell received a substantial benefit from the plea
agreement. Accordingly, the trial court did not abuse its discretion in failing to
cite Powell’s guilty plea as a mitigating factor.
3
We will assume without deciding that the possession charge was a lesser included offense of the dealing
charge and that the trial court could not have entered judgment of conviction on both offenses.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 7 of 13
II. Inappropriate Sentence
[13] Powell argues that his sentence is inappropriate considering the nature of his
offenses and his character. Under Indiana Appellate Rule 7(B), we may revise
a sentence if, after due consideration of the trial court’s decision, we find the
sentence is inappropriate considering the nature of the offense and the character
of the offender. Anglemyer, 868 N.E.2d at 491. The nature of offense compares
the defendant’s actions with the required showing to sustain a conviction under
the charged offense, Cardwell v. State,
895 N.E.2d 1219
, 1224 (Ind. 2008), while
the character of the offender permits for a broader consideration of the
defendant’s character. Anderson v. State,
989 N.E.2d 823
, 827 (Ind. Ct. App.
2013), trans. denied. Whether a sentence is inappropriate turns on our sense of
the culpability of the defendant, the severity of the crime, the damage done to
others, and other factors that come to light in a given case. Cardwell, 895
N.E.2d at 1224.
[14] We consider not only the aggravators and mitigators found by the trial court but
also any other factors appearing in the record. Johnson v. State,
986 N.E.2d 852
,
856 (Ind. Ct. App. 2013). We defer to the trial court’s decision, and our goal is
to determine whether the appellant’s sentence is inappropriate, not whether
some other sentence would be more appropriate. Conley v. State,
972 N.E.2d 864
, 876 (Ind. 2012). “Such deference should prevail unless overcome by
compelling evidence portraying in a positive light the nature of the offense (such
as accompanied by restraint, regard, and lack of brutality) and the defendant’s
character (such as substantial virtuous traits or persistent examples of good
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 8 of 13
character).” Stephenson v. State,
29 N.E.3d 111
, 122 (Ind. 2015). When we
review a sentence, we seek to leaven the outliers, not to achieve a perceived
correct result. Cardwell, 895 N.E.2d at 1225.
Nature of Offense
[15] Powell argues that his fifteen-year aggregate sentence is inappropriate because
he contends “nothing about this offense is remarkable” or merits imposing two
years more than the advisory sentence for a Level 4 felony. Appellant’s Br. at 15-
16. When considering the nature of the offense, the advisory sentence is the
starting point in our analysis. Holloway v. State,
950 N.E.2d 803
, 806 (Ind. Ct.
App. 2011); Anglemyer, 868 N.E.2d at 494. A Level 4 felony carries an advisory
sentence of six years, with a range of two to twelve years.
Ind. Code § 35-50-2
-
5.5. An habitual offender enhancement for a person convicted for a Level 4
felony ranges between six and twenty years.
Ind. Code § 35-50-2-8
(i)(1).
[16] The nature of the offense is found in the details and circumstances of the
commission of the offense. Perry v. State,
78 N.E.3d 1
, 13 (Ind. Ct. App. 2017).
The nature of the offense refers to a defendant’s actions in comparison with the
elements of the offense. Cardwell, 895 N.E.2d at 1224. When determining
whether a sentence that exceeds the advisory sentence is inappropriate, “we
consider whether there is anything more or less egregious about the offense as
committed by the defendant that ‘makes it different from the typical offense
accounted for by the legislature when it set the advisory sentence.’” Moyer v.
State,
83 N.E.3d 136
, 142 (Ind. Ct. App. 2017) (quoting Holloway,
950 N.E.2d at 807
), trans. denied.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 9 of 13
[17] Here, the nature of Powell’s sentence does not make his sentence inappropriate.
Powell decided to drive despite the fact that he was an habitual traffic offender
and had lost his license for life in 2003 after repeated incidents of operating a
vehicle while intoxicated and driving with a suspended license. Appellant’s Conf.
App. II at 58-59. Also, it appears Powell was out on bond when he committed
the instant offenses. See Tr. Vol. II at 17, 25-26. Moreover, regardless of the
seriousness of his crimes, Powell did not receive the maximum sentences. His
sentence for dealing in methamphetamine was only two years above the
advisory sentence, and his habitual offender enhancement was only one year
above the minimum possible enhancement. See
Ind. Code § 35-50-2-5
.5;
Ind. Code § 35-50-2-8
(i)(1). Thus, Powell’s crime did not need to be especially
egregious to justify the fact that his sentence for Level 4 dealing in
methamphetamine was only two years above the advisory sentence. Powell’s
sentence was not inappropriate considering the nature of his offense.
Character of the Offender
[18] Powell cites a variety of factors in contending his fifteen-year aggregate
sentence is inappropriate considering his character. First, Powell admits that he
frequently uses illegal drugs, but he contends this does not reflect poorly on his
character because he is addicted to drugs. Since the age of fifteen, Powell has
used heroin and Dilaudid. Appellant’s App. Vol. II at 63. He also began using
alcohol at that age but quit consuming alcohol in 2009.
Id.
During the last five
years, Powell has used methamphetamine.
Id.
Powell explains that although
he had been incarcerated as a result of drug offenses previously, he had not
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 10 of 13
received treatment for anything other than alcohol abuse. Tr. Vol. II at 11-12,
15. Powell states that he attempted to sign up for treatment programs in DOC’s
Purposeful Incarceration program during his most recent five-year
incarceration, but he never reached the top of the selection list because the trial
court had not issued an order recommending Powell’s placement in that
program.
Id. at 12-13
.
[19] Second, Powell acknowledges that he has an extensive criminal history, but he
contends this does not reflect poorly on his character because most of his
convictions were related to traffic offenses or crimes related to his substance
abuse. He argues that his lack of drug treatment during his thirty years of
substance abuse “renders his recidivism unsurprising.” Appellant’s Br. at 18.
Thus, he contends his criminal history should not reflect negatively on his
character.
[20] Third, Powell claims his medical problems should persuade us that his fifteen-
year aggregate sentence was inappropriate. His health problems include
depression and anxiety, diabetes, degenerative back disorder, hypertension, and
foot problems. Appellant’s Conf. App. Vol. II at 62. Since 1996, Powell has had
ten back surgeries and seventeen surgeries on his feet.
Id.
[21] We reject Powell’s argument that his drug use and addiction do not reflect
poorly on his character. Powell started abusing alcohol and heroin when he
was fifteen years old and has been abusing drugs for thirty years. Appellant’s
Conf. App. Vol. II at 63. Although the court ordered Powell to participate in
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 11 of 13
alcohol counseling in 2002, Powell never sought out treatment for his decades-
long addiction to heroin until he attempted to participate in the DOC’s
Purposeful Incarceration program at some point within the previous five years
Tr. Vol. II at 11-13.
[22] We next reject Powell’s efforts to minimize his criminal record by stating that
most of his convictions were for traffic offenses or offenses related to his
addiction. We first observe that many of his convictions were for other kinds of
offenses. These include convictions for robbery, theft, battery resulting in
bodily injury, criminal mischief, and false informing. Appellant’s Conf. App. Vol.
II at 56-60. Moreover, we reject Powell’s suggestion that convictions for traffic
offenses do not reflect poorly on his character. Four of his prior traffic related
convictions were for operating while intoxicated, an offense that endangers the
public.
Id. at 57-59
. While the record supports Powell’s contention that he
suffers from addictions to heroin and methamphetamine, he could have made
the prudent decision to not drive while under the influence of illegal drugs or
alcohol but chose to do so anyway. Powell’s other traffic-related convictions
include two convictions for operating while an habitual traffic violator and two
convictions for driving while suspended; such offenses show flagrant disregard
for the consequences of his prior convictions.
Id. at 56-60
. In total, Powell’s
thirty-five-year criminal history includes fifteen convictions (eight for felonies
and seven for misdemeanors), at least two revocations of probation, and
multiple arrests.
Id.
Powell’s criminal record does not speak well to his
character.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 12 of 13
[23] Finally, we reject Powell’s argument that his medical problems should persuade
us that his fifteen-year aggregate sentence was inappropriate. We are not
required to consider a defendant’s poor health to be a mitigating circumstance.
Henderson v. State,
848 N.E.2d 341
, 345 (Ind. Ct. App. 2006). Furthermore,
Powell does not demonstrate or even allege a nexus between his medical
problems and his lengthy history of criminal misconduct. Thus, we conclude
that Powell’s sentence was not inappropriate considering his character. And
because we earlier found that Powell’s sentence was not inappropriate
considering the nature of his offense, we conclude that Powell is not entitled to
a sentence reduction pursuant to Indiana Appellate Rule 7(B).
[24] Affirmed.
Pyle, J., and Tavitas, J., concur.
Court of Appeals of Indiana | Memorandum Decision 20A-CR-1371 | December 3, 2020 Page 13 of 13 |
Subsets and Splits