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2020-12-01 19:00:27.525111+00

http://media.ca11.uscourts.gov/opinions/unpub/files/202011671.pdf

USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 1 of 14 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 20-11671 Non-Argument Calendar ________________________ D.C. Docket No. 4:18-cv-01747-LSC RONALD CRAIG WALKER, Plaintiff-Appellant, versus COMMISSIONER, SOCIAL SECURITY ADMINISTRATION, Defendant-Appellee. ________________________ Appeal from the United States District Court for the Northern District of Alabama ________________________ (December 1, 2020) Before BRANCH, GRANT, and LUCK, Circuit Judges. PER CURIAM: Ronald Craig Walker appeals from a district court order affirming the Commissioner of the Social Security Administration’s (“Commissioner”) decision  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 2 of 14 to deny Walker’s application for Disability Insurance Benefits and Supplemental Security Income, and denying Walker’s motion for remand pursuant to Sentence 4 and Sentence 6 of 42 U.S.C. § 405(g). Walker argues that the Commissioner’s finding that he does not have a severe impairment or combination of impairments is not supported by substantial evidence. He also argues that the Commissioner improperly rejected the opinions of two consulting physicians—Dr. Sathyan Iyer and Dr. Robert Haas—without showing good cause or explaining his reasoning with clarity. Finally, Walker contends that the Social Security Administration (“SSA”) Appeals Council erred by refusing to review new evidence that he submitted and that the district court erred by denying his motion for remand under Sentence 4 and Sentence 6 of § 405(g). Because Walker has not shown reversible error, we affirm. I. Facts and Procedural Background In February 2017, Walker applied for Disability Insurance Benefits and Supplemental Security Income. Walker alleged that he had stopped working as a truck driver on January 27, 2017, and was unable to return to work due to ongoing, disabling conditions, including: “crushed vertebrae in lower back, dizzy spells”; “pain in both knees”; pain in his right leg stemming from a motorcycle accident that occurred in 1983; “high blood pressure”; and a “thyroid problem.” He 2  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 3 of 14 indicated that, due to his conditions, he could not lift more than 25 pounds, had trouble standing, walking, kneeling, bending, and squatting without “a lot of pain.” In support of his claims, Walker submitted medical records from Doctors Med Care of East Gadsden, P.C. (“Doctors Med Care”) and the Etowah Free Community Clinic (“Etowah Clinic”). Walker received treatment at Doctors Med Care from February 2013 to February 2017, primarily for his hypertension, hypothyroidism, and hyperlipidemia. At those appointments, he consistently denied suffering from muscle weakness, joint pain, and back pain; his physical examination findings were normal; and he reported that his symptoms were stable or decreased with the use of his medications. Walker also sought treatment in November 2017 and January 2018 at the Etowah Clinic. At an appointment on November 1, 2017, he complained of knee pain, but the knee examination he received returned normal findings. On April 10, 2017, Walker visited Dr. Sathyan Iyer for a consultative physical examination. Dr. Iyer noted that Walker had normal grip strength, opposition functions, and muscle power of the upper and lower extremities. He also noted that Walker had a full range of motion throughout, except for a reduced range of motion in the lumbar spine. Based on the examination, Dr. Iyer opined that Walker “could have impairment of functions involving standing for long periods, walking long distance, bending, lifting, overhead activities, pushing, and 3  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 4 of 14 pulling.” Dr. Robert Haas, a non-examining state medical consultant, subsequently reviewed Walker’s case file and opined that Walker’s obesity and spine disorder were severe impairments. At a hearing before an SSA Administrative Law Judge (“ALJ”), Walker testified that he could not sit or stand for long periods of time and that he would need to lie down for eight hours on a normal workday to relieve his back pain. After considering Walker’s testimony and the medical evidence, the ALJ denied Walker’s application. Although the ALJ found that Walker suffered from the medically determinable impairments of obesity, hypertension, and hypothyroidism, he found that Walker did not have a severe impairment or combination of impairments. The ALJ also gave no weight to the opinions of Dr. Iyer and Dr. Haas because he found their opinions to be inconsistent with the “very little physical findings” on examination. Walker requested review of the ALJ’s decision by the SSA Appeals Council. He submitted additional evidence, consisting of x-rays of his right foot and ankle taken on April 24, 2018, an MRI scan of his lumbar spine taken on May 10, 2018, and a physical capacities form completed on May 7, 2018, by Dr. William Hartzog of the Etowah Clinic. In the physical capacities form, Dr. Hartzog opined that Walker would miss ten days of work a month due to his physical symptoms and would be off-task for twenty-five percent of the workday. 4  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 5 of 14 The Appeals Council denied review, making the ALJ’s decision the final decision of the Commissioner. In denying review, the Appeals Council noted that the additional evidence that Walker submitted did “not show a reasonable probability that it would change the outcome” of the ALJ’s decision. After the Appeals Council’s decision was issued, Walker received a favorable decision on a separate application for Supplemental Security Income. Walker appealed to the district court, arguing that the ALJ erred by finding that he did not have a severe impairment or combination of impairments and by giving no weight to the opinions of Dr. Iyer and Dr Haas; that the Appeals Council erred by denying review based on the additional evidence he submitted after the ALJ’s decision; and requesting remand pursuant to Sentence 4 and Sentence 6 of 42 U.S.C. § 405(g). The district court affirmed the Commissioner’s decision and denied Walker’s request for remand. II. Discussion We review a final decision of the Commissioner to determine whether it is supported by substantial evidence and whether the correct legal standards were applied. Winschel v. Comm’r of Soc. Sec., 631 F.3d 1176 , 1178 (11th Cir. 2011). Substantial evidence means “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Biestek v. Berryhill, 139 S. Ct. 1148 , 1154 (2019) (quotation omitted). “We may not decide the facts anew, reweigh the 5  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 6 of 14 evidence, or substitute our judgment for that of the Commissioner.” Mitchell v. Comm’r, Soc. Sec. Admin., 771 F.3d 780 , 782 (11th Cir. 2014) (quotation omitted). Our review of whether the Commissioner applied the correct legal standards is de novo. Ingram v. Comm’r of Soc. Sec. Admin., 496 F.3d 1253 , 1260 (11th Cir. 2007). 1. Substantial evidence supports the ALJ’s decision that Walker does not have a severe impairment or combination of impairments To qualify for disability insurance benefits and supplemental security income, Walker was required to prove that he had a disability. Barnhart v. Thomas, 540 U.S. 20 , 21 (2003). “The Social Security regulations provide a five- step sequential evaluation process for determining if a claimant has proven that [he] is disabled.” Jones v. Apfel, 190 F.3d 1224 , 1228 (11th Cir. 1999). At the first step, the claimant must prove that [he] has not engaged in substantial gainful activity. At the second step, [he] must prove that [he] has a severe impairment or combination of impairments. If, at the third step, [he] proves that [his] impairment or combination of impairments meets or equals a listed impairment, [he] is automatically found disabled regardless of age, education, or work experience. If [he] cannot prevail at the third step, [he] must proceed to the fourth step where [he] must prove that [he] is unable to perform [his] past relevant work. At the fifth step, the burden shifts to the Commissioner to determine if there is other work available in significant numbers in the national economy that the claimant is able to perform. If the Commissioner can demonstrate that there are jobs the claimant can perform, the claimant must prove [he] is unable to perform those jobs in order to be found disabled. 6  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 7 of 14 Id. (citations omitted). Because Walker failed to prove that he had a severe impairment or combination of impairments at the second step of this process, we do not address the other steps. “An impairment or combination of impairments is not severe if it does not significantly limit [the claimant’s] physical or mental ability to do basic work activities.” 20 C.F.R. § 404.1522; see also Crayton v. Callahan, 120 F.3d 1217 , 1219 (11th Cir. 1997). “Basic work activities,” include “(1) Physical functions such as walking, standing, sitting, lifting, pushing, pulling, reaching, carrying, or handling; (2) Capacities for seeing, hearing, and speaking; (3) Understanding, carrying out, and remembering simple instructions; (4) Use of judgment; (5) Responding appropriately to supervision, co-workers, and usual work situations; and (6) Dealing with changes in a routine work setting.” 20 C.F.R. § 404.1522. The impairment or impairments also must “have lasted or must be expected to last for a continuous period of at least 12 months.” 20 C.F.R. § 404.1509. Here, the ALJ’s decision that Walker did not suffer from a severe impairment was supported by substantial evidence. This evidence included Walker’s medical records, which indicated that his medications controlled his hypothyroidism and hypertension without side effects; that Walker’s obesity did not prevent him from working in the past and that none of his physicians found that 7  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 8 of 14 he had any limitations due to his obesity; that Walker’s physical examinations in relation to his back did not show any issues; and that Walker consistently reported to his physicians that he did not have any muscle weakness, joint pain, or back pain. These medical records are substantial evidence that supports the Commissioner’s decision that Walker does not have a severe impairment or combination of impairments. 2. Substantial evidence supports the weight the ALJ gave to the opinions of Dr. Iyer and Dr. Haas Walker argues that the ALJ erred by failing to give adequate weight to the medical opinions of the Commissioner’s experts—Dr. Iyer and Dr. Haas—without good cause, and by failing to state his reasons for doing so with clarity. 1 Dr. Iyer examined Walker once and opined that he “could have impairment of functions involving standing for long periods, walking long distance, bending, lifting, overhead activities, pushing, and pulling.” Dr. Haas reviewed Walker’s case file and opined that Walker’s obesity and spine disorder were severe impairments. The weight a medical opinion receives depends on, among other things, the doctor’s examining and treating relationship with the claimant, the evidence the 1 As the government notes, Walker’s argument on this issue consists of lengthy block quotes to caselaw without any attempt to apply the law to the facts of this case. He has thus abandoned the issue by failing to develop his arguments. See Hamilton v. Southland Christian Sch., Inc., 680 F.3d 1316 , 1318 (11th Cir. 2012) (“A passing reference to an issue in a brief is not enough, and the failure to make arguments . . . in support of an issue waives it.”). Regardless, we find that his argument is without merit. 8  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 9 of 14 doctor presents to support their opinion, and how consistent that opinion is with the rest of the record. 20 C.F.R. § 404.1527(c). “Absent ‘good cause’ an ALJ is to give the medical opinions of treating physicians ‘substantial or considerable weight.’” Winschel, 631 F.3d at 1179 (quoting Lewis v. Callahan, 125 F.3d 1436 , 1440 (11th Cir. 1997)). Good cause to discount a treating physician’s opinion exists “when the: (1) treating physician’s opinion was not bolstered by the evidence; (2) evidence supported a contrary finding; or (3) treating physician’s opinion was conclusory or inconsistent with the doctor’s own medical records.” Id. (quotation omitted). However, a doctor who only examines a claimant one time is not a treating physician and his or her opinion is not entitled to deference. See McSwain v. Bowen, 814 F.2d 617 , 619 (11th Cir. 1987). We will not second guess an ALJ’s decision about the weight medical opinions deserve so long as the ALJ articulates a specific justification for his decision. See Hunter v. Soc. Sec. Admin., Comm’r, 808 F.3d 818 , 823 (11th Cir. 2015); Sharfarz v. Bowen, 825 F.2d 278 , 279–80 (11th Cir. 1987). Here, the ALJ provided specific reasoning for disregarding the opinions of Dr. Iyer and Dr. Haas, which are not entitled to deference because neither doctor is a treating physician, and those reasons were supported by substantial evidence. Dr. Iyer opined that Walker’s conditions “could have an impairment of functioning involving standing for long periods, walking long distances, bending, lifting, overhead activities, 9  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 10 of 14 pushing and pulling.” The ALJ gave no weight to Dr. Iyer’s opinion because he found that it was not “consistent with the objective medical evidence that shows completely normal physical examinations . . . .” Based on the same lack of objective medical evidence, the ALJ gave no weight to Dr. Haas’s opinion that Walker’s obesity and spine disorder “limited him to a range of light work.” Accordingly, we find that substantial evidence supports the ALJ’s decision to discount Dr. Iyer’s and Dr. Haas’s opinions, and that he stated his reasons for doing so with sufficient clarity. 3. The Appeals Council did not err by finding that there was not a reasonable probability that the additional evidence would change the outcome of the ALJ’s decision Walker next argues that the Appeals Council erred by refusing to review additional evidence that he submitted—an x-ray of his right foot, an MRI of his spine, and a physical capacities evaluation completed by Dr. William Hartzog. In that evaluation, Dr. Hartzog found that Walker would miss ten days of work a month due to his physical symptoms and would be off-task for twenty-five percent of the workday. But the Appeals Council did not refuse to review this evidence. Instead, it found that the evidence “[did] not show a reasonable probability that it would change the outcome of the decision.” The Appeals Council “must consider new, material, and chronologically relevant evidence and must review the case ‘if the administrative law judge’s 10  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 11 of 14 action, findings, or conclusion is contrary to the weight of the evidence currently of record.’” Ingram, 496 F.3d at 1261 (quoting 20 C.F.R. § 404.970(b)); see also Washington v. Soc. Sec. Admin, Comm’r, 806 F.3d 1317 , 1321–22 (11th Cir. 2015).2 Walker argues that there is a reasonable probability that the additional evidence would change the outcome of the ALJ’s decision because Dr. Hartzog is a treating physician whose opinion is entitled to deference. But Dr. Hartzog is not a treating physician because he only treated Walker one time. See McSwain, 814 F.2d at 619 . Accordingly, Dr. Hartzog’s opinion was not entitled to deference and the Appeals Council did not err by finding that there was not a reasonable probability that the additional evidence would change the outcome of the ALJ’s decision, considering the substantial evidence that the ALJ had already identified in Walker’s medical records. 4. The district court did not err by failing to remand pursuant to Sentence 4 and Sentence 6 of 42 U.S.C. § 405(g) Walker’s final argument is that the district court erred by failing to remand his case to the Commissioner for consideration of new evidence, pursuant to Sentence 4 and Sentence 6 of 42 U.S.C. § 405(g). Sentence 4 of § 405(g) “authorizes a court to enter ‘a judgment affirming, modifying, or reversing the 2 Walker argues that remand is required under Washington. But Washington involved a different issue—whether the physician’s opinion was chronologically relevant—which is not disputed here. 806 F.3d at 1322 –23. 11  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 12 of 14 decision of the Secretary, with or without remanding the cause for a rehearing.’” Melkonyan v. Sullivan, 501 U.S. 89 , 98 (1991) (quoting 42 U.S.C. § 405(g)). Sentence 6 of § 405(g) provides that: The court may . . . at any time order additional evidence to be taken before the Commissioner of Social Security, but only upon a showing that there is new evidence which is material and that there is good cause for the failure to incorporate such evidence into the record in a prior proceeding . . . . 42 U.S.C. § 405(g). To obtain a remand under Sentence 6, Walker was required to establish that: “(1) there is new, noncumulative evidence; (2) the evidence is ‘material,’ that is, relevant and probative so that there is a reasonable possibility that it would change the administrative result, and (3) there is good cause for the failure to submit the evidence at the administrative level.” Hunter, 808 F.3d at 821 (quoting Caulder v. Bowen, 791 F.2d 872 , 877 (11th Cir. 1986)). We review de novo the district court’s decision of whether a remand is necessary based on the new evidence. Vega v. Comm’r of Soc. Sec., 265 F.3d 1214 , 1218 (11th Cir. 2001). The only new evidence that Walker has identified is a favorable SSI decision that he subsequently received in a different case. But this Court has held—and Walker does not dispute—that a later favorable decision is not new evidence for 12  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 13 of 14 purposes of Sentence 6. Hunter, 808 F.3d at 822 . 3 Instead, Walker argues that this general rule does not apply because he also moved for remand under Sentence 4 of 42 U.S.C. § 405(g).4 We disagree. Sentence 4 “describes an entirely different kind of remand” than Sentence 6. Ingram, 496 F.3d at 1267 (quoting Sullivan v. Finkelstein, 496 U.S. 617 , 626 (1990)). Under Sentence 4, “a reviewing court is limited to the certified administrative record in examining the evidence.” Id. at 1268 (quoting Caulder, 791 F.2d at 876 ). Because the later favorable decision was not part of the administrative record, it cannot justify a remand under Sentence 4. See id. at 1267–68 (“[E]vidence first presented to the district court should not be considered for the purposes of a [Sentence 4] remand.”). And because the later favorable decision was not new evidence for purposes of Sentence 6, the district court properly rejected Walker’s request for a remand pursuant to that sentence. III. Conclusion Because we find that the Commissioner’s decision was supported by 3 See Hunter, 808 F.3d at 822 (“Faced with the same record, different ALJs could disagree with one another based on their respective credibility determinations and how each weighs the evidence. Both decisions could nonetheless be supported by evidence that reasonable minds would accept as adequate. Because of that possibility, the mere existence of a later favorable decision by one ALJ does not undermine the validity of another ALJ’s earlier unfavorable decision or the fact findings upon which it was premised.”) 4 The district court properly rejected Walker’s motion for remand under Sentence 4 of 42 U.S.C. § 405(g) because it found that substantial evidence supported the ALJ’s decision and that the correct legal standards were applied. 13  USCA11 Case: 20-11671 Date Filed: 12/01/2020 Page: 14 of 14 substantial evidence and that the correct legal standards were applied, and because the district court properly denied Walker’s request for a remand pursuant to Sentence 4 and Sentence 6 of 42 U.S.C. § 405(g), we affirm the district court’s decision. AFFIRMED. 14

2020-12-01 19:02:01.536356+00

http://www.courts.ca.gov/opinions/documents/B299044M.PDF

Filed 12/1/20 (unmodified opinion attached) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX THE PEOPLE, 2d Crim. No. B299044 (Super. Ct. No. F435613002) Plaintiff and Respondent, (San Luis Obispo County) v. ORDER MODIFYING OPINION AND DENYING RYAN JAMES JOHNSON, REHEARING [NO CHANGE IN Defendant and Appellant. JUDGMENT] THE PEOPLE, 2d Crim. No. B302697 (Super. Ct. No. F435613001) Plaintiff and Respondent, (San Luis Obispo County) v. JESSE MICHAEL BAKER- RILEY, Defendant and Appellant. THE COURT: It is ordered that the opinion filed herein on November 9, 2020, be modified as follows:  On page 14, the first full paragraph, beginning ‘There is no merit to Johnson’s imaginative claim” is deleted and the following paragraph is inserted in its place: “We need not decide whether, after the effective date of S.B 1437, Johnson “could not be convicted of [provocative act murder] because of changes to Section 188 . . . .” (§ 1170.95, subd. (a)(3).) If he could not be so convicted today, he would still be ineligible for relief under section 1170.95 because he was not originally “convicted of felony murder or murder under a natural and probable consequences theory . . . .” (Id., subd. (a).) As we explain below, we cannot conclude that the Legislature intended to afford relief to persons convicted of murder under other theories such as provocative act murder. There is no change in judgment. Appellant Ryan James Johnson’s Petition for Rehearing is denied. GILBERT, P.J. YEGAN, J. PERREN, J. 2 Filed 11/9/20 (unmodified opinion) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX THE PEOPLE, 2d Crim. No. B299044 (Super. Ct. No. F435613002) Plaintiff and Respondent, (San Luis Obispo County) v. RYAN JAMES JOHNSON, Defendant and Appellant. THE PEOPLE, 2d Crim. No. B302697 (Super. Ct. No. F435613001) Plaintiff and Respondent, (San Luis Obispo County) v. JESSE MICHAEL BAKER- RILEY, Defendant and Appellant. Ryan James Johnson and Jesse Michael Baker-Riley appeal from orders denying their petitions to vacate their first degree murder convictions and obtain resentencing pursuant to Senate Bill No. 1437 (S.B. 1437), which went into effect on January 1, 2019. (See Stats. 2018, ch. 1015, § 4.) S.B. 1437 added section 1170.95 to the Penal Code.1 If a defendant has previously been convicted of murder under the felony-murder rule or the natural and probable consequences doctrine and qualifies for relief under section 1170.95, the statute permits the defendant to petition to vacate the conviction and obtain resentencing on any remaining counts. Appellants were separately tried before different juries for the same criminal conduct – a home-invasion armed robbery that went awry when one of the victims shot and killed an accomplice. Appellants’ convictions were based solely upon the provocative act murder doctrine. The Superior Court denied appellants’ petitions because it concluded that section 1170.95 is unconstitutional. We need not consider this issue. Irrespective of the constitutionality of section 1170.95, appellants are ineligible for relief because they were not convicted of murder pursuant to the felony-murder rule or the natural and probable consequences doctrine. They were convicted of murder under the provocative act murder doctrine. (See People v. Lee (2020) 49 Cal. App. 5th 254 , 257-258 (Lee), review granted July 15, 2020, S262459 [petitioner not entitled to resentencing under section 1170.95 because he was convicted of provocative act murder].)2 1 All statutory references are to the Penal Code. 2 “Pending review and filing of the Supreme Court’s opinion,” Lee has “no binding or precedential effect, and may be cited for potentially persuasive value only.” (Cal. Rules of Court, rule 8.1115(e)(1).) 2  Because the appeals involve the same criminal conduct and common legal issues, in the interest of judicial economy and efficiency we order the appeals consolidated for the purpose of decision. We issue a single opinion affirming the orders denying appellants’ petitions. (See People v. Schnaible (1985) 165 Cal. App. 3d 275 , 277.) Convictions and Prior Appeals In addition to being convicted of first degree murder (§§ 187, subd. (a), 189), Johnson was convicted of first degree residential burglary (§§ 459, 460, subd. (a)), conspiracy to commit robbery (§§ 182, subd. (a)(1), 211), and two counts of first degree residential robbery. (§§ 211, 212.5, subd. (a).) The jury found true firearm enhancements within the meaning of section 12022, subdivision (a)(1). Johnson was sentenced to prison for 26 years to life. In addition to being convicted of first degree murder, Baker-Riley was convicted of first degree residential burglary and two counts of first degree residential robbery. The jury found true firearm enhancements within the meaning of sections 12022.53, subdivision (b) and 12022.5, subdivision (a). Baker- Riley was sentenced to prison for 35 years to life. In People v. Johnson (2013) 221 Cal. App. 4th 623 (Johnson), and People v. Baker-Riley (2012) 207 Cal. App. 4th 631 (Baker- Riley), we affirmed the judgments. Since we do not consider the constitutionality of section 1170.95, we deny as moot the People’s motions to take judicial notice of various documents in support of their argument that the statute is unconstitutional. We grant Johnson’s motion to take judicial notice of a jury instruction given in his case: CALCRIM No. 561, entitled “Homicide: Provocative Act by Accomplice.” 3  Facts Except as otherwise noted, the facts are taken from the statement of facts in our prior opinion, Johnson, supra , 221 Cal.App.4th at pp. 627-629. A separate statement of facts is set forth in Baker-Riley, supra , 207 Cal.App.4th at pp. 633-634. The two statements are similar except that the statement of facts in Baker-Riley does not mention Johnson’s conduct. “Peter Davis lived in Los Osos. . . . [¶] [Johnson] knew Davis and on July 18, 2009, he told Janine Lindemans that he ‘and his homies are taking care of something’ and ‘[w]e are going to come up big.’ [Johnson] explained ‘that they were taking care of somebody that was selling pot or dope . . . in our town, meaning Los Osos, and that the person had no business doing business like that in [ ]our town, and that [Johnson] . . . [and] his homies were basically doing a home invasion.’ Lindemans asked, ‘Are you talking about a home invasion robbery?’ [Johnson] replied, ‘Well, yeah, I guess, if you want to call it that.’ [Johnson] identified one of his ‘homies’ as ‘Kelsey’ (Kelsey Alvarez). [Johnson] said that they were going to ‘take . . . Pete’s [Peter Davis’s] pot, and that they had a gun.’ They intended to use the gun during the robbery. [Johnson] boasted ‘that he was running things,’ and he appeared to be ‘pretty proud of himself that he was the shot caller.’ “That same day Peter Davis and his friend, Dylan Baumann, were inside Davis’s residence when they heard a knock on the door. Davis opened the door and saw two persons whom he did not recognize. They were Kelsey Alvarez and Jesse Baker-Riley. Baker-Riley ‘pulled out a large firearm and put it in [Davis’s] face.’ Baker-Riley and Alvarez entered the residence. Baker-Riley said to Baumann, ‘[S]it down or I’ll shoot you.’ 4 Baumann testified that Baker-Riley ‘put his gun on my kneecaps and told me he was going to shoot off my kneecaps.’ [¶] Baker- Riley demanded cash and marijuana. Baumann emptied his pockets of all items, including a cell phone. Baker-Riley took the cell phone and put it in his pocket. “Baker-Riley ‘pointed to a pile of vaporized pot that was on the table.’ He ordered Davis to wrap it in a paper towel and give it to him. Davis complied with the order. Baker-Riley was ‘clicking the safety’ of his gun ‘on and off’ and was ‘taunting’ Davis and Baumann. He made them look at the gun, threatened to kill them if they ‘did anything,’ and said, ‘I’m quick on the trigger, homie.’ Baker-Riley warned: ‘I’m a fucking thug. You don’t want[ ] to fuck with me, homie. . . .’[3] “Baker-Riley saw a fortune cookie on a table. He pointed the gun at Davis and said: ‘Open that fortune cookie, homie.’ Davis opened the cookie and, at Baker-Riley's direction, read the fortune inside. The fortune said: ‘There will be many upcoming opportunities. Take advantage of them.’ Baker-Riley laughed and ‘made a statement about how he was taking advantage of us.’ Baker-Riley ate some food that was on the table and, at gunpoint, 3 In our prior Baker-Riley opinion, the statement of facts includes the following excerpts: Baker-Riley said to Baumann: “‘I’ll fucking make you paralyzed for the rest of your fucking life. I’ll shoot your fucking kneecaps.’” ( Baker-Riley, supra , 207 Cal.App.4th at p. 634.) “[Baker-Riley] pointed his gun at Davis and Baumann and ordered them to empty their pockets. They did as they were told. [Baker-Riley] said, ‘I’ll fucking kill. I’ll fucking shoot you right now.’ . . . Baumann thought, ‘I can’t believe I’m going to die and I haven’t lived the life I want to fulfill.’” (Ibid.) 5 forced Baumann and Davis to eat some of the food. . . . “Baker-Riley saw marijuana drying in a back bedroom. He said, ‘Oh, here is their f-ing weed. Here is their grass.’ Baker- Riley pointed his gun at Davis and ordered him to walk into the back bedroom and sit on the bed. Davis complied with the order. He pleaded: ‘Don’t kill me. I’m not going to do anything. Take what you want. Just don’t kill me.’ Baker-Riley did not respond. Davis thought that he ‘was going to die,’ that Baker-Riley ‘was separating me to kill me.’ “Davis saw his own firearm next to the bed. He picked it up, aimed at Baker-Riley, and started firing. One of the bullets struck Alvarez in the chest and killed him.” S.B. 1437 “Under the felony-murder rule as it existed prior to Senate Bill 1437, a defendant who intended to commit a specified felony [such as robbery] could be convicted of murder for a killing during the felony, or attempted felony, without further examination of his or her mental state. [Citation.] . . . [¶] Independent of the felony-murder rule, the natural and probable consequences doctrine rendered a defendant liable for murder if he or she aided and abetted the commission of a criminal act (a target offense), and a principal in the target offense committed murder (a nontarget offense) that, even if unintended, was a natural and probable consequence of the target offense. [Citation.]” (People v. Lamoureux (2019) 42 Cal. App. 5th 241 , 247-248.) In S.B. 1437 the Legislature declared, “It is necessary to amend the felony murder rule and the natural and probable consequences doctrine, as it relates to murder, to ensure that murder liability is not imposed on a person who is not the actual killer, did not act with the intent to kill, or was not a major 6 participant in the underlying felony who acted with reckless indifference to human life.” (Stats. 2018, ch. 1015, § 1, subd. (f).) To achieve this goal, S.B. 1437 amended section 189, insofar as it pertains to the felony-murder rule, to add subdivision (e), which provides: “A participant in the perpetration or attempted perpetration of a felony listed in subdivision (a) in which a death occurs is liable for murder only if one of the following is proven: (1) The person was the actual killer. (2) The person was not the actual killer, but, with the intent to kill, aided, abetted, counseled, commanded, induced, solicited, requested, or assisted the actual killer in the commission of murder in the first degree. (3) The person was a major participant in the underlying felony and acted with reckless indifference to human life, as described in subdivision (d) of Section 190.2.” (Stats. 2018, ch. 1015, § 3.) S.B. 1437 also amended section 188 to add subdivision (a)(3), which provides, “Except as stated in subdivision (e) of Section 189, in order to be convicted of murder, a principal in a crime shall act with malice aforethought. Malice shall not be imputed to a person based solely on his or her participation in a crime.” (Stats. 2018, ch. 1015, § 2.) The amendment of section 188 “eliminated liability for murder under the natural and probable consequences doctrine.” (Lee, supra , 49 Cal.App.5th at p. 262.) The Legislature declared, “A person’s culpability for murder must be premised upon that person’s own actions and subjective mens rea.” (Stats. 2018, ch. 1015, § 1, subd. (g).) Section 1170.95, added by S.B. 1437, gives retroactive effect to the changes in sections 188 and 189. It provides in subdivision (a), “A person convicted of felony murder or murder under a natural and probable consequences theory may file a petition with the court that sentenced the petitioner to have the 7 petitioner’s murder conviction vacated and to be resentenced on any remaining counts when” certain conditions apply. One of the conditions is that “[t]he petitioner could not be convicted of first or second degree murder because of changes to Section 188 or 189 made [by S.B. 1437] effective January 1, 2019.” (Id., subd. (a)(3).) Provocative Act Murder Doctrine “‘Under the provocative act [murder] doctrine, when the perpetrator of a crime maliciously commits an act that is likely to result in death, and the victim kills in reasonable response to that act, the perpetrator is guilty of murder. [Citations.] “In such a case, the killing is attributable, not merely to the commission of a felony, but to the intentional act of the defendant or his accomplice committed with conscious disregard for life.” [Citation.]’ [Citation.] [¶] . . . ‘[A] participant in the underlying crime who does not actually commit a provocative act himself may nevertheless be vicariously liable for the killing caused by his provocateur accomplice based upon having aided and abetted commission of the underlying crime. [Citations.] Thus, under the provocative act doctrine, a defendant may be vicariously liable for the provocative conduct of his surviving accomplice in the underlying crime. [Citation.]’ [Citation.]” ( Johnson, supra , 221 Cal.App.4th at pp 629-630.) “As to the mental element of provocative act murder, the People must prove ‘that the defendant personally harbored . . . malice.’ [Citations.] But, malice may be implied: ‘[T]he central inquiry in determining criminal liability for a killing committed by a resisting victim . . . is whether the conduct of a defendant or his accomplices was sufficiently provocative of lethal resistance to support a finding of implied malice.’ [Citation.]” ( Johnson, supra , 221 Cal.App.4th at p. 630.) 8  Appellants Not Eligible for Relief under Felony-Murder Provision of Section 1170.95 Appellants cannot seek relief under the felony-murder provision of section 1170.95. They were convicted of provocative act murder, not felony murder. “When someone other than the defendant or an accomplice kills during the commission or attempted commission of a crime, the defendant is not liable under felony-murder principles but may nevertheless be prosecuted for murder under the provocative act doctrine. . . . Under the felony-murder rule, if an accomplice is killed by a crime victim and not by the defendant, the defendant cannot be held liable for the accomplice’s death. [Citations.] The provocative act doctrine is not so limited. Under the provocative act doctrine, . . . ‘the killing is attributable, not merely to the commission of a felony, but to the intentional act of the defendant or his accomplice committed with conscious disregard for life.’” (People v. Gonzalez (2012) 54 Cal. 4th 643 , 654-655 (Gonzales).) Even though he was not convicted of felony murder, Baker- Riley contends he is eligible for relief under section 1170.95 because the felony-murder rule was invoked to determine the degree of the murder, i.e., murder of the first degree. (See Baker- Riley, supra , 207 Cal.App.4th at p. 635 [“‘provocative act implied malice murders are first degree murders when they occur during the course of a felony enumerated in section 189 that would support a first degree felony-murder conviction’”].) Therefore, Baker-Riley argues: “[H]is conviction is inextricably intertwined with the felony murder rule, since it is only by virtue of that rule that the mens rea required for first degree murder is imputed to the defendant. . . . This . . . provides an additional basis for appellant’s eligibility for resentencing under the new law . . . .” 9  We disagree. The language of section 1170.95, subdivision (a) clearly and unambiguously states that “[a] person convicted of felony murder” may file a petition for relief. Although the felony- murder rule was invoked to determine the degree of Baker- Riley’s and Johnson’s murder, it was legally impossible for them to have been “convicted of felony murder” because one of the victims, not Baker-Riley, Johnson, or their accomplice, fired the fatal shot. (Gonzalez, supra , 54 Cal.4th at pp. 654-655.) Thus, appellants do not qualify for relief pursuant to the felony-murder provision of section 1170.95. Appellants’ Not Eligible for Relief under “Natural and Probable Consequences” Provision of Section 1170.95 Because they were not convicted of felony murder, appellants are eligible for section 1170.95 relief only if they were “convicted of . . . murder under a natural and probable consequences theory” and could not be convicted of murder today because of changes made by S.B. 1437. (§ 1170.95, subd. (a)(3).) “‘[U]nder the natural and probable consequences doctrine, an aider and abettor is guilty not only of the intended crime, but also “[of] any other offense that was a ‘natural and probable consequence’ of the crime aided and abetted.”’” (People v. Chiu (2014) 59 Cal. 4th 155 , 158 (Chui).) “‘By its very nature, aider and abettor culpability under the natural and probable consequences doctrine is not premised upon the intention of the aider and abettor to commit the nontarget offense because the nontarget offense was not intended at all. It imposes vicarious liability for any offense committed by the direct perpetrator that is a natural and probable consequence of the target offense.” (Id. at p. 164.) 10  “[A] person aids and abets the commission of a crime when he or she, acting with (1) knowledge of the unlawful purpose of the perpetrator; and (2) the intent or purpose of committing, encouraging, or facilitating the commission of the offense, (3) by act or advice aids, promotes, encourages or instigates, the commission of the crime.” (People v. Beeman (1984) 35 Cal. 3d 547 , 561.) Baker-Riley Not Eligible for Relief under “Natural and Probable Consequences” Provision Baker-Riley was not an aider and abettor. He was a direct perpetrator of the crimes committed during the home-invasion robbery. He was also a direct perpetrator of the acts that provoked Davis to fire his gun. The legislature made clear that S.B. 1437 would not benefit “a major participant in the underlying felony [such as Baker-Riley] who acted with reckless indifference to human life.” (Stats. 2018, ch. 1015, § 1, subd. (f); see also § 189, subd. (e)(3).) Nevertheless, Baker-Riley claims that he qualifies for relief under section 1170.95 because, “[a]s currently characterized by the California Supreme Court, provocative act murder is clearly one particular subset of the natural and probable consequences doctrine.” In support of his claim, Baker-Riley cites the following passage from Gonzales, supra , 54 Cal.4th at pp. 655-656: “When the defendant commits an inherently dangerous felony, the victim’s self-defensive killing is generally found to be a natural and probable response to the defendant’s act, and not an independent intervening cause that relieves the defendant of liability.” The above-quoted passage from Gonzales does not support Baker-Riley’s claim that provocative act murder is a “subset of 11 the natural and probable consequences doctrine.” The passage relates to proximate cause. (See Lee, supra , 49 Cal.App.5th at p. 266 [similar statement by Supreme Court in People v. Concha (2009) 47 Cal. 4th 653 , 661, was “made . . . in the context of explaining that a conviction for provocative act murder requires proof of proximate causation”].) The Gonzales court noted: “An important question in a provocative act case is whether the act proximately caused an unlawful death. ‘[T]he defendant is liable only for those unlawful killings proximately caused by the acts of the defendant or his accomplice. . . . “[I]f the eventual victim’s death is not the natural and probable consequence of a defendant’s [provocative] act, then liability cannot attach.” [Citation.]’” ( Gonzales, supra , 54 Cal.4th at p. 655.) Baker-Riley is not assisted by S.B. 1437’s amendment of section 188 to add the provision, “Malice shall not be imputed to a person based solely on his or her participation in a crime.” (§ 188, subd. (a)(3).) Malice was not imputed to Baker-Riley based solely on his participation in the crime of robbery. It was imputed to him based on his commission during the robbery of provocative acts that manifested a conscious disregard for life. Baker-Riley therefore does not satisfy the requirement that he “could not be convicted of first or second degree murder because of changes to Section 188 or 189 made effective January 1, 2019.” (§ 1170.95, subd. (a)(3).) Johnson Not Eligible for Relief under “Natural and Probable Consequences” Provision Unlike Baker-Riley, Johnson was an aider and abettor. He was not present when the robbery and provocative acts occurred. “[Johnson] was the ‘mastermind’ of the home-invasion robbery. He sent his accomplices to do his bidding and knew that they 12 were going to use a gun to accomplish his goals.” ( Johnson, supra , 221 Cal.App.4th at p. 636.) “He planned, directed, and supervised this crime.” (Id. at p. 630.) Although Johnson was an aider and abettor, he is ineligible for section 1170.95 relief because he was not convicted of murder pursuant to the natural and probable consequences doctrine, i.e., he was not convicted under the theory that a principal (Baker- Riley) in the commission of the target crime (robbery) had committed a nontarget crime (murder) that was a natural and probable consequence of the target crime. (See People v. Smith (2014) 60 Cal. 4th 603 , 611.) He was convicted of murder on a provocative act theory. Johnson’s Legislative Intent Argument “‘If there is no ambiguity in the language [of a statute], we presume the Legislature meant what it said, and the plain meaning of the statute governs. [Citation.]’” (Curle v. Superior Court (2001) 24 Cal. 4th 1057 , 1063.) Johnson “concedes that under such a ‘plain meaning’ interpretation of subdivision (a) of section 1170.95, the Court could assume that [he] does not qualify for relief under this section as he was not convicted of murder under the felony murder rule or the natural and probable consequences theory.” But Johnson with some imaginative thinking, argues “that harmonizing the entirety of . . . [S.B.] 1437, consideration of the object of the legislation and the evils to be remedied, and the legislat[ive] history clearly leads to a finding that the Legislature intended [that he be] included in the relief available under section 1170.95.” Johnson’s argument is based on the assumption that he “could not be convicted of murder if he were to go to trial subsequent to the enactment of [S.B.] 1437.” This 13 assumption in turn is based on S.B. 1437’s amendment of section 188 to add the provision, “Malice shall not be imputed to a person based solely on his or her participation in a crime.” (§ 188, subd. (a)(3).) Johnson claims, “[I]t is clear that [his] conviction was based on malice imputed to him ‘based solely on his participation’ in a conspiracy to commit the crime of robbery [that] led to the death of a co-conspirator [Alvarez].” Johnson reasons that, since he could not today be convicted of provocative act murder because of changes made to section 188 by S.B. 1437, the Legislature must have intended to permit him to seek relief from his conviction pursuant to section 1170.95. There is no merit to Johnson’s imaginative claim. In our view he could be convicted today of provocative act murder. “If the words of the statute are clear, the court should not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history.” (People v. Knowles (1950) 35 Cal. 2d 175 , 183.) The express language in section 1170.95 and its legislative history show that the Legislature intended the statute to afford relief only to “[a] person convicted of felony murder or murder under a natural and probable consequences theory . . . .” (§ 1170.95, subd. (a).) “When describing the proposed petition process, the Legislature consistently referred to relief being available to individuals charged in a complaint, information or indictment ‘that allowed the prosecution to proceed under a theory of first degree felony murder, second degree felony murder, or murder under the natural and probable consequences doctrine’ . . . .” (People v. Lopez (2019) 38 Cal. App. 5th 1087 , 1105, review granted Nov. 13, 2019, S258275.) 14  Johnson in effect is contending that the omission of “provocative act murder” from section 1170.95, subdivision (a), was a legislative oversight. “[I]f the omission was the product of legislative oversight, we cannot correct the mistake.” (People v. Superior Court (2003) 107 Cal. App. 4th 488 , 494.) “[T]he Legislature should provide the remedy.” (People v. Pecci (1999) 72 Cal. App. 4th 1500 , 1506; see Adoption of Kelsey S. (1992) 1 Cal. 4th 816 , 827 [“to insert words into the statute . . . would violate the cardinal rule that courts may not add provisions to a statute”]; accord, People v. Guzman (2005) 35 Cal. 4th 577 , 587.) Johnson’s Equal Protection Argument Johnson claims that, if section 1170.95 does not apply to him, it violates equal protection under the federal and California constitutions. “‘“The concept of the equal protection of the laws compels recognition . . . that persons similarly situated with respect to the legitimate purpose of the law receive like treatment.”’ [Citation.] ‘The first prerequisite to a meritorious claim under the equal protection clause is a showing that the state has adopted a classification that affects two or more similarly situated groups in an unequal manner.’” (Cooley v. Superior Court (2002) 29 Cal. 4th 228 , 253.) “Where two or more groups are properly distinguishable for purposes of the challenged law, it is immaterial if they are indistinguishable in other respects.” (People v. Barrett (2012) 54 Cal. 4th 1081 , 1107.) Johnson and persons convicted of felony murder or murder under the natural and probable consequences doctrine are not similarly situated for equal protection purposes. Johnson was convicted of murder based on Baker-Riley’s provocative acts that caused Davis to shoot an accomplice. Felony-murder principles do not apply to such a factual scenario. (Gonzalez, supra , 54 15 Cal.4th at pp. 654-655.) Nor does the natural and probable consequences doctrine apply because Davis’s shooting of the accomplice was not “‘“a ‘natural and probable consequence’ of the crime aided and abetted,”’” but instead was a natural and probable consequence of Baker-Riley’s provocative acts. (Chiu, supra , 59 Cal.4th at p. 158.) Johnson is also not similarly situated to persons convicted of felony murder or murder under the natural and probable consequences doctrine because “[u]nlike [these murders], ‘[a] murder conviction under the provocative act doctrine . . . requires proof that the defendant personally harbored the mental state of malice . . . .’”4 (Lee, supra , 49 Cal.App.5th at p. 264, quoting from Gonzalez, supra , 54 Cal.4th at p. 655.) “Because [Johnson] was convicted of provocative act murder, the jury necessarily found he acted with malice aforethought.” (Lee, supra , at p. 265.) In our prior opinion, we rejected Johnson’s contention “that the evidence is insufficient to support his conviction for murder because ‘he did not personally harbor malice.’” ( Johnson, supra , 221 Cal.App.4th at p. 630.) We reasoned, “To credit this contention we would have 4 “Liability for felony murder does not depend on an examination of ‘the individual state of mind of each person causing an unlawful killing to determine whether the killing was with or without malice . . . .’ . . . ‘The felony-murder rule generally acts as a substitute for the mental state ordinarily required for the offense of murder.’” (People v. Cavitt (2004) 33 Cal. 4th 187 , 205.) “The natural and probable consequences doctrine . . . allows an aider and abettor to be convicted of murder, without malice . . . .” (People v. Culuko (2000) 78 Cal. App. 4th 307 , 322, italics added.) 16 to hold, as a matter of law, that malice cannot be imputed to the ‘mastermind’ of an armed home-invasion robbery if he is not personally present at the scene of the murder. We will not do so.” (Ibid.) Conclusion Both appellants are ineligible for relief pursuant to section 1170.95 because they were convicted of provocative act murder, not “felony murder or murder under a natural and probable consequences theory.” (Id., subd. (a).) Disposition The orders in B299044 and B302697 denying appellants’ petitions for relief under section 1170.95 are affirmed. CERTIFIED FOR PUBLICATION YEGAN, J. We concur: GILBERT, P. J. PERREN, J. 17  Dodie A. Harman, Judge Superior Court County of San Luis Obispo ______________________________ Leonard J. Klaif, under appointment by the Court of Appeal, for Defendant and Appellant, Ryan Johnson. Jonathan E. Demson, under appointment by the Court of Appeal, for Defendant and Appellant, Jesse Baker-Riley. Dan Dow, District Attorney, Eric Dobroth, Assistant District Attorney, Melissa Chabra, Christopher G. Peuvrelle, Deputy District Attorneys, for Plaintiff and Respondent. Mark Zahner, Chief Executive Officer; Michael A. Hestrin, District Attorney, Alan D. Tate, Lead Deputy District Attorney; Jason Anderson, District Attorney, James R. Secord, Deputy District Attorney, as Amicus Curiae on behalf of Plaintiff and Respondent.

2020-12-01 19:02:07.186938+00

https://www.courts.ca.gov/opinions/nonpub/C084755.PDF

Filed 12/1/20 San Joaquin Regional Transit Dist. v. Superior Court CA3 NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (San Joaquin) ---- SAN JOAQUIN REGIONAL TRANSIT DISTRICT, C084755 Petitioner, (Super. Ct. No. 39-2010- 00252684-CU-EI-STK) v. THE SUPERIOR COURT OF SAN JOAQUIN COUNTY, Respondent; DSS-2731 MYRTLE LLC et al., Real Parties in Interest. Beginning in 2005, petitioner San Joaquin Regional Transit District (District) began discussing with real parties in interest DSS-2731 Myrtle LLC and Sardee Industries, Inc. (Sardee) the possible acquisition through negotiated purchase or eminent domain of a two-acre parcel in Stockton on which Sardee operated a manufacturing 1 facility. Correspondence regarding appraisal of the property and Sardee’s rights in eminent domain followed in 2008 and efforts to negotiate a purchase were undertaken but failed, leading to the filing of an eminent domain complaint in 2010. Thereafter, in April 2011 a stipulated order of possession gave legal possession of the parcel to District with a right of Sardee to occupy a portion of the property as it explored options for a new facility, to wind down its operations and to move elsewhere. Ultimately, Sardee undertook to move its Stockton operations to its facility in Lisle, Illinois, which it upgraded to handle ongoing work from its Stockton plant. Under the stipulated order Sardee could occupy the property without charge until March 2012 and until June 30, 2012, by payment of rent. By March 2012 most of its equipment and operations had been relocated; the only machine items left in Stockton had been packed and were ready for shipment to Illinois. In April 2012 the District abandoned its condemnation action. Following dismissal of the action, Sardee sought damages under Code of Civil Procedure section 1268.620,1 which permits an award of damages under prescribed circumstances “after the defendant moves from property in compliance with an order or agreement for possession or in reasonable contemplation of its taking.” (§ 1268.620.) District argued that complete physical dispossession of the property is a prerequisite to an award of damages under section 1268.620. Thus, the costs involved in closing down Sardee’s Stockton facility and moving all but the items remaining for shipment in March could not be recovered. The trial court disagreed with this all-or-nothing interpretation of the statutory language and concluded Sardee should be permitted to present its damage claim to a jury, whereupon District filed its petition for writ of mandate, prohibition or 1 All undesignated statutory references are to the Code of Civil Procedure. 2 other appropriate relief and sought a stay of the damages trial. This court issued an order to show cause and stayed further proceedings. Upon further consideration, the stay order issued by this court is vacated, the order to show cause heretofore issued is discharged, and the petition is denied. FACTUAL AND PROCEDURAL BACKGROUND Sardee Industries Sardee is a manufacturing and service business. Sardee designs, manufactures, and installs packaging machinery and conveyor systems for the food and beverage industry. The company began operations in 1962 and is an internationally recognized business. The company operates out of three different plant locations, two of which are relevant here: Stockton, California and Lisle, Illinois (Sardee Stockton and Sardee Lisle). Sardee Stockton manufactures certain signature product lines, including equipment for bulk pallet handling and pallet emptying, packing equipment, and equipment used in production flow. Sardee Lisle manufactures more basic machinery and conveying systems, and offers installation and maintenance services to Sardee customers. Condemnation Action In 2005 District contacted Sardee about the potential acquisition of the Stockton property and the potential of an eminent domain action. Sardee received a notice of decision to appraise in October 2008, and considered this a sign District was serious about taking the Stockton property. In a December 2008 letter, District advised Sardee about its rights concerning reimbursement for relocation costs, loss of goodwill, and a relocation assistance program. District’s relocation agent contacted Sardee in December 2008 and January 2009 regarding the relocation process and District’s need to access the property. The agent informed Sardee that District intended to take the property so it could expand its 3 operations. The agent and a District appraiser visited the Stockton property in January 2010. Sardee received a letter from District regarding reimbursement of relocation and reestablishment expenses and the moving process in March 2010. In May 2010 District sent Sardee a purchase offer, proposed purchase agreement, appraisal summary statement, notice of eligibility for relocation assistance, information on the eminent domain process, and a loss of business goodwill notification. Sardee’s attempt to negotiate the purchase price proved unavailing. A resolution of necessity authorizing District to take the property was adopted in September 2010 and District filed its eminent domain complaint in November 2010. District made a deposit of probable just compensation in the amount of $1,624,125. The property consists of approximately two acres. The front portion of the property contained Sardee’s manufacturing facility, office space, and engineering space. The rear portion was unimproved. Transfer of Possession to District District filed a motion for possession in December 2010, seeking possession of the property in four months. Sardee stipulated to possession, executed in April 2011, to secure a limited extended right of occupancy through March 2012, allowing the company to wind down its property operations and move them elsewhere. On April 22, 2011, the court entered an order which provided that as of May 1, 2011, (1) District had legal possession of the property, (2) Sardee had the right to sole physical occupancy of the improved portion of the property “for the purpose of allowing” it “to continue its manufacturing operation,” and (3) District had the right to sole physical occupancy of the unimproved portion of the property. The stipulated order of possession transferred legal possession of the entire parcel to District on May 1, 2011, but reserved a limited right to Sardee to occupy the front 4 portion rent-free through March 31, 2012, with an option to extend through June 30, 2012, in exchange for a monthly rent of $6,500. Sardee was required to vacate the front portion of the property no later than June 30, 2012, under threat of ex parte writ of possession and a financial penalty. Sardee fully vacated the back portion of the property by May 1, 2011, and District took physical possession of that portion of the property. Sardee characterizes the back of the property as integral to the company’s operations for storage, truck turnaround, and housing dumpsters. According to Sardee, District’s right of possession destroyed any opportunity for the firm to expand its facilities, undertake larger and more complex jobs, and operate its business normally. In August 2011 Sardee proposed an amendment to allow a second option to extend occupancy through September 30, 2012, with increased rent. District rejected the amendment, but agreed to an extension to July 31, 2012. Sardee’s Relocation Process After being contacted by District, Sardee reviewed its options and determined that quickly finding a build-to-suit site would not work. To complete the build-to-suit option without a transition facility, Sardee would have to shut down operations for five to six months, which would kill its business. Instead, Sardee decided to expand and upgrade Sardee Lisle to allow for the transition of Sardee Stockton’s work and product lines to Sardee Lisle. Sardee was aware of its duty to mitigate and aware of the disruption to its manufacturing business at Sardee Stockton the move would cause. Sardee management explored options for a new facility from 2009 through 2011.2 Ultimately, Sardee planned on moving the company to its Lisle facility on an interim basis. 2 Sardee entered into a purchase agreement for a relocation property in Stockton on April 9, 2012, but did not close escrow because District abandoned its condemnation of the Sardee Stockton property. 5  Stockton had been a machine-building factory. Lisle focused on design and layout engineering and space planning for conveyor systems, manufacturing small parts for conveying systems, and installing conveying systems offsite at its customers’ facilities. Lisle’s business relied more on layout engineering and less on design engineering. It did not utilize machine-design engineers or involve electrics or pneumatics. As Sardee describes it: “One might analogize the contrasts between the Lisle and Stockton operations as building bicycles versus building Harley Davidsons or cars.” Lisle’s facilities were less than half the size of the Stockton operation. Although smaller, Lisle was equipped to manufacture can conveyors, had shipping and receiving docks and storage areas, and a space for assembly and staging of assembled conveyor systems. However, Lisle required upgrading in several areas to be able to manufacture the Stockton product lines: manufacturing support equipment, floor space, processes of purchasing, engineering disciplines, and the ability to manufacture for higher tolerances and expertise in electrical wiring. Sardee upgraded Lisle’s facilities and moved Stockton’s business to Lisle between January 2010 and March 2012. Procedural Background On April 24, 2012, District adopted a resolution abandoning its condemnation of the improved portion of the property where Sardee operated its business. On April 17, 2013, District adopted a resolution abandoning its condemnation of the unimproved portion of the property. The trial court dismissed the condemnation action, but retained jurisdiction over Sardee’s section 1268.620 damage claim. Following a court trial, the trial court issued a statement of decision. The court found Sardee entitled to damages under section 1268.620. The court found that by April 23, 2012, Sardee had taken numerous actions as part of the move, had decided to expand Sardee Lisle to serve as an interim relocation site, 6 and took numerous steps in preparation for the relocation. On May 21, 2010, six months prior to the current action, Sardee sent the Sonoco conveyor project to Sardee Lisle. This was a big order for 10 balancers and Sardee was already deep into the project. Other projects were moved off the Sardee Stockton floor to focus on this job. Sardee had previously fulfilled such large orders, but never sent the end conveyor work to Sardee Lisle. Sardee Stockton completed the electrical control panel required for the Sonoco conveyor job and transferred responsibility for completing the job to Sardee Lisle. In September 2010 the third Sardee location, in Orlando, Florida, sent the shear and brake divisions to Sardee Lisle. They were sent as part of the contingency plan for Sardee. There was a concern that without shear and brake, Sardee would not be able to complete projects if dispossessed of Sardee Stockton. Sardee also sought extra space in the Chicago area for manufacturing its Sardee Stockton product lines. It sent its general manager and lead engineers to Sardee Lisle to enable the transition from Sardee Stockton to Sardee Lisle. Sardee trained Sardee Lisle employees to perform numerous functions previously exclusively performed by Sardee Stockton. As of January 1, 2010, Sardee leased about 9,800 square feet of space at Sardee Lisle. By November 2010, it increased the leased square footage to 15,000 square feet to accommodate the transition. The additional space would accommodate moving manufacturing lines from Sardee Stockton to Sardee Lisle. In November 2010 Sardee installed a paint booth at Sardee Lisle and moved auxiliary painting components. Sardee hired an electrical apprentice to perform electrical work in Sardee Lisle that had previously been performed by Sardee Stockton. In 2011 Sardee sent an end conveyor project, a can cleaner project, a cork and seal project, and a magnetic wheel project to Sardee Lisle. By mid-2011 jobs previously performed exclusively by Sardee Stockton could be and were performed by Sardee Lisle. 7  In November 2011 computer systems at Lisle were upgraded so that Sardee Stockton’s engineering and purchasing work could be moved to Sardee Lisle. Sardee made a deposit, negotiated a lease, and began demolition on additional space, doubling the size of the Sardee Lisle property. In March 2012 Sardee Lisle began building the Bush Brothers’ bright stacker, a major product. The project formed a large part of Sardee’s good reputation. But for the District’s actions, the Bush Brothers’ bright stacker would have been built at Sardee Stockton. Sardee also sent an electrical control panel for another Bush Brothers project, which would have been manufactured and completed at Sardee Stockton, to Sardee Lisle. The court noted that the only items left in Sardee Stockton were the last machines of an order referred to as the Rexum jobs and these machines were packed up and ready for shipment. Subsequently, District filed a petition for writ of mandate and stay of trial. Sardee filed a return by answer. DISCUSSION Section 1268.620 Section 1268.620 provides: “If after the defendant moves from property in compliance with an order or agreement for possession or in reasonable contemplation of its taking by the plaintiff, the proceeding is dismissed with regard to that property for any reason . . . the court shall: [¶] (a) Order the plaintiff to deliver possession of the property to the persons entitled to it; and [¶] (b) Make such provision as shall be just for the payment of all damages proximately caused by the proceeding and its dismissal as to that property.” (§ 1268.620.) Here we focus on the phrase “after the defendant moves from property.” 8 Trial Court’s Decision In its statement of decision, the trial court noted section 1268.620 does not use the term “physically dispossessed” and that dispossession logically encompasses legal dispossession based on an order or agreement for possession. The court found, under the facts before it, physical dispossession is not a requirement of entitlement to an award under section 1268.620. The trial court explained the foundation for its determination that Sardee had moved from the property: “Sardee was physically dispossessed because [District] had taken physical possession of the northern portion of the parcel, and Sardee was paying rent to [District]. No taxes were being imposed by the County Tax Assessor. Further, Sardee had physically moved almost everything it needed to move from Stockton to Lisle to perform all of Sardee Stockton’s manufacturing operations in Lisle. The Sardee Stockton facility on the southern portion of the parcel was almost empty. [District’s] counsel even concedes that Sardee ‘did have to spend money in preparing to move, in preparing for a transition. There is no doubt about that.’ Sardee did more than just prepare. Sardee was well into the process of moving, and was almost done. [¶] The facts of this case show that the differing manufacturing and service operations of Sardee were separated in Stockton and in Lisle. A business consists of tangibles and intangibles. Under the facts of this case, and applying . . . section 1268.620 to Sardee’s particular situation, its business is not just equipment, but also its operations, which concern, among other services, its ability to design, engineer, and manufacture its signature product lines. Sardee took the steps necessary to move its operations so it could design, engineer, and manufacture its signature product lines at Sardee Lisle.” Physical Dispossession of a Property District argues the trial court erred in finding that complete physical dispossession of the property is not a prerequisite to an award of damages under section 1268.620. 9 According to District, the language of the statute “after the defendant moves from” requires physical dispossession. In support, District cites Los Angeles Unified School Dist. v. Trump Wilshire Associates (1996) 42 Cal. App. 4th 1682 (Trump). District contends the trial court incorrectly found Trump distinguishable. In Trump, a school district filed an eminent domain action seeking to acquire a portion of a 23-acre plus parcel on which sat the previously closed Ambassador Hotel. Trump Wilshire Associates (Trump Wilshire) had recently acquired the site and was in the early stages of redeveloping the hotel. At the time the eminent domain action was filed, Trump Wilshire had set a planning schedule, prepared development budgets, and started an environmental assessment. After the filing of the eminent domain action, these efforts ceased and the development staff moved from the property. Subsequently, Trump Wilshire only used the property for short-term parking and film shoots, which provided enough income for Trump Wilshire to report a loss for tax purposes. (Trump, supra , 42 Cal.App.4th at p. 1685.) The school district deposited approximately $48 million into court as the amount of probable compensation under section 1255.010. Trump Wilshire moved to strike the deposit on the ground it had been illegally transferred from the school district’s workers’ compensation insurance fund. When this failed, Trump Wilshire applied to withdraw the funds in order to pay off its lender, and subsequently withdrew the $48 million deposit for the benefit of its lender. At first, the lender objected to the withdrawal of funds due to concerns about the possibility the school district would look to it for repayment if the condemnation action were abandoned. The lender’s apprehension stemmed from a Trump Wilshire’s counsel’s statement to the press that Trump Wilshire would seek $200 million as the fair market value of the property and force the school district to abandon the condemnation proceeding. (Trump, supra , 42 Cal.App.4th at pp. 1685-1686.) To assuage these concerns, the parties entered into a stipulation that provided the school district would not seek to recover from the lender in case of abandonment and also 10 provided in the event the school district served a notice of abandonment pursuant to section 1268.510, subdivision (a), judgment would be entered to dismiss the proceeding and that the school district would be entitled to repayment from Trump Wilshire of the total amount of the deposit less any costs Trump Wilshire would be entitled to under sections 1268.610 and 1268.620. (Trump, supra , 42 Cal.App.4th at p. 1686.) A few years later, with little in the way of progress, Trump Wilshire moved for an order compelling the school district to take the property under section 1255.460. The court denied the motion. Subsequently, the school district filed a notice of abandonment. Trump Wilshire moved to set aside the abandonment, arguing it had suffered detriment by withdrawing its deposit and ceasing all development efforts. The school district opposed the motion on the ground there was no evidence of detrimental reliance. The trial court found for the school district. After entry of judgment in the school district’s favor, Trump Wilshire sought compensation under section 1268.620, arguing it had effectively moved from the hotel site. The court denied the motion. Trump Wilshire appealed on both grounds and the Court of Appeal affirmed the judgment. (Trump, supra , 42 Cal.App.4th at pp. 1687-1688, 1693.) Here, the trial court carefully considered Trump and noted Trump Wilshire’s right of possession was never threatened, nor could it be said that Trump Wilshire was dispossessed either legally or physically. In contrast, Sardee did not pursue the remedy of forcing the taking. District received an order of possession, had taken possession of the northern portion of the property, and continued to move forward with taking the property. In contrast, there was ample evidence in Trump of an uncertainty there would be a taking. “[T]he only thing Trump Wilshire did was put its development plans on hold. There was nothing to move but a meager development staff who had barely begun preliminary work.” The trial court also addressed District’s argument that under Trump, in order to qualify for damages an eminent domain defendant must be completely moved from the 11 property. The Trump court cited to the Law Revision Commission’s Comment that “ ‘[s]ection 1268.620 provides for restoration of possession of the property and damages where the defendant was dispossessed from property prior to a dismissal or a final judgment that the plaintiff cannot acquire the property.’ ” (Trump, supra , 42 Cal.App.4th at p. 1692.) The Trump court continued: “The legislative intention that the remedies available under section 1268.620 be applied only to parties who have been physically disposed is confirmed by the Report on the Subcommittee on Eminent Domain, which stated when enacting the present version of the statute in 1975: ‘Where the condemnor takes possession of property to be condemned and subsequently abandons the condemnation action, the condemnor must redeliver possession of the property and pay damages arising out of its taking and use of the property, along with damages for any loss or impairment of value suffered by the land and improvements.’ ” (Ibid.) The trial court found Trump inapplicable to the facts before it. In Trump, Trump Wilshire never had to move, but just put its development plans on hold. Nor did Trump Wilshire ever change its position throughout the litigation by buying other property or developing the remainder of the parcel not subject to the taking. In contrast the trial court noted: “[District] made repeated declarations that it was not abandoning its action. [District] had its Order of Possession, Sardee had spent several years setting up the interim site in Lisle for Sardee Stockton’s manufacturing work, had located a relocation site in Stockton, and had moved equipment and begun carrying out Sardee Stockton’s manufacturing functions in Lisle. [District] had refused Sardee’s request for extra time to September 30, 2012. Sardee had to be out, and it affirmatively altered its position according to [District’s] representations and actions.” We agree with the trial court. Trump did not provide an extensive analysis of what constitutes a “move” sufficient to invoke section 1268.620. The Trump court rejected Trump Wilshire’s claim that it was effectively dispossessed of the property because it was unable to proceed with its development plans. The Trump court concluded: 12 “Throughout the litigation and despite its efforts to transfer possession to the District in 1993, Trump Wilshire continued to exercise ownership control over the property and to derive substantial income from it.” (Trump, supra , 42 Cal.App.4th at p. 1693.) We do not find Trump’s brief reference to section 1268.620 applying to “parties who have been physically dispossessed” supports District’s assertion that the statute requires a complete move of all items from the property in question. (Trump, at p. 1692.) We note section 1268.620 does not use the term “physically dispossessed,” it only states the party must “move[ ] from” the property. When interpreting a statute, the plain language of the statute governs. We give the words their usual and ordinary meaning. Absent ambiguity in the language, we presume the Legislature meant what they said. (Heidi S. v. David H. (2016) 1 Cal. App. 5th 1150 , 1173.) The question becomes, did Sardee move from the property, not was Sardee completely physically dispossessed from the property. District argues Sardee had not moved within the meaning of the statute “because it had exclusive rights to physically occupy the portion of the Property where it operated its Stockton facility, it did occupy the portion of the Property where it operated its Stockton facility, and it continuously operated its business there. As long as Sardee continued to operate its business on the Property, a fact confirmed by Sarovich’s April 20, 2012 e- mail, there’s no basis for finding that it moved from the Property.”3 The trial court disagreed, finding: “Sardee was physically dispossessed because [District] had taken physical possession of the northern portion of the parcel, and Sardee was paying rent to [District]. No taxes were being imposed by the County Tax Assessor. 3 In an e-mail dated April 20, 2012, Sardee owner Steven Sarovich stated that the “beginning of the move-out is currently scheduled for Friday July 6, 2012 and to be completed by July 31, 2012.” The e-mail also listed items still to be removed from the property including substantial raw materials, work in process, shipping and crating supplies, painting supplies, and stockroom supplies. 13 Further, Sardee had physically moved almost everything it needed to move from Stockton to Lisle to perform all of Sardee Stockton’s manufacturing operations in Lisle. The Sardee Stockton facility on the southern portion of the parcel was almost empty. [District’s] counsel even concedes that Sardee ‘did have to spend money in preparing to move, in preparing for a transition. There is no doubt about that.’ Sardee did more than just prepare. Sardee was well into the process of moving and was almost done.” The court also noted “it was impressed with the honesty, integrity and professionalism of the Sardee owners/partners/employees in the face of [District’s] actions. The court can imagine organizations with less integrity attempting to take advantage of such a situation. Sardee did not take advantage or abuse its position, in the court’s view. It acted at all times in an exemplary fashion. This ultimately inures to the benefit of [District], both economically and otherwise.” In brief, the court carefully considered the evidence surrounding the condemnation action and Sardee’s efforts to relocate. Sufficient evidence supports the court’s finding that Sardee had moved from the property, supporting application of section 1268.620. District contends the court’s decision did not address the April 20 e-mail. However, the court noted that District’s counsel “astutely, thoroughly, and very carefully went through claimed damages by Sardee in an effort to show that some of the damages were incurred after RTD abandoned the taking on April 24, 2012. While allowed to do so in the entitlement phase, as it was arguably relevant to whether a move was underway, the court notes much if not all of this evidence is more appropriate in the next phase before the jury.” 14  DISPOSITION Having served its purpose, the order to show cause is discharged and the petition for writ of mandate is denied. The stay order previously issued by this court is vacated. Sardee shall recover its costs in this proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).) /s/ RAYE, P.J. We concur: /s/ ROBIE, J. /s/ MURRAY, J. 15

2020-12-01 19:02:07.772022+00

https://www.courts.ca.gov/opinions/nonpub/C080001.PDF

Filed 12/1/20 P. v. Johnson CA3 NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento) ---- THE PEOPLE, C080001 Plaintiff and Respondent, (Super. Ct. No. 11F08807) v. ANDREW DARNELL JOHNSON, Defendant and Appellant. M.N. interrupted defendant Andrew Darnell Johnson while he was breaking into a window near the front door of her house. Defendant fled and was apprehended a short time later with a screwdriver and gloves. A jury found him guilty of first degree residential burglary and possession of burglary tools, and he was sentenced to an aggregate term of nine years in state prison. On appeal, defendant contends the trial court erroneously permitted the prosecutor to present evidence of his prior 2008 burglary conviction under Evidence Code section 1 11011 to show intent or lack of accident or mistake. He attacks the court’s ruling permitting the prior crime evidence on several grounds, including: (1) intent was not an issue at trial since he offered to stipulate that the person M.N. encountered, which he denied was him, had the requisite intent to steal; (2) the prior burglary crime and the charged offense were not sufficiently similar for purposes of section 1101, subdivision (b); (3) the prior crime evidence was more prejudicial than probative under section 352; and (4) admitting the evidence violated his federal constitutional rights to due process and a fair trial. Defendant also contends recent legislative amendments in Senate Bill No. 1393 (2017-2018 Reg. Sess.) require remand for the court to consider whether to exercise newly granted discretion to strike the prior serious felony enhancement imposed under Penal Code section 667, subdivision (a)(1). We shall affirm defendant’s convictions, but remand for the court to determine whether to exercise its discretion to strike the prior serious felony enhancement. FACTUAL AND PROCEDURAL BACKGROUND In December 2011 M.N. lived with her brother, daughter, and a college student at her home in Sacramento. The house had a gate separating the front yard from the front door; it was necessary to enter the gate before approaching the front door. To the left of the front door was a screened window to a bedroom. A small table and chair were positioned below the window in a small patio area. On the morning of December 28, 2011, M.N. and her brother left the house to run a quick errand; M.N.’s daughter and the college student were not at home at the time. When they left, the screen to the window near the front door was in place, the window was closed and locked, and the gate leading to the front door was closed. 1 Further undesignated statutory references are to the Evidence Code. 2  M.N. and her brother went to a store a short distance from the house and returned home a few minutes later, about 10:35 a.m. When they returned, M.N.’s brother went to the garbage cans on the side of the house while M.N. walked towards the front door; she noticed the gate was open and unlatched even though it was closed before she left. M.N. saw a young Black man hiding behind a plant near the front bedroom window. She asked him who he was and what he was doing there; he responded that he was looking for someone named Michael. M.N. said she did not know anyone named Michael. While they spoke, M.N. and the man were about two feet apart. The man walked toward M.N., causing her to back out of the gated area. M.N.’s brother came up behind her and she told him that someone was there. Her brother wanted to fight or grab the young man, but M.N. told him not to grab him. M.N.’s brother told her that the screen from the front window had been removed and the window was open. When M.N. turned to look at the window, the man fled. Shortly thereafter, M.N.’s other daughter, who did not live with her, arrived at the house. M.N. and her daughter drove through the neighborhood looking for the man, and called 911 about 10:40 a.m. to report the break-in. M.N. reported that the man was a young Black man, in his early twenties, with a mustache. He was wearing a navy blue hoody shirt and light blue pants with a black knitted cap. The man had hopped over a fence and was in a nearby park. Around this same time, Lorena G., who lived near M.N., called 911 to report that a Black man had jumped over her neighbor’s fence into her yard. He was wearing a blue beanie and a blue sweatshirt or jacket and dark pants. She described the man as approximately 30 to 40 years old during the 911 call. When questioned at trial whether she felt this description was accurate, Lorena G. testified that she did not see his face, but only his hand as he jumped over the fence, which she thought “looked young.” Several officers responded to the area, including Officer Randy Van Dusen and his police dog Bodie; he was dispatched to the scene around 10:44 a.m. Bodie was trained to 3 search for outdoor articles that had a fresh human scent. In a backyard near Lorena G.’s home, Bodie found a blue jacket and a black beanie that had recently been discarded. Officer Van Dusen broadcasted on the radio that he had found clothing that matched the suspect’s clothing. Officer Patricia Verozza, who also responded to the call, spoke with a local resident who told her that someone ran by his driveway about five minutes before the officer arrived. The person was wearing a white T-shirt and light blue pants. After hearing Officer Van Dusen’s broadcast about the discarded clothing, Officer Verozza believed that the resident had seen the suspect. Another officer broadcast on the police radio that someone who matched the suspect’s description was walking on a bike trail in the area. Officer Verozza proceeded to the bike trial and saw defendant, who was wearing jeans and a white T-shirt with dirt, weeds, and brush on it. She detained him at 11:12 a.m. Defendant was approximately one mile from M.N.’s home when he was detained. He had a screwdriver and purple gloves in his possession. Defendant also had a mustache and facial hair. Officer Zach Eaton escorted M.N. to a field showup, where she identified defendant as the person she previously encountered breaking into her home. Defendant was then transported for M.N.’s brother to see, but he was not able to identify defendant. Defendant was charged with first degree residential burglary (Pen. Code, § 459, count one) and misdemeanor possession of burglary tools (Pen. Code, § 466, count two). It was further alleged that defendant suffered a prior serious felony conviction (Pen. Code, § 667, subd. (a)), a prior strike (Pen. Code, §§ 667, subds. (b)-(i), 1170.12), and a prior prison term (Pen. Code, § 667.5, subd. (b)). Prior to trial, the prosecutor moved in limine to admit two prior burglary convictions under section 1101, subdivision (b)—one from 2006 and one from 2008—in order to prove defendant’s intent or absence of mistake in breaking into M.N.’s home. 4 The prosecutor argued that the 2008 burglary and the present offense were similar; defendant had broken into a stranger’s home while she was at work, rummaged through jewelry without actually taking anything, and then fled the scene while discarding clothing. Defense counsel objected, arguing the prior crimes’ evidence was inadmissible under section 1101 because defendant did not contest the intent element but rather claimed that he was not the man at M.N.’s house. She also argued that the prior burglaries were not sufficiently similar and were too inflammatory to admit. Defense counsel offered to stipulate that the man at M.N.’s house, whoever he was, had the requisite intent to steal for purposes of the burglary charge. The trial court ruled the prosecutor could introduce one of defendant’s prior burglaries under section 1101, subdivision (b), but not both. While one was relevant to show intent or lack of mistake or accident, both the prior burglaries would have been too prejudicial to defendant. The court also found that the prosecutor was not required to accept defendant’s offer to stipulate to intent. At trial, M.N. again identified defendant as the man who broke into her home. She testified that she was approximately two feet from defendant when she spoke to him at her house. She was wearing her glasses when she identified him during the field showup. The window screen, according to her, had been bent in the corners, but the marks did not appear to her to be pry marks; the screen was not bent before she left the house that day. M.N.’s brother was unable to identify defendant at trial.2 He said he could not remember many details because it had been four years since the break-in. Although he admitted talking to police the day of the incident, and he conceded that his memory was 2 The brother was a reluctant trial witness, who did not want to testify. 5 better than it was at trial, he later denied telling police that the young Black man he saw was five foot nine or five foot 10 inches tall, about 160 pounds, with dreadlocks or possibly a black skull cap, and a jacket. He also denied telling police the window screen had pry marks on it. Officer Eaton later testified that M.N.’s brother had given the above description to him the day of the incident, and had said that the window screen had pry marks on it that had not been there before. Likewise, M.N. had told him the screen had pry marks that were not there before. Officer Eaton also saw the screen when he responded to the scene and testified that the screen had pry marks on it. A DNA expert testified at trial regarding tests she conducted on the jacket and beanie recovered by police. After testing two samples from the jacket, the results were inconclusive. The expert also tested two samples from the beanie. Tests on the first beanie sample showed two contributors, a male and a female, and that defendant was a possible contributor to DNA found on the sample; the probability of identifying an unrelated African-American contributor to this sample was one in 96 million. As to the second beanie sample, the expert identified at least two DNA contributors, but possibly three. Assuming there were two contributors, defendant’s DNA was conclusively identified in the sample, and the probability of identifying an unrelated African-American contributor was one in 190 million. However, if there were three contributors, the results were inconclusive. The prosecutor also presented evidence that defendant was convicted of burglarizing V.B.’s house in 2008. She called four witnesses who testified, in sum, for about 30 minutes. Defense counsel asked a total of five questions while cross-examining these witnesses.3 3 V.B., the homeowner, testified for four minutes and defense counsel did not ask any questions on cross-examination. V.B.’s neighbor testified for five minutes and defense 6  According to the witnesses, V.B. was at work when her neighbor saw someone standing outside V.B.’s house the neighbor had never seen before. The neighbor heard a door open and close from the direction of V.B.’s house and called police. The sliding glass door to V.B.’s house had pry marks, and another door was kicked in. The intruders had gone through the bedroom, dresser, and jewelry cabinet, although nothing was taken. A responding officer saw defendant jump over a backyard fence; defendant was removing items of clothing as he fled. The officer chased defendant and eventually detained him. The parties stipulated that defendant pleaded no contest to burglary for his role in the incident. Defendant did not testify, but defense counsel called a private investigator with experience investigating crimes in the area surrounding M.N.’s home. The area was comprised of a mix of racial groups. The jury found defendant guilty as charged. Defendant waived a jury trial on the prior conviction allegations, and the court found the prior conviction true. The court imposed an aggregate term of nine years in state prison; the low term of two years for the burglary offense, doubled to four years for the strike prior, plus five years for the prior serious felony conviction. The court imposed and stayed a two-year term for the possession of burglary tools offense. (Pen. Code, § 654.) Defendant timely appealed. counsel asked one question on cross-examination. Officer Marcel Loriaux testified for nine minutes, and defense counsel asked three questions during cross. Officer Cynthia Bohrer initially testified for seven minutes, and defense counsel declined to ask any questions on cross. The prosecutor recalled her to ask a single question, and defense counsel asked one question on cross. 7  DISCUSSION I Evidence of Prior Burglary Defendant contends the trial court improperly admitted evidence of his prior 2008 burglary conviction under section 1101, subdivision (b) to prove intent and absence of mistake or accident. He argues the element of intent was not in dispute because he offered to stipulate that the person M.N. encountered had the requisite intent to steal; defendant simply denied being that person. Thus, in his view, identity was the only issue at trial. He also contends that the prior burglary was not sufficiently similar to the charged crime and that the probative value of the evidence under section 352 was substantially outweighed by the undue risk of prejudice. Section 1101 controls the admission of evidence of prior conduct. (People v. Thompson (2016) 1 Cal. 5th 1043 , 1113.) Subdivision (a) of section 1101 provides, with exceptions not applicable here: “[E]vidence of a person’s character or a trait of his or her character (whether in the form of an opinion, evidence of reputation, or evidence of specific instances of his or her conduct) is inadmissible when offered to prove his or her conduct on a specified occasion.” (§ 1101, subd. (a); People v. Leon (2015) 61 Cal. 4th 569 , 597 (Leon) [“ ‘Character evidence, sometimes described as evidence of propensity or disposition to engage in a specific conduct, is generally inadmissible to prove a person’s conduct on a specified occasion’ ”].) Evidence that a person committed a crime, civil wrong, or other act may be admitted, however, to prove some other material fact, such as that person’s intent, identity, or absence of mistake or accident. (§ 1101, subd. (b); Leon, supra , 61 Cal.4th at p. 597.) The uncharged act must be relevant to prove a fact at issue (§ 210), and its admission must not be unduly prejudicial, confusing, or time consuming (§ 352). (Leon, at pp. 597-598.) We review the trial court’s decision whether to admit evidence, including evidence of other crimes, for abuse of discretion. (Id. at p. 597.) A trial court’s 8 determination “ ‘must not be disturbed on appeal except on a showing that the court exercised its discretion in an arbitrary, capricious or patently absurd manner that resulted in a manifest miscarriage of justice.’ ” (People v. Rodrigues (1994) 8 Cal. 4th 1060 , 1124.) Relevance under section 1101 depends, in part, on whether the act is sufficiently similar to the current charges to support a rational inference of intent or some other material fact. ( Leon, supra , 61 Cal.4th at p. 598.) “ ‘The least degree of similarity (between the uncharged act and the charged offense) is required in order to prove intent.’ ” (Ibid.) That is, the uncharged misconduct must be sufficiently similar to support the inference that the defendant probably harbored the same intent in each instance. (People v. Ewoldt (1994) 7 Cal. 4th 380 , 402 [recurrence of a similar result tends to establish, at least provisionally, the presence of criminal intent].)4 Defendant first argues that the prior burglary evidence was not relevant because defense counsel offered to stipulate to intent, and he did not argue lack of intent. In essence, he contends the trial court erred by not compelling the prosecutor to accept the proffered stipulation. Our Supreme Court has held, however, that “[n]either the prosecutor nor the trial court [is] legally obligated” to accept a stipulation. (People v. Rogers (2013) 57 Cal. 4th 296 , 329-330 [prosecutor could properly reject the defendant’s offer to stipulate that the charged murder was a first degree or nothing type of case, instead opting to prove intent with prior acts evidence of the defendant’s prior uncharged murders].) And a trial court is not authorized to enforce such a stipulation over the prosecutor’s objection. (Ibid.) 4 The greatest degree of similarity is required for evidence of uncharged misconduct to be relevant to prove identity. (People v. Ewoldt, supra , 7 Cal.4th at p. 403.) The trial court found that the prior burglary was not sufficiently similar to prove identity. Neither party challenges this finding on appeal. 9 This is because “ ‘[a] criminal defendant may not stipulate or admit his way out of the full evidentiary force of the case as the Government chooses to present it.’ ” (Id. at p. 330, quoting Old Chief v. United States (1997) 519 U.S. 172 , 186-187 [ 136 L. Ed. 2d 574 , 592] [conventional evidence “tells a colorful story with descriptive richness”; it “has force beyond any linear scheme of reasoning, and as its pieces come together a narrative gains momentum”].) Defendant’s reliance on a much older case, People v. Hall (1980) 28 Cal. 3d 143 , for the proposition that a prosecutor must accept a stipulation, is not persuasive. While it is true Hall states that when “a defendant offers to admit the existence of an element of a charged offense, the prosecutor must accept that offer and refrain from introducing evidence . . . to prove that element to the jury” (id. at p. 152), more recent cases from our Supreme Court, like Rogers, have held otherwise. (See, e.g., People v. Rogers, supra , 57 Cal.4th at pp. 325, 329-330; People v. Scheid (1997) 16 Cal. 4th 1 , 16-17 [defense’s offer to stipulate as to the fact or manner of the shootings did not negate the relevance of photographic evidence showing murder victim; the prosecutor was not obliged to accept “ ‘ “antiseptic stipulations” ’ ”]; see also People v. Thornton (2000) 85 Cal. App. 4th 44 , 48 [refusing to revert to the “outmoded notion that a criminal defendant may limit the prosecution’s evidence by ‘not putting things at issue’ ”].) We shall follow the court’s more recent directive. Defendant claims that he did not put the element of intent in issue. But he pleaded not guilty to the charges. Such a plea puts the entire charge, including his intent to steal for purposes of the burglary offense, at issue. (People v. Catlin (2001) 26 Cal. 4th 81 , 146 [a defendant’s not guilty plea put in issue all the elements of the charged offenses]; People v. Thornton, supra , 85 Cal.App.4th at pp. 48-49 [a fact—like a defendant’s intent—generally becomes “ ‘ “disputed” ’ ” when it is raised by a plea of not guilty or a denial of an allegation].) 10  Moreover, during closing argument defense counsel argued the issue of intent to the jury. Counsel stated: “Then, even if you could somehow find that this defendant did these two things to commit a burglary, the burglary is not proven until you can prove that the reason he is there is to specifically intend to commit the theft . . . of this residence.” (Italics added.) Counsel continued: “Another jury instruction that is just as important that you will get has to do with the act of union and intent. What that means is whatever was done had to be done with the specific intent -- with the specific intent of doing [a theft]. . . . Like I said, there’s no evidence of theft. A taking and carrying away, I don’t know what would be alleged to have been taken. There’s no burglary and there’s no theft.” (Italics added.) In a similar vein, with respect to the possession of burglary tools charge, defense counsel argued: “You will also be given a jury instruction about possession of burglary tools, and the same point is made with regard to the intent. A person who is carrying a screwdriver or walking around with a screwdriver or what could be considered a burglary tool is not a burglary tool unless that tool can be used for burglary and the person is possessing the tool with the specific intent to use it to commit the burglary.” (Italics added.) Counsel then argued, “And in order to prove that, yes, my client was found he had a screwdriver on his person. But . . . the prosecution would have to prove beyond a reasonable doubt, that he possessed it with the intent to feloniously . . . break or enter into the building for the purpose of committing the theft . . . .” (Italics added.) Thus, while defense counsel argued identity, she also raised the specter of lack of intent. To counter that argument, the trial court properly allowed the prosecutor to reject the stipulation and prove intent using the prior burglary evidence under section 1101, subdivision (b). Defendant next contends that even if the prosecutor was not required to stipulate to intent, the prior burglary evidence lacked probative value under section 1101, subdivision (b) because it differed significantly from the charged crime. He cites the 11 following differences: (1) the 2008 burglary involved two suspects while the present crime involved a single person; (2) the 2008 burglary occurred at an apartment rather than a single family residence; (3) the 2008 burglary did not have a gated front area; (4) the back door was kicked in during the 2008 burglary whereas a window screen was removed and the window opened here; (5) no burglary tools were found on defendant during the 2008 burglary and he was found with a screwdriver and gloves when detained in the present case; (6) the 2008 burglary involved rummaging through drawers in a bedroom and moving a mattress while no similar evidence was found here; and (7) defendant removed his T-shirt and pants after fleeing the 2008 burglary, but was alleged to have removed only a jacket and hat during the present crimes. In addition, defendant contends that fleeing from a burglary scene by hopping over a fence is not unusual or distinctive. Although the 2008 burglary and the charged offense were dissimilar in some ways, a reasonable court could conclude that in sum the actions taken by defendant in the earlier burglary were sufficiently similar to admit the evidence to establish intent. Defendant targeted strangers’ homes5 when they were not present. Pry marks were found on a sliding glass door in the earlier case (in addition to the door being kicked in) and on the window screen in the present case. Defendant fled the scene of both crimes while discarding clothing so as not to be identified as the perpetrator. These common features support a finding that defendant harbored a similar intent in each instance to steal from the absent homeowners. For the same reasons, the prior burglary evidence was admissible to show lack of mistake or accident. In this case, M.N. testified that defendant said he was looking for Michael when she surprised him upon returning to the house. Evidence that defendant 5 The record belies defendant’s claim that the 2008 burglary occurred at an apartment. The victim testified that she lived in a home, not an apartment. 12 had previously been convicted of burglarizing a stranger’s home in 2008 while the victim was away at work tended to show that he did not have an innocent reason for being at M.N.’s house; he was not mistakenly there looking for someone, with gloves and a screwdriver in his possession. Admitting evidence of defendant’s prior burglary also was not more prejudicial than probative. “Although a prior criminal act may be relevant for a noncharacter purpose to prove some fact other than the defendant’s criminal disposition, the probative value of that evidence may nevertheless be counterbalanced by a section 352 concern. Evidence may be excluded under section 352 if its probative value is ‘substantially outweighed by the probability that its admission [would] . . . create substantial danger of undue prejudice, of confusing the issues, or of misleading the jury.’ ” (People v. Hendrix (2013) 214 Cal. App. 4th 216 , 238.) Defendant’s arguments to the contrary notwithstanding, the trial court’s finding that the probative value of the prior burglary evidence outweighed any prejudicial effects was within the bounds of reason. As discussed above, the prior burglary and the present crime shared several common characteristics, meaning the evidence of the prior burglary was probative in establishing defendant’s intent and absence of mistake. The prior burglary was not stronger or more inflammatory than the charged crime. And, we note, the court denied the prosecutor’s initial request to introduce evidence of two prior burglaries, instead allowing only one prior burglary so as to balance the legitimate need to present relevant evidence with defendant’s right not to be unduly prejudiced by the prior crimes evidence. We cannot say on this record that the court abused its discretion in so ruling. Because the court properly admitted the prior burglary evidence, his constitutional rights to due process and a fair trial under the Fifth and Fourteenth Amendments to the 13 United States Constitution were not violated.6 McKinney v. Rees (9th Cir. 1993) 993 F.2d 1378 , upon which defendant relies is not helpful. First, we are not bound by decisions of lower federal courts. (People v. Bradley (1969) 1 Cal. 3d 80 , 86.) In any event, McKinney held that a state court’s erroneous admission of prior crimes’ evidence violated the federal due process clause (McKinney, at pp. 1384-1386); the prior burglary evidence here was properly admitted. Even assuming that the court should have excluded the prior burglary evidence, defendant has failed to show prejudice from the purported error under any standard. (People v. Watson (1956) 46 Cal. 2d 818 , 836 [erroneous admission of evidence warrants reversal only if “it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of error”]; People v. Thompson, supra , 1 Cal.5th at p. 1116 [the “ ‘ “ ‘routine application of state evidentiary law does not implicate [a] defendant’s constitutional rights’ ” ’ ”]; People v. Marks (2003) 31 Cal. 4th 197 , 227 [the Watson standard of harmless error applies to claims regarding “ordinary rules of evidence like . . . section 352”]; Chapman v. California (1967) 386 U.S. 18 , 24 [ 17 L. Ed. 2d 705 , 710] [federal constitutional errors require reversal unless the prosecutor shows the error was harmless beyond a reasonable doubt].) The record belies defendant’s assertion that the prior burglary evidence took up a considerable portion of the trial. While it is true that four witnesses testified about the 2008 burglary, their testimony was relatively short and resulted in minimal cross- examination. The victim of the 2008 burglary testified for approximately four minutes and defense counsel did not cross-exam her. Her neighbor, who called police, testified for about five minutes and defense counsel asked a single question during cross. One of the officers who responded to the scene testified for nine minutes and was asked three 6 To forestall an ineffective assistance of counsel claim for failure to raise the issue, we address defendant’s federal constitutional error challenge. 14 questions on cross-examination. Another officer testified for seven minutes and initially was not cross-examined by defense counsel. The officer was later recalled and both the prosecutor and defense counsel asked a single question upon recall. In total, testimony from the four witnesses took less than a half-hour. By contrast, the DNA expert testified for approximately three hours. Although the prosecutor briefly referenced the prior burglary evidence during her closing argument, she focused primarily on the eyewitness identification and the physical evidence linking defendant to the present crime. She highlighted that defendant was linked by DNA evidence to clothing matching the description of the suspect’s clothing and found discarded in a nearby backyard, that defendant was caught nearby, that he had scratches and dirt on him, which was indicative of someone trying to evade capture, and that he had gloves and a screwdriver on him when apprehended by police. While she did reference the prior burglary evidence, after reviewing the record we cannot say the prosecutor focused exclusively, or even heavily, on the evidence at closing. Defendant’s argument that the evidence was closely contested is equally without merit. His assertion that only two of the four residents at the home testified at trial is true, but irrelevant. The two residents that were home at the time defendant burglarized their home—M.N. and her brother—both testified. The other residents, as M.N. made clear, were not home at the time of the incident and would have added nothing to the testimony. This is especially so since M.N. and her brother both testified that when they left to run errands, no one else was home, the window was closed, and the screen was on the window. Pry marks on the window screen were consistent with the screwdriver defendant was carrying when he was arrested. While M.N. and her brother testified at trial four years later that the screen showed signs of being bent rather than pried, the day of the incident, when the events were fresh in their minds, both told officers that the screen had 15 pry marks on it. That observation was confirmed at trial by Officer Eaton, who also viewed the damaged screen. Citing the fact that he was found walking and not running, defendant implies that he could not have traveled what he characterizes as “some distance” from M.N.’s house to where he was ultimately detained. Yet the evidence showed that defendant, who was a young man with no sign of any physical impediments, was found a little over a mile from M.N.’s home nearly 30 minutes after M.N. called police. Several witnesses, including M.N., saw a person matching defendant’s description running from the vicinity of M.N.’s home. Officer Eaton estimated that it would only take a person of similar age, size, and weight approximately six to eight minutes to run about a mile. While defendant’s DNA or fingerprints were not found at M.N.’s house, evidence showed defendant had gloves in his possession when he was detained. DNA evidence, moreover, did link defendant to the freshly discarded beanie, which M.N. testified defendant was wearing when she first saw him at her house. Defendant’s claim that evidence regarding identity was also closely contested is equally without merit. M.N. had a conversation with defendant at her house while they stood approximately two feet apart. She thus had an excellent opportunity to view defendant, making her subsequent identification of him during the field showup highly credible. Her description of defendant during the 911 call as having a mustache was also accurate, notwithstanding defendant’s claim that he had no mustache when he was found. Defendant cites a picture in the record where his face is turned down, away from the camera. But another picture shown to the jury clearly shows defendant facing towards the camera with a mustache, and Officer Verozza also testified that defendant had a mustache the day he was arrested. Defendant was approximately 21 years old when apprehended. M.N. reported that the person who burglarized her home was around 19 or 20 years old. Similarly, M.N.’s brother described the man as young; he estimated he was between 21 and 23 years old. 16 And while the neighbor who reported seeing a Black man jump over her fence described the man as 30 or 40 years old, she clarified at trial that she did not see his face but described him as being 30 or 40 years old because she thought his hand looked “young.” Thus, three eyewitnesses described the suspect as being young, which defendant was at the time. M.N.’s brother, moreover, did not merely report that the suspect had dreadlocks as defendant implies. Instead, he reported that he thought the man had dreadlocks or that he could have been wearing a “skull” or beanie cap. DNA evidence linked defendant to the beanie found in a nearby neighbor’s backyard. The fact that defendant was handcuffed when M.N. viewed defendant during the single-person showup does not mean the field showup was “highly-suggestive” as defendant claims. (In re Carlos M. (1990) 220 Cal. App. 3d 372 , 386 [single-person showup is not inherently unfair; mere presence of handcuffs on a detained suspect is not so unduly suggestive as to taint the identification].) Officer Eaton testified that he admonished M.N. before the showup with the following: “Number 1: You will be asked to view a person who has been contacted by the police. [¶] Number 2: The person you are going to view may or may not be the subject you observed commit the crime. [¶] Number 3: You are under no obligation to identify the person. If you identify the person as the subject you saw commit the crime, you will not be told if it is the person who is suspected of committing the crime. [¶] Number 4: Please keep an open mind when viewing the person and explain to the officer why or why not the person is the suspect. [¶] Number 5: Please do not take into consideration if the person is handcuffed or removed from a police vehicle. [¶] Number 6: Please do not discuss the field showup with any other people.” Furthermore, while M.N. viewed defendant while she remained in the police car, she testified that she wore her glasses during the showup and easily identified defendant. According to Officer Eaton, M.N. identified defendant right away and was “very sure” of her identification. 17  Defendant’s assertion that the jury did not decide the case quickly and had questions during deliberations does not mean the evidence was as close as he contends. A careful review of the record reveals that the jury deliberated for about 20 minutes the first day it got the case. Much of that time was likely spent picking a jury foreman since the court instructed the jury that the first thing they must do was pick a foreman. (CALCRIM No. 3550 [“When you go to the jury room, the first thing you should do is choose a foreperson”].) The next day the jury deliberated a full day without reaching a verdict. The following day, before deliberations began, the court released an ill juror and replaced her with an alternate. The jury had to begin deliberations anew, and reached a verdict less than an hour later. Thus, the jury, as reconstituted, reached its verdict quickly, and the original jury had deliberated for only about one day before the alternate was seated. And, one of the jury’s questions focused on whether removing a screen constituted entry into the home under the burglary statute, not anything related to identity or intent. Any prejudice from the prior burglary evidence was also lessened because the evidence actually allowed defense counsel to argue that defendant admitted guilt in the prior incident because he had in fact committed the prior burglary. By contrast, defendant went to trial in this case because he was not the person M.N. confronted at her home and did not commit the charged burglary. Finally, the court instructed the jury that it could only consider the prior burglary evidence for the purpose of showing defendant’s intent or the absence of mistake. Jurors are presumed to follow the court’s instruction, and no evidence here shows the jurors disregarded the court’s instruction. (People v. Edwards (2013) 57 Cal. 4th 658 , 746 [Supreme Court presumes jurors understand and follow the trial court’s instructions].) For all these reasons, admission of the prior burglary evidence was not prejudicial under any standard. (People v. Watson, supra , 46 Cal.2d at p. 836; Chapman v. California, supra , 386 U.S. at p. 24.) We are convinced beyond a reasonable doubt that 18 the jury would have reached the same verdict had the prior burglary evidence been excluded. II Prior Serious Felony Enhancement Defendant contends recent legislative amendments in Senate Bill No. 1393 (2017- 2018 Reg. Sess.) require remand for the court to consider whether to exercise newly granted discretion to strike the prior serious felony enhancement imposed under Penal Code section 667, subdivision (a). The People concede the legislation applies retroactively to defendant, and that remand is proper under the circumstances. We agree. As previously noted, defendant’s sentence in this case includes a five-year term for a prior serious felony conviction under Penal Code section 667, subdivision (a). When he was sentenced, the trial court had no power to strike the prior serious felony enhancement. (See People v. Valencia (1989) 207 Cal. App. 3d 1042 , 1045; see also, former Pen. Code, §§ 667, subd. (a)(1) [prior serious felony enhancements shall be imposed “[i]n compliance with [former] subdivision (b) of Section 1385”], former 1385, subd. (b) [“This section does not authorize a judge to strike any prior conviction of a serious felony for purposes of enhancement of a sentence under Section 667”].) Recent amendments in Senate Bill No. 1393 to Penal Code section 667, subdivision (a) and Penal Code section 1385, subdivision (b), which became effective January 1, 2019, now give trial courts the power to strike the five-year enhancement for a prior serious felony conviction. (Stats. 2018, ch. 1013, §§ 1, 2 [deleting the prohibition against striking a prior serious felony enhancement]; Cal. Const., art. IV, § 8, subd. (c); Gov. Code, § 9600, subd. (a); People v. Camba (1996) 50 Cal. App. 4th 857 , 865.) We agree the statutory amendments apply retroactively to defendant. Under In re Estrada (1965) 63 Cal. 2d 740 , 745, “when a statute mitigating punishment becomes effective after the commission of the prohibited act but before final judgment the lesser punishment provided by the new law should be imposed in the absence of an express 19 statement to the contrary by the Legislature.” (People v. Francis (1969) 71 Cal. 2d 66 , 75-76.) As the Supreme Court stated in Estrada, “When the Legislature amends a statute so as to lessen the punishment it has obviously expressly determined that its former penalty was too severe and that a lighter punishment is proper as punishment for the commission of the prohibited act. It is an inevitable inference that the Legislature must have intended that the new statute imposing the new lighter penalty now deemed to be sufficient should apply to every case to which it constitutionally could apply.” (Estrada, at p. 745.) Defendant should have an opportunity to argue to the trial court that it should exercise its informed discretion to strike the prior serious felony enhancement. We therefore remand for this purpose. DISPOSITION Defendant’s convictions are affirmed. The matter is remanded to allow the trial court to determine whether to exercise its discretion to strike the prior serious felony enhancement imposed under Penal Code section 667, subdivision (a). /s/ RAYE, P. J. We concur: /s/ BLEASE, J. /s/ RENNER, J. 20

2020-12-01 19:02:08.633049+00

https://www.courts.ca.gov/opinions/nonpub/B303493.PDF

Filed 12/1/20 Marriage of Cunningham CA2/6 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX In re Marriage of JENNIFER 2d Civil No. B303493 and JOHN PAUL (Super. Ct. No. D372438) CUNNINGHAM. (Ventura County) JENNIFER CUNNINGHAM, Appellant, v. JOHN PAUL CUNNINGHAM, Respondent. Jennifer Cunningham appeals from the trial court’s postjudgment order granting John Paul Cunningham’s motion to dismiss her request for an order finding him in contempt of court.1 We affirm. 1 We use the parties’ first names for clarity.  Jennifer and John married in 1997, and separated in 2015. In 2016 John received a federal income tax refund of $5,700 for overpayments made in tax year 2015. Jennifer became aware of the refund in 2018 while she and John were discussing a settlement agreement to divide their community assets and liabilities. The two signed the agreement later that day. One of the provisions of the settlement agreement provided that Jennifer and John would share any tax refund equally. Another provided that they each waived any “[c]laim[] for reimbursement from the other [p]arty . . . regarding . . . payments made to or on behalf of the [p]arties or the community prior or subsequent to the [d]ate of separation.” A third provided that they each waived “any claim against the other [p]arty for the receipt of community property funds after separation[,] or for the expenditure of community property after separation, or both.” The agreement was incorporated into the final judgment in Jennifer and John’s dissolution action. Six weeks after entry of judgment, Jennifer requested an order finding John in contempt of court based on his failure to remit her portion of the $5,700 tax refund. The trial court granted John’s motion to dismiss Jennifer’s request, finding that she knew about the refund when she entered into the 2018 settlement agreement. It also concluded that she waived any claim to the refund when she signed the agreement. Jennifer does not challenge the trial court’s finding that she knew about the tax refund when she entered into the settlement agreement. Nor does she substantively challenge the court’s conclusion that she waived her claim to the refund in that agreement. Because it is supported by substantial evidence, we are bound by the finding that Jennifer knew about the refund 2 when she signed the agreement. (See In re Marriage of Bonds (2000) 24 Cal. 4th 1 , 37-38, superseded by statute on other grounds as stated in In re Marriage of Cadwell-Faso & Faso (2011) 191 Cal. App. 4th 945 , 958.) We also conclude that the court below correctly interpreted the agreement since its interpretation gave effect to the agreement as a whole. (See Civ. Code, § 1641.) Because she knew about the $5,700 tax refund when she signed the settlement agreement, Jennifer waived any claim to it. Her request that the trial court find John in contempt therefore lacked a legal basis. The court thus properly granted his motion to dismiss the request. (See Board of Supervisors v. Superior Court (1995) 33 Cal. App. 4th 1724 , 1737 [punishment for contempt requires violation of specific order].) DISPOSITION The trial court’s order granting John’s motion to dismiss Jennifer’s request to find him in contempt of court, entered December 24, 2019, is affirmed. NOT TO BE PUBLISHED. TANGEMAN, J. We concur: GILBERT, P. J. YEGAN, J. 3  John R. Smiley, Judge Superior Court County of Ventura ______________________________ Jennifer Cunningham, in pro. per., for Appellant. No appearance for Respondent.

2020-12-01 19:02:08.938539+00

https://www.courts.ca.gov/opinions/nonpub/A156834.PDF

Filed 12/1/20 In re F.N. CA1/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE In re F.N., a Person Coming Under the Juvenile Court Law. THE PEOPLE, Plaintiff and Respondent, A156834, A157674, A157936 v. F.N., (Contra Costa County Super. Ct. No. J17-00123) Defendant and Appellant. After sustaining allegations that F.N. committed three robberies and a carjacking, and that he personally used a firearm in the commission of each offense, the juvenile court declared him a ward of the court pursuant to Welfare and Institutions Code section 602 and committed him to the Department of Corrections and Rehabilitation, Division of Juvenile Justice (DJJ) for a maximum term of confinement of 52 years. On appeal,1 F.N. (1) challenges his commitment to DJJ on the ground there was no evidence the commitment would benefit him due to his F.N. appeals from three separate juvenile court orders, including the 1 original disposition order and two amended disposition orders. The appeals were consolidated by order of this court on September 6, 2019. 1 intellectual disability, and (2) contends, pursuant to Penal Code section 654, the juvenile court should have stayed execution of the term of commitment imposed for one of the robberies and corresponding firearm enhancement.2 We affirm. BACKGROUND On the night of October 1, 2015, then 16-year-old F.N. and his friend R.R. contacted G.R., and her two friends, M.V. and C.L. “to go hang out at a park” to drink and “smoke.” M.V. had a car, and the three girls drove to pick up F.N. and R.R. Upon arrival at the park, M.V. parked “a good distance away” from some benches. While walking to the benches, F.N. and R.R. walked ahead of the three girls whispering to each other. About 15 minutes after they arrived, R.R., began “messing” with G.R.’s phone, by picking it up, “putting it down and picking it back up,” and at one point, he erased his phone number from her phone. G.R. asked why he was “messing around,” and R.R. grabbed the phone once again and put it in his pocket. She asked him to return her phone, and R.R. refused. F.N., in turn, proceeded to take G.R.’s purse from under her arm. At this point, R.R. pulled out a gun and told F.N. to “ ‘Whip it out,’ ” and F.N. also pulled out a gun. The two pointed their guns at the three girls, 2 In his opening brief, F.N. also maintained the juvenile court failed to find he was a child with exceptional needs and that he must undergo an individualized education program (IEP) assessment. However, he has conceded this issue is moot, given that his twenty-third birthday has now passed. (See Ed. Code, § 56026 [defining “ ‘Individuals with exceptional needs’ ” as those who, among other things, come within certain age categories, and caps the age limit at 23].) We therefore need not, and do not, address this issue. (See In re Jessica K. (2000) 79 Cal. App. 4th 1313 , 1315– 1316.) 2 who were standing about five feet away, demanded their belongings, and took C.L.’s purse and cell phone, and M.V.’s cell phone. R.R. and F.N. then demanded M.V.’s car keys. M.V. threw the keys to the ground, and R.R. and F.N. both ran towards them. After R.R. picked up the keys, he and F.N. proceeded to the car. Two of the girls followed, pleading with the boys not to take the car, while the third ran to get help. M.V. was “crying, begging him to not take” the car. R.R. told her to “ ‘back the fuck up,’ ” and when he arrived at the driver’s side door, he pointed his gun at her and fired a shot over her head. M.V. was standing only about four feet away. R.R. and F.N. then drove away. During a search of F.N.’s residence, officers seized a .357-caliber revolver and various ammunition. The victims could not identify the gun as that used in the commission of the offenses. The district attorney filed a Welfare and Institutions Code section 602 wardship petition alleging F.N. committed four felonies— three second degree robberies (Pen Code, §§ 211, 212.5, subd. (c)) and one carjacking (id., § 215, subd. (a))—and that he personally used a firearm in the commission of each felony (id., § 12022.53, subd. (b)). The court sustained the petition as alleged. The probation department filed a report in preparation for the disposition hearing. The report noted F.N. had refused to speak about the underlying offenses, so the probation officer was “unable to determine if [the minor] is willing to acknowledge his wrongdoing or take responsibility for his action.” Police described F.N.’s behavior, upon his arrest, as “feigning ‘indifference, yawning, and repeatedly brushing imagined debris off his pants.’ ” 3  The probation report also outlined numerous inconsistencies in what minor told the probation department and his reported behavior. Except for two occasions, minor denied drinking alcohol. However, his mother stated he was given alcohol at family gatherings and the detention facility documented F.N. “as being in possession of ‘pruno,’ ” or prison wine. F.N. said he began sporadically smoking marijuana at age 16, but “asserted that he could stop . . . and is not addicted.” However, the detention facility documented minor as “being in possession . . . of lighted articles he was smoking on two occasions.” F.N. stated he rarely got angry and when he did, “he breathes in and out until he calms down.” However, his mother believed “he could benefit from counseling to address his anger,” and since his detention, he had “two documented fights.” Additionally, a detention facility incident report stated he “ ‘is a constant management problem on the building and fails to improve his behavior after multiple formal and informal disciplines.’ ” F.N. also said, since being detained, he had “attended school continuously.” However, detention center records indicated he was “not currently enrolled in academics.” F.N. was enrolled in a program geared toward substance abuse, stress management and job development but was going to “be dropped from the program” due to his lack of attendance, attending only 20 out of the required 60 classes. F.N. also attended a workforce readiness program where he had attained 10.5 hours of credit. Given the “misrepresentations of his behavior and continued risky behavior,” his age (he was 21 years old at the time), and “criminogenic needs,” probation recommended DJJ as “the most appropriate course of action.” Due to his age, F.N. was “ineligible for any other programming the Probation Department offers and was therefore not screened” for anything other than DJJ. Probation also “considered [minor’s] psychological 4 evaluation,” which highlighted his “intellectual impairments.” This, “coupled with the concerns expressed by Probation,” suggested “any intervention should be of an intensive nature, and involve housing him in a safe and secure facility while receiving treatment.” Specifically, probation outlined several programs that “effect changes” in a youth’s “typical patterns of thinking” and “reduce aggression.” F.N. would also participate in programs that focused on “active journaling and victim awareness . . . to strengthen his cognitive comprehension of the consequences of his actions,” and allow him to obtain his high school diploma and upon completion have access to college courses or vocational training. On the eve of the disposition hearing, F.N. filed a motion “toward appropriate disposition.” (Capitalization and boldface omitted.) The supporting memorandum detailed his childhood history and family background, including his father’s conviction and subsequent federal prison sentence, the family’s financial struggles, and his own “mental health issues.” Counsel maintained the least restrictive confinement was in the minor’s best interest, and rather than a DJJ commitment, F.N. “should be placed on formal probation and provided with appropriate terms and conditions to ensure he is provided with the support and guidance he needs,” such as the East Bay Regional Center—an outpatient program geared toward individuals with intellectual disabilities, cerebral palsy, epilepsy, and autism, whereby participants can “engage in activities of their choice, such as work, volunteering, education, training, or leisure.”3 3 Among other things, counsel attached Dr. Everev’s report, as well as F.N.’s report cards, to the motion. The report cards showed grades ranging from D to A-. He received four D’s, four D+’s, 12 C-’s, 10 C’s, three C+’s, eight B-’s, nine B’s, and three A-’s. He needed 75 credits to graduate from high school. 5  At the disposition hearing,4 F.N.’s counsel called several witnesses, including a former teacher, F.N.’s mother, two neuropsychologists, and a professor of psychology. Jacqueline Barrow, F.N.’s former teacher in an independent studies program, testified she met with the minor one hour a week, over the course of three years—from eighth grade to eleventh grade—to give F.N. his homework and correct his assignments. When she first began meeting with F.N., his test scores for reading and in math “were below [a] fourth-grade level,” and by the time she no longer met with him, he “was able to get up to about sixth- grade level . . . with the reading, and the math was a little bit lower.” F.N.’s mother testified about F.N.’s childhood. His father was arrested on his sixth birthday. He attended at least two years of therapy, after his father was arrested. Mother thought his grades, which had been lower in third or fourth grade, had gone up since he entered his independent study 4 Several intervening proceedings led to a delay between the time the commitment of the crime (2015) and the disposition (2019): In 2016, the district attorney filed a felony complaint alleging F.N. committed a carjacking and three counts of second degree robbery. F.N. then moved to remand the case to juvenile court pursuant to Proposition 57. In early 2017, the trial court granted the motion, and the case was remanded to the juvenile court. Next, the district attorney simultaneously filed a Welfare and Institutions Code section 602 wardship petition and a motion to transfer the case back to adult court. Meanwhile, the juvenile court proceedings were stayed pending resolution of the transfer proceedings. In April 2018, the district attorney withdrew the motion to transfer, and the juvenile court proceedings resumed. Four months later, during F.N.’s contested jurisdiction hearing, minor’s counsel filed a motion to disqualify the juvenile court judge and the proceedings were once again suspended. That challenge was denied a month later, and proceedings once again resumed. After the court sustained the allegations in the petition, the disposition hearing was set. This hearing, which was set for October 2018, was continued until November 2018. The hearing took place over multiple days—and spanned several months— concluding in March 2019. 6 program. She thought he was “getting A’s and B’s,” but acknowledged his report card showed a range of grades from D’s to A’s. Mother noticed F.N. smoking marijuana or drinking alcohol “two or three times before.” Dr. Lapeq Everev, a neuropsychologist, had evaluated the then 20-year- old minor and opined F.N.’s “word and reading comprehension reflected a fifth-grade capacity, equivalent to a 10 or 11-year-old child,” and he was “in the ‘Intellectual Disability/Mild Mental Retardation’ category for ‘Intelligence.’ ” Dr. Everev testified as an expert in neuropsychology. A year before the hearing, Dr. Everev “conducted a full battery [of tests] looking at verbal skills, motor functioning, attention, learning, memory and then executive functioning, as well as overall IQ.” “His verbal and academic abilities . . .his knowledge of words, simple reading, and then reading comprehension were all within the borderline range, fifth percentile, equivalent to about the fifth grade ability.” His verbal capacity was at a fifth- grade level, “on par with maybe an 11-year-old.” Dr. Everev also gave F.N. a “global assessment of intelligence” test, and he scored a “69, and that falls in the intellectually disabled, formally known as mild mental retarded range.” Everev stated that “[s]imply put,” F.N.’s “overall intellectual functioning” would be assessed “to be that of approximately an 11-year-old” and “consistent with the scores that we had seen prior, at the fifth grade level.” The juvenile court asked numerous questions about the tests Dr. Everev used, including examples of the types of questions he had asked. On one test, F.N. was asked “What is money used for? And [the minor] got that correct, to buy things. [¶] And the second follow-up question was, Why do many foods need to be cooked? And [the minor’s] response was, So that they can be eaten, so he wasn’t able to say, you know, so they may give more nutrients, they may taste better, or to avoid—avoid becoming sick.” The 7 court stated, “That’s not a wrong response,” to which Everev replied, “Actually, it’s insufficient on this test, because you could eat the food without it being cooked.” After a series of examples,5 the court stated “Boy, these are all subject to interpretations. I mean, really, this is very subjective. Whoever created these have [in] their mind of what’s going to be right.” Dr. Everev opined F.N. needed “structure and support and guidance.” He also spoke about the East Bay Regional Center. While F.N. qualified for the Regional Center, which has a cutoff for services of “ ‘70 and above’ ” on the IQ scale, Everev was not sure if F.N. would be accepted and even if he was, his IQ score meant “intensive services . . . administered by [the Center would be] atypical”; what they “would likely do is help access services that would be helpful—you know, housing occupation.” Dr. Peggy Holcomb, a “Child and Adolescent Clinical Neuropsychologist,” testified as an expert in neuropsychology and behavior in adolescence. Dr. Holcomb had previously worked at DJJ from 2014 to 2016. Her last role involved creating “programs for young men whom [she] had 5 Other examples included: “How are a horse and a tiger alike? And so, a correct response would be ‘an animal.’ An incorrect response would be ‘they both have tails.’ So, you want to look at how efficient one’s abstraction is.” The court responded, “But they’re both right. [¶] . . . [¶] I would have said four legs.” Or, “How are an anchor and a fence alike, is a harder one.” Dr. Everev stated the correct answer was, “They both hold things in,” to which the court replied, “They don’t hold things in. An anchor does not hold things in.” The tests were progressive, meaning they started out simple and got harder, if the person answered correctly. A progressive example might be, how are a “Piano and a drum” alike? F.N. “said instruments; correct answer. Boat and automobile. Both vehicles; correct answer. A nose and a tongue; they’re both body parts.” The court replied, “So far, he’s gotten three right.” But Dr. Everev responded, to get full points for the last comparison, minor would have had to say a nose and a mouth are both “associate[d] with the senses.” 8 identified as having neurodevelopment disorders, who were not getting appropriate services.” When asked if there were programs at the DJJ which would address F.N.’s disabilities, she replied, “That’s what I was trying to put in effect when I left. [¶] But my understanding is it didn’t take place.” And that, “[c]urrently, as I know it, there’s no program for individuals who have intellectual disabilities.” Once again, the court had questions. The court asked Dr. Holcomb how she knew about the current programming at DJJ since she had not worked there since 2016. Holcomb responded, “Just in my ongoing contact with prior colleagues who remain there.” The court followed-up, and Holcomb admitted, “things have changed a bit.” But based on speaking with her old colleagues “off and on every few months,” she did not believe there had been organizational changes involving the “creation of a program for people with intellectual disabilities.” But Holcomb also admitted she had no “affirmative knowledge” of what programs were currently available at DJJ. Dr. Holcomb opined, based on her review of Dr. Everev’s evaluation and because she had “no reason to question . . . another clinician,” that F.N. “has an intellectual disability, formally known . . . as ‘mental retardation.’ ” She stated individuals with intellectual disabilities were prone to “victimization and exploitation.” When the court asked if this could be attributed to “life in general” and that people with intellectual disabilities “[n]o matter where they are, they’re going to be more victimized,” Holcomb responded, “Sure, absolutely. It’s just that the difference in a correctional setting, it’s . . . a self- selecting population, where those individuals already don’t have regard for other people’s property or rights.” Elizabeth Cauffman, a professor of psychological science, testified as an expert on the issue of “Youth Brain Development.” Cauffman did not 9 interview F.N. but instead testified about several studies, including one conducted with 1,000 individuals aged 10 to 30 years old. From this study, she concluded that while adolescents have the same “cognitive” capacity as adults, they do not possess the same maturity or emotional self-regulation. Another study showed adolescents are very reward-focused, as opposed to adults who tend to be more harm-avoidant, and the transition from reward- focused to harm-avoidant usually occurs around age 25. Another study showed the prefrontal cortex—the part of the brain responsible for self- regulation and emotional control—does not fully develop until age 25. The People, in turn, called Probation Officer Cesar Estrada-Ramirez. Estrada-Ramirez testified about the various programs at DJJ, including Aggression-Interruption Training, “a 10-session course where [youths] learn social skills” to “gain a perspective of other individuals that they might encounter in the community, with the hopes of using the behavior change”; Counterpoint, “a 33-session course which primarily focuses on youths that have been determined to pose a higher risk to reoffend” with the “ultimate goal of reducing recidivism”; Cognitive Behavioral Intervention, “a 38-session course” in which youths “learn social skills to identify triggers, develop alternative plans where they are presented with those triggers in the community to, hopefully, . . . divert them from continued substance abuse”; Skill of the Week, which “continues throughout” a youth’s stay at DJJ where they learn to reinforce learned skills despite finishing “ ‘AIT’ or Counterpoint or any other determined treatment” and to “develop coping strategies in order for them to succeed”; and other programs focused on curbing recidivism and providing reentry services. Estrada-Ramirez did not know “how successful” the programs were “with people with developmental disabilities” and could not identify a 10 “specific program that is geared towards individuals with intellectual disabilities.” However, he stated that in his experience the programs are adjusted “based on the necessary needs of a youth while they’re there—with intellectual and learning disabilities.” Additionally, DJJ contained two “mental health units,” where youth “receive services with psychologists and, if need be, they also have a contract with Napa State Hospital . . . that could address any mental health needs.” The officer also testified about DJJ’s continued education programs. He explained that after the youth completes an educational screening, “they have an opportunity to either obtain their high school diploma or work toward their GED, and once that’s been obtained, they have an opportunity to earn college credits” or the “youths are afforded an opportunity” for vocational training. Estrada-Ramirez did not know any “specifics” about the educational programs regarding whether they had a “component that is specific to addressing people that have intellectual disabilities,” but stated, that upon minor’s initial arrival, DJJ would “make appropriate recommendations to any learning disabilities or educational plans.” “In addition to reviewing the initial paperwork and documentation during the orientation process—which is approximately 45 days in the reception center—after receiving psychological and mental health education . . . screenings, a specific case plan is created—and actually forwarded to the county, as well—with information on the specific programming that they will receive based on those results.” After hearing argument by counsel, the juvenile court ordered F.N. committed to DJJ. In so doing, the court recited the basis for its decision. The court found that some of Dr. Everev’s questions to F.N. during his evaluation had been “very, very subjective.” Although the court was aware of Everev’s evaluation that the minor had a mild intellectual disability, the 11 court stated F.N. knew right from wrong and he could “change because [he had] changed” both “intellectually and cognitively,” and that “with intensive treatment geared to his abilities, he will continue to progress.” And, while Dr. Holcomb presented “very interesting testimony,” the court found she was “certainly not current on the Department of Juvenile Justice” and her “reasoning” was “based on her inaccurate knowledge.” The court also stated it had “considered all the alternatives,” but determined F.N. needed “an intensive, structured program” and given his “needs,” his age, “and given the time that we would have with him,” neither the Ranch or the Youth Offender Treatment Program were appropriate. The court then went through the programs that would be of benefit to the minor, including the victim empathy program so that minor could “understand—the ramifications of what he did and what he could do in the future”; the programs “available to minor for guidance, for decision-making, and decision- making skills”; those aimed at helping to change his “patterns of thinking” and “at reducing aggression and anger”; and finally the “educational programs” and “advantages in career and work incentive programs.” Additionally, the court observed that “all the while, during these programs, he will be getting the intensive help that he needs, at least more so than I can think of in any other thing available.” The juvenile court committed F.N. for a maximum time of 52 years, with credit for time served and with “no more than three years” per Welfare and Institutions Code section 731. DISCUSSION DJJ Commitment F.N. maintains the juvenile court abused its discretion in committing him to DJJ because “not a scintilla of evidence was presented during the disposition hearings, or in the probation report, to establish that the DJJ 12 programs will provide any benefit to an individual, like [himself], who has an intellectual disability.” Juvenile justice law specifies that minors “shall, in conformity with the interests of public safety and protection, receive care, treatment, and guidance that is consistent with their best interest, that holds them accountable for their behavior, and that is appropriate for their circumstances.” (Welf. & Inst. Code, § 202, subd. (b).) We review a juvenile court’s decision to commit a minor to the DJJ for an abuse of discretion. (In re Robert H. (2002) 96 Cal. App. 4th 1317 , 1329–1330 (Robert H.); In re Asean D. (1993) 14 Cal. App. 4th 467 , 473 (Asean D.); see In re Emmanuel R. (2001) 94 Cal. App. 4th 452 , 465 [“ ‘ “ ‘The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.’ ” ’ ”].) “A DJJ commitment is not an abuse of discretion where the evidence demonstrates a probable benefit to the minor from the commitment and less restrictive alternatives would be ineffective or inappropriate.” (In re M.S. (2009) 174 Cal. App. 4th 1241 , 1250.) “We must indulge all reasonable inferences to support the decision of the juvenile court and will not disturb its findings when there is substantial evidence to support them.” (In re Michael D. (1987) 188 Cal. App. 3d 1392 , 1395.) Substantial evidence is “ ‘evidence which is reasonable, credible, and of solid value. . . .’ ” (In re Paul C. (1990) 221 Cal. App. 3d 43 , 52.) In In re Carlos J. (2018) 22 Cal. App. 5th 1 (Carlos J.), the court discussed the showing required to support a commitment to the DJJ. “Where a minor has particular needs, the probation department should [] include brief descriptions of the relevant programs to address those needs.” (Id. at p. 13 12.) The probation department is not required, however, “in its report and initial testimony to provide in depth information about the DJF’s programs or to preemptively respond to even predictable criticism of the DJF.” (Id. at p. 13, italics added.) “The People bear the burden of showing the appropriateness of a proposed placement.” (Id. at p. 12.) If this “initial burden” is met by the People, the burden then shifts to the minor. “If a minor wishes to dispute the availability or efficacy of particular programs, or to suggest that other conditions at the DJF undermine the programs, the minor must present sufficient evidence to reasonably bring into question the benefit he or she will receive from the adoption of the probation department’s recommendation.” (Id. at p. 13.) Finally, if the minor provides such sufficient evidence—either through submitted materials or testimony—and it “raises concerns about a particular aspect of DJF” (Seiser & Kumli, Cal. Juvenile Courts Practice & Procedure (2020) § 3.96, at p. 3-246), then it may be necessary “for the People to provide additional information to the juvenile court in order for the court to make a properly supported finding of probable benefit.” (Carlos, J., at p. 14.) Although F.N. relies on Carlos J. to support his assertion the juvenile court abused its discretion in the instant case, his reliance on the case is misplaced. In Carlos J., the Court of Appeal reversed a commitment to DJJ given the lack of showing of any programs offered. (Carlos J., supra , 22 Cal.App.4th at pp. 10–12.) In contrast here, the probation department provided information—both in the probation report and through testimony— about numerous programs that would benefit F.N., including programs designed toward victim empathy, social skills and decision-making and testified that in his experience “adjustments based on the necessary needs of a youth while they’re there—with intellectual and learning disabilities”— 14 could be made to those programs. Accordingly, here, the People amply met its “initial burden.” Under Carlos J., it then became the minor’s burden to show the inefficacy or unavailability of programs or acceptable modification of existing programs. F.N. contends the “evidence demonstrated” that rather than benefit minor,” a DJJ commitment “would exacerbate his issues” and have “negative impact” on him because “he would likely not be able to take advantage of many of the DJJ programs and would be more susceptible to negative influences given his cognitive challenges.” He points to Dr. Holcomb’s testimony that minors with “intellectual disabilities prior to the age of 25” are more prone to “[v]ictimization and exploitation” and there are “no specific measures” at DJJ “directed toward protecting individuals with disabilities,” and her testimony that based on her “time there and subsequent information [she had] received” there are no specific programs “geared towards treatment of developmentally-disabled individuals” at DJJ. The juvenile court, however, while finding Dr. Holcomb’s testimony “very interesting,” did not credit her opinion, as she was “certainly not current on the Department of Juvenile Justice” and her “reasoning” was “based on her inaccurate knowledge.” Furthermore, the court also heard from the probation officer, who testified F.N. would receive an individualized treatment plan upon arrival and orientation, and his educational needs would be evaluated, and educational services could be accommodated to address any needs he had. In short, F.N.’s briefing assumes the juvenile court was required to accept Dr. Holcomb’s opinion and reject the testimony of the probation officer. However, “[t]he court was not required to take all the information properly considered by it at face value. The court was entitled to evaluate . . . the 15 weight to be afforded to the psychological evaluation, as well as to accept or reject the recommendations of the probation officer.” (See In re Robert H., supra , 96 Cal.App.4th at p. 1329.) Minor further asserts, citing In re Aline D. (1975) 14 Cal. 3d 5576 , “the negative impact of a DJJ commitment on an unsophisticated individual like [minor] has been well documents for years.” Not only has it been 45 years since Aline D. was decided, but that case does not, in any event, provide an evidentiary basis to disregard the evidence provided by the probation department in this case. Further, DJJ must accept a minor if it “believes that the ward can be materially benefited by the division’s reformatory and educational discipline, and if the division has adequate facilities, staff, and programs to provide that care” (Welf. & Inst. Code, §§ 736, subd. (a), 1731.5, subd. (b)), and therefore must reject wards it concludes could not be materially benefited. Dr. Holcomb, herself, testified that during her time at DJJ, she evaluated 50 to 200 wards, and “between four and eight or nine” were youths she “thought were so extremely low functioning that they would not program well” at DJJ and they were not accepted. She further recalled a ward “who had already been placed” at DJJ, and “after watching how they functioned, [she] made [the] recommendation that they be moved, and they were.” In sum, the record here adequately supports the juvenile court’s determination that the DJJ would provide F.N. with the “structured” and “supportive environment” he needs and can afford him the appropriate means to develop both “intellectually and cognitively,” as he has done in the past “with intensive treatment.” (In re Jonathan T. (2008) 166 Cal. App. 4th 474 , 6 Superseded by statute on another ground as stated in In re Luisa Z. (2000) 78 Cal. App. 4th 978 , 987–988. 16 486 [“A juvenile court must determine if the record supports a finding that it is probable the minor will benefit from being committed to DJJ. [Citation.] . . . There is no requirement that the court find exactly how a minor will benefit from being committed to DJJ.”].) Penal Code Section 654 F.N. also asserts that because “the taking of [the] vehicle and other personal belongings occurred in a single transaction with a single objective— to deprive [all three girls] of all of their property—Penal Code section 654 prohibited punishment for both the carjacking and [the] robbery of the [car owner].” Penal Code section 654 provides in part, “An act or omission that is punishable in different ways by different provisions of law shall be punished under the provision that provides for the longest potential term of imprisonment, but in no case shall the act or omission be punished under more than one provision. An acquittal or conviction and sentence under any one bars a prosecution for the same act or omission under any other.” (Pen. Code, § 654, subd. (a).) Plainly stated, Penal Code section 654 prohibits multiple punishment for a single act or indivisible conduct. (People v. Reyes-Tornero (2016) 4 Cal. App. 5th 368 , 376.) “ ‘Whether a course of criminal conduct is divisible and therefore gives rise to more than one act within the meaning of [Penal Code] section 654 depends on the intent and objective of the actor. If all the offenses were incident to one objective, the defendant may be punished for any one of such offenses but not for more than one. [¶] . . . [¶] If, on the other hand, defendant harbored, “multiple criminal objectives,” which were independent of and not merely incidental to each other, he may be punished for each statutory violation committed in pursuit of each objective, “even 17 though the violations shared common acts or were parts of an otherwise indivisible course of conduct.” ’ ” (People v. Rodriguez (2015) 235 Cal. App. 4th 1000 , 1005.) Whether Penal Code section 654 “ ‘applies in a given case is a question of fact for the trial court, which is vested with broad latitude in making its determination. [Citations.] Its findings will not be reversed on appeal if there is any substantial evidence to support them. [Citations.] We review the trial court’s determination in the light most favorable to the respondent and presume the existence of every fact the trial court could reasonably deduce from the evidence.’ ” (People v. Vang (2010) 184 Cal. App. 4th 912 , 915–916.) Defendant relies on People v. Bauer (1969) 1 Cal. 3d 368 (Bauer), People v. Lewis (2008) 43 Cal. 4th 415 (Lewis), overruled in part on another ground as stated in People v. Black (2014) 58 Cal. 4th 912 , 919, and Asean D., supra , 14 Cal. App. 4th 467 , in support of his assertion the trial court should have stayed the sentence for carjacking. In Bauer, after gaining admittance to the victims’ home under false pretenses, the defendant drew a gun and forced two of the victims to lie face [down] on the floor and tied the third to a chair. (Bauer, supra , 1 Cal.3d at p. 372.) Over the course of “about two hours,” the three victims “observed defendant and his accomplice ransack the house and carry the loot to the garage” and then drive away in one of the victim’s cars. (Ibid.) A jury found the defendant guilty of first degree robbery, first degree burglary, grand theft and automobile theft, and the trial court gave the defendant concurrent sentences for the robbery and auto theft convictions. (Id. at pp. 371–372.) On appeal, the defendant asserted it was “improper,” under Penal Code section 654, to punish him for both the robbery and the auto theft. (Id. at 18 p. 375.) The Supreme Court agreed. The court held the taking of the vehicle was incidental to the robbery, stating “where a defendant robs his victims in one continuous transaction of several items of property, punishment for robbery on the basis of the taking of one of the items and other crimes on the basis of the taking of the other items is not permissible.” Additionally, the court noted the “crime of automobile theft is not a crime of violence but is a violation of property interests” similar to that of robbery. Therefore, the court held “proscription against double punishment” precluded “punishment for this offense in the circumstances of the present case.” (Id. at pp. 377– 378.) The People point out Bauer involved auto theft and not carjacking, and that in People v. Capistrano (2014) 59 Cal. 4th 830 (Capistrano), overruled on another ground as stated in People v. Hardy (2018) 5 Cal. 5th 56 , the Supreme Court distinguished Bauer on that basis. In Capistrano, two armed men confronted and demanded money from a woman and her husband as they pulled into their garage. (Capistrano, supra , 59 Cal.4th at p. 841.) One man then motioned for the wife to exit the vehicle, and the two men led the victims into the house and bedroom where they bound them. (Ibid.) Two additional men then arrived at the house. The defendant took the wife into the bathroom and twice forced her to orally copulate him and twice raped her. (Ibid.) The four men eventually left taking various items from the home and the victims’ car. (Id. at p. 842.) A jury convicted the defendant of carjacking, robbery, rape and forcible oral copulation during the robbery. (Id. at p. 838.) On appeal, the defendant contended the consecutive sentences for the carjacking and the robbery violated Penal Code section 654. (Id. at p. 885.) 19  The Supreme Court disagreed. In doing so, the court distinguished Bauer which had involved auto theft, with the defendant’s conviction for carjacking. The court stated, “ ‘ “ ‘Carjacking’ is the felonious taking of a motor vehicle in the possession of another, from his or her person or immediate presence, or from the person or immediate presence of a passenger of the motor vehicle, against his or her will and with the intent to either permanently or temporarily deprive the person in possession of the motor vehicle of his or her possession, accomplished by means of force or fear.” ’ [Citations.] . . . Carjacking is thus distinct from ordinary automobile theft because it is a crime accomplished by fear or force. . . .” And unlike Bauer—a decision “rendered before the enactment of the carjacking statute”— carjacking “is a crime of violence, distinct from robbery, and not merely a violation of the victims’ property interest in their motor vehicle.” (Capistrano, supra , 59 Cal.4th at pp. 886–887.) Additionally, the court rejected the defendant’s attempt to “cast [the] carjacking convictions as vehicle thefts that were part and parcel of a single course of conduct, beginning when the victims were removed from their cars and ending only when defendants left with the stolen items, which included the vehicles.” (Capistrano, supra , 59 Cal.4th at p. 887.) The court affirmed the jury’s “conclusion that defendant harbored separate objectives” in convicting the defendant of “two distinct crimes of violence.” The court held that “temporal proximity of the two offenses” was “insufficient by itself to establish . . . a single objective,” and that the defendant had confronted the victims “at two points”—the car and inside the residence—and the “elevation of the threat to the victims by forcing them into their homes where defendant committed additional crimes amounts to a separate criminal objective.” (Ibid.) 20  F.N. maintains Capistrano is inapposite because he “possessed a single intent—to relieve the victims of their cell phones, purses, and vehicle—and did so during a single confrontation,” all of which occurred in a relatively short time span and at a single location. To begin with, this overlooks the Supreme Court’s distinction between auto theft and carjacking. As in Capistrano, the instant case involves carjacking, which was accomplished here not just by demanding M.V.’s keys, but by pointing a gun at her and firing a shot over her head, when she was a mere four feet away from the car door. Further, as Capistrano states, “temporal proximity” is “insufficient by itself to establish . . . a single objective. (Capistrano, supra , 59 Cal.4th at p. 887.) Here, R.R. and F.N. first harried the three girls, then R.R. stole G.R.’s cell phone, and then F.N. took G.R.’s purse. Then the boys pulled out guns and demanded that the other two girls turn over their cell phones and belongings. And it was after that, that the two boys demanded M.V.’s car keys. Thereafter, they made their way back to the car, with M.V. following and pleading with them not to take the car. R.R. finally told her to back off, and after that, when he reached the driver’s side door and was only about four feet away from M.V., he pointed his gun at her and fired a shot over her head. On this record, the juvenile court could conclude F.N. had, over the course of the encounter with the girls, “multiple criminal objectives,” which were independent of, and not merely incidental to, each other. In Lewis, the defendant and his codefendants forced their way into various victims’ cars at gunpoint and then drove with the bound victims to different banks or stores forcing them to withdraw money. The defendant would then either abandon or kill the victims, and sometimes took parts from the victims’ cars. (Lewis, supra , 43 Cal. 4th 415 , 434–438.) A jury convicted 21 the defendant of robbery, simple kidnapping, and kidnapping to commit robbery of six victims. (Id. at p. 518.) On appeal, the defendant maintained Penal Code section 654 barred “multiple punishments for both the kidnappings for robbery and the robberies of each of the victims.” The Supreme Court agreed. (Lewis, at p. 519.) The court held “the kidnappings for robbery and the robberies of each victim were committed ‘pursuant to a single intent or objective,’ that is, to rob the victims of their cars and/or cash from their bank accounts.” (Ibid.) The circumstances here are different. In Lewis, the charged crime was kidnapping for robbery. Thus, the kidnappings of the victims while in their cars were perpetrated for the purpose of robbery and were also the means by which the robberies were accomplished by forcing the victims to withdraw money at different banks and stores. Here, in contrast, the carjacking did not facilitate the robberies of the three girls. Nor, conversely, did the theft of M.V.’s cell phone, which occurred before the boys demanded the car keys—let alone, before they walked back to the car with M.V. following, and R.R. raised his gun on reaching the car and fired a shot over M.V’s head at a range of only four feet—facilitate the carjacking. In Asean D., the minor and two companions “broke into an occupied van in a parking lot” and “dragged out the male victim, and one of the three kicked him in the face.” The minor, who had a handgun, threatened the female victim, who was “also knocked to the ground.” After a “search for the keys, the three minors escaped with the van.” (Asean D., supra , 14 Cal.App.4th at p. 471.) The minor admitted two counts of robbery and one count of unlawful taking of a vehicle. (Ibid.) On appeal, he argued the juvenile court erred in imposing separate terms for both robberies and the unlawful taking. (Id. at p. 474.) The appellate court agreed stating, 22 “[a]lthough a small amount of the male victim’s personal property was also taken inside the van, it is clear that the robberies were committed for the purpose of taking the vehicle and constituted a single transaction; there was no separate criminal objective in the brutalizing of the victims beyond compelling them to give up their property.” (Id. at p. 475.) The facts here are different. Whereas in Asean D., the minor broke into an occupied vehicle, dragged the victims outside the van, took the keys, and re-entered the van and drove off, here R.R. and F.N. engaged in different conduct, a good part of which was not for the purpose of stealing the car. On the contrary, unlike in Asean D., where the minor and his companions inadvertently drove off with a “small amount” of the victim’s personal property, R.R. and F.N. did not inadvertently steal a few inconsequential items. They first stole G.R.’s cell phone, then stole her purse, and then stole the belongings of the other two girls. It was only after that that R.R. and F.N. demanded the car keys from M.V. and after she had trailed them back to the car begging them not to take the car, that R.R. told her to back off and then shot at her. Accordingly, we cannot say the juvenile court violated Penal Code section 654 by imposing sentences for both the robbery of M.V. and the carjacking. DISPOSITION The juvenile court’s orders are AFFIRMED. 23  _________________________ Banke, J. We concur: _________________________ Margulies, Acting P.J. _________________________ Sanchez, J. A156834, In re FN 24

2020-12-01 19:02:09.190965+00

https://www.courts.ca.gov/opinions/nonpub/B296925.PDF

Filed 12/1/20 Guillermo v. Los Angeles County Dept. etc. CA2/5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE MARICELA GUILLERMO, B296925 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BS159674) v. LOS ANGELES COUNTY DEPARTMENT OF HEALTH SERVICES, Defendant and Respondent. APPEAL from a judgment of the Superior Court of Los Angeles County, Mary H. Strobel, Judge. Affirmed. Rosen Marsili Rapp, Howard Z. Rosen, Amanda Pitrof, for Plaintiff and Appellant.  Hausman & Sosa, Jeffrey M. Hausman, Larry D. Stratton, for Defendant and Respondent. __________________________ In 2012, the Los Angeles County Department of Health Services (the Department) terminated appellant Maricela Guillermo’s employment. Guillermo successfully petitioned the trial court for a writ of mandate, and the court ordered that she be reinstated and compensated pursuant to Los Angeles County Code section 6.20.100 (section 6.20.100). Guillermo was awarded back pay, which she received as a lump sum, and because of the lump-sum nature of the payment, incurred an additional tax liability of $226,862. Guillermo requested that the trial court award her a “gross- up” to neutralize the tax increase.1 The trial court denied the motion, concluding that section 6.20.100 does not authorize such an award. On appeal, Guillermo contends that, pursuant to section 6.20.100, the Department must compensate her for the increased tax liability she incurred through no fault of her own. The Department contends that we lack jurisdiction to hear Guillermo’s appeal, but that, even if the court’s order is appealable, section 6.20.100 does not authorize a gross-up award to compensate Guillermo for tax consequences over 1 A “gross-up” is an award to a prevailing employee of an additional sum of money to compensate for the increased tax burden created by a back pay award made in a lump sum. 2 which it has no control (and which have changed over the years). We agree with Guillermo that we have jurisdiction over the appeal. However, we affirm the trial court’s order, because we conclude that section 6.20.100 does not permit a trial court to award a wrongfully terminated employee a gross-up payment. FACTS AND PROCEDURAL BACKGROUND In April 2009, the Department hired Guillermo in the position of Pharmacy Services Chief II. On September 14, 2012, the Department discharged Guillermo based on her “insubordination and refusal to follow instructions” as well as her “failure to maintain confidentiality.” She appealed to the Civil Service Commission (the Commission). After an administrative hearing, the hearing officer found that Guillermo was “‘not a model, but in general, a problem as well as a problematic employee who tends to go rogue in performing her duties, nonetheless, [the Department] failed to present evidence sufficient . . . to meet [the] preponderance of the evidence [standard]’ necessary to support a discharge.” The hearing officer concluded that “‘[w]hile the Department failed on technical grounds to support its disciplinary action of discharging [Guillermo], nevertheless it was successful in clearly establishing that [Guillermo] was an extremely difficult employee to manage[,] and . . . an out-of-control employee . . . . [T]he Hearing 3 Officer is compelled to recommend that [Guillermo] be reinstated to employment with the Department without any back pay and not necessarily to her former position as Pharmacy Services Chief II.’” On October 7, 2015, the Commission sustained the discharge, stating: “‘The Department was successful in clearly establishing that [Guillermo] was an extremely difficult employee to manage and that she marches to the beat of her own drum. The portrait of [Guillermo] as an out-of-control employee persuades the Commission to sustain the Department.” On December 22, 2015, Guillermo petitioned for writ of administrative mandate. On January 31, 2017, the court remanded the matter to the Commission to “make additional findings or clarify the findings on which it relied to reach its decision to discharge” Guillermo. On November 29, 2017, following remand proceedings, the Commission reinstated Guillermo, and imposed a 30-day suspension. On January 19, 2018, the trial court entered judgment granting the writ of mandate, and ordering the Department to reinstate Guillermo without loss of seniority and to compensate her pursuant to section 6.20.100, with interest thereon at a rate of 7 percent per annum from the date of her discharge, September 12, 2012, through the date of payment. The trial court further ordered the Department to provide Guillermo with “all of the fringe benefits that she would have had but for her termination until her reinstatement less the period of her 30-day suspension . . . .” 4  In June 2018, the Department reinstated Guillermo, and the following month, paid her $655,849.96 in back pay and $180,691.27 in interest, most of which relates to years prior to 2018. On November 9, 2018, Guillermo filed a motion in the trial court for an order directing the Department to compensate her for the excess tax liability she incurred as the result of the lump-sum reinstatement payments. As authority to make such a compensation award, the motion relied solely on section 6.20.100, which provides: “In the event an employee is reduced, suspended and/or discharged, and upon appeal the civil service commission or a court having jurisdiction does not sustain such reduction, suspension and/or discharge, the employee shall be entitled to his base rate of salary, vacation and sick leave as if such unsustained reduction, suspension or discharge had not been invoked. However, in no event shall an employee be entitled to any salary or credit for vacation and sick leave for any period of time covered by a suspension which is sustained or for any period of time waived by an employee as a condition to the granting of a continuance of his civil service or judicial hearing.” Based on the calculations of a CPA and expert in tax planning and preparation, Guillermo contended her federal and state tax liability was $226,864 greater than the amount she would have paid in each tax year had she not been discharged. In a written order filed on February 19, 2019, the trial court denied the motion for excess tax liability 5 compensation, concluding that the “express language of the ordinance says nothing about payment of tax liability. Even as modified by the phrase ‘as if such unsustained . . . discharge had not been invoked,’ the terms ‘base rate of salary,’ ‘vacation,’ and ‘sick leave’ cannot reasonably be interpreted to include payment of tax liability.” Guillermo appealed to this court on April 15, 2019. DISCUSSION This Court Has Jurisdiction The Department contends that we lack jurisdiction to hear the appeal because Guillermo’s post-judgment motion seeking gross up relief neither enforced nor stayed the trial court’s judgment, and she did not file her appeal until approximately 15 months after the judgment was entered. We disagree. Code of Civil Procedure section 1097 authorizes a trial court to “make any orders necessary and proper for the complete enforcement” of a writ of mandate. It is a “‘well settled rule that the court which issues a writ of mandate retains continuing jurisdiction to make any orders necessary and proper for the complete enforcement of the writ.’ [Citations.]” (King v. Woods (1983) 144 Cal. App. 3d 571 , 578.) Code of Civil Procedure section 904.1, subdivision (a)(2), in turn, permits an appeal from an order to enforce a 6 judgment. (Lakin v. Watkins Associated Industries (1993) 6 Cal. 4th 644 , 651–652.) The Department relies on APRI Ins. Co. v. Superior Court (1999) 76 Cal. App. 4th 176 (APRI), which holds that a trial court loses jurisdiction to reconsider its ruling after entry of judgment. (Id. at p. 180.) APRI is inapposite. The trial court did not reconsider its ruling in this case. Guillermo’s motion for relief could not have been made until the Department determined the amount of her back pay; accordingly, the motion was an effort to enforce the underlying writ of administrative mandate under Code of Civil Procedure section 1097. The trial court had jurisdiction to hear the motion, and the notice of appeal, which was filed within 60 days of the court’s order, was timely. (Cal. Rules of Court, rule 8.104(a)(1)(B) & (C).) We have jurisdiction to hear the appeal.2 Section 6.20.100 Does Not Permit Gross Up Awards Guillermo received her back salary payment from the Department in a lump sum in 2018, which pushed her into a 2 The Department also argues that Guillermo failed to file a Government Code claim in connection with her motion. The argument is simply another version of the primary jurisdictional argument—that the motion for a gross-up was an attempt to modify rather than to enforce the judgment. Because we conclude that the motion was a lawful attempt to enforce the judgment under section 6.20.100, the argument necessarily fails. 7 higher tax bracket than would have applied if she had been paid the salary over each of the years to which a particular back pay amount applied (2012 to 2018). As a result, she suffered greater tax liability than she would have if she had been paid over time as an employee. She argues that section 6.20.100 requires that she be paid as if her termination had not occurred—i.e. the Department must compensate her to cover the additional tax liability. We reject Guillermo’s contention, because the plain language of the ordinance does not authorize gross up payments. “Where, as here, an appeal from administrative mandamus proceedings presents questions of law, our review is de novo.” (Alameida v. State Personnel Bd. (2004) 120 Cal. App. 4th 46 , 52.) We employ the same rules to interpret both statutes and ordinances. (Chaffee v. San Francisco Public Library Com. (2005) 134 Cal. App. 4th 109 , 114.) In construing [an ordinance], our task is to discern the drafters’ intent. (Wells v. One2One Learning Foundation (2006) 39 Cal. 4th 1164 , 1190 [statutory interpretation].) We start with the ordinance’s words, “assigning them their usual and ordinary meanings, and construing them in context. If the words themselves are not ambiguous, we presume the [drafters] meant what [they] said, and the [ordinance’s] plain meaning governs.” (Ibid.) Our role “is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, 8 if possible, to be adopted as will give effect to all.” (Code Civ. Proc., § 1858.) We again quote the language of section 6.20.100, as it is key to the question we are asked to decide. “In the event an employee is reduced, suspended and/or discharged, and upon appeal the civil service commission or a court having jurisdiction does not sustain such reduction, suspension and/or discharge, the employee shall be entitled to his base rate of salary, vacation and sick leave as if such unsustained reduction, suspension or discharge had not been invoked. However, in no event shall an employee be entitled to any salary or credit for vacation and sick leave for any period of time covered by a suspension which is sustained or for any period of time waived by an employee as a condition to the granting of a continuance of his civil service or judicial hearing.” (§ 6.20.100.) Guillermo argues that section 6.20.100 unambiguously provides for a gross-up award because it entitles a reinstated employee to her “base rate of salary . . . as if” she had not been discharged, which necessarily encompasses tax neutralization, where appropriate. Without a gross-up, Guillermo would receive significantly less than the taxable salary she would have received had she never been discharged. The Department contends that “base rate of salary” refers to one part of an employee’s overall compensation— direct monetary compensation at a monthly rate. The Department argues that the meaning is reflected in section 9 6.26.040, the County of Los Angeles Salary Table, which lists the monthly rates for positions that are on a one-step, two- step, three-step, four-step, and five-step rate of compensation. (See L.A. County Code, § 6.26.010.) The Department asserts that the base rate of salary is unaffected by the tax liability an employee incurs. We agree with the Department that the language of section 6.20.100 is unambiguous. The section lists “base rate of salary, vacation and sick leave,” which are separate elements of an employee’s compensation. If there were any ambiguity in the plain meaning of “base rate of salary,” it would be easily resolved by consulting the County of Los Angeles Salary Table included in the Los Angeles County Code, which lists monthly rates of monetary compensation as “salary.” We are not persuaded that the commonly understood definition of “base rate of salary” renders the ensuing phrase, “as if such . . . discharge had not been invoked,” superfluous. “[A]s if such . . . discharge had not been invoked” clearly sets forth the time period for which the employee is to be paid—i.e., the period between the date of the unsustained discharge and the date of the employee’s reinstatement. The subsequent sentence in section 6.20.100 reinforces this interpretation, as it creates an exception for the days that an employee is suspended or waives time within the relevant time period. (“However, in no event shall an employee be entitled to any salary or credit for vacation and sick leave for any period of time covered by a 10 suspension which is sustained or for any period of time waived by an employee as a condition to the granting of a continuance of his civil service or judicial hearing.”) When “salary” is read as commonly defined, there is no overlap with the phrase “as if such . . . discharge had not been invoked,” and full effect is given to all of the language in section 6.20.100. (Medical Board v. Superior Court (2001) 88 Cal. App. 4th 1001 , 1013 [courts are to construe language in a manner that gives effect to all parts of a statute where possible].) If the Los Angeles County Board of Supervisors (Board of Supervisors) had intended for section 6.20.100 to include payment of tax liability it would have expressly said so, or incorporated catch-all language authorizing the court to provide other equitable relief.3 Section 6.20.100 does not expressly provide for a gross up or vest the court with 3 At the invitation of the court, both parties submitted letter briefs on the significance of section 5.25.055 of the Los Angeles County Code, which provides that a reinstated employee receive a gross-up in connection with the Deferred Compensation and Thrift Plan. The parties agree that section 5.25.055 does not shed light on the interpretation of section 6.20.100. We therefore deny the parties’ requests for judicial notice of the legislative history of section 5.25.055 and the County’s related motion to present additional evidence. 11 equitable powers that would permit it to award a gross up.4 Guillermo points to no authority holding that a court has the authority to award a gross up based on statutory language as precisely limited as section 6.20.100.5 4 We previously granted Guillermo’s request for judicial notice of various ordinances relating to the legislative history of section 6.20.100. We hereby deny Guillermo’s additional request, deferred to this panel, to take judicial notice of certain email correspondence between appellant’s counsel and the county’s customer service center regarding an ordinance (No. 10,034) missing from the county’s archives. 5 Guillermo cites to authority, including Ofsevit v. Trustees of California State University & Colleges (1978) 21 Cal. 3d 763 , 777, fn. 14, for the general proposition that the purpose of a back pay order is to make employees whole for losses suffered as a result of unfair labor practices. This general proposition, however, does not address the specific issue of compensation for increased tax liability under section 6.20.100. Guillermo relies on several federal antidiscrimination cases that have held that a trial court has the authority to award a gross up where a discharged employee has been reinstated. (Clemens v. CenturyLink Inc. (9th Cir. 2017) 874 F.3d 1113 , 1115–1117 (Clemens); EEOC v. Northern Star Hospitality, Inc. (7th Cir. 2015) 777 F.3d 898 , 903–904 (Northern Star Hospitality); Eshelman v. Agere Sys. (3rd Cir. 2009) 554 F.3d 426 , 441–443 (Eshelman); Sears v. Atchison, T. & S. F. R. Co. (10th Cir. 1984) 749 F.2d 1451 , 1456–1457 (Sears).) These cases are inapposite. Guillermo was not terminated for a discriminatory reason, and section 6.20.100 does not authorize “any other equitable 12  As Guillermo concedes, the single California case to which she cites that addresses gross up damages, Economy v. Sutter East Bay Hospitals (2019) 31 Cal. App. 5th 1147 (Economy), does so in a different context. There, the Court of Appeal held that a hospital was required to provide an anesthesiologist with appropriate peer review procedures and due process protections prior to terminating his ability to practice, and that the anesthesiologist was entitled to lost income damages for period in which the discipline he suffered was invalid. (Id. at pp. 1156–1162.) The Economy court further held that the anesthesiologist’s expert’s testimony was sufficient to support award of damages for tax neutralization. (Id. at pp. 1163–1164.) Notably, in Economy, the hospital argued only that the evidence in support of the trial court’s award of damages for tax neutralization was speculative, not that an award for tax neutralization damages was unauthorized. (Ibid.) Thus, the appellate court did not need to address the issue before us to resolve that matter. relief as the court deems appropriate,” as the statutory language implicated in those cases did. (Clemens, supra , at p. 1115–1117 [Title VII]; Northern Star Hospitality, supra , at pp. 903–904 [Title VII]; Eshelman, supra , at pp. 440–443 [Americans with Disabilities Act]; Sears, supra , at pp. 1456– 1457 [Title VII].) Likewise, Guillermo’s examples of gross-up awards in the private sector for unlawful discharge under the National Labor Relations Act (29 U.S.C. § 158(a)(1) & (3)) do not inform the inquiry with respect to section 6.20.100. 13  The only case in California that addresses whether a statute authorizes the award of a gross up to a reinstated public employee is Barber v. State Personnel Bd. (2019) 35 Cal. App. 5th 500 (Barber). There, a divided court found that, under Government Code section 19584, an employee who was reinstated by the State Personnel Board was not entitled to recover the amount equal to the increased tax liability resulting from a lump sum payment. As Barber addressed whether gross ups were authorized under Government Code section 19584,6 and not section 6.20.100, it, too, is not directly on point. Significantly, however, the court held that increased tax liability was not encompassed in the term “salary” as used in that statute, because tax liability “is neither earned nor a payment.” (Id. at p. 513.) Although the plain language of section 6.20.100 clearly conveys that compensation for increased tax liability is not 6 Government Code section 19584 provides, in relevant part: “Whenever the board revokes or modifies an adverse action and orders that the employee be returned to his or her position, it shall direct the payment of salary and all interest accrued thereto, and the reinstatement of all benefits that otherwise would have normally accrued. ‘Salary’ shall include salary, as defined in Section 18000, salary adjustments and shift differential, and other special salary compensations, if sufficiently predictable.” 14 contemplated, Barber’s holding lends additional support to the Department’s arguments.7 There are policy arguments from the perspective of a successful claimant that would support requiring the Department to pay a gross up award and there are policy arguments from the perspective of the Department (which has no control over tax rules adopted by the Federal and State governments) that counsel in favor of a contrary conclusion. The policy debate is not for us to resolve. The Board of Supervisors has not authorized gross up payments in Section 6.20.100, and if the Board of Supervisors thinks a different rule would be more just, it is the Board of Supervisors that must change it. 7 Notably, in Barber, the dissent interpreted Government Code section 19584’s reference to “special salary compensations” as “being a catchall provision that allows . . . courts to fashion appropriate remedies to ensure the employee is made whole.” (Barber, supra , 35 Cal.App.5th at p. 527 (dis. opn. of Slough, J.).) The dissent found the word “compensation” “broad enough to cover compensating the employee for work and for injuries related to the wrongful termination.” (Ibid.) Section 6.20.100 contains no similar catch-all category. 15  DISPOSITION The judgment is affirmed. Respondent Los Angeles County Department of Health Services is awarded its costs on appeal. MOOR, J. I concur: BAKER, J. 16 Guillermo v. Department of Health Services – B296925 RUBIN, P. J. concurring and dissenting: BACKGROUND Under Los Angeles County Code section 6.20.100 (section 6.20.100) a wrongfully discharged employee “shall be entitled to his base rate of salary . . . as if such unsustained . . . discharge had not been invoked.” In my view, the plain purpose of this ordinance and the remedy of back pay in general is to make the employee whole “for losses suffered on account of an unfair labor practice.” (Ofsevit v. Trustees of Cal. State University & Colleges (1978) 21 Cal. 3d 763 , 777, fn. 14.) The question raised by this appeal is whether a statute designed to compensate an employee for losses incurred due to her wrongful termination allows a “gross-up” award in order to accomplish that end? The availability of a “gross-up” award gained particular significance after the federal tax code eliminated income averaging. (See 1986 Tax Reform Act, P.L. 99-514, § 141 (1986).)1 Income averaging had allowed taxpayers to allocate income on an average basis over several years, rather than in a single year. (See Schmalbeck, Income Averaging After Twenty Years: A Failed 1 Current section 6.20.00 was enacted in 1968 as section 245 and amended several times before federal income averaging was repealed in 1986. (See Ord. 6222, § 245 (1968, added by Ord. 9577, § 19); Ord. 6222, § 245 (1972, amended by Ord. 10273, § 24); Ord. No. 6222, § 245 (1979, amended by Ord. 12022, § 28); Ord. No. 6222, § 6.20.100 (1982, amended by Ord. 84-0149P, § 3.) 1 Experiment in Horizontal Equity (1984) 1984 Duke L.J. 509, 510– 512.) The amendment to the Internal Revenue Code had the effect of “ ‘leaving all those receiving a lump sum award to suffer the consequences of additional tax liability.’ ” (Barber v. State Personnel Bd. (2019) 35 Cal. App. 5th 500 , 507 (Barber), review denied Aug. 21, 2019; see Polsky & Befort, Employment Discrimination Remedies and Tax Gross Ups (2004) 90 Iowa L . Rev. 67, 77.) Employees who thereafter received a lump sum back pay award were not able to allocate a portion of their award to the respective tax years when the lost earnings would have been earned. The result was that, under a progressive income tax system, a lump sum award likely pushes an employee into a higher tax bracket than she would have occupied if she had received her pay regularly over several years. (See generally Ireland, Tax Consequences of Lump Sum Awards in Wrongful Termination Cases, 17 J. Legal Econ. 51, 51-52 (2010).) Over the years, the term “gross-up” has slowly crept into our legal lexicon but is found in only one published California appellate opinion, Barber, supra , 35 Cal. App. 5th 500 .2 2 Several federal circuits have held that a district court has the discretion to award a gross-up in Title VII suits. (See Sears v. Atchison, T. & S. F. R., Co. (10th Cir. 1984) 749 F.2d 1451 ; Eshelman v. Agere Sys., Inc. (3d Cir. 2009) 554 F.3d 426 ; EEOC v. Northern Star Hospitality, Inc. (7th Cir. 2015) 777 F.3d 898 ; and Clemens v. CenturyLink Inc. (9th Cir. 2017) 874 F.3d 1113 .) Title VII provides in part that “the court may . . . order . . . any other equitable relief as the court deems appropriate.” No similar provision is found in section 6.20.100. 2  SECTION 6.20.100 Section 6.20.100 broadly provides general authority for an award that compensates an employee for the salary lost due to wrongful termination. Under section 6.20.100, a wrongfully terminated employee is “entitled to his base rate of salary . . . as if . . . such discharge had not been invoked.” A reading of section 6.20.100 that limits an award to only an employee’s “base rate of salary” fails to take into account the “as if” clause, essentially rendering the latter phrase superfluous. (See People v. Arias (2008) 45 Cal. 4th 169 , 180 [“Significance should be given, if possible, to every word of an act. [Citation.] Conversely, a construction that renders a word surplusage should be avoided.”].) By couching “base rate of salary” in terms of “as if . . . such discharge had not been invoked,” the ordinance provides for compensation to an employee for all salary truly lost, not just her monthly gross pay. The gross-up achieves that purpose without creating a windfall for those wrongfully terminated employees like appellant whose court and administrative proceedings drag on for years. Instead, those who receive a lump sum back pay award covering a period of years receive the same net-of-tax salary they would have received had there been no wrongful discharge. The majority reads the “as if” clause differently, but the construction I give to the ordinance effectuates the make-whole purpose of the statute. As our Supreme Court has reminded, the purpose of the remedy of back pay is to make the employee whole “for losses suffered on account of an unfair labor practice.” (Ofsevit v. Trustees of Cal. State University & Colleges, supra , 21 Cal.3d at p. 777, fn. 14.) In cases like appellant’s, without a 3 gross-up an employee is not restored to the same financial situation as she was before termination. Instead, many wrongfully discharged employees will effectively receive significantly less than their base rate of salary.3 BARBER v. STATE PERSONNEL BD. The Department relies almost exclusively on Barber, supra , 35 Cal. App. 5th 500 , the only case in California that addresses whether a statute authorizes the award of a gross-up to a reinstated public employee. Barber concluded that Government Code section 19584 gave no such authorization. That statute provides, in part: “Whenever the [State Personnel Bd.] revokes or modifies an adverse action and orders that the employee be returned to his or her position, it shall direct the payment of salary and all interest accrued thereto, and the reinstatement of all benefits that otherwise would have normally accrued. ‘Salary’ shall include salary, as defined in Section 18000, salary adjustments and shift differential, and other special salary compensations, if sufficiently predictable.” The Barber majority concluded that the statute limited “backpay relief recoverable to lost salary and benefits,” and construed “special salary compensation” as referring only to “income paid for work performed.” (Barber, supra , at pp. 513–514.) The Barber court found that, because increased tax liability was “neither earned 3 I am not persuaded that the phrase, “as if such . . . discharge had not been invoked” is necessary to set forth “the time period for which the employee is to be paid—i.e., the period between the date of the unsustained discharge and the date of the employee’s reinstatement.” (Maj. Opn., pp. 8-9.) Without the “as if,” the ordinance would be read temporally in the same manner. 4 nor a payment,” a reinstated employee could not be awarded a gross-up. (Id. at p. 513.) The Barber court also held that a determination of increased tax liability was not “sufficiently predictable” under the statute because “at the time of the wrongful termination, it is unpredictable as to whether this will occur, [as] increased tax liability turns on a multitude of factors, including the employee’s unique financial situation at the time the lumpsum award is received, the amount of the lumpsum award, applicable tax exemptions and deductions, the employee’s previous and current tax brackets, the past and current tax laws, and the length of time it takes to resolve the reinstatement claim.” (Barber, supra , 35 Cal.App.5th at p. 514.) Not even the majority’s litany of unpredictables could deter Justice Slough from dissenting. Her dissent interpreted Government Code section 19584’s reference to “special salary compensations” as “being a catchall provision that allows . . . courts to fashion appropriate remedies to ensure the employee is made whole.” (Barber, supra , 35 Cal.App.5th at p. 527 (Slough, J., dis.).) In so holding, the dissent took “a different view of the meaning of the word ‘compensation[],’ ” finding the word “broad enough to cover compensating the employee for work and for injuries related to the wrongful termination.” (Ibid.) Because the term “compensation” itself is “broad and general,” the dissent found it was designed “as a true catchall.” (Ibid.) The Barber dissent reasoned that its interpretation “effectuates the purpose of the statute. Section 19584’s plain aim is making whole employees injured by their employer’s misconduct or mistake. . . . As our Supreme Court has recognized, about this provision as well as other backpay 5 provisions, ‘ “[t]he purpose of the remedy is clear. ‘A backpay order is a reparation order designed to vindicate the public policy of the statute by making the employees whole for losses suffered on account of an unfair labor practice.’ ” ’ [Citation.]” (Barber, supra , 35 Cal.App.5th at p. 528 (Slough, J., dis.).) There is no “catch-all” “other special salary compensations” in section 6.20.100 but in my view the “as if such unsustained . . . discharge had not been invoked” is both “broad and general” (Barber, supra , 35 Cal.App.5th at p. 528 (Slough, J., dis.)) and supports a gross-up award under section 6.20.100 to make appellant “whole for losses suffered on account of an unfair labor practice.” (Ibid.) CONCLUSION In this case, appellant was paid six years’ salary and benefits in one lump sum. She presented evidence that she owed approximately $227,000 more in taxes than she would have owed had she worked during those years and was paid per pay period. I would reverse the trial court’s decision and remand for a determination of whether the evidence supports a gross-up award. Although I disagree with the majority on the merits of appellant’s appeal, I concur in two respects. First, I agree with the majority that this court has appellate jurisdiction. (Maj. Opn., pp. 5-6.) I also agree that there “are policy arguments from the perspective of a successful claimant that would support requiring the Department to pay a gross up award.” The majority also cites “policy arguments from the perspective of the Department (which has no control over tax rules adopted by the Federal and State governments) that counsel in favor of a contrary conclusion.” Neither the Barber opinion nor this one 6 was unanimous, as each garnered a dissent. It does seem time for government entities, such as the County of Los Angeles, to address head on whether gross-up awards are authorized in wrongful termination litigation. RUBIN, P. J. 7

2020-12-01 19:15:35.980281+00

http://www.courts.wa.gov/opinions/pdf/D2 53400-2-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II In the Matter of the Personal Restraint of: No. 53400-2-II JASON ROBERT STOMPS, UNPUBLISHED OPINION Petitioner. LEE, C.J. — In this personal restraint petition (PRP), Jason R. Stomps seeks relief from restraint resulting from his convictions for first degree burglary and three counts of second degree kidnapping; each conviction included a firearm sentencing enhancement.1 Stomps’ grounds for relief include ineffective assistance of counsel, sufficiency of the evidence, and freestanding actual innocence. Recognizing he has filed his PRP more than one year after his judgment became final,2 Stomps argues that his PRP is not time barred because he has a gateway actual innocence claim, his claims are based on newly discovered evidence, and there has been a significant change in the law. We hold that Stomps’ PRP is a mixed petition and must be dismissed. 1 Stomps was also found guilty of three counts of second degree assault. At sentencing, the trial court found that the assault charges merged with the kidnapping charges and vacated the verdicts on the three counts of second degree assault. 2 RCW 10.73.090(1). No. 53400-2-II FACTS The facts underlying Stomps’ convictions are documented in Stomps’ direct appeal3 and are undisputed here. We summarized the facts underlying Stomps’ convictions in his direct appeal: Stomps worked as a bail bond recovery agent. One evening, Stomps went to the home of Annette and Bill Waleske looking for Courtney Barnes. Barnes was free on bail, and his girlfriend, Sinan Hang, guaranteed the bail bond. Hang listed the Waleskes’ address as her address. Hang was friends with Annette and had used the Waleskes’ address in the past, but she did not have permission to use it on the bail bond application. Barnes listed a separate address. When Barnes failed to appear for a court hearing, the bail bond company contracted with Stomps to locate him. When Stomps arrived at the Waleskes’ residence, Annette and Bill were out, but their daughter, Tayler Waleske; son, Quincey Waleske; and daughter’s boyfriend, Nathan Panosh, were at the home. Tayler and Nathan were watching a movie when they heard pounding on the door. They walked towards the door and heard Stomps yell, “I’m looking for Courtney Barnes. Open up your door, or I’ll kick your f[*****]g door down.” Report of Proceedings (RP) at 114. Tayler did not know anyone by the name of Courtney Barnes. Tayler was frightened by Stomps, and yelled out, “We don’t know Courtney. You need to leave.” RP at 115. The pounding and yelling continued. Tayler and Nathan went upstairs to get Quincey. Tayler then called 911. While Tayler was on the phone with the 911 operator, Stomps broke down the front door with a railroad tie driver, which is similar to a sledgehammer. Once inside, he ordered everyone downstairs. Even though he recognized that the three individuals were not the fugitive he was looking for and that Barnes was not in the house, Stomps pointed his gun at them and ordered Quincey, who had just gotten out of the shower and had only a towel wrapped around him, to handcuff himself to Nathan and then ordered all three to get on the floor. Stomps then identified himself as a bail bond recovery agent. The parties dispute whether this was the first time Stomp[s] identified himself. Nathan then repeatedly asked for the key to unlock the handcuffs, but Stomps refused. Police arrived at the residence and detained Stomps. The State ultimately charged Stomps with first degree burglary, three counts of first degree kidnapping, 3 State v. Stomps, No. 47546-4-II (Wash. Ct. App. July 19, 2016) (unpublished), http://www.courts.wa.gov/opinions/pdf/D2%2047546-4-II%20Unpublished%20Opinion.pdf. 2 No. 53400-2-II and three counts of second degree assault; each charge included a special allegation that he was armed with a firearm. Stomps, No. 47546-4-II, slip. op. at 1-2. Stomps testified in his own defense at trial. A jury found Stomps guilty as charged. Id. at 3. Stomps appealed, arguing that evidence was insufficient to support the jury’s verdict. Id. We affirmed Stomps’ convictions. Id at 7. The mandate terminating review was issued on February 13, 2017.4 Stomps filed this PRP on April 22, 2019. ANALYSIS Stomps argues several grounds for relief in his PRP: (1) ineffective assistance of counsel based on trial counsel’s failure to request jury instructions on unplanned entry; (2) ineffective assistance of counsel based on trial counsel’s failure to call Stomps’ former partner, David Smith, as a witness; (3) sufficiency of the evidence; and (4) freestanding actual innocence. Specifically, Stomps contends that his PRP is not time barred because he has met his burden to establish a gateway actual innocence claim, allowing this court to address his ineffective assistance of counsel claims. He also contends that his claim that his trial counsel was ineffective for failing to call Smith as a witness is not time barred because of newly discovered evidence, an enumerated exception to the time bar. Stomps further contends that his PRP is not time barred because insufficient evidence supports his conviction and there was a significant change in the law material to his conviction, which are also enumerated exceptions to the time bar. Finally, Stomps contends that he has a freestanding actual innocence claim. 4 Mandate, No. 47546-4-II (February 13, 2017). 3 No. 53400-2-II Because Stomps cannot meet his burden to establish a gateway actual innocence claim to allow him to argue ineffective assistance of counsel based on trial counsel’s failure to request jury instructions on unplanned entry, at least one of his ineffective assistance claims is time barred. Therefore, Stomps’ petition is an improper mixed petition and must be dismissed. A. LEGAL PRINCIPLES “Relief by way of a collateral challenge to a conviction is extraordinary, and the petitioner must meet a high standard before this court will disturb an otherwise settled judgment.” In re Pers. Restraint of Coats, 173 Wn.2d 123 , 132, 267 P.3d 324 (2011). To be entitled to relief in a PRP, the petitioner must show either (1) a constitutional error resulting in actual and substantial prejudice, or (2) “a fundamental defect of a nonconstitutional nature that inherently resulted in a complete miscarriage of justice.” In re Pers. Restraint of Finstad, 177 Wn.2d 501 , 506, 301 P.3d 450 (2013). When reviewing a PRP, we may (1) deny the petition, (2) grant the petition, or (3) transfer the petition to the superior court for a reference hearing. In re Pers. Restraint of Yates, 177 Wn.2d 1 , 17, 296 P.3d 872 (2013); In re Pers. Restraint of Schreiber, 189 Wn. App. 110 , 113, 357 P.3d 668 (2015). Under RCW 10.73.090(1), “[n]o petition or motion for collateral attack on judgment and sentence in a criminal case may be filed more than one year after the judgment becomes final if the judgment and sentence is valid on its face and was rendered by a court of competent jurisdiction.”5 RCW 10.73.100 provides six exceptions to the one year time bar on collateral attacks: 5 We note that, in a statement of additional authorities, Stomps submitted Governor’s Proclamation 20-47 for consideration on the issue of whether his petition is time barred, implying 4 No. 53400-2-II The time limit specified in RCW 10.73.090 does not apply to a petition or motion that is based solely on one or more of the following grounds: (1) Newly discovered evidence, if the defendant acted with reasonable diligence in discovering the evidence and filing the petition or motion; (2) The statute that the defendant was convicted of violating was unconstitutional on its face or as applied to the defendant’s conduct; (3) The conviction was barred by double jeopardy under Amendment V of the United States Constitution or Article I, section 9 of the state Constitution; (4) The defendant pled not guilty and the evidence introduced at trial was insufficient to support the conviction; (5) The sentence imposed was in excess of the court’s jurisdiction; (6) There has been a significant change in the law, whether substantive or procedural, which is material to the conviction, sentence, or other order entered in a criminal or civil proceeding instituted by the state or local government, and either the legislature has expressly provided that the change in the law is to be applied retroactively, or a court, in interpreting a change in the law that lacks express legislative intent regarding retroactive application, determines that sufficient reasons exist to require retroactive application of the changed legal standard. If a petition is mixed, in that it raises both untimely claims and claims that are exempt from the time bar under RCW 10.73.100, then the entire petition must be dismissed. In re Pers. Restraint of Thomas, 180 Wn.2d 951 , 952-53, 330 P.3d 158 (2014). We need only determine whether one claim is time barred in order to dismiss the petition as mixed. In re Pers. Restraint of Hankerson, 149 Wn.2d 695 , 702-03, 72 P.3d 703 (2003). “Under such circumstances the court will not analyze every claim that is raised in order to determine or advise which claims are time the Governor’s proclamation tolls the time bar in RCW 10.73.090. However, the proclamation only preserves existing rights, it does not revive already expired claims. In re Matter of Blanks, ___ Wn. App. 2d ____, 471 P.3d 272 (Sept. 1, 2020), In re Pers. Restraint of Millspaugh, 14 Wn. App. 2d 137, 469 P.3d 336 (2020). Here, the time bar expired on February 13, 2018, one year after the mandate was issued in Stomps’ case and well before the Governor’s proclamation was issued on April 14, 2020. Therefore, the Governor’s’ proclamation has no application to Stomps’ petition. 5 No. 53400-2-II barred and which are not, nor will it decide claims under RCW 10.73.100 that are not time barred.” Id. at 703.6 B. GATEWAY ACTUAL INNOCENCE Stomps’ ineffective assistance claim based on trial counsel’s failure to request jury instructions on unplanned entry does not implicate any of the exceptions to the time bar enumerated in RCW 10.73.100.7 However, establishing a gateway actual innocence claim would permit this court to consider grounds for relief in a petition that would otherwise be time barred under RCW 10.73.090. Thus, Stomps’ ineffective assistance of counsel claim based on the failure to request jury instructions is time barred unless Stomps meets his burden to establish a gateway 6 Our Supreme Court has explained this rule exists, in part, “because by definition any claim that is not time barred may be refiled without danger of untimeliness.” Hankerson, 149 Wn.2d at 702 . 7 We recognize that the avoidance principle, articulated in In re Personal Restraint of Carter, requires this court to consider claimed statutory exceptions to the time bar before applying the actual innocence doctrine. 172 Wn.2d 917 , 932-33, 263 P.3d 1241 (2011). However, Stomps’ ineffective assistance of counsel claim based on the failure to request jury instructions on unplanned entry does not implicate any statutory exception to the time bar. To the extent Stomps attempts to argue that this claim is based on newly discovered evidence and, therefore, falls under RCW 10.73.100(1), this argument must fail. To prevail on a claim of newly discovered evidence, a petitioner must show that the evidence “‘(1) will probably change the result of the trial; (2) was discovered since the trial; (3) could not have been discovered before trial by the exercise of due diligence; (4) is material; and (5) is not merely cumulative or impeaching.’” In re Pers. Restraint of Lord, 123 Wn.2d 296 , 319- 20, 868 P.2d 835 (1994) (quoting State v. Williams, 96 Wn.2d 215 , 223, 634 P.2d 868 (1981)). Here, even if certain “newly discovered” evidence could revive an otherwise time barred ineffective of counsel claim, Stomps has not identified what newly discovered evidence supports his claim that counsel was ineffective for failing to request a jury instruction on unplanned entry. Instead, Stomps’ claim is based on what did or did not occur during trial, facts that cannot be considered “newly discovered.” Therefore, there is no basis for applying the newly discovered evidence exception to the time bar to Stomps’ ineffective assistance of counsel claim based on the failure to request jury instructions on unplanned entry. 6 No. 53400-2-II actual innocence claim. We hold that Stomps does not meet his burden to establish a gateway actual innocence claim, and therefore, his ineffective assistance claim based on the failure to request jury instructions is time barred. Our Supreme Court has recognized that a petitioner may raise two types of actual innocence claims. In re Pers. Restraint of Weber, 175 Wn.2d 247 , 256, 284 P.3d 734 (2012). First, freestanding actual innocence claims are “constitutional claims of actual innocence in which innocence itself provides a basis for relief.” Id. Second, gateway actual innocence claims are “used to avoid procedural time bars so that a court may review other claimed constitutional errors.” Id. The “probability standard” applies when considering a gateway actual innocence claim. Id. at 259. “Under the probability standard, after evaluating the new reliable evidence in light of the evidence presented to the jury, a court must be persuaded that ‘it is more likely than not that no reasonable juror would have found petitioner guilty beyond a reasonable doubt.’” Id. at 260 (quoting Schlup v. Delo, 513 U.S. 298 , 327, 115 S. Ct. 851 , 130 L. Ed. 2d 808 (1995)). Furthermore, To be credible, a gateway actual innocence claim requires the petitioner to support his allegations with new, reliable evidence. This may include exculpatory scientific evidence, trustworthy eyewitness accounts, or critical physical evidence that was not presented at trial. New evidence in this context does not mean “newly discovered” but rather “newly presented” evidence. Id. at 258-59. First, we must determine what “new, reliable” evidence Stomps has presented to support his gateway actual evidence claim. Id. at 258. Stomps has presented two specific pieces of “new” 7 No. 53400-2-II evidence to support his claim: (1) David Smith’s statement to the police following the incident and (2) the expert declaration of Brian Johnson. When the petitioner’s allegations are based on matters outside of the existing record, the petitioner must show that competent, admissible evidence supports the allegations. In re Pers. Restraint of Rice, 118 Wn.2d 876 , 886, 828 P.2d 1086 , cert. denied, 506 U.S. 958 (1992). If the evidence is based on knowledge that is in the possession of others, the petitioner must present affidavits of those witnesses or other corroborative evidence. Id. Factual allegations must be based on more than speculation, conjecture, or inadmissible hearsay. Id. “‘Hearsay’ is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” ER 801(c). Hearsay is inadmissible unless an exception or exclusion applies. ER 802. Smith’s statement is not a sworn declaration or affidavit. Stomps provides only the transcript from Smith’s recorded interview with the police. These unsworn, out-of-court statements are inadmissible hearsay. See ER 802. Therefore, Smith’s statement to the police is not competent, admissible evidence that can be used to support Stomps’ claims in his PRP. Rice, 118 Wn.2d at 886 . In contrast, Johnson’s declaration is properly sworn and presents Johnson’s conclusions based on his training and experience. Therefore, Johnson’s declaration is the only “new, reliable” evidence Stomps has presented in support of his gateway actual innocence claim. Weber, 175 Wn.2d at 258 . Johnson declared that he is “widely considered to be a ‘recognized authority’ in the field of Bail, Bondsmen and Bail Recovery Agents.” Ex. 7 at 1. Johnson has extensive academic 8 No. 53400-2-II experience studying criminal justice and the bail industry. Johnson reviewed Stomps’ case and, based on his training and experience, offered his opinions on Stomps’ actions. Johnson opined that Stomps exercised “ordinary care and prudence in establishing reasonable suspicion that Barnes was present in the home.” Ex. 7 at 6. Johnson also opined that Stomps’ entry into the home was unplanned. Finally, Johnson opined that Stomps’ use of force and restraint of the three teenagers in the home was appropriate in the circumstances. The question before us is whether “‘it is more likely than not that no reasonable juror would have found petitioner guilty beyond a reasonable doubt’” when Johnson’s opinions are considered in light of the evidence presented at trial. Weber, 175 Wn.2d at 260 (quoting Schlup, 513 U.S. at 327 ). We hold that Johnson’s opinions are insufficient to establish Stomps’ gateway actual innocence claim. Here, Stomps does not dispute the underlying facts supporting his conviction. Stomps only argues that his actions were reasonable under the circumstances and, therefore, he should not be subject to criminal liability. However, Johnson’s declaration is not proof that Stomps is innocent of the charges. It is nothing more than Johnson’s expert opinion that Stomps acted reasonably under the circumstances. Juries are not bound by an expert’s opinion and are instructed that they are responsible for determining the weight and credibility of the evidence. State v. Kirkman, 159 Wn.2d 918 , 928, 155 P.3d 125 (2007). Given that Stomps does not dispute he forcibly entered the residence without conclusively identifying Barnes, brandished a firearm, and held the three teenage occupants at gunpoint, a reasonable juror could have rejected Johnson’s opinion and found 9 No. 53400-2-II Stomps guilty of the charges against him. Therefore, Stomps has failed to meet his burden to establish a gateway actual innocence claim.8 Because Stomps has failed to meet his burden to establish a gateway actual innocence claim, any grounds for relief that do not fall within the exception to the time bar enumerated in RCW 10.73.100 are time barred. Here, Stomps’ ineffective assistance of counsel claim based on the failure to request jury instructions on unplanned entry does not implicate any of the enumerated exceptions to the time bar. Accordingly, this claim is time barred. C. MIXED PETITION As discussed above, Stomps fails to meet his burden of establishing a gateway actual innocence claim to allow us to address his ineffective assistance of counsel claim based on the failure to request jury instructions on unplanned entry. Therefore, his ineffective assistance of counsel claim is time barred. Because at least one of the grounds that Stomps raises in his PRP is time barred, Stomps’ petition is mixed. Accordingly, we dismiss Stomps’ PRP. 8 Although, as discussed below, Stomps’ failure to meet his burden to establish a gateway actual innocence claim makes this petition a mixed petition that must be dismissed without addressing any of the remaining claims, it is worth noting that Stomps’ freestanding actual innocence claim also must necessarily fail. The burden to establish a freestanding actual innocence claim is higher than the burden to establish a gateway actual innocence claim. Weber, 175 Wn.2d at 262-63 . Therefore, the failure to succeed at establishing a gateway actual innocence claim means a petitioner necessarily fails at making the required showing on a freestanding actual innocence claim. Id. 10 No. 53400-2-II A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. Lee, C.J. We concur: Maxa, J. Glasgow, J. 11

2021-01-26 20:03:15.871933+00

https://www.courts.state.hi.us/wp-content/uploads/2021/01/SCWC-17-0000695.pdf

*** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Electronically Filed Supreme Court SCWC-XX-XXXXXXX 26-JAN-2021 08:22 AM Dkt. 20 OP IN THE SUPREME COURT OF THE STATE OF HAWAIʻI ---o0o--- EDELMIRA SALAYES ARAIZA, Petitioner/Petitioner-Appellant, vs. STATE OF HAWAIʻI, Respondent/Respondent-Appellee. SCWC-XX-XXXXXXX CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-XX-XXXXXXX; CR. NO. 14-1-0162; S.P.P. NO. 15-1-0007) JANUARY 26, 2021 RECKTENWALD, C.J., NAKAYAMA, McKENNA, AND WILSON, JJ., AND CIRCUIT JUDGE BROWNING, ASSIGNED BY REASON OF VACANCY OPINION OF THE COURT BY RECKTENWALD, C.J. I. INTRODUCTION Edelmira Salayes Araiza is a citizen of Mexico and a lawful permanent resident (LPR) of the United States. She has lived in Hawaiʻi for more than twenty-two years and has two children, both of whom were born in the United States. In 2014,  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Araiza pleaded no contest in the Circuit Court of the Second Circuit to Theft in the First Degree, an aggravated felony under federal immigration law, 8 U.S.C. § 1101 (a)(43), and to Welfare Fraud. Her attorney advised her that pleading no contest would make deportation “almost certain,” but that “[his office] had criminal defendants who were convicted of felonies who are not automatically deported” because immigration was “handled by federal authorities who do not oversee state courts.” Here, we are asked to determine whether counsel properly advised his client, Araiza, about the consequences of an aggravated felony conviction. We hold he did not. In order to be effective under the United States and Hawaiʻi Constitutions, criminal defense attorneys must advise their clients about adverse immigration consequences that may result from a plea of guilty or no contest. Haw. Const. art. I, § 14; Padilla v. Kentucky, 559 U.S. 356 , 368 (2010). Despite her attorney’s reference to deportation being “almost certain,” when taken as a whole, his advice conveyed that there was a realistic possibility Araiza would not be deported. In reality, Araiza was precluded from discretionary relief from deportation because of her conviction. Budziszewski v. Comm’r of Corr., 142 A.3d 243 , 251 (Conn. 2016) (“If counsel gave the advice required under Padilla, but also expressed doubt about the likelihood of enforcement, the court must also look to the totality of the 2  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** immigration advice given by counsel to determine whether counsel’s enforcement advice effectively negated the import of counsel’s advice required under Padilla about the meaning of federal law.” (emphasis added)). Araiza is therefore entitled to relief. In light of our resolution of this issue, we decline to determine whether the Intermediate Court of Appeals (ICA) erred on the other points of error raised by Araiza. 1 However, we offer guidance on one of those issues relating to qualifications of interpreters. When a lower court appoints an interpreter who has not been certified by the judiciary as proficient in the applicable foreign language, it must conduct a brief inquiry to establish that the interpreter is qualified, as required by Hawaiʻi Rules of Evidence (HRE) Rules 604 and 702, and the Hawaiʻi Rules for Certification of Spoken-Language Interpreters (HRCSLI). II. BACKGROUND In March 2014, the State charged Araiza with Theft in the First Degree in violation of Hawai‘i Revised Statutes (HRS) § 708-830.5(1)(a) (2014) and with Welfare Fraud in violation of 1 On appeal, Araiza raised four additional issues: (1) her defense attorney provided ineffective assistance of counsel by failing to negotiate an immigration-safe plea; (2) the circuit court’s plea colloquy was insufficient under State v. Ernes, 147 Hawaiʻi 316 (2020); (3) her Rule 40 counsel had been ineffective; and (4) the circuit court committed plain error by appointing an unqualified interpreter for the Rule 40 hearing. 3  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** HRS § 346-34(b) and/or (c) (2015), alleging she had failed to report income, which resulted in a substantial overpayment of Supplemental Nutrition Assistance Program (SNAP) benefits over the course of several years. Araiza had no prior experience with the criminal justice system. At her arraignment, the circuit court 2 advised Araiza pursuant to HRS § 802E-4 (2014) 3: “[Y]our case may have severe and irreversible [immigration] consequences, including immediate detention, deportation or exclusion from admission or denial [of] naturalization to the United States. Your attorney must advise you regarding the possible consequences this case may have on your immigration status.” 2 The Honorable Rhonda I.L. Loo presided over Araiza’s circuit court proceedings including her arraignment, no contest plea, and Rule 40 petition. 3 HRS § 802E-4 provides: At the commencement of the court session for arraignment and plea hearings for an offense punishable as a crime under state law, except offenses designated as infractions under state law, the court shall administer the following advisement on the record to all defendants present: If you are not a citizen of the United States, whether or not you have lawful immigration status, your case may have severe and irreversible consequences, including immediate detention, deportation, or exclusion from admission or denial of naturalization to the United States. Your attorney must advise you regarding the possible consequences this case may have on your immigration status. You are not required to disclose your immigration or citizenship status to the court. 4  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** A. Araiza’s No Contest Plea On October 10, 2014, Araiza, who was represented by a deputy public defender (trial counsel), pleaded no contest to both charges and moved for a deferred acceptance of her plea. The plea paperwork, which Araiza and her attorney both signed, specified, “[T]his document has been read to me or has been interpreted for me.” It also contained an advisement about immigration consequences: If I am not a citizen of the United States, whether or not I have lawful immigration status, I have the right to receive advice from my lawyer about the specific impact that this case will have, if any, on my immigration status. The entry of a guilty or nolo contendre (no contest) plea, . . . may have the consequences of my immediate detention, deportation, exclusion from admission to the United States, or denial of naturalization pursuant to the laws of the United States. In some case[s], detention and deportation from the United States will be required. My lawyer must investigate and advise me about the aforementioned issues prior to . . . entry of a guilty or nolo contendere (no contest) plea . . . and I acknowledge that I have been so advised. I am not required to disclose my immigration or citizenship status to the court. (Emphasis added). The circuit court also read Araiza the immigration advisement from her plea paperwork, informing her that her plea “may have the consequences of your immediate detention, deportation[,] . . . [e]xclusion from admission to the United States, or denial of naturalization pursuant to the laws of the United States,” and that “[y]our lawyer must investigate and advise you about these issues prior to the . . . entry of a 5  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** guilty or no contest plea.” 4 Araiza told the court she did not need additional time to consider her plea, and that she had discussed immigration consequences with her attorney and was satisfied with his advice. Accordingly, the circuit court found she “voluntarily entered a plea of no contest, with the understanding of the nature of the charges and the consequences of her plea.” 4 Like the circuit court’s advisement at Araiza’s arraignment, this advisement was required by statute. HRS § 802E-2 (2014) provides: Prior to the commencement of trial, entry of a plea of guilty or nolo contendere, or admission of guilt or sufficient facts to any offense punishable as a crime under state law, except offenses designated as infractions under state law, the court shall administer the following advisement on the record to the defendant: If you are not a citizen of the United States, whether or not you have lawful immigration status, you have the right to receive advice from your attorney about the specific impact that this case will have, if any, on your immigration status. The entry of a guilty or nolo contendere plea, admission of guilt or sufficient facts, or conviction, deferred judgment, or deferred sentence may have the consequences of your immediate detention, deportation, exclusion from admission to the United States, or denial of naturalization pursuant to the laws of the United States. In some cases, detention and deportation from the United States will be required. Your lawyer must investigate and advise you about these issues prior to the commencement of trial, entry of a guilty or nolo contendere [plea], or admission of guilt or sufficient facts to any offense punishable as a crime under state law, other than those offenses designated as infractions. You are not required to disclose your immigration or citizenship status to the court. Upon request, the court shall allow the defendant additional time to consider the appropriateness of the plea in light of the advisement as described in this section. 6  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** The circuit court subsequently denied Araiza’s motion for a deferral and sentenced her to five years of probation on Count One (Theft in the First Degree), and one year of probation on Count Two (Welfare Fraud), with both terms of probation to run concurrently. Araiza did not appeal her conviction. Four months later, the U.S. Department of Homeland Security detained Araiza without bond and served her with a Notice to Appear, alleging that she was removable because her conviction for Theft in the First Degree was an aggravated felony conviction. B. Rule 40 Petition 1. Rule 40 Petition and Hearing Five months after Araiza’s conviction, Araiza filed a Hawaiʻi Rules of Penal Procedure (HRPP) Rule 40 petition, 5 5 HRPP Rule 40 provides in relevant part: (a) Proceedings and Grounds. The post-conviction proceeding established by this rule shall encompass all common law and statutory procedures for the same purpose, including habeas corpus and coram nobis; provided that the foregoing shall not be construed to limit the availability of remedies in the trial court or on direct appeal. Said proceeding shall be applicable to judgments of conviction and to custody based on judgments of conviction, as follows: (1) From Judgment. At any time but not prior to final judgment, any person may seek relief under the procedure set forth in this rule from the judgment of conviction, on the following grounds: (continued . . .) 7  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** asserting that her trial counsel’s failure to advise her of immigration consequences constituted ineffective assistance of counsel and, in turn, prevented her no contest plea from being knowing and intelligent. Initially, the circuit court summarily denied Araiza’s Rule 40 petition without a hearing, finding that her claim of ineffective assistance of counsel had been waived because she failed to raise it on appeal, and that Araiza had not been convicted of an aggravated felony, so “the consequences resulting from [Araiza’s] plea were truly unclear.” But the ICA reversed and explained that “[c]ontrary to the Circuit Court’s assumption, []Araiza’s conviction for first-degree theft by deception in violation of HRS § 708-830.5(1)(a) is an aggravated felony under the immigration laws.” Salayes-Araiza v. State, No. CAAP-XX-XXXXXXX, 2016 WL 6948461 , at *4 (Haw. App. Nov. 28, 2016). Accordingly, citing Padilla, the ICA concluded that Araiza’s “petition sufficiently stated a colorable claim for relief” and remanded for a hearing. Id. at *5 . (i) that the judgment was obtained or sentence imposed in violation of the constitution of the United States or of the State of Hawai‘i; (ii) that the court which rendered the judgment was without jurisdiction over the person or the subject matter; (iii) that the sentence is illegal; (iv) that there is newly discovered evidence; or (v) any ground which is a basis for collateral attack on the judgment. 8  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** At the hearing on remand, the parties stipulated to admitting State’s Exhibit 1, Araiza’s trial counsel’s declaration. Araiza’s trial counsel stated in his declaration that he discussed immigration consequences with Araiza: [N]early every conversation with my client centered on immigration concerns, the looming and almost-certain possibility that she’d be deported, and the difficulty in presenting a defense in this case due to the language barrier, the severity of the charge, and the State’s evidence, and I remember that she burst into tears or became teary-eyed anytime I brought up this topic, which was every discussion we had prior to pre-trial. Trial counsel also advised Araiza and her husband that a plea of guilty or no contest “would result in an almost- certain deportation,” and he strongly advised them to speak to an immigration attorney. However, he also explained that sometimes defendants convicted of felonies were not deported: As part of this discussion, I informed her that I had discussed this issue with more senior attorneys in my office, and discovered that there were situations in our own office where people who were found guilty of felony offenses were actually not deported, despite their convictions, and for that reason I could not give her 100% confirmation that she’d be automatically deported for the very reason that the immigration is handled by Federal authorities who do not oversee the State courts and that certain defendants seemed to slip through the grasp of what would [] otherwise be an automatic deportation. (Emphases added). Overall, trial counsel advised Araiza that she needed to weigh “risking automatic deportation with no jail (upon a plea agreement) versus going to trial and possibly being found guilty, serving jail and then being deported (which would be far 9  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** worse)[.]” 6 During the Rule 40 hearing, trial counsel testified on behalf of the State. Consistent with his declaration, trial counsel testified that he advised Araiza she would be subject to almost-certain deportation if convicted. Deportation was not certain because his office “had criminal defendants who were convicted of felonies who are not automatically deported.” When pressed about his advice on cross-examination, trial counsel conceded he did not know, and had never advised Araiza, that state criminal records were automatically forwarded to Immigration and Customs Enforcement. Moreover, trial counsel did not tell Araiza she would be automatically detained after her plea, even though he knew that that would happen and had advised her she would not go to jail if she pleaded no contest. Trial counsel also admitted that he did not tell Araiza that her conviction would be for an “aggravated felony,” or that a conviction for an aggravated felony precluded any 6 Trial counsel also stated in his declaration that he had wanted to negotiate a dismissal if Araiza could raise “the full amount of restitution money,” but that Araiza and her husband were unable to do so. When he learned they did not have the money, I again explained that there could be immigration consequences, especially with a Theft in the First Degree conviction, and that deportation would be almost certain if convicted or put on probation. I again proposed that we could just take our chances at trial and try for an acquittal and [Araiza] indicated she did not want to risk losing at trial and again was very emotional during the conversation. 10  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** possible relief from removal. Although he did not tell Araiza she was pleading to an “aggravated felony,” he testified that he told her it was “a more serious felony,” and explained “the difference between a Class B and a Class C [felony.]” When asked, he also said that he knew that someone deported for an aggravated felony would never be able to naturalize, but that he did not tell Araiza that: “I didn’t go through the specifics of the law because almost certain deportation, a reasonable inference would be that once you’re deported, you’re not allowed to come back. But that’s why I also requested that she seek the advice of an immigration attorney.” When Araiza’s attorney explained that inadmissibility and inability to naturalize were two different things, trial counsel conceded he did not advise Araiza of either consequence. Trial counsel testified that he was not aware of Padilla, and that he never contacted immigration attorneys about his cases “because of client confidentiality,” even though the public defender’s office “encouraged us to contact immigration attorneys personally.” Finally, when asked if he had a duty to research immigration consequences, he replied, “I believe that this is an issue that keeps on coming up in courts and that keeps on changing, especially with the presidency. . . . Back then I didn’t believe I had the duty to know immigration law as 11  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** much as an immigration attorney.” Araiza herself also testified at the hearing. She testified that she had lived in Hawai‘i for twenty-two years. She was married and had two children, both born in the United States. She had a green card — and therefore was an LPR — and had hoped to become an American citizen. Araiza did not know what an aggravated felony was, and she testified that trial counsel had not advised her about possible immigration consequences: 7 What I’m seeing, that he wanted to finish the case fast, because he told me to plead guilty, to just get an agreement; that I had to give $3,000; I was going to -- I was not going to go to jail; I was going to get an approval for five years [deferral]; and that I should continue with the payments; and that everything was going to be all right. So I felt relaxed on that sense. When asked if she would have gone to trial had she known about the immigration consequences of her plea, Araiza replied, “I would have gone and fight.” Araiza used a Spanish-speaking interpreter during the Rule 40 hearing. Almost as soon as the hearing began, the circuit court interrupted the proceedings to instruct the interpreter twice that “[e]verything [Araiza] says you need to translate for us.” Shortly after the first witness began 7 Araiza testified that trial counsel had not given her any legal advice, but immediately went on to explain the non-immigration legal advice he had given her. 12  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** testifying, the circuit court interrupted again to ask if the interpreter was “getting all this,” to which the interpreter responded, “No. . . . [I’m] getting a little behind. But I’m getting the whole idea.” The court said, “No,” and the interpreter said, “I can only translate ideas, no words.” During Araiza’s testimony, the court again instructed the interpreter to translate everything Araiza said. However, when asked if Araiza wanted a different interpreter, Araiza’s attorney said, “No.” 2. The Circuit Court’s Findings of Facts and Conclusions of Law The circuit court denied Araiza’s Rule 40 petition in a written order filed on September 6, 2017. The circuit court found trial counsel credible and that he had advised Araiza a no contest plea or guilty conviction “would result in an almost certain deportation, but could not provide 100% confirmation that [Araiza] would be deported.” The court also noted that it had advised Araiza that her case could have immigration consequences and that her attorney must advise her about them. By contrast, the circuit court found Araiza’s “claims that [trial counsel] did not give her any legal advice, including any advice pertaining to possible immigration consequences, are not credible.” Accordingly, the circuit court found that trial 13  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** counsel “adequately advised [Araiza] of the possible immigration and/or deportation consequences of her no contest pleas.” The court further concluded that Araiza “had a full understanding of what her no contest pleas connoted, [and] their direct consequences; and therefore, [Araiza’s] no contest pleas were knowingly, intelligently, and voluntarily entered.” In sum, the circuit court concluded “in light of all the circumstances, [Araiza] has failed to meet her burden of demonstrating that her counsel’s performance was not objectively reasonable,” and that “there were specific errors or omissions reflecting her counsel’s lack of skill, judgment, or diligence.” The circuit court therefore “conclude[d] that [Araiza] was not provided ineffective assistance of counsel under the State of Hawai‘i or United States Constitutions[.]” B. ICA Memorandum Opinion Araiza appealed to the ICA, arguing that the circuit court erred in concluding that trial counsel did not provide ineffective assistance of counsel by providing deficient immigration advice 8 and, for the first time on appeal, that the circuit court did not provide Araiza with a qualified interpreter during her Rule 40 hearing. 8 Araiza also argued in her Rule 40 petition and application for writ of certiorari that she was prejudiced by trial counsel’s advice because she would not have pleaded no contest had she known that deportation was mandatory. The State did not dispute this argument. 14  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** The ICA affirmed the circuit court’s denial of Araiza’s Rule 40 petition. First, the ICA held that the circuit court’s factual finding that trial counsel advised Araiza she faced “almost-certain deportation” was not clearly erroneous because it was supported by evidence in the record and was based on the court’s credibility assessment. With respect to the sufficiency of trial counsel’s immigration advisement, the ICA decided that “the Supreme Court has not consistently characterized the immigration consequence of an aggravated felony conviction” and therefore “has not made it clear whether the immigration consequence for an aggravated felony is absolute or qualified.” The ICA conducted its own analysis of the consequences of an aggravated felony. First, it held that the statutory language in 8 U.S.C. § 1227 (a)(2)(A)(iii) and 8 U.S.C. § 1228 (c) regarding aggravated felonies “does not support Araiza’s argument” because it “does not state that deportation is automatic, mandatory, or certain.” Second, the ICA concluded that removal is not automatic because “[t]here are also administrative proceedings and limited judicial review available,” since immigration judges conduct removal proceedings. While the ICA recognized that federal courts have no appellate jurisdiction over final orders of removal where the basis for removal was an aggravated felony conviction, the ICA concluded that since federal courts retain 15  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** jurisdiction over questions of law, “even when removal proceedings are initiated, the result is not always automatic deportation.” Third, quoting Chacon v. State, 409 S.W.3d 529 , 537 (Mo. Ct. App. 2013), the ICA held that “Padilla does not require that counsel use specific words to communicate to a defendant the consequences of entering a plea.” And it cited several decisions from state and federal courts that approved of qualifying language such as “virtual certainty” or “almost certainly will.” Thus, “[t]rial counsel was not ineffective when he provided Araiza with correct advice, informing her that deportation was ‘almost certain’ if she pleaded no contest.” Finally, the ICA held that the circuit court did not plainly err by failing to provide Araiza with a qualified interpreter based on the presumption that an interpreter acted regularly in the course of their duty. The ICA observed that Araiza did not prove the interpreter had not been certified when the Rule 40 hearing occurred in June 2017, and that there is no requirement an interpreter be formally certified, nor that a trial court “express[ly]” find an interpreter to be qualified. Thus, the ICA affirmed the circuit court’s order in its entirety. Araiza timely filed an application for writ of certiorari. 16  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** III. STANDARDS OF REVIEW A. Ineffective Assistance of Counsel “The proper standard for claims of ineffective assistance of counsel on appeal is whether, ‘viewed as a whole, the assistance provided was within the range of competence demanded of attorneys in criminal cases.’” State v. DeLeon, 131 Hawai‘i 463, 479, 319 P.3d 382 , 398 (2014) (quoting Dan v. State, 76 Hawai‘i 423, 427, 879 P.2d 528 , 532 (1994)). The defendant has the burden of establishing ineffective assistance of counsel and must meet the following two-part test: 1) that there were specific errors or omissions reflecting counsel’s lack of skill, judgment, or diligence; and 2) that such errors or omissions resulted in either the withdrawal or substantial impairment of a potentially meritorious defense. Id. at 478–79, 319 P.3d at 397–98 (quoting State v. Wakisaka, 102 Hawai‘i 504, 514, 78 P.3d 317 , 327 (2003)). Unlike the federal standard, defendant need only show “a possible impairment, rather than a probable impairment, of a potentially meritorious defense. A defendant need not prove actual prejudice.” Id. at 479, 319 P.3d at 398 (quoting Wakisaka, 102 Hawai‘i at 514, 78 P.3d at 327 ). B. Court Interpreters The court has discretion to appoint an “interpreter of its own selection[.]” HRPP Rule 28(b). Under HRE Rule 604, interpreters must be qualified to the same extent as an expert witness pursuant to HRE Rule 702. Thus, as with an expert 17  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** witness, a trial court’s determination whether a witness is qualified to be an interpreter is reviewed for abuse of discretion. HRE Rule 604 cmt. (“Under Hawaii law, preliminary determination of [an interpreter’s] qualifications is a matter within the discretion of the court[.]”). IV. DISCUSSION A. Araiza’s Trial Counsel Provided Inadequate Immigration Advice According to trial counsel’s own testimony, 9 he gave Araiza three pieces of advice regarding immigration consequences: (1) a no contest plea would result in “almost certain deportation,” but that (2) his office has had defendants “convicted of felonies who are not automatically deported,” and that (3) “immigration is handled by federal authorities who do not oversee state courts[.]” He told Araiza, in sum, that she needed to weigh “risking automatic deportation” as the result of a plea, versus “going to trial and possibly being found guilty . . . and then being deported[.]” The ICA decided trial counsel’s advisement satisfied his professional duty to advise Araiza about the immigration consequences of her no contest plea. For the following reasons, 9 The circuit court found trial counsel credible, and the ICA appropriately held that the circuit court’s finding regarding trial counsel’s credibility was not clearly erroneous because there was evidence in the record to support it. 18  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** we disagree. 1. The Right to Immigration Advice Under Padilla, the sixth amendment of the United States Constitution guarantees a defendant the right to receive immigration advice from their defense attorney. 559 U.S. at 368 (mandating advice where “the terms of the relevant immigration statute are succinct, clear, and explicit in defining the removal consequence for [the defendant’s] conviction”). Such advice is necessary to “ensure that no criminal defendant — whether a citizen or not — is left to the ‘mercies of incompetent counsel.’” Id. at 374 . This same right can be independently found in article I, section 14 of the Hawai‘i Constitution since, “under Hawaii’s Constitution, defendants are clearly afforded greater protection of their right to effective assistance of counsel.” State v. Aplaca, 74 Haw. 54 , 67 n.2, 837 P.2d 1298 , 1305 n.2 (1992). We note that the Hawai‘i Legislature has also acknowledged that such advice is constitutionally required. Indeed, it enacted HRS § 802E-4 and amended HRS § 802E-2 to “conform [the statutes] to current federal court holdings,” including Padilla, and to ensure a defendant is “adequately advise[d] . . . of the defendant’s Sixth Amendment right to competent and specific advice on immigration consequences of a criminal conviction.” S. Stand. Comm. Rep. No. 1376, in 2013 19  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Senate Journal, at 1518. Thus, by statute, the court must inform defendants that their attorneys will “investigate and advise” them about “the specific impact” the case will have on their immigration status, including “[1] detention, [2] deportation, [3] exclusion from admission to the United States, or [4] denial of naturalization pursuant to the laws of the United States.” HRS §§ 802E-2, 802E-4. Further, the court has to tell defendants that their attorney must advise them whether “detention and deportation from the United States will be required.” HRS § 802E-2. Accordingly, under Padilla, and independently, under article I, section 14 of the Hawai‘i Constitution, defense counsel must adequately advise their clients regarding the immigration consequences of a plea. The failure to do so renders counsel’s advice deficient under the United States and Hawai‘i Constitutions. 2. The Immigration Consequences of an Aggravated Felony Conviction Trial counsel’s advice to Araiza did not capture the severity of a plea to an aggravated felony. See Sessions v. Dimaya, 138 S. Ct. 1204 , 1211 (2018) (“[R]emoval is a virtual certainty for an alien found to have an aggravated felony conviction, no matter how long [she] has previously resided 20  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** here.”). Araiza’s conviction for Theft in the First Degree constitutes an aggravated felony under 8 U.S.C. § 1101 (a)(43)(M)(i) (“[A]n offense that . . . involves fraud or deceit in which the loss to the victim or victims exceeds $10,000[.]”). “Aggravated felony” is a term of art: 8 U.S.C. § 1101 (a)(43) lists twenty-one categories of offenses that constitute aggravated felonies, and any immigrant convicted of an aggravated felony “shall . . . be removed.” 8 U.S.C. § 1227 (a) (emphasis added). Trial counsel explained that he told Araiza she was pleading to a “more serious felony,” and explained the difference between class B and class C felonies. But contrary to trial counsel’s apparent belief, the term “aggravated felony” does not include all serious felonies, and designation as an aggravated felony does not depend on the class of felony. Lopez v. Gonzales, 549 U.S. 47 , 59-60 (2006) (holding that the “aggravated felony” classification turns on analogies to federal law and noting that state misdemeanors can constitute aggravated felonies). The consequences of an aggravated felony conviction are well-documented. See, e.g., Richard D. Steel, Steel on Immigration Law § 13:16 (2020 ed.); Kathy Brady, Practice Advisory: Aggravated Felonies, Immigrant Legal Resource Center (Apr. 2017), https://perma.cc/N3WM-97W7. And Congress has made 21  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** it clear that “a listed offense should lead to swift removal, no matter whether it violates federal, state, or foreign law.” Torres v. Lynch, 136 S. Ct. 1619 , 1627 (2016). Such a conviction makes an immigrant removable (i.e., deportable) under 8 U.S.C. § 1227 (a)(2)(A)(iii), and unlike other grounds of removability, anyone convicted of an aggravated felony is “conclusively presumed to be deportable” under 8 U.S.C. § 1228 (c). Removal is considered mandatory because 8 U.S.C. § 1227 (a) provides that an immigrant falling under one of the listed categories “shall” be removed. Further, an aggravated felony conviction makes an immigrant ineligible for relief from removal, including cancellation of removal, 8 U.S.C. § 1229b(a)(3), adjustment of status, 8 U.S.C. § 1229b(b)(1)(C), asylum, 10 8 U.S.C. § 1158 (b)(2)(B)(i), or voluntary departure, 11 8 U.S.C. § 1229c(a)(1). See Lopez, 549 U.S. at 50–51 (discussing these consequences). In addition, an aggravated felony conviction reduces an immigrant’s procedural protections during removal 10 Additionally, a conviction for an aggravated felony is grounds for termination of asylum status. 8 U.S.C. § 1158 (c)(2)(B). 11 “Voluntary departure” means choosing to leave voluntarily in lieu of being removed. 8 U.S.C. § 1229c(a)(1). It enables immigrants to avoid certain grounds for inadmissibility that are contingent on having been deported for a crime. See 8 U.S.C. § 1182 (a)(9)(A)(i). However, because it is not available to an immigrant convicted of an aggravated felony, it is impossible for someone with this type of conviction to avoid becoming permanently inadmissible after removal. 22  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** proceedings. They are subject to mandatory detention without bond. 8 U.S.C. § 1226 (c)(1)(B); Demore v. Kim, 538 U.S. 510 , 517–18 (2003) (“Section 1226(c) mandates detention during removal proceedings for a limited class of deportable aliens — including those convicted of an aggravated felony.”). But see Rodriguez v. Robbins, 715 F.3d 1127 , 1138 (9th Cir. 2013) (holding a bond hearing must be held once detention lasts more than six months). Further, immigrants convicted of an aggravated felony are subject to expedited removal proceedings and, under certain circumstances, can be deported without a hearing before an immigration judge. 8 U.S.C. § 1228 (b); see also Richard D. Steel, Steel on Immigration Law § 14:5 (2020 ed.). Finally, the immigration consequences of an aggravated felony conviction go beyond removal: Such a conviction makes an immigrant permanently inadmissible, 8 U.S.C. § 1182 (a)(9)(A)(i), and precludes that person from ever becoming an American citizen. Elmakhzoumi v. Sessions, 883 F.3d 1170 , 1172 (9th Cir. 2018) (holding aggravated felony conviction makes an immigrant “permanently ineligible for naturalization”). 12 12 Advice about these consequences is required by HRS § 802E-2, and at least one state has held that defense attorneys are constitutionally obligated to advise defendants of all clear statutory consequences of a plea, including inadmissibility and ineligibility for naturalization, noting that (continued . . .) 23  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Thus, trial counsel’s advice to Araiza on the nature of the felony to which she pleaded no contest failed to convey that “aggravated felony” is a term of art connoting severe and permanent consequences. 3. Inconsistencies between the ICA’s Analysis and Existing Federal Law The ICA concluded that because the Supreme Court has not “made it clear whether the immigration consequence for an aggravated felony conviction is absolute or qualified,” deportation was not “certain” given the statutory language and procedural protections available. This analysis is in tension with existing federal law. First, it is true that the Supreme Court sometimes uses qualifying language with respect to an aggravated felony conviction. E.g., Dimaya, 138 S. Ct. at 1211 (“virtual certainty”); Chaidez v. United States, 568 U.S. 342 , 352 (2013) (“nearly an automatic result”). But the Court has not qualified the magnitude of risk a criminal defendant must understand when contemplating a plea to an aggravated felony. In Padilla, the defendant pleaded guilty to transporting a large quantity of marijuana. 559 U.S. at 359 . The Supreme Court recognized that his plea “made his deportation virtually mandatory,” and doing so is the “prevailing professional norm[]” for criminal defense attorneys. Diaz v. State, 896 N.W.2d 723 , 730-31 (Iowa 2017) (citing ABA standards). 24  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** therefore held that “constitutionally competent counsel would have advised him that his conviction for drug distribution made him subject to automatic deportation.” Id. at 359-60 (emphases added). More recently, in Lee v. United States, 137 S. Ct. 1958 , 1968–69 (2017), the Supreme Court considered the significance of knowing deportation was “certain” versus “almost certain.” In Lee, the defendant pleaded guilty to an aggravated felony after his attorney failed to advise him of immigration consequences, which the Court explained made the defendant subject to “mandatory deportation.” Id. at 1963 . The government conceded that Lee’s attorney had been deficient but argued that Lee had not been prejudiced because he had no viable defense for trial. Id. at 1964 . The Supreme Court rejected that argument, holding that while the difference between “certain” and “almost certain” deportation may seem slight, a defendant concerned about immigration consequences should know that deportation is “certain” because it may affect their decision: But for his attorney’s incompetence, Lee would have known that accepting the plea agreement would certainly lead to deportation. Going to trial? Almost certainly. If deportation were the “determinative issue” for an individual in plea discussions, as it was for Lee; if that individual had strong connections to this country and no other, as did Lee; and if the consequences of taking a chance at trial were not markedly harsher than pleading, as in this case, that “almost” could make all the difference. Id. at 1968–69. 25  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Thus, the ICA’s conclusion that “the Supreme Court has not consistently characterized this immigration consequence of an aggravated felony conviction,” overlooks the Court’s clear admonition that defendants must know if a plea will “certainly lead to deportation.” Id. Second, the ICA’s conclusion that “[t]he relevant statutory language [in 8 U.S.C. § 1227 (a)(2)(A)(iii)] does not state that deportation is automatic, mandatory, or certain,” conflicts with the plain language of the statute and misapprehends the meaning of “deportable.” An earlier section of 8 U.S.C. § 1227 provides that “deportable” means an immigrant “shall . . . be removed.” 8 U.S.C. § 1227 (a); see also Padilla, 559 U.S. at 368-69 (explaining removal is “presumptively mandatory” because “the text of the statute . . . specifically commands removal”); Encarnacion v. State, 763 S.E.2d 463 , 465 (Ga. 2014) (“The [Immigration and Nationality Act] . . . defines ‘deportable’ to mean that the alien is subject to mandatory, rather than discretionary, removal. . . . Thus, the applicable federal statutes make it clear that a conviction for an aggravated felony automatically triggers the removal consequence and almost always leads to deportation.” (citations omitted)). Consequently, the ICA’s reading of the statute puts Hawai‘i at odds with other jurisdictions’ interpretations of “shall” in 8 U.S.C. § 1227 . 26  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Third, the ICA concluded removal is not automatic because “[t]here are . . . administrative proceedings and limited judicial review available to defendants convicted of an aggravated felony making deportation or removal less than automatic,” citing 8 U.S.C. § 1229a(a)(1) (an immigration judge (IJ) conducts proceedings deciding removability). This is incorrect: While an IJ conducts most removal proceedings, they do not necessarily conduct expedited removal proceedings for aggravated felonies, which are governed by 8 U.S.C. § 1228 , not 8 U.S.C. § 1229a. Moreover, under 8 U.S.C. § 1228 , immigrants who are not LPRs or who have conditional LPR status can be removed automatically without a hearing. 8 U.S.C. § 1228 ; see also Richard D. Steel, Steel on Immigration Law § 14:5 (2020 ed.). Accordingly, the ICA’s reasoning is erroneous. We now address what immigration advice a defense attorney must convey to their clients to provide effective assistance of counsel under the United States and Hawai‘i Constitutions. 4. In Order to be Effective, a Criminal Defense Attorney Must Accurately Convey that Deportation will be “Required” In assessing the sufficiency of a defense attorney’s immigration advice, the court must determine whether the advice given accurately conveys the legal consequences of a plea and the magnitude of the risk. United States v. Bonilla, 637 F.3d 27  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** 980, 984 (9th Cir. 2011). Rather than focusing solely on the defense attorney’s specific wording, “the focus of the court’s inquiry must be on the essence of the information conveyed to the client to ensure that counsel clearly and accurately informed the client of the immigration consequences under federal law in terms the client could understand.” Budziszewski, 142 A.3d at 250. Even technically-accurate immigration advice can be deficient if the advice as a whole “understates the likelihood that [a defendant] would be removed.” United States v. Rodriguez-Vega, 797 F.3d 781 , 791 (9th Cir. 2015); Encarnacion, 763 S.E.2d at 466 (“In light of [the defendant’s] conviction for an aggravated felony, defense counsel had no reason to believe there was a realistic probability that his client would escape deportation. It follows that defense counsel performed deficiently by failing to advise petitioner that he would be deported as a result of his guilty plea[.]” (emphasis added)); see also State v. Blake, 132 A.3d 1282 , 1292 (N.J. Super. Ct. App. Div. 2016) (“[A]n attorney may fail to provide effective assistance if he or she minimizes the risk of removal, and thereby misleads a client.”). When defense counsel tells a defendant they might not be deported despite being removable, the Connecticut Supreme Court has set forth a two-step test: 28  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** First, the court must determine whether counsel complied with Padilla by explaining to the client the deportation consequences set forth in federal law. The advice must be accurate, and it must be given in terms the client could comprehend. If the petitioner proves that counsel did not meet these standards, then counsel’s advice may be deemed deficient under Padilla. If counsel gave the advice required under Padilla, but also expressed doubt about the likelihood of enforcement, the court must also look to the totality of the immigration advice given by counsel to determine whether counsel’s enforcement advice effectively negated the import of counsel’s advice required under Padilla about the meaning of federal law. Budziszewski, 142 A.3d at 251. In Budziszewski, the defense attorney customarily advised his noncitizen clients that “if the law is strictly enforced, it will result in deportation, but it’s been my experience that the law is not strictly enforced. So you take a chance.” 13 Id. at 247 (alterations omitted). The Connecticut Supreme Court explained that “counsel is not required to provide the client with predictions about whether or when federal authorities will apprehend the client and initiate deportation proceedings,” but that if counsel does give such advice, “counsel must still impress upon the client that once federal authorities apprehend the client, deportation will be practically inevitable under federal law.” Id. at 250-51. 13 The Connecticut Supreme Court remanded the case for a new hearing because while the attorney testified to “his usual practice,” “[t]he habeas court made no findings of fact regarding what [the attorney] actually told the petitioner about what federal law mandated or what [the attorney] might have stated about the likelihood of enforcement.” Budziszewski, 142 A.3d at 247, 251. The court also noted that “there was no separate consideration by the habeas court about whether counsel’s advice regarding enforcement negated the import of counsel’s advice about what federal law mandated regarding deportation.” Id. at 251. 29  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** Other states have similarly recognized that while there is no magic phrase an attorney must use, “[c]ounsel . . . was obligated to provide to his client, in language that the client could comprehend, the information that presumptively mandatory deportation would have been the legal consequence of pleading guilty.” Commonwealth v. DeJesus, 9 N.E.3d 789 , 795 (Mass. 2014). In DeJesus, the Massachusetts Supreme Judicial Court found advice that the defendant would “face deportation” and would be “eligible for deportation” insufficient because it did not advise the defendant “that all of the conditions necessary for removal would be met by the defendant’s guilty plea, and that, under Federal law, there would be virtually no avenue for discretionary relief once the defendant pleaded guilty and that fact came to the attention of Federal authorities.” Id. at 796 ; see also Diaz v. State, 896 N.W.2d 723 , 732 (Iowa 2017) (finding ineffective assistance of counsel where “counsel never mentioned the crime constituted an aggravated felony, and never attempted to explain the sweeping ramifications of that classification” (citations omitted)). Further, HRS § 802E-2 requires a trial court to advise defendants that they have the “right” to be given specific immigration advice and that their attorney “must investigate and advise” them if their plea would mean that “detention and deportation from the United States will be required.” HRS 30  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** § 802E-2 (emphasis added); see In re Yung-Cheng Tsai, 351 P.3d 138 , 143 (Wash. 2015) (explaining that the “plain language” of Washington’s immigration-advisement statute establishes an “unequivocal” right to immigration advice). Here, we hold that under the United States and Hawaiʻi Constitutions, Araiza received inadequate immigration advice to meet the requirements of effective assistance of counsel. That counsel used the phrase “almost certain deportation” does not end the inquiry; trial counsel’s statements must be considered as a whole. “[A]lmost certain deportation” was not the extent of his advice — he also downplayed the severity of the risk of deportation by telling Araiza that his office had seen defendants convicted of felonies who were not deported and that immigration officials do not know about state court proceedings. These statements were very similar to the advice at issue in Budziszewski, and we find them concerning for the same reason as the Connecticut Supreme Court: The combined effect was to convey that deportation was very likely if Araiza pleaded no contest — and possibly more likely if she went to trial — but that there was a realistic possibility she would not be deported because it had not happened to other similarly-situated defendants. Indeed, the equivocal nature of trial counsel’s advice is evident from the fact that he told her a plea was “risking automatic deportation,” whereas being found guilty after a trial 31  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** meant she would be deported. These statements failed to accurately convey the serious legal consequence of Araiza’s plea: “that all of the conditions necessary for removal would be met by the defendant’s guilty plea, and that, under Federal law, there would be virtually no avenue for discretionary relief[.]” DeJesus, 9 N.E.3d at 796; Encarnacion, 763 S.E.2d at 466 (“In light of [the defendant’s] conviction for an aggravated felony, defense counsel had no reason to believe there was a realistic probability that his client would escape deportation.”). Moreover, since Araiza’s plea paperwork (and the court’s later oral advisement) informed her that trial counsel had to tell her if detention and deportation would be “required,” trial counsel’s advice that deportation was “almost” certain because some defendants were not deported created a misleading impression that deportation was not legally required. See Bonilla, 637 F.3d at 984–85 (concluding lawyer’s omission could mislead defendant into believing there would not be adverse immigration consequences). While the ICA is correct that, as noted in Chacon, 409 S.W.3d at 537 , “Padilla does not require that counsel use specific words to communicate to a defendant the consequences of entering a guilty plea,” HRS § 802E-2 promises that defense attorneys will advise their clients if “detention and 32  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** deportation from the United States will be required.” Indeed, the ICA’s holding that trial counsel did not need to advise Araiza that deportation was “automatic, mandatory, or certain” renders HRS § 802E-2’s requirement meaningless. Accordingly, we hold that defense attorneys must advise their clients using language that conveys that deportation “will be required” by applicable immigration law for an aggravated felony conviction. Since Araiza’s trial counsel failed to adequately advise Araiza of the immigration consequences of her plea, the circuit court erred in concluding he provided her effective assistance of counsel. B. When a Trial Court Appoints an Interpreter who has not been Certified by the Judiciary, the Court Must Conduct a Brief Inquiry on the Record to Establish that the Interpreter is Qualified Araiza alleges that the circuit court plainly erred during her Rule 40 hearing by appointing an interpreter who, according to Araiza, was not “certified and/or qualified.” Nothing in the record demonstrates the interpreter’s qualifications. It appears Araiza’s interpreter was neither a 33  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** certified 14 interpreter nor a registered 15 interpreter for the Judiciary when the Rule 40 hearing was held in June 2017. While we decline to decide whether the appointment of this interpreter constituted plain error in light of our disposition of this case, we offer some guidance on the procedures needed to ensure an interpreter is qualified. “All persons involved in proceedings before the Hawai‘i State Courts, regardless of literacy or proficiency in the English language, have the right to equal access to the courts and to services and programs provided by the Hawai‘i State Courts.” HRCSLI Rule 1.2. 16 A trial court has the discretion to appoint an interpreter “of its own selection.” HRPP Rule 28(b). And HRCSLI Rule 14.1 does not require formal certification, only that an interpreter be qualified under court rules. 14 “Certified” means that the interpreter has passed the applicable language exam from the National Center for State Courts. Hawai‘i’s Office of Equality and Access to the Courts (OEAC) uses six tiers of designation for interpreters that range from “registered” to “certified master.” In order to be deemed “certified” (tier 4), the interpreter must receive a score of 70% on the exam. To be a “certified master” (tier 6), the interpreter must receive 80% on the exam. Right now, there is no tier 5 designation for spoken-language interpreters. HRCSLI Appendix A. 15 “Registered” means that a person has fulfilled the minimum requirements necessary to be on the list of interpreters for the judiciary. In order to be registered, the lowest available tier, an interpreter must pass a written English proficiency test and an ethics exam, attend a 2-day basic orientation workshop, and pass a criminal background check. However, proficiency in the foreign language is not assessed. HRCSLI Appendix A. 16 In March 2019, this court ordered that the previous version of these rules, the Hawaiʻi Rules for Certification of Spoken and Sign Language Interpreters, be vacated and replaced with the HRCSLI, effective July 2019. This change did not affect the substance of the relevant rules. 34  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** In 1995, the Chief Justice adopted policies for interpreted proceedings in the state courts, which were incorporated into the HRCSLI as Appendix B. As relevant here, section I(D) governs qualifications of interpreters and provides that if an interpreter is not on the list of recommended interpreters, the court must conduct an inquiry: Courts should use interpreters who can (a) understand terms generally used in the type of proceeding before the court, (b) explain these terms in English and the other language being used, and (c) interpret these terms into the other language being used. If a list of recommended interpreters is not available, or if it appears an interpreter cannot understand or interpret the terms used in the proceeding, the judge should conduct a brief examination of the interpreter to determine if the interpreter is qualified to interpret the proceeding. When conducting the examination the judge should, if possible, seek the assistance of an interpreter whose qualifications have been established. HRCSLI Appendix B, § I(D) (emphases added). HRCSLI Appendix B comports with the HRE, which establishes that an interpreter is regarded as an expert under HRE Rule 702 “for the purpose of determining his qualifications to interpret or to translate in the matter at issue.” HRE Rule 604 cmt. In other words, in accordance with HRE Rule 702, there must be evidence in the record that the interpreter was “qualified as an expert by knowledge, skill, experience, training, or education.” The commentary to HRE Rule 604 notes that the rule is identical to the Federal Rules of Evidence Rule 604. If an interpreter has been certified by the judiciary, 35  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** there is often no need for the court to conduct an inquiry because the interpreter has already been qualified through “training and education.” 17 27 Charles Alan Wright, Arthur R. Miller & Victor J. Gold, Federal Practice & Procedure § 6054 (2d ed. 2020) (“As a practical matter, however, a court usually need not exercise its power to reexamine the qualifications of a certified interpreter.”). However, when an interpreter has not been certified, some other kind of foundation of their qualifications must be established: “Rule 604 does not establish a specific procedure for the courts to follow in determining interpreter qualifications. One way or the other, however, the record must reflect that the individual in question had the requisite ability to interpret.” Id. Accordingly, we hold that, if a court appoints an interpreter who is not certified by the judiciary as proficient in the foreign language, the court “should conduct a brief examination of the interpreter to determine if the interpreter 17 Because registered interpreters are not assessed for language proficiency, that designation may be insufficient to demonstrate expert qualifications under HRE Rules 604 and 702. Similarly, certification in the applicable foreign language may be insufficient if the party needing an interpreter speaks a different dialect: “[W]here a language features multiple dialects, an interpreter certified for that language might not be sufficiently fluent in the specific dialect employed by a given witness. In such a case, the certified interpreter would not qualify as an expert under Rule 702[.]” 27 Charles Alan Wright, Arthur R. Miller & Victor J. Gold, Federal Practice & Procedure § 6054 (2d ed. 2020) (footnote omitted). 36  *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER *** is qualified to interpret the proceeding.” HRCSLI Appendix B, § I(D). V. CONCLUSION For the reasons set forth in this opinion, we vacate the ICA’s April 23, 2020 judgment on appeal and the circuit court’s findings of fact, conclusions of law, and order denying petitioner’s petition to vacate, set aside or correct illegal sentence through a writ of habeas corpus pursuant to HRPP Rule 40 filed on September 6, 2017, and remand to the circuit court for further proceedings consistent with this opinion. Hayden Aluli /s/ Mark E. Recktenwald for petitioner /s/ Paula A. Nakayama Mark R. Simonds /s/ Sabrina S. McKenna for respondent (Peter A. Hanano /s/ Michael D. Wilson on the brief) /s/ R. Mark Browning 37

2020-12-01 19:15:36.210023+00

http://www.courts.wa.gov/opinions/pdf/D2 53722-2-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II In the Matter of the Personal Restraint of: No. 53722-2-II CARLOS PEREZ CALDERON, Petitioner, UNPUBLISHED OPINION CRUSER, J. — In this personal restraint petition (PRP), Carlos E. Perez Calderon challenges his conviction for second degree murder. He argues that he received ineffective assistance of counsel on appeal and at trial. Calderon’s ineffective assistance of appellate counsel claim is based on appellate counsel’s failure to argue that (1) the trial court abused its discretion when it ruled that testimony from a detective about a witness’s omission of certain facts in an interview was not admissible as a prior inconsistent statement, and (2) the exclusion of this evidence deprived him of his constitutional right to present a defense. The first argument fails because the trial court properly refused to admit the evidence as a prior inconsistent statement since Calderon failed to lay the necessary foundation for admission as a prior inconsistent statement under ER 613. The second argument fails because the trial court’s refusal to admit the prior inconsistent statement did not preclude Calderon from impeaching the witness and the evidence of guilt was overwhelming. No. 53722-2-II Calderon’s ineffective assistance of trial counsel claim is based on trial counsel’s failure to argue in closing argument that the State’s failure to conduct “gunpowder” residue testing of his hands established a reasonable doubt that he shot the victim. But trial counsel’s failure to make this argument was not prejudicial in light of the other uncontested evidence that established that such testing was highly unreliable. Accordingly we deny Calderon’s PRP. FACTS1 I. THE SHOOTING On June 6, 2015, Amanda “Mindy” Hughes, who had been Calderon’s girlfriend, and her daughters, eight-year-old MC and four-year-old GH, were staying in Calderon’s home. While the children were in the home, Calderon and Hughes got into an argument and Hughes was shot in the chest. Calderon called 911 and attempted to provide aid to Hughes. Calderon’s friend Ivan Montes arrived at the house shortly after the shooting and saw Calderon on the floor next to Hughes. Calderon had one hand over the gunshot wound and was trying to administer CPR with his other hand. According to Montes, the “younger child” was standing near her mother. 3 Report of Proceedings (RP) at 239. Montes took GH to a bedroom and told her to stay there with MC, who was already in the room. Montes returned to the living room to try to help Hughes. Calderon told Montes that his gun had been on the table and “went off” when Hughes “flipped the table.” Id. at 241. Montes asked Calderon where the gun was, but Calderon said he 1 The record from the direct appeal, State v. Calderon, No. 49343-8-II (Wash. Ct. App. Apr. 10, 2018) (unpublished), http://www.courts.wa.gov/opinions/, was considered as part of this petition. 2 No. 53722-2-II could not find the gun and did not know where it was. Montes found the gun and put it in the kitchen.2 Montes then administered CPR to Hughes while Calderon put pressure on the gunshot wound with his hands. When the officers arrived, they found Montes and Calderon in the living room trying to help Hughes. The officers observed that Calderon was putting pressure on Hughes’s gunshot wound with his hands and that he had blood on him. One of the officers observed that “the table [was] flipped on the floor.” 2 RP at 196. The officers found the two children in a bedroom. Chaplains Larry and Diane Huffman were called in to tell the children that their mother had died and to transport them to the police station. Calderon spoke to and was interviewed by several officers and consistently denied shooting Hughes. Although he could not explain how the gun had fired, Calderon told the officers that the gun fired when Hughes flipped over the coffee table the gun had been on. II. INTERVIEWS WITH MC A. JUNE 19, 2015 INTERVIEW On June 19, 13 days after the shooting, MC was interviewed at the Child Advocacy Center. Detective Reynaldo Punzalan observed the interview and described the interview in a supplemental police report. Punzalan’s supplemental report described what MC said during this interview, but it did not mention MC saying anything about hearing Calderon tell her mother to bend down while they 2 It is not clear from the record where Montes found the gun. 3 No. 53722-2-II were arguing. There was nothing in the supplemental report establishing that MC’s June 2015 statements were made under oath. B. APRIL 2016 INTERVIEW Ten months later, in April 2016, defense counsel interviewed MC. During this interview, MC told defense counsel that she saw Calderon with the gun and that she had seen him shoot her mother, facts she had not previously disclosed. She later asserted, however, that although she had seen Calderon with the gun and had heard the shooting, she had not seen the shooting. MC also stated, for the first time, that she heard Calderon tell her mother to “bend down” before he shot her. PRP Decl. of Wayne Fricke, App. B at 27-28. After defense counsel asked her if she was sure she heard this statement and her grandmother reminded her that she had to tell the truth, MC reiterated that she had heard Calderon tell her mother to “bend down.” Id. at 28. III. TRIAL The State charged Calderon with second degree murder and, in the alternative, second degree felony murder with the predicate offense of second degree assault. The case proceeded to a jury trial. At trial, the State presented testimony from Montes, the officers who responded to the incident, MC, the chaplains who transported the children, the medical examiner, Detective Christopher Bowl, and a forensic scientist. We describe the testimony from Montes, the responding officers, and Punzalan in the facts above. We describe the testimony of the remaining witnesses below. Calderon did not present any evidence. 4 No. 53722-2-II A. TESTIMONY 1. MC MC was nine years old at the time of the trial. She testified that before the shooting, she saw her mother and Calderon arguing and saw her mother throw something at Calderon, but her mother then sent her (MC) to her room. While in her room, MC “heard something like go, boom, kind of.” 3 RP at 290. MC testified that at one point she came out of the room and “sneaked and looked and . . . saw her [mother] lying down on the [floor].” Id. The State questioned MC about the April 2016 interview and asked her if she recalled telling defense counsel that she saw Calderon holding the gun. MC initially responded that she “thought he was,” but she later clarified that she did not know if she actually saw him holding the gun. Id. at 297. The State then asked MC if she heard Calderon tell her mother to do anything, and she responded that she heard him tell her to “bend down . . .[a] few times.” Id. She estimated that she heard the gun go off 10 or 15 minutes after Calderon told her mother to bend down. On cross-examination, defense counsel asked MC if she remember telling him during the April 2016 interview that Calderon had told her mother “to get down, or bend over,” and MC responded that she did. Id. at 300. Although defense counsel questioned MC about whether she said anything during the June 2015 interview about seeing Calderon shoot her mother or seeing Calderon with the gun, defense counsel did not ask MC if she had mentioned the “bend over” statement before April 2016. 5 No. 53722-2-II 2. THE CHAPLAINS Larry Huffman, one of the chaplains who took the girls to the police station, testified that while he and his wife were with MC and GH, MC told them that she had heard her mother and Calderon arguing in the living room and that her mother had asked her to go out on the back porch with her sister. MC stated that she was on the porch praying for her mother when she heard “a loud bang.” Id. at 320. Diane Huffman, the other chaplain, testified that she talked with MC after they arrived at the police station. Id. at 327. MC told Diane Huffman that Hughes and Calderon were fighting and getting loud and that she (MC) took her sister out on the back porch when the girls were asked to leave the room. MC said that the screaming got louder and she (MC) started to pray. MC said that “shortly after she stopped her prayer she heard a gunshot.” Id. On cross-examination, defense counsel asked Diane Huffman if MC had mentioned a nutcracker. Diane responded, “[MC] told me that her grandma had sent the girls a nutcracker for Christmas. It was sitting on the dresser in her bedroom, and that there were times at night when the nutcracker would talk to her.” Id. at 332. MC also told Diane Huffman that “the nutcracker told her [(MC)] it hated her and that she was going to die.” Id. at 333. Neither Larry nor Diane Huffman testified that MC mentioned hearing Calderon tell Hughes to bend down. 3. MEDICAL EXAMINER Pierce County Medical Examiner Dr. Thomas Clark testified that the bullet that killed Hughes entered her right upper chest and then “passed backward, down [towards her feet] and slightly to the left.” 4 RP at 473-74. The bullet passed through Hughes’s first rib on the right side, 6 No. 53722-2-II lacerated her aorta, pierced the lower lobe of her right lung, and continued through her until it lodged in her spine. Dr. Clark testified that the “wound tract” was “consistent with the shooter standing facing Ms. Hughes and she was bent over toward him.” Id. at 489. But on cross-examination, Dr. Clark agreed that the wound track could also be consistent with someone stumbling, “depend[ing] on which way the person was stumbling.” Id. He further testified that he had no way of knowing whether Hughes had been standing or seated when she was shot. Dr. Clark also testified that because there was no stippling on Hughes, there was no indication that the gun was fired less than two feet away from Hughes. 4. DETECTIVE CHRISTOPHER BOWL Detective Christopher Bowl testified that the police swabbed Calderon for biological evidence but not for “gunshot residue.” Id. at 500. Bowl stated that the police did not conduct gunshot residue tests anymore because there were too may false positives from these tests. 5. FORENSIC SCIENTIST Forensic scientist Johan Schoeman from the Washington State Patrol Crime Laboratory testified about gunshot residue testing and gun testing. Schoeman described the two types of gunshot residue that are created when a gun fires, primer residue and soot, Primer residue are the barium, lead and antimony that you will get on the primer of that cartridge. Every opening that the gun has when you pull the trigger and this whole chain reaction of burning starts taking place, the primer residue will land on your hands, your clothes, or on surfaces around the area where the firearm was discharged. Some of that primer residue from the primer also exits the muzzle of the gun. 7 No. 53722-2-II The second part will be the soot, particularly burned, and any burned propellant particles or gunpowder leaving the muzzle of the gun and gets deposited on clothing, on a victim’s shirt, jacket or jersey or whatever the case may be in the form of a circle. . . . If you are far away, you will have a big pattern. The closer you move towards the muzzle of the gun, the smaller the pattern is going to be. 5 RP at 562. Schoeman further testified that although the laboratory still tested clothing for soot residue, it had not tested for primer residue since August 1996, because “[s]tudies have found it is not very reliable.” Id. at 563. Specifically, he testified, If you and I are in the same room, and I fire a gun and you are close to me, you’re going to pick up some of the primer residue. If you test positive for primer residue, does it mean you fired the gun? If you are tested negative for primer residue, does it mean you did not fire the gun? If you fire a gun and you just wipe your hands, you are getting rid of the primer residue because it is so small and so light you can rub it off, and then you will test negative. Primer residue is going to land on surfaces. If you just go with your hand like this over a table or area the gun was discharged, you are going to test positive for primer residue, and I wipe mine off (sic). So there is no real significance on performing the primer residue examinations. That is why we haven’t done if for the last 30 years, since 1996. Id. (emphasis added). Additionally, Schoeman testified that the gun had a “drop safety” that prevented the gun from firing unless the gun’s trigger was pulled. 4 RP at 533. He also stated that the gun had a trigger guard that would minimize the risk that the trigger would be accidently pulled if the gun were dropped. Schoeman further testified that he had conducted a series of “drop tests” on the gun to determine if the gun would discharge if it fell, was dropped, or was bumped against something. 5 RP at 558. Schoeman was unable to get the gun to fire if he hit it with a rubber mallet while the gun was cocked or by dropping the gun in various orientations from a distance of about four feet. He testified that he would have been able to determine “[i]f this firearm had a slight possibility of 8 No. 53722-2-II going off” if dropped or struck and that the tests revealed that it would not have fired without the trigger being pulled with about “seven and a quarter pounds” of force.3 Id. at 560-61. B. MOTION TO ALLOW PUNZALAN TO TESTIFY ABOUT THE JUNE 2015 INTERVIEW During Punzalan’s testimony, defense counsel moved to allow Punzalan to testify that during the June 2015 interview MC did not mention that Calderon told her mother “to bend down.” 4 RP at 392, 393. Without specifying any evidence rule, defense counsel asserted that this evidence was admissible as a prior inconsistent statement. The State responded that MC’s failure to say something during the June 2015 interview was an “omission,” not an inconsistent statement, so her failure to mention the “bend down” statement during that interview could not be used to impeach MC. Id. at 394. The State also argued that because defense counsel had not asked MC while she was testifying about her failure to mention the “bend down” statement during the June 2015 interview and had not provided her with an opportunity to explain or deny any potentially inconsistent statement, the evidence regarding her failure to mention this statement in the June 2015 interview was not admissible as extrinsic evidence of a prior inconsistent statement by a witness under ER 613(b). Defense counsel responded that he believed he had asked MC if she had told anyone else about the “bend down” statement and had given her the opportunity to explain or deny the omission in the prior statement.4 After reviewing its notes, the trial court responded that defense counsel had 3 Schoeman testified that picking up a gallon of milk with one finger created a force against the finger of approximately eight pounds. 4 Calderon now admits that defense counsel was mistaken and that the trial transcript does not show that defense counsel had asked the child about this subject. 9 No. 53722-2-II questioned MC about her assertion that she had seen Calderon with the gun, not her failure to mention the “bend down” statement during the June 2015 interview. The trial court ruled that Punzalan could not testify about the June 2015 interview, stating, “I don’t think there is anything that is being impeached or being offered to impeach this statement or her testimony through what has been presented to me in this offer of proof. I am not going to allow you to go into this area at this point in time.” Id. at 396. C. CLOSING ARGUMENTS 1. STATE’S CLOSING ARGUMENT AND REBUTTAL In its closing argument and rebuttal, the State argued that Calderon had intentionally shot Hughes or had shot her while intentionally assaulting her. The State repeatedly referred to MC’s testimony that she “heard [Calderon] tell her mom to bend down” and argued that this evidence was consistent with the medical examiner’s testimony that Hughes was shot from more than two feet away while bending down. 5 RP at 623. The slides the State showed the jury during closing argument also referred to the “bend down” statement. 2. DEFENSE CLOSING ARGUMENT In Calderon’s closing argument, defense counsel argued that the shooting was accidental and that Calderon did not shoot Hughes. Defense counsel’s argument largely focused on witness credibility. As to MC’s “bend down” statement, defense counsel argued that if Hughes had been bent over when she was shot, she would have fallen face down and that there was no evidence that she fell forward. Defense counsel also suggested that the medical examiner’s testimony that the bullet may have deflected a bit when it hit the rib would support this theory. 10 No. 53722-2-II Defense counsel then discussed MC’s testimony and her credibility, [MC], now we can all feel for this young lady having to get up here and testify, a nine-year-old girl, eight-year-old girl. It is a horrible thing. I would suggest to you that what she says is inconsistent. Did she pray or not? I don’t know. I don’t know that it matters. She probably did. When she told the chaplain she had herself praying going out to the back deck and praying out there. She did acknowledge later on that she never went out to the deck. She went to the room and closed the door. Did she say that she heard my client tell Ms. Hughes to bend over? Yeah, she said that. She didn’t say when that happened. I am going to suggest to you that that is a creation of her memory that happened in April that didn’t exist before. Now, this is illustrative Exhibit No. 79. You are also not going to have this one back in the jury with you because it is not admitted as substantive evidence. For purposes of argument -- I don’t know if it was shown to you. In April of this year in an interview, [MC] drew this. She draws this. She had this in her mind, my client coming up with a gun in his hand to Ms. Hughes and leaning over her and shooting her. Now, she acknowledged, well, she was just trying to come up with an explanation as to what happened. I have no doubt that that is true, and that’s consistent with what she says. In the context of coming up with an explanation, she could very easily have said, as part of that, that I heard him say “bend over,” even though she never told the chaplains that or anybody else. On top of that, the reason we ask these questions, is this nutcracker a big deal? Well, yeah, it is because she has, in the same context of this conversation, this talking nutcracker. Now, it is sad. Maybe it is sweet. I don’t know. What it does show in the context of it being able to say that, and being able to have that be a real thing for her, is that she is very imaginative or perhaps suffers from nightmares, I don’t know what. She can create things that are impossible to do. She acknowledged she created one scenario again to explain what happened. When you look at the credibility of the witnesses, including this young lady, these are the things you should look at. The reason the nutcracker is important for looking at one’s credibility is it shows this great imagination she has. I would suggest to you the imagination she has is not credible. She is trying to come up with an explanation as to what happened. That’s natural. She wants to explain because she lost her mother. We would . . . all expect her to do that. 11 No. 53722-2-II Id. 648-51 (emphasis added). IV. VERDICT, APPEAL, AND PERSONAL RESTRAINT PETITION The jury found Calderon guilty of second degree murder. We affirmed Calderon’s conviction in an unpublished decision that mandated on September 11, 2018. State v. Calderon, No. 49343-8-II (Wash. Ct. App. Apr. 10, 2018) (unpublished), http://www.courts.wa.gov/opinions/. On September 3, 2019, Calderon filed this timely PRP. See RCW 10.73.090(3)(b). ANALYSIS I. INEFFECTIVE ASSISTANCE OF APPELLATE COUNSEL Calderon first argues that he received ineffective assistance of counsel on appeal because his appellate counsel did not challenge the trial court’s exclusion of Punzalan’s testimony about MC’s failure to mention the “bend down” statement during the June 2015 interview. Calderon contends that his appellate counsel should have argued that (1) the trial court erred when it concluded that MC’s failure to mention hearing the “bend down” statement during the June 2015 interview was not an inconsistent statement and (2) the trial court’s exclusion of this evidence deprived him of his due process right to present his defense. A. LEGAL PRINCIPLES To be entitled to relief based on a claim of ineffective assistance of appellate counsel raised in a PRP, Calderon “must show that ‘the legal issue that appellate counsel failed to raise had merit’” and that the failure to raise this issue was prejudicial. In re Pers. Restraint of Meredith, 191 Wn.2d 300 , 308, 422 P.3d 458 (2018) (quoting In re Pers. Restraint of Dalluge, 152 Wn.2d 772 , 777-78, 100 P.3d 279 (2004)). To establish prejudice in this context, Calderon must “‘show 12 No. 53722-2-II a reasonable probability that, but for his counsel’s unreasonable failure to [raise this issue], he would have prevailed on his appeal.’” Id. at 308 (quoting Dalluge, 152 Wn.2d at 788 ) (emphasis omitted). When examining whether the trial court’s exclusion of evidence violates the defendant’s constitutional right to present a defense, we apply a two part test. State v. Arndt, 194 Wn.2d 784 , 797-98, 453 P.3d 696 (2019). We first review “the trial court’s individual evidentiary rulings for abuse of discretion.” State v. Case, 13 Wn. App 2d 657, 466 P.3d 799 (2020). Then we consider “de novo the constitutional question of whether those rulings deprived the defendant of their right to present a defense and cross-examine adverse witnesses.” Id. at 667. B. EVIDENTIARY RULING Calderon contends that the trial court erred when it concluded that MC’s failure to mention the “bend over” statement in the June 2015 interview was not an inconsistent statement and asserts that there was a reasonable probability that the outcome of the appeal would have been different if appellate counsel had raised this issue.5 This argument fails. Calderon argues that the trial court erroneously determined that an omission in a prior statement can never be a prior inconsistent statement. The record does not, however, support this assertion. When the trial court excluded Punzalan’s testimony about the June 2015 interview, the court stated, “I don’t think there is anything that is being impeached or being offered to impeach this statement or her testimony through what has been presented to me in this offer of proof. I am 5 The State accepts Calderon’s argument that under State v. Newbern, 95 Wn. App. 277 , 975 P.2d 1041 (1999), an omission can be a prior inconsistent statement. 13 No. 53722-2-II not going to allow you to go into this area at this point in time.” 4 RP at 396. The trial court’s specific reference to the adequacy of the offer of proof belies the conclusion that it relied on the legal premise that a prior omission can never be a prior inconsistent statement. The trial court instead ruled that Calderon failed to establish the foundation required to admit the statement as a prior inconsistent statement, namely that the State afford MC “an opportunity to explain or deny” the statement, which suggests that the trial court relied on ER 613(b). Id. at 395. Thus, Calderon does not show that the outcome of his appeal would have been different if appellate counsel had raised this issue in the appeal.6 Because Calderon does not establish that the trial court abused its discretion when it excluded Punzalan’s testimony about the omission in MC’s June 2015 statement, we hold that Calderon does not establish ineffective assistance of appellate counsel on this ground.7 6 Furthermore, to the extent Calderon may be arguing that Punzalan’s testimony about MC’s June 2105 statement was admissible as a non-hearsay statement under ER 801(d)(1)(i), Calderon moved to admit this evidence as impeachment evidence, not as substantive evidence, so ER 801(d)(1)(i) does not apply. And even if he had raised an ER 801(d)(1)(i) issue, statements from MC’s June 2015 interview were not admissible under this rule because her statement was not made under oath subject to the penalty of perjury at a trial, hearing, or other proceeding, or in a deposition, as required under the rule. 7 Calderon argues in his reply that his trial counsel should have known the law and corrected the State’s erroneous assertions that an omission cannot be an inconsistent statement and that appellate counsel’s failure to challenge the trial court’s ruling “compounded the error.” Pet’rs’ Reply Br. at 17. But we do not consider this attempt to reframe this issue as an ineffective assistance of trial counsel claim because Calderon raises this issue for the first time in a responsive brief. State v. Hand, 199 Wn. App. 887 , 899 n.7, 401 P.3d 367 (2017), aff'd, 192 Wn.2d 289 , 429 P.3d 502 (2018). Furthermore, even if we were to address this argument it would fail because, as discussed above, the trial court’s ruling was not based on the alleged error of law. 14 No. 53722-2-II C. DUE PROCESS Calderon next argues that appellate counsel provided ineffective assistance of counsel because his “failure to raise the trial [court’s] error on direct appeal also allowed a [Sixth and Fourteenth Amendment] due process violation to go unchallenged” and violated Calderon’s right to present a defense. PRP at 29. We disagree. Because a defendant’s constitutional right to present a defense is not absolute, see, e.g., [State v.] Jones, 168 Wn.2d [713,] 720, 230 P.3d 576 [(2010)], the State’s interest in excluding evidence must be balanced against the defendant’s need for the information sought to be admitted. Id. In some instances regarding evidence of high probative value, “it appears no state interest can be compelling enough to preclude its introduction consistent with the Sixth Amendment and Const. art. 1 § 22.” State v. Hudlow, 99 [Wn].2d 1, 16, 659 P.2d 514 (1983). Arndt, 194 Wn.2d at 812. Arndt is instructive here. In Arndt, our Supreme Court held that the trial court’s evidentiary rulings did not violate the appellant’s right to present a defense because the rulings did not eliminate the defendant’s entire defense, and she was still able to advance the defense theory of the case. Id. at 814. The court distinguished Arndt’s case from Jones, where “the trial court interpreted a rape shield law to preclude the defendant from presenting any evidence that the victim had voluntarily engaged in an ‘all-night, drug-induced sex party.’” Id. at 812-13 (quoting Jones, 168 Wn.2d at 721) (emphasis added). Unlike in Jones, Arndt was still permitted to present evidence that pointed to an alternative cause for the fire that she was accused of starting and rebutted some of the State’s evidence. Id. at 813-14. As in Arndt, MC’s failure to present evidence that MC did not disclose the “bend down” statement during the June 2015 interview did not prevent Calderon from presenting his defense. The trial court’s ruling in no way prevented Calderon from cross-examining MC about whether 15 No. 53722-2-II she had mentioned the “bend down” statement during her June 2015 interview. And similar evidence was presented at trial based on MC’s statements to the chaplains, and defense counsel was able to argue that MC failed to disclose the “bend down” statement until April 2016 by pointing out that omission. Ultimately, Calderon was able to, and in fact did, argue that the “bend down” statement was a new disclosure in April 2016, and that MC fabricated this statement, as well as other facts, in an attempt to make sense of what had happened to her mother.8 Furthermore, the evidence that the shooting was not accidental was overwhelming in light of Schoeman’s testimony that the gun would not fire without significant force being applied to the gun’s trigger, which was protected by a trigger guard. We hold that because Calderon was able to argue his defense theory to the jury and the additional evidence would have had little impact because of the overwhelming evidence that the only way the gun fired was if the trigger was pulled, his “right to present a defense” was not violated, and Calderon does not show that the outcome of the appeal would have been different if appellate counsel had raised this issue. See id. Accordingly, this ineffective assistance of appellate counsel claim also fails. II. INEFFECTIVE ASSISTANCE OF TRIAL COUNSEL CLAIM Calderon next argues that he received ineffective assistance of trial counsel because his trial counsel failed to argue in closing argument that the lack of “gunpowder” residue testing of his hands created a reasonable doubt that he committed the offense since such testing could have 8 Furthermore, the trial court’s ruling did not entirely prevent Calderon from presenting this evidence to the jury because the ruling did not preclude Calderon from calling MC as a witness and asking her directly about what she disclosed during the June 2015 interview and then impeaching her if necessary. 16 No. 53722-2-II corroborated his claim “that he never touched the gun.” PRP at 36. Given the unrefuted evidence from the State’s witnesses regarding the reasons gunshot residue tests are not routinely conducted, we hold that this argument fails. To establish ineffective assistance of trial counsel, Calderon must show that (1) trial “counsel’s representation was deficient, i.e., it fell below an objective standard of reasonableness based on consideration of all the circumstances,” and (2) this deficient representation was prejudicial, “i.e., there is a reasonable probability that, except for counsel’s unprofessional errors, the result of the proceeding would have been different.” State v. McFarland, 127 Wn.2d 322 , 334- 35, 899 P.2d 1251 (1995). “[I]f a personal restraint petitioner makes a successful ineffective assistance of counsel claim, he has necessarily met his burden to show actual and substantial prejudice” for PRP purposes. In re Pers. Restraint of Crace, 174 Wn.2d 835 , 846-47, 280 P.3d 1102 (2012). Calderon contends that his trial counsel should have argued that the failure to test his hands for “gunpowder” residue created a reasonable doubt because negative results would have corroborated his assertion that he had not handled or fired the gun. But given the facts in this case and testimony about why gunshot residue, specifically primer residue, testing is rarely done, there is no reasonable probability that this argument would have swayed the jury. Bowl testified that gunshot residue tests were no longer used because they were unreliable. And Schoeman testified that the primer residue tests had “no real significance,” because it was easy to wipe away the residue, to have the residue land on you if you were in the room when the gun was fired, or to pick up residue from surfaces where it had landed. 5 RP at 563. The jury also heard that Calderon was in the room when the gun fired; that Calderon had close physical contact 17 No. 53722-2-II with Hughes after she was shot, including direct contact with the gunshot wound; and that Calderon’s hands were covered in blood by the time the officers arrived. Considering the uncontradicted testimony about how easily gunshot residue can be transferred or wiped away, there is no reasonable probability that the jury would have given any weight to the presence or absence of gunshot residue on Calderon’s hands under these circumstances. Calderon cites to Ard v. Catoe, 372 S.C. 318 , 642 S.E.2d 590 (2007), as an example of “the critical importance of investigating the presence or absence of gunshot residue, and the resulting prejudice that a defendant may suffer when his trial counsel fails to do such an investigation.” PRP at 34. But Ard addressed an ineffective assistance of counsel claim based on defense counsel’s failure to investigate, failure to retain an independent expert to evaluate the gunshot reside evidence, and failure to adequately cross examine witnesses who testified about the gunshot residue evidence. Here, Calderon is not arguing that his trial counsel was ineffective for failing to investigate, failing to retain an expert witness, or failing to cross examine witnesses—he is arguing that counsel was ineffective for failing to argue that the lack of testing established a reasonable doubt, so Ard is not helpful. And although Ard discusses the importance of the lack of gunshot residue in that case, we must examine the implication of failure to test for gunshot residue on Calderon’s hands in the context of the evidence. As discussed above, the jury heard unrefuted testimony that gunshot residue tests were not reliable and testimony about facts that would bring the reliability of any gunshot residue testing into question. Because there is no reasonable probability that the jury would have placed any weight on the presence or absence of any gunshot residue on Calderon’s hands, we hold that there was no 18 No. 53722-2-II reasonable probability that the verdict would have been different had trial counsel argued that the lack of gunshot residue testing created a reasonable doubt. Accordingly, this ineffective assistance of trial counsel argument fails. Because Calderon fails to establish ineffective assistance of appellate or trial counsel, we deny this petition. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. CRUSER, J. We concur: WORSWICK, P.J. MELNICK, J. 19

2013-10-30 04:17:23.421199+00

941 So.2d 482 (2006) Alain MURGA, Individually and on behalf of all other similarly situated Plaintiffs, Appellant, v. UNITED PROPERTY & CASUALTY INSURANCE COMPANY, Appellee. No. 3D05-2295. District Court of Appeal of Florida, Third District. November 1, 2006. Mary E. Kestenbaum and David J. Pettinato, Tampa, for appellant. James C. Kelley, Miami, for appellee. Before WELLS, CORTIÑAS, and LAGOA, JJ. WELLS, Judge. Alain Murga appeals from an order dismissing his class action complaint against insurer United Property & Casualty Insurance Company. Rule 1.220 of the Florida Rules of Civil Procedure governing pleadings in class action cases requires the plaintiff to allege the existence of a class; to define the alleged class; to specify the approximate number of class members; and to "demonstrate that the four prerequisites specified in rule 1.220(a) are satisfied and that the action meets the criteria for one of the three types of class actions defined in rule 1.220(b)." Bobinger v. Deltona Corp., 563 So.2d 739, 742 (Fla. 2d DCA 1990). Murga's complaint demonstrates that his claim cannot satisfy the criteria of any of the three types of actions defined in Rule 1.220(b). Because amendment in this case would be futile, the action was properly dismissed. See Kay's Custom Drapes, Inc. v. Garrote, 920 So.2d 1168, 1171 (Fla. 3d DCA 2006)(quoting Kimball v. Publix Super Mkts., Inc., 901 So.2d 293, 296 (Fla. 2d DCA 2005), observing *483 that "[r]efusal to allow an amendment is an abuse of the trial court's discretion `unless it clearly appears . . . amendment would be futile.' State Farm Fire & Cas. Co. v. Fleet Fin. Corp., 724 So.2d 1218, 1219 (Fla. 5th DCA 1998)."); Carter v. Ferrell, 666 So.2d 556, 557 (Fla. 2d DCA 1995)(observing that "refusal to allow an amendment constitutes an abuse of discretion unless it clearly appears that . . . amendment would be futile"). Accordingly, the order under review is affirmed. LAGOA, J., concurs. CORTIÑAS, Judge (dissenting). I respectfully dissent. This is an appeal from an order granting a motion to dismiss the class action complaint. The trial court's order does not explain or detail the judge's grounds for dismissal. Assuming, as the majority does, that the trial court dismissed the complaint for failure to meet the Rule 1.220 criteria applicable to class actions, the order doing so is completely defective.[1] Rule 1.220(d)(1) of the Florida Rules of Civil Procedure requires that the court conduct a hearing "as soon as practicable after service of any pleading alleging the existence of a class." Fla. R. Civ. P. 1.220(d)(1). After holding a hearing, the trial court "shall enter an order determining whether the claim or defense is maintainable" as a class action. Id. Rule 1.220(d)(1) further requires that "[i]rrespective of whether the court determines that the claim or defense is maintainable on behalf of a class, the order shall separately state the findings of fact and conclusions of law upon which the determination is based." Fla. R. Civ. P. 1.220(d)(1)(emphasis added); see also Fla. Dep't of Agric. & Consumer Servs. v. City of Pompano Beach, 829 So.2d 928, 930 (Fla. 4th DCA 2002)("Rule 1.220(d) requires the court to conduct a hearing and enter an order determining whether the claim is maintainable on behalf of a class, stating its findings as to the requirements of Rule 1.220(a) and (b)."). Here, the trial court's order does not contain a single finding of fact or any conclusion of law. In fact, the trial court's order does not even cite to the rule under which dismissal is being granted. On its face, the trial court's order is completely defective and, as such, cannot be affirmed. In my opinion, the majority puts the proverbial cart before the horse in conducting what is essentially a de novo review of the propriety of appellant's class action allegations without any indication that the allegations were properly considered and ruled upon by the trial court. Such a review is entirely inconsistent with the applicable standard of review for appeals of trial court decisions on class certification. United Auto. Ins. Co. v. Diagnostics of S. Fla., Inc., 921 So.2d 23, 25 (Fla. 3d DCA 2006)(stating that a trial court's order certifying a class is reviewed for abuse of discretion) (citations omitted). An abuse of discretion review, which is required in this case, does not and can not entail performing the functions of a trial *484 court. As an appellate court, we cannot review the propriety of the trial court's order without any indication, as required by Rule 1.220(d)(1), of the grounds on which it is based. I would reverse the order of dismissal and remand this case to the trial court for consideration of appellant's class action allegations. NOTES [1] There is nothing to indicate that the trial court's dismissal of the complaint was based on Rule 1.140, which applies to dismissals for failure to state a cause of action. Cf. Slade v. Federated Nat'l Ins. Co., 904 So.2d 623, 624 (Fla. 4th DCA 2005)(holding that an order granting a motion to dismiss class action allegations on the grounds that they are not sufficient to maintain a class action is implicitly a Rule 1.140(b)(6) motion, not a denial of class certification, and therefore is not appealable as a non-final order); see also Fla. Dep't of Agric. & Consumer Servs. v. City of Pompano Beach, 829 So.2d 928, 930 (Fla. 4th DCA 2002)(recognizing a difference between motions to dismiss for failure to state a cause of action under Rule 1.140 and motions to deny class certification under Rule 1.220).

2013-10-30 07:29:33.862551+00

619 So.2d 1210 (1993) Marvin D. COOPER[1] v. Carole Bullock COOPER. No. 91 CA 1581. Court of Appeal of Louisiana, First Circuit. May 28, 1993. Guy Modica, Baton Rouge, for plaintiff/appellant. Tracy S. Pickerell, Baton Rouge, for defendant/appellee. Before EDWARDS, SHORTESS and WHIPPLE, JJ. SHORTESS, Judge. Carole B. Cooper (plaintiff) brought this suit against Marvin D. Cooper (defendant) seeking a judicial partition of community property. From a judgment in plaintiff's favor, defendant appeals. *1211 FACTS Plaintiff and defendant were married in Mississippi on April 23, 1963, and later moved to Louisiana. On January 30, 1985, defendant filed a petition for a legal separation to which plaintiff answered and reconvened. On April 3, 1985, the parties were granted a judgment of separation on the grounds of mutual fault. Thereafter, defendant filed a petition for divorce which was granted on February 26, 1986. On March 18, 1986, plaintiff filed a petition for judicial partition of the community property. However, in lieu of a full hearing on the merits, the parties entered into an oral stipulation in open court on October 27, 1989, and resolved part of their dispute. Respective counsel were then given 45 days to submit briefs and additional evidence[2] to the trial judge regarding the partition of the remaining community property. On August 22, 1990, the trial court issued written reasons for judgment finding defendant indebted to plaintiff for certain sums totalling $23,335.12. Most of this award came from a "secret" bank account comprised of community funds which the trial court valued at $41,518.00. The trial court subsequently signed a judgment in accord with its reasons for judgment on December 13, 1990. On appeal, defendant contends the trial court erred in (1) not partitioning assets of the community as of January 30, 1985, the date the community terminated, and in not using the date of trial, or alternatively the date of termination, as the date for valuation; (2) finding defendant liable to plaintiff when no fraud or mismanagement was ever alleged or proven; (3) finding defendant was obligated to pay the mortgage payments on the community debt from or with his separate funds; (4) relieving plaintiff of all responsibility on the community mortgage debt once defendant was granted the exclusive use of the home; and (5) not allocating the assets of the community to plaintiff before ordering him to pay her from his separate property, in the event he is accountable to her.[3] THE "SECRET" ACCOUNT The trial court determined defendant was "indebted to petitioner for certain sums, due either to his maintaining a secret bank account in which he deposited community funds without her knowledge or to his mismanagement of community assets." The court then valued the account as of August 1983, at which time the account reflected its highest balance of $41,518.00. From this amount, the court deducted $7,481.75 worth of community debts which were accounted for by defendant and paid by him out of the account, leaving a remainder of $34,036.25 to be split equally between the parties. Defendant contends the trial court erred in finding him liable to plaintiff since no fraud or mismanagement was ever alleged or proven, and further argues the trial court erred in valuing the account as of the date of its highest balance, rather than as of the date of trial. After a thorough review of the record, we agree. It is undisputed that the "secret" account was comprised of community funds and maintained solely by defendant. However, the record reflects that when the community terminated in January 1985, there was a total balance of only $41.96 remaining in the account. Thus, it appears that all funds except the remaining $41.96 were withdrawn from the account during the existence of the community property regime. To remedy the loss of an asset caused by a spouse during the existence of the community property regime, the complaining spouse must look to Louisiana Civil Code article 2354 which provides: A spouse is liable for any loss or damage caused by fraud or bad faith in the management of the community property. *1212 However, Louisiana Code of Civil Procedure article 856 provides: In pleading fraud or mistake, the circumstances constituting fraud or mistake shall be alleged with particularity. Malice, intent, knowledge, and other condition of mind of a person may be alleged generally. (Emphasis ours.) Here, plaintiff did not allege any fraud, bad faith, or mismanagement on the part of defendant with respect to any loss or damage of community property. Rather, plaintiff sought only to partition the property belonging to the former community. Moreover, since there was no evidentiary hearing on the merits, the record, i.e., the oral stipulation, is completely silent as to proof of fraud or mismanagement on the part of defendant. Under these circumstances, defendant was not accountable to plaintiff for the spent community funds and the trial court erred as a matter of law in ordering a partition of funds no longer in existence. Defendant further argues the trial court erred in valuing the account as of the date of its highest balance, rather than as of the date of trial or the date the community terminated. We agree.[4] Louisiana Revised Statute 9:2801 provides the rules for judicially partitioning community property when the spouses are unable to agree. Revised Statute 9:2801(4)(a) states: "[t]he court shall value the assets as of the time of trial on the merits, determine the liabilities, and adjudicate the claim of the parties." (Emphasis added.) As stated above, the account had a balance of $41.96 at the termination of the community and was included in both parties' descriptive lists of community assets. However, the record reveals the account was no longer in existence at the time of trial on the merits. Accordingly, the account had no value for purposes of partitioning it between the parties. MORTGAGE PAYMENTS Defendant asserts the trial court erred in allowing plaintiff to recover one-half of the $6,500.00 in community funds, part of which he used to pay the community mortgage while he had the exclusive occupancy of the home, and one-half of the $5,100.00 in equity used to pay the delinquent mortgage payments which the parties would have otherwise received when they sold the home. Specifically, defendant argues the trial court has, in effect, granted plaintiff a rent credit for his use of the home, in direct violation of Louisiana Revised Statute 9:374,[5] and has relieved plaintiff of all responsibility on the community mortgage debt. Defendant was awarded the exclusive use of the community home in the judgment of separation. While he was living in the home, defendant withdrew $4,389.00 from the community Individual Retirement Accounts (IRA's) to apply to back-due mortgage payments. The parties stipulated that the three IRA's totaling $6,500.00 were classified as community funds. The trial court found that defendant "in receiving exclusive use of the matrimonial domicile, obligated himself to keep up the mortgage payments but failed to shoulder this responsibility." However, we find no evidence in the record to support the trial court's conclusion. Furthermore, we find no authority, and plaintiff points to none, for the proposition that the spouse who has been granted the exclusive occupancy of the matrimonial domicile is obligated to pay the community mortgage debt from his separate funds. Indeed, even if this were the case, the spouse who used his separate property to pay a community debt would be entitled to reimbursement from the community. See LSA-C.C. art. 2365. The *1213 $4,389.00 taken from the IRA's was simply a community asset used to satisfy a community debt. Accordingly, the trial court erred in holding defendant liable for one-half of the $6,500.00 in community IRA's. Defendant is liable to plaintiff only for one-half of $2,111.00, the difference between the $4,389.00 used in satisfaction of the community debt and the total amount of community IRA's, $6,500.00.[6] With regard to the $5,100.00 of equity which the parties would have otherwise received from the sale of the community home, the trial court found plaintiff was entitled to one-half of this amount "because Mr. Cooper, who received exclusive use of the home, failed to make the monthly mortgage payments for which he had obligated himself." After a thorough review of the record and the evidence presented, we find the trial court erred. Presumably, the trial court based its decision on a letter signed by defendant and his counsel on April 2, 1985,[7] in which defendant agreed: "Mr. Cooper will make no claims against the community for payments made on the outstanding mortgage on the family home after the date of separation until such time as the home is sold and the community divided between the parties." However, this letter does not state, nor can it be construed to mean, that defendant obligated himself solely to pay the mortgage payments.[8] The mortgage on the community home was a community debt and, therefore, plaintiff was just as responsible as defendant for making the mortgage payments. Accordingly, the trial court erred in awarding plaintiff one-half of the $5,100.00. For these reasons, the judgment of the trial court in favor of plaintiff is amended to delete the award of one-half of the balance in the "secret" account; to reduce the award from one-half of the $6,500.00 in community IRA's to one-half of $2,111.00; and to delete the award of one-half of $5,100.00. Accordingly, the judgment is amended to award plaintiff a total of $1,055.50. Costs of this appeal are assessed to plaintiff, Carole Bullock Cooper. AMENDED, AND AS AMENDED, AFFIRMED. NOTES [1] The original petition filed in this case was for a separation instituted by Marvin D. Cooper. The suit involved in this appeal was filed by Carole B. Cooper. [2] Plaintiff and defendant both submitted certain documentary evidence to the trial court with their briefs. [3] The portions of the judgment partitioning the Boilermaker's Retirement Fund and the 6.2-acre tract of land in Livingston Parish were not appealed and are now final. [4] Had this been a proceeding for an accounting brought under La.C.C. art. 2354, the trial court's valuation of the account may have been correct. [5] Louisiana Revised Statute 9:374(C) provides: A spouse who uses and occupies or is awarded by the court the use and occupancy of the family residence pending either the termination of the marriage or the partition of the community property in accordance with the provisions of R.S. 9:374(A) or (B) shall not be liable to the other spouse for rental for the use and occupancy, unless otherwise agreed by the spouses or ordered by the court. [6] Defendant lists this difference as $2,000.00 in his detailed descriptive list. However, our review of the evidence shows this figure to be $2,111.00, and there is no dispute that this asset was in existence at the time of trial. [7] This letter was part of plaintiff's offerings which were submitted to the court after the oral stipulation was made. [8] The stipulation is confusing on this issue because while purporting to include $5,100.00 in equity in the house as an asset, it is obvious that defendant never had this sum in his possession, as it was used at the closing on the sale of the property. While it is unfortunate that it was necessary to "catch up back-due notes," the mortgage installments and the sale proceeds were both part of the community, one an asset and the other a liability.

2021-03-18 21:02:44.922341+00

http://www.courts.ca.gov/opinions/documents/A160558.PDF

Filed 3/18/21 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR GEORGE M. RUSH, Plaintiff and Appellant, A160558 v. • STATE TEACHERS’ RETIREMENT (City & County of San Francisco SYSTEM, Super. Ct. No. CPF-16-515214) Defendant and Respondent. George M. Rush, who retired in 2012 from City College of San Francisco after 38 years of service, disputes a decision by respondent California State Teachers Retirement System (CalSTRS) calculating his pension. The pension is based on Rush’s years of service, retirement age, and “final compensation” as defined by Education Code section 22134.5, subdivision (a) (hereafter section 22134.5(a)). (See Ed. Code,1 § 24202.5.) The parties dispute the proper method of calculating Rush’s final compensation given that, for 12 consecutive months over portions of two school years, Rush served as an associate dean at a salary significantly higher than his salary during the other portions of those years. We conclude that CalSTRS properly construed the versions of the statutes in effect in 2012, and that their application to Rush does not unconstitutionally impair any contractual obligation created by prior versions. We will thus affirm the denial of his writ petition to overturn CalSTRS’s determination. 1 Statutory references are to the Education Code unless otherwise noted. 1  Factual and Procedural History The material facts are undisputed. Rush began work in 1974 and retired in 2012. Given his years of service and age at retirement, CalSTRS calculated his pension under the Teachers’ Retirement Law (§ 22000 et seq.) as 92.58 percent of his final compensation.2 Rush disputes the determination of his “final compensation.” 1. Statutory context As enacted in 2000, section 22134.5(a) defined “final compensation” to mean, for a member with 25 years or more of service, “the highest average annual compensation earnable by a member during any period of 12 consecutive months.” (Stats. 2000, ch. 1028, § 1, italics added.) Neither party contends that, between its enactment in 2000 and Rush’s retirement in 2012, section 22134.5(a) was amended in any way material to this appeal.3 Section 22115, defining the term “compensation earnable,” was enacted in 1994. (Stats. 1994, ch. 933, § 5.) As originally enacted, it provided that “ ‘Compensation earnable’ by a member means the compensation as determined by the board that would have been earned by the member if he or she were engaged in his or her duties on a full-time basis.” (§ 22115, subd. (a).) In 1995, the Legislature added a new subdivision (c) to section 22115 stating that “For purposes of determining final compensation for persons employed on a part-time basis, compensation earnable shall be 2 Section 24202.5 makes a retiring CalSTRS member’s pension “equal to the percentage of the final compensation set forth opposite the member’s age at retirement in the following table multiplied by each year of credited service.” For members who retire at age 63 or older, as Rush did, the table lists a percentage of 2.4. Multiplying 2.4 percent by his 38.575 years of service yields a factor of 92.58 percent to be applied to his “final compensation,” as determined pursuant to section 22134.5. 3 Cf. post, footnote 14 [discussing post-2012 amendment]. 2 determined by dividing the compensation earned by the service credit.” (Stats. 1995, ch. 390, § 3.) After other, immaterial amendments, the Legislature amended section 22115, subdivision (a), in 1997 by adding the following italicized terms: “’Compensation earnable’ means the annual creditable compensation that a person would earn in a school year if he or she were employed on a full-time basis and if that person worked full time in that position.” (Stats. 1997, ch. 482, § 2, italics added.) In 2000, on the same day that it enacted section 22134.5, the Legislature again amended section 22115.4 (Stats. 2000, ch. 1021, § 3.) The 2000 amendment to section 22115 retained the phrase “in a school year” in subdivision (a) and modified the section to define “compensation earnable,” with an irrelevant exception, as “the creditable compensation a person could earn in a school year for creditable service performed on a full-time basis.” (Ibid.) The amendment also modified subdivision (c) and added a new subdivision (d). (Ibid.) Those subdivisions, as discussed below, provide rules for calculating “compensation earnable” for members who earned creditable compensation at multiple pay rates within a school year. Neither party contends that, between 2000 and Rush’s retirement in 2012, section 22115 was amended in any way material to this appeal. The versions of the two provisions in effect when Rush retired in 2012 thus provided in pertinent part that “final compensation” meant “the highest average annual compensation earnable by a member during any period of 4 The bill amending section 22115 was separate from the bill enacting section 22134.5, but the two bills were enacted on the same day and approved by the Governor and chaptered on the same day. (Compare Assem. Bill No. 821 Fin. Hist. (1999–2000 Reg. Sess.) with Assem. Bill No. 2700 Fin. Hist. (1999–2000 Reg. Sess.).) 3 12 consecutive months” (§ 22134.5(a)5), and “compensation earnable” meant “the creditable compensation a person could earn in a school year for creditable service performed on a full-time basis.” (§ 22115, subd. (a).) 2. Factual background From July 2008 through February 2009 Rush served as head football coach at a salary of roughly $120,000. For the next twelve calendar months, from March 2009 through February 2010, a period encompassing the last four months of the 2008–2009 school year and the first eight months of the 2009–2010 school year, Rush served in a position that he describes as “associate dean,” in which he earned an annual salary of approximately $160,000 for a portion of the period and $151,000 for the other portion.6 For the last four months of the 2009–2010 school year he resumed serving as the head football coach at a salary of approximately $120,000.7 5 Unless otherwise noted, all citations to provisions of the Teachers’ Retirement Law are to the versions in effect when Rush retired in 2012. 6 Rush describes his salary as an “associate dean” for the entire 12- month period from March 2009 through February 2010 as “approximately $160,000.” CalSTRS refers to Rush’s job title during this period as “executive assistant to the chancellor” and indicates that for the six months from March 2009 through August 2009 his salary was approximately $160,000, and that for the final six months it was roughly $151,000. The discrepancy regarding his pay rate in the final six months is immaterial to the issues raised in this appeal. For simplicity, we refer to Rush’s position as “associate dean.” 7 Based on data in CalSTRS’s brief that are not materially disputed, the following are the precise figures, all rounded to the nearest dollar: 4  Shortly after Rush retired, CalSTRS informed him that it had calculated his pension using the entire 2009–2010 school year as the period of 12 consecutive months in which he had the highest average annual compensation earnable. That is the school year in which Rush served the first eight months as associate dean and the last four months as football coach. To calculate Rush’s annual compensation earnable in 2009–2010, CalSTRS applied subdivisions (c) and (d) of section 22115. Subdivision (d) specified a method for calculating compensation earnable “if a member earns creditable compensation at multiple pay rates during a school year.” (§ 22115, subd. (d).) It provided that if a member worked at least 90 percent of a school year at the higher pay rate, compensation earnable was to be calculated as if the member earned all service credit for the year at the higher rate. (Ibid.) But if the member worked less than 90 percent of the year at the higher rate, as Rush did, compensation earnable “shall be determined pursuant to subdivision (c).” (Ibid.) That subdivision stated that compensation earnable “shall be the quotient obtained when creditable compensation paid in that year is divided by the service credit for that year.”8 Thus, if a member worked School Pay Service Creditable Period Year rate credit compensation July 2008–Feb. 2009 $120,024 0.6228 $74,752 2008– 2009 Mar. 2009 –Jun. 2009 $160,601 0.3772 $60,578 July 2009–Aug. 2009 $160,601 0.1798 $28,880 2009–2010 Sep. 2009–Feb. 2010 $150,965 0.4430 $66, 878 Mar. 2010 –Jun. 2010 $120,024 0.3771 $45,272 8 Subdivision (c) of section 22115 read: “If service credit for a school year is less than 1.000, compensation earnable shall be the quotient obtained when creditable compensation paid in that year is divided by the service credit for that year, except as provided in subdivision (d).” Subdivision (d) 5 for a full school year at two salaries, accruing a total service credit of 1.0, and if the credit at the higher salary was less than 0.9, as here, compensation earnable for that school year would be the weighted average of the two salaries. For Rush, the section 22115 calculus yielded compensation earnable for the 2009–2010 school year of $141,569, or $11,797 per month. Taking 92.58 percent of this amount, and adding a $400 per month “longevity bonus,” CalSTRS calculated his monthly pension at $11,322. Rush disagreed, contending that section 22134.5(a)—defining “final compensation” as “the highest average annual compensation earnable by a member during any period of 12 consecutive months”—dictates that his final compensation is the annual compensation of $160,600 that he earned as an associate dean during the 12 consecutive months from March 2009 through February 2010. Using this figure would increase his monthly pension to approximately $12,790. In his view, the definition of “compensation earnable” in section 22115, subdivision (a), referring to the compensation one could earn in a “school year,” is irrelevant to the definition of “final compensation” in section 22134.5(a). Rush requested a hearing pursuant to section 22219, which authorizes the Teachers’ Retirement Board (the board) to hold a hearing to determine “any question presented to it involving any right, benefit, or obligation of a read: “If a member earns creditable compensation at multiple pay rates during a school year and service credit at the highest pay rate is at least 0.900 of a year, compensation earnable shall be determined as if all service credit for that year had been earned at the highest pay rate. This subdivision shall be applicable only for purposes of determining final compensation. If a member earns creditable compensation at multiple pay rates during a school year and service credit at the highest pay rate is less than 0.900 of a year, compensation earnable shall be determined pursuant to subdivision (c).” 6 person under [the Teachers’ Retirement Law].”9 Following a hearing, an administrative law judge issued a proposed decision denying Rush’s appeal from the calculation of his pension, and an appeals committee of the board subsequently adopted that decision. Rush filed a petition in the trial court seeking a writ of traditional or administrative mandamus (Code Civ. Proc., §§ 1085, 1094.5) to reverse the board’s decision. After briefing and a hearing, the trial court issued an order denying Rush’s petition, from which he has filed a timely notice of appeal. Discussion This appeal questions the interpretation of two seemingly inconsistent provisions of the Teachers’ Retirement Law, sections 22134.5(a) and 22115, and the constitutionality of applying to Rush the versions of those statutes in effect when he retired.10 This court reviews de novo the statutory interpretation made by CalSTRS and upheld by the trial court, while deferring to CalSTRS’s expertise as the agency charged with administering the Teachers’ Retirement Law (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1 , 7–8). We review de novo Rush’s 9 Such a hearing is conducted by an administrative law judge subject to the rules governing administrative adjudications (Gov. Code, § 11500 et seq.). 10 The parties also dispute whether the trial court correctly held that Rush could seek relief only by way of administrative mandamus, which applies to the review of proceedings in which “by law a hearing is required to be given, evidence is required to be taken, and discretion in the determination of facts is vested in the inferior tribunal” (Code Civ. Proc., § 1094.5), rather than traditional mandamus, applicable if the agency is not required by law to hold an evidentiary hearing (Code Civ. Proc., § 1085). We need not decide whether the standards for traditional or administrative mandamus apply because, in either case, CalSTRS’s statutory interpretation is correct as a matter of law. 7 constitutional claim. (Cal Fire Local 2881 v. California Public Employees’ Retirement System (2019) 6 Cal.5th 965 , 976.) If CalSTRS properly construed the definition of “final compensation” in section 22134.5(a) to incorporate the definition of “compensation earnable” in section 22115, it unquestionably applied subdivisions (c) and (d) of section 22115 correctly in calculating Rush’s pension.11 Rush argues that section 22134.5(a) does not incorporate the definition of “compensation earnable” set forth in section 22115,12 and that interpreting section 22134.5(a) to incorporate that definition would deprive him of a vested right in violation of the Contracts Clause. Both arguments fail. 1. CalSTRS’s Interpretation of the Statutory Scheme is Correct. As noted, section 22134.5(a) defined “final compensation” as “the highest average annual compensation earnable by a member during any period of 12 consecutive months” (italics added); section 22115, in turn, defined “compensation earnable” as “the creditable compensation a person could earn in a school year for creditable service performed on a full-time basis” (italics added). Focusing on the italicized terms in section 22134.5(a), Rush contends that the compensation he received during the 12 consecutive months he 11Rush made an additional argument below that he has understandably abandoned on appeal. In the trial court he contended that under section 22115, subdivision (d) his service credit at the higher pay rate was “at least 0.900 of a year,” because the 12 months he served as associate dean was a year. But it is clear in context that “at least 0.900 of a year” means at least 90 percent of the school year in which the member earned multiple pay rates, as Rush implicitly acknowledges on appeal. 12 CalSTRS makes a strong showing that Rush forfeited this argument by failing to develop it in the trial court, where he argued almost exclusively that applying the 2012 versions of the statutes to him is unconstitutional. Since Rush’s statutory-construction argument raises a pure question of law, we exercise our discretion to consider it. 8 served as associate dean was his “final compensation.” Focusing on the italicized language in section 22115, CalSTRS contends, in effect, that Rush’s “highest average annual compensation earnable” in a school year is the average monthly compensation he earned in the school year in which he earned the highest total compensation, which was the 2009–2010 school year. Considering the language of section 22134.5(a) in isolation, Rush’s view is plausible. His petition alleges that if the phrase “any period of 12 consecutive months” in that section necessarily refers to a school year, the reference to “12 consecutive months” is essentially meaningless and the Legislature would have simply used the term “a school year” in that section. CalSTRS acknowledges that “[b]ecause of the manner in which compensation earnable is calculated, a member’s highest 12 consecutive months of compensation earnable will often coincide with the school year” (italics added).13 Rush contends that the use of the phrase “compensation earnable” in section 22134.5(a) does not incorporate the statutory definition of “compensation earnable” in section 22115, but instead identifies those parts of a member’s service that count as years of “creditable service” by excluding summer school and overtime. However, section 22134.5(a) cannot be read in isolation and must be interpreted as part of the statutory scheme in which it appears. The definition of “final compensation” in section 22134.5(a) includes “compensation earnable,” and section 22115 defines that term to refer to the compensation 13 At oral argument, CalSTRS’s attorney outlined a hypothetical in which the “period of 12 consecutive months” could span parts of two school years for a member who received a raise at the start of a school year and retired in the middle of that year. For such a member, the 12 consecutive months of “highest average annual compensation earnable” could encompass the final six months of the prior school year and the initial six months of the final year. 9 earned in a school year. Section 22115, moreover, is part of the “Definitions” chapter of the Teachers’ Retirement Law (§§ 22100–22177). The Teachers’ Retirement Law is a “comprehensive statutory scheme” that must be construed “with an eye toward harmonizing all of its parts.” (O’Connor v. State Teachers’ Retirement System (1996) 43 Cal.App.4th 1610 , 1621.) If a provision in the Definitions chapter defines a term, CalSTRS must apply that definition when construing provisions in the Teachers’ Retirement Law that use the term. Section 22100 provides explicitly, “Unless the context otherwise requires, the definitions set forth in this chapter govern the construction of [the Teachers’ Retirement Law].”14 Settled rules of statutory construction dictate the same conclusion. (See Wilcox v. Birtwhistle (1999) 21 Cal.4th 973 , 979 [“words or phrases given a particular meaning in one part of a statute must be given the same meaning in other parts of the statute”]; Stillwell v. State Bar (1946) 29 Cal.2d 119 , 123 [deeming that principle a “well- established rule of construction”].) The definition of “compensation earnable” in section 22115 thus governs the construction of that term as used in section 22134.5(a). Any doubt in this regard is dispelled by subdivision (d) of section 22115. That subdivision includes the sentence, “This subdivision shall be applicable only for purposes of determining final compensation.”15 Rush’s contention, that the definition of “compensation earnable” in section 22115 does not apply 14Section 22100 was enacted in 1994 (Stats. 1994, ch. 933, § 3) and has never been amended. 15 As noted, when the Legislature first added subdivision (c) to section 22115 in 1997, it included a similar provision stating, “For purposes of determining final compensation . . . .” (Stats. 1997, ch. 482, § 2.) The 2000 amendment to section 22115 removed that language from subdivision (c) and added it to the newly enacted subdivision (d). (Stats. 2000, ch. 1021, § 3.) 10 to the determination of final compensation, is thus diametrically at odds with the express provisions of the statute. At a minimum, CalSTRS’s interpretation is well within the range of reasonable statutory construction, so that we may appropriately defer to its expertise. (Yamaha Corp. of America v. State Bd. of Equalization, supra, 19 Cal.4th at pp. 7–8.)16 2. CalSTRS’s application to Rush of the provisions in effect when he retired did not unconstitutionally impair an obligation of contract. In his argument concerning the proper interpretation of section 22134.5(a), Rush asserts that the superior court “held, mistakenly, that the addition of the two words ‘school year’ to [section] 22115 (Compensation Earnable) in the year 1997, changed [section] 22134.5 (Final Compensation) which was adopted three years later in the year 2000.” In his constitutional argument he contends that CalSTRS’s determination impaired his vested contractual right to a pension calculated pursuant to section 22134.5(a) as enacted in 2000. The sequence of enactments, however, belies his contention. There is no dispute about the applicable constitutional principles. “[A] vested contractual right to pension benefits accrues upon acceptance of 16 Although we do not rely on a statutory amendment enacted subsequent to Rush’s retirement, we note that in 2014 CalSTRS proposed a bill “mak[ing] various technical, conforming, or non-controversial changes to the Teachers Retirement Law . . . to facilitate efficient administration of the State Teachers Retirement Plan.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 1220 (2013–2014 Reg. Sess.) as amended Apr. 10, 2014, p. 1.) The changes included an amendment of section 22134.5(a) to provide, as it now does, that “ ‘Final compensation’ means the highest average annual compensation earnable, as defined in Section 22115, by a member during any period of 12 consecutive months of service . . . .” (§ 22134.5(a), as amended by Stats. 2014, ch. 755, § 12, italics added.) A committee report stated that this amendment “clarifies [that] calculation rules for final compensation are based on compensation earned in the school year.” (Assem. Comm. on Appropriations, Analysis of Sen. Bill No. 1220 (2013–2014 Reg. Sess.) as amended Aug. 4, 2014.) 11 employment.” (Betts v. Board of Administration (1978) 21 Cal.3d 859 , 863.) “Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity.” (Ibid.) By Rush’s own account, CalSTRS did not apply to him any provision enacted after the formula for calculating his pension was adopted in section 22134.5(a). As he states, “The statutory definition of ‘final compensation’ enacted in 2000, . . . § 22134.5(a), is the same language in effect in 2012 when Rush retired.” That is the definition CalSTRS applied in calculating his pension. Rush’s contention is that CalSTRS misconstrued section 22134.5(a) by incorporating the definition of “compensation earnable” set forth in section 22115. But as he emphasizes, it was in 1997 that the Legislature amended section 22115 to add the phrase “in a school year” to the definition of “compensation earnable.” (Stats. 1997, ch. 482, § 2.) What Rush challenges, in sum, is CalSTRS’s reliance on statutory text enacted in 1997 when it construed section 22134.5(a), as enacted in 2000. He makes no suggestion that section 22134.5(a) reduced any benefits he was promised prior to its adoption. Since section 22115 contained the phrase “in a school year” when section 22134.5(a) was enacted, there was no subsequent enactment that diminished any rights that Rush had previously held. There is no colorable merit to his constitutional argument. Disposition The order denying the petition for a writ of mandate is affirmed. POLLAK, P. J. WE CONCUR: TUCHER, J. BROWN, J. 12 Trial court: San Francisco County Superior Court Trial judge: Honorable Ethan P. Schulman Counsel for plaintiff and CLISHAM & SORTOR appellant: David P. Clisham Justine L. Clisham Counsel for defendant and PILLSBURY WINTHROP SHAW respondent: PITTMAN LLP Marc H. Axelbaum Ryan Selness A160588 13

2020-12-01 19:15:36.596573+00

http://www.courts.wa.gov/opinions/pdf/D2 53725-7-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II In the Matter of the Parenting and Support of: No. 53725-7-II A.M.S., Child, UNPUBLISHED OPINION SHELDON AARON SANDERS, Respondent, and SADIE JOHANNA ENGEBRETSON, Appellant. MAXA, J. – Sadie Engebretson appeals the trial court’s order ruling that there was not adequate cause to schedule a hearing on her petition to modify the parenting plan relating to AMS, the son of Engebretson and Sheldon Sanders, and dismissing the petition. The parenting plan provided that AMS’s residential placement would be shared equally between Engebretson and Sanders in a week on/week off arrangement. Less than six months later Engebretson filed a motion to modify the parenting plan to a four days on/four days off arrangement, claiming that Sanders’s work schedule and AMS’s reaction to that schedule constituted a substantial change in circumstances. We hold that (1) the trial court did not err in finding no adequate cause for a hearing on modifying the parenting plan under RCW 26.09.260(5) because Engebretson did not present No. 53725-7-II sufficient evidence to support a finding of a substantial change in circumstances; and (2) the trial court did not err in denying Engebretson’s motion for reconsideration, which was based on additional evidence. Accordingly, we affirm the trial court’s dismissal of Engebretson’s petition to modify the parenting plan. FACTS GAL Report and Parenting Plan Engebretson and Sanders are the parents of AMS, who was born in March 2012. They have never been married. In April 2017, Sanders filed a petition for a parenting plan in Cowlitz County. The parties agreed on and implemented a week on/week off residential schedule. In January 2018, the trial court appointed a guardian ad litem (GAL) for AMS. The GAL undertook an investigation and in May 2018 prepared a lengthy report. The GAL reported that:  Sanders recently had obtained employment with a four days on/four days off schedule from 5:00 AM to 4:00 PM.  There had been an allegation that AMS had been sexually abused by MS, Sanders’s developmentally disabled 12-year-old brother. The parties agreed that there would be no contact between MS and AMS.  Engebretson reported that AMS needed to attend counseling. “For the past two years [AMS’s] behavior within her home has included angry outbursts and aggressive behavior. This behavior seems to occur most often when [AMS] returns from Sheldon’s and becomes overly angry and aggressive after he spends time at Sheldon’s mothers when [MS] may be present.” Clerk’s Papers (CP) at 47.  “[AMS’s] behavior was significantly different within both households during the home visits. In his father’s home he was kind and polite and in his mother's he was emotional and angry fighting for all of the attention.” CP at 52.  AMS told the GAL that he liked the residential schedule and did not think that the amount of time between parents was too long.  A counselor diagnosed AMS with an adjustment disorder and referred AMS to counseling sessions a few times per month beginning in late May. 2 No. 53725-7-II The GAL recommended a residential schedule that was consistent with Sanders’s four days on/four days off work schedule. She also recommended that AMS not be allowed to spend the night with Sanders’s parents if MS was present and that AMS not be left alone with MS. In October 2018, the trial court entered a final parenting plan. Both parties agreed to the parenting plan. And the GAL certified that the parenting plan could be signed without notice to her. The parenting plan provided that Engebretson and Sanders would equally share residential placement, with AMS living with each parent every other week. Petition for Modification In April 2019, Engebretson filed a petition for a minor modification of the parenting plan under RCW 26.09.260(5). Engebretson also filed a motion for adequate cause decision on holding a hearing on the petition to change the parenting plan as required under RCW 26.09.270. As grounds for the minor modification, Engebretson stated, “The situation of the child/ren, a parent, or a non-parent custodian has changed substantially.” Clerk’s Papers (CP) at 71. In her declaration in support of her petition, she alleged substantial changes in circumstances: Sanders’s new work schedule that prevented him from spending meaningful time with AMS four days a week and AMS’s difficulty adjusting to the residential schedule. In her declaration, Engebretson stated, The problem is the Petitioner’s current work schedule of four days on and four days off. In addition, he is on call and regularly goes to work at 4 am and doesn’t get home until as late as 8 or 9 pm. Thus on his work days, he is unavailable for [AMS]. Having a week-on/week-off residential schedule means that there are up to four days a week that the Petitioner is not spending with our son. ... Our son has not been doing well on this schedule at all. . . . [AMS] is acting out. [AMS’s] teachers have reported [AMS] crying in class and that he has begun self- harm including banging his head against the wall, hitting himself in the head and 3 No. 53725-7-II calling himself “stupid.” [AMS] recently has made comments such as “I just want to die in a fire” and “I wish I was never born.” [AMS’s] mental health is extremely concerning to me. These behaviors have been getting progressively worse. I felt it was necessary to get him help through counseling ASAP. I have . . . had [AMS] seen by counselors at his school. .... [Sanders’s] current significant other has a son, [W] age 10. From what [AMS] states, [W] is very mean to him and hurts him. I believe the acting out is a direct result of [AMS] being left alone or spending substantial time with [W] without [Sanders] being present. .... [Sanders] has refused to communicate with me regarding counseling. After the comment about dying in a fire I made an appointment for [AMS] with his counselor. The soonest they could get [AMS] in was April 19 which was [Sanders’s] time. He refused to respond to my text message and the appointment was lost. The next appointment available for my time is May 9. That is simply too long for [AMS] to go without help. ... Because of [Sanders’s] new work schedule and the problems I am witnessing with [AMS], I propose a minor modification of the residential schedule to coincide with [Sanders’s] work schedule. CP at 79-81. Engebretson requested that the residential schedule be modified to coincide with Sanders’s work schedule. Engebretson also submitted a declaration from AMS’s maternal grandmother, Jacqui Bach; a letter from AMS’s maternal aunt, Rachael Worthington, who worked at AMS’s school; and an email from AMS’s teacher, Katie Watkins. Bach noted a shift in AMS’s emotional wellbeing from a “happy, fun, energetic boy” to a “sullen, quiet, moody and angry child,” which had gotten progressively worse over the previous few months. CP at 83. She stated that on April 11 AMS was hitting himself and saying “I’m stupid,” “I just want to die,” and “I wish I was never born.” CP at 83. Worthington noted that AMS often was frustrated, upset, anxious and unwell while he was at Sanders’s home. She stated that AMS was happy, lighthearted and a 4 No. 53725-7-II “completely different kid” during his time with his mother. CP at 86. And Watkins noted that AMS had displayed a “roller coaster of emotions” over the previous two weeks and that she had heard his negative self talk. CP at 102. In a responsive declaration, Sanders acknowledged that AMS previously had been placed in counseling due to his “anger and outbursts largely at [Engebretson’s] home.” CP at 92. According to Sanders, [AMS] has graduated from the counseling that the GAL recommended. . . . [Engebretson] then had [AMS] reevaluated for additional counseling through Lower Columbia Wellness Center due to continued behaviors observed in her home. Until I was served with the current request for modification, I was unaware that [Engebretson] had signed [AMS] up for counseling at school . . . two (2) days before filing this modification action. .... In regards to [AMS’s] verbal outburst . . . I met with [AMS’s] general education teacher on April 22, 2019 to inquire about the statements [Engebretson] claims came from our child. Mrs. Katie Watkins specifically indicated that she had never heard the comment, “I just want to die in a fire” from [AMS] until that very day (three days after the modification action was filed). . . . Ms. Watkins also made a point to inform me that other children in his classroom have been using that same statement. CP at 92. Sanders also stated that AMS and his girlfriend’s son had a typical sibling relationship, which sometimes involved arguing and nit-picking one another. He did not believe that this relationship was cause for concern. In reply, Engebretson submitted a declaration in which she stated that AMS seemed to be suffering under the current schedule. She emphasized that she was not seeking a modification of Sanders’s total time with AMS. She requested that the court find adequate cause and reappoint the GAL to determine what was in AMS’s best interests. 5 No. 53725-7-II The trial court entered an order ruling that there was not adequate cause to schedule a full hearing and dismissed Engebretson’s petition to modify the parenting plan. In its oral ruling, the court stated: [I]n preparing for the case, I did look back through the Guardian ad Litem Report. . . . She did recommend a four-on/four-off, but she also signed off on this agreed - - apparently agreed order that was negotiated, or something. So, she felt that that was an appropriate resolution, or she would not have signed off, I assume. . . . [W]hen I look at the declarations, when I compared that with the Guardian ad Litem Report in full, as kind of how we got here, I don’t think I can make an adequate cause finding today. Report of Proceedings at 9. Motion for Reconsideration Engebretson filed a motion for reconsideration. She argued that the trial court erred in finding no adequate cause for a minor modification under RCW 26.09.260(5) based on what Engebretson argued was newly discovered evidence under CR 59(a)(4). In the declaration attached to her motion, Engebretson stated that AMS suffered a mental health episode at school on May 6 – the day before the adequate cause hearing – in which AMS expressed thoughts of self-harm. Engebretson noted that this episode followed an overnight camping trip with Sanders: Unbeknownst to me, [Sanders] took [AMS] out of school Friday May 3rd to go camping. I was only made aware of this when the school para-professional, Ms. Worthington, called me to inquire as to where [AMS] was. It was only after that phone call that I learned [Sanders] had taken [AMS] out of school. I have learned that the camping trip of May 3rd included [Sanders’s] brother, [MS]. . . . [MS] inappropriately touched [AMS] when he was younger. [MS] is developmentally delayed and because there was no collaborating evidence, no criminal charges were brought. Nevertheless, . . . [MS] is a trigger for [AMS]. On the weekend of May 3rd [AMS] was required to go camping the entire weekend with [MS] present. I knew none of this at the time. Following that weekend [AMS] had the mental and emotional breakdown that occurred on May 6th. None of this could have been before the Court for the hearing on May 7th.” 6 No. 53725-7-II CP at 121. According to Engebretson, AMS’s mental health issues could not be adequately addressed under the parenting plan: [Sanders] has indicated that he will not allow [AMS] to enter counseling outside of school counseling . . . [and] he will not take [AMS] to counseling during his time. Under the current week-on/week-off schedule, [AMS] would go a minimum of two weeks between appointments. If we changed the parenting plan to coincide with [Sanders] work schedule of four-days-on/four-days-off, I can schedule [AMS’s] counseling weekly for as long as needed. CP at 121. Engebretson attached three exhibits that postdated the adequate cause hearing. The first exhibit contained an email from AMS’s teacher, Watkins, describing a mental health episode AMS had in class on May 6, the day before the adequate cause hearing. The second exhibit contained a letter from AMS’s counselor at Lower Columbia Wellness recommending weekly counseling, documenting AMS’s diagnosis of “oppositional defiant disorder,” and stating that he is “currently being monitored for Depression and Suicidal Ideation.” CP at 126. And the third exhibit contained a letter from AMS’s pediatrician diagnosing AMS with “adjustment disorder with disturbance of emotions and conduct” and recommending continued counseling with both AMS’s counselors at school and at Columbia Wellness. CP at 128. Sanders opposed the motion to reconsider with a response declaration. Attached to his declaration, Sanders provided an exchange of text messages with Engebretson. In those messages, Sanders stated: I agree with core health individual counseling for [AMS] as he does need it. I also agree that he can have his counseling at the school for his counseling sessions. I disagree with lower Columbia counseling as he needs to have sessions just him and the therapist and not with parents present. CP at 136. 7 No. 53725-7-II The trial court denied Engebretson’s motion for reconsideration. In its written order denying reconsideration, the court ruled: The parties have been exercising a week on, week off, residential schedule for over a year. In review of the Guardian ad Litem report, they have been effectively managing that plan. The recommendation of a 4 on, 4 off, schedule creates less stability and increases the number of transitions for the child. The child has expressed, at least to the GAL, that he is comfortable with the existing schedule. The letters related to counseling simply do not give rise to a finding of adequate cause for a change to the parenting plan. The statements by the child are quite concerning, and the parties should continue to seek counseling for him, however there is nothing indicating that the residential schedule has anything to do with the current behavioral episodes. If the current plan had recently been changed and we were seeing reactive behaviors, the situation might be different, but that is not the case. The child has been operating under the current system in excess of a year before the final plan was agreed to and adopted by the Court. The simple entry of an order memorializing what the parties have been doing for the past year cannot be seen as a trigger for the behavior. CP at 145-46. Engebretson appeals the trial court’s order ruling that there was no adequate cause to schedule a hearing on her motion to modify the parenting plan and the court’s denial of her motion for reconsideration. ANALYSIS A. ADEQUATE CAUSE FOR HEARING ON MINOR MODIFICATION Engebretson argues that the trial court erred when it found that there was not adequate cause for a hearing on her petition for a minor modification of the parenting plan. We disagree. 1. Statutory Process for Modification RCW 26.09.260 addresses the grounds for modifying a parenting plan. Under RCW 26.09.260(1), the general rule is that the trial court will not modify a parenting plan unless the court finds based on facts that have arisen since the parenting plan or were unknown to the court at the time of the plan “that a substantial change has occurred in the circumstances of the child or 8 No. 53725-7-II the nonmoving party and that the modification is in the best interest of the child and is necessary to serve the best interests of the child.” In addition, the court must retain the residential schedule in the parenting plan unless one of the four factors listed in RCW 26.09.260(2) is present. However, RCW 26.09.260(5) allows a trial court to adjust residential aspects of a parenting plan through a minor modification in the residential schedule without considering the RCW 26.09.260(2) factors “upon a showing of a substantial change in circumstances of either parent or of the child.” The court must base its determination of a substantial change in circumstances on facts unknown to the court at the time of the prior decree or plan or arising since entry of the decree or plan. In re Marriage of Tomsovic, 118 Wn. App. 96 , 105, 74 P.3d 692 (2003). Unknown facts include those that were not anticipated by the court at the time of the prior plan. Id. The minor modification procedure is available only if (1) the modification “does not change the residence the child is scheduled to reside in the majority of the time,” and (2) at least one of three listed conditions are met. RCW 26.09.260(5). A party seeking to modify a parenting plan must submit a motion and an affidavit setting forth facts showing adequate cause for the requested modification. RCW 26.09.270. The trial court must deny the motion without a hearing unless the affidavit establishes adequate cause to schedule a hearing. RCW 26.09.270; see In re Marriage of MacLaren, 8 Wn. App. 2d 751, 770- 71, 440 P.3d 1055 (2019). If the court finds adequate cause, the court must schedule a hearing on an order to show cause why the requested modification should not be granted. RCW 26.09.270. 9 No. 53725-7-II To show adequate cause, the petitioner must present evidence that would support a modification under RCW 26.09.260. MacLaren, 8 Wn. App. 2d at 774.1 The petitioner must do more than assert unsupported allegations that would support modification if proved. Id. at 771. “[T]he moving party must set forth facts and provide supporting evidence – not self-serving or conclusory statements – to establish adequate cause.” Id. at 774. At a minimum, “adequate cause” requires evidence sufficient to support a finding on each fact the moving party must prove to modify the parenting plan. Id. at 772-73. There is a strong statutory presumption against modification of parenting plans because custodial changes are disruptive to children. Id. at 771. Therefore, the statutory adequate cause requirement imposes a heavy burden on the petitioner that must be satisfied before a hearing even will be scheduled. Id. We review a trial court’s determination of adequate cause for a proposed parenting plan modification for abuse of discretion. In re Parentage of Jannot, 149 Wn.2d 123 , 128, 65 P.3d 664 (2003). A trial court abuses its discretion when its decision is manifestly unreasonable or based on untenable grounds or reasons. In re Marriage of Black, 188 Wn.2d 114 , 127, 392 P.3d 1041 (2017). More specifically, “the procedures and criteria set forth in RCW 26.09.260 limit the superior court’s range of discretion.” In re Marriage of Hoseth, 115 Wn. App. 563 , 569, 63 P.3d 164 (2003). Therefore, the superior court abuses its discretion if it fails to base its modification ruling on the statutory criteria. Id.2 1 MacLaren involved a petition for a major modification of the parenting plan. 8 Wn. App. 2d at 754. However, the threshold finding of a substantial change in circumstances is the same for either a major or a minor modification of a residential schedule established in a parenting plan. Tomsovic, 118 Wn. App. at 105-06. 2 Engebretson argues that we should articulate a new standard for determining adequate cause in seeking a minor modification. Specifically, she claims that we should find adequate cause for a 10 No. 53725-7-II 2. Adequate Cause under RCW 26.09.260(5) To obtain a minor modification under RCW 26.09.260(5), there must be a “substantial change in circumstances of either parent or of the child.” To establish adequate cause, Engebretson had to present sufficient evidence to support a finding of a change in circumstances. MacLaren, 8 Wn. App. 2d at 772-73. The trial court did not expressly address this requirement in initially finding no adequate cause. Engebretson’s petition for a minor modification primarily was based on the assertion that there had been a substantial change in circumstances due to Sanders’s work schedule. However, it is undisputed that Sanders had worked a four-on, four-off schedule at the time the parenting plan was entered and for the previous five months. Engebretson concedes this point. As noted above, the trial court must base its determination of a substantial change in circumstances on facts arising since entry of the decree or plan. Tomsovic, 118 Wn. App. at 105. Therefore, Sanders’s work schedule cannot support a finding of adequate cause for a hearing. Engebretson also argues that AMS’s reaction to Sanders’s work schedule – as evidenced by his worsening mental health struggles – constituted a substantial change in circumstances. She claims that although Sanders’s work schedule changed before entry of the parenting plan, the effects of that change on AMS were unknown at that time. A child’s mental health issues and particularly suicidal ideation should be taken very seriously. However, in order to support a change in the parenting plan based on a finding of a hearing “[i]f viewed in [the] light most favorable to the moving party, a reasonable person could argue there is a stated detriment to the child given the circumstances.” Br. of Appellant at 19. We decline to do so and continue to follow the well-established standards for reviewing a determination regarding adequate cause. 11 No. 53725-7-II substantial change in circumstances, these mental health issues must have some connection with the parenting plan. Engebretson presented evidence that AMS’s mental health had worsened since the time the parenting plan was entered. We acknowledge that if AMS’s worsening mental health was related to the existing parenting plan, that fact could support a finding of substantial change in circumstances. However, three factors suggest that AMS’s worsening condition was not related to the parenting plan and specifically to Sanders’s work schedule. First, Engebretson reported to the GAL that AMS had demonstrated aggressive behavior and angry outbursts in her home for the previous two years. This behavior obviously predated Sanders’s schedule change, which had occurred around May 2018, and entry of the parenting plan in October 2018. And AMS was diagnosed with an adjustment disorder and referred to counseling in May 2018. All this was known when the parenting plan was entered. Second, AMS’s worsening condition apparently had started shortly before Engebretson filed her petition in April 2019. Bach, AMS’s grandmother, reported that AMS’s emotional health had progressively worsened over the previous few months. She reported a disturbing incident on April 11 when AMS was hitting himself and saying “I’m stupid,” “I just want to die,” and “I wish I was never born.” CP at 83. In an email to Watkins, AMS’s teacher, Engebretson stated that AMS’s behavior had been worse beginning two weeks earlier. Watkins responded that AMS had displayed a “roller coaster of emotions” over the previous two weeks. CP at 102. The timing of AMS’s worsening condition is significant because by April 2019, Sanders had been working at his current schedule for at least 11 months and the parenting plan had been in place for six months. 12 No. 53725-7-II Third, Engebretson presented no evidence that AMS’s worsening condition was connected to Sanders’s work schedule or the parenting plan. Worthington, AMS’s maternal aunt, attributed AMS’s problems to the fact that he spent so much time at Sanders’s home – not to Sanders’s work schedule. And Engebretson believed that there was a connection, but her statements in this regard were conclusory and unsupported by actual evidence. Self-serving or conclusory statements are not sufficient to establish adequate cause. MacLaren, 8 Wn. App. 2d at 774. Worsening mental health issues also can support a change in the parenting plan if one of the parents is not responding appropriately to those issues. See MacLaren, 8 Wn. App. 2d at 776-77. In MacLaren, the child was diagnosed with autism spectrum disorder and had mental health problems, including suicidal ideation. Id. at 761. The child’s mother and primary residential parent disagreed with the autism diagnosis and refused to engage in autism treatment for the child. Id. at 776. The court held that these facts would support finding a substantial change in circumstances. Id. But here, Sanders has acknowledged AMS’s mental health issues. He also agrees that AMS should receive counseling. Engebretson’s actual argument appears to be that a four days on/four days off arrangement would be “better” for AMS. According to Engebretson, this arrangement would (1) provide more parental supervision when AMS was with Sanders, (2) help alleviate allegations that Sanders’s girlfriend’s son was mistreating AMS, (3) allow Sanders to spend more time with AMS because he would not be at work when AMS was at his home, and (4) allow AMS to get counseling every week. But the requirement under RCW 26.09.260(5) is a substantial change of circumstances, not that a different residential schedule would be “better.” 13 No. 53725-7-II Under the specific facts of this case, AMS’s mental health struggles do not provide sufficient evidence to support a finding of a substantial change in circumstances as required for a minor modification under RCW 29.09.260(5). Therefore, we hold that the trial court did not abuse its discretion in finding no adequate cause for a full hearing on modifying the parenting plan. B. DENIAL OF MOTION FOR RECONSIDERATION Engebretson argues that the trial court abused its discretion when it denied her motion for reconsideration of the order denying her petition for a minor modification. We disagree. We review a trial court’s decision on a motion for reconsideration for abuse of discretion. Phillips v. Greco, 7 Wn. App. 2d 1, 9, 433 P.3d 509 (2018). An abuse of discretion occurs when the decision is manifestly unreasonable or based on untenable grounds or reasons. Id. The trial court’s decision is manifestly unreasonable if it exceeds the range of acceptable choices, in light of the facts and applicable law. BNSF Ry. Co. v. Clark, 192 Wn.2d 832 , 846, 434 P.3d 50 (2019). Engebretson challenges several of the trial court’s findings of fact and conclusions of law in the order denying the motion for reconsideration. We reject these challenges. First, Engebretson argues that substantial evidence does not support the court’s finding that the “[t]he recommendation of a 4 on, 4 off, schedule creates less stability and increases the number of transitions for the child.” CP at 145-46. But such an arrangement necessarily would interrupt the existing schedule and require that AMS adapt to a schedule with shorter intervals of time with each parent. And the transfer would be on a different day of the week each time. Second, Engebretson argues that the court erred in concluding that “The letters related to counseling simply do not give rise to a finding of adequate cause for a change to the parenting 14 No. 53725-7-II plan.” CP at 146. In one letter, AMS’s mental health primary care provider recommended that AMS see a counselor on a weekly basis until his symptoms stabilized and cautioned that “[failure to] do so could be detrimental to [AMS’s] immediate and long-term mental health.” CP at 126. In the other letter, AMS’s pediatrician recommended that AMS would continue to benefit from counseling. Although these letters indicated a change in AMS’s mental health, they did not necessarily show a change in circumstances sufficient to support a finding of adequate cause. Third, Engebretson assigns error to the court’s failure to acknowledge Sanders’s resistance to counseling alongside its recommendation that the “parties should continue to seek counseling for [AMS].” CP at 146. But Sanders voiced support for counseling sessions: “I agree with core health individual counseling for [AMS] as he does need it. I also agree that he can have his counseling at the school for his counseling sessions.” CP at 136. Fourth, Engebretson argues that substantial evidence does not support the court’s finding that “there is nothing indicating that the residential schedule has anything to do with the current behavioral episodes.” CP at 146. But although the record reflects a recent change in AMS’s mental health, there was no change in the residential schedule from the time at which the parenting plan was entered to the filing of the motion for adequate cause. Fifth, Engebretson argues that substantial evidence does not support the court’s finding that “[AMS] has been operating under the current system in excess of a year.” CP at 146. She claims that the parenting plan had only been in place for six months when she petitioned for a modification and moved for adequate cause. But the record shows that Engebretson and Sanders had been operating under the week on/week off schedule since Sanders filed his petition in April 2017. 15 No. 53725-7-II Sixth, Engebretson challenges the court’s finding that “the simple entry of an order memorializing what the parties have been doing for the past year cannot be seen as a trigger for the behavior.” CP at 146. But as noted above, Engebretson and Sanders had already been operating under the same arrangement for more than a year before the parenting plan was entered. The parties memorialized that schedule when the parenting plan was entered. Engebretson failed to present sufficient evidence that adhering to that schedule contributed to AMS’s mental health struggles. The standard of review for an order denying a motion for reconsideration is abuse of discretion. Greco, 7 Wn. App. 2d at 9. We conclude that the trial court did not abuse its discretion in denying the motion for reconsideration. C. REQUESTS FOR ATTORNEY FEES Engebretson requests reasonable attorney fees on appeal under RCW 26.26B.0603, which provides in relevant part, “The court may order that all or a portion of a party’s reasonable attorney’s fees be paid by another party.” Engebretson contends that she is entitled to an award of fees because of financial hardship. But Engebretson is not the prevailing party on appeal, and she cites no authority for the proposition that RCW 26.26B.060 supports an award of fees to a nonprevailing party based on financial hardship. See In re Parentage of J.D.W., 14 Wn. App. 2d 388, 423, 471 P.3d 228 (2020). Therefore, in the exercise of our discretion we deny Engebretson’s request for attorney fees. Sanders requests an award of attorney fees he incurred in defending against this appeal as sanctions for a frivolous appeal under RAP 18.9(a). But Engebretson’s appeal raised a debatable 3 RCW 26.26B.060 has been amended since the events of this case transpired. Because these amendments are not material to this case, we do not include the word “former" before RCW 26.26B.060. 16 No. 53725-7-II issue as to the trial court’s finding of no adequate cause. Therefore, we deny Sanders’s request for attorney fees. CONCLUSION We hold that the trial court did not err in finding no adequate cause for a hearing on modifying the parenting plan or in denying the motion for reconsideration. Accordingly, we affirm the trial court’s dismissal of Engebretson’s petition to modify the parenting plan. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. MAXA, J. We concur: WORSWICK, P.J. MELNICK, J. 17

2020-12-01 19:15:36.845441+00

http://www.courts.wa.gov/opinions/pdf/D2 53898-9-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II KITSAP COUNTY, a political subdivision of No. 53898-9-II the State of Washington, Respondent, v. KITSAP RIFLE AND REVOLVER CLUB, a UNPUBLISHED OPINION not-for-profit corporation registered in the State of Washington, and JOHN DOES and JANE DOES I-XX, inclusive, Appellants. and IN THE MATTER OF NUISANCE AND UNPERMITTED CONDITIONS LOCATED at One 72-acre parcel identified by Kitsap County Tax Parcel ID No. 362501-4-002-1006 with street address 4900 Seabeck Highway NW, Bremerton, Washington. MAXA, J. – Kitsap Rifle and Revolver Club (Club) appeals the trial court’s June 2019 order amending the court’s February 2016 supplemental judgment. In the June 2019 order, the trial court ruled that certain activities at the Club’s shooting range were expansions of the Club’s nonconforming use and prohibited those activities. This court had vacated the February 2016 supplemental judgment and remanded for the trial court to clarify that judgment. The trial court had entered the February 2016 supplemental judgment after this court vacated the trial court’s original judgment entered in 2012 following a lengthy trial. No. 53898-9-II In the June 2019 order, the trial court entered a declaratory judgment ruling that the following activities constituted unlawful expansions of the Club’s nonconforming use: (1) discharging cannons or causing exploding targets to explode, (2) discharging fully automatic firearms and discharging semiautomatic rifles larger than nominal .30 caliber, and (3) conducting more than two practical shooting competitions and 10 scheduled shooting practices per month. The court entered a land use injunction prohibiting those activities. The Club argues that the June 2019 order must be vacated and the case remanded because the trial court (1) did not follow this court’s instructions on remand in that the prohibitions on cannons and exploding targets, fully automatic weapons and semiautomatic rifles greater than .30 caliber, and the number of practical shooting competitions and practices do not reflect that only expansions of nonconforming use and not mere intensifications can be prohibited; (2) failed to define important terms in the land use injunction that are vague or ambiguous; and (3) failed to balance the interests of the parties and the public in issuing the land use injunction. Underlying all these arguments is the Club’s contention that additional fact finding is required on remand to properly tailor the appropriate remedies for the Club’s expansion of use. We hold that (1) the trial court erred by concluding that more than two scheduled practical shooting competitions per month and more than ten scheduled practical shooting practices per month constituted an unlawful expansion of the Club’s nonconforming use but did not err regarding the other declaratory judgment provisions, (2) the trial court erred by enjoining discharging cannons without defining the term “cannons” but did not err in failing to define other terms in the land use injunction, and (3) the balancing of the equities requirement for issuing an injunction does not apply here. 2 No. 53898-9-II Accordingly, we vacate in part the declaratory judgment and land use injunction in the trial court’s June 2019 order and remand with specific instructions for the trial court to (1) determine the number of practical shooting competitions and practices held at the Club before the expansion of use in 2005 or 2006 and to prohibit only those competitions and practices above that number, and (2) define the term “cannons.” We affirm the remaining portions of the June 2019 order’s declaratory judgment and land use injunction. FACTS Background The Club is a nonprofit corporation that has operated a shooting range in Bremerton since its founding in 1926. In 1993, the Kitsap County Board of Commissioners notified the Club that it considered the Club’s use of the shooting range to be a lawfully established nonconforming use. Before 1993, club members and members of the general public used small caliber weapons and shooting occurred only occasionally and for short periods of time. The use of automatic weapons and rapid-fire shooting occurred infrequently. In 2005 or 2006, the Club’s use of the shooting range changed. For profit companies began using the shooting range for classes and for training military personnel. The range frequently was used for scheduled practical shooting practices and competitions, resulting in loud, rapid-fire shooting for several hours. The Club also allowed the use of exploding targets and cannons. The use of explosive devices and higher caliber weaponry as well as practical shooting practices and competitions increased the noise level of the Club’s shooting activities. Shooting became clearly audible in neighborhoods near the range and frequently was loud, disruptive, and long in duration. 3 No. 53898-9-II In 2011, the County filed a complaint for an injunction, declaratory judgment, and nuisance abatement against the Club. The County alleged that the Club’s changes in use of the shooting range were unlawful expansions of the Club’s nonconforming use. After a lengthy bench trial, the trial court in 2012 issued detailed findings of fact and conclusions of law. The court ruled that the Club had significantly changed and enlarged the existing use through expanded hours, commercial and military use, and increased noise levels because of explosive devises, higher caliber weapons greater than .30 caliber, and practical shooting. The court concluded that these actions were expansions and not merely intensifications of the nonconforming use. The court ruled that this expansion of use terminated the nonconforming use status of the Club’s property. The trial court issued a permanent land use injunction prohibiting the Club from operating as a shooting range until the County issued a conditional use permit for the property. The court also issued a permanent nuisance injunction prohibiting the use of fully automatic firearms, “rifles of greater than nominal .30 caliber” and “exploding targets and cannons,” and prohibiting operation of the range before 9:00 AM and after 7:00 PM. Clerk’s Papers (CP) at 114. Kitsap Rifle I The Club appealed the trial court’s declaratory judgment and permanent injunctions to this court. Kitsap County v. Kitsap Rifle & Revolver Club (Kitsap Rifle I), 184 Wn. App. 252 , 266, 337 P.3d 328 (2014). A commissioner of this court granted a stay of the trial court’s injunction while the appeal was pending. Id. In Kitsap Rifle I, the Club did not assign error to any of the trial court’s findings of fact regarding the Club’s expansions of its nonconforming use. Id. at 267 . Consequently, those unchallenged findings became verities on appeal. Id. 4 No. 53898-9-II This court upheld the trial court’s conclusions that commercial and military use of the shooting range and dramatically increased noise levels constituted impermissible expansions of the Club’s nonconforming use.1 Id. at 273-74 . However, the court concluded that termination of the nonconforming use was not the proper remedy. Id. at 300-01 . As a result, the court vacated the trial court’s injunction prohibiting the Club from operating as a shooting range. Id. at 301 . The court stated that the appropriate remedy “must reflect the fact that some change in use – ‘intensification’ – is allowed and only ‘expansion’ is unlawful.” Id. The court remanded for the trial court “to determine the appropriate remedies for the Club’s expansion of its nonconforming use.” Id. The court also affirmed the trial court’s conclusion that excessive noise and other activities constituted a public nuisance. Id. at 261, 303 . The court affirmed “the trial court’s injunction limiting certain activities at the Club in order to abate the Club’s nuisance activities.” Id. at 303-04 . Remand from Kitsap Rifle I On remand from Kitsap Rifle I, the Club filed a motion to reopen the record. The Club sought to introduce evidence of the Club’s operations during this court’s stay order, including a study of the shooting range’s noise levels, arguing that this evidence was necessary for the trial court to fashion an appropriate remedy. The trial court denied the Club’s motion to reopen the record. The court stated that it did not believe that Kitsap Rifle I anticipated reopening the record and that additional evidence was not necessary to determine the proper remedy. 1 This court disagreed with the trial court’s determination that the shooting range’s increased operating hours constituted an expansion of use. 184 Wn. App. at 272. 5 No. 53898-9-II On February 5, 2016, the trial court issued an Order Supplementing Judgment on Remand. The order replaced only the declaratory judgment provision and the land use injunction precluding operation of the shooting range in the 2012 judgment. The court granted declaratory judgment and ruled that “activities and uses of the Property consisting of military training uses; commercial, for-profit uses; and uses increasing noise levels by allowing explosive devices, higher caliber weaponry greater than .30 caliber and practical shooting, each constitute unlawful expansions of and changes to the nonconforming use of the Property as a shooting range.” CP at 124. The order issued a “Land Use Injunction” prohibiting the following expanded uses: 1. Commercial, for-profit uses; 2. Military training uses; 3. Use of explosive devices including exploding targets; 4. Use of high caliber weaponry greater than .30 caliber; and 5. Practical shooting, uses, including organized competitions and practice sessions. CP at 124. The supplemental order did not eliminate or revise the permanent nuisance injunction contained in the 2012 judgment. Kitsap Rifle II The Club appealed the trial court’s ruling denying the motion to reopen the record, and the court’s declaratory judgment and land use injunction. Kitsap County v. Kitsap Rifle (Kitsap Rifle II), No. 48781-1-II, slip op. at 1 (Wash. Ct. App. Nov. 21, 2017) (unpublished), https://www.courts.wa.gov/opinions/pdf/D2%2048781-1-II%20Unpublished%20Opinion.pdf. In Kitsap Rifle II, this court affirmed the trial court’s decision to deny the Club’s motion to reopen the record on remand. Id. at 10-13. However, the court vacated the portion of the trial court’s injunction that prohibited the “use of explosive devices including exploding targets”; the 6 No. 53898-9-II “use of high caliber weaponry greater than .30 caliber”; and “practical shooting uses, including organized competitions and practice.” Id. at 2 (internal quotations omitted).2 Regarding the use of explosive devices, the court concluded that this part of the trial court’s injunction was overbroad and vague because it appeared to prohibit all “explosive devices.” Id. at 19-21. The court noted that the trial court’s original permanent injunction prohibited the use of only exploding targets and cannons. Id. at 20. The court stated that this prohibition prohibited “more than necessary to remedy the increased noise levels at the shooting range,” which constituted the impermissible expansion. Id. The court remanded with specific instructions to the trial court (1) “to clarify which explosive devices were found to create an impermissible expansion of the Club’s nonconforming use,” and (2) “to fashion a remedy that implements its original permanent injunction prohibiting the use of ‘exploding targets and cannons.’ ” Id. at 20, 21. Regarding the use of high caliber weaponry, the court concluded that this part of the trial court’s injunction was overbroad because it appeared to prohibit all weapons greater than .30 caliber, including pistols and shotguns. Id. at 21-23. The court noted that the trial court’s original nuisance injunction prohibited only rifles that were greater than .30 caliber. Id. at 21. In addition, the trial court made findings regarding increased noise levels only from fully and semiautomatic weapons. Id. 21-22. And the trial court found that higher caliber weaponry had caused an increase in noise levels only in the previous five to six years. Id. at 22. The court remanded with specific instructions to the trial court (1) “to clarify which weapons are prohibited because they create noise levels that constitute an impermissible expansion of the Club’s 2 The court also vacated the portion of the trial court’s injunction prohibiting commercial, for- profit uses. Kitsap Rifle II, Slip Op. at 145. That provision is not at issue in this appeal. The court held that the trial court did not err in prohibiting military training uses. Id. 7 No. 53898-9-II nonconforming use,” and (2) to fashion a remedy that “reflect[s] that only the more recent increases in noise levels constitute an expansion of use.” Id. at 21, 22. Regarding practical shooting uses, the court concluded that this part of the trial court’s injunction was vague because it was not reasonably clear what constituted “practical shooting uses” other than regularly scheduled practices and competitions. Id. at 24. In addition, the court noted that the trial court’s original order found that activities including practical shooting competitions had caused an increase in noise levels only in the previous five to six years. Id. at 23-24. The court remanded with specific instructions for the trial court (1) “to clarify whether ‘practical use’ includes only practical shooting practices and competitions or whether practical use includes other conduct,” and (2) to fashion a remedy that “reflect[s] that only the more recent increases in noise levels constitute an expansion of use.” Id. at 23, 24. This court vacated in part the trial court’s land use injunction and remanded “with instructions to comply with this court’s instructions regarding the permanent injunction.” Id. at 28. Remand from Kitsap Rifle II On remand from Kitsap Rifle II, the County in May 2019 filed a motion to enter an order amending the February 2016 supplemental judgment. The County submitted a proposed order with the motion. The Club subsequently filed another motion to reopen the record. The Club sought to introduce evidence of “the difference in the firearms used at the Club before and after 2006 that constituted a sound expansion,” “the difference in practical shooting activities at the Club before and after 2006 that constituted a sound expansion,” and “the relative interests of the parties and the public before issuing a new injunction remedy.” CP at 364. The Club argued that this 8 No. 53898-9-II evidence was necessary for the trial court to resolve factual questions raised in Kitsap Rifle II and that the answers to these questions could not be determined from the existing record. The Club also filed a memorandum opposing the County’s motion. In the opposition, the Club proposed definitions for various terms for the trial court to consider in refashioning the terms of the injunction. In response, the County filed a revised proposed order. At oral argument, counsel for both the County and the Club represented that the parties had agreed on some of the terms of the proposed order. The trial court did not rule on the Club’s motion to reopen the record. Instead, the court opted to rule on the County’s motion to enter an amended order. The court reasoned that if it entered an order on the County’s motion, the Club’s motion to reopen the record would be moot. The trial judge noted that she would be retiring soon and that the case would be assigned to a different judge if the court reopened the record. The court further stated: [W]hen I went through your materials . . . I thought; how do I resurrect in my own mind all of the evidence that came in in 2011, 2012? . . . There is just no way I could do that. I confess, I throw myself on my sword, I couldn’t do it. And so when I’m looking at, you know, what’s an explosive device and how big does it have to be, and .30-caliber this, I’m at a loss. And everyone who potentially is my successor is at a loss, right? I can’t imagine if somebody else is going to look at my findings and then look at all the history of the case, both the . . . appellate decisions but also the orders that have been entered subsequent, and be able to ferret out that information. Report of Proceedings (RP) at 7-8. The trial court decided to enter the County’s revised proposed order amending the February 2016 supplemental judgment. The court stated its reasoning on the record: I appreciate that that will probably be Kitsap III from Pierce County, but I’m not sure what else to do. I cannot set this for an evidentiary hearing, certainly not before myself, and I appreciate that this is already on appeal per the Club’s notice of appeal of my last decision, so I think it makes most sense that it go up to the Court of Appeals altogether [sic]. And if the Court of Appeals believes there needs to be an 9 No. 53898-9-II evidentiary hearing, it’ll come back down for definition of those terms as the Club is proposing. RP at 31. In June 2019, the trial court entered an Order Amending February 5, 2016 Order Supplementing Judgment on Remand. The order replaced the declaratory judgment and land use injunction provisions of the 2016 order. The revised declaratory judgment ruled that the following uses at the shooting range were unlawful expansions of the Club’s nonconforming use: 1. military training uses; 2. the provision of firearms training courses sanctioned by the military and provided by commercial, for-profit businesses; 3. discharging cannons or causing exploding targets to explode; 4. the discharge of fully automatic firearms or the discharge of semiautomatic rifles larger than nominal .30 caliber; and 5. more than two scheduled practical shooting competitions per month and more than ten scheduled practical shooting practices per month. CP at 446. The order also issued a revised “Land Use Injunction” prohibiting those uses. CP at 446. The order did not define any of the terms used in the injunction. The Club appeals the trial court’s June 2019 order. ANALYSIS A. LEGAL PRINCIPLES 1. Expansion of Nonconforming Use A nonconforming use is one that lawfully existed before a change in regulation and may continue even though the use does not comply with current regulations. Kitsap Rifle I, 184 Wn. App. at 268. A nonconforming use may continue because requiring immediate cessation of use would be unfair and potentially would violate due process. Id. A nonconforming use may grow in volume or intensity over time. Id. A property owner generally may continue a protected nonconforming use. Id. However, “there is no right to 10 No. 53898-9-II ‘significantly change, alter, extend, or enlarge the existing use.’ ” Id. (quoting Rhod–A–Zalea & 35th, Inc. v. Snohomish County, 136 Wn.2d 1 , 7, 959 P.2d 1024 (1998)). A nonconforming use “ ‘may be intensified, but not expanded.’ ” Kitsap Rifle I, 184 Wn. App. at 268 (quoting City of University Place v. McGuire, 144 Wn.2d 640 , 649, 30 P.3d 453 (2001)). This court in Kitsap Rifle I explained how to distinguish between intensification and expansion: “When an increase in volume or intensity of use is of such magnitude as to effect a fundamental change in a nonconforming use, courts may find the change to be proscribed by the ordinance. Intensification is permissible, however, where the nature and character of the use is unchanged and substantially the same facilities are used. The test is whether the intensified use is different in kind from the nonconforming use in existence when the zoning ordinance was adopted.” Id. at 269 (quoting Keller v. City of Bellingham, 92 Wn.2d 726 , 731, 600 P.2d 1276 (1979)). 2. Law of the Case The law of the case doctrine binds this court to the prior appeal’s holdings. Humphrey Indus., Ltd. v. Clay St. Assocs. LLC, 176 Wn.2d 662 , 669, 295 P.3d 231 (2013). Questions that were decided by the prior appellate decision, or that could have been decided if they had been raised on appeal, “ ‘will not again be considered on a subsequent appeal if there is no substantial change in the evidence.’ ” Folsom v. County of Spokane, 111 Wn.2d 256 , 263, 759 P.2d 1196 (1988) (quoting Adamson v. Traylor, 66 Wn.2d 338 , 339, 402 P.2d 499 (1965)). In Kitsap Rifle I, this court affirmed the trial court’s conclusion that the increased noise levels caused by explosive devices, higher caliber weaponry greater than .30 caliber, and practical shooting was an expansion of the Club’s nonconforming use. 184 Wn. App. at 272-73. Because this court affirmed this conclusion in Kitsap Rifle I, the trial court’s conclusion of law regarding the increased noise levels is the law of the case, and we are bound by that conclusion. Folsom, 111 Wn.2d at 263 . 11 No. 53898-9-II However, in Kitsap Rifle II, this court vacated and remanded the trial court’s conclusions of law regarding explosive devices, higher caliber weaponry, and practical shooting. Slip op. at 27-28. Accordingly, those conclusions did not become the law of the case and we are not bound by them in this appeal. 3. Standard of Review In reviewing a declaratory judgment, we review whether substantial evidence supports the trial court’s findings of fact and, if so, whether the findings support the trial court’s conclusions of law. Sunnyside Valley Irrig. Dist. v. Dickie, 149 Wn.2d 873 , 879-80, 73 P.3d 369 (2003). Substantial evidence is the “quantum of evidence sufficient to persuade a rational fair- minded person the premise is true. Id. at 879. Unchallenged findings of fact are verities on appeal. See Folsom, 111 Wn.2d at 263 . In Kitsap Rifle I, the Club did not assign error to any of the trial court’s findings of fact regarding the Club’s expansions of its nonconforming use. 184 Wn. App. at 267. Consequently, this court treated the unchallenged findings as verities on appeal. Id. Therefore, those findings also are verities in this appeal. See Folsom, 111 Wn.2d at 263 . Whether an activity constitutes an expansion or an intensification is a question of law. Kitsap Rifle I, 184 Wn. App. at 272. Therefore, we review de novo the trial court’s legal conclusions on this issue. Elliott Bay Adjustment Co., Inc. v. Dacumos, 200 Wn. App. 208 , 213, 401 P.3d 473 (2017). We generally review the terms of an injunction for an abuse of discretion. Kitsap Rifle I, 184 Wn. App. at 297. “Trial courts have broad discretionary power to fashion injunctive relief to fit the particular circumstances of the case before it.” Hoover v. Warner, 189 Wn. App. 509 , 528, 358 P.3d 1174 (2015). But we review de novo questions of law regarding injunctions. See 12 No. 53898-9-II Kitsap Rifle I, 184 Wn. App. at 297. In addition, a trial court necessarily abuses its discretion if it based its ruling on an erroneous view of the law. Tedford v. Guy, 13 Wn. App. 2d 1, 13, 462 P.3d 869 (2020). The Club argues that if this court vacates the trial court’s declaratory judgment, the court also must vacate the corresponding injunction. The County does not appear to dispute this contention. B. EXPANSION OF USE ANALYSIS The Club argues that the trial court did not follow this court’s instructions in Kitsap Rifle II on remand in that the prohibition on the use of cannons and exploding targets, the discharge of fully automatic weapons and the discharge of semiautomatic rifles greater than .30 caliber, and the number of practical shooting competitions and practices do not reflect that only expansions of nonconforming use and not mere intensifications can be prohibited. We conclude that the trial court did not err with regard to the first two prohibitions, but did err in limiting the Club’s regularly scheduled practical shooting to two competitions and 10 practices per month. 1. Cannons and Exploding Targets The June 2019 order found that “discharging cannons or causing exploding targets to explode” constituted an unlawful expansion of the Club’s nonconforming use. CP at 446. The Club argues that the June 2019 order did not clarify which explosive devises and what specific use of the cannons and exploding targets created the expansion. We conclude that the Club waived this argument. In the trial court, the County’s attorney stated that “at least with respect to the order as it pertains to exploding targets. That’s a compromised agreement.” RP at 25. The Club’s attorney replied, “Yeah; and, you know, we don’t want to rehash things that are common in the two 13 No. 53898-9-II orders.” RP at 25. Later, the County’s attorney stated, “1(c) and 6(a)(3), discharge of cannons or causing exploding targets to explode. That right there, that phrase, is agreed upon amongst the parties. Now the definitions, that’s different, but that particular clause is agreed upon.” RP at 26. The Club’s attorney did not object to that statement. The Club argues only that it took the position that this language was acceptable only if the court defined “cannons” and “exploding targets.” But that is a different argument (discussed below); that argument does not address whether the use of cannons and exploding targets constituted an expansion of use. The trial court record shows that the Club agreed that the use of cannons and exploding targets constituted an expansion of use. We decline to consider the Club’s argument that the trial court erred in ruling that discharging cannons or causing exploding targets to explode constituted an unlawful expansion of the Club’s nonconforming use. 2. Fully Automatic Firearms and Semiautomatic Rifles Greater than .30 Caliber The trial court’s 2012 nuisance injunction prohibited the use of “fully automatic firearms” and “rifles of greater than nominal .30 caliber.” CP at 114. The February 2016 order prohibited the use of “high caliber weaponry greater than .30 caliber.” CP at 124. This court in Kitsap Rifle II remanded with specific instructions to the trial court (1) “to clarify which weapons are prohibited because they create noise levels that constitute an impermissible expansion of the Club’s nonconforming use,” and (2) to fashion a remedy that “reflect[s] that only the more recent increases in noise levels constitute an expansion of use.” Slip op. at 21, 22. The June 2019 order found that “the discharge of fully automatic firearms or the discharge of semiautomatic rifles greater than nominal .30 caliber” constituted an unlawful expansion of the Club’s nonconforming use. CP at 446. The Club argues that the trial court 14 No. 53898-9-II reached this conclusion without any finding regarding the specific firearms or caliber of those firearms that created the expansion of use. We disagree. The trial court’s 2012 findings of fact support the conclusion that discharge of fully automatic firearms and the discharge of semiautomatic rifles greater than nominal .30 caliber constituted an unlawful expansion. The court found that the “[u]se of fully automatic weapons, and constant firing of semi-automatic weapons led several witnesses to describe their everyday lives as being exposed to the ‘sounds of war,’ ” which the trial court found persuasive. CP at 102 (emphasis added). By contrast, “[r]apid-fired shooting” and the “use of automatic weapons . . . at the Property occurred infrequently in the early 1990[]s.” CP at 102. In addition, this court in Kitsap Rifle I noted that the trial court had concluded that increased noise levels caused by, among other things, “ ‘high caliber weaponry greater than [.]30 caliber’ ” constituted an expansion of the Club’s nonconforming use. 184 Wn. App. at 272. The court held that these “activities did constitute an impermissible expansion of use.” Id. at 273. In other words, the court affirmed the trial court’s conclusion of law that use of weapons greater than .30 caliber and other activities constituted an expansion. As noted above, that holding is the law of the case. Folsom, 111 Wn.2d at 263 . This court in Kitsap Rifle II interpreted Kitsap Rifle I as holding that “the noise created by the use of fully and semiautomatic weapons created an impermissible noise expansion because it contributed to the shooting range’s dramatically increased noise levels.” Kitsap Rifle II, slip op. at 21-22. And the court in Kitsap Rifle II stated that “the trial court did not make any findings regarding increased noise levels by high caliber weapons other than fully and semiautomatic weapons.” Slip op. at 22 (emphasis added). 15 No. 53898-9-II The Club appears to argue that the trial court should have engaged in additional fact finding to clarify which fully and semiautomatic weapons increased the noise levels beginning in around 2006. But because the February 2016 order too broadly prohibited the use of all weapons greater than .30 caliber, this court in Kitsap Rifle II required clarification only as to which weapons were found to create an impermissible expansion. Kitsap Rifle II, slip op. at 21. The June 2019 order provided this clarification based on the 2012 findings, limiting the expansion to the discharge of fully automatic weapons and the discharge of semiautomatic rifles greater than .30 caliber. This court in Kitsap Rifle II did not request clarification of which specific types of fully automatic firearms and semiautomatic rifles caused the expansion. Therefore, we decline to engage in the fact-finding requested by the Club. We conclude that the trial court did not err in ruling that the Club’s discharge of fully automatic firearms and the discharge of semiautomatic rifles greater than nominal .30 caliber constituted an unlawful expansion of the Club’s nonconforming use and in prohibiting those activities. 3. Practical Shooting Competitions and Practices In 2012, the trial court entered a conclusion of law that increased noise levels caused by (among other things) practical shooting constituted an expansion of use. The February 2016 order prohibited “[p]ractical shooting, [sic] uses, including organized competitions and practice sessions.” CP at 124. This court in Kitsap Rifle II remanded with specific instructions to the trial court (1) “to clarify whether ‘practical use’ includes only practical shooting practices and competitions or whether practical use includes other conduct,” and (2) to fashion a remedy that “reflect[s] only the more recent increases in noise levels constitute an expansion of use.” Slip op. at 23, 24. 16 No. 53898-9-II The June 2019 order concluded that “more than two scheduled practical shooting competitions per month and more than ten scheduled practical shooting practices per month” constituted an unlawful expansion of the Club’s nonconforming use. CP at 446. The Club argues that the trial court reached this conclusion without any findings regarding the number of practical shooting competitions and practices that occurred before the expansion. We agree with the Club.3 The trial court found in 2012 that the shooting range “is frequently used for regularly scheduled practical shooting practices and competitions, which use the shooting bays for rapid- fire shooting in multiple directions.” CP at 99. The court also found that “[r]apid-fire shooting . . . occurred infrequently in the early 1990s.” CP at 102. But the court’s 2012 findings of fact did not specifically address the number of practical shooting competitions and practices that occurred before or after the expansion. The County relies on evidence presented at the 2012 trial regarding the number of activities at the shooting range. The County claims that this evidence shows that in the 2004- 2006 time frame there were less than the 12 practical shooting competitions and practices allowed in the 2019 order. However, the trial court made no findings of fact in 2012 regarding this evidence. In addition, the trial court’s June 2019 order could not have been based on this evidence because the trial court admitted that it did not remember the trial evidence. Therefore, the County cannot 3 The trial court did comply with the first instruction in Kitsap Rifle II by clarifying that only scheduled practical shooting competitions and practices were limited. 17 No. 53898-9-II rely on this evidence.4 In any event, the Club claims that the evidence at trial showed that there may have been as many as 18 scheduled events in a month before the expansion in 2005 or 2006. We conclude that the trial court erred in concluding that more than two scheduled practical shooting competitions per month and more than 10 scheduled practical shooting practices per month constituted an unlawful expansion of the Club’s nonconforming use because it does not reflect only the more recent noise levels, as instructed by this court in Kitsap Rifle II. 4. Summary We vacate the part of the trial court’s declaratory judgment ruling that “more than two scheduled practical shooting competitions per month and more than ten scheduled practical shooting practices per month,” CP at 446, constituted an unlawful expansion of the Club’s nonconforming use and the corresponding injunction provision. We remand for the trial court to conduct additional fact finding on the number of practical shooting competitions and practices held at the Club before the expansion of the Club’s nonconforming use in 2005 or 2006. The trial court should prohibit only practical shooting competitions and practices above that number. We affirm the other portions of the declaratory judgment. C. UNDEFINED TERMS IN 2019 INJUNCTION The Club argues that portions of the injunction in the June 2019 order must be vacated because the trial court should have defined the terms “cannons,” “exploding targets,” “rifles greater than nominal .30 caliber,” and “practical shooting.” We conclude that the trial court’s 4 In addition, the witness who presented this evidence testified that his summaries were incomplete and that there were gaps in his data collection. 18 No. 53898-9-II injunction enjoining the discharge of “cannons” must be vacated, but not the other portions of the injunction.5 1. Legal Principles CR 65(d) sets forth the form and scope of an injunction and provides that “[e]very order granting an injunction . . . 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.” Because Federal Rule of Civil Procedure (FRCP) 65(d) is identical to CR 65(d), we may look to cases interpreting the federal rule for guidance. All Star Gas, Inc. of Wash. v. Bechard, 100 Wn. App. 732 , 736-37, 998 P.2d 367 (2000). FRCP 65(d) “ ‘was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood.’ ” Fortyune v. Am. Multi–Cinema, Inc., 364 F.3d 1075 , 1087 (9th Cir. 2004) (quoting Schmidt v. Lessard, 414 U.S. 473 , 476, 94 S. Ct. 713 , 38 L. Ed. 2d 661 (1974)). As a result, FRCP 65(d) requires that the language of an injunction be reasonably clear so that an ordinary person will know precisely what action is prohibited. United States v. Holtzman, 762 F.2d 720 , 726 (9th Cir. 1985). Injunctions do not violate the requirements of FRCP 65(d) “unless they are so vague that they have no reasonably specific meaning.” Id. 2. “Cannons” and “Exploding Targets” The Club argues that the trial court’s June 2019 order should have defined the terms “cannons” and “exploding targets” because they are vague and ambiguous. We agree with regard to “cannons.” 5 Initially, the County argues that we decline to consider the Club’s arguments because the Club did not challenge the meaning of these terms in the first two appeals. We disagree. The meaning of these terms was not at issue in the prior appeals. 19 No. 53898-9-II In the trial court, the Club proposed definitions of these terms. The County does not explain what it believes the term “cannons” means. The term could refer to any number of things; there are many different types of “cannons.” It is unclear what type of cannon the trial court was referencing. The County notes only that the trial court found in 2012 that the use of cannons and exploding targets caused “loud ‘booming’ sounds in residential neighborhoods within two miles of the property, and cause houses to shake.” CP at 103. Therefore, we remand this part of the injunction for the trial court to define the operative term “cannons.” On the other hand, term “exploding target” has a generally accepted meaning based on the trial court’s finding in 2012 that exploding targets caused loud, booming sounds in nearby residential neighborhoods. An exploding target should be understood to be a target the triggers an explosive device within the target that results in a loud noise. 3. “Rifles Greater than Nominal .30 Caliber” The Club argues that the trial court’s June 2019 order should have defined the terms “rifle” and “nominal .30 caliber” because their meaning is uncertain. We disagree. In the trial court, the Club proposed definitions of these terms. The County does not explain what it believes “rifle” and “nominal .30 caliber” mean. However, we believe that these terms have generally accepted meanings, particularly among gun owners and users. Therefore, the prohibition of rifles greater than .30 caliber in the injunction is reasonably clear. We hold that the trial court did not err in failing to define that phrase. 4. “Practical Shooting” The Club argues that although the trial court defined “practical shooting” in the 2012 judgment, it is unclear whether the court intended that definition to apply to the June 2019 order. And the Club claims that the terms within that definition themselves are unclear. We disagree. 20 No. 53898-9-II The 2012 judgment stated that practical shooting competitions and practices “use the shooting bays for rapid-fire shooting in multiple directions.” CP at 99. The Club acknowledges that this description constitutes a definition of “practical shooting.” And in the trial court, the Club proposed adoption of this definition. We believe that the trial court’s 2012 finding of fact provides a reasonable definition of “practical shooting.” In addition, the terms within that definition have generally accepted meanings that are reasonably clear. Therefore, we hold that the trial court did not err in failing to define that term. D. BALANCING THE EQUITIES The Club argues that the trial court erred by issuing the land use injunction without balancing the relative interests of the parties and the public. We disagree. In general, issuing an injunction may involve an equitable balancing of the relative interests of the parties and the interests of the public. Tyler Pipe Indus., Inc. v. Dep’t of Revenue, 96 Wn.2d 785 , 792, 638 P.2d 1213 (1982). However, the issuance of the land use injunction was not at issue on remand from Kitsap Rifle II. This court remanded for the trial court to revise the language of the injunction. Therefore, we conclude that the balancing of the equities requirement does not apply here. CONCLUSION We hold that the trial court erred by concluding that “more than two scheduled practical shooting competitions per month and more than ten scheduled practical shooting practices per month” constituted an unlawful expansion of the Club’s nonconforming use. In addition, we conclude that the trial court erred by enjoining the discharge of “cannons” without defining that term. 21 No. 53898-9-II Accordingly, we vacate in part the declaratory judgment and land use injunction in the trial court’s 2019 order and remand with specific instructions for the trial court to (1) determine the number of practical shooting competitions and practices held at the Club before the expansion of use in 2005 or 2006 and to prohibit only those competitions and practices above that number, and (2) define the terms “cannons.” We affirm the remaining portions of the June 2019 order’s declaratory judgment and land use injunction. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. MAXA, J. We concur: WORSWICK, P.J. MELNICK, J. 22

2020-12-01 19:15:37.073175+00

http://www.courts.wa.gov/opinions/pdf/D2 52877-1-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II DAVID HOWARD HEDGES, No. 52877-1-II Respondent, v. UNPUBLISHED OPINION TIMOTHY HEDGES, PHILIP HEDGES, and WASHINGTON STATE DEPARTMENT OF SOCIAL AND HELTH SERVICES, Defendants, EVA JUDITH HEDGES, Appellant. SUTTON, J. — A Polish court ordered David Hedges, a Washington resident, to pay child support for his two adult children, who were found by a Polish court to be disabled. The Polish court entered its order 13 years after the Hedges’ children reached the age of majority. The Polish court then requested enforcement of the Polish order from the Washington State Department of Child Support (DCS). An administrative law judge (ALJ) ruled that the Polish order was enforceable and ordered David1 to pay child support as ordered by the Polish court. David petitioned for review, and the superior court reversed the ALJ’s decision, ordering that the Polish order not be registered or enforced by DCS. 1 We use the parties’ first names for clarity and mean no disrespect. No. 52877-1-II In this appeal, David argues that his due process rights were violated because he did not receive notice of or an opportunity to participate in the evidentiary proceeding in the Polish court. He also argues that appearing through his attorney to appeal the Polish court’s order was not meaningful because he was deprived of the opportunity to participate in any evidentiary proceeding.2 We hold that David’s due process rights were violated and enforcement of the Polish order is manifestly incompatible with public policy. Therefore, we affirm the superior court’s order and reverse the ALJ’s final order. FACTS I. PARTIES’ DISSOLUTION OF MARRIAGE David and Eva Hedges were married and divorced twice. During their marriage, they had two children. The parties’ second dissolution of marriage was completed on March 27, 1998, in New York, with the first dissolution of marriage settlement agreement from Arizona incorporated into the New York decree. According to the agreement, David was to pay child support to Eva until their two children reached the age of majority. David continued to pay child support until the parties’ children turned 21 in 2004 and 2005, respectively. After they became adults and David’s child support obligation had already terminated, Eva moved with their two sons to Poland. 2 David also argues that the Polish court lacked personal jurisdiction over him and lacked subject matter jurisdiction over the case. Because we resolve this appeal based on due process, we do not reach the other issues. 2 No. 52877-1-II II. 2012 POLISH CHILD SUPPORT ORDER On March 9, 2012, the District Court for Krakow, a trial court in Poland, issued a child support order (Polish order) against David to pay child support in favor of the parties’ two adult children after finding that both children are disabled. The evidentiary hearing at which the trial court decided this issue was February 28, 2012; at that time, the children were 28 and 29, respectively. David did not receive any notice of or opportunity to participate in this hearing. It is undisputed that the District Court for Krakow was required to serve David with notice of the 2012 Polish hearing, and he was never served. The first time David heard of the Polish order was when he received an email from Eva on April 13, 2012, notifying him of it. The District Court for Krakow then sent David a registered letter in May of 2012 informing him of the Polish order. On April 25, 2012, David retained an attorney in Poland to appeal the Polish order. On appeal, David argued that there was a “blatant violation of civil proceedings regulations” and disputed that his two children were, in fact, disabled, among other issues. Administrative Record (AR) at 87-92; CP at 14; FF 4.13. On May 21, 2013, the Regional Court for Krakow, an appellate court, issued a Decree ordering David to pay child support in favor of the parties’ two adult children, commencing on February 28, 2012. CP at 11; FF 4.2. III. ENFORCEMENT OF THE POLISH ORDER, THE ALJ’S DECISION, AND THE SUPERIOR COURT’S REVERSAL On March 31, 2016, DCS received a request from the child support agency in Poland to enforce the Polish order. DCS issued and served a Notice of Support Debt and Registration by certified mail on David on August 30, 2016. David timely objected and requested an administrative hearing. 3 No. 52877-1-II At the administrative hearing before the ALJ, David argued, among other issues, that the Polish court failed to provide him with procedural due process. The ALJ issued an Order on Submission of Documents on November 22, 2017, directing DCS to provide a copy of the service of process documents that were served by the Polish Court on [David] for the March 9, 2012 hearing and the May 21, 2013 hearing and/or a record attesting that [David] had proper notice of the support order and an opportunity to be heard. Clerk’s Papers (CP) at 10. In response to this order, a DCS claim officer/attorney filed a nonresponsive statement indicating that “[t]he [DCS] business records indicate that Mr. Hedges signed for the Notice of Registration on August 30, 2016.” AR at 310. Despite the ALJ’s order, DCS never provided any evidence to show that David received proper notice and service of the 2012 hearing in the District Court for Krakow. At the hearing before the ALJ, both parties presented written evidence and testimony, as did DCS’s attorney. The ALJ made the following relevant conclusion of law: 5.7 . . . . The undersigned concludes that, although he did not receive notice of the underlying District Court for Krakow hearing and did not have an opportunity to participate in that hearing, that he did have the opportunity to defend himself from the District Court for Krakow’s judgment in Poland with legal counsel to raise his defense. The undersigned concludes, [David] submitted to the jurisdiction of Poland by retaining an attorney to represent him in his defense before the Regional Court for Krakow and thereby had notice and an opportunity [to] be heard. The undersigned therefore, does not conclude that the enforcement of the Regional Court for Krakow’s Decree is manifestly in violation of public policy. CP at 19-20. The ALJ ordered that the Polish order was enforceable and could be registered with DCS, and ordered David to pay current child support in the amount of $1,547.06 beginning August 4 No. 52877-1-II 1, 2016, and $99,287.92 for past support for the period of March 10, 2012, through July 31, 2016. David filed a petition for judicial review under the Administrative Procedures Act (APA).3 Based on the administrative record, the superior court determined that the ALJ misapplied the law and the Polish order could not be registered or enforced by DCS; therefore, it reversed the ALJ’s decision. Eva appeals the superior court’s order which reversed the ALJ’s decision. ANALYSIS I. STANDARDS OF REVIEW A. ADMINISTRATIVE PROCEDURE ACT The APA governs our review of an agency’s final administrative decision. RCW 34.05.570. We will reverse the ALJ’s decision if it is not supported by substantial evidence or if the ALJ “erroneously interpreted or applied the law.” RCW 34.05.570(3)(d), (e). We “‘give the agency’s interpretation of the law great weight where the statute is within the agency’s special expertise.’” Crosswhite v. Dep’t of Soc. & Health Servs., 197 Wn. App. 539 , 549, 389 P.3d 731 (2017) (quoting Cornelius v. Dep’t of Ecology, 182 Wn.2d 574 , 585, 344 P.3d 199 (2015)). However, “[d]eference ‘is inappropriate when the agency interpretation conflicts with the statute.’” Crosswhite, 197 Wn. App. at 549 (quoting Brown v. Dep’t of Soc. & Health Servs., 145 Wn. App. 177 , 183, 185 P.3d 1210 (2008)). The party seeking relief bears the burden of demonstrating the invalidity of the agency action. Olympic Healthcare Servs. II LLC v. Dep’t of Soc. & Health Servs., 175 Wn. App. 174 , 180, 304 P.3d 491 (2013); RCW 34.05.570(1)(a). 3 Ch. 34.05 RCW. 5 No. 52877-1-II We review factual determinations from a final administrative decision under the substantial evidence standard, and the decision will be upheld “if supported by a sufficient quantity of evidence to persuade a fair-minded person of the order’s truth or correctness.” Crosswhite, 197 Wn. App. at 548. Unchallenged findings are verities on appeal. Darkenwald v. Employment Sec. Dep’t, 183 Wn.2d 237 , 244, 350 P.3d 647 (2015). We review de novo whether the findings support the conclusions of law. Olympic Healthcare, 175 Wn. App. at 181. B. UNIFORM INTERSTATE FAMILY SUPPORT ACT (UIFSA) It is undisputed that the Uniform Interstate Family Support Act (UIFSA)4 governs this case. The UIFSA applies to all actions in Washington commenced on or after July 1, 2015, that attempt to register child support orders. RCW 26.21A.907. When a party seeks recognition of a convention support order5 from another tribunal, that party must register the order with DCS. RCW 26.21A.613. “Except as otherwise provided in subsection (2) of this section, a tribunal of this state shall recognize and enforce a registered convention support order.” RCW 26.21A.617(1). Relevant here, an objecting party may raise the defense that “[r]ecognition and enforcement of the order is manifestly incompatible with public policy, including the failure of the issuing tribunal to observe minimum standards of due process, which include notice and an opportunity to be heard.” RCW 26.21A.617(2)(a). 4 Ch. 26.21A RCW. 5 A “convention support order” is “a support order of a tribunal of a foreign country” which is in forced with respect to the United States under the Hague Convention of November 23, 2007. RCW 26.21A.601(3); RCW 26.21A.010(3), (5)(d). 6 No. 52877-1-II II. MINIMUM STANDARDS OF DUE PROCESS David argues that his procedural due process rights were violated because he was not served with notice of the hearing by the District Court for Krakow as required, nor did he have an opportunity to participate in the 2012 evidentiary hearing before the Polish court. Eva argues that David’s procedural due process rights were not violated because he received notice and had an opportunity to be heard in the appeal after the child support order was issued. We hold that David’s right to minimum due process was violated because there is no evidence in the record that he was served with prehearing notice or had any opportunity to participate in any evidentiary hearing that led to the Polish order for child support. Because David was not afforded even minimum due process, the District Court for Krakow proceeding and resulting order are manifestly incompatible with public policy. The federal and state constitutions guarantee a right to due process. U.S. CONST. amend. XIV, § 1; WASH. CONST. art. I, § 3. “Due process protections include . . . the right to notice and an opportunity to be heard and defend.” In re the Welfare of M.B., 195 Wn.2d 859 , 867, 467 P.3d 969 (2020); see also Morrison v. Dep’t of Labor & Industr., 168 Wn. App. 269 , 273, 277 P.3d 675 (2012) (“An essential principle of due process is the right to notice and a meaningful opportunity to be heard.”). “To determine whether a particular procedure for providing notice and an opportunity to be heard is constitutionally adequate, we must assess the risk of erroneous deprivation in light of the competing interests at stake.” Fields v. Dep’t of Early Learning, 193 Wn.2d 36 , 44, 434 P.3d 999 (2019). RCW 4.24.820(1) (2015) states that “Washington’s courts, administrative agencies, or any other Washington tribunal shall not recognize, base any ruling on, or enforce any order issued 7 No. 52877-1-II under foreign law, or by a foreign legal system, that is manifestly incompatible with public policy.” “[A]n order is presumed to be manifestly incompatible with public policy when it does not grant parties the same rights as the parties are granted under the Washington or United States Constitutions.” Brett v. Dep’t of Soc. & Health Servs., 9 Wn. App. 2d 303, 311, 455 P. 3d 568 (2019) (citing RCW 4.24.820(2)). In Washington, a non-moving party must be personally served with a summons in advance of the court proceeding. RCW 4.28.080; RCW 26.10.030(2). Here, the ALJ concluded that enforcement of the Polish order was not manifestly in violation of public policy. The ALJ based its conclusion on its finding that the District Court for Krakow served David by registered mail with the Polish order after it was entered, and then David retained an attorney in Poland to appeal the order. The ALJ erred in concluding that enforcing the Polish order did not manifestly violate public policy. Despite the ALJ’s order requiring that DCS provide proof that David was properly served before the District Court for Krakow issued its child support order, DCS failed to provide any such evidence. The record does not show that David was served with a prehearing notice or had the opportunity to participate and defend himself in the District Court for Krakow proceeding. Thus, contrary to RCW 26.21A.617(2)(a)’s requirement, David was not provided any notice of the proceedings in the Polish district court. David was not afforded minimum due process protections under the federal and state constitutions. Serving him with the child support order after it was entered is not minimum due process. Although David hired an attorney to appeal the Polish order, participating in an appeal was not meaningful participation because he was deprived of the opportunity to participate in the evidentiary proceeding before the District Court for Krakow. 8 No. 52877-1-II Because David did not receive prehearing notice and did not have an opportunity to defend himself in the District Court for Krakow, we hold that David did not receive minimum due process, and thus, the Polish proceedings were manifestly incompatible with public policy. Therefore, the Polish order may not be registered with DCS and is not enforceable. CONCLUSION We affirm the superior court’s order and reverse the ALJ’s final order. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. SUTTON, J. We concur: LEE, C.J. CRUSER, J. 9

2014-10-31 02:05:14.600331+00

http://www.courts.ca.gov/opinions/nonpub/E058417.PDF

Filed 10/30/14 Ettlin v. Veasey CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO DENNIS ETTLIN et al., Plaintiffs and Appellants, E058417 v. (Super.Ct. No. YC064994) GLENDA VEASEY et al., Defendants and Respondents. ______________________________________ ANTHONY LOCATELLI, E058420 Plaintiff and Appellant, (Super.Ct. No. BC472585) v. THOMAS TRENT LEWIS, OPINION Defendant and Respondent. [And eight other cases.*] APPEAL from the Superior Court of Los Angeles County. Robert H. O’Brien and Frederick C. Shaller, Judges. Affirmed. Dennis Ettlin, Daniel Cooper, and Anthony Locatelli, Plaintiffs and Appellants in pro. per. * Ettlin v. Slawson (No. YC065018); Ettlin v. Kriegler (No. YC065019); Ettlin v. Taylor (No. YC065021); Ettlin v. Kuhl (No. YC065164); Cooper v. Weinbach (No. SC113064); Cooper v. Todd (No. SC113135); Cooper v. Ashmann-Gerst (No. SC113136); Cooper v. Levanas (No. SC113137) 1  Benton, Orr, Duval & Buckingham and Kevin M. McCormick for Defendants and Respondents. This appeal comprises ten cases that have been consolidated, either at the trial or at the appellate level. In each case, one of the three plaintiffs is suing a judge, commissioner, or appellate justice. Basically, plaintiffs claim that, because defendants have received supplemental employment benefits from their local county, above and beyond their salary from the state, defendants are biased in favor of the county. Plaintiffs also claim that, in divorce cases, the county has an interest in awarding custody to one parent and in requiring the other parent to pay a relatively high amount of child support. Thus, according to plaintiffs, defendants should have been disqualified from presiding over plaintiffs’ divorces (and possibly other matters involving plaintiffs; the record is not entirely clear on this point). Plaintiffs seek money damages. The trial court sustained demurrers in all ten cases. Plaintiffs appeal. We will hold that a jurist who has received local supplemental benefits from a county is not therefore disqualified from cases involving that county. Separately and alternatively, we will also hold that plaintiffs’ claims are barred by absolute judicial immunity. I HISTORICAL BACKGROUND Because plaintiffs’ complaints do not go into detail about the nature of local supplemental benefits, we take judicial notice of certain background facts. (See Evid. Code, § 452, subd. (h) [judicial notice of facts not reasonably subject to dispute and 2 capable of immediate and accurate determination by resort to reasonably indisputable sources].) In California, until 1994, superior court judges’ salaries were funded partly by the state and partly by their respective counties. (Judicial Council of California, Historical Analysis of Disparities in Judicial Benefits (Dec. 15, 2009) pp. 5-7.)1 In 1994, however, the state took over the exclusive responsibility for the payment of these salaries. (Id. at p. 7.) Both before and after 1994, some counties provided superior court judges with supplemental employment benefits, such as life insurance, medical and/or dental insurance, retirement benefits, and, in some instances, cash. (Sturgeon v. County of Los Angeles (2008) 167 Cal. App. 4th 630 , 635-636 (Sturgeon I); Historical Analysis, supra , at pp. 8-11.) These local supplemental benefits varied greatly from county to county. One survey found that, as of 2007-2008, some counties provided no local supplemental benefits at all, while others provided local supplemental benefits worth up to $50,000 a year. (Id. at pp. 1-2, D-10-D-14.) Counties that did provide local supplemental benefits justified them on the ground that they were necessary to attract and retain high-quality jurists. (E.g., Sturgeon I, supra , 167 Cal.App.4th at p. 636.) In 2006, one Harold P. Sturgeon (represented by Judicial Watch, Inc.) filed an action challenging the payment of local supplemental benefits, arguing, among other things, that (1) they constituted an unlawful gift of public funds, (2) they violated statutes 1 Available at , as of October 27, 2014.) 3 relating to state funding of judicial salaries, and (3) they violated the requirement of the California constitution that the legislature prescribe the compensation of judges (Cal. Const., art. VI, § 19). (Sturgeon I, supra , 167 Cal.App.4th at pp. 637-657.) In 2008, an appellate court rejected Sturgeon’s first two arguments; however, it did agree that local supplemental benefits violated the state constitutional provision giving the legislature the duty of prescribing judges’ compensation. (Sturgeon I, supra , 167 Cal.App.4th at pp. 637-657.) It stated, “Under our constitutional scheme, judicial compensation is a matter of statewide concern and the Legislature must set policy with respect to all aspects of judicial compensation. . . . [T]he Legislature’s obligation to ‘prescribe judicial compensation’ requires that it set forth standards or safeguards which assure that fundamental policy is implemented. . . . The obligation is not onerous, but does require that the Legislature consider the specific issue and, at a minimum, establish or reference identifiable standards.” (Id. at p. 657.) In 2009, in response to Sturgeon I, the Legislature passed Senate Bill No. 11 (2009–2010 2d Ex. Sess.) (SBX2 11). SBX2 11 enacted Government Code section 68220, which, as relevant here, provides: “(a) Judges of a court whose judges received supplemental judicial benefits provided by the county or court, or both, as of July 1, 2008, shall continue to receive supplemental benefits from the county or court then paying the benefits on the same terms and conditions as were in effect on that date. “(b) A county may terminate its obligation to provide benefits under this section upon providing the Administrative Director of the Courts and the impacted judges with 4 180 days’ written notice. The termination shall not be effective as to any judge during his or her current term while that judge continues to serve as a judge in that court or, at the election of the county, when that judge leaves office.” In addition, an uncodified portion of SBX2 11 provides: “Notwithstanding any other law, no governmental entity, or officer or employee of a governmental entity, shall incur any liability or be subject to prosecution or disciplinary action because of benefits provided to a judge under the official action of a governmental entity prior to the effective date of this act on the ground that those benefits were not authorized under law.” (SBX2 11, § 5.) On remand, Sturgeon asserted that SBX2 11 was invalid for three reasons: (1) It was outside the scope of the governor’s proclamation calling the special session at which it was enacted, (2) it did not adequately prescribe the benefits to be provided, and (3) it violated equal protection. (Sturgeon v. County of Los Angeles (2010) 191 Cal. App. 4th 344 , 347, 350 (Sturgeon II).) In 2010, an appellate court rejected all three challenges. (Sturgeon I I, supra , 191 Cal.App.4th at pp. 350-355.) The court, however, repeatedly characterized SBX2 11 as only “an interim solution.” (Id. at p. 352; see also id. at pp. 348, 354-355.) It concluded with the following homily: “[O]n its face [SBX2 11] is not a permanent response to either the constitutional issues we identified in Sturgeon I or the difficult problem of adopting a compensation scheme that deals with varying economic circumstances in an equitable and efficient manner. Thus, we would be remiss in discharging our duties if we did not state that while the Legislature’s interim response to Sturgeon I defeats the 5 particular challenges asserted by Sturgeon in this litigation, that interim remedy, if not supplanted by the more comprehensive response [SBX2 11] plainly contemplates, most likely will give rise to further challenges by taxpayers or members of the bench themselves. . . . [T]he issue of judicial compensation is a state, not a county, responsibility. We are confident that the Legislature within a reasonable period of time will act to adopt a uniform statewide system of judicial compensation.” (Id. at p. 355.)2 II FACTUAL BACKGROUND Consistent with the applicable standard of review (see part IV, post), the following facts are drawn from plaintiffs’ complaints. Commissioner Glenda Veasey presided over the divorce of plaintiff Dennis Ettlin, Judge Elia Weinbach presided over the divorce of plaintiff Daniel Cooper, and Judge Thomas Trent Lewis presided over the divorce of plaintiff Anthony Locatelli. All three of these jurists received local supplemental benefits. According to plaintiffs, the County of Los Angeles (County) “is a ‘real party in interest’ in every divorce case as it reaps a financial benefit.” The County’s Child Support Services Department (CSSD) receives so-called Title IV-D funds from the state and federal governments based on “a percentage of the expenses related to support orders as well as incentives . . . .” Higher child support awards benefit the County because they 2 Plaintiffs claim that Sturgeon II “encouraged” taxpayers to challenge SBX2 11. We do not agree that that was its intent, though that may have been its effect. It merely predicted that taxpayers would challenge SBX2 11 — a prediction that has now become a self-fulfilling prophecy. 6 “reduce the likelihood that children and supported spouses will seek indigent aid from the [C]ounty[,] . . . increase the need [for] and likelihood [of] enforcement[, and] . . . increase the CSSD operations budget.” Plaintiffs conclude that local supplemental benefits are, in effect, bribes “to influence the judge’s decision to create a non-custodial parent and [a] high child support order, thus protecting the [C]ounty’s interests.” The relief that plaintiffs seek consists exclusively of money damages. III PROCEDURAL BACKGROUND Ettlin, Cooper, and Locatelli, between them, filed the following 10 actions: Plaintiff Defendant County Case No. Ettlin Glenda Veasey Los Angeles YC064994 Ettlin John A. Slawson Los Angeles YC065018 Ettlin Sandy R. Kriegler Los Angeles YC065019 Ettlin Kenneth Taylor Los Angeles YC065021 Ettlin Carolyn Kuhl Los Angeles YC065164 Cooper Elia Weinbach Los Angeles SC113064 Cooper Kathryn Doi Todd Los Angeles SC113135 Cooper Judith Ashmann-Gerst Los Angeles SC113136 Cooper Michael Levanas Los Angeles SC113137 Locatelli Thomas Trent Lewis San Diego BC472585 Each of the defendants is a judge, commissioner, or appellate justice sitting in Los Angeles. The only complaints that have been included in the appellate record are the complaints in Ettlin v. Veasey, Cooper v. Weinbach, and Locatelli v. Lewis. Those complaints are all essentially identical; they vary only as to details regarding the respective plaintiffs and their interactions with the respective defendants. 7  All of the cases filed by Ettlin and Cooper were assigned to Judge Robert H. O’Brien. Judge O’Brien then ordered these cases consolidated. Meanwhile, Locatelli v. Lewis was transferred to Los Angeles County and assigned to Judge Frederick C. Shaller. Each of the defendants filed a separate demurrer. Once again, however, the only demurrers that are in the record are the demurrers in Ettlin v. Veasey, Cooper v. Weinbach, and Locatelli v. Lewis. Those three demurrers were all essentially identical. They raised the following grounds: 1. Local supplemental benefits were not unconstitutional and not disqualifying. 2. Absolute judicial immunity. 3. Failure to file a claim under the Government Claims Act. (Gov. Code, § 810 et seq.) 4. Governmental immunity for instituting or prosecuting a judicial or administrative proceeding. (Gov. Code, § 821.6.) The trial court sustained the demurrers without leave to amend. Accordingly, it entered judgments against each of the plaintiffs and in favor of each of the defendants. Plaintiffs filed timely notices of appeal. We ordered Ettlin and Cooper’s appeal consolidated with Locatelli’s appeal. IV STANDARD OF REVIEW A demurrer should be sustained when “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) 8  “Our standard of review of an order sustaining a demurrer is well settled. We independently review the ruling on demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. [Citation.] In doing so, we ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. [Citations.]’ [Citation.]” (Parthemore v. Col (2013) 221 Cal. App. 4th 1372 , 1378.) “[I]n ruling on a demurrer, the court may consider facts that are properly subject to judicial notice, and a ‘“‘complaint otherwise good on its face is subject to demurrer when facts judicially noticed render it defective.’ [Citation.]” [Citation.]’ [Citation.]” (Arroyo v. Plosay (2014) 225 Cal. App. 4th 279 , 296.) “We will affirm an order sustaining a demurrer on any proper grounds, regardless of the basis for the trial court’s decision. [Citation.]” (Cansino v. Bank of America (2014) 224 Cal. App. 4th 1462 , 1468.) V THE ADEQUACY OF THE APPELLATE RECORD As noted, the appellate record does not include seven of the ten complaints. It also does not include the demurrers to those complaints. “‘It is the duty of an appellant to provide an adequate record to the court establishing error. Failure to provide an adequate record on an issue requires that the issue be resolved against appellant. [Citation.]’ [Citation.] This principle stems from the well-established rule of appellate review that a judgment or order is presumed correct and 9 the appellant has the burden of demonstrating prejudicial error. [Citations.] By failing to provide an adequate record, appellant cannot meet his burden to show error and we must resolve any challenge to the order against him. [Citation.]” (Hotels Nevada v. L.A. Pacific Center, Inc. (2012) 203 Cal. App. 4th 336 , 348.) Because a demurrer challenges the complaint (see part IV, ante), it is literally impossible to review an order sustaining a demurrer unless the complaint is in the record. Admittedly, the three complaints that are in the record are remarkably similar to each other. One possible inference would be that the seven missing complaints are essentially similar to the three that we do have. However, that inference is not compelled. Indeed, at a minimum, the complaints against the appellate justices must have been different, as they must have presided over different proceedings involving plaintiffs, and they would not have been receiving local supplemental benefits at that time (though they may have received them in the past).3 At bottom, it is appellants’ burden to establish the contents of the seven missing complaints. We decline to employ inferences to fill in the record in their favor. We will affirm the judgments in favor of Justices Kriegler, Doi Todd, and Ashmann-Gerst, Judges Kuhl and Levanas, and Commissioners Slawson and Taylor based solely on lack of an adequate record. We will address the demurrers on the merits solely with respect to Judges Weinbach and Lewis and Commissioner Veasey (and we will refer to these three defendants hereafter as “the judges”). 3 Also, at least according to the briefs, some of the actions involve traffic cases rather than divorce cases. 10  We also note, however, that if, in fact, the missing complaints were substantially similar to the complaints in the record, we would still affirm all of the judgments, albeit on the grounds discussed in the remainder of this opinion. VI THE JUDGES WERE NOT DISQUALIFIED AND DID NOT VIOLATE DUE PROCESS The judges demurred, in part, on the ground that they did nothing wrong by receiving local supplemental benefits and by nevertheless presiding over plaintiffs’ cases. As a matter of federal due process, “a judge must recuse himself when he has ‘a direct, personal, substantial, pecuniary interest’ in a case. [Citation.]” (Caperton v. A.T. Massey Coal Co., Inc. (2009) 556 U.S. 868 , 876.) Moreover, even when the judge does not have a direct pecuniary interest, “‘[e]very procedure which would offer a possible temptation to the average man as a judge . . . not to hold the balance nice, clear and true . . . denies . . . due process of law.’ [Citation.]” (Id. at p. 878; see also id. at pp. 885- 886.) As a matter of state law, a judge is disqualified if “he or she “has a financial interest in the subject matter in a proceeding or in a party to the proceeding.” (Code Civ. Proc., § 170.1, subd. (a)(3)(A).) A judge is also disqualified if: “(i) The judge believes his or her recusal would further the interests of justice. “(ii) The judge believes there is a substantial doubt as to his or her capacity to be impartial. 11  “(iii) A person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial.” (Code Civ. Proc., § 170.1, subd. (a)(6)(A).) We begin with the proposition that judges must be paid. Thus, the federal government pays federal judges, even though the United States is probably the most frequent party to litigation in federal court (especially when its departments and officers are included). Likewise, the state government pays state judges, even though it appears frequently in state court litigation. Plaintiffs, to their credit, acknowledge this argument from necessity. They argue, however, that this “deeply considered compromise” is permissible only because the federal government and the state government are “sovereign entit[ies].” They argue that it does not authorize “non-sovereign lower-level organizational entities, such as county government” to compensate judges. They conclude that “Los Angeles County’s actual payments to a judge are no different than payments (hypothetically) by Plaintiff[s].” Plaintiffs offer no authority for their assertion that sovereignty is what matters; it is merely an ipse dixit. If, however, sovereignty is the test, counties must be deemed sovereigns for this purpose. Under the California Constitution, “counties . . . are legal subdivisions of the State.” (Cal. Const., art. XI, § 1, subd. (a); see also Gov. Code, § 23002.) Thus, “[c]ounties are state agencies which exercise within their boundaries the sovereignty of the state . . . .” (Griffin v. County of Colusa (1941) 44 Cal. App. 2d 915 , 920.) They “perform many functions which are state functions . . . .” (County of Santa Barbara v. City of Santa Barbara (1976) 59 Cal. App. 3d 364 , 371.) “The principal purpose in establishing counties was to make effectual the political organization and civil 12 administration of the state which require local direction, supervision and control, including, to a large extent, the administration of public justice. [Citation.]” (Dineen v. City and County of San Francisco (1940) 38 Cal. App. 2d 486 , 490.) “‘[T]he state may, through its legislature, and in the exercise of its sovereign power and will, in all cases where the people themselves have not restricted or qualified such exercise of that power, apportion and delegate to the counties any of the functions which belong to it’ . . . .’ [Citation.]” (Watson v. Greely (1924) 67 Cal. App. 328 , 337.) Here, by enacting SBX2 11, the state not only authorized but required counties to assist it in carrying out the sovereign function of compensating judges. In our view, however, what distinguishes the state or federal government’s payment of a salary from a private citizen’s payment of a bribe is not the fact that the payor is a sovereign. Sovereigns are not necessarily disinterested; they want to win their lawsuits as much as private citizens do. Moreover, it is certainly possible for a sovereign to bribe a judge. For example, if a lawyer employed by the state Department of Transportation agreed to give a judge a Lamborghini if the judge ruled in favor of the state, the involvement of the sovereign would not excuse either the bribe-giver or the bribe-taker. What matters is not the nature of the offeror but the nature of the offer. A judge’s salary is not conditional on whether the judge’s rulings favor the state. The state has little ability to use a judge’s salary as a vehicle for either reward or retaliation. Under the California Constitution, a judge’s salary cannot be reduced during his or her term in office. (Cal. Const., art. III, § 4, subd. (b).) And by statute, all superior court judges 13 (except presiding judges) receive the same salary. (Gov. Code, §§ 68202, 68203, 68203.1.) Local supplemental benefits look, walk, and quack like a salary, not like a bribe. They consist of perks conventionally provided to employees in both the public and private sectors. They are not conditional on whether a judge’s rulings favor the county. Under SBX2 11, they cannot be either increased or reduced during a judge’s term in office. Most counties that provide local supplemental benefits at all provide them to every judge in the county; the minority of counties that provide them only to some judges do so based on fixed cutoff dates, depending on when a judge first took office. (Historical Analysis, supra , at pp. 16-17, D-10-D-14.) Thus, a county cannot use local supplemental benefits to reward or to retaliate against a judge. In this case, we may accept as true plaintiffs’ allegations that, even though the County was not a party to their divorce proceedings, it had a pecuniary interest in those proceedings. The judges who presided over the divorce proceedings, however, had no such pecuniary interest, because their rulings could not possibly affect their local supplemental benefits. Moreover, the mere fact that the County provided a portion of the judges’ compensation would not cause a reasonable person to entertain a doubt that the judges would be able to be impartial. Indeed, under SBX2 11, the state required the County to do so. Silva v. County of Los Angeles (C.D. Cal. 2002) 215 F. Supp. 2d 1079 is directly on point. There, the plaintiff filed an action against Los Angeles County in state court. (Id. at pp. 1080-1081.) The state court judge granted a directed verdict against the plaintiff 14 and in favor of the County. The plaintiff then filed an action in federal court against the state judge and others (id. at p. 1081); he asserted that, by receiving local supplemental benefits and by failing to disclose the receipt of those benefits, the state judge deprived him of his federal constitutional right to due process. (Id. at p. 1082.) The federal court granted a motion to dismiss. (Silva v. County of Los Angeles, supra , 215 F.Supp.2d at p. 1080.) It ruled, “Even assuming all of the facts in [the] complaint are true, those facts simply do not establish a due process violation.” (Id. at p. 1086.) It explained, in part, “[T]he County pays local judicial benefits to Superior Court judges regardless of the outcome of any particular case, and thus there is no incentive for a Superior Court judge to rule in the County’s favor.” (Id. at p. 1087; accord, Fine v. Sheriff of Los Angeles County (9th Cir. Dec. 16, 2009, No. 09–56073) 2009 U.S. App. LEXIS 27586 [judge who received local supplemental benefits was not disqualified from case to which county was a party]; Priddel v. Shankie (1945) 69 Cal. App. 2d 319 , 327 [judge whose salary was paid by county was not disqualified from case to which county was party].)4 4 The judges’ main argument as to why they were not disqualified is that Sturgeon I and II supposedly held that local supplemental benefits are constitutional. Neither of those cases, however, addressed the particular due process argument that plaintiffs are raising here. “‘“It is axiomatic that cases are not authority for propositions not considered.”’ [Citation.]” (McWilliams v. City of Long Beach (2013) 56 Cal. 4th 613 , 626.) The judges’ briefs would have been more helpful if they had cited Silva, Fine, or Priddel. 15  We conclude that, for the same reason, the trial court correctly sustained the demurrers without leave to amend.5 VII ABSOLUTE JUDICIAL IMMUNITY The judges also demurred based, in part, on absolute judicial immunity. “Judicial immunity from a civil action for monetary damages is absolute. [Citations.]” (Soliz v. Williams (1999) 74 Cal. App. 4th 577 , 586.) “‘The concept of judicial immunity is long-standing . . . , with its roots in English common law. It bars civil actions against judges for acts performed in the exercise of their judicial functions and it applies to all judicial determinations, including those rendered in excess of the judge’s jurisdiction, no matter how erroneous or even malicious or corrupt they may be. [Citations.]’ [Citation.] ‘The rationale behind the doctrine is twofold. First, it “protect[s] the finality of judgments [and] discourag[es] inappropriate collateral attacks.” [Citation.] Second, it “protect[s] judicial independence by insulating judges from vexatious actions prosecuted by disgruntled litigants. [Citation.]” [Citation.]’ [Citation.]” (McClintock v. West (2013) 219 Cal. App. 4th 540 , 550.) “Under the concept of ‘quasi-judicial immunity,’ California courts have extended absolute judicial immunity to persons other than judges if those persons act in a judicial 5 Ettlin filed a request that this appeal be heard by justices who have never received local supplemental benefits. The foregoing reasoning compels us to deny his request and to assign the case without regard to whether the justices on the panel have or have not received local supplemental benefits. We also note that, if any of the justices on this panel have received such benefits, that event was so remote in time that no one could reasonably entertain a doubt as to their impartiality. 16 or quasi-judicial capacity. Thus, court commissioners ‘acting either as a temporary judge or performing subordinate judicial duties ordered by the appointing court’ have been granted quasi-judicial immunity. [Citation.]” (Howard v. Drapkin (1990) 222 Cal. App. 3d 843 , 852-853; see also Tagliavia v. County of Los Angeles (1980) 112 Cal. App. 3d 759 , 763.) Plaintiffs argue that judicial immunity does not apply because they sued the judges as individuals, rather than in their official capacity. “‘“Immunity exists for ‘judicial’ actions; those relating to a function normally performed by a judge and where the parties understood they were dealing with the judge in his official capacity. [Citations.]” [Citation.] Thus, the line is drawn “between truly judicial acts, for which immunity is appropriate, and acts that simply happen to have been done by judges. Here, as in other contexts, immunity is justified and defined by the functions it protects and serves, not by the person to whom it attaches.” [Citation.]’ [Citation.]” (Regan v. Price (2005) 131 Cal. App. 4th 1491 , 1495-1496.) Here, plaintiffs are suing the judges because the judges accepted benefits that were prescribed by law (albeit a law that plaintiffs contend is unconstitutional) as compensation for performing their official judicial duties. Even more important, plaintiffs are suing the judges because, they allege, the benefits functioned as bribes to the judges, to influence them in the performance of their official judicial duties. It is hard to imagine a claim that more clearly implicates judicial acts. Plaintiffs cannot plead their way around judicial immunity simply by naming each defendant as “an individual.” 17  Plaintiffs also assert that “[b]ench officers must abide by the CCP, the Code of Judicial Ethics and the laws of California and the United States as a precondition for any immunity.” Not so. (Dennis v. Sparks (1980) 449 U.S. 24 , 25-29 [judge who was sued for allegedly taking bribe had judicial immunity].) If this were true, a judge could claim immunity only if he or she could prove that he or she did nothing wrong; but in that case, the judge would not need immunity at all. Rather, as already noted, judicial immunity applies even if the judge’s actions were erroneous, in excess of jurisdiction, malicious, or corrupt. Plaintiffs argue that “[t]aking payments personally from any party other than their employer is outside the scope of all official judicial actions.” (Emphasis omitted.) Once again, however, as already noted, a judge accused of taking a bribe can have immunity. In any event, the judges’ employer — the State of California — has authorized the payments by enacting SBX2 11.6 Los Angeles County Ass’n of Envtl. Health Specialists v. Lewin (C.D. Cal. 2002) 215 F. Supp. 2d 1071 upheld a claim of judicial immunity on almost identical facts. There, the plaintiff filed an action against the County of Los Angeles in state court. (Id. at p. 1072.) The plaintiff prevailed; however, the state court judge denied the plaintiff’s motion for attorney fees. (Id. at pp. 1072-1073.) The plaintiff then filed an action against the state judge in federal court, alleging that, because the judge received local 6 Actually, Commissioner Veasey’s employer is the County. Thus, even under plaintiffs’ formulation, for her, receiving local supplemental benefits is an official judicial action. 18 supplemental benefits from the county, he was disqualified, and that, by presiding over the case without revealing that he was disqualified, he violated due process. (Id. at pp. 1073-1074.) The federal court granted the state judge’s motion to dismiss. (Los Angeles County Ass’n of Envtl. Health Specialists v. Lewin, supra , 215 F.Supp.2d at p. 1074.) It ruled that, even assuming the allegations of the complaint were true, the state judge was entitled to absolute judicial immunity. (Id. at pp. 1077-1078.) It explained that the state judge “clearly was performing a judicial function when he denied the [plaintiff]’s request for attorney’s fees. [Citation.]” (Id. at p. 1077.) Moreover, “[e]ven if [the state judge] violated the [plaintiff]’s constitutional rights by failing to disclose that he received payments from the County, he did not act in the complete absence of jurisdiction.” (Id. at p. 1078.)7 Plaintiffs cite Caperton v. A.T. Massey Coal Co., Inc., supra , 556 U.S. 868 , which held that it was a violation of due process for an appellate judge to hear an appeal involving a corporation after accepting a $3 million campaign contribution from an officer of the corporation. (Id. at p. 872.) Plaintiffs then argue that, if judges have absolute immunity, “[t]he U.S. Supreme Court would not have wasted its precious time 7 Under Government Code section 6103, a “public officer . . . acting in his or her official capacity” is exempt from paying filing fees. Defendants were granted an exemption from paying filing fees on appeal. Ettlin has filed a document entitled “Appellant’s Objection to Fee Exemption,” in which he argues that defendants are not exempt from filing fees because they were sued in their individual capacities, not their official capacities. However, for the same reasons that we concluded above that defendants are entitled to judicial immunity, we also conclude that defendants are entitled to a fee exemption. 19 on Caperton . . . .” In Caperton, however, the judge was not even a party. The mere fact that bribe-taking and bias on the part of a judge violate due process does not tell us what the remedy for the due process violation is. And the doctrine of judicial immunity tells us that the remedy is not an action for money damages against the judge. Plaintiffs also draw an analogy to the “kids for cash” scandal, in which two Pennsylvania judges took bribes from private juvenile detention facilities in exchange for sentencing children to those facilities. Eventually, however, those judges were criminally convicted. (See generally , as of May 20, 2014.) Absolute judicial immunity does not shield a judge from criminal liability. (Mireles v. Waco (1991) 502 U.S. 9 , 10, fn. 1.) This demonstrates, once again, that there are remedies for judicial bribe-taking and corruption other than an action for money damages. We emphasize that we are applying the common-law doctrine of judicial immunity; we are not applying the retroactive immunity provision of SBX2 11. Plaintiffs argue that this retroactive immunity provision is unconstitutional.8 We need not and do not decide this issue. We conclude that the demurrers were properly sustained based on judicial immunity. 8 Some of this argument has been cribbed from a Salon article, without any citation or other form of credit. (, as of October 27, 2014.) 20  VIII THE GOVERNMENT CLAIMS ACT Finally, the judges demurred based, in part, on failure to file a claim pursuant to the Government Claims Act and statutory immunity under the Government Claims Act. Plaintiffs, however, pleaded civil rights claims under 42 United States Code section 1983 (section 1983). The claim presentation requirement of the Government Claim Act does not apply to a section 1983 cause of action. (Felder v. Casey (1988) 487 U.S. 131 , 138; Williams v. Horvath (1976) 16 Cal. 3d 834 , 842; Florio v. City of Ontario (2005) 130 Cal. App. 4th 1462 , 1468 [Fourth Dist., Div. Two].) Similarly, state statutory immunities cannot bar a section 1983 cause of action. (Martinez v. California (1980) 444 U.S. 277 , 283-284; Asgari v. City of Los Angeles (1997) 15 Cal. 4th 744 , 759, fn. 11.) Accordingly, to the extent that the trial court sustained the demurrers without leave to amend on either of these grounds, it erred. For the reasons already stated, however, the demurrers were properly sustained. Therefore, the error is harmless. IX MISCELLANEOUS ISSUES A. Disqualification of Judges O’Brien and Shaller Plaintiffs contend that Judge O’Brien and Judge Shaller, who sustained the demurrers, were themselves disqualified. 21  1. Additional factual and procedural background. After their case was assigned to Judge O’Brien, Ettlin and Cooper filed statements that Judge O’Brien was disqualified based on bias. (See Code Civ. Proc., § 170.3, subd. (c).) In support, they asserted that, between 1989 and 1999, Judge O’Brien had received over $270,000 in local supplemental benefits. Judge O’Brien ordered the statements stricken. (See Code Civ. Proc., § 170.4, subd. (b).) He explained: “The undersigned retired as a Superior Court Judge on August 16, 1999, more than a decade ago. As a retired judge, the undersigned [h]as been assigned to sit as a judge of the Los Angeles Superior court by the California Chief Justice pursuant to [the] California Constitution, Article VI, section 6. As an assigned judge, the undersigned is paid entirely by the state. Government Code section 68543.5(a). The undersigned does not receive compensation or benefits from the County of Los Angeles. [¶] Accordingly, as a matter of law the statement of disqualification demonstrates on its face no legal grounds for disqualification.” Cooper and Ettlin challenged Judge O’Brien’s order by filing petitions for writ of mandate. We take judicial notice that the petitions were summarily denied. As far as the record reflects, Locatelli never asserted below that Judge Shaller was disqualified. 2. Analysis. We cannot reach this contention because it simply is not cognizable on appeal. “The determination of the question of the disqualification of a judge is not an appealable 22 order and may be reviewed only by a writ of mandate from the appropriate court of appeal . . . .” (Code Civ. Proc., § 170.3, subd. (d).) With regard to Judge Shaller, we cannot reach this contention for the additional reason that Locatelli never sought to disqualify Judge Shaller below. (Code Civ. Proc., § 170.3, subd. (c); People v. Farley (2009) 46 Cal. 4th 1053 , 1110.) B. Change of Venue. Plaintiffs contend that they were entitled to a change of venue (presumably based on inability to get a fair trial; see Code Civ. Proc., § 397, subd. (b)). However, they have forfeited this contention by failing to support it with reasoned argument and citation of authority. (Lewis v. City of Benicia (2014) 224 Cal. App. 4th 1519 , 1539.) Separately and alternatively, they have also forfeited this contention by failing to provide us with an adequate record. (See part V, ante.) Although Cooper did file a motion for change of venue, which is in the record, the record does not contain any opposition to the motion or any ruling on the motion. C. Misprision of Felony. Plaintiffs contend that, by failing to report the fact that local supplemental benefits are illegal, the judges are guilty of misprision of felony under 18 United States Code section 4. This statute provides that “[w]hoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States” has committed a federal crime. (Plaintiffs do not identify the federal felony that the judges supposedly concealed.) 23  Plaintiffs did not allege misprision of felony in their complaints. Accordingly, this contention fails to show that the trial court erred in any way in sustaining the demurrers. If only out of an excess of caution, we note that even if the judges did fail to report a federal felony, we could not do anything about it. A federal criminal charge can be brought only by a federal prosecutor (Linda R.S. v. Richard D. (1973) 410 U.S. 614 , 619) in a federal court. (18 U.S.C. § 3231.) D. Sex Discrimination. Plaintiffs contend that SBX2 11 violates the federal Equal Pay Act of 1963 (29 U.S.C. § 206) because it “allows [the] 58 county Superior Courts to make unequal payments to male and female bench officers.” Again, plaintiffs did not allege sex discrimination in their complaints. Thus, this contention fails to show that the trial court erred in sustaining the demurrers. In any event, plaintiffs’ sex discrimination theory is fatally flawed. Basically, they argue that, because Los Angeles County provides local supplemental benefits and Humboldt County does not, male judges in Los Angeles County are paid more than female judges in Humboldt County. This ignores the fact that female judges in Los Angeles County are also paid more than male judges in Humboldt County. In other words, to the extent that SBX2 11 has a discriminatory impact, it is discriminatory based on location, not sex. The Equal Pay Act “applies only to pay disparities stemming from sex discrimination. Pay disparities due to other reasons, by contrast, are not actionable.” (Kangethe v. District of Columbia (D.D.C. 2013) 953 F. Supp. 2d 194 , 203.) 24  E. Involvement of the Commission on Judicial Performance and the Attorney-General. Plaintiffs claim that the Commission on Judicial Performance (Commission) has determined that SBX2 11 is unconstitutional. According to plaintiffs, the Commission has asked the Attorney General for an opinion on whether SBX2 11 is constitutional, but the Attorney General “is delaying and effectively refusing” to respond. Even if true, this has no bearing on this case. The Commission is not in charge of deciding whether statutes are or are not constitutional. And, as plaintiffs concede, the Attorney General has never issued an opinion on the matter.9 In any event, plaintiffs have not properly placed the general constitutionality of SBX2 11 at issue in this action. Even assuming that SBX2 11 and/or local supplemental benefits are unconstitutional, plaintiffs do not explain how that adversely affected their divorce cases. Certainly it would not entitle them to the money damages that they are seeking. F. Disqualification of the Sturgeon I and II Justices. Plaintiffs argue that the justices who decided Sturgeon I and Sturgeon II lacked “personal jurisdiction” because they had received local supplemental benefits in the past. Plaintiffs also make a somewhat convoluted claim that then-Chief Justice Ronald M. 9 Plaintiffs seem to think that the Attorney General has a duty to “certif[y] the constitutionality of SBX2 11 pursuant to United States Supreme Court Rule 14.1(e)(v) and pursuant to 28 U.S.C. [section] 2403(b).” The rule and statute cited, however, merely allow a state attorney general to intervene in a federal case involving the constitutionality of a state statute. They do not require a state attorney general to do anything. 25 George exercised undue influence over Justice Patricia Benke shortly before she authored Sturgeon II. Plaintiffs do not explain, however, what any of this has to do with this case. They do not suggest that we should simply disregard Sturgeon I and II; quite the contrary, they rely on those cases. Moreover, even if we were to disregard Sturgeon I and II, the result in this case would still be the same. X ATTORNEY FEES Defendants have requested an award of attorney fees on appeal under 42 United States Code section 1988 (section 1988). As mentioned earlier (see part VIII, ante), plaintiffs relied on section 1983. Section 1988, as relevant here, provides that: “In any action or proceeding to enforce . . . section[] . . . 1983 . . . the court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee . . . .” (§ 1988(b).) In a section 1983 action, a prevailing plaintiff is entitled to attorney fees under section 1988 as a matter of right, “absent special circumstances which would render such an award unjust. [Citation.]” (Beach Colony II v. California Coastal Com. (1985) 166 Cal. App. 3d 106 , 117.) By contrast, “[a] prevailing defendant . . . is entitled to an award of attorney fees under section 1988 only when the plaintiff’s action is ‘“frivolous, unreasonable, or without foundation.”’ [Citation.]” (California Correctional Peace Officers Assn. v. Virga (2010) 181 Cal. App. 4th 30 , 38-39, fn. 7.) 26  Here, plaintiffs’ claims are about as frivolous, unreasonable, and without foundation as can be. We may assume, without deciding, that plaintiffs’ challenges to local supplemental benefits, while meritless, fall short of being frivolous. Even if so, however, under the circumstances of this case, they are indisputably barred by judicial immunity.10 Plaintiffs assert that they “read the Sturgeon II decision as an invitation by the [a]ppellate [c]ourt for citizens to bring this kind of suit.” (Italics added.) Sturgeon I and II, however, did not involve any issue of judicial immunity. Even assuming Sturgeon II could be read as an invitation to bring a claim, it was not an invitation to bring a claim that was defective or procedurally barred. We therefore conclude that respondents are entitled to an award of attorney fees on appeal, in an amount to be determined by the trial court on remand. XI REQUEST FOR JUDICIAL NOTICE Locatelli has filed a request for judicial notice. In brief summary, he asks us to take judicial notice that, in his divorce case, he sought to disqualify Judge Lewis, and that the Judicial Council assigned a judge of the Orange County Superior Court (who therefore, according to Locatelli, had received local supplemental benefits) to rule on the 10 We also note that, with respect to seven of the ten defendants, the appeal lacked merit due to plaintiffs’ failure to provide us with an adequate record. (See part V, ante.) 27 disqualification issue. Locatelli concludes that the Judicial Council “lack[s] . . . appreciation for the issues involved.” We decline to take the requested judicial notice because the materials that are the subject of the request are irrelevant to any of the issues to be decided in this appeal. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal. 4th 415 , 422, fn. 2.) XII DISPOSITION The judgments are affirmed. Defendants are awarded attorney fees on appeal against plaintiffs in an amount to be determined by the trial court on remand. NOT TO BE PUBLISHED IN OFFICIAL REPORTS RICHLI J. We concur: RAMIREZ P. J. KING J. 28

2020-06-05 07:04:00.460468+00

https://efast.gaappeals.us/download?filingId=07fb7ce6-da5c-4127-b474-439a7201922b

Court of Appeals of the State of Georgia ATLANTA,____________________ June 04, 2020 The Court of Appeals hereby passes the following order: A20D0329. ARTHUR E. FERDINAND, FULTON COUNTY TAX COMMISSIONER v. FULTON COUNTY, GEORGIA. Arthur E. Ferdinand, the Fulton County Tax Commissioner, brought an action for declaratory judgment against Fulton County, seeking a judicial determination as to whether certain employees are covered by the County’s Civil Service Act and Merit System as amended in 2013. The superior court issued summary judgment in favor of the County, and Ferdinand filed both a direct appeal, Case No. A20A1548, and, in an abundance of caution, this application for discretionary review.1 The superior court’s order is subject to direct appeal. See OCGA §§ 5-6-34 (a) (1) (appellate courts may review final judgments of the superior courts), 9-4-2 (a) (declaratory judgment “shall have the force and effect of a final judgment or decree and be reviewable as such”), 9-11-56 (h) (grant of summary judgment is subject to direct appeal). Notably, although the respondent in this case is Fulton County, the superior court did not review an adjudicative decision of the County, so the provisions of OCGA § 5-6-35 (a) (1) do not apply. See State of Ga. v. Intl. Keystone Knights of the Ku Klux Klan, Inc., 299 Ga. 392 , 403-404 (4) (a) (788 SE2d 455) (2016) (“The decisions in which this Court has actually applied OCGA § 5-6-35 (a) (1) to require applications for discretionary review in cases involving administrative agencies almost uniformly appear to have concerned agency determinations of an 1 We transferred the application and direct appeal to the Supreme Court, which concluded that appellate jurisdiction lies in the Court of Appeals. See Supreme Court Order in S20D1033 (decided on April 9, 2020) & Supreme Court Order in S20A1094 (decided on May 18, 2020). adjudicative nature. We consistently have refused, on the other hand, to require applications in cases concerning executive determinations and those involving rulemaking or other determinations of a legislative nature.”). Ordinarily, when an applicant seeks discretionary review of a superior court order that is subject to direct appeal, we grant the application under OCGA § 5-6-35 (j). Ferdinand, however, has already filed a notice of appeal in the trial court. This application is therefore DISMISSED as duplicative. Court of Appeals of the State of Georgia Clerk’s Office, Atlanta,____________________ 06/04/2020 I certify that the above is a true extract from the minutes of the Court of Appeals of Georgia. Witness my signature and the seal of said court hereto affixed the day and year last above written. , Clerk.

2020-01-17 22:01:40.49248+00

Lansdon

*1322OPINION. Lansdon : Three questions are presented for determination in this proceeding : (1) The allowable deduction on account of net additions to reserves during the taxable year; (2) whether reserves held during the taxable year should be included in invested capital; and (3) whether there exists such abnormality of income or invested capital as will entitle petitioner to special assessment. The respondent has allowed the full reserves claimed by petitioner for its life and endowment contracts. The petitioner makes no objection as to the reserves allowed by respondent for the sick element of the life, sick benefit and accident contracts, and concedes that the reserve computed by the respondent at December 31, 1920, on the life element of the life, sick benefit and accident policies is correct. We are concerned, then, only with the reserve at December 31, 1919, on the life element of the life, sick benefit and accident insurance. Section 234 (a) (11) of the Revenue Act of 1918 provides: (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * * * tf * * 4) (11) In the case of corporations issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan continuing for life and not subject to cancellation, in addition to the above, such portion of the net addition (not required by law) made within the taxable year to reserve funds as the Commissioner finds to be required for the protection of the holders of such policies only. The petitioner made no additions to the reserve herein involved from 1914 to 1920. On its income-tax return for 1920 it claimed a net addition of $155,919.17. Upon audit the respondent calculated the proper increase in the reserve for the 6-year period and allowed one-sixth of that amount as a net addition during the taxable year. It is the petitioner’s contention that the increase would be less than the arbitrary amount determined by the respondent in the earlier years and greater in the later years. It offers in support of this contention a revaluation made in 1926 and submitted for the approval of the Insurance Bureau of the State of Virginia. Ray P. James, Actuary for the Virginia Insurance Bureau, was called as a witness for the petitioner and identified the letter set out in our findings of fact. He testified that on the figures submitted to him, the reserves stated in the letter were correct. On cross-examination *1323be admitted that he had not seen the petitioner’s books, and that the figures submitted for insurance in force at December 31, 1919, were stated to be estimates. Such evidence can be given little weight to establish the correct reserve at that date in the absence of proof showing the amount of insurance then in force. The figures submitted for insurance in force at December 31, 1920, were taken from the petitioner’s books and establish as the correct reserve on that date the amount determined by the respondent. Petitioner must establish that the net additions in the taxable year are required for the protection of policyholders. Mammoth Life & Accident Insurance Co., 6 B. T. A. 869. Proof of this fact necessarily includes the actual amounts of insurance outstanding at the beginning and end of the taxable year, which is the basis for additions to reserves. We think the petitioner has failed to establish that the deduction claimed on account of net additions to reserves required for the protection of policyholders under section 234(a) (11) of the Revenue Act of 1918 is properly allocable to the taxable year. Petitioner alleges that under the decision of the Supreme Court in Duffy v. Mutual Benefit Life Insurance Co., 272 U. S. 613, it is entitled to have included in its invested capital the amount of reserves held during the taxable year. We do not agree with petitioner. In the Dufy case, supra, the court held that the legal reserve of a mutual life insurance company, consisting of premiums paid by the members, constitutes invested capital within the meaning of section 207 of the Revenue Act of 1917. The decision in that case rests upon the fact that each policyholder is a member of the corporation, and that the corporation has no capital stock. The petitioner in the instant proceeding is a stock company whose policyholders are not members of the corporation. In such circumstances, the petitioner’s reserves do not come within the definition of invested capital as stated in section 326 of the Revenue Act of 1918. In support of its claim for special assessment the petitioner urges the following grounds: (1) That special assessment was granted for the years 1918 and 1919; (2) that the respondent has allowed invested capital in the amount of $365,520.21, and determined net income to have been $299,062.10, which is an impossible yield of 82 per cent; (3) that, if petitioner is required to pay the deficiency determined, the total tax paid to the Government would amount to $138,149.15, which is 46.2 per cent of its net income as determined by the respondent; (4) that had it been permitted it would have shown gross disproportion between the tax determined and that paid by representative corporations; and (5) that, due to unfavorable .living conditions and the hazardous nature of the work of petitioner’s policyholders;, most of whom were colored, the mortality rate was *1324approximately 200 per cent of the rate shown by the American Experience Table of Mortality, upon which petitioner’s reserves are based. Before the benefits of section 328 of the Revenue Act of 1918 can be granted, it must be shown that there were abnormal conditions affecting capital or income as provided in section 327 of the 1918 Act, which follows: (d) Where upon application by the corporation the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations specified in section 328. This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high merely because the corporation earned within the taxable year a high rate of profit upon a normal invested capital, * * * The Board has repeatedly held that the granting of special assessment for one year does not of itself warrant the granting of special assessment for a succeeding year. Granting relief in 1918 and 1919 is not proof that error was committed in denying relief for 1920. Enameled Metals Co., 14 B. T. A. 1392; Standard Rice Co., Inc., 13 B. T. A. 338. The second, third, and fourth grounds urged by petitioner in support of its claim for special assessment are not directed to any abnormal conditions affecting capital or income. That the percentage of net income to invested capital is high or that the tax determined is large are not matters to be considered in a proceeding-limited to the issues set out in subdivisions (a) and (b) of Rule 62. The fact of gross disproportion between the tax determined and that paid by representative corporations becomes material only in proceedings under section 328. The petitioner’s fifth ground, stated above, constitutes in our opinion an abnormality of income. Section 4256 of the Virginia Code of 1919 provides that all life insurance companies operating in the State shall maintain a reserve based upon the American Experience Table of Mortality, with 4 per cent interest. Pursuant to that statute petitioner set up its reserves, though its experience establishes a mortality rate 100 per cent in excess of that shown by the American Experience Table of Mortality, which is based on select white risks, while petitioner’s risks consist of colored industrial workers. Petitioner’s actuary, A. B. Upshur, testified that at some time subsequent to the taxable year, he calculated the' reserve on the life element of the life, sick benefit and accident policies as of the beginning and end of the taxable year on the basis of the Sub-standard *1325Industrial Table of Mortality and that the reserves thus computed were $366,198 and $446,238, an increase of $80,040. The reserves set up and held by petitioner during the taxable year being, ^sufficient to meet its mortality losses, it follows that a part of the net income determined by the respondent will be required later for the payment of death claims. We are of the opinion, therefore, that petitioner’s situation falls within the provisions of section 327 of the Revenue Act of 1918 and that its tax liability for the year 1920 should be computed under section 328 of such Act. Reviewed by the Board. Decision will he entered after 'proceeding under Buie 6% (c).

2020-01-17 22:01:40.529429+00

Lansdon

*1330OPINION. Lansdon: The single issue to be determined in this proceeding is whether the petitioner was a personal service corporation during the first six months of its fiscal year ended June 30, 1922, the benefit of that classification having been specifically denied after December 81, 1921, by section 218(d) of the Revenue Act of 1921. The statutory definition of a personal service corporation is contained in section 200(5) of the Revenue Act of 1921, which reads in part as follows: (5) The term “ personal service corporation ” means a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor; * * * In order to bring itself within the definition, petitioner must establish (1) that it is engaged in rendering personal service as distinguished from trading, merchandising or manufacturing; (2) that capital, whether invested or borrowed, is not a material income-producing factor; (3) that the principal stockholders are regularly engaged in the active conduct of the business; and (4) that the income may be ascribed primarily to the activities of the principal stockholders. Failure to meet any one of these qualifications is fatal to the claim for personal service classification. The petitioner operates a school of dentistry, where students seek and are afforded instruction from an experienced and capable faculty. Only an insignificant amount of income is derived from the sale of books and supplies, the rental of caps and gowns, and interest paid by stockholders on notes for the balance of their subscriptions to stock. *1331During the period June 30, 1921, to December 31, 1921, the petitioner had 22 stockholders who held its 500 shares of outstanding stock. We have found that six of such stockholders, who held 33.2 per cent of the stock, were inactive in petitioner’s aifairs. The petitioner contends that one of such number, Barnwell, who held 75 shares of stock, was actively engaged in petitioner’s aifairs during the taxable period inasmuch as he was vice president, was influential in securing new students and attended the regular business meetings. We have heretofore held that a principal stockholder who renders no service to the corporation other than social in character, such as the cultivation of acquaintances for the purpose of inducing them to have business transactions with the corporation, is not regularly engaged in the active conduct of the aifairs of the corporation. Agenzia Fugazi, 3 B. T. A. 16; Joseph Emsheimer Insurance Agency, 1 B. T. A. 649; Boyd Tax Service Corporation, 1 B. T. A. 346. We are of the opinion that the remaining 16 of petitioner’s stockholders, who held 68.8 per cent of the stock, do not constitute “ the principal owners or stockholders” within the meaning of.the Revenue Act, and that petitioner’s principal stockholders were not regularly engaged in the active conduct of its affairs. We think petitioner fails to come within the fourth condition listed above, namely, that its income may be ascribed primarily to the activities of its principal stockholders. It employed 17 professors and instructors who were not stockholders, paying them salaries in the aggregate amount of $19,209.49 as compared with aggregate salaries paid to the 16 stockholder professors of $21,476.68. Petitioner’s other employees, who received salaries totaling $7,391.11, were clerks and stenographers and were incidental to the management. The 17 nonstockholder professors and instructors, however, were skilled employees and were responsible for the production of a large portion of petitioner’s income. They may not be described as incidental to petitioner’s management and their efforts in pro-’ ducing income may not be ascribed to the management. Cf. Metropolitan Business College v. Blair (C. C. A.), 24 Fed. (2d) 176, affirming 5 B. T. A. 10; Infant Incubator Co., 12 B. T. A. 449; Strayer's Business College, Inc., 10 B. T. A. 573; Crider Brothers Commission Co., 10 B. T. A. 338; Albrecht & Weaver, Inc., 9 B. T. A. 560. The petitioner contends that, having been granted personal service classification for the preceding taxable years 1918, 1919, and 1920, when it operated substantially the same kind of a business under similar conditions, including the employment of substantially the same professors, it should be granted personal service classification in this proceeding. We do not agree with such contention. The *1332granting of a special classification for one year does not of itself warrant the granting of that classification for a succeeding year. Enameled Metals Co., 14 B. T. A. 1392; Standards Rice Co., 13 B. T. A. 338. Reviewed by the Board. Decision will be entered for the respondent. Trussell dissents.

2020-01-17 22:01:40.56647+00

Morris

*138OPINION. MoRRis: The first allegation of error relates to the failure of the respondent to allow a deduction for obsolescence, exhaustion, wear and tear or loss of a patented process which became, as the peti*139tioner alleges, exhausted and obsolete and therefore a complete loss in the year 1918. The respondent contends that the deduction claimed should not be allowed for the reason that there is no competent evidence to support the March 1, 1913, value as contended for, and that even assuming that said value has been clearly evidenced, the facts do not justify the deduction as obsolescence under section 234 (a) (7), the loss, if one has been sustained, is a loss of useful value, not obsolescence, and therefore the basis for determining the deduction is the cost of the patent and not its March-1, 1913, value. If a deduction is allowable, authority therefor must be found in one of the following subdivisions of section 234 (a) of the Revenue Act of 1918: (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * ⅜ * * ⅝ # HC (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise; * * * * * * ⅜ (7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. We disagree with counsel for the respondent that the value of the - patent is unsupported by the evidence. Considering the earnings of the petitioner for the several years prior to March 1, 1913, which are unquestionably in large part attributable to the patented process, the marketability of its product at that time, the lack of competition, and the future prospects of the business after that date, together with the positive testimony of men who were at all times during the life of the petitioner in intimate contact therewith, we have found as a fact that the patent in question had a value at March 1, 1913, of $275,000. The respondent offered copies of certain letters patent in evidence for the purpose of rebutting the testimony that the petitioner had a monopoly on the manufacture of purified bleached cotton fibers from low-grade cotton linters. No evidence was offered as to whether the processes covered by these patents were in use, or if they were, that they were identical or even similar to those employed by the petitioner. We can, therefore, attribute no value to this evidence. It must be conceded at the outset that the manufacture of gun cotton base was hopelessly imperiled at the close of the World War in 1918, due to the oversupply of gun cotton and gun powder, enough, it was testified, to supply the needs of the world for four or five years, and a consequent sudden cessation in demand for that product. In 1917 the petitioner believed its business would be absolutely at an end and its plants valueless at the close of the war. Immediately after the signing of the Armistice its plants were closed down and operations were never thereafter resumed, except for a futile attempt *140which was made during 1919, 1920, and 1921 to divert its product to the manufacture of paper. We must also concede that the success or failure of the petitioner depended entirely upon the product manufactured under the patent which it claims became obsolete in 1918. But do those factors, without more, render the patent itself obsolete, within the meaning of the statute? Webster’s New International Dictionary defines “obsolescent” or “ obsolescence,” “ to wear out gradually; to fall into disuse,” and the word obsolete ” is defined to mean “ no longer in use; disused; neglected; as, an obsolete word; an obsolete statute.” Obsolescence as used in the statute is the state or process of becoming obsolete and the provision allowing a deduction therefor is intended to care for losses of capital which take place over a longer period than the taxable year. William Zakon, 7 B. T. A. 687. The state of obsoleteness is reached when the property which can not be used for any other purpose is no longer economically useful for the purpose for which it was acquired, Frederick C. Renziehausen et al., 8 B. T. A. 87, and is therefore abandoned. It could be foreseen, after the signing of the Armistice, that the market as a base for explosives, for the product manufactured under the patent was completely wiped out during the remaining life of the patent. The patent, or the process protected thereby was not abandoned, however. While the petitioner closed its plant in 1918, it engaged in experimental work in the hope that it would succeed in diverting its product to the manufacture of paper, a use for which the petitioner had been more or less successful in disposing of its product prior to the execution of the contract with the du Pont Company. We are satisfied that had the petitioner been convinced in 1918 that its patent was obsolete for all purposes, it certainly would not have spent $50,000 or more in trying to revive a former use. In this connection it is interesting to note the language used by this Board in Yough Brewing Co., 4 B. T. A. 612, wherein the Board said: * * * It is urged that the taxpayer should not be made to suffer because it in effect attempted to increase the amount of salvage when it knew there was small chance of successful operation. This argument presuppose.s that the taxpayer was attempting only to realize salvage, a premise with which we do not agree. We must presume that the taxpayer’s officers were exercising their best business judgment and that in so doing they saw a reasonable prospect of a profitable business in near beer. We can not credit them with power to prophesy in 1919 that the public would not take to near beer. If that fact could have been foreseen would they have gone into the near beer business? We think not. Because their expectations for profitable business were not realized, they can not now maintáin that the plant was obsolete when they began making near beer. Considering all the facts and circumstances we are of the opinion that the patent did not become obsolete during the year 1918. *141In our decisions relied upon by the petitioner the assets claimed to have become obsolete or valueless within the taxable year, upon which a claim for deduction was based, were tangible property, definitely discarded or abandoned within the taxable year, and either completely charged off in the books^of account or the value thereof written down to a junk or scrap value. Here the value of the asset was not carried in the books of account, and for that reason could not have been charged off within the taxable year as was done in those cases, but the patent was not abandoned. The product was manufactured thereunder, and shipped to various paper mills in an attempt to establish a market in that trade. We are also of the opinion that the petitioner is not entitled to a deduction under section 234 (a) (4) of the Revenue Act of 1918. As already pointed out, the patent was not discarded during 1918, nor j at the close of that year was it established that it was valueless. Tax i liability is determined upon the basis of annual accounting periods,' and when a determination is made for a given year, the facts and conditions occurring and existing during such year must be the basis upon which we predicate our action. H. P. Robertson Co., 14 B. T. A. 887. We found as a fact that the patent had a March 1, 1913, value of $275,000. The petitioner is therefore entitled to a deduction for exhaustion based on that value and a life extending to July 20, 1920. J. J. Gray, Jr., 2 B. T. A. 672. The second allegation of error herein was expressly withdrawn by petitioner’s counsel at the hearing of this proceeding. L. S. Ayers & Co., 1 B. T. A. 1135, is determinative of the third allegation of error herein. Reviewed by the Board. Judgment will be entered under Rule 50. Trammell dissents.

2020-01-17 22:01:40.614047+00

Steknhagen

*1339OPINION. Steknhagen : The deduction claimed by each petitioner for 1921 is for a loss said to be realized in the sale in that year by the trust company of securities for less than either the value on March 1, 1913, or'the value when received in 1912 in the Standard Oil distribution, the latter figure being apparently taken as representing the statutory cost. United States v. Flannery, 268 U. S. 98, and Ludington v. McCaughn, 268 U. S. 106. The Commissioner denied the deduction because in his view the trust company was making the sale as a trustee taxable under section 219, Revenue Act of 1921, and the loss therefore was available for deduction only by the trustee and not directly by the petitioners, who, in his view, are the beneficiaries of such trust. If respondent’s view be correct, the petitioners’ whole case falls and it is conceded that .judgment for the full amount should enter for respondent. But petitioners establish that before the sale the trust had come to an end by operation of law, that the property was owned by petitioners and held by the trust company under a dry, passive or nominal trust, and its sale was by them, and that the consequent loss or gain was theirs directly. *1340With the death of the life tenant, these petitioners as remainder-men became at once entitled, despite the nominal power of the trustee, to sell and distribute the proceeds. New York Real Property Law, §§92, 93; Personal Property Law, §11; Cochrane v. Schell, 140 N. Y. 516; Brown v. Richter, 25 .App. Div. 239; In re O'Reilly's Estate, 82 App. Div. 374; Steinert v. Steinert, 161 App. Div. 841; In re Finck’s Estate, 103 Misc. 526. The sale thereafter must be regarded as a sale by them with such resulting gain or loss to each as may be recognized by the statute. Section 202, Revenue Act of 1921, provides: Sec. 202. (a) That the basis for ascertaining the gain derived or loss sustained from a sale or other disposition of property, real, personal, or mixed, acquired after February 28, 1913, shall be the cost of such property; except that — ■ * ■ * * * * * * (2) In the case of such property, acquired by gift after December 31, 1920, the basis shall be the same as that which it would have in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the facts necessary to determine such basis are unknown to the donee, the Commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person cognizant thereof. If the Commissioner finds it impossible to obtain such facts, the basis shall be the value of such property as found by the Commissioner as of the date or approximate date at which, according to the best information the Commissioner is able to obtain, such property was acquired by such donor or last preceding owner. In the case of such property acquired by gift on or before December 31, 1920, the basis for ascertaining gain or loss from a sale or other disposition thereof shall be the fair market price or value of such property at the time of such acquisition; (3) In the case of such property, acquired by bequest, devise, or inheritance, the basis shall be the fair market price or value of such property at the time of such acquisition. The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision (c) or (e) of section 402. ⅜ * * ⅜ ⅝ ⅝ ⅜ Reading section 202(a)(2) in the light of the statement of purpose contained in both the House and Senate reports upon the bill before it became a law and as it has been adjudicated in Taft v. Bowers, 278 U. S. 470, we are of the opinion that it does not, either by intendment or expressly, cover the sale of property acquired as this was. The difference between a gift and a trust has been too well known in the law to permit the view that Congress intended by using the word gift to include trusts and thus to involve the statute in the confusion which would necessarily result. The later provision of section 204, Revenue Act of 1924, demonstrates this. While the petitioners in one sense acquired the property by gift in that they paid nothing for it, there is no reason to attribute this meaning to the Act. They acquired it pursuant to a vested legal right and this right *1341had been theirs since long before the adoption of the Sixteenth Amendment in 1913. We think, therefore, that as to petitioners the property was not “ acquired by gift after December 31, 1920 ” and therefore the exceptional basis of paragraph (2) does not apply. We think also that paragraph (3) has no application. The trust instruments were not in terms- testamentary, nor were property interests acquired by petitioners such as were specified in subdivision (c) or (e) of section 402. The only basis to apply for the determination of gain or loss is the value at the time of acquisition by petitioners of the property sold, that is March 3,1921. The petitioners’ motion for judgment on the pleadings is therefore denied. Reviewed by the Board. Trammell dissents. Phillips and Green dissent on the ground that the loss on the sale of the securities in question was properly returnable by the trustees under section 219 of the Revenue Act of 1921.

2020-01-17 22:01:40.663645+00

Littleton

*1344OPINION. Littleton: The record upon which this proceeding is submitted consists solely of those parts of the petition which are admitted by respondent’s answer, affirmative admissions in respondent’s answer and evidence on one disputed fact, to wit, the amount which was paid by the firm of Levy Bros, prior to the death of Abe M. Levy (hereafter referred to as decedent), either to him or on his account. At the hearing petitioners, while conceding that the amount of $27,092.64, which was actually received by or paid on account of decedent during his life out of the earnings of the firm ,of Levy Bros, for the calendar year 1924, is subject to income tax, contend that no part of his share of income which was not so received or paid is taxable, or, to state their contention in another way, the decedent should be charged with only the amounts actually paid to or for him during his lifetime and that the large earnings of the partnership during his lifetime which were not actually received should not be included. They further contend that the method employed by respondent in computing the income of decedent from the partnership was erroneous. The only fact we have before us on the latter point is the admission in respondent’s answer to the effect that he “ in determining the balance on the books of account of Levy Bros, as of November 10, 1924, considered only actual receipts and disbursements up to said date.” The effect of this admission will be referred to later in this opinion. We assume for the purpose of this opinion that the articles of partnership contained no provision authorizing Haskel Levy to continue the business of the partnership after the death of decedent. At the outset, it is well to consider the ultimate effect of the first contention. It is clear that decedent’s share of the net earnings of the partnership as of the date of his death, whether or not actually distributed, was income. Such share of the earnings was not income to his estate. Nichols v. United States, 64 Ct. Cls. 241; certiorari denied, 277 U. S. 584. Cf. Walter R. McCarthy, Executor, v. Commissioner, 9 B. T. A. 525. With certain well defined exceptions, none of which are applicable, section 213 of the Revenue Act of 1924 includes in gross income “ gains or profits and income derived from any source whatever.” There is no provision in that section or in that revenue act which declares that such income is exempt from tax. We, therefore, have before us income which is not exempt and which can escape taxation, if at all, only by reason of the provisions of *1345section 218 of the Revenue Act of 1921. If any part of the income of decedent from the firm escapes taxation, then the revenue act “ has missed so much of the general purpose that it expresses at the start.” Irvin v. Gavit, 268 U. S. 161; 5 Am. Fed. Tax Rept. 5380. Petitioners rely upon section 218(a) of the Revenue Act of 1924 and upon Appeal of R. W. Archbald, Jr., et al., Executors, 4 B. T. A. 483. Section-218(a) reads: Sec. 218. (a) Individuals carrying on business in partnership shall be liable for income tax only in their individual capacity. There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year, or, if his net income for such taxable year is computed upon the basis of a period different from that upon the basis of which the net income of the partnership is computed, then his distributive share of the net income of the partnership for any accounting period of the partnership ending within the taxable year upon the basis of which the partner’s net income is computed. The above subdivision provides how the income of partners shall be returned and taxed. It gives full recognition to the common law rules governing partnerships and partners. It treats a partnership not as a distinct taxable entity, but taxes the partners individually. It follows the common law concept that each partner is, within the scope of the partnership business, the agent of the other partners, and, therefore, that receipt by one is receipt by all, with the consequent result that each partner is in receipt of his share of the partnership income “ whether distributed or not.” Following this principle, it further provides that each partner shall return for taxation his share, whether distributed or not, of the partnership income for the taxable year. Recognizing the fact that the taxable year of the partnership might be a different year from that of a partner, provision is made to cover such a state of case. In this proceeding, we are not concerned with this question, since the taxable year of the decedent coincides with the taxable year of the partnership. Here, decedent was required in his return for each calendar year to include therein his share of the partnership income for the taxable year from. the partnership, the two taxable years being the same. He was not required to return more or less than his share, whatever that may have been. It was his share that he was required to return and not the share of some other taxable entity which might have acquired an interest in his property rights during the taxable year. Neither would such other taxable entity be required to return the income of decedent. The term “partnership,” as used in section 218, refers only to ordinary partnerships. Burk-Waggoner Oil Assn. v. Hopkins, 269 U. S. 110; 5 Am. Fed. Tax Rept. 5663. The general rule ⅛ that such partnerships are terminated by the death of a partner, except where provision is made to preserve the continuity in *1346case of death, and we have no evidence that the latter contingency was true in this case. This rule prevails in Texas. Upon the death of a partner the surviving partner is entitled, without interference, to take over the partnership assets in trust, first for the creditors and then for the estate of the deceased partner. As such fiduciary be is authorized to dispose of the partnership assets, even to the extent of executing in his name, as surviving partner, a deed of assignment for the benefit of creditors. The only duty and the only right of a surviving partner is to wind up the partnership affairs. If the surviving partner continues the business of the partnership, he does so at his own risk, and the estate of the deceased partner ⅛ entitled either to interest on the value of the decedent’s investment in the partnership, or, at its' election, to an equitable share of the profits. This share is not the share prescribed by the partnership articles, but is the share to which the estate is equitably entitled when all the facts are taken into consideration, including the fact that the estate is not a partner. See cases Rogers v. Flournoy, 21 Tex. Civ. App. 556; 54 S. W. 386; Amarillo National Bank v. Harrell (Tex. Civ. App.), 159 S. W. 858; Douthart v. Logan, 190 Ill. 243; 60 N. E. 507; Robinson v. Simmons, 146 Mass. 167; 15 N. E. 558; Emerson v. Senter, 118 U. S. 3. From the foregoing it may be deduced that the death of decedent terminated the partnership to the same extent as it ended his earthly existence; that from the date of decedent’s death Haskel Levy was no longer a partner, but only a liquidating agent or trustee for the benefit, first, of the firm creditors and then for himself and for the estate of decedent, which was a distinct taxable entity; that any income that may have been earned thereafter was not partnership income but the income of Haskel Levy and decedent’s estate; and that section 218 has no application to such income. If, on November 10, 1924, decedent, while living, had sold his interest in the partnership to Haskel Levy, reserving to himself his share of the partnership income up to the date of sale, it would have been his duty after the end of the calendar year to have returned such share of income, whether distributed or not, even though it was income for but a part of the taxable year. It matters not within what part of a taxpayer’s accounting year income is received. What A-""is required is that at the end of the accounting period income received in any part of that period must be returned. We can perceive no difference in principle between the supposed case and what actually took place. The only difference in fact is that instead of decedent making his return at the end of the accounting period, this duty devolved upon his executor. ■' Having reached the conclusion that decedent’s executor should have returned at the end of the year 1924 the share of the partnership *1347income for that year to which decedent was entitled as of the date of his death, whether distributed or not, we are met with the contention that this results in shortening the accounting periods of both decedent and the partnership. It is clear that this rule does not shorten the accounting or taxable period of decedent, since his executor was required to report all his income for the whole year. Neither does it shorten the accounting period of the partnership. It only recognizes the fact that both decedent and the partnership ceased to exist within the accounting period and that, after the death of the one and the termination of the other, neither could be in receipt of taxable income, for the obvious reason that neither thereafter had actual or legal existence. Since there was no partnership after November 9, 1924, it follows that the profits of the partnership for the period January 1, 1924, to November 9, 1924, inclusive, should be computed as of the end of such period, and the decedent’s share of such profits, whether distributed or not, should be included in computing his net income in the return which was required to be rendered in his behalf for the calendar year 1924. The partnership apparently kept its books on a receipts and disbursements basis — at least its calendar year reports of income for the years prior to 1924 had been rendered on the receipts and disbursements basis, and the report which was filed by the surviving member of the partnership on account of the partnership for 1924 was filed on the same basis. This last report was for the entire calendar year 1924 and covered receipts and disbursements by the partnership from January 1 to November 9, 1924, inclusive, as well as receipts and disbursements from November 10, 1924, to December 31, 1924, inclusive, of the surviving partner, who carried on the business after the dissolution of the partnership. In making such report, the surviving partner allocated a part of the profits, which he determined for the entire year, to the period January 1 to November 9, 1924, and the remainder to the period November 10 to December 31, 1924. No evidence was furnished as to the manner in which this allocation between periods was accomplished. The respondent likewise followed the receipts and disbursements method, but instead of first determining the profits for the entire year 1924 and then allocating such profits to the two periods, he determined the profits of each period on the basis of receipts and disbursements for such periods. The petitioners admit that if there is to be a determination of income of the partnership for the period January 1 to November 9, 1924, inclusive, on the basis of cash received and disbursed in this period, the result reached by the respondent is mathematically correct, but objection is made thereto on the ground that in determining the profits for the period ended November 9, 1924, there was left out of account obligations then outstanding *1348which were properly chargeable against the profits for the period January 1 to November 9, 1924. While no evidence was furnished as to the existence of these obligations or their character, we fail to see wherein such obligations, if they existed, should be taken into consideration. The partnership is on a receipts and disbursements basis. On such basis similar objection could be made in most cases wherein income is being determined in this manner, since it would be most unusual to find a period in the existence of any business enterprise where there were not accrued items of income or expense which had not been received or paid. Then, too, if the obligations referred to are to be considered, the same argument would apply to any income due, but not yet received and, likewise, if we are to make these adjustments at the end of this partnership period, would it not be necessary to make similar adjustments at January 1, 1924? While the foregoing discussion illustrates objections which may be made to the use of the receipts and disbursements basis, we fail to see wherein there is warrant in the statute for accepting a method proposed by the petitioners which would be part accrual and part receipts and disbursements. When a taxpayer elects to report on a receipts and disbursements basis, he must take such method with the advantages and disadvantages appertaining thereto. When Abe Levy died, the partnership was dissolved, and we must determine the profits of the partnership without regard to what happens in the liquidation of the partnership. What we are seeking to determine is profits of operation — not gain or loss which may result through liquidation of the partnership. Whatever income had been earned up to this time which had not been collected and which properly belonged to the decedent would represent an asset which would become a part of the corpus of the decedent’s estate, and any part of the liabilities for which the decedent was responsible would become liabilities of the estate. The fact that their collection and payment at face value would not constitute income and expense to the estate (Nichols v. United States, supra, and Walter B. McCarthy, Executor, supra) would not alter the fact that in determining the profits of the partnership (a separate taxable entity) on the receipts and disbursements basis, such profits must be computed on the basis of income received and expenses disbursed. In the Nichols case, the decedent was, at his death, the member of a partnership which had performed some services for which the partnership had not been paid at decedent’s death. The amount was paid between the date of death and the end of the calendar year in which the decedent died. Both the decedent and the decedent’s executors kept their books of account on the cash receipts and -disbursements basis. The Commissioner sought to tax the share of these profits which was received by the *1349estate as income of tbe estate. The Court of Claims, in denying the contentions of the Commissioner, said: It tiras appears that the one item has been treated as part of the value of the gross estate for estate-tax purposes, and as part of the gross income of the estate for income-tax purposes and the question for decision is whether it can be made to serve in both these capacities. We think the answer must be in the negative. For taxation purposes the individual’s income during his lifetime and the income of his estate after his death are distinct things, the individual and his -estate being separate entities. * ⅜ * When, therefore, an item is properly determined to constitute a part of the gross estate of a decedent for estate-tax purposes it can not by any sort of reasoning be made to constitute a part of the income of the same estate. It is a part of the corpus. The income of an estate which the statute taxes, is, generally speaking, the income which accrues after the estate begins, and it begins with the decedent’s death. * ⅜ ⅜ In the instant case the decedent did not receive the amount in question. He did not keep his books on an accrual basis. According to the facts his books of account, as also the books of plaintiff, as executors, “ were kept on a cash receipts and disbursements basis.” In these circumstances the right to receive from the partnership the distributive share to which the decedent was entitled passed at the time of his death to the executors as an asset of the estate, and when the amount was ascertained and paid it became part of the estate, not as income, but as corpus. That there may be a hiatus as between the income taxable to the decedent and that taxable to the decedent’s estate is explained by the fact that we are dealing with entirely separate taxable entities, and that specific statutory provision is made for the starting point in dealing with an estate which may or may not coincide with the extent ’to which accretions in income have been taxed to the decedent. (Section 204 (a) (5), Kevenue Act of 1924.) In the case at bar, any liabilities of the decedent which existed at his death would become liabilities of his estate and their satisfaction would not constitute a deduction from any income which the estate may have realized during the period of its administration, even though they may have been deductible to the partnership in determining its income on the basis on which its books were kept and reports of income rendered. In view of the foregoing, the Board is of the opinion that the profits of the partnership for the period January 1 to November 9, 1924, inclusive, must be determined upon the basis of accounting employed by the partnership and that since the basis so employed was the receipts and disbursements basis, income accrued at the decedent’s death or expenses then due, but unpaid, can not be taken into consideration. In the brief filed after the hearing the Commissioner makes the following statement: The respondent concedes that the correct tax liability of the decedent can not be determined as of the date of his death without taking into consideration the aggregate net income of the partnership for the year 1924, the books of the petitioner not having been closed, to determine the profit as of the date of death. *1350In other words, the decedent’s income is limited to what he would have been entitled to receive upon the dissolution of the partnership, November 10, 1924, and a winding up of its affairs. It is the position of the respondent that the decedent’s distributive share of the aggregate net income of the partnership of which he was a member for the year 1924 should be allocated to him in the proportion that the number of days he lived during the year 1924 has to the entire ye$.r. The decedent having died November 10, 1924, his income would be 314/365ths of his distributive share of the aggregate net income of the partnership for the year 1924. The Board is of the opinion that the foregoing statement proceeds upon the false premise that profits of the partnership for the period when it was in existence will be changed by what happens in the liquidation of the partnership. It is not understood as a confession of error on the part of the respondent with respect to his determination of the profits of the partnership on a receipts and disbursements basis on account of its operations from January 1 to November 9, 1924, inclusive, when this period is considered without regard to events which happened subsequent to November 9, 1924. The decedent’s share of the profits of the partnership from January 1 to November 9, 1924, inclusive, as determined by the respondent on the receipts and disbursements basis, was $68,486.74. Since the Board is of the opinion that no valid objection had been made to the respondent’s computation, its prima facie correctness will be sustained. The foregoing views are not in conflict with the decision in Bankers Trust Co. v. Bowers (C. C. A.), 295 Fed. 89. The facts in that case were that one Glackner, who had made his income-tax returns on the calendar year basis, died on April 4, 1921. His executors filed two income-tax returns- — one return reported the net income received by Glackner during the taxable year 1921, and the other the net income received by them as executors during the same taxable year, and paid the taxes shown due by the two returns. Respondent applied section 226 of the Revenue Act of 1921, and increased the tax on both returns. The court held that section 226 had no application and that the executors’ method of returning income of their decedent and his estate was proper. In that case the question arose as to what was the taxable year of both decedent and his estate, and in passing on this issue, the court said: * * * The fundamental scheme of title 2 of the Revenue Act is for a tax upon the net income of the taxpayer during an accounting period of 12 successive months. This general accounting period seems to be a predetermined measure to be applied to a taxpayer as income, and is not affected by his death or change of status within the period. The tax is imposed upon the entire net income for such period, and the return of such income constitutes his return for the period of 12 full months, even though, he may have IweS, only a portion thereof. (Italics supplied.) *1351Again, the court said: The plaintiffs allege their accounts as executors were kept on the calendar year basis, and upon this basis they are taxable pursuant to Section 219. We find nothing in the act making returns filed for decedents or estates exceptions to the general rule. The plaintiffs, in their returns for the decedent and his estate, did not elect to change the accounting period, nor is there any attempt to defeat the collection of the tax, which might invoke either of the sections above referred to. Therefore, not falling within either of the exceptions above, they would be improperly considered, if returned for less than a year. The time of receipt of income or the ability to receive income has no bearing upon the accounting period. A taxpayer may receive his income for the year on the first day of the year. He may become a nonresident alien during the year, without property in or income from any source in the United States. As an alien, he may have come to this country during the first taxable year, and he may have attained his majority or become incompetent during the year. When during the year his status changes, and he becomes a taxpayer, or ceases to be one, is immaterial. If he received taxable income during any part of that year, and, kept his books on a calendar year basis, a return is required of all such income derived from or received within the IS months of such calendar year, and the return is for a period of 12 months. Here the plaintiffs reported all the taxable income received by the decedent during the calendar year of 1921; and in their return, they reported all the taxable income received by the estate of the decedent during the same calendar year 1921. The estate and deceased were separate entities, each having a separate accounting. Because their books were kept for the calendar year 1921, it required them to return for that year. It was possible for the estate to have kept its books on a fiscal year basis. A different period might then have been called for. The return filed for the decedent was one of the returns required to be filed by the fiduciaries and for “ an individual ” having a net income for the taxable year of “ $1,000 or over ” under section 225, and the estate return was required for “ every estate or trust the net income of which for the taxable year is $1,000 or over ” under the same section. The decedent and his estate have long been regarded as separate taxable entities. In Mandell v. Pierce (16 Fed. Cas. 576, Case No. 9,008), arising under the Act of June 30, 1864 (13 Stat. c. 173), an executor sought to recover a tax collected on the income received by the decedent from January 1, 1865, to July 2, 1865, the date of his death. The plaintiff argued that the income tax was imposed on an annual income, and the act required no return to be filed by an executor, where the deceased died before the time appointed for the filing of the return. In sustaining the tax, the court said it was imposed upon the income received within the income year, and that the income received by the decedent within the income year constituted “ annual gains, profits, and income ” within the meaning of the act, holding that: “ Gains, profits, and income received within the income year are annual gains, profits, and income within the meaning of those laws, although the whole amount of the same in a given case may be received within the first month or the last month of the year.” And further: “When ascertained as required by law, the intention of Congress was, that gains, profits, and income received within the income year, from the sources therein defined, should be subject to the prescribed taxation, whether such *1352gains, profits, or income were derived from any kind of property, rents, interest, dividends, salaries; or from any trade, profession, employment, vocation, owned, collected, pursued, or followed for the whole or any part of the income year.” Subdivision (f) of section 216 (Comp. St. Ann. Supp. 1923, § 6336-l/8h) provides: “The credits allowed by subdivisions (c) (d) and (e) of this section shall be determined by the status of the taxpayer on the last day of the period for which the return, of income is made; but in the case of an individual who dies during the taxable year, such credits shall be determined by his status at the time of his death, and in such case full credits shall be allowed to the surviving spouse, if any, according to his or her status, at the close of the period for which such survivor makes return of income.” This section indicates it was not the intention of Congress that the date of death be the last day of the period for which the decedent’s return is filed. * * ⅜ (Italics supplied.) The decision of the Board in the Appeal of R. W. Archbald, Jr., et al., Executors, supra, on which reliance is placed by the petitioners, involved certain facts which are not present in the case at bar. In that case, a partner, who had regularly made his income-tax return on a calendar year basis, was a member of a partnership which had kept its accounts on the basis of fiscal years ending January 81 of each year. The partner died on August 15, 1920. The question presented was whether the executors of a deceased partner should return for the year 1920 not only the share of decedent in the partnership income for the fiscal year ending January 31, 1920, but also the share of the profits of the partnership from February 1, 1920, to August 15, 1920, the date of decedent’s death, and the consequent dissolution of the partnership. The Board held that the only income from the partnership to be included in the return for the decedent for the calendar year 1920 was the distributive share of the partnership to which he was entitled for the fiscal year ended January 31, 1920. There is not involved in the case at bar any conflict on account of the partnership being on a fiscal year basis and the partner 'on a calendar j^ear basis; here the accounting periods coincide. Nor is there involved the question of a partner being required to report more than 12 months’ income on account of the operations of a partnership. To the extent, however, that the views expressed in the ArcKbald case are ⅛- conflict with the views herein expressed, the ArcKbald case is overruled. Reviewed by the Board. Judgment will be entered for the respondent. Teussell and GeeeN dissent. Phillips concurs in the result.

2020-01-17 22:01:40.677934+00

Milliken

Milliken, dissenting: I concur in the solution set forth in the concurring opinion as to the manner in which the income of the decedent from the partnership is to be determined for' the period January 1,1924, to date of death. I dissent however from the action of the majority in affirming the determination of the respondent. While we know the exact amount of the partnership income for the calendar year 1924 which was paid to or for the benefit of decedent during his lifetime, we do not know the net income of the partnership for the period January 1, 1924, to November 10, 1924, the date of death of the decedent. Both respondent and petitioner have proceeded upon the theory that the partnership did not terminate with the death of the decedent and computed the income of the partnership for the whole calendar year. In this computation they differ as to the amount of such income. Respondent determined one amount and then admitted that petitioner reported a larger amount. Petitioner allocates only so much of the annual income to the decedent as was either paid to him in his lifetime or during such period was paid for or on his account. This is not in accord with section 218. On the other hand, respondent has erroneously refused to consider charges against the partnership which existed but were unpaid at decedent’s death. Both computations are in error and we have not been supplied with sufficient data whereby we might correct them. The respondent admits in brief filed in this cause that his method of computation was erroneous and requests us to *1354apportion the annual income between the decedent and his estate on the basis of time. In other words, he has requested us to indulge in speculation pure and simple. For all we know losses may have been sustained after the decedent’s death which would have wiped out almost entirely the income attributable to the period January 1, 1924, to date of decedent’s death. * It is also pertinent to point out that the prevailing opinion overrules R. W. Archibald, Jr., et al., 4 B. T. A. 483. The petitioner tried this case at a time when he had the right to consider that the Arch-bald case, supra, represented the settled views of the Board. By the overruling of the Archbald case the petitioner is placed in a dilemma' that he would not have found himself in had the Archbald case been followed. Bule 50 of our rules of practice specifically provides that the burden of proof shall be upon the petitioner, and the cases are legion where we have found it necessary to affirm the determination of the respondent due to the failure' of the petitioner to prove the errors averred. However, to affirm the determination of the respondent in the case at bar, when it clearly appears that his determination was in error and is so admitted by him in the brief filed, would result in the application of our rule to a state of case not intended and work a manifest injustice. We should not give sanction to that which on its face shows error. In my opinion this proceeding should be restored to the general calendar for hearing in due course and both parties given the opportunity to try the case in conformity with the rule laid down in the prevailing opinion. VAN FossaN concurs in this dissent.

2020-12-01 19:00:19.889903+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:19-3038:J:Kanne:aut:T:fnOp:N:2621162:S:0

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 19-3038 JAMES A. DONALD, Plaintiff-Appellant, v. WEXFORD HEALTH SOURCES, INC., ANTHONY CARTER, and KURT OSMUNDSON, Defendants-Appellees. ____________________ Appeal from the United States District Court for the Central District of Illinois. No. 16-1481 — James E. Shadid, Judge. ____________________ ARGUED OCTOBER 2, 2020 — DECIDED DECEMBER 1, 2020 ____________________ Before RIPPLE, KANNE, and HAMILTON, Circuit Judges. KANNE, Circuit Judge. When James Donald entered prison, he had two eyes. Now he has one. The immediate cause of the loss of his left eye was an aggressive bacterial infection, but Donald argues that the substandard care of two prison doc- tors is to blame. He sued the doctors (and one of their employ- ers) for deliberate indifference under the Eighth Amendment and medical malpractice under Illinois law. The district court 2 No. 19-3038 granted summary judgment in favor of the defendants on the federal claims and one of the malpractice claims. It then relin- quished jurisdiction over the remaining state-law claims. We agree that summary judgment was proper because (1) the undisputed evidence shows that the defendants did not act with deliberate indifference toward an objectively se- rious medical condition and (2) the district court appropri- ately exercised supplemental jurisdiction to dispose of the malpractice claim. We therefore affirm the district court. I. BACKGROUND James Donald has an unfortunate ocular history. He has glaucoma, a common condition that causes increased pres- sure in the eyes, and he also has keratoconus, a thinning of the cornea that causes distorted vision. And, to treat his kerato- conus, Donald had left-eye corneal transplant surgery in 2011. A few years later, Donald was convicted of drug crimes, and he began his prison sentence at Illinois River Correctional Facility in Canton, Illinois, in September 2014. Before long, his eye problems started flaring up, causing redness and poor vi- sion. So he went to see one of Illinois River’s optometrists, Dr. Anthony Carter, on October 2, 2014. 1 Dr. Carter examined Donald, noted that his corneal transplant “looked excellent,” and referred him to Illinois Eye Center in Peoria for an evalu- ation and a fitting for the contact lens he wore in his left eye. Per Dr. Carter’s referral, Donald went to Illinois Eye Cen- ter on October 27, 2014, and saw Dr. Steven Sicher, an 1 Dr. Carter was employed by an entity called Eye Care Solutions, which subcontracts with Defendant Wexford Health Sources, Inc., to pro- vide care to Illinois River inmates. It is not a party to this case. No. 19-3038 3 ophthalmologist who specializes in the cornea and external diseases. Dr. Sicher assessed Donald’s corneal transplant and found that it was doing well with no signs of graft rejection. Donald also had normal intraocular pressure. Dr. Sicher rec- ommended no changes in care and suggested that Donald continue using eye drops. He also suggested that Donald see the physician who performed his corneal transplant surgery, Dr. Catharine Crockett, “in four months.” He did not recom- mend that Donald see Dr. Crockett for any particular reason other than for “follow-up maintenance of [his] corneal trans- plant and keratoconus” because “continuity of care is im- portant.” Dr. Sicher also recommended that the prison con- tinue to obtain Donald’s contact lenses; apparently, he did not realize that part of the reason Donald had been sent to him was to obtain the prescription for those lenses. When Donald returned to Illinois River, Dr. Carter did not schedule a follow-up appointment with Dr. Crockett because he didn’t think it was necessary; both he and Dr. Sicher had concluded that Donald’s eye conditions were stable. And be- cause Dr. Sicher did not provide Donald’s contact prescrip- tion, Donald filled out a records release form, and Dr. Carter received Donald’s prescription on November 25, 2014. He ap- proved a supply of lenses the next week and then attempted to contact Dr. Crockett’s office to process the order. But de- spite several attempts and “many calls and letters,” his staff could not get ahold of Dr. Crockett. Strangely, during this same period, the Illinois Depart- ment of Corrections received a letter from Dr. Crockett stress- ing the importance of proper treatment and medication for Donald’s corneal transplant. The letter also indicated that Donald needed a contact lens “for vision in his left eye.” 4 No. 19-3038 Donald had apparently told his family that he wasn’t getting proper care, and his family told Dr. Crockett. There is no dep- osition from Dr. Crockett in the record and no evidence that she knew the prison was attempting to get in touch with her or obtain new contacts for Donald. In any event, Donald fi- nally received new lenses in February 2015. When Donald visited Dr. Carter again in May 2015, his eye pressure had increased because of his glaucoma, so Dr. Carter approved a refill of his eye-pressure medication. Dr. Carter continued to monitor Donald’s eye pressure and supply med- ication over the next two months. By July 30, Donald’s eye pressure had improved significantly. On September 17, 2015, Donald reported that his left eye had been red for two weeks, without irritation. Upon exami- nation, Dr. Carter saw that the vision in Donald’s left eye had improved and his corneal transplant was stable, but he also had a papillary reaction—an allergic or histamine response that causes bumps to form under the eyelids. Dr. Carter diag- nosed allergic conjunctivitis in Donald’s left eye and sus- pected that it was caused by either Donald’s eye drops or con- tact lens solution. Dr. Carter instructed Donald to stop using his contacts for a few days to see if his condition improved. A week later, on September 24, 2015, Donald’s eye was still red, still without irritation. Dr. Carter did not suspect corneal rejection because the redness was generalized rather than concentrated around the cornea. Donald’s eye pressure had also continued to improve, his transplant looked good, and there were no signs of infection. He changed Donald’s eye drops to see if they were causing the reaction and told Donald to come back the next month. That was the last time Donald saw Dr. Carter. No. 19-3038 5 On October 19, 2015, Donald saw Dr. Kurt Osmundson for the first time. Dr. Osmundson is a doctor of osteopathic med- icine and is employed by Defendant Wexford Health Sources, Inc. (“Wexford”), which provides medical care to inmates at Illinois prisons. At this visit, Donald complained about in- creased pain and decreased vision. His left eye was cherry red in color, and he noticed some “matter in his eye.” Dr. Os- mundson, who was aware of Donald’s ocular history, diag- nosed a corneal ulcer and made an urgent referral to an offsite ophthalmologist. Donald was immediately transferred to Illinois Eye Cen- ter, but no ophthalmologists were in the office that day. In- stead, an optometrist, 2 Dr. Jacqueline Crow, examined Don- ald’s eye and observed redness, swelling, and poor vision. Be- cause she was not a cornea specialist, she called Dr. Sicher to discuss her observations. 3 Dr. Sicher concluded that Donald’s symptoms were more consistent with a corneal graft rejection than an ulcer. Based on her consultation with Dr. Sicher, Dr. Crow entered a diagnosis of corneal graft rejection. She also recommended that Donald change eye drops and that he re- turn to see Dr. Evan Pike, an ophthalmologist and cornea spe- cialist, in two or three days. When Donald returned to Illinois River—and following Dr. Crow and Dr. Sicher’s diagnosis and recommendations— Dr. Osmundson immediately ordered the change in eye drops 2 Optometrists provide routine eye care and, unlike ophthalmologists, are not medical doctors. 3Dr. Crow first asked the transporting guards if they could move Donald to the office where Dr. Sicher was located, but the request was denied. The record does not reflect who denied the request. 6 No. 19-3038 and scheduled the follow-up appointment with Dr. Pike. He also admitted Donald to the infirmary so he could be moni- tored in the meantime. A few days later, on October 22, 2015, Dr. Pike examined Donald and diagnosed a left-eye corneal ulcer caused by a bacterial infection. He could not determine if the infection and the previously diagnosed graft rejection were related, but in any event, he was forced to treat both conditions at the same time. He therefore ordered antibiotic drops to treat the infec- tion and steroid drops to treat the graft rejection. He asked Donald to return in five to seven days after the medication had some time to kick in. That day, Dr. Osmundson wrote the order recommended by Dr. Pike, and the record indicates that Donald received the prescribed eye drops from a nurse that evening. 4 Over the next three days, Donald reported that he had no vision, yellow drainage, and immense pain, all in his left eye. By October 26, nursing staff confirmed increased pain, bleed- ing, and drainage. Nurses contacted Dr. Osmundson, who di- rected them to call Illinois Eye Center for instructions. Donald was immediately transferred there and seen by Dr. Sicher. Dr. Sicher diagnosed a rupture of the globe: “the corneal graft had come off and … there was a wide opening in the front of his eye with protrusion of iris and intraocular con- tents through the opening in the front of his eye.” This was, in Dr. Sicher’s words, “an irreversible loss of vision. It’s basically a disaster.” Dr. Sicher performed surgery to remove Donald’s 4The nurse and Donald both confirmed this in their depositions, and the nurse documented delivery of the medication that day. Donald’s claim on appeal that he did not promptly receive eye drops is unsupported. No. 19-3038 7 left eye. After surgery, pathological tests revealed that the in- fection that led to the ruptured globe was caused by pseudo- monas aeruginosa, bacteria that can act very quickly and cause perforation in as few as seventy-two hours. On December 16, 2016, Donald sued Dr. Carter, Dr. Os- mundson, and Wexford. He brought claims under 42 U.S.C. § 1983 for deliberate indifference to a serious medical need in violation of the Eighth Amendment and for medical malprac- tice under Illinois law. During discovery, the defendants jointly submitted an ex- pert report from Dr. Lisa Nijm, an ophthalmologist and cor- nea specialist, who opined that, to a reasonable degree of medical certainty, the earliest indication of a possible corneal rejection or infection would have appeared on October 18, 2015, three weeks after Donald had last seen Dr. Carter. She also explained that there was appropriate monitoring and treatment of Donald’s symptoms at all times prior to his in- fection and that there is no connection between glaucoma (or its treatment) and the development of an ulcer. Dr. Carter also submitted an expert report from Dr. Julie DeKinder, an optometrist, who explained that (1) Dr. Carter’s treatment was appropriate and within the standard of care, (2) an optometrist is qualified to treat a patient exhibiting Donald’s symptoms and would not be expected to refer a pa- tient with those symptoms to an ophthalmologist, (3) Dr. Carter’s diagnosis of allergic conjunctivitis was consistent with Donald’s symptoms at the time, (4) there was no evi- dence that Donald was suffering from a corneal infection or rejection at any time that he saw Dr. Carter, and (5) the serious condition that resulted in Donald’s eye loss was unrelated to the conditions managed by Dr. Carter. 8 No. 19-3038 Donald also engaged an expert, Dr. Melvin Ehrhardt, but his testimony was limited to “managing inmate care” and “coordinated care and communication within a prison set- ting.” He was not admitted as an expert in optometry, oph- thalmology, corneal transplants, keratoconus, or corneal ul- cers. Dr. Ehrhardt opined that Donald showed signs of infec- tion and graft rejection and that the defendants breached the standard of care by, among other things, failing to promptly refer Donald to a specialist and failing to provide medications on a timely basis. After discovery, the defendants moved for summary judg- ment. The district court granted the defendants’ motions with respect to the deliberate indifference claims and exercised its supplemental jurisdiction to grant summary judgment on the malpractice claim against Dr. Carter. The court relinquished jurisdiction over the remaining state-law claims against Dr. Osmundson and Wexford. Donald then filed this appeal. II. ANALYSIS We review the district court’s order granting summary judgment de novo. Flexible Steel Lacing Co. v. Conveyor Accesso- ries, Inc., 955 F.3d 632 , 643 (7th Cir. 2020) (citing Ga.-Pac. Con- sumer Prods. LP v. Kimberly-Clark Corp., 647 F.3d 723 , 727 (7th Cir. 2011)). “Summary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). “A genuine dispute of material fact exists if ‘the evidence is such that a reasonable jury could return a ver- dict for the nonmoving party.’ We ‘consider all of the evidence in the record in the light most favorable to the non-moving party, and we draw all reasonable inferences from that evi- dence in favor of the party opposing summary judgment.’” No. 19-3038 9 Dunn v. Menard, Inc., 880 F.3d 899 , 905 (7th Cir. 2018) (first quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 (1986); and then quoting Feliberty v. Kemper Corp., 98 F.3d 274 , 276–77 (7th Cir. 1996)). Donald’s primary contention on appeal is that the district court erred in granting summary judgment on his § 1983 claims for deliberate indifference to a serious medical condi- tion in violation of the Eighth Amendment. “‘[D]eliberate in- difference to serious medical needs’ of a prisoner constitutes the unnecessary and wanton infliction of pain forbidden by the Constitution.” Rodriguez v. Plymouth Ambulance Serv., 577 F.3d 816 , 828 (7th Cir. 2009) (quoting Estelle v. Gamble, 429 U.S. 97 , 104 (1976)). To succeed on his claims, Donald “must estab- lish ‘(1) an objectively serious medical condition; and (2) an official’s deliberate indifference to that condition.’” Gomez v. Randle, 680 F.3d 859 , 865 (7th Cir. 2012) (quoting Arnett v. Web- ster, 658 F.3d 742 , 750, 751 (7th Cir. 2011)). The first, objective element is satisfied by showing that the plaintiff suffered from a condition “that ‘has been diagnosed by a physician as mandating treatment or one that is so obvi- ous that even a lay person would perceive the need for a doc- tor’s attention.’” Gayton v. McCoy, 593 F.3d 610 , 620 (7th Cir. 2010) (quoting Hayes v. Snyder, 546 F.3d 516 , 522 (7th Cir. 2008)). The second element of “[d]eliberate indifference is proven by demonstrating that a prison official knows of a sub- stantial risk of harm to an inmate and ‘either acts or fails to act in disregard of that risk.’” Gomez, 680 F.3d at 865 (quoting Arnett, 658 F.3d at 750 ). This has been called a “high hurdle,” Rosario v. Brawn, 670 F.3d 816 , 821 (7th Cir. 2012), and an “ex- acting” standard, Johnson v. Doughty, 433 F.3d 1001 , 1018 n.6 (7th Cir. 2006) (citing Snipes v. DeTella, 95 F.3d 586 , 591 (7th 10 No. 19-3038 Cir. 1996)); it requires “something approaching a total uncon- cern for the prisoner’s welfare in the face of serious risks,” Ro- sario, 670 F.3d at 821 (quoting Collins v. Seeman, 462 F.3d 757 , 762 (7th Cir. 2006)). A defendant must make a decision that represents “such a substantial departure from accepted pro- fessional judgment, practice, or standards, as to demonstrate that the person responsible actually did not base the decision on such a judgment.” Sain v. Wood, 512 F.3d 886 , 895 (7th Cir. 2008) (quoting Collignon v. Milwaukee County, 163 F.3d 982 , 988 (7th Cir. 1998)). With this framework in mind, we analyze Donald’s claims against each defendant in turn. A. Claims Against Dr. Carter The district court granted summary judgment in favor of Dr. Carter on Donald’s deliberate indifference claim because Donald did not have an objectively serious medical condition while in Dr. Carter’s care and because Dr. Carter provided ad- equate treatment. The court also exercised its supplemental jurisdiction to grant summary judgment in favor of Dr. Carter on Donald’s Illinois tort claim. While some of our reasoning differs, we agree with the district court’s order granting sum- mary judgment in favor of Dr. Carter. 1. Deliberate Indifference The district court granted summary judgment in favor of Dr. Carter on Donald’s deliberate indifference claim for two reasons. First, the court found that Donald failed to show that he suffered from a serious medical condition. The court ex- plained that conjunctivitis is not a serious medical condition, and “no qualified medical expert or medical provider has pro- vided evidence [that Donald] suffered from anything other No. 19-3038 11 than conjunctivitis in September of 2015” or that conjunctivi- tis was linked to the loss of Donald’s eye. Second, the district court found that even if conjunctivitis were a serious condi- tion, Donald offered no evidence to show that Dr. Carter’s treatment represented a “substantial departure from accepted professional judgment, practice, or standards” such that it would amount to deliberate indifference. Id. (quoting Col- lignon, 163 F.3d at 988). We do not completely agree with the district court’s first conclusion. Although other courts have found that conjuncti- vitis alone is not a serious medical condition, see Potter v. Dep- uty Att’ys Under Abraham, 304 Fed. App’x 24, 28 (3d Cir. 2008), Donald did not have conjunctivitis alone. It’s true that Donald generally lacks medical testimony from a qualified expert to establish that he had an objectively serious condition while in Dr. Carter’s care. But the conclusion that Donald did not suf- fer “from anything other than conjunctivitis” at the relevant time somewhat oversimplifies the matter. It is undisputed that, since before entering prison, Donald suffered from glaucoma and keratoconus, the latter of which was treated with a corneal transplant. Add those ailments to the conjunctivitis later diagnosed by Dr. Carter, and it’s clear that Donald’s eye condition was more complex than your av- erage patient’s. And it’s possible that the combination of these afflictions created a condition serious enough to satisfy the objective requirement of a deliberate indifference claim. Gay- ton, 593 F.3d at 620 (“A medical condition need not be life- threatening to be serious; rather, it could be a condition that would result in further significant injury or unnecessary and wanton infliction of pain if not treated.”). 12 No. 19-3038 In fact, we have previously indicated—albeit in an un- published order—that glaucoma “is manifestly a sufficiently serious medical condition to satisfy the objective element of the deliberate indifference standard.” O’Banner v. Bizzell, 151 F.3d 1033 , *2 (7th Cir. 1998) (nonprecedential). Keratoconus, too, has been found to be a serious medical condition. See Nunez v. Spiller, No. 15-CV-00514-SMY, 2015 WL 3419513 , at *2 (S.D. Ill. May 28, 2015); Marshall v. Nickel, No. 06-C-617-C, 2007 WL 5582139 , at *5 (W.D. Wis. Jan. 29, 2007). And the same goes for a stable corneal transplant. Spencer v. Kokor, No. 117CV00597LJOJLTPC, 2018 WL 1305742 , at *3 (E.D. Cal. Mar. 13, 2018); see Henley v. Richter, No. 11-CV-89, 2013 WL 1288035 , at *12 (E.D. Wis. Mar. 26, 2013) (“[Defendants] con- cede that [Plaintiff’s] corneal transplant constitutes a serious medical need … .”). In addition, some evidence in the record supports that Donald’s eye afflictions required ongoing monitoring, if not actual treatment, which indicates a serious medical condition. Gay ton, 593 F.3d at 620 . For example, the letter from Dr. Crockett advised that Donald needed to be “regularly as- sessed for any transplant rejection,” and Dr. Carter sent Don- ald to an outside ophthalmologist for an evaluation. Though Donald failed to put forth expert testimony estab- lishing that he had an objectively serious condition while in Dr. Carter’s care, and such testimony would have been bene- ficial, Donald had an undoubtedly unique combination of eye conditions, most of which have been deemed objectively seri- ous even in isolation. We therefore assume without deciding that Donald had a serious medical condition while in Dr. Carter’s care. See Bone v. Drummy, No. 2:12-CV-80-WTL- WGH, 2014 WL 3566576 , at *4 (S.D. Ind. July 18, 2014) No. 19-3038 13 (“[P]reexisting and underlying eye issues,” including g lau- coma and keratoconus, “are objectively serious medical con- cerns.”). But that’s only half the inquiry. Donald must also show that Dr. Carter acted with deliberate indifference toward the risk posed by that serious condition. Arnett, 658 F.3d at 750 . And we agree with the district court’s second conclusion that Donald did not show that Dr. Carter acted with deliberate in- difference. The evidence compels this conclusion. Expert testimony established that Donald’s symptoms while in Dr. Carter’s care—generalized redness with no irritation—were con- sistent with Dr. Carter’s diagnosis of conjunctivitis. Expert testimony also established that optometrists like Dr. Carter are qualified to treat conjunctivitis, along with a stable corneal transplant and glaucoma, and that Dr. Carter acted within his duty of care when treating these conditions. Indeed, the rec- ord shows that Dr. Carter successfully treated Donald’s glau- coma by reducing his eye pressure and continually monitored the status of his corneal transplant. And expert testimony es- tablished that any indication of corneal rejection or infection would have appeared no earlier than October 18, 2015—three weeks after Dr. Carter last saw Donald—so Dr. Carter could not have known about, let alone disregarded, the risk of harm posed by these other ailments. Donald marshalled no expert testimony to contradict the above evidence that Dr. Carter appropriately monitored and treated Donald’s various eye conditions. The one expert Don- ald did retain, Dr. Ehrhardt, was admitted to opine only on “coordinated care and communication within a prison set- ting.” But the district court made clear that Dr. Ehrhardt “is 14 No. 19-3038 not qualified to testify as an optometrist or ophthalmologist concerning specific eye care or conditions,” so his testimony cannot support Donald’s assertions that his symptoms “were consistent with graft rejection or infection of the eye” or that Dr. Carter should have referred Donald to a “qualified corneal specialist physician in light of the complexity of his condi- tion.” We therefore reject Dr. Ehrhardt’s inadmissible state- ments concerning supposed signs of infection or graft rejec- tion and the need for Dr. Carter to promptly refer Donald to a cornea specialist or provide certain medications. See Lewis v. CITGO Petroleum Corp., 561 F.3d 698 , 704 (7th Cir. 2009) (“To defeat a summary judgment motion, … a party may rely only on admissible evidence. This rule applies with equal vigor to expert testimony.” (citing, among other cases, Porter v. White- hall Labs., Inc., 9 F.3d 607 , 612 (7th Cir. 1993))). Given his lack of admissible expert testimony, Donald re- sorts to arguing about the delay in receiving his contact lenses, which he attributes to Dr. Carter. First off, the record shows that Dr. Crockett’s office, not Dr. Carter, was the cause of the delay. At any rate, Donald also fails to explain how that delay is relevant or how it had anything to do with his later eye problems. Worse, Donald borders on misrepresenting the record by repeatedly suggesting that these lenses were “pre- scribed to treat his serious eye condition” and that he “could lose the corneal transplant if the lens … was not supplied.” Those unfounded assertions stem from a mistaken assump- tion made by Dr. Ehrhardt, but Dr. Crockett’s letter explained that the lenses were merely for improved vision: “[Donald] only sees adequately at distance with a myopic contact lens, so if you wish this patient to see anything or not be considered legally blind, you will supply him with the contact lens that he requires for vision in his left eye.” What’s more, Dr. Nijm No. 19-3038 15 confirmed that wearing a contact lens only increases a patient’s risk of developing a corneal ulcer. All of this evidence shows that Dr. Carter did not act with deliberate indifference to any of Donald’s conditions. The dis- trict court therefore appropriately granted summary judg- ment in favor of Dr. Carter on Donald’s deliberate indiffer- ence claim. 2. Medical Malpractice Next, we must determine whether the district court properly exercised supplemental jurisdiction over Donald’s remaining state-law malpractice claim against Dr. Carter. Here, too, we apply de novo review. Groce v. Eli Lilly & Co., 193 F.3d 496 , 499–500 (7th Cir. 1999). When “the federal claim in a case drops out before trial,” a district court usually “relinquish[es] jurisdiction over any supplemental claim to the state courts.” Leister v. Dovetail, Inc., 546 F.3d 875 , 882 (7th Cir. 2008) (citing Brazinski v. Amoco Pe- troleum Additives Co., 6 F.3d 1176 , 1182 (7th Cir. 1993)). But “ju- dicial economy, convenience, fairness and comity may point to federal retention of state-law claims … when it is absolutely clear how the pendent claims can be decided.” Wright v. Asso- ciated Ins. Cos. Inc., 29 F.3d 1244 , 1251 (7th Cir. 1994). “Here, as in any medical malpractice action, [Donald] had the burden of establishing, through expert testimony, the standard of care applicable to [Dr. Carter], to identify the un- skilled or negligent manner in which [Dr. Carter] deviated from that standard, and show a causal connection between that deviation and the injuries sustained.” Jones v. Chi. Osteo- pathic Hosp., 738 N.E.2d 542 , 547 (Ill. App. 2000) (citing Purtill 16 No. 19-3038 v. Hess, 489 N.E.2d 867 , 872 (Ill. 1986); Lloyd v. County of Du Page, 707 N.E.2d 1252 , 1258 (Ill. App. 1999)). “The general rule is that expert testimony is required to establish” the above elements. Prairie v. Univ. of Chi. Hosps., 698 N.E.2d 611 , 615 (Ill. App. 1998). But Donald has no experts competent to testify about the standard of care for an optom- etrist, how Dr. Carter breached that standard, or how that breach caused Donald’s injuries. Nor does he have any evi- dence to rebut the expert testimony that optometrists like Dr. Carter are qualified to evaluate and treat a stable corneal transplant, glaucoma, and conjunctivitis, and that Dr. Carter rendered appropriate care with respect to these conditions. And as explained, Donald lacks evidence that he showed any symptoms of an infection or a graft rejection at any point while in Dr. Carter’s care, or even that such symptoms could have been present at that time. Donald relies heavily on Dr. Ehrhardt’s opinions, but again, these are largely inadmissible. To the extent his opin- ions are limited to the topic on which he was admitted to tes- tify—“coordinated care and communication within a prison setting”—they mean nothing without admissible expert testi- mony that Donald’s condition required more than what Dr. Carter provided or that Donald’s condition at that time was connected to his eventual eye loss. Donald also argues that Dr. Carter was negligent by fail- ing to speedily procure new contact lenses and failing to fol- low Dr. Sicher’s advice to schedule follow-up appointments with Dr. Crockett every four months. We have already re- jected the first of these arguments. As for the second, Dr. Sicher never recommended that Donald see Dr. Crockett every four months; he suggested scheduling one appointment “in No. 19-3038 17 four months” for general “continuity of care” purposes. Nei- ther Dr. Sicher nor Dr. Carter saw any problems with Don- ald’s transplant at the time, and Donald offers no admissible evidence that Dr. Carter’s failure to schedule that check-up somehow breached the standard of care or caused Donald’s eye loss a year later. He simply asserts that Dr. Carter was not qualified to provide routine post-operative care, but this is not supported by any testimony from an optometrist or ophthal- mologist and is, in fact, flatly contradicted by Dr. DeKinder. Given this dearth of evidence, expert or otherwise, Donald cannot prove the elements of an Illinois medical malpractice claim. It is thus “absolutely clear” that summary judgment was appropriate on Donald’s malpractice claim against Dr. Carter in addition to the deliberate indifference claim. Wright, 29 F.3d at 1251 . B. Claims Against Dr. Osmundson The district court dismissed Donald’s deliberate indiffer- ence claim against Dr. Osmundson because Donald lacked ev- idence showing that Dr. Osmundson acted with deliberate in- difference. Again, we agree with the district court. There is no dispute that by the time Donald first saw Dr. Osmundson on October 19, 2015, Donald had developed an objectively serious medical condition. The question is whether Dr. Osmundson responded to that condition with deliberate indifference. An overview of Dr. Osmundson’s actions shows that he was not deliberately indifferent to Donald’s condition. First, he referred Donald to a specialist on an urgent basis the first time he examined him. He next carried out every recommen- dation made by Dr. Crow (in consultation with Dr. Sicher) 18 No. 19-3038 and admitted Donald to the infirmary to be monitored. Then, after Donald saw Dr. Pike, Dr. Osmundson executed each of his recommendations. And when he was informed that Don- ald’s condition had deteriorated, he instructed nurses to con- tact Illinois Eye Center, and Donald was transferred there im- mediately. In short, Dr. Osmundson urgently referred Donald to an outside specialist at the first opportunity and approved every recommendation made by a specialist thereafter. Donald strains to make Dr. Osmundson’s above actions look like “‘something approaching a total unconcern’ for [Donald’s] welfare.” Rosario, 670 F.3d at 822 (quoting Collins, 462 F.3d at 762 ). His argument goes something like this: sure, Dr. Osmundson urgently referred Donald to an ophthalmol- ogist, but Donald only saw an optometrist; Dr. Osmundson must have known that his order was not carried out and should have ensured that it was; he should not have “blindly accepted” Dr. Crow’s graft-rejection “misdiagnosis,” which delayed Donald’s treatment and led to the loss of his eye; and he didn’t personally guarantee that Donald received the eye drops that Dr. Pike recommended. The first problem with these arguments is that there is no competent evidence to support them. Dr. Osmundson testi- fied that he did not know Donald had not seen an ophthal- mologist. Donald’s assertion that a jury could find otherwise is empty, and in any event, Dr. Crow consulted with Dr. Sicher—an ophthalmologist—before rendering a diagnosis. The record reflects that Donald did, in fact, timely receive the eye drops that Dr. Osmundson prescribed. And the unrebut- ted expert testimony establishes that Dr. Osmundson acted appropriately in following the recommendations and diagno- sis received from other doctors. No. 19-3038 19 Second, as a legal matter, Donald’s argument that Dr. Os- mundson should have done more than “blindly accept” spe- cialists’ recommendations is unavailing. To be sure, “[d]elib- erate indifference may occur where a prison official, having knowledge of a significant risk to inmate health or safety, ad- ministers ‘blatantly inappropriate’ medical treatment, acts in a manner contrary to the recommendation of specialists, or delays a prisoner’s treatment for non-medical reasons, thereby exacerbating his pain and suffering.” Perez v. Fenoglio, 792 F.3d 768 , 777 (7th Cir. 2015) (citations omitted) (quoting Edwards v. Snyder, 478 F.3d 827 , 831 (7th Cir. 2007)) (citing Arnett, 658 F.3d at 753 ; McGowan v. Hulick, 612 F.3d 636 , 640 (7th Cir. 2010)). But Donald points to no authority for the proposition that a doctor who follows the advice of a specialist, in circumstances like these, exhibits deliberate indifference. Perhaps Donald could survive summary judgment if he had evidence that Dr. Osmundson knew that the advice he received from Drs. Crow, Sicher, or Pike was “blatantly inap- propriate” and carried it out anyway. Pyles v. Fahim, 771 F.3d 403 , 412 (7th Cir. 2014). But Donald has no such evidence, so he cannot fault Dr. Osmundson for following their recom- mendations. Nor can Dr. Osmundson be liable under a theory that he didn’t micromanage his nurses closely enough. “[N]othing in the record suggests that [any] nurse was anything less than attentive to [Donald’s] condition.” Gilman v. Amos, 445 F. App’x 860, 864 (7th Cir. 2011) (nonprecedential). Regardless, Dr. Osmundson could be liable only if he “kn[e]w about the conduct and facilitate[d] it, approve[d] it, condone[d] it, or turn[ed] a blind eye for fear of what [he] might see.” Jones v. City of Chicago, 856 F.2d 985 , 992 (7th Cir. 1988). There is no 20 No. 19-3038 evidence that Dr. Osmundson knew of inadequate treat- ment—because there was none. We therefore conclude that summary judgment in favor of Dr. Osmundson was proper. C. Monell Claim Against Wexford Finally, we must determine whether the district court properly disposed of Donald’s claim against Wexford for de- liberate indifference under a Monell theory of liability. See Mo- nell v. New York City Dep’t of Soc. Servs., 436 U.S. 658 (1978) (local governments can be held liable for § 1983 violations where the constitutional deprivation results from policy or custom). The district court granted summary judgment in fa- vor of Wexford after concluding that Donald “failed to estab- lish an underlying constitutional violation.” “[W]e’ve held that the Monell theory of municipal liability applies in § 1983 claims brought against private companies that act under color of state law,” such as Wexford, where “‘an official with final policy-making authority’ acted for the cor- poration.” Whiting v. Wexford Health Sources, Inc., 839 F.3d 658 , 664 (7th Cir. 2016) (quoting Thomas v. Cook Cnty. Sheriff’s Dep’t, 604 F.3d 293 , 303 (7th Cir. 2009)). But “if the plaintiff’s theory of Monell liability rests entirely on individual liability,” as Donald’s does here, then “negating individual liability will automatically preclude a finding of Monell liability.” Id. We therefore agree that summary judgment in favor of Wexford was appropriate because Donald failed to establish a deliber- ate indifference claim against Dr. Osmundson individually. III. CONCLUSION For the above reasons, we AFFIRM the decision of the dis- trict court.

2020-12-01 19:15:35.088242+00

http://www.courts.wa.gov/opinions/pdf/D2 51279-3-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II STATE OF WASHINGTON, No. 51279-3-II Respondent, v. UNPUBLISHED OPINION MALISHA MIRANDA MORALES, REMAND FROM THE WASHINGTON SUPREME COURT Appellant. WORSWICK, J. — Following her guilty plea to second degree murder in superior court, Malisha Miranda Morales appealed her conviction and sentence. In a previous opinion, State v. Morales,1 we affirmed her conviction and held that the sentencing court did not abuse its discretion by inadequately considering youth as a mitigating factor but remanded to the sentencing court to strike the criminal filing fee and interest accrual provision on nonrestitution LFOs. Morales filed a petition for review of youth as a mitigating factor issue in the Supreme Court. Our Supreme Court granted review and remanded Morales I for this court to reconsider our decision in light of State v. Delbosque, 195 Wash. 2d 106 , 456 P.3d 806 (2020). Because Delbosque makes clear that sentencing courts must meaningfully consider on the record how the characteristics of youth may mitigate the culpability of a juvenile offender, we reverse our prior holding that the sentencing court did not abuse its discretion during sentencing and remand for 1 No. 51279-3-II, (Wash. Ct. App. Apr. 7, 2020) (unpublished), http://www.courts.wa.gov/opinions/pdf/D2%2051279-3-II%20Unpublished%20Opinion.pdf. (Morales I). No. 51279-3-II the sentencing court to reconsider Morales’s youth. We further direct the sentencing court to strike the criminal filing fee and interest accrual provision on nonrestitution LFOs on remand. FACTS The State charged 16-year-old Morales with one count of first degree murder and five counts of first degree assault with a deadly weapon, alleging that Morales was an accomplice to the drive-by shooting death of a 15-year-old boy. Morales ultimately entered a guilty plea to second degree murder. The State and defense counsel reminded the trial court that under State v. Houston- Sconiers,2 it was obligated to consider Morales’s youth as a mitigating factor in determining her sentence. The parties agreed to recommend the low end of the standard range. The trial court considered that Morales had no criminal history and noted that, although she did not fire the gun, she was nonetheless a “critical player” in the murder. Verbatim Report of Proceedings (VRP) (Nov. 22, 2017) at 18. “So it is only because of the Houston-Sconiers case and the [S]upreme [C]ourt’s order that the Court must . . . consider your age and the impact that has on your ability to exercise good judgment that the Court is going to go along with the joint recommendation for the low end.” VRP (Nov. 22, 2017) at 18-19. The trial court sentenced Morales to 123 months of confinement—the low end of the standard range. The trial court also imposed a $500 crime victim assessment, $100 DNA (deoxyribonucleic acid) database fee, and $200 criminal filing fee and ordered that the LFOs would bear interest from the date of the judgment until payment in full. The trial court found that Morales lacked sufficient funds to prosecute an appeal and entered an order of indigency. 2 188 Wash. 2d 1 , 21, 391 P.3d 409 (2017). 2 No. 51279-3-II Morales appealed, and we affirmed her conviction and sentence but remanded to the sentencing court to strike the criminal filing fee and interest accrual provision on nonrestitution LFOs. Morales I, slip op. at 10. Morales filed a petition for review by the Supreme Court arguing that the sentencing court abused its discretion by failing to adequately consider the characteristics of her youth during sentencing. Our Supreme Court granted review and remanded Morales I for this court to reconsider our decision in light of State v. Delbosque, 195 Wash. 2d 106 . ANALYSIS I. YOUTH AS A MITIGATING FACTOR The Sentencing Reform Act of 1981 (SRA), chapter 9.94A RCW, prohibits appeal of a standard range sentence. RCW 9.94A.585(1). However, a defendant may challenge the procedure by which a standard range sentence is determined. State v. Garcia-Martinez, 88 Wn. App. 322, 329, 944 P.2d 1104 (1997). Review in such cases “is limited to circumstances where the court has refused to exercise discretion at all or has relied on an impermissible basis for refusing to impose an exceptional sentence below the standard range.” Garcia-Martinez, 88 Wn. App. at 330. Courts have “an affirmative duty to ensure that proper consideration is given to the juvenile’s ‘chronological age and its hallmark features.’” State v. Ramos, 187 Wash. 2d 420 , 443, 387 P.3d 650 (2017) (quoting Miller v. Alabama, 567 U.S. 460 , 477, 132 S. Ct. 2455 , 183 L. Ed. 2d 407 (2012) (plurality opinion)). Those features include (1) mitigating circumstances of youth, including the juvenile’s “‘immaturity, impetuosity, and failure to appreciate risks and consequences’”; (2) the juvenile’s environment and family circumstances, the juvenile’s participation in the crime, or the effect of familial and peer pressure; and (3) how youth impacts 3 No. 51279-3-II any legal defense, as well as any factors suggesting that the child might be rehabilitated. Houston-Sconiers, 188 Wash. 2d at 23 (quoting Miller, 567 U.S. at 477 ). Courts are required to consider these differences during sentencing in order to comply with the Eighth Amendment. Houston-Sconiers, 188 Wash. 2d at 19 . When doing so, courts must “fully and meaningfully” inquire into the individual circumstances of the particular juvenile offender. State v. Solis-Diaz, 194 Wash. App. 129 , 141, 376 P.3d 458 (2016), rev’d in part on other grounds, 187 Wash. 2d 535 (2017). However, “age is not a per se mitigating factor automatically entitling every youthful defendant to an exceptional sentence.” State v. O’Dell, 183 Wash. 2d 680 , 695, 358 P.3d 359 (2015). Trial courts retain full discretion when considering the imposition of an exceptional sentence based on mitigating circumstances associated with youth. In re Pers. Restraint of Meippen, 193 Wash. 2d 310 , 314, 440 P.3d 978 (2019). Delbosque involved a resentencing hearing pursuant to the Miller-fix statute. 195 Wash. 2d 106 (citing RCW 10.95.030, .035). In sentencing Delbosque to a minimum term of 48 years in prison, the sentencing court stated that it considered the appropriate factors but determined that Delbosque’s attitude toward others was “reflective of the underlying crime,” and that the crime “was not symptomatic of transient immaturity, but has proven over time to be a reflection of irreparable corruption, permanent incorrigibility, and irretrievable depravity.” Delbosque, 195 Wash. 2d at 114 , 116. On appeal, this court held that insufficient evidence supported the trial court’s findings, and the Supreme Court affirmed. Delbosque, 195 Wash. 2d at 120 . The Supreme Court reiterated that when considering a defendant’s youth at a Miller hearing, a sentencing court “‘must meaningfully consider how juveniles are different from adults.’” Delbosque, 195 Wash. 2d at 121 (emphasis omitted) (quoting Ramos, 187 Wash. 2d at 434-35 ). 4 No. 51279-3-II Here, the sentencing court acknowledged the application of Houston-Sconiers to Morales’s sentencing, but did not expressly discuss any of the features of youth on the record. Rather, the sentencing court focused on the fact that Morales was a “critical player” in the murder. Although Morales did not request an exceptional downward sentence, and the sentencing court said on the record that it considered Houston-Sconiers, our Supreme Court precedent demands a more meaningful consideration of the Houston-Sconiers factors on the record when sentencing a juvenile in adult court. This case is similar to the recent Supreme Court decision in In re Pers. Restraint of Domingo-Cornelio, 196 Wash. 2d 255 , 474 P.3d 524 (2020). There, our Supreme Court held that a petitioner proved he was actually and substantially prejudiced by the sentencing court’s failure to consider mitigating circumstances related to his youth even though his appointed counsel did not request an exceptional downward sentence. Domingo-Cornelio, 196 Wash. 2d at 268-69 . The Supreme Court reasoned, “Unless the court meaningfully considers youth and knows it has absolute discretion to impose a lower sentence, we cannot be certain that an adult standard range was imposed appropriately on a juvenile under Houston-Sconiers.” Domingo-Cornelio 196 Wash. 2d at 268 . As was the case in Domingo-Cornelio, remand for meaningful consideration of Morales’s youth on the record and resentencing if warranted is appropriate. We reverse our prior holding and hold that the sentencing court abused its discretion by not meaningfully considering Morales’s youth. Accordingly, we remand to the sentencing court 5 No. 51279-3-II to fully consider the features of youth identified in Houston-Sconiers at resentencing and to strike the $200 criminal filing fee and interest accrual provision on nonrestitution LFOs.3 A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. ______________________________ Worswick, J. ______________________________ Lee, C.J. ______________________________ Melnick J. 3 In our previous opinion, we accepted the State’s concession that the sentencing court erred by imposing a criminal filing fee and interest accrual provision on nonrestitution LFOs under State v. Ramirez, 191 Wash. 2d 732 , 426 P.3d 714 (2018). We reiterate that holding. 6

2020-12-01 19:15:35.32062+00

http://www.courts.wa.gov/opinions/pdf/D2 53964-1-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II STATE OF WASHINGTON, No. 53964-1-II Respondent, v. DEPREE RAMONE SMITH, UNPUBLISHED OPINION Appellant. WORSWICK, J. — Dupree Smith appeals his conviction for second degree unlawful possession of a firearm. He argues that his convictions for both first degree unlawful possession of a firearm and second degree unlawful possession of a firearm constitute a violation of double jeopardy because he is being punished twice for a single unit of prosecution: the uninterrupted possession of a single firearm. The State concedes that Smith’s conviction is violative of double jeopardy and must be vacated. We accept the State’s concession and remand to the trial court to vacate the conviction for second degree unlawful possession of a firearm and to resentence Smith. FACTS In February 2019, Smith was arrested for being a minor in possession of marijuana. While police were arresting Smith, a handgun fell out of his pocket. Smith had prior convictions that prevented him from possessing a firearm, including second degree attempted assault with a deadly weapon (RCW 9A36.021), and second degree malicious mischief (RCW 9A.48.080). The State charged Smith with two counts: first degree unlawful possession of a firearm (RCW No. 53964-1-II 9.41.040(1)(a)), predicated by his assault conviction as a prior “serious offense” defined under RCW 9.41.010(28)1 and second degree unlawful possession of a firearm (RCW 9.41.040(2)(a)), predicated by his other prior felony conviction. A jury found Smith guilty on both counts, and the trial court sentenced him on both counts, to be served concurrently. Smith appeals. ANALYSIS I. DOUBLE JEOPARDY Smith argues that his two convictions violate the prohibition against double jeopardy because they constitute one unit of prosecution. The State concedes that Smith is correct and that Smith’s conviction for second degree unlawful possession of a firearm should be vacated. We agree. A. Legal Principles The United States Constitution and the Washington Constitution provide that no person shall be twice put in jeopardy for the same offense. U.S. CONST. amend. V; WASH. CONST. art. I, § 9. This prohibition against double jeopardy forbids the government from imposing multiple punishments for the same offense. State v. Classen, 4 Wash. App. 2d 520, 531, 422 P.3d 489 (2018). We review claims of double jeopardy de novo. Classen, 4 Wash. App. 2d at 531. “When a defendant is convicted of violating one statute multiple times, each conviction can withstand scrutiny under double jeopardy standards only if each one is a separate unit of prosecution.” Classen, 4 Wash. App. 2d at 531. The unit of prosecution is the scope of the criminal act that the legislature intended to punish under a specific criminal statute. State v. 1 “Serious offense” was defined under subsection 24 of this section in a prior version of this chapter, as was referenced in the charging document at trial. LAWS OF 2018, ch. 7, § 1 2 No. 53964-1-II Reeder, 184 Wash. 2d 805 , 825, 365 P.3d 1243 (2015). The unit of prosecution for a crime may be a single act or it may be a course of conduct. State v. Tvedt, 153 Wash. 2d 705 , 710, 107 P.3d 728 (2005). Ascertaining legislative intent, a task requiring statutory interpretation, is necessary to determine whether each violation of one statute corresponds to separate units of prosecution. Reeder, 184 Wash. 2d at 825 . “[W]hen a statute defines a crime as a course of conduct over a period of time, ‘then it is a continuous offense.’” State v. Kenyon, 150 Wash. App. 826 , 834, 208 P.3d 1291 (2009) (alteration in original) (quoting State v. McReynolds, 117 Wash. App. 309 , 339, 71 P.3d 663 (2003)). B. Sentence Violates the Constitutional Prohibition Against Double Jeopardy To determine the unit of prosecution, we examine the plain language of the statute. Classen, 4 Wash. App. 2d at 531. If a definition of the unit of prosecution is not unambiguously provided in the statutory language, we turn to the legislative history of the statute. Classen, 4 Wash. App. 2d at 531. We resolve any ambiguity in favor of the defendant under the rule of lenity. Classen, 4 Wash. App. 2d at 531. Division Three of this court has analyzed the statute in question in State v. Mata: Subsection (1)(a) makes it a crime for a person convicted of a serious offense to own or have possession of “any” firearm, without tying the commission of the crime to a particular duration of ownership or possession or to the location of the firearm. Subsection (7) of the statute provides, “Each firearm unlawfully possessed under this section shall be a separate offense.” RCW 9.41.040(7). Each firearm therefore constitutes a separate unit of prosecution. In re Pers. Restraint of Shale, 160 W[n].2d 489, 500, 158 P.3d 588 (2007). 180 Wash. App. 108 , 117-18, 321 P.3d 291 (2014). In Mata, Division Three reversed a conviction of unlawful possession of a firearm where a defendant was twice prosecuted in two jurisdictions for possessing the same firearm on the 3 No. 53964-1-II same day during a multi-county crime spree. 180 Wash. App. at 120 . In the prior trial resulting in his acquittal, the State charged Mata for possessing a pistol that was found in a stolen van recovered incident to arrest in Pierce County. 180 Wash. App. at 112-13 . In the latter trial resulting in his conviction, the State charged Mata for possessing the same pistol earlier that day during the commission of an armed robbery in Yakima County. 180 Wash. App. at 112-13 . The Mata court concluded that the crime of unlawful possession was a “course of conduct” that could be violated multiple times with a single firearm if there was an “interruption in possession.” 180 Wash. App. at 120 . Because the State did not offer evidence of an “interruption in possession” that would evidence “distinct, separately chargeable” crimes, the Mata court held that the conviction must be reversed, reasoning that Mata’s acquittal for possession of the firearm for a portion of that day barred further prosecution for his possession during the remainder of the day. 180 Wash. App. at 120 . We agree with Mata that multiple offenses of RCW 9.41.040 involving a single firearm, for purposes of double jeopardy, would require separate and discrete periods of interrupted possession. Here, there is no dispute that Smith was convicted twice under RCW 9.41.040 for the singular, uninterrupted possession of a single firearm. We hold that Smith’s right to be free from double jeopardy was violated because Smith is being punished multiple times for the same single unit of prosecution. C. Vacation of Lesser Offense is Warranted The remedy for double jeopardy from multiple convictions is the vacation of the lesser offense. State v. Marchi, 158 Wash. App. 823 , 829, 243 P.3d 823 (2010). Because Smith was convicted for both first and second degree unlawful possession of a firearm in violation of the 4 No. 53964-1-II prohibition against double jeopardy, the proper remedy is to remand to the trial court to vacate the second degree unlawful possession of a firearm conviction, and resentence Smith. We remand to the trial court to vacate the second degree unlawful possession conviction and resentence Smith. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. ____________________________ Worswick, P.J. _____________________________ Maxa, J. _____________________________ Melnick, J. 5

2020-12-01 19:15:35.497193+00

http://www.courts.wa.gov/opinions/pdf/D2 53494-1-II Unpublished Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II ROBERT E. MARTIN, No. 53494-1-II Respondent, v. KIMBERLY HAN, and KITSAP COUNTY, UNPUBLISHED OPINION Appellants. MELNICK, J. — Kimberly Han appeals an order granting summary judgment to Robert Martin on a claim of unjust enrichment. Han argues the court erred by granting summary judgment to Martin because a material fact is in dispute. Han also argues Martin cannot bring an unjust enrichment claim because he was a volunteer. Lastly, Han argues that if summary judgment is affirmed, the judgment amount was incorrect. We affirm but remand to correct the judgment amount. FACTS Han and Martin met each other after she became his neighbor. They became good friends. Han provided home care for Martin during an illness, and Martin helped Han with home maintenance. At some point, Han acquired a bank loan for business purposes. Martin helped Han acquire the loan by providing his certificates of deposit (CDs) as collateral. At some point after Han and Martin signed the loan document, they became estranged. 53494-1-II Han made payments on the loan until she could not pay a balloon payment that became due. As a result, Han defaulted on the loan and the bank used Martin’s CDs to pay the outstanding balance. Martin sued Han for unjust enrichment seeking the value of the CDs. In a pretrial deposition, Han stated that she believed the purpose of the loan was a gift from Martin. Han also stated that Martin wanted to help her with the loan so she could build her credit. Q: You say, “The purpose of the loan”—and the loan refers to the Kitsap Credit Union loan that you took out with Mr. Martin as a cosigner; is that right? A: Yes. Q: Okay. And you say the purpose of the loan was actually a gift to help you recover or rebuild your credit? A: Yes Q: So what do you mean by that? A: He said, since I needed help, so he said he want to help me out due to my credit. Clerk’s Papers (CP) at 55-56 When asked about the CDs, Han said that Martin had intended to give her the CDs upon his death and that he had probably used them to pay off the loan instead. Han admitted that she received the loan and that she used it for her benefit. Han understood that she was responsible for repaying the loan. Han admitted that she defaulted on the loan. Han also admitted that Martin’s CDs were used to pay the balance of the loan. Martin moved for summary judgment. To support his summary judgment motion, Martin relied on Han’s deposition, interrogatory responses, and other discovery she provided. The trial court granted his motion and awarded Martin $296,779.73. Han appeals. ANALYSIS I. STANDARD OF REVIEW We review orders of summary judgment de novo, and perform the same inquiry as the trial court. Lybbert v. Grant County, 141 Wash. 2d 29 , 34, 1 P.3d 1124 (2000). We consider the facts 2 53494-1-II and the inferences from the facts in the light most favorable to the nonmoving party. Bremerton Pub. Safety Ass'n v. City of Bremerton, 104 Wash. App. 226 , 230, 15 P.3d 688 (2001). A party is entitled to summary judgment if the pleadings, affidavits, and depositions establish that there is no genuine issue of material fact and that the party is entitled to judgment as a matter of law. CR 56(c); Lybbert, 141 Wash. 2d at 34 . II. GIFT Han argues that a dispute of a material fact exists as to whether Martin intended to give her a gift. We disagree. “The essential elements of a valid gift are: (1) an intention on the part of the donor to presently give; (2) a subject matter capable of passing by delivery; and (3) an actual delivery at the time.” Henderson v. Tagg, 68 Wash. 2d 188 , 192, 412 P.2d 112 (1966). The donor must demonstrate a “clear and unmistakable intention” to make a gift. In re Gallinger's Estate, 31 Wash. 2d 823 , 829, 199 P.2d 575 (1948). The undisputed facts, taken in a light most favorable to Han, are that she received the proceeds of the bank loan. She used the money for her benefit and she intended to pay the bank back for the loan. Martin co-signed the loan with the expectation that Han would pay it back. Han defaulted on the loan and the bank used the collateral posted by Martin to pay off the default. Han argues that her deposition testimony, quoted above, shows a material disputed fact exists. However, Han mischaracterizes her testimony, as does the dissent, even when viewing it in the light most favorable to her. The loan is from the bank, not Martin. Her deposition testimony does not demonstrate that Martin intended to pay off the bank loan as a gift. In addition, Han speculates as to Martin “probably” giving the CDs to her now instead of after he dies. CP at 66. Martin did not give Han the CDs. He allowed them to be used as collateral for a loan that Han 3 53494-1-II knew she had to pay off. Han does not provide any facts showing that Martin gifted the CDs to her. Because there are no material facts in dispute, the court did not err in granting summary judgment. III. UNJUST ENRICHMENT Han argues that Martin cannot bring an unjust enrichment claim because he voluntarily provided his CDs as collateral, which makes him a volunteer. We disagree. An unjust enrichment claim, has three elements: that “(1) the defendant receives a benefit, (2) the received benefit is at the plaintiff's expense, and (3) the circumstances make it unjust for the defendant to retain the benefit without payment.” Young v. Young, 164 Wash. 2d 477 , 484-85, 191 P.3d 1258 (2008). Additionally, the plaintiff conferring the benefit must not be a volunteer. Lynch v. Deaconess Med. Ctr., 113 Wash. 2d 162 , 165, 775 P.2d 681 (1989); Ellenburg v. Larson Fruit Co., Inc., 66 Wash. App. 246 , 251-52, 835 P.2d 225 (1992). Courts look to the surrounding circumstances to determine whether a person is a volunteer, including “(1) whether the benefits were conferred at the request of the party benefited, (2) whether the party benefited knew of the payment, but stood back and let the party make the payment, and (3) whether the benefits were necessary to protect the interests of the party who conferred the benefit or the party who benefited thereby.” Larson Fruit Co., 66 Wash. App. at 251-52 (internal citations omitted). A volunteer is a person who pays someone’s financial obligations without request from the person benefitted. Newcomer v. Masini, 45 Wash. App. 284 , 288-89, 724 P.2d 1122 (1986). Volunteers act even though they have no legal or moral obligation to do so. Masini, 45 Wash. App. at 288-89 . 4 53494-1-II Here, Martin correctly claims that Han conceded the material facts necessary for him to prevail on his unjust enrichment claim. First, Han admitted she received the loan from the bank for her benefit. Second, Han received the loan because Martin co-signed on the loan and used his CDs as collateral; therefore, Han received the benefit of the loan at Martin’s expense. Third, Han retained the loan money even when she understood that she had sole responsibility for repaying the loan. Han admitted that she defaulted on the loan and understood that as a result Martin’s CDs were forfeited to pay the loan balance. In light of Han’s knowledge that she was responsible for repaying the loan, it is unjust for Han to retain the benefits without paying Martin back. Han argues that Martin cannot recover under unjust enrichment because Martin became a volunteer by signing the loan document. Han bases this argument on her deposition statements, where she said Martin wanted to help her. The summary of these statements is that Martin wanted to help Han rebuild her credit and as such offered his CDs as collateral. Relying on the language in Masini, there is no evidence that Martin was a volunteer. The evidence does not demonstrate that Han did not request Martin to post the CDs as collateral. Martin paid the defaulted balance on Han’s loan because he had the legal obligation to do so as a co-signer. While Martin may have offered to help Han, there is no evidence to support he is a volunteer. We conclude the trial court properly granted Martin’s order for summary judgment IV. JUDGMENT AMOUNT Han argues that if we affirm the order for summary judgment, the judgment amount should be recalculated based on loan payments Han made prior to her default. Martin concedes that the judgment should be reduced in the amount of Han’s loan payments. We agree with Han and accept Martin’s concession. 5 53494-1-II We affirm the court’s order granting summary judgment but remand for it to recalculate the judgment amount. A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040, it is so ordered. Melnick, J. I concur: Cruser, J. 6 53494-1-II Maxa, J. (dissenting) – The evidence in this case certainly could be more clear. However, when the evidence is viewed in the light most favorable to Kimberly Han, there are genuine issues of fact regarding whether (1) Robert Martin intended that the use of his certificates of deposit (CDs) to pay off Han’s defaulted loan would be a gift to Han, and (2) allowing Han to obtain a benefit at Martin’s expense would be “unjust.” Therefore, the majority opinion wrongfully affirms the trial court’s grant of summary judgment in favor of Martin. Han claims that Martin’s payment of the loan amount from his CDs was a gift in lieu of bequeathing the same amount to her when he died. In an interrogatory answer, Han stated that Martin told her that when she no longer paid on the loan, the money she received would be the only money she would get from him. In another interrogatory answer, Han stated that “[a]fter the CDs were taken by the bank,” Martin stated that Han now had already received everything he was going to give her. Clerk’s Papers at 79 (emphasis added). These statements along with Han’s somewhat confusing deposition testimony creates an inference that using the CDs to pay off the loan was a gift from Martin to Han. Han also argues that Martin cannot prevail on his unjust enrichment theory because payment of the defaulted loan with the CDs was not unjust. An essential element of an unjust enrichment claim is even though the defendant may have received a benefit at the plaintiff’s expense, the circumstances must make it unjust for the defendant to retain the benefit without payment. Norcon Builders, LLC v. GMP Homes VG, LLC, 161 Wash. App. 474 , 490, 254 P.3d 835 (2011). “The mere fact that a defendant has received a benefit from the plaintiff is insufficient alone to justify recovery.” Id. In other words, enrichment alone is not enough; it must be unjust as between the parties under the circumstances. Id. 7 53494-1-II Here, Martin had the burden of presenting evidence that it was unjust for Han to receive the benefit, not just that she was “enriched.” But Martin presented no such evidence. Martin presented evidence that Han had an obligation to repay the loan and that he paid it instead through his CDs. But that evidence shows only enrichment, not unjust enrichment. The only other evidence that Martin presented gave rise to an inference that he did not expect to be paid back. A jury should be allowed to decide whether Martin intended a gift and whether Martin’s payment of Han’s loan with his CDs was unjust. Accordingly, I dissent. Maxa, P.J. 8

2020-12-01 19:15:35.797375+00

http://www.courts.wa.gov/opinions/pdf/D2 54629-9-II Published Opinion.pdf

Filed Washington State Court of Appeals Division Two December 1, 2020 IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION II In the Matter of the Personal Restraint of No. 54629-9-II ROBERT RUFUS WILLIAMS, Petitioner. PUBLISHED OPINION GLASGOW, J.—Robert Rufus Williams seeks relief from restraint imposed following his convictions for burglary, robbery, and attempted murder. In his personal restraint petition (PRP), Williams alleges that due to the spread of COVID-19 in prisons, including his prison in particular, and his age, race, and disability, the conditions of his confinement have become a cruel punishment in violation of article I, section 14 of the Washington Constitution and the Eighth Amendment to the United States Constitution. Williams asks to be released and argues a sentence of home confinement with his sister is the only effective remedy. Although we hold that the Washington Constitution is more protective than the federal constitution in these circumstances, we conclude that Williams’s incarceration does not violate the Washington Constitution considering (1) Washington’s consistency with other states in its approach to releasing inmates during the COVID-19 pandemic; (2) an evaluation of Williams’s risk in light of the Department of Corrections’ continuously evolving multifaceted response to COVID-19; and (3) the penological purposes of ongoing confinement in Williams’s case, which include ensuring community safety. Moreover, we follow recent Washington Supreme Court and Division One cases concluding that the Department has not been deliberately indifferent to the risk No. 54629-9-II of COVID-19 and, therefore, Williams’s ongoing incarceration is not cruel and unusual under the Eighth Amendment. We deny Williams’s PRP and deny his motion for release. We also deny his alternative request for a reference hearing. FACTS I. WILLIAMS’S MEDICAL CONDITIONS AND CONVICTIONS Williams is a 78-year-old, Black man who has been diagnosed with diabetes and hypertension. Since suffering a stroke in 2010, the right side of Williams’s body has been largely immobilized. Williams now uses a wheelchair and receives assistance with activities of daily living. In 2007, Williams “brutally assaulted” his ex-girlfriend, and she suffered “severe, life- threatening injuries.” State v. Williams, noted at 160 Wash. App. 1036 , 2011 WL 1004554 , at *1-2. A jury convicted Williams of first degree burglary, first degree robbery, and attempted second degree murder. The jury returned special verdicts finding that Williams was armed with a deadly weapon for each offense. He was sentenced to approximately 270 months of confinement, and he entered prison in 2009 at the age of 67. His earned release date is in 2028. We affirmed his convictions on appeal. Id. at *5.1 1 Williams also argued that the trial court had improperly entered an order stating that his lesser included first degree assault conviction was still valid in the event his attempted murder conviction was overturned on appeal. Williams, 2011 WL 1004554 , at *5. We agreed with Williams that such an order violated double jeopardy and remanded for the trial court to address the error and vacate the assault conviction. Id. 2 No. 54629-9-II This PRP was filed in the Supreme Court, along with a motion for release pending final determination and accelerated review pursuant to RAP 16.15(b) and 17.4(b). The PRP was promptly transferred to this court. We granted the motion for accelerated review. II. WILLIAMS’S CONDITIONS OF CONFINEMENT AT COYOTE RIDGE AND HIS COVID-19 DIAGNOSIS When Williams filed his PRP, he was incarcerated at Coyote Ridge Corrections Center. At that time, three staff members at Coyote Ridge had tested positive for COVID-19, but no one from the incarcerated population had yet tested positive. Although Williams’s legal team had been advocating for his return to the Sage Unit, a unit for “elderly and/or infirm residents,” Williams was living in the general population in a roughly 200 square foot cell with three other men. Department of Corrections’ Resp. (Resp.), Ex. 3 ¶ 6 (Decl. of Dr. Frank Longano).2 This was a dry cell without plumbing, so there was not an easily accessible sink for handwashing or a toilet. Williams was also regularly exposed to over 70 men in the cafeteria during meals. Williams repeatedly asked for a face mask in early April 2020, but face masks were not provided until April 17, 2020. As of May 12, 2020, Williams’s face mask had never been washed, and he had not been provided any soap free of charge. On April 14, 2020, Williams asked the Department for an “[e]xtraordinary [m]edical [p]lacement” of home confinement with his sister in another state. Pet’r’s Reply to Resp. to PRP (Reply), Ex. 1, Attach. D ¶¶ 4, 8 (Decl. of Dayton L. Campbell-Harris). The secretary of the 2 Williams was previously housed in the Sage Unit, but he returned to the general population in June 2019. Williams did not know why he was returned to the general population. Dr. Frank Longano, Deputy Chief Medical Officer for the Department, noted that Williams requested to return to the Sage Unit prior to his COVID-19 diagnosis and stated, “Mr. Williams’ records indicate a history of being non-compliant and refusing to take his medications, though recent compliance appeared to be good.” Resp., Ex. 3 ¶ 6 (Decl. of Longano). 3 No. 54629-9-II Department may authorize an extraordinary medical placement outside of a Washington prison under RCW 9.94A.728(1)(c)(i)(A)-(C) when three conditions are met: (1) the person “has a medical condition that is serious and is expected to require costly care or treatment,” (2) the person “poses a low risk to the community because he or she is currently physically incapacitated due to age or the medical condition or is expected to be so at the time of release,” and (3) “granting the extraordinary medical placement will result in a cost savings to the state.” For purposes of this statute, the term “incapacitated” is defined as “having a medical condition that renders the offender permanently unable or unlikely to engage in activities of daily living without assistance, to perform gainful employment, and participate in criminal behavior.” Reply, Ex. 1, Attach. D, Attach. 2 (May 7, 2020 letter from Department’s Health Services Division to Williams). Williams was informed on May 7, 2020 that his request for extraordinary medical placement was denied because, although he met the medical criteria, he did not satisfy the “community safety criteria.” Id. There was “no avenue for appeal illustrated on the . . . denial letter,” and Williams does not attempt to appeal or seek review of the denial in this proceeding. Reply, Ex. 1, Attach. D ¶ 17 (Decl. of Campbell-Harris). Rather, he asks this court for the same remedy—release to home confinement with his sister—through the avenue of a PRP. On May 14, 2020, Coyote Ridge reported its first confirmed case of COVID-19 in the inmate population. The Department transferred the infected inmate and others who were symptomatic to Airway Heights Corrections Center. Williams believes these symptomatic individuals were transferred from the unit where he was living at the time. Coyote Ridge staff “delayed by two days” a quarantine of the units where the COVID-19 positive and symptomatic inmates had been living. Reply, Ex. 1, Attach. A at 1 (Office of the 4 No. 54629-9-II Corrections Ombuds Monitoring Visit to Coyote Ridge). Once the quarantine began, when Williams needed to use the restroom, he would have to wait for corrections staff to come and unlock the cell and transport him to an Americans with Disabilities Act (ADA) compliant bathroom facility. Due to the infrequency of Williams’s access to a toilet during this time, he often had to urinate in a bottle, and he repeatedly soiled himself. Others reported being forced to defecate in food storage containers during this quarantine period. In a report following a monitoring visit to Coyote Ridge, the Office of the Corrections Ombuds found the lack of toileting access concerning. The Department responded to the ombuds report by requiring corrections staff to check every 15 minutes whether individuals in dry cells needed to use the restroom. On June 8, 2020, Williams was not feeling well.3 He was transported to a local hospital on June 9, 2020, and upon admission he was septic with a high fever and a fast heart rate. He tested positive for COVID-19. Williams received oxygen, antibiotics, steroids, Plaquenil (hydroxychloroquine), and fluids for kidney failure. On June 16, 2020, after 7 days in the hospital, Williams was transferred to the Airway Heights infirmary. The infirmary is designed for individuals who “need to be in an inpatient setting, but do not need continuous cardiac or pulmonary monitoring.” Resp., Ex. 3 ¶ 9 (Decl. of Longano). In the infirmary, nursing staff provided care 24 hours a day, 7 days a week, and Williams received assistance with activities of daily living. At Airway Heights, Williams’s 3 Williams alleges his illness “was only discovered because his therapy aid noticed he wasn’t feeling or looking well after Mr. Williams had taken yet another fall.” Reply at 8; see also id., Ex. 1, Attach. F ¶ 22 (Suppl. Decl. of Robert Williams (“My pusher realized that I had COVID-19 because I did not look or feel so good, and I had fallen.”)). 5 No. 54629-9-II symptoms improved, and his kidney function remained normal. However, Williams self-reported that he was “tired all the time.” Reply, Ex. 1, Attach. F ¶ 8 (Suppl. Decl. of Williams). By June 19, 2020, approximately one month after the first confirmed inmate case of COVID-19 at Coyote Ridge, 91 Coyote Ridge inmates, including Williams, had tested positive for COVID-19. One inmate had died from COVID-19 complications. When Williams filed his reply one week after that, on June 26, 2020, 45 staff at Coyote Ridge had tested positive, 112 inmates had tested positive, and 2 inmates who contracted the virus at Coyote Ridge had died. The ombuds initiated a review of the Coyote Ridge staff’s response to the outbreak. The Department also initiated an “internal ‘fact-finding’ exercise” to investigate the delay in quarantining inmates who had been exposed to COVID-19. Reply, Ex. 1, Attach. A at 2 (Office of the Corrections Ombuds Monitoring Visit to Coyote Ridge). In July 2020, Williams was transferred from Airway Heights to an intensive management unit at the Monroe Correctional Complex for a period of isolation. Williams remained in COVID- 19 isolation there until July 30, 2020. On August 7, 2020, Williams was transferred back to Coyote Ridge. That evening, staff noticed that Williams was having tremors. He complained of chest pain, shortness of breath, and excessive fatigue. After being treated with blood pressure medication in the infirmary, he was well enough to return to his cell that night. On August 22, 2020, Williams was taken to the emergency room of Kadlec Regional Medical Center for shortness of breath and chest tightness. He tested negative for COVID-19 and was discharged that day. He remained in the Coyote Ridge infirmary for observation until August 24, 2020. 6 No. 54629-9-II Since August 2020, Williams has resided at Coyote Ridge in a cell in the general population. Williams is in an ADA compliant cell that houses four men using two bunk beds. His cell is approximately 100 feet from an ADA compliant restroom, which Williams may access at any time, except during four 20-minute periods per day when inmates are being counted. Williams’s recent medical care has included an appointment with a podiatrist and an evaluation for difficulties swallowing. Williams has not raised additional medical concerns, and the Department reports that “[h]e has access to medical care 24 hours a day, seven days a week,” should he need it. Department of Corrections’ Suppl. Br. (Resp’t’s Suppl. Br.), App. B ¶ 8 (Decl. of Sarah Landis, PA-C). III. THE DEPARTMENT’S STEPS TO MITIGATE RISK POSED BY COVID-19 Coordinated Statewide Response: The Department is now operating under the 22nd version (Nov. 3, 2020) of its Washington DOC COVID-19 Screening, Testing, and Infection Control Guideline (Guideline), and the Guideline is “continually updated” as knowledge about COVID-19 increases. Department of Corrections Mot. to Suppl. Record (Mot. to Suppl.), Ex. 1 ¶ 4 & Attach. A (Second Decl. of Scott Russell). The Department has employed an infectious disease doctor to oversee its infection prevention program and employed nurses specializing in infection prevention at each major prison facility. In February 2020, the Department opened an Emergency Operations Center to support a statewide COVID-19 response, and in March, the center was expanded. This summer, the Department developed an “Outbreak Checklist” that draws from its “considerable experience managing positive cases earlier this year.” Id. As of October 2020, the Department had spent more than $29 million on its COVID-19 response. Additionally, the mortality rate within 7 No. 54629-9-II Washington prisons has remained lower than the state’s mortality rate overall, as well as the mortality rates of most other correctional agencies publicly reporting data. Staff Monitoring: All staff are screened daily according to guidelines that are regularly updated. The Department has instituted an “enhanced screening process” for all staff and contractors using screening questions and temperature checks. Resp., Ex. 2 ¶ 18 (Decl. of Julie Martin). If staff fail this screening process, they are refused entry. The Department has created systems to track inmates who have had close contact with staff who have reported COVID-19 symptoms. If a staff member becomes ill, all incarcerated persons with whom they had contact are quarantined. Staff who have been ill are monitored to be sure they are no longer contagious before they can return to work. Staff who are able to telecommute have been encouraged to do so. Access: The Department suspended all visitation at all of its facilities. The Department also suspended all volunteer programs and stopped allowing volunteers into the facilities. The Department is taking a “step-by-step approach” to resuming operations, and its “Safe Start plan” is publicly available at https://www.doc.wa.gov/corrections/covid-19/safe-start.htm. Resp’t’s Suppl. Br., App. A. ¶ 20 (Decl. of Russell). New Intakes and Transport Among Facilities: The Department screens all inmates entering its custody using screening questions and temperature checks, and it requires new inmates to quarantine for 14 days upon entry at one of two reception centers. A temperature and questionnaire screening process is also used for anyone in the Department’s custody who is being transported between facilities. If an individual fails screening, they are given a surgical mask and placed in isolation. Staff responsible for transporting inmates “are required to wear gloves, eye protection, a gown or disposable coveralls, and an approved 8 No. 54629-9-II respirator” when these precautions do not conflict with safety requirements. Resp., Ex. 2 ¶ 31 (Decl. of Martin). Staff must also disinfect transport vehicles before and after a transport, as well as at the end of each day. The Department instituted new protocols to limit the volume of transfers occurring statewide, and it implemented additional transfer restrictions at Coyote Ridge following the outbreak there. The Department also reduced the number of individuals coming into its facilities by amending arrest protocols for those who violated conditions of community custody and imposing “non-confinement sanctions” for low-level violations, although this waiver has now expired. Id. ¶ 71. Cleaning and Disinfection: The Department implemented an “intensive cleaning protocol focusing on sanitizing high touch surfaces.” Id. ¶ 47. It trained some inmates to assist with ongoing cleaning efforts and provided inmates with access to cleaning products for cleaning their cells. All inmates have been given two bars of soap at no cost and access to water for handwashing. Free soap will be provided for the duration of the pandemic. Hand sanitizer is available in areas with staff supervision, although the ombuds reported some of the dispensers were empty during its May 15, 2020 monitoring visit. Social Distancing: Social distancing protocols “discourage physical touching or handshakes,” “limit dining room occupancy to only the number that allows for six-foot social distancing,” reduce programming and density in the outside yards, require staggered pill lines and movements, close weight lifting facilities, and adjust religious services. Id. ¶ 53. These protocols permit “grab and go” meals and “in-cell feeding when warranted.” Id. ¶ 55. 9 No. 54629-9-II Testing and Contact Tracing: After the initial nationwide shortage of COVID-19 tests, the Department has now acquired sufficient tests and distributed them among their facilities. Test results are reported, and testing data is posted on the Department’s website. At Coyote Ridge, where the Department experienced an outbreak in spring 2020, the Department tested all staff and all inmates in the Medium Security Complex and the Sage Unit in June 2020. The Department also implemented detailed guidelines for contact tracing. See Guideline supra p. 7. Quarantined and COVID-19 Positive Inmates: The Department issued guidelines for screening, testing, isolating, quarantining, and providing clinical care. See generally id. The Department waived its copay for patient-initiated clinic visits and has encouraged all inmates to report to health services if they feel ill. Those who are “suspected or confirmed to have COVID- 19” are immediately isolated, tested when they are symptomatic, and “assessed at least once every eight-hour shift” while in medical isolation. Resp., Ex. 2 ¶¶ 58-59 (Decl. of Martin). These inmates “remain in isolation until they are symptom-free for 14 days or have been symptom-free for 72 hours and have tested negative for COVID-19 twice, with at least 48 hours between tests.” Id. ¶ 59. Inmates who are asymptomatic but have had “close contact” with an individual suspected or confirmed to have COVID-19 are quarantined. Id. ¶ 60. These inmates are housed either alone or with others who had the same exposure, and they are assessed twice daily by nurses. If a quarantined inmate becomes symptomatic, they are immediately moved into medical isolation. The Department coordinated with other state agencies to set up regional care facilities to house those who test positive for COVID-19 and require a greater level of medical attention but do not need hospitalization. Inmates are hospitalized in the community when necessary. 10 No. 54629-9-II Masks and Personal Protective Equipment (PPE): All facilities must ensure everyone wears appropriate face coverings. On April 14, 2020 the Department distributed PPE to staff, including some expired N95 masks. For the inmate population, the Department provided “bandana face covering packs that include all materials necessary to make two face coverings,” so that one can be worn while the other is washed. Id. ¶ 64. After the outbreak at Coyote Ridge, all staff at that facility were “fit tested” for N95 masks and required to wear them. Resp’t’s Suppl. Br., App. A. ¶ 11 (Decl. of Russell). Reducing Prison Population: On April 15, 2020 Governor Jay Inslee issued emergency Proclamation No. 20-50 Reducing Prison Population4 and suspended in full or in part 16 statutes “to facilitate immediate prison population reductions.” Resp., Ex. 2 ¶ 84 (Decl. of Martin). The proclamation “directed the Department to continue to explore actions to identify other incarcerated individuals for potential release through Rapid Reentry, furlough, commutation, or emergency medical release.” Id. On April 15, 2020, Governor Inslee also issued an Emergency Commutation in Response to COVID-195 which commuted the remaining sentence of confinement for all individuals who were not incarcerated on “violent, serious violent, or sex offense convictions” and 4 Proclamation of Governor Jay Inslee, No. 20-50 (Wash. Apr. 15, 2020), https://www.governor.wa.gov/sites/default/files/proclamations/20-50%20-%20COVID- 19%20Reducing%20Prison%20Population.pdf [https://perma.cc/C5J8-7KQ2]. 5 Wash. Gov. Jay Inslee, Emergency Commutation in Response to COVID-19 (Apr. 15, 2020), https://www.governor.wa.gov/sites/default/files/COVID-19%20- %20Commutation%20Order%204.15.20%20%28tmp%29.pdf?utm_medium=email&utm_source =govdelivery [https://perma.cc/Py9P-3YK9]. 11 No. 54629-9-II who had an earned release date on or before June 29, 2020. Id. ¶ 85. This resulted in the release of 422 inmates. Through the Department’s Rapid Reentry Program, which was created in response to COVID-19, an additional 528 individuals were released and are serving the remainder of their sentences in the community on electronic monitoring. The Department granted 66 individuals emergency furloughs, expedited release for some nonviolent offenders incarcerated for low-level community custody violations, and authorized the majority of pregnant inmates for rapid release. Additional Precautions at Units for Elderly and Infirm Inmates: There are special housing units for elderly or infirm inmates, including the Sage Unit at Coyote Ridge and the K Unit at Airway Heights. Special restrictions apply to these housing units to protect their vulnerable populations. Restrictions limit the staff who may enter the units and require staff who enter to wash their hands and wear specific PPE. Procedures in these special housing units permit residents to dine separately from the rest of the incarcerated population and “allow individuals to self- quarantine in their cells, if they desire.” Id. ¶ 57. Response to the June 2020 Coyote Ridge Outbreak: Coyote Ridge staff imposed a quarantine of the units where the COVID-19 positive and symptomatic inmates had been living, but the quarantine was “delayed by two days,” a response that the ombuds and the Department are reviewing. Reply, Ex. 1, Attach. A at 1 (Office of the Corrections Ombuds Monitoring Visit to Coyote Ridge). The Department then engaged in aggressive testing, contact tracing, and isolation practices. In June 2020, all staff at Coyote Ridge and all inmates housed in the Medium Security Complex and the Sage Unit were tested for COVID-19. Two hundred thirty-three inmates tested positive. The Department then reported that there were no “active” COVID-19 cases in the 12 No. 54629-9-II incarcerated population at Coyote Ridge from mid-August through early November 2020. Resp’t’s Suppl. Br., App. A. ¶ 12 (Decl. of Russell). Substantial Compliance with United States Centers for Disease Control (CDC) Guidelines: The Department asserts that it is in substantial compliance with CDC guidelines. In May 2020, Division One concluded the Department was in substantial compliance with the majority of CDC recommendations. In re Pers. Restraint of Pauley, 13 Wash. App. 2d 292, 299-300, 466 P.3d 245 (2020). On October 15, 2020, the Department reported only 14 active cases among the incarcerated population statewide. Since that time, another outbreak has occurred at Coyote Ridge. The Department is engaging in serial testing, contact tracing, and quarantining of the affected units. Mot. to Suppl. Record, Ex. 1 ¶¶ 7-12 (Second Decl. of Russell). There have been no positive cases reported in the unit where Williams is currently housed. Id. ¶ 13. ANALYSIS I. PERSONAL RESTRAINT PETITIONS A PRP offers relief from unlawful restraint. RAP 16.4(a). A restraint is unlawful if the “conditions or manner of the restraint . . . are in violation of the Constitution of the United States or the Constitution or laws of the State of Washington.” RAP 16.4(c)(6). To be entitled to relief under a PRP, “the petitioner must make a threshold showing of harm.” In re Pers. Restraint of McNeil, 181 Wash. 2d 582 , 589, 334 P.3d 548 (2014). Where the petitioner raises a claim that was “afforded no previous opportunity for judicial review, such as constitutional challenges to actions taken by prison officials,” a showing of prejudice is not required. In re Pers. Restraint of Gentry, 170 Wash. 2d 711 , 714-15, 245 P.3d 766 (2010). The 13 No. 54629-9-II petitioner “need only show [they are] unlawfully restrained.” Id. at 715. A PRP based on conditions of confinement is not a “collateral attack on a judgment and sentence” subject to the time limit under RCW 10.73.090(1). There is no dispute that Williams is under restraint. Because the available remedy is relief from unlawful restraint, when evaluating a PRP alleging unlawful conditions of confinement, we look to the petitioner’s current conditions of confinement. See, e.g., Gentry, 170 Wash. 2d at 715 (requiring petitioner to show that “he is unlawfully restrained” (emphasis added)). Claims of unlawful restraint must be supported by facts, not conclusory allegations. In re Pers. Restraint of Gronquist, 138 Wash. 2d 388 , 396, 978 P.2d 1083 (1999). The evidence presented must be “more than speculation, conjecture, or inadmissible hearsay.” Id. If there is an unlawful restraint, “the appellate court will grant appropriate relief,” RAP 16.4(a), but only “if other remedies which may be available to petitioner are inadequate under the circumstances,” RAP 16.4(d). Compare State v. Scott, 190 Wash. 2d 586 , 601, 416 P.3d 1182 (2018) (denying PRP requesting resentencing because the petitioner already had an “adequate remedy” of petitioning for parole), with In re Pers. Restraint of Metcalf, 92 Wash. App. 165 , 173 n.5, 963 P.2d 911 (1998) (rejecting State’s argument that a declaratory judgment action was an “adequate remedy” because counsel was not statutorily guaranteed in such an action). We note that Williams availed himself of the process for requesting an extraordinary medical placement, but this request was denied. II. ARTICLE I, SECTION 14 OF THE WASHINGTON CONSTITUTION Williams challenges the conditions of his confinement under both the federal and state constitutions. “We have ‘a duty, where feasible, to resolve constitutional questions first under the 14 No. 54629-9-II provisions of our own state constitution before turning to federal law.’” State v. Gregory, 192 Wash. 2d 1 , 14, 427 P.3d 621 (2018) (internal quotation marks omitted) (quoting Collier v. City of Tacoma, 121 Wash. 2d 737 , 745, 854 P.2d 1046 (1993)). This ensures that the people are not deprived of their “‘double security.’” Id. at 15 (internal quotation marks omitted) (quoting Alderwood Assocs. v. Wash. Envtl. Council, 96 Wash. 2d 230 , 238, 635 P.2d 108 (1981)). Article I, section 14 of the Washington Constitution provides, “Excessive bail shall not be required, excessive fines imposed, nor cruel punishment inflicted.” In contrast, the Eighth Amendment prohibits “cruel and unusual punishments.” Washington courts have “repeated[ly] recogni[zed] that the Washington State Constitution’s cruel punishment clause often provides greater protection than the Eighth Amendment.” State v. Roberts, 142 Wash. 2d 471 , 506, 14 P.3d 713 (2000). But “‘[e]ven where it is already established that the Washington Constitution may provide enhanced protections on a general topic, parties are still required to explain why enhanced protections are appropriate in specific applications.’” State v. Bassett, 192 Wash. 2d 67 , 79, 428 P.3d 343 (2018) (alteration in original) (quoting State v. Ramos, 187 Wash. 2d 420 , 454, 387 P.3d 650 (2017)). The Supreme Court has identified six neutral criteria as relevant to determining whether the Washington Constitution extends broader rights than the United States Constitution in a given situation. See State v. Gunwall, 106 Wash. 2d 54 , 61, 720 P.2d 808 (1986). The six factors are: the text of the state constitution, any significant differences between the state’s text and the text of the federal constitution’s parallel provision, state constitutional and common law history, preexisting state law, structural differences in state and federal constitutions, and whether the subject matter is of particular state interest or local concern. Id. at 61-62. 15 No. 54629-9-II A. Gunwall Analysis The first Gunwall factor requires consideration of the text of the state constitution. Id. at 61. Article I, section 14 prohibits “cruel punishment.” Cruel punishment has been held to include both disproportionate sentences and “certain modes of punishment.” State v. Manussier, 129 Wash. 2d 652 , 676, 921 P.2d 473 (1996). The second factor considers significant differences in the text of the parallel provision of the federal constitution. Gunwall, 106 Wash. 2d at 61 . The Eighth Amendment states, “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” The text of the Eighth Amendment is similar to the text of article I, section 14, but the federal provision refers to “cruel and unusual” punishment. Id. (emphasis added). “This difference indicates that ‘[a]rticle [I], section 14, on its face, may offer greater protection than the Eighth Amendment, because it prohibits conduct that is merely cruel; it does not require that the conduct be both cruel and unusual.’” Bassett, 192 Wash. 2d at 80 (quoting State v. Dodd, 120 Wash. 2d 1 , 21, 838 P.2d 86 (1992)). Third, courts look to state constitutional and common law history. Gunwall, 106 Wash. 2d at 61 . “Especially where the language of our constitution is different from the analogous federal provision, we are not bound to assume the framers intended an identical interpretation.” State v. Fain, 94 Wash. 2d 387 , 393, 617 P.2d 720 (1980). The framers of article I, section 14 “were of the view that the word ‘cruel’ sufficiently expressed their intent, and refused to adopt an amendment inserting the word ‘unusual.’” Id. (citing THE JOURNAL OF THE WASHINGTON STATE 16 No. 54629-9-II CONSTITUTIONAL CONVENTION 1889 501-02 (B. Rosenow ed. 1962)).6 Thus, the first three Gunwall factors, the text of article I, section 14, the absence of the words “and unusual,” and our state constitutional history, all weigh in favor of our state constitution providing stronger protection. Williams points to two recent Supreme Court cases, Bassett, 192 Wash. 2d 67 , which held life without the possibility of parole unconstitutional for juveniles, and Gregory, 192 Wash. 2d 1 , which held the death penalty unconstitutional as applied in Washington. Williams contends these cases show that previously acceptable punishment “can become cruel under article I, section 14 if there is a material change in circumstances.” Pet’r’s Opening Br. at 23. Courts have “relied on advances in social science data and psychology” to make these determinations. Id. The Department argues that these cases from the sentencing context are not relevant in the context of prison conditions. Although Williams presents these cases as state constitutional history under the third Gunwall factor, these cases are most appropriately considered under the fourth Gunwall factor, which requires consideration of preexisting state law. 106 Wash. 2d at 61-62 . Turning to that factor, although Bassett and Gregory involved article I, section 14 challenges to sentences, rather than conditions of confinement, those cases establish that scientific developments and changes in circumstances can render a previously acceptable punishment cruel under our state constitution. See Bassett, 192 Wash. 2d at 81 (looking at “how our jurisprudence on juvenile sentencing has 6 See THE JOURNAL OF THE WASHINGTON STATE CONSTITUTIONAL CONVENTION 1889 502 (“Query: Griffitts asked why the ordinary phrase ‘cruel and unusual’ was not used. Answer: Warner said that the committee thought the word ‘cruel’ sufficient. Motion: Griffitts moved to insert ‘unusual’ since he was opposed to execution by electricity. Action: Not reported, but presumably lost.”). 17 No. 54629-9-II evolved”); Gregory, 192 Wash. 2d at 18-19 (relying on statistical analysis showing that the death penalty in Washington was “administered in an arbitrary and racially biased manner”). Further, the appellants in Bassett and Gregory argued that their sentences were disproportionate based on immutable characteristics of youth and race, respectively. Bassett, 192 Wash. 2d at 72-73 ; Gregory, 192 Wash. 2d at 23-24 . Williams points out that immutable characteristics like age, race, and disability impact COVID-19 risks, and he argues that when the punishment of incarceration is imposed upon him during this pandemic, the risks related to COVID-19 render his punishment disproportionate to his crimes. Given the similarity between Williams’s claim and recent cases where the Supreme Court expanded article I, section 14 to new contexts in light of a person’s immutable characteristics, this preexisting case law weighs in favor of interpreting article I, section 14 to provide broader protections in this context. Williams also refers to the Department’s longstanding duty to keep an incarcerated person “in health and safety.” Kusah v. McCorkle, 100 Wash. 318 , 323, 170 P. 1023 (1918). Williams further cites to specific Department policies and the Washington Law Against Discrimination (WLAD), chapter 49.60 RCW, to demonstrate that Washington law has been responsive to concerns of discrimination on the basis of disability. Finally, Williams emphasizes that article I, section 14 is ultimately about “fundamental fairness,” which in Gregory required the cessation of a sentencing practice that was producing arbitrary results and disparate impacts on a particular population. 192 Wash. 2d at 28 . The Department notes that Williams has not cited state laws specifically applicable to prisons. According to the Department, the WLAD is inapposite because “the Department is not 18 No. 54629-9-II discriminating in its response to COVID-19. It is the virus itself that has disproportionately affected certain populations.” Resp. at 46. We need not rely on the WLAD to find that factor four weighs in favor of interpreting article I, section 14 to provide broader protections. Punishment violates article I, section 14 when it is imposed in a manner that is arbitrary or biased, when it offends society’s standards of decency, and when it lacks fundamental fairness. Gregory, 192 Wash. 2d at 24 . Preexisting state law weighs in favor of broader state constitutional protection where a punishment is alleged to have discriminatory or disproportionate impacts that may render it fundamentally unfair. The fifth Gunwall factor, structural differences between the state and federal constitutions, “‘will always point toward pursuing an independent state constitutional analysis because the federal constitution is a grant of power from the states, while the state constitution represents a limitation of the State’s power.’” Bassett, 192 Wash. 2d at 82 (quoting State v. Young, 123 Wash. 2d 173 , 180, 867 P.2d 593 (1994)). “[T]he explicit affirmation of fundamental rights in our state constitution may be seen as a guarantee of those rights rather than as a restriction on them.” Gunwall, 106 Wash. 2d at 62 . The Department recognizes that the fifth factor always supports an independent constitutional analysis. The sixth and final factor asks whether the subject matter of the claim is of particular state interest or local concern. Id. Williams notes that “Washington leaders, rather than their federal counterparts, are taking the most direct action to combat the virus in Washington State.” Pet’r’s Opening Br. at 30. He cites to Governor Inslee’s Proclamation No. 20-50, which ordered a reduction in the state prison population to address “‘continued worldwide spread of COVID-19, its significant progression in Washington State, and the high risk it poses to our most vulnerable 19 No. 54629-9-II populations.’” Id. at 30 n.87 (quoting Governor Inslee Proclamation No. 20-50 (Wash. Apr. 15, 2020). The Department counters that preventing cruel punishments and the spread of COVID-19 are “nationwide” issues. Resp. at 47. How state penal institutions are responding to COVID-19 is a local issue governed by state law. Article XIII, section 1 of the Washington Constitution provides that “penal institutions . . . and such other institutions as the public good may require, shall be fostered and supported by the state.” Chapter 72.09 RCW is devoted to the Department of Corrections. See RCW 72.09.010(9) (“The system should meet those national standards which the state determines to be appropriate.” (emphasis added)); RCW 72.09.030 (“There is created a department of state government to be known as the department of corrections.”). Because the Department’s COVID-19 response is a matter of state interest and local concern, this factor also favors greater state constitutional protection. In sum, all six Gunwall factors weigh in favor of interpreting article I, section 14 to be more protective than the Eighth Amendment in this context, warranting independent state constitutional analysis. B. Developing an Appropriate Legal Test Having determined that article I, section 14 provides broader protections in this context, we must now evaluate Williams’s claim under the Washington Constitution. We note that no existing test under article I, section 14 is perfectly suited to addressing a challenge to the conditions of confinement, rather than a challenge to a particular sentence. The traditional test for assessing whether a sentence is disproportionate under article I, section 14 is the Fain factors. See 94 Wash. 2d at 397 (considering “(1) the nature of the offense; (2) the legislative purpose behind the . . . criminal 20 No. 54629-9-II statute; (3) the punishment defendant would have received in other jurisdictions for the same offense; and (4) the punishment meted out for other offenses in the same jurisdiction”). But the Fain framework “weighs the offense with the punishment,” so where the petitioner raises “a categorical challenge based on the characteristics of the offender class,” Washington courts have opted for a categorical framework instead. Bassett, 192 Wash. 2d at 83 . A categorical analysis consists of two steps. First, courts assess whether a “national consensus” exists regarding the practice at issue. Id. at 85. Second, courts conduct a “judicial exercise of independent judgment,” which “requires consideration of ‘the culpability of the offenders at issue in light of their crimes and characteristics, along with the severity of the punishment in question’ and ‘whether the challenged sentencing practice serves legitimate penological goals.’” Id. at 87 (emphasis added) (quoting Graham v. Florida, 560 U.S. 48 , 67, 130 S. Ct. 2011 , 176 L. Ed. 2d 825 (2010)). Because Williams is challenging his punishment by arguing that his immutable characteristics make him disproportionately vulnerable to COVID-19, the categorical analysis appears more closely aligned with these circumstances than the Fain framework. But the existing categorical analysis is not a perfect fit. Applying a purely categorical analysis in the context of evaluating susceptibility to COVID-19 may not be as helpful as allowing an individualized assessment of the risk and potential harm to a particular inmate. Further, Bassett applied the categorical analysis to consider how the characteristic of youth affected culpability. Id. The characteristics identified here affect only an individual’s medical vulnerability, not their culpability for the underlying offense. 21 No. 54629-9-II The categorical analysis does not perfectly address Williams’s challenge to his conditions of confinement, but we have flexibility under the law to adopt a more workable analysis by drawing from existing frameworks and newly relevant considerations. “We are free to evolve our state constitutional framework as novel issues arise to ensure the most appropriate factors are considered.” Id. at 85. To evaluate Williams’s claim, we therefore engage in an adapted categorical analysis. We consider whether the conditions of his confinement create an unreasonable and unacceptable risk of death or serious injury in light of all relevant circumstances. First, we consider whether there is a clear national consensus against incarcerating people with similar characteristics and similar underlying convictions during the COVID-19 pandemic, as Washington courts have done when engaging in a traditional categorical analysis. See id. at 85-87. Second, we independently evaluate the severity of the risk for this petitioner, including how the conditions of confinement impact his degree of risk. This factor is informed by current scientific understandings of the virus, the individual characteristics of the incarcerated person, and the present conditions of confinement. And third, we consider whether legitimate penological purposes are served by this inmate’s ongoing incarceration during the pandemic. See id. at 88-89. This factor requires a review of the incarcerated person’s convictions, whether they have already served a large proportion of their sentence, and any Department assessment of the risk to public safety that release would pose. C. Williams’s Article I, Section 14 Claim Williams argues his sentence has become disproportionate and unconstitutional due to the spread of COVID-19 “in an institution unable to keep [him] safe.” Pet’r’s Opening Br. at 30. He contends that his case is analogous to Gregory, which held the death penalty unconstitutional as 22 No. 54629-9-II administered in Washington, because “his immutable traits – age, disabilities and race – rather than his crime of conviction, increase the severity of his sentence.” Id. at 33. Williams also points to Bassett, which held mandatory life without parole unconstitutional for juveniles, to argue that his sentence is disproportionate because “it fails to take into account his relevant biological traits.” Id. He argues that his ongoing confinement during the pandemic serves no penological purpose and bears no relation to his crime. We evaluate Williams’s claim by considering the specific factors enumerated above and determining whether the conditions of his confinement create an unreasonable and unnecessary risk of death or serious injury from COVID-19. As explained below, while we acknowledge the increased risk Williams may face in his current environment due to his immutable traits, we disagree that his ongoing confinement serves no penological purpose, and we hold that his sentence remains constitutional. 1. National consensus on release eligibility during COVID-19 When Washington courts engage in a categorical analysis, they first consider whether a national consensus exists on the constitutionality of the punishment at issue before making an independent judicial determination. See Bassett, 192 Wash. 2d at 85-87 . As discussed below, since the COVID-19 pandemic has spread to the United States, several states have chosen to accelerate the release of certain categories of inmates. Most states have considered a combination of factors in deciding who is eligible for early release, including medical vulnerability, proximity to release date, the nature of the underlying offense, and public safety risks. States have not readily released inmates who have committed violent crimes. 23 No. 54629-9-II For example, in Oregon, Governor Kate Brown chose to commute the sentences of 57 “particularly vulnerable” adults after directing the Oregon Department of Corrections to identify appropriate candidates on a case-by-case basis.7 In announcing these commutations, Governor Brown declared that all of the recipients were “particularly vulnerable to COVID-19 and . . . do not present an unacceptable public safety risk.”8 Considerations included whether the underlying offense was “a violent crime against another person,” whether the individual had served at least 50 percent of their sentence, and whether they could access suitable housing and health care upon release.9 Kentucky’s Governor Andrew Beshear also commuted hundreds of sentences in three separate executive orders, and he similarly determined eligibility based on who was “particularly vulnerable” due to their age or medical conditions, had “fewer than five years” remaining to serve on their sentence, and not convicted of a violent or sexual offense.10 California expedited the transition to parole for inmates who had “60 days or less to serve on their sentences and [were] not currently serving time for a violent crime as defined by law, a 7 Conrad Wilson, Oregon Governor Commutes Sentences of 57 Inmates Vulnerable to COVID-19, OR. PUB. BROADCASTING (June 25, 2020, 2:00 PM), https://www.opb.org/news/article/oregon- governor-commutes-57-prison-sentences-covid-19/. 8 Id. 9 Id. 10 Executive Order 2020-699 (Ky. Aug. 25, 2020), https://governor.ky.gov/attachments/ 20200825_Executive-Order_2020-699_Commutations.pdf; Executive Order 2020-293 (Ky. Apr. 24, 2020), https://governor.ky.gov/attachments/20200424_Executive-Order_2020- 293_Conditional-Commutation.pdf; Executive Order 2020-267 (Ky. Apr. 2, 2020), https://governor.ky.gov/attachments/20200402_Executive-Order_2020-267_Conditional- Commutation-of-Sentence.pdf. 24 No. 54629-9-II sex offense, or domestic violence.”11 California continued to expedite release for inmates who were nearing their release dates, “not currently serving time for domestic violence or a violent crime as defined by law,” not required to register as a sex offender, and not assessed as “high risk for violence.”12 Pennsylvania established a “Reprieve of Sentence of Incarceration Program” to transfer to community corrections and home confinement individuals who were eligible for release within the next 12 months; at risk based on age, autoimmune disorder, pregnancy, or serious chronic medical conditions; and whose underlying convictions did not include a personal injury crime, crime of violence, firearms offense, deadly weapons enhancement, or certain sexual offenses or drug offenses involving firearms.13 New Jersey’s Governor Philip Murphy directed the Department of Corrections to identify inmates for referral to either the State Parole Board or the Emergency Medical Review Committee, a committee created in response to the COVID-19 pandemic which considers eligibility for 11 Press Release, Cal. Dep’t of Corr. & Rehab. (CDCR), CDCR Announces Plan to Further Protect Staff and Inmates from the Spread of COVID-19 in State Prisons (Mar. 31, 2020), https://www.cdcr.ca.gov/news/2020/03/31/cdcr-announces-plan-to-further-protect-staff-and- inmates-from-the-spread-of-covid-19-in-state-prisons/. 12 CDCR, Expedited Releases (last visited Nov. 23, 2020), https://www.cdcr.ca. gov/covid19/expedited-releases/. 13 Commonwealth of Pa.: Office of the Governor, Order of the Governor of the Commonwealth of Pennsylvania Regarding Individuals Incarcerated in State Correctional Institutions (Apr. 10, 2020), https://www.governor.pa.gov/wp-content/uploads/2020/04/20200410-GOV-DOC- reprieve-release-order-COVID-19.pdf. 25 No. 54629-9-II placement in “temporary home confinement.”14 Referrals were identified based on age, underlying medical conditions, parole eligibility, and proximity to release date. 15 However, referrals were limited to inmates “who are not currently serving a sentence for an offense subject to the provisions of the No Early Release Act, [N.J. Stat. Ann. §] 2C:43-7.2.”16 The No Early Release Act applies to several violent crimes, including burglary and attempted murder. See N.J. STAT. ANN. § 2C:43- 7.2(d). New York has similarly limited early release to nonviolent offenders “most of whom were a few months from their release.”17 In Illinois, Governor Jay Robert Pritzker issued an executive order suspending provisions of the Illinois Unified Code of Corrections, 730 Ill. Comp. Stat. 5/3-11-1, that limited the permissible length of time for furloughs and the permissible justifications for furloughs, but otherwise left determinations of who should be eligible for furlough up to the Illinois Department of Corrections.18 Michigan Governor Gretchen Whitmer “strongly encouraged” county officials to consider early release for those held in jails who were older, had chronic conditions or were “otherwise 14 Executive Order No. 124 ¶¶ 1, 5 (N.J. Apr. 10, 2020), https://nj.gov/infobank/ eo/056murphy/pdf/EO-124.pdf. 15 Id. ¶ 1. 16 Id. ¶ 2(b). 17 Natasha Haverty, Why New York is Releasing so Few Inmates During the Pandemic, N. COUNTRY PUB. RADIO (July 24, 2020), https://www.northcountrypublicradio.org/news /story/41971/20200724/why-new-york-is-releasing-so-few-inmates-during-the-pandemic. 18 Executive Order 2020-21 (Ill. Apr. 6, 2020), https://www2.illinois.gov/Pages/Executive- Orders/ExecutiveOrder2020-21.aspx. 26 No. 54629-9-II medically frail,” were pregnant, and were nearing their release dates, “so long as they do not pose a public safety risk.”19 Governor Whitmer further encouraged releasing persons incarcerated for traffic violations, failures to appear or pay, and those with behavioral health conditions who could be diverted to treatment.20 In addition to considering medical vulnerability, the national consensus endorses consideration of underlying offenses and public safety risks. Oregon, Kentucky, California, Pennsylvania, New Jersey, and New York have all explicitly limited eligibility based on the nature of an individual’s underlying convictions and excluded those who committed specific violent offenses. Oregon, California, and Illinois have all relied on their Department of Corrections for assistance in determining which incarcerated individuals should be prioritized for release. None of these states seems to be releasing violent offenders. Washington’s approach aligns with this national trend. Governor Inslee commuted the “remaining confinement portion” of sentences for those who had an earned release date on or before June 29, 2020 and were not incarcerated on a “violent offense, serious violent offense, or sex offense.” See supra note 5. Governor Inslee also encouraged the Department to consider accelerated release options for other inmates, and the Department has released hundreds of people under this guidance. See supra note 4. Notably, the Department has evaluated Williams’s request for release under the extraordinary medical placement program. In doing so, the Department concluded that Williams 19 Executive Order 2020-29, ¶ 3(a) (Mich. Mar. 29, 2020) (effective through Apr. 26, 2020, 11:59 PM), https://www.michigan.gov/whitmer/0,9309,7-387-90499_90705-523422--,00.html. 20 Id. ¶ 3(b)-(d). 27 No. 54629-9-II was not eligible for release because he poses a risk to the community. Although the Department has not provided information regarding the reasons for its determination, given the violent nature of Williams’s convictions, which include attempted murder with a deadly weapon enhancement, and the fact that his earned release date is not until 2028, this conclusion does not depart from the national consensus. Even considering Williams’s risk factors, his continued incarceration does not depart from what other states have done in evaluating inmates for COVID-19-related release. 2. Severity of the risk faced by Williams Next, we consider the severity of the risk faced by Williams in particular, as well as how his characteristics and the conditions of his confinement impact that risk. As the Supreme Court did in Bassett, we look to the expertise of scientists to determine whether there is “‘a clear connection’” between Williams’s characteristics and an increased risk from COVID-19. 192 Wash. 2d at 87 (quoting State v. O’Dell, 183 Wash. 2d 680 , 695, 358 P.3d 359 (2015)). Federal and state health officials have not determined whether infection with COVID-19 offers lasting immunity from reinfection, and we do not assume Williams’s prior infection will protect him from future reinfection.21 As the Supreme Court recently explained, “[I]nmates live in close confinement with one another with no real choice as to social distancing or other measures to control spread of the virus.” Colvin v. Inslee, 195 Wash. 2d 879 , 900, 467 P.3d 953 (2020). Public health experts recognize that prisons and jails have historically been sites where respiratory diseases are spread more easily, and 21 The CDC has acknowledged that the immune response to COVID-19 is “not yet understood.” CDC, Coronavirus Disease 2019 (COVID-19): Clinical Questions about COVID-19: Questions and Answers, https://www.cdc.gov/coronavirus/2019-ncov/hcp/faq.html (last updated Nov. 18, 2020). At least one court has recognized that the risk of reinfection remains a “serious question.” United States v. Bandrow, __ F. Supp. 3d __, 2020 WL 4050242 , at * 6. 28 No. 54629-9-II this remains true. Pet’r’s Opening Br., App. 4 ¶¶ 9-10 (Decl. of Dr. Michael Puisis & Dr. Ronald Shansky); see also Pauley, 13 Wash. App. 2d at 312. In addition, the CDC has found that 8 out of 10 COVID-19-related deaths in the United States have been adults aged 65 or older and that Black or African American people are 2.6 times more likely to contract COVID-19 than white people and 2.1 times more likely to die from it.22 People who have diabetes and hypertension are “at increased risk of severe illness.”23 Williams is a 78-year-old, Black man who has been diagnosed with diabetes and hypertension and who has experienced a stroke. When he had COVID-19, Williams was admitted to the hospital with sepsis, a high fever, and a fast heart rate. While there, he required oxygen and treatment for kidney failure. Williams remained hospitalized for seven days and then required constant nursing care in an infirmary for approximately two weeks. Williams clearly faces a risk of severe consequences from COVID-19. The remaining question is the degree to which Williams’s confinement exacerbates this risk. Williams is currently housed in an ADA compliant cell in the general population at Coyote Ridge with three other inmates. He has free access to an individual ADA compliant bathroom about 100 feet from his cell, except during inmate counts four times per day. 22 CDC, Coronavirus Disease 2019 (COVID-19): Older Adults, https://www.cdc.gov/ coronavirus/2019-ncov/need-extra-precautions/older-adults.html (last updated Sept. 11, 2020); CDC, Coronavirus Disease 2019 (COVID-19): COVID-19 Hospitalization and Death by Race/Ethnicity, https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations- discovery/hospitalization-death-by-race-ethnicity.html (last updated Aug. 18, 2020). 23 CDC, Coronavirus Disease 2019 (COVID-19): People with Certain Medical Conditions, https://www.cdc.gov/coronavirus/2019-ncov/covid-data/investigations-discovery/hospitalization- underlying-medical-conditions.html (last updated Nov. 2, 2020). 29 No. 54629-9-II As described in detail above, the Department has engaged in a constantly adapting, statewide response to COVID-19. The Department has implemented precautions that restrict unnecessary access to its facilities; monitor staff and inmates for infection; ensure access to soap and hand sanitizer; ensure regular cleaning and disinfection of common area and cells; require the use of masks and, in certain situations, PPE; require social distancing whenever possible; provide for quarantines and treatment for ill inmates; and provide extra precautions for inmates who are at particular risk. And the record shows that the Department’s response has expanded and evolved as the risk posed by COVID-19 has grown. When there was a recent outbreak at Coyote Ridge, the Department engaged in aggressive widespread testing, contact tracing, and quarantining that controlled the outbreak, and there were several weeks in the fall of 2020 when there were no active cases at Coyote Ridge. In light of the rapid, significant increase in COVID-19 cases nationwide and in Washington in recent weeks, it is not surprising that additional cases have since been discovered at Coyote Ridge. But perfection is not a realistic expectation under these extraordinary circumstances. The Department has demonstrated an ability to respond aggressively to outbreaks, and the Department’s response overall has been effective. Further, when he was infected with COVID-19, the Department provided Williams with appropriate and successful medical care. Since his return to Coyote Ridge, Williams has continued to have access to “prompt and appropriate medical care.” Resp’t’s Suppl. Br., App. B ¶ 8 (Decl. of Landis). The mortality rate among inmates statewide has been lower than among Washingtonians overall. Finally, Williams does not contend that he should be housed in a different unit—his only argument is that he should be released. 30 No. 54629-9-II For as long as the pandemic continues, there will be some risk of harm for everyone, and that risk is undeniably elevated for inmates like Williams who have particular risk factors. The risk cannot be eliminated entirely. But the risk that Williams faces is mitigated by the Department’s comprehensive and constantly evolving response to COVID-19, including the Department’s provision of successful medical care to Williams when he was infected, and its demonstrated capacity to control an outbreak at Coyote Ridge through aggressive testing, contact tracing, and quarantining. 3. Penological justifications for Williams’s continued incarceration The categorical analysis for evaluating whether a sentence is disproportionate requires consideration of whether the sentence “‘serves legitimate penological goals.’” Bassett, 192 Wash. 2d at 87 (quoting Graham, 560 U.S. at 67 ). We also consider this factor here. “A sentence lacking any legitimate penological justification is by its nature disproportionate to the offense.” Graham, 560 U.S. at 71 . The Sentencing Reform Act of 1981, chapter 9.94A RCW, aims to sentence people convicted of felony offenses in a manner that ensures the punishment is proportionate to the seriousness of the offense and the person’s criminal history, promotes respect for the law, is commensurate with punishment imposed on others with similar convictions, protects the public, offers an opportunity for self-improvement, preserves state and local governments’ resources, and reduces the risk of reoffending. RCW 9.94A.010. To determine whether Williams’s continued incarceration serves legitimate penological goals, we must consider the nature of his convictions, the amount of his sentence served and the amount remaining, as well as the risk to public safety if he were released. Williams was convicted of multiple violent felonies: first degree burglary, first degree robbery, and attempted second 31 No. 54629-9-II degree murder, all with enhancements for being armed with a deadly weapon. Williams was charged with these offenses after he “brutally assaulted” his ex-girlfriend and she suffered “severe, life-threatening injuries.” Williams, 2011 WL 1004554 , at *1-2. The violent nature of Williams’s offense weighs in favor of a finding that his ongoing incarceration protects the public and reduces risk to others in the community. Punishment is also a legitimate penological goal of imprisonment. See Bassett, 192 Wash. 2d at 88 . Williams is still serving his sentence for attempted second degree murder, and his earned release date is currently set for 2028. Unlike the inmates released early in Washington and in other states under the COVID-19 criteria discussed above, Williams still has several years to serve on his sentence for attempted second degree murder, even accounting for an anticipated early release. While not determinative, the length of time remaining on Williams’s sentence also weighs against release. Turning to the risk to public safety, the risk that Williams poses is arguably mitigated by his current medical conditions and disability. Since suffering a stroke in 2010, Williams has largely lost mobility in the right side of his body. He now uses a wheelchair and requires assistance with activities of daily living. He has difficulty seeing as well as writing. The Department concluded that Williams satisfied the medical criteria for an extraordinary medical placement. But the Department nevertheless determined that Williams did not qualify for an extraordinary medical placement based on its “community safety criteria.” Reply, Ex. 1, Attach. D, Attach. 2 (May 7, 2020 letter from Department’s Health Services Division to Williams). Thus, the Department determined that Williams did not pose a low enough risk to the community to warrant release based on incapacitation. The decision of whether to grant an extraordinary medical 32 No. 54629-9-II placement is entirely within the Department’s discretion. See RCW 9.94A.728(1)(c)(i) (“The secretary may authorize an extraordinary medical placement [when the three requisite conditions are met].” (emphasis added)). Although Williams may suffer some degree of medical incapacitation, the Department is in a better position than this court to determine whether he poses a risk to community safety. We defer to their conclusion. In sum, weighing the national consensus that inmates serving long sentences for violent crimes have not typically been released as a result of COVID-19; the current serious, but somewhat mitigated, risk to Williams in light of the Department’s evolving precautions, recognizing the fact that the mortality rate is currently lower inside of Washington prisons than outside of them; and the remaining length of Williams’s sentence, as well as the Department’s conclusion that Williams still poses a risk to community safety, we hold that his continued incarceration does not violate article I, section 14. In light of this conclusion, we deny Williams’s alternative request for a reference hearing. III. EIGHTH AMENDMENT Williams also argues the Department violated his Eighth Amendment right to be free from cruel and unusual punishment by failing to take reasonable measures to mitigate known risks presented by COVID-19. We disagree. A. Evaluating Eighth Amendment Claims During COVID-19 The Eighth Amendment prohibits “cruel and unusual punishments.” It places restraints on the behavior of prison officials and also imposes affirmative duties, including the duty to provide “humane conditions of confinement” and the duty to provide adequate medical care. Farmer v. Brennan, 511 U.S. 825 , 832, 114 S. Ct. 1970 , 128 L. Ed. 2d 811 (1994). In evaluating Eighth 33 No. 54629-9-II Amendment claims, Washington courts apply the standard from Farmer. See Colvin, 195 Wash. 2d at 900 (applying Farmer to evaluate the Department’s response to COVID-19); Pauley, 13 Wn. App. 2d at 310 (same). The petitioner must show “a substantial risk of serious harm and deliberate indifference to that risk.” Colvin, 195 Wash. 2d at 900 (citing Farmer, 511 U.S. at 832 ). The first prong of the Eighth Amendment analysis requires “‘an objectively intolerable risk of harm’” or “an unreasonable risk of serious damage to [the petitioner’s] future health or safety.” Pauley, 13 Wash. App. 2d at 310 (quoting Swain v. Junior, 958 F.3d 1081 , 1088 (11th Cir. 2020)). The second prong is satisfied where the petitioner shows that officials acted with “subjective recklessness or deliberate indifference; that is, the official must know of and disregard the risk.” Colvin, 195 Wash. 2d at 900 (citing Farmer, 511 U.S. at 837 ). “[P]rison officials are not liable for known risks if they have responded reasonably to the risk, ‘even if the harm ultimately was not averted.’” Pauley, 13 Wash. App. 2d at 311 (quoting Farmer, 511 U.S. at 844 ). In Colvin, the Supreme Court recently evaluated whether the Department’s response to COVID-19 violated the Eighth Amendment rights of several inmates at various facilities around the state. 195 Wash. 2d at 884 . In Pauley, Division One analyzed the same question in the context of a personal restraint petition brought by a Monroe Correctional Complex inmate. 13 Wash. App. 2d at 294. Addressing the necessary “substantial risk of serious harm,” the Colvin court found persuasive petitioners’ argument that “in prison and jail facilities, inmates live in close confinement with one another with no real choice as to social distancing or other measures to control spread of the virus.” 195 Wash. 2d at 900 . The Supreme Court described the risk of a COVID- 19 outbreak under these conditions as “undeniably high.” Id. The Pauley court noted, “Public 34 No. 54629-9-II health experts appear to agree that incarcerated individuals are at special risk of infection,” and assumed this first prong was satisfied. 13 Wash. App. 2d at 312. Turning to the second requirement, the Colvin court recognized Governor Inslee’s “proactive orders” to reduce the incarcerated population and the Department’s “multifaceted strategy” to protect those who remain incarcerated. 195 Wash. 2d at 901 . The court concluded that, “[w]hile reasonable minds may disagree as to the appropriate steps that should be taken,” the record before the court did not show deliberate indifference. Id. Similarly, in Pauley, the petitioner failed to prove that officials had ignored risks to him. 13 Wash. App. 2d at 313. The record instead showed that the Department had “taken the threat of COVID-19 seriously” and had “taken reasonable and appropriate steps to mitigate the risk to incarcerated individuals.” Id. at 316. B. Williams’s Eighth Amendment Claim With regard to the first prong of the Eighth Amendment test, whether Williams faces a substantial risk of serious harm, we do not depart from Colvin and Pauley. The Department does not urge us to find an absence of substantial risk because Williams has already had COVID-19 once. The Supreme Court and Division One have already recognized that the risk of COVID-19 outbreaks in Washington prisons is “undeniably high.” Colvin, 195 Wash. 2d at 900 . And “[p]ublic health experts appear to agree that incarcerated individuals are at special risk of infection.” Pauley, 13 Wash. App. 2d at 312. In addition, Williams has submitted evidence that people over the age of 65 and those with significant cardiac conditions “have a higher probability of death if they are infected.” Pet’r’s Opening Br., App. 4 ¶ 12 (Decl. of Dr. Puisis & Dr. Shansky). The CDC has further recognized that “[l]ong-standing systemic health and social inequities have put many 35 No. 54629-9-II people from racial and ethnic minority groups at increased risk of getting sick and dying from COVID-19.”24 This record sufficiently demonstrates that Williams’s age, significant cardiac conditions, and race create a substantial risk of him suffering an adverse outcome from COVID- 19. Even so, on this record Williams fails to demonstrate ongoing deliberate indifference by the Department. To succeed on an Eighth Amendment claim, Williams must show that officials have recklessly disregarded or ignored the risk to him. See Colvin, 195 Wash. 2d at 900 (citing Farmer, 511 U.S. at 837 ); Pauley, 13 Wash. App. 2d at 313. Instead, this record shows numerous new restrictions, protocols, and policies that the Department has implemented since the emergence of COVID-19 in Washington, and even since the Colvin and Pauley courts found no deliberate indifference. The record shows that the Department’s response has expanded and evolved as the risk posed by COVID-19 has grown, and the Department managed to control an outbreak at Coyote Ridge through aggressive testing, contract tracing, and quarantining. This is not deliberate indifference. Further, when Williams exhibited symptoms of COVID-19, he was promptly transported to a hospital where he received medical care that enabled his survival and recovery. Then Williams was transported to an infirmary where he received constant nursing care. The Department’s response to Williams’s infection does not reflect deliberate indifference or reckless disregard to the risk of harm he faced. 24 CDC, Coronavirus Disease 2019 (COVID-19): Health Equity Considerations and Racial and Ethnic Minority Groups, https://www.cdc.gov/coronavirus/2019-ncov/community/health- equity/race-ethnicity.html (last updated July 24, 2020). 36 No. 54629-9-II Although Williams has described some troubling conditions of confinement that occurred in Coyote Ridge, in particular the initial two-day delay in implementing a quarantine and the initial lack of access to bathrooms during quarantines, the Department’s responses indicate that these issues have now been remedied. Williams’s current restraint is not the result of deliberate indifference, and Williams is not entitled to release under the Eighth Amendment. CONCLUSION We deny Williams’s PRP and his motion for release. We also deny Williams’s alternative request for a reference hearing. Glasgow, J. I concur: Worswick, P.J. 37 No. 54629-9-II Cruser, J. (Dissenting in part) — While I agree with the majority’s analysis of Williams’s petition under the Eighth Amendment to the United States Constitution and with the proposed test under article I, section 14 of the Washington Constitution, I write separately because I disagree that the third factor of this proposed test should be decided by deferring to the Department of Correction’s (DOC) conclusion regarding the community safety component of the extraordinary medical placement analysis under RCW 9.94A.728(1)(c)(i)(B). On this narrow issue, I respectfully dissent. Under the third factor of the majority’s test for evaluating Williams’s claim under article I, section 14, we consider the penological justification for his continued incarceration. This factor is derived from the second step in a “categorical bar” analysis that requires “judicial exercise of independent judgment,” to evaluate “‘whether the challenged sentencing practice serves legitimate penological goals.’” State v. Bassett, 192 Wash. 2d 67 , 87, 428 P.3d 343 (2018) (quoting Graham v. Florida, 560 U.S. 48 , 67, 130 S. Ct. 2011 , 176 L. Ed. 2d 825 (2010)). Such penological goals include “retribution, deterrence, incapacitation, and rehabilitation.” Id. at 88. The majority explains that we must consider the nature of an individual’s convictions and the risk the individual poses to public safety on evaluating this factor. I agree with this broader framework and with the majority’s assessment of the nature of Williams’s conviction as a violent one for which incarceration “protects the public and reduces risk to others in the community” as a general matter. Majority at 32. Where I depart from the majority, however, is in its decision to defer to DOC’s determination that Williams poses a risk to the community based on DOC’s assessment of Williams’s eligibility for extraordinary medical placement under RCW 9.94A.728(1)(c)(i). In 38 No. 54629-9-II determining whether an individual qualifies for emergency medical placement, DOC evaluates three criteria: (A) The offender has a medical condition that is serious and is expected to require costly care or treatment; (B) The offender poses a low risk to the community because he or she is currently physically incapacitated due to age or the medical condition or is expected to be so at the time of release; and (C) It is expected that granting the extraordinary medical placement will result in a cost savings to the state. RCW 9.94A.728(1)(c)(i). Each individual criterion must exist to allow extraordinary medical placement. RCW 9.94A.728(1)(c)(i). Persistent offenders and individuals sentenced to death or life without the possibility of parole are categorically excluded from release under this statute. RCW 9.94A.728(1)(c)(v), .728(1)(c)(ii). The undisputed facts reflect that Williams uses a wheelchair and requires assistance with activities of daily living since suffering a stroke that caused him to lose mobility in the right side of his body. Williams is no longer able to read or write due to his deteriorated eyesight and lack of fine motor control. He is prone to falling and has suffered related injuries. DOC, in its letter denying Williams’s request for extraordinary medical placement, stated that although Williams met the “medical criteria,” the community screening committee reviewed his case and “and based on the above community safety criteria; it was determined that [he did] not qualify.” Reply, Ex. 1, Attach. D, Attach. 2. DOC did not provide any further explanation as to why, despite his medical condition, Williams nevertheless posed a safety risk to the community and was not sufficiently incapacitated to qualify for extraordinary medical placement. 39 No. 54629-9-II Notwithstanding DOC’s lack of explanation regarding why Williams remains a threat to the community despite his medical conditions, the majority defers to DOC’s determination, explaining that DOC is in a better position to evaluate whether Williams poses a risk to community safety. While I agree that DOC’s analysis should be lent great weight, I disagree that this court should wholly defer to its decision, particularly where, as here, there is no dispute that Williams has serious and incapacitating medical conditions and DOC has not explained why he remains a threat to community safety, his medical condition notwithstanding. To defer in this circumstance abdicates this court’s role in evaluating a personal restraint petitioner’s claim. I would instead refer the issue of whether Williams, in light of his current physical condition, poses a threat to community safety for a reference hearing before the superior court. See In re Pers. Restraint of Rice, 118 Wash. 2d 876 , 886, 828 P.2d 1086 (1992) (holding that “the purpose of a reference hearing is to resolve genuine factual disputes.”). Resolution of this factual issue could then provide the foundation for evaluating whether continued incarceration serves a penological purpose. Accordingly, I respectfully dissent. CRUSER, J. 40

2011-08-23 09:34:07+00

http://bulk.resource.org/courts.gov/c/F2/732/732.F2d.939.83-1552.html

732 F.2d 939 Hill v. Hill 83-1552 United States Court of Appeals, Fifth Circuit. 4/19/84 1 N.D.Tex. AFFIRMED

2020-12-01 20:00:23.138071+00

https://www2.ca3.uscourts.gov/opinarch/182888p.pdf

PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________ No. 18-2888 _____________ UNITED STATES OF AMERICA v. MALIK NASIR, Appellant _______________ On Appeal from the United States District Court for the District of Delaware (D.C. No. 1-16-cr-00015-001) District Judge: Hon. Leonard P. Stark _______________ Argued on November 12, 2019 before Merits Panel Argued En Banc on June 24, 2020  Before: SMITH, Chief Judge, McKEE, AMBRO, CHAGARES, JORDAN, HARDIMAN, GREENAWAY, JR., SHWARTZ, KRAUSE, RESTREPO, BIBAS, PORTER, MATEY, PHIPPS, SCIRICA,* and RENDELL,* Circuit Judges. (Filed: December 1, 2020) _______________ Leigh M. Skipper Brett G. Sweitzer Keith M. Donoghue [ARGUED] Federal Community Defender Office For the Eastern District of Pennsylvania 601 Walnut Street The Curtis Center – Suite 540 West Philadelphia, PA 19106 Counsel for Appellant Ilya Shapiro Cato Institute 1000 Massachusetts Avenue, NW Washington, DC 20001 Counsel for Amicus Cato Institute * Judges Scirica and Rendell have elected to participate as a member of the en banc court pursuant to Third Cir. I.O.P. 9.6.4. 2 Jared McClain New Civil Liberties Alliance 1225 19th Street, NW – Suite 450 Washington, DC 20036 Counsel for Amicus New Civil Liberties Alliance Evan A. Young Baker Botts 98 San Jacinto Boulevard – Suite 1500 Austin, TX 78701 Counsel for National Association of Home Builders, American Farm Bureau Federation, National Cattlemens Beef Association, and National Mining Association David C. Weiss Robert F. Kravetz [ARGUED] Whitney C. Cloud [ARGUED] Daniel E. Logan, Jr. Office of United States Attorney 1313 North Market Street Hercules Bldg. – Ste. 400 Wilmington, DE 19801 Counsel for Appellee _______________ OPINION OF THE COURT** ** The opinions of Judges McKee, Ambro, Jordan, Greenaway, Jr., Krause, Restrepo, Matey, Scirica, and Rendell are reflected in this Majority Opinion in Sections I, II.D., and II.E., as well as in the Conclusion in Section III of the Opinion, 3  _______________ JORDAN, Circuit Judge. On a tip, Malik Nasir was arrested near a storage unit in which he kept the marijuana he was selling. He was subsequently charged with, and convicted of, two drug offenses and a firearm offense. At sentencing, the District Court applied a career offender enhancement. Nasir now appeals his convictions and challenges the application of that enhancement. We will affirm Nasir’s convictions in part but, in light of the Supreme Court’s decision in Rehaif v. United States, 139 S. Ct. 2191 (2019), we will vacate his conviction as a felon in possession of a firearm and remand for a new trial on that charge, as well as for resentencing on the remaining counts of conviction. to the extent the Conclusion addresses subjects considered in Sections II.D and II.E. Judge Bibas has written a concurring opinion as to Section II.D., and Judge Matey has written a concurring opinion as to Section II.E. The opinions of Chief Judge Smith and Judges Chagares, Hardiman, Shwartz, Bibas, Porter, and Phipps are reflected in the Partial Dissent authored by Judge Porter and in Sections I and II.D. of the Majority Opinion, and in the Conclusion in Section III, to the extent the Conclusion addresses the subject considered in Section II.D. The remaining portions of the Majority Opinion represent the precedential decision of the original panel in this case, consisting of Judges Jordan, Scirica, and Rendell. 4 I. BACKGROUND On December 21, 2015, the owner of a storage facility in Dover, Delaware reported to the police suspicious activity at one of the storage units, number C69. The owner asked the police to visit the storage facility to discuss what he believed to be “drug occurrences” on his property. (App. at 90.) When the police arrived, he told them that, over the past several months, someone had visited that unit frequently, as often as five times a day. Each time, the man – whom he identified as Nasir – would enter the storage unit and close the door behind him. Shortly thereafter, he would reemerge and leave the facility. Concerned about illegal activity, the owner had taken a photograph of the inside of the unit, which he showed the officers. It revealed two large coolers, two closed buckets, a box of baggies, a large bag, and an aerosol spray can. The owner provided a copy of a rental agreement signed by Nasir and a photocopy of Nasir’s driver’s license. The rental agreement listed Nasir’s storage unit as C43, not C69, but the police apparently did not notice that discrepancy.1 Following up on the information provided by the facility owner, the police ran a criminal history check on Nasir and learned that he had a criminal record that included felony drug convictions. They visited unit C69 with a drug detection dog, and the dog positively alerted to the presence of drugs there. Based on the accumulated evidence, the detectives applied for a search warrant for that unit. 1 Nasir had initially agreed to rent unit C43, but soon after transferred to unit C69. 5  While awaiting the warrant, several police officers remained at the storage unit, and one surveilled Nasir’s home. The officer at the home saw Nasir place a large black bag in the back of a Mercury Mariner SUV and drive in the direction of the storage facility. Nasir in fact went to the facility, and, when he arrived, the officers stopped him as he entered the row of units including numbers C69 and C43. After handcuffing him and putting him in the back of a patrol car, they searched his SUV, where they found a black duffle bag and a key to unit C69. That same night, a search warrant issued and was executed. In unit C69, the police found more than three kilograms of marijuana, as well as scales and packaging materials. The next day, they applied for and received a search warrant for Nasir’s home and any vehicles on the property. While executing the warrant, the officers found $5,000 in cash in a grocery bag in the house and several handguns with ammunition in a Dodge Charger parked on the property. Nasir was indicted for violating 21 U.S.C. § 856 (a)(1), part of what is commonly known as the crack house statute (Count One), and was also charged under 21 U.S.C. §§ 841 (a)(1) and (b)(1)(D) for possession of marijuana with intent to distribute (Count Two), and under 18 U.S.C. §§ 922 (g)(1) and 924(a)(2) as a felon in possession of a firearm (Count Three). He moved to suppress the evidence obtained from the searches of the storage unit, his house, and his vehicles. The District Court held hearings on that motion and denied it. At trial, and of particular relevance now, Nasir entered a stipulation with the government as to the charge that he 6 illegally possessed a firearm. Pursuant to Old Chief v. United States, 519 U.S. 172 (1997),2 he stipulated that, prior to the date when he allegedly possessed the firearm, he had been “convicted of a felony crime punishable by imprisonment for a term exceeding one year, in the United States District Court for the Eastern District of Virginia.”3 (Supp. App. at 21.) The jury convicted him on all three counts of the indictment. 2 Old Chief held that defendants in prosecutions under 18 U.S.C. § 922 (g)(1) are entitled to enter a stipulation establishing their status as felons (and thus as persons prohibited from possessing firearms), in which case the government cannot introduce evidence establishing what the prior offense was. “The most the jury needs to know is that the conviction admitted by the defendant falls within the class of crimes that Congress thought should bar a convict from possessing a gun, and this point may be made readily in a defendant’s admission … .” 519 U.S. at 174 , 190–91. 3 In its entirety, the stipulation stated: The United States of America, by and through its undersigned attorneys, and James Brose, attorney for Defendant Nasir, hereby stipulate and agree to the following: Prior to December 21, 2015, the date alleged in Count Three of the Indictment, Defendant Malik Nasir was convicted of a felony crime punishable by imprisonment for a term exceeding one year, in the United States District Court for the Eastern District of Virginia. 7  After the trial, Nasir filed a motion to set aside the verdict and a motion for a new trial, both of which were denied. The District Court sentenced him to 210 months of imprisonment and three years of supervised release, having determined that he qualified as a career offender under the United States Sentencing Guidelines (the “guidelines”) because of two earlier convictions in Virginia, one from the year 2000 for attempting to possess cocaine with intent to distribute and one from 2001 for possession of cocaine and marijuana. This timely appeal followed. II. DISCUSSION4 Nasir raises five arguments. First, he says that there was insufficient evidence to sustain his conviction under the crack house statute because the section of the statute under which he was convicted does not make it unlawful to store drugs. Second, he argues that the officer who searched the Mercury Mariner did not have probable cause to justify that search, so the evidence found there should have been suppressed. Third, he contends that a member of his jury was avowedly partial, so seating her deprived him of a fair trial. Fourth, he asserts that the career offender enhancement under the guidelines should not have factored into his sentencing because one of his prior felony convictions does not qualify as a “controlled substance offense,” as that term is defined in the guidelines. Finally, he (Supp. App. at 21.) 4 The District Court had jurisdiction under 18 U.S.C. § 3231 . We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742 . 8 argues that the government did not prove that he knew he was a felon, as is now required by Rehaif in a prosecution under 18 U.S.C. § 922 (g), 139 S. Ct. at 2194 , so his conviction under that statute for being a felon in possession of a firearm cannot stand. We will affirm the District Court’s denial of Nasir’s motion for acquittal as to Counts 1 and 2 and accordingly affirm those convictions. In doing so, we reject Nasir’s first three arguments. However, we agree that he does not qualify for the career offender enhancement and must be resentenced. We also hold that his conviction for being a felon in possession of a firearm must be vacated and remanded for a new trial on that count of the indictment. A. The Crack House Conviction Nasir first challenges his conviction under the crack house statute, specifically 21 U.S.C. § 856 (a)(1), which makes it unlawful to “knowingly … lease, rent, use, or maintain any place … for the purpose of manufacturing, distributing, or using any controlled substance.” Despite the breadth of that language, Nasir argues that his conviction should be reversed because, he says, that subsection was not meant to cover storage.5 Nasir did not preserve that argument in the District 5 Nasir does not argue that 21 U.S.C. § 856 (a)(1) does not cover storage units; instead, he says that it does not cover the activity of storing. The distinction he attempts to draw is irrelevant here because, as we will explain, there was ample evidence to support the finding that Nasir was not merely storing drugs, he was distributing drugs from a rented place. 9 Court, so we review the denial of his motion for judgment of acquittal for plain error.6 United States v. Olano, 507 U.S. 725 , 731 (1993). We will reverse for plain error only if there was an actual error that is plain, that affects “the outcome of the district court proceedings,” and that “seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.” Id. at 734-36 (citations and internal quotation marks omitted) (alteration in original). Nasir’s argument rests on the contrast between subsection (a)(1) of the crack house statute, which he was convicted of violating, and subsection (a)(2), under which he was not charged. That latter subsection declares it unlawful to “manage or control any place, whether permanently or temporarily, … and knowingly and intentionally rent, lease, profit from, or make available for use, with or without compensation, the place for the purpose of unlawfully manufacturing, storing, distributing, or using a controlled substance.” 21 U.S.C. § 856 (a)(2) (emphasis added). According to Nasir, because “storing” is listed as a prohibited activity in subsection (a)(2) but is not mentioned in subsection (a)(1), it was intentionally excluded from (a)(1). By 6 Nasir claims he preserved his position when he raised a sufficiency-of-the-evidence challenge. At trial, Nasir’s attorney said, “[s]uccinctly, it’s our position that the government has not proved Mr. Nasir in possession of either the firearms or the marijuana.” (App. at 549.) But counsel’s generic statement, which made no reference to 21 U.S.C. § 856 , was not sufficient to preserve a claim of error on this issue. 10 his lights, since he was storing illegal drugs, he should be safe from conviction under (a)(1). But even if we were inclined to accept that subsection (a)(1) does not cover storage, that does not help Nasir. No sensible reading of the statute allows one to distribute drugs just because one is also storing them. Within unit C69, besides the drugs themselves, there was drug distribution paraphernalia, namely scales and packaging materials such as food storage bags. In addition to that evidence, there was the testimony of the facility owner about Nasir’s frequent and suspicious trips to the unit. Subsection (a)(1) expressly prohibits “distributing” a controlled substance from any rented place, and the jury was presented with more than ample evidence that Nasir was doing just that. The District Court properly instructed the jury that it could find Nasir guilty of violating section 856(a)(1) if he used a “place for the purpose of manufacturing, distributing, or using any controlled substance.” (App. at 615 (emphasis added).) There was thus an obvious and legitimate basis for his conviction under the crack house statute, and the District Court’s denial of Nasir’s motion for a judgment of acquittal was not error at all, let alone plain error. B. The Motion to Suppress Evidence from the SUV Nasir also appeals the denial of his motion to suppress the evidence retrieved in the search of his Mercury Mariner SUV. He repeats the argument he made in the District Court, saying that the officer who searched the SUV lacked probable cause. We review de novo whether there was probable cause to justify police action. United States v. Vasquez-Algarin, 821 F.3d 467 , 471 (3d Cir. 2016). 11  The legal theories offered in opposition to and support of the SUV search have morphed over time. They began with Nasir objecting to the search as the proverbial fruit of the poisonous tree. He said the “[p]olice did not have cause to arrest [him] at the time he arrived at the storage facility parking lot and accordingly all statements made by him and any evidence found subsequent to his arrest should be suppressed.” (App. at 47.) In responding to that motion, the government said that the search of the SUV “was a lawful search incident to a valid arrest pursuant to Arizona v. Gant, 556 U.S. 332 (2009).” (App. at 60 n.21.) The government also stated that, at the suppression hearing, it “would present evidence that the search … was a valid inventory search[,]” although apparently it did not do so. (App. at 60 n.21.) In his post-hearing rebuttal briefing before the District Court, Nasir argued that the search of the SUV was unlawful as a search incident to arrest and as an inventory search. The District Court ultimately classified the search as being incident to Nasir’s arrest but noted that, even if the search had occurred prior to the arrest, “the search of the vehicle appears to have been within the scope of the automobile exception” to the warrant requirement of the Fourth Amendment. (App. at 21 n.4 (citations omitted).) On appeal, Nasir simply asserts that there was no probable cause to search the SUV, without specifying the legal framework for analysis.7 We conclude that the District Court 7 Although Nasir pointed out in his briefing that the arresting officer said he “[b]asically … looked at [the search] as an inventory search,” (App. at 138,) that does not appear to have been the theory that the government pursued before the District Court or now pursues on appeal. 12 correctly approached the issue as being a search incident to arrest. Even when, like Nasir, an arrestee is detained and not within reach of his vehicle, the police may conduct “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.” Gant, 556 U.S. at 343 (citation and internal quotation marks omitted). Whether viewed as a question of probable cause to arrest Nasir or probable cause to search the SUV under the automobile exception, however, the pertinent facts and the outcome are the same. In challenging the search of the SUV, Nasir says that the evidence uncovered in that vehicle – a black duffle bag and the key to unit C69 – should have been suppressed because the investigating officers did not corroborate the tip from the storage facility owner. Nasir characterizes the owner as an unknown and unreliable informant, and he lays particular emphasis on the incorrect unit number on the rental agreement the owner provided to the police. Nasir also argues that the District Court impermissibly attributed information known only to officers not present at the search to the officer who actually conducted the search. His arguments are unpersuasive. When the police receive information from an informant for the first time, they have a duty to independently corroborate at least some of the information the informant provides. See Illinois v. Gates, 462 U.S. 213 , 242 (1983) (“[A]n officer may rely upon information received through an informant, rather than upon his direct observations, so long as the informant’s statement is reasonably corroborated by other matters within the officer’s knowledge.” (citation and internal quotation marks omitted)). They discharged that duty in this case. The 13 arresting officers personally knew the following at the time of the arrest and related search of the vehicle: according to a background check, Nasir had a history of drug dealing; the owner of the storage facility had reported Nasir engaged in suspicious activity at unit C69, including making numerous trips to the storage unit, sometimes several in a day; the owner had taken a photograph that showed items in the unit consistent with drug distribution; an officer had seen Nasir put a bag in the back of his car and drive toward the storage facility; and a narcotics dog had positively alerted to drugs at unit C69. Given the totality of those circumstances known to the officers who arrested Nasir, there was certainly probable cause, reasonably corroborated, for Nasir’s arrest, and it was reasonable to believe that evidence of his drug dealing would be found in the SUV.8 We will therefore affirm the District Court’s denial of Nasir’s motion to suppress. C. The Ruling on Alleged Juror Bias 8 We note, as did the District Court, that even if the search had been performed prior to Nasir’s arrest, “the search of the vehicle appears to have been within the scope of the automobile exception.” (App. at 21 n.4 (citations omitted).) It is well established that under the automobile exception to the warrant requirement, the police may search a vehicle if they have probable cause to believe that the vehicle contains evidence of criminal activity. Carroll v. United States, 267 U.S. 132 , 155-56 (1925). Here, the same facts that gave rise to probable cause for an arrest can rightly be seen as independently giving rise to probable cause for a search of the vehicle. 14  Nasir next claims that he was deprived of a fair and impartial jury because one of the jurors at his trial, Juror 27, did not unequivocally affirm that she would be impartial. Our review of a ruling on a motion to strike a juror for cause is for manifest error – a most deferential standard. Skilling v. United States, 561 U.S. 358 , 396 (2010). The Supreme Court has emphasized that jury selection is “particularly within the province of the trial judge” and cautioned against “second- guessing the trial judge’s estimation of a juror’s impartiality[.]” Id. at 386 (citation and internal quotation marks omitted). During voir dire, one of the questions the District Court asked to determine juror partiality was, “Would you give more or less weight to the testimony of a law enforcement agent or police officer than you would give to that of a civilian witness, simply because he or she is employed as a law enforcement agent or police officer?” (App. at 237-38.) Because Juror 27 answered “yes” to that question, the following colloquy ensued: A JUROR: […] But the other thing that I kind of answered “yes” to was police officer and a person on the street. I would like to think I would be partial (sic), but I don’t know. THE COURT: You would like to think you would be impartial and fair to both sides? A JUROR: Yes, impartial that is what I would like to say. THE COURT: What is your concern you wouldn’t be? A JUROR: Well, my daughter dates a state police officer. And I really have a lot of respect 15  for them, you know, and I feel that for the most part they all do a good job, and they try to be fair. I think I might tend to believe what they say. I don’t know. THE COURT: Do you think if I instruct you that you have to be fair and impartial and assess everybody’s credibility as best as you can that you would be able to do that? A JUROR: I would think I would. I would hope I would. (App. at 305.) Then, outside the juror’s presence the Court and counsel had this further conversation: [NASIR’S ATTORNEY]: Your Honor, I move to strike on the basis that she -- her daughter is dating a state police officer and she would tend to believe the officer and police testimony. THE COURT: What is the government’s position? [GOVERNMENT’S ATTORNEY]: Your Honor, I don’t have a real strong one. That she would answer any questions that she was instructed [sic]. She could stay impartial. She confronted all those issues. I certainly understand why [Defense counsel] is objecting. THE COURT: Any response? [NASIR’S ATTORNEY]: No response, Your Honor. THE COURT: I’m going to deny the motion. I felt sufficient confidence that she would work as hard as anyone could to be fair and impartial, and 16  I think she would follow the instructions. So I’m denying the motion to strike. (App. at 306-07). Nasir argues that the statements “I would think I would” and “I would hope I would” are not sufficiently strong affirmations of impartiality. Because the juror admitted to her concern about partiality, the District Court quite rightly asked follow-up questions to determine whether she was actually biased. Cf. United States v. Mitchell, 690 F.3d 137 , 142 (3d Cir. 2012) (holding that actual bias is “the existence of a state of mind that leads to an inference that the person will not act with entire impartiality[,]” unlike implied bias, which is “presumed as [a] matter of law” (citations and internal quotation marks omitted)). Here, Juror 27’s acknowledgement that she “ha[s] a lot of respect for” police officers and “might tend to believe what they say” prompted the District Court to emphasize her obligation to be fair and impartial and to weigh the evidence equally. (App. at 305.) She responded with assurances that she would follow the Court’s instructions. Her declaration that she “would think” and “would hope” (App. at 305) that she could be impartial – combined, it seems, with the way in which she said it – allowed the District Court, observing her behavior and mannerisms first hand, to have “sufficient confidence that she would work as hard as anyone could to be fair and impartial.” (App. at 306-07.) That decision, on this record, is not manifestly erroneous. D. The Career Offender Enhancement Nasir next challenges the enhancement he received at sentencing pursuant to the “career offender” provision of the sentencing guidelines. He argues that he should not have 17 received the enhancement because one of his two prior qualifying convictions was an inchoate drug offense, which does not qualify as a predicate offense under the plain language of the guidelines. The interpretation of the guidelines is a legal question, so we exercise plenary review. United States v. Wilson, 880 F.3d 80 , 83 (3d Cir. 2018). We agree with Nasir that the plain language of the guidelines does not include inchoate crimes, so he must be resentenced. 1. The Definition of “Controlled Substance Offenses” in the Guidelines Under section 4B1.1 of the sentencing guidelines, an adult defendant is a career offender if “the instant offense of conviction is a felony that is either a crime of violence or a controlled substance offense; and … the defendant has at least two prior felony convictions of either a crime of violence or a controlled substance offense.” U.S.S.G. § 4B1.1(a). If a defendant is a career offender, that designation increases the offense level of the crime for which he is to be sentenced and mandates a criminal history ranking of Category VI. U.S.S.G. § 4B1.1(b). The District Court determined that one of Nasir’s three convictions in this case is a controlled substance offense, namely his conviction on Count Two for possession of marijuana with intent to distribute. After evaluating Nasir’s criminal history, the Court concluded that two of his prior convictions in Virginia state court also qualify as predicate controlled substance offenses: a 2000 conviction for an attempt to possess with intent to distribute cocaine and a 2001 conviction for possession of marijuana and cocaine with intent 18 to distribute.9 Nasir was accordingly sentenced as a career offender. He argues that his conviction in 2000 for attempting to possess with intent to distribute cocaine should not qualify as a “controlled substance offense” under section 4B1.1 because the guidelines’ definition of a “controlled substance offense” does not include inchoate crimes.10 In particular, Nasir points out that section 4B1.2 of the sentencing guidelines defines the term “controlled substance offense,” to mean an offense under federal or state law, punishable by imprisonment for a term exceeding one year, that prohibits the manufacture, import, export, distribution, or dispensing of a controlled substance (or a counterfeit substance) or the possession of a controlled substance (or a counterfeit substance) with intent to manufacture, import, export, distribute, or dispense. 9 Nasir has other prior convictions, but the government and Nasir appear to agree than none of them qualify as predicate offenses. 10 An inchoate offense is “[a] step toward the commission of another crime, the step itself being serious enough to merit punishment.” Offense, Black’s Law Dictionary (11th ed. 2019). Inchoate offenses include, for example, the attempt, conspiracy, or solicitation to commit a crime. Id. 19 U.S.S.G. § 4B1.2(b). Nasir notes this definition plainly does not mention inchoate crimes, and consequently asserts that his inchoate “attempt” crime should not qualify as a predicate offense for the career offender enhancement. The analytical problem is more complicated than that, however, because the commentary to section 4B1.2 appears to expand the definition of “‘controlled substance offense’ [to] include the offenses of aiding and abetting, conspiring, and attempting to commit such offenses.” U.S.S.G. § 4B1.2 cmt. n.1. That section of the commentary, and, importantly, our precedent on the application of the commentary to the interpretation of the guidelines, informed the District Court’s decision to apply the career offender enhancement. The question, then, is whether the more expansive commentary should be given controlling weight in interpreting the narrower guideline at issue here.11 2. The Effect of the Commentary on our Interpretation of the Guidelines 11 The Sentencing Commission has proposed an amendment to the guidelines to explicitly include inchoate offenses in section 4B1.2(b). Notice of Proposed Amendments, 83 Fed. Reg. 65400 -01, 65412-15 (Dec. 20, 2018). The proposed change has been submitted for notice and comment, and the time for notice and comment has closed. Id. However, the Commission does not currently have a quorum (and has not had one since at least 2018), so it cannot act on that issue. U.S. Sentencing Commission, 2018 Annual Report 2-3, available at https://www.ussc.gov/sites/default/files/pdf/research-and- publications/annual-reports-and-sourcebooks/2018/2018- Annual-Report.pdf. 20  The extent to which the guidelines’ commentary controls our interpretation of the guidelines themselves is informed by principles of administrative law. In Stinson v. United States, 508 U.S. 36 (1993), the Supreme Court considered how to classify the commentary to the sentencing guidelines and whether and when it should be given binding interpretive effect. Because the guidelines are written by the Sentencing Commission, a body that straddles both the legislative and judicial branches of the government, the Court determined that the commentary to the guidelines is more akin to an agency regulation than a statute. Id. at 44 . Consequently, the Court determined that the commentary should “be treated as an agency’s interpretation of its own legislative rule.” Id. Relying on its opinion in Bowles v. Seminole Rock & Sand Co., the Court said that such determinations should be given deference unless they are “plainly erroneous or inconsistent with the regulation.” Id. at 45 (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 , 414 (1945)). Further, the Court instructed that, “if the guideline which the commentary interprets will bear the construction,” the commentary can expand the guidelines, particularly when the commentary is “interpretive and explanatory.” Id. at 46-47. Accordingly, so- called Seminole Rock deference, also sometimes called Auer deference,12 governs the effect to be given to the guidelines commentary. 12 In 1945, the Supreme Court upheld a regulation from the Office of Price Administration in Bowles v. Seminole Rock, after it determined that the language of the regulation was consistent with Administration’s interpretation of the regulation. Seminole Rock, 325 U.S. at 417 . Seminole Rock thus became shorthand for the doctrine of deference to an administrative agency’s interpretation of its own regulations. 21  Our precedent has followed that course. In United States v. Hightower, 25 F.3d 182 (3d Cir. 1994), we applied the principles set forth in Stinson to determine whether inchoate crimes are covered by sections 4B1.1 and 4B1.2 of the sentencing guidelines. We asked “whether the Sentencing Commission exceeded its statutory authority by expanding the definition of a controlled substance offense” when it included inchoate offenses as part of the definition of the term “controlled substance offense” in the commentary to section 4B1.2. Hightower, 25 F.3d at 184 (internal quotation marks omitted). We determined that the commentary to 4B1.2 was explanatory and therefore binding. Id. at 185-87 . Specifically, although we admitted that the inclusion of inchoate crimes was an “expansion of the definition of a controlled substance offense[,]” we said that the expansion was “not ‘inconsistent with, or a plainly erroneous reading of,’ § 4B1.2(2) of the [s]entencing [g]uidelines, and that it does not ‘violate[ ] the Constitution or a federal statute.’” Id. at 187 (second two alterations in original) (quoting Stinson, 508 U.S. at 38 ). We later followed that precedent in United States v. Glass, 904 F.3d 319 (3d Cir. 2018), in which we held that a conviction under a Pennsylvania “attempt” statute qualified as a predicate controlled substance offense for the career offender enhancement under the guidelines. More than fifty years later, in Auer v. Robbins, 519 U.S. 452 (1997), the Court reinforced that doctrine. The doctrine is thus sometimes referred to as Seminole Rock deference, after the case that introduced it, and at other times referred to as Auer deference, the more recent reiteration of the doctrine. 22  Our interpretation of the commentary at issue in Hightower – the same commentary before us now – was informed by the then-prevailing understanding of the deference that should be given to agency interpretations of their own regulations. Thus, although we recognized that the commentary expanded and did not merely interpret the definition of “controlled substance offense,” we nevertheless gave it binding effect. In doing so, we may have gone too far in affording deference to the guidelines’ commentary under the standard set forth in Stinson. Indeed, after the Supreme Court’s decision last year in Kisor v. Wilkie, 139 S. Ct. 2400 (2019), it is clear that such an interpretation is not warranted. In Kisor, the Court cut back on what had been understood to be uncritical and broad deference to agency interpretations of regulations and explained that Auer, or Seminole Rock, deference should only be applied when a regulation is genuinely ambiguous. Id. at 2414-15 . Kisor instructs that “a court must carefully consider the text, structure, history, and purpose of a regulation, in all the ways it would if it had no agency to fall back on. Doing so will resolve many seeming ambiguities out of the box, without resort to Auer deference.” Id. at 2415 (citation, brackets, and quotation marks omitted). Thus, before deciding that a regulation is “genuinely ambiguous, a court must exhaust all the traditional tools of construction.” Id. (citation and quotation marks omitted). Even when a regulation is ambiguous, there are limits to deference. The agency’s reading must be “reasonable[,]” as informed by “[t]he text, structure, history, and so forth[,]” which “establish the outer bounds of permissible interpretation.” Id. at 2415-16 . A court “must make an 23 independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight[,]” including whether it is the agency’s “official position[.]” Id. at 2416 . Moreover, an agency’s interpretation must “in some way implicate its substantive expertise” if it is to be given controlling weight, since “[s]ome interpretive issues may fall more naturally into a judge’s bailiwick.” Id. at 2417 . Finally, the reading must “reflect fair and considered judgment” and not simply be a “convenient litigating position.” Id. (citations and quotation marks omitted). In short, the degree of deference to be given an agency’s interpretation of its own regulations is now context dependent. 3. Plain Text and Policy The definition of “controlled substance offense” in section 4B1.2(b) of the guidelines is, again, in pertinent part as follows: [A]n offense under federal or state law, punishable by imprisonment for a term exceeding one year, that prohibits the manufacture, import, export, distribution, or dispensing of a controlled substance (or a counterfeit substance) or the possession of a controlled substance (or a counterfeit substance) with intent to manufacture, import, export, distribute, or dispense. U.S.S.G. § 4B1.2(b). The guideline does not even mention inchoate offenses. That alone indicates it does not include them. The plain-text reading of section 4B1.2(b) is strengthened when contrasted with the definition of “crime of 24 violence” in the previous subsection. That definition in section 4B1.2(a) does explicitly include inchoate crimes, see U.S.S.G. § 4B1.2(a) (“The term ‘crime of violence’ means any offense … that – (1) has as an element the use, attempted use, or threatened use of physical force against the person of another[.]” (emphasis added)), which further suggests that the omission of inchoate crimes from the very next subsection was intentional. That suggestion is separately bolstered by the fact that section 4B1.2(b) affirmatively lists many other offenses that do qualify as controlled substance offenses. As a familiar canon of construction states, expressio unius est exclusio alterius: the expression of one thing is the exclusion of the other. Applying that canon has led at least one court of appeals to conclude that section 4B1.2(b) does not include inchoate crimes. See United States v. Winstead, 890 F.3d 1082 , 1091 (D.C. Cir. 2018) (“Section 4B1.2(b) presents a very detailed ‘definition’ of controlled substance offense that clearly excludes inchoate offenses.”). There is an important additional policy advantage to the plain-text approach: it protects the separation of powers. If we accept that the commentary can do more than interpret the guidelines, that it can add to their scope, we allow circumvention of the checks Congress put on the Sentencing Commission, a body that exercises considerable authority in setting rules that can deprive citizens of their liberty. Unlike the guidelines, the commentary “never passes through the gauntlets of congressional review or notice and comment.” United States v. Havis, 927 F.3d 382 , 386 (6th Cir. 2019) (en banc) (per curiam); see also United States v. Swinton, 797 F. App’x 589, 602 (2d Cir. 2019) (quoting same and remanding 25 for resentencing with an instruction for the district court to “consider again whether, in light of the concerns addressed in Havis and Winstead, the career offender [g]uideline applies” to a defendant whose predicate offenses for the career offender enhancement include a conviction for attempted criminal sale of a controlled substance). On that basis, along with the plain text of the guidelines, another of our sister courts of appeals has rejected the notion that commentary to 4B1.2(b) can expand the guidelines’ scope. See Havis, 927 F.3d at 386. (Because it has not been approved by Congress, “commentary has no independent legal force—it serves only to interpret the [g]uidelines’ text, not to replace or modify it.”). We too agree that separation-of-powers concerns advise against any interpretation of the commentary that expands the substantive law set forth in the guidelines themselves. Cf. 28 U.S.C. § 995 (a)(20) (granting the Sentencing Commission power to “make recommendations to Congress concerning modification or enactment of statutes relating to sentencing[.]” (emphasis added)). In light of Kisor’s limitations on deference to administrative agencies, we conclude that inchoate crimes are not included in the definition of “controlled substance offenses” given in section 4B1.2(b) of the sentencing guidelines. Therefore, sitting en banc, we overrule Hightower, and accordingly, will vacate Nasir’s sentence and remand for resentencing without his being classified as a career offender. E. The Felon-in-Possession Conviction The final issue on appeal concerns Nasir’s conviction under 18 U.S.C. § 922 (g) for being a felon in possession of a 26 firearm. After Nasir filed his opening brief, the Supreme Court decided Rehaif v. United States, holding that, “in a prosecution under … § 922(g) …, the Government must prove both that the defendant knew he possessed a firearm and that he knew he belonged to the relevant category of persons barred from possessing a firearm.” 139 S. Ct. at 2200. The latter half of that holding – that the government must prove that the defendant knew of his status as a person prohibited from having a gun – announced a newly found element of the crime. For a defendant like Nasir, a previously convicted felon, that knowledge-of-status element means that the government has to prove that he knew he was a “person … who has been convicted … of … a crime punishable by imprisonment for a term exceeding one year.” 18 U.S.C. § 922 (g)(1). Proving that a felon knew he possessed a gun remains necessary but is no longer sufficient for a conviction. Proof of knowledge of status is now essential. Rehaif represents a reevaluation of an old and oft- invoked criminal statute. Nasir responded to the Supreme Court’s opinion by promptly filing a supplemental brief, arguing that his conviction as a felon in possession of a firearm cannot stand since the government did not provide any evidence to prove the knowledge-of-status element of the crime. He admits, though, that he did not voice an objection to that at trial. We therefore review for plain error. Again, the test for plain error under United States v. Olano proceeds in four steps and requires the defendant to prove that there was (1) an actual error (2) that is plain or obvious, (3) that affected “the outcome of the district court proceedings,” and (4) that “seriously affect[ed] the fairness, integrity or public reputation of judicial proceedings.” Olano, 27  507 U.S. at 734-36 (citations omitted). Even if the first three steps of the test are met, the fourth step grants us a degree of discretion in determining whether to correct the error. 13 Whether the alleged error is plain is evaluated based on the law at “the time of appellate review[,]” regardless of whether it was plain at the time of trial. Henderson v. United States, 568 U.S. 266 , 269 (2013). The government concedes that, in light of Rehaif’s applicability in this case, Nasir has satisfied the first two steps of Olano. The dispute here is whether the third and fourth steps are satisfied. Before directly addressing those steps, however, it bears repeating that, until Rehaif, § 922(g) had not been understood as the Supreme Court interpreted it there. No knowledge-of- status element had previously been perceived in the statute, and 13 Our dissenting colleagues say that, in addressing whether to correct the conceded plain error in this case, we have failed to appreciate the purpose of plain error review under Federal Rule of Criminal Procedure 52(b). (Dissent at 2-4.) In particular, the Dissent says that we “seem[] to suggest a presumption in favor of error-correction.” (Dissent at 4.) But we’ve said nothing of the sort. The import of our statement here should be clear: it is not enough to win on the first three prongs of Olano, because you can still lose at prong four. The implication is quite the opposite of what the Dissent attributes to us. The disagreement between our opinion and the Dissent hinges not on what Rule 52(b) means but, as we shall explain, on whether, given the type of error under consideration, we are free to look beyond the trial record when deciding if we should exercise our discretion under that rule. 28 no proof of it was required.14 It is hardly surprising, then, that the government did not offer any evidence at Nasir’s trial that 14 The Dissent implies that the knowledge-of-status element was somehow well known before Rehaif. But to say, as our dissenting colleagues do, that “the scienter issue was hardly a secret at the time of Nasir’s trial,” is to set up a straw man. (Dissent at 3.) It is true that scienter was understood to be a required point of proof in a § 922(g) prosecution, but the knowledge that had to be proven was the defendant’s knowledge that he possessed a firearm. While the Dissent has been able to identify a very few – three – dissenting opinions in appellate cases suggesting a knowledge-of-status element, such scienter was not a holding in any case, it appears, except for a single unreported district court case from many years ago. The small handful of judges who anticipated the Supreme Court’s turn by a dozen years deserve credit, but that hardly warrants the Dissent’s effort to paint the knowledge-of-status element as something that was current in conversation within the bench and bar. Far from it. As Justice Alito noted in his dissent in Rehaif, the Supreme Court majority in that watershed case “overturn[ed] the long-established interpretation of an important criminal statute, ... an interpretation that ha[d] been adopted by every single Court of Appeals to address the question” and an interpretation that “ha[d] been used in thousands of cases for more than 30 years.” 139 S. Ct. at 2201. So we think our emphasis on the unexpected and striking impact of Rehaif is fully justified. What is not justified is the Dissent’s suggestion that Nasir’s failure to object “deprived the government and trial court of … opportunities” to “supplement the record with additional evidence of Nasir’s mens rea.” (Dissent at 4.) Regardless of whether the knowledge-of-status element 29 he knew he was a felon, and the District Court did not instruct the jury that such proof was necessary. Since Rehaif, the government has claimed that the evidence admitted at the trial in this case was adequate to prove that, when Nasir was found with guns in his possession, he knew he was a felon and hence a person prohibited from possessing a firearm. But, perhaps recognizing how unconvincing that characterization of the evidence is, the government has spent the majority of its efforts in this appeal on a more plausible but still ultimately unsuccessful argument: that, even if the record is devoid of proof on the knowledge-of-status element, we should not recognize and correct the error on plain-error review because Nasir surely did know that he was a felon. That brings us to the difficult and dividing issue in this case, one that has elicited a variety of responses from other courts of appeals dealing with the aftermath of Rehaif. The was widely recognized before Rehaif, the government’s burden of proving that element, and every other element of the § 922(g) charge, was the same. Nothing that Nasir did or didn’t do at trial affected that. Failure to object at trial begets plain- error review on appeal; it does not reverse the constitutionally mandated burden of proof and does not put the government on moral high ground in our assessment of the consequences of plain error, as the Dissent seems to think. If the Dissent wants to think in terms of fault – an exercise that seems unproductive, especially in light of the marked change in the law wrought by Rehaif – then surely some fault must fall on the government for failing to recognize that knowledge-of-status is an element of the offense and therefore failing to introduce evidence about Nasir’s knowledge of his prior felony. 30 assertion that Nasir knew he was a felon is founded entirely on information that his jury never saw or heard, so the question is whether an appellate court on plain-error review is restricted to the trial record or is instead free to consider evidence that was not presented to the jury. We conclude that, even on plain- error review, basic constitutional principles require us to consider only what the government offered in evidence at the trial, not evidence it now wishes it had offered. Accordingly, we will vacate Nasir’s conviction for being a felon in possession of a firearm and will remand for a new trial on that charge.15 15 Nasir raises three Rehaif-based challenges to his conviction: that the indictment was defective for omitting knowledge-of-status as an element of the crime, that the jury was not properly instructed that knowledge-of-status is an element of the crime, and that the government did not present sufficient evidence of knowledge-of-status. While we are persuaded by Nasir’s last argument and recognize some merit in the second, we see no merit at all in the first. The language of the indictment echoes the language of the statute, stating that Nasir “did knowingly possess in and affecting interstate and foreign commerce, firearms … after having been convicted of a crime punishable by imprisonment for a term exceeding one year[.]” (App. at 40-41.) The indictment thus mirrors the language of the statute by listing the “knowingly” mens rea element first, allowing it to modify the other elements of the crime. See Hamling v. United States, 418 U.S. 87 , 117 (1974) (“It is generally sufficient that an indictment set forth the offense in the words of the statute itself, as long as ‘those words of themselves fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offence intended to be punished.’” (quoting 31  1. Due Process and the Right to Trial by Jury Limit our Review to the Trial Record As stated by the Supreme Court in In re Winship, “the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” 397 U.S. 358 , 364 (1970). The government has to prove its case to the “proper factfinder,” and “[d]ue process commands that no man shall lose his liberty unless the Government has borne the burden of … convincing the factfinder of his guilt.” Id. In the context of a jury trial such as Nasir’s, the requirements of due process are further bolstered by the Sixth Amendment, which allocates the role of “proper factfinder” to the jury, and to the jury alone. Indeed, going back at least as far as Blackstone, it has been a given that the jury – not appellate judges after the fact – must find “the truth of every accusation” for a conviction to be sustained.16 4 William United States v. Carll, 105 U.S. 611 , 612 (1882)). Because the language of the indictment is not uncertain or ambiguous, there was no error, much less plain error, in allowing prosecution of the § 922(g) count of the indictment. 16 On this point, we are in full agreement with the concurrence of our colleague Judge Matey, which eloquently emphasizes the right to trial by jury. Although our colleagues in dissent say that they “do not purport to ‘find facts’ in order to overcome a deficiency in the evidence and on that basis pronounce the defendant’s conviction while relieving the government of its burden” (Dissent at 7), that is precisely the effect of their position. If no facts were given to the jury from 32 Blackstone, Commentaries on the Laws of England, *343-44. The jury has “an unquestionable right” to decide the case, “for, if the judge’s opinion must rule the verdict, the trial by jury would be useless.” Id. at *354-55. Accordingly, to secure a conviction that is consistent with its constitutional obligations, the government must present evidence to the jury to prove beyond a reasonable doubt every single element of the crime. Notably, no one questions that if we were reviewing a sufficiency-of-the-evidence objection that had been preserved at trial, our review would be confined to the trial record. Only evidence and argument that had actually been proffered would matter. That foundational point, rooted as it is in the Due Process Clause of the Fifth Amendment, serves as a bright-line rule, buttressed by the Sixth Amendment’s guarantee of trial by jury. The question before us thus becomes whether the plain-error standard of review permits us to disregard the demands of the Due Process Clause and the Sixth Amendment and to affirm a conviction when no evidence was presented to the jury on one of the elements of the charged offense. We think the answer to that question has to be no. To rule otherwise would give us free rein to speculate whether the government could have proven each element of the offense beyond a reasonable doubt at a hypothetical trial that established a different trial record. But no precedent of the Supreme Court or our own has ever sanctioned such an which the existence of an element of the charged crime can be determined, and if the appellate court then searches outside the trial record to discover facts that will fill that void, those appellate judges are indeed finding facts to decide the case. That is antithetical to the right to a jury trial. 33 approach. To the contrary, given the dictates of the Due Process Clause, as described in Winship, 397 U.S. at 364 , our inquiry must necessarily focus on whether the government did prove – or at least introduced sufficient evidence to prove – each element of the offense beyond a reasonable doubt at the actual trial. And Nasir’s right to trial by jury reinforces that point: “Consistent with the jury-trial guarantee, the question [that precedent] instructs the reviewing court to consider is not what effect the constitutional error might generally be expected to have upon a reasonable jury, but rather what effect it had upon the guilty verdict in the case at hand.” Sullivan v. Louisiana, 508 U.S. 275 , 280 (1993) (emphasis added). Plain error is a deferential standard, to be sure, but it does not alter fundamental constitutional precepts.17 Accordingly, the Supreme Court has limited itself to the trial record in analogous cases. The exact procedural posture we are in now was present in Johnson v. United States, 520 U.S. 17 This may be where our views and those of our dissenting colleagues diverge most dramatically. The Dissent says we are “fixate[d] on Winship’s requirement of proof beyond a reasonable doubt in criminal trials” and have a “misconception of plain-error review [that] infects [our] entire discussion of the record … .” (Dissent at 8.) Since Winship only said what the Constitution itself requires, the Dissent might just as well say we are fixated on the Constitution. The intimation is that, if we really understood plain-error review under Rule 52(b), we would not be so bothered by someone’s being convicted without a shred of proof having been introduced at trial on one of the elements of the charged offense. 34 461 (1997). The defendant in that case was convicted of perjury, but, before her direct appeal to the Eleventh Circuit was concluded, the Supreme Court handed down an opinion holding that the materiality of a false statement had to be decided by a jury rather than the trial judge. Id. at 463-64. The defendant had not objected at trial to the judge being the one who made the decision on materiality, because no one at the time knew there was such an objection to be made. Id. at 464. The Eleventh Circuit decided that the error inherent in the judge rather than the jury making the materiality decision did not affect the defendant’s substantial rights. Id. In other words, it decided the case at Olano step three. It made that decision, though, not in spite of a government failure to carry the constitutionally mandated burden of proof but precisely because the government had carried its burden so fully. As described by the Supreme Court, the Eleventh Circuit conducted an “independent review of the record and determin[ed] that … ‘overwhelming’ evidence of materiality” had been provided to the jury, so “[n]o reasonable juror” could have decided the materiality question in any way other than as the trial judge did. Id. at 465 (second alteration in original). The Supreme Court agreed with the outcome but took a different analytical path. It did not address the plain-error analysis in Johnson at Olano step three, as the court of appeals had. Instead, it went directly to step four, and, accepting that the evidence on materiality in the trial record was so “overwhelming” that a rational jury could not reach any conclusion but guilt, the Court decided that the fairness, integrity, and reputation of the judicial process could not be called into question by the conviction. Id. at 469-70. The argument for reversal on plain error failed, in other words, based on the trial record. Johnson thus highlights the 35 importance of the government carrying its constitutional burden at trial.18 18 The Dissent asserts that our “insistence that [the Olano] prong-four analysis is … limited to the time of trial (as memorialized in the trial record) is unwarranted and finds no support in Johnson.” (Dissent at 6.) We will leave to thoughtful readers to decide who has more faithfully considered the text of Johnson. Suffice it to say that our reading finds ample support in that text and makes perfect sense, particularly in light of later Supreme Court pronouncements, like those in Neder v. United States, 527 U.S. 1 (1999). In Neder, a similar legal error was at issue. As in Johnson, the district court wrongly decided the issue of the materiality of false statements, this time in a case that included the filing of false tax returns. Over the defendant’s objection, the district judge had instructed the jury that the question of materiality was for the court alone to decide. Looking at the evidence produced by the government at trial, the trial judge found that “the evidence established the materiality of all the false statements at issue.” Id. at 6 . The Eleventh Circuit affirmed the conviction. On review, the Supreme Court applied the harmless-error standard from Chapman v. California, 386 U.S. 18 (1967), because the defendant had lodged an objection to the ruling at issue (in contrast to Nasir and the defendant in Johnson, both of whom were left with plain-error review because they failed to object). In the end, the Supreme Court said that the jury-instruction error was harmless because there was so much evidence of materiality in the trial record that “no jury could reasonably find that Neder’s failure to report substantial amounts of income … was not a ‘material matter.’” 527 U.S. at 16 . So again, it was not in spite 36  Given the due process and Sixth Amendment concerns in play here, we are not free to suppose what the government could have proven at a different trial. The only relevant question, even on plain-error review, is what the government did prove at this trial. Nevertheless, while the constitutional implications of Rehaif seem clear to us, they are not beyond dispute, as the close division among us in this en banc appeal shows and as is further evidenced by decisions from our sister circuits. 2. The Differing Approaches of Other Courts of Appeals With one exception,19 other courts of appeals that have considered whether the government’s failure to prove the of the government’s failure to carry its burden of proof but rather because it had carried its burden so overwhelmingly that the Court upheld the conviction. 19 In United States v. Medley, 972 F.3d 399 (4th Cir. 2020), the Fourth Circuit vacated a defendant’s jury trial conviction on plain-error review after Rehaif because the indictment did not allege knowledge-of-status, the government had presented no evidence of knowledge-of-status at trial, and the jury was not instructed to find knowledge-of-status. However, the Court did not address the issue we confront here, namely whether we are restricted to the trial record on plain- error review of a jury conviction. It is noteworthy, though, that the majority in that case appeared to take it as given that it was limited to the trial record, id. at 417 (noting that the government “provided substantial post-trial evidence 37 knowledge-of-status element in a 922(g) prosecution is plain error have decided that it is not. They have reached that result based on their preliminary conclusion that they are permitted to look outside the trial record to find evidence to plug the gap left by the prosecution at trial. The justifications offered for that view are not all of a piece. See United States v. Huntsberry, 956 F.3d 270 , 284 (5th Cir. 2020) (“We note that our sister courts have taken different paths on this issue.”). Under one line of thinking, the Supreme Court’s decision in United States v. Vonn, 535 U.S. 55 (2002), authorizes consideration of the entire record, not just the trial record, at step three of plain-error review of a jury verdict, even though Vonn was decided in the context of a guilty plea. United States v. Ward, 957 F.3d 691 , 695 & n.1 (6th Cir. 2020); United States v. Reed, 941 F.3d 1018 , 1021 (11th Cir. 2019). A second rationale holds that a reviewing court is limited to the trial record on the first three steps of plain-error review but may look to the entire record at the fourth step, which involves the exercise of discretion in considering potential harm to the reputation of the judiciary. United States v. Owens, 966 F.3d 700 , 706-07 (8th Cir. 2020); United States v. Maez, 960 F.3d 949 , 961 (7th Cir. 2020); United States v. Miller, 954 F.3d 551 , supporting [the defendant’s] knowledge of his prohibited status” but “declin[ing] the Government’s invitation to engage in the level of judicial factfinding that would be required to affirm,” given the trial record), while the dissent appears to have assumed that it was not so limited, id. at 419-20 (Quattlebaum, J., dissenting) (asserting that the conviction should be sustained because the defendant had previously served more than twelve years in prison for second-degree murder, information that was not presented to the jury). 38 560 (2d Cir. 2020). We respectfully disagree with both of those perspectives, neither of which can comfortably co-exist with our own precedent, nor, to our thinking, with due process, the Sixth Amendment, or relevant Supreme Court authority. The trailblazer on the first path – the one resting on the Supreme Court’s decision in Vonn – was the Eleventh Circuit in United States v. Reed, a case initially decided on the basis of the pre-Rehaif state of the law. 941 F.3d at 1019. When the case reached the Supreme Court on certiorari, the Court vacated the judgment and sent the matter back for further proceedings consistent with Rehaif. Id. On remand, the Eleventh Circuit determined that, even though it was reviewing a conviction after a jury trial, it could nonetheless “consult the whole record when considering the effect of any error on [the defendant’s] substantial rights.” Id. at 1021. As authority for that premise, the Court cited Vonn, which held that, when a defendant has entered a guilty plea and later asserts on appeal that there was a failure to ensure the plea’s voluntariness through a colloquy under Rule 11 of the Federal Rules of Criminal Procedure,20 “a [previously] silent defendant has the burden to satisfy the plain-error rule and that a reviewing court may consult the whole record when considering the effect of any error on substantial rights.” 535 U.S. at 59 ; see Reed, 941 F.3d at 1021. Other circuits have cited Reed for the premise that, on plain-error review, an appeals court may satisfy itself of an element with evidence that was never presented to a jury. 20 Under Rule 11, if the defendant has pled guilty, “the court must address the defendant personally in open court and determine that the plea is voluntary and did not result from force, threats, or promises (other than promises in a plea agreement).” Fed. R. Crim. P. 11(b)(2). 39 See United States v. Mancillas, 789 F. App’x 549, 550 (7th Cir. 2020); cf. Ward, 957 F.3d at 695 n.1 (6th Cir. 2020) (citing Vonn, 535 U.S. at 59 ). The problem with Reed and the cases that follow it, however, is that Vonn involved review of the voluntariness of a guilty plea, a procedural posture that is completely unlike the review of a conviction following trial. In Vonn, the Supreme Court held that, in ascertaining the adequacy of a Rule 11 colloquy, a reviewing court may look beyond the colloquy to the record created at a defendant’s initial appearance and arraignment “[b]ecause … defendants may be presumed to recall information provided to them prior to the plea proceeding[.]” Vonn, 535 U.S. at 75 . The focus was, appropriately, on the information known to the defendant at the time of the plea because, when a defendant pleads guilty, the district court must ensure that the plea is knowing and voluntary. That’s the job at the plea stage because it is what due process demands in that context. McCarthy v. United States, 394 U.S. 459 , 466 (1969) (“[I]f a defendant’s guilty plea is not equally voluntary and knowing, it has been obtained in violation of due process and is therefore void.”). And the reviewing court’s job is to make sure of the same thing, which makes it logical to look at what a defendant was told at earlier stages of the criminal proceedings. The question is quite different when reviewing whether the government has borne at a trial – or even at a plea proceeding21 – its burden to “convince the trier [of fact] of all 21 Because we of course acknowledge that a guilty plea must be knowing and voluntary, the Dissent concludes that we are “comfortable inferring a defendant’s knowledge-of-felon 40 the essential elements of guilt.” Winship, 397 U.S. at 361 (citation omitted). In that procedural setting, due process and Sixth Amendment considerations compel us to focus our inquiry on the information presented to the trier of fact – in this case, the jury. Vonn is inapposite where, as here, we are concerned not with the facts possessed by the defendant and their effect on the voluntariness of his plea but with the information presented to the fact-finder to prove an element of the charged offense. Put differently, when there has been a plea rather than a trial, no one is concerned about or mentions the adequacy of the trial record because there is none. Likewise, however, when there has been a trial and an utter status from his prior guilty plea.” (Dissent at 9 n.5.) The Dissent therefore faults us for refusing to consider Nasir’s three prior guilty pleas – especially one for a felon-in-possession charge. That conviction is one that our colleagues especially emphasize as a “central reason” not to correct the plain error here. (Dissent at 9 n.5.) But the fact that a guilty plea must be knowing and voluntary has no bearing on whether we may consider a guilty plea that was never presented to the jury. What divides us has nothing to do with the strength of the evidence outside the trial record. It has everything to do with whether, consistent with constitutional safeguards, we can properly go outside the trial record. And to the extent the Dissent suggests that the government is free to ignore the elements of the charged offense at a plea colloquy, we disagree with that as well. The government must always make a record demonstrating a factual basis for the crime to which the plea is entered. 41 failure of proof is at issue, it is simply beside the point to rely on case law dealing with the voluntariness of plea colloquies.22 22 The Dissent asserts that United States v. Young, 470 U.S. 1 (1985), supports its position, and the position taken in Reed, 941 F.3d at 1020-21, that we must consider evidence outside the trial record when applying Olano step four. (Dissent at 14-15.) Not so. Although Young does refer to “the entire record,” it does so in a way that, in context, makes plain that what the Supreme Court was referring to was the entire trial record. The full quote from Young reads as follows: Especially when addressing plain error, a reviewing court cannot properly evaluate a case except by viewing such a claim against the entire record. We have been reminded: “In reviewing criminal cases, it is particularly important for appellate courts to relive the whole trial imaginatively and not to extract from episodes in isolation abstract questions of evidence and procedure. To turn a criminal trial into a quest for error no more promotes the ends of justice than to acquiesce in low standards of criminal prosecution.” It is simply not possible for an appellate court to assess the seriousness of the claimed error by any other means. 470 U.S. at 16 (emphasis added) (internal citation and quotation marks omitted). Far from supporting the Dissent or Reed, that statement emphasizes that our focus is supposed to be on the actual field of play – the trial – to see whether the government has fulfilled its constitutional obligations in a way that preserves the fairness and integrity of the prosecution and maintains the confidence of the public. The trial record is the only place to 42  The second rationale adopted by some courts for going beyond the trial record acknowledges that a reviewing court is restricted to the trial record at the first three steps of plain-error review, but then holds that the fourth step changes the scope of review. Since the fourth step of Olano calls for the exercise of discretion, and since that discretion must account for potential harm to the reputation of the judiciary, those courts say it is fine to look outside the trial record because the public will. The reasoning is, in effect, that the defendant is obviously guilty and the justice system will not appear to have served justice if, through no fault of the prosecution, the defendant is freed on the technicality that proof of a previously unknown element of the offense was not offered in evidence.23 which one rightly can look if what is being considered is the trial supposedly under review. For purposes of Olano step four, and for this type of error, the trial is the only judicial proceeding at issue. 23 Applying a different version of this approach, the Fifth Circuit at first declined to answer whether it was limited to the trial record on plain-error review but determined that it could judicially recognize facts at the fourth step of plain-error review, including a defendant’s prior state convictions. See Huntsberry, 956 F.3d at 285-86. Subsequently, however, the Fifth Circuit decided that it is permitted to look outside the trial record at the fourth step. See United States v. Staggers, 961 F.3d 745 , 756 (5th Cir. 2020); see also United States v. Burden, 964 F.3d 339 , 348 n.8 (5th Cir. 2020). In another post-Rehaif case, the First Circuit similarly indicated that judicial notice might be a proper path to resolution, but in the end, it did not take that path. United States v. Lara, --- F.3d ---, Nos. 17-1957, 43  The Second Circuit took essentially that approach in United States v. Miller. In analyzing a Rehaif challenge to jury instructions, the court decided that “the substantial-rights analysis [, i.e., the Olano step three question,] in [the defendant’s] case is a difficult one, given the paucity of factual development at trial pertaining to a question that was not discerned before Rehaif was decided.” 954 F.3d at 559. Because the step-three question was difficult, the court chose “to resolve [the] case on the fourth prong of plain-error review[,] … which does not necessarily confine us to the trial record.” Id. The court cited no authority for that postulate about being free to roam beyond the trial record. It asserted it and then, noting that the presentence investigation report provided ample evidence that the defendant must have known he was a felon, and referencing his stipulation at trial, concluded that the fairness and integrity of the judicial system would not be questioned, even though there was a “paucity” of evidence of his guilt presented at trial. Id. at 559-60. The Seventh Circuit has adopted the same kind of approach. In United States v. Maez, it began by explaining why Vonn is not applicable when reviewing jury convictions, 17-1964, 2020 WL 4668535 , at *13 (1st Cir. Aug. 12, 2020) (noting that “the government had available to it evidence of [the defendant’s] four recent and serious convictions from Maine,” and although it did not present that evidence at trial, “we regularly take judicial notice of … state court records given their presumed reliability”). For the reasons discussed herein, however, we are unpersuaded that judicial notice can properly be used as a means to circumvent a defendant’s rights to due process and trial by jury. 44 distinguishing that case as we have above and saying, “[t]he Supreme Court has made clear that harmless-error analysis [performed at Olano step three] looks only to the trial record to measure the effect of trial error.” Maez, 960 F.3d at 961. It reasoned that such a “restriction to the jury record flows logically from the nature of a substantial-rights inquiry on direct review.” Id. When asking whether a trial error affected substantial rights, “[t]he more abstract question of the defendant’s actual guilt or innocence is not the issue. Rather, the appellate court asks what effect the error could have had on the verdict in the trial actually conducted.” Id. But the court then decided that, because the fourth step of plain-error review is a separate, discretionary step, reviewing courts may, and perhaps should, consider claims of actual innocence. Id. at 962. Having determined that appellate courts “have broad discretion under prong four to leave even plain errors uncorrected where we have no doubt as to the ultimate result of further proceedings[,]” the court decided that step-four “discretion necessarily implies some power to look beyond the trial record to assess an error’s effect, at least for the errors argued here, where … [Old Chief] prevented the government from offering a great deal of circumstantial evidence showing” knowledge-of-status.24 Id. at 963. The only authority cited for looking beyond the trial record was the Second Circuit’s decision in Miller.25 Id. 24 Subsequently, the Seventh Circuit has exercised its discretion to recognize the plain error in a post-Rehaif challenge to a § 922(g) conviction. See United States v. Cook, 970 F.3d 866 (7th Cir. 2020). 25 The First Circuit has also recently joined the ranks of the Second and Seventh Circuits, saying that “the Supreme 45 Court has never suggested that we are categorically barred from taking into account evidence not introduced at trial in considering whether an instructional error satisfies the fourth prong of plain-error review.” Lara, 2020 WL 4668535 , at * 13. Although the Court acknowledged the due process concerns in “revis[ing] the basis on which a defendant is convicted simply because the same result would likely obtain on retrial,” id. at *14 (citation omitted), it nonetheless characterized a reversal in this context as “wasteful” and declined to exercise its discretion to notice the error on the fourth prong of plain-error review, id. at *13-14 . Similarly, the Ninth Circuit has decided that examination of evidence outside the trial record is permissible to avoid “wasteful reversals.” United States v. Johnson, No. 17-10252, 2020 WL 6268027 , at *4 (9th Cir. Oct. 26, 2020) (quoting United States v. Dominguez Benitez, 542 U.S. 74 , 82 (2004)). The court’s Johnson decision had an earlier iteration in which the expressed rationale for looking outside the trial record was the availability of a retrial in the case and the court’s conclusion (suspect, in our view) that the Double Jeopardy Clause is the source of the ordinary prohibition on going beyond the trial record when conducting appellate review. United States v. Johnson, 963 F.3d 847 , 851 (9th Cir. 2020) (vacated). While the unusual Double Jeopardy rationale may have made a cameo appearance in the most recent version of Johnson, see 2020 WL 6268027 , at *4 (“To satisfy the fourth prong when a retrial would be permissible, a defendant must offer a plausible basis for concluding that an error-free retrial might end more favorably.” (emphasis added)), the court’s stated basis for looking past the government’s proof at trial is now more in line with the Olano prong four analysis in Miller and Maez. 46  Our disagreement with this fourth-step approach is that it treats judicial discretion as powerful enough to override the defendant’s right to put the government to its proof when it has charged him with a crime.26 We do not think judicial discretion trumps that constitutional right, and neither Miller nor Maez cite any pre-Rehaif authority supporting a contrary conclusion. Moreover, those decisions and the ones that follow them are independently troubling to the extent they imply that relief on 26 As discussed below, we think the existence of an Old Chief stipulation has little relevance to the analysis and, thus, disagree with the Seventh Circuit’s conclusion that it was justified in straying from the trial record on that basis. To the extent that either the Second or Seventh Circuit (or any other court of appeals) sought to make a broader point that going beyond the trial record was permissible because the government presented all of the evidence it needed to, given the state of the law prior to Rehaif, our views again diverge. Whether fair to the government or not, it does not matter that the change in the law came after trial. The Supreme Court has said that the error must be measured based on the law at the time of appeal. See Henderson, 568 U.S. at 273 (“Johnson explicitly rejects applying the words ‘plain error’ as of the time when the trial judge acted. Instead, Johnson deems it ‘enough that an error be “plain” at the time of appellate consideration’ for that error to fall within Rule 52(b)’s category of ‘plain error.’” (quoting Johnson, 520 U.S. at 468 )). There will be cases that fall in the gap between the state of the law at trial and the state of the law on appeal. This is one. 47 plain-error review is available only to the innocent.27 That is a proposition the Supreme Court put to rest in Rosales-Mireles v. United States, 138 S. Ct. 1897 (2018), when it observed that “Olano rejected a narrower rule that would have called for relief only … where a defendant is actually innocent.” Id. at 1906 . And as for any objection that technicalities can be overlooked on plain-error review, we do not accept that the question of whether we are confined to the trial record is a mere technicality. It is, in our view, a matter of the highest importance. The word “technicality” is too often used to denigrate a principle that stands between an advocate and a preferred result. “All law is technical if viewed solely from 27 The Dissent suggests the same. Indeed, the consistent theme of the Dissent is that, when evidence outside the trial record is considered, it is so obvious that Nasir is guilty that we are “profoundly mistaken” (Dissent at 1) in “persist[ing]” in our desire to correct a plain error of constitutional magnitude that has affected Nasir’s substantial rights. (Dissent at 19.) “[I]n the face of overwhelming, reliable information supporting Nasir’s conviction” (Dissent at 19), our persistence is explained as “a reflexive inclination … to reverse because of unpreserved error[.]” (Dissent at 19 (quoting Puckett v. United States, 556 U.S. 129 , 134 (2009)).) Our view, however, is more reflective than reflexive and is consistent with the Supreme Court’s instruction that “the public legitimacy of our justice system relies on procedures that are neutral, accurate, consistent, trustworthy, and fair, and that provide opportunities for error correction.” Rosales-Mireles v. United States, 138 S. Ct. 1897 , 1908 (2018) (internal quotation marks and citation omitted). 48 concern for punishing crime without heeding the mode by which it is accomplished.” Bollenbach v. United States, 326 U.S. 607 , 614-15 (1946). The Constitution puts procedural safeguards in place to protect against just such an approach. Given the imperative of due process, and “[i]n view of the place of importance that trial by jury has in our Bill of Rights,” it should not be supposed that “the belief of appellate judges in the guilt of an accused, however justifiably engendered by the dead record, [can be substituted] for ascertainment of guilt by a jury under appropriate judicial guidance, however cumbersome that process may be.” Id. at 615 . In sum, we disagree with both variants of the rationales that other courts of appeals have adopted to justify unmooring themselves from the trial record when conducting plain-error review.28 Given our view of the due process and jury trial 28 The Dissent relies heavily on the several cases we have just discussed and others following them, counting the number of courts and judges and asking, “[h]ow could so many federal judges approve the obvious violation of important Fifth Amendment and Sixth Amendment rights?” (Dissent at 13.) We are certainly aware that thoughtful people can analyze the plain-error conundrum here differently than we have. But then, not long ago, there was a contrary consensus that plain-error relief is warranted when the trial record is “devoid of evidence.” See United States v. Castro, 704 F.3d 125 , 138 (3d Cir. 2013) (citation omitted) (collecting cases). More to the point, however, we are making an independent judgment, as we are required to do, and counting up judges who see the issue differently does not alter our obligation. The answer to the old saw that “fifty million Frenchmen can’t be wrong” is yes, they can. Rehaif itself is an example of everyone except the 49 rights at issue, our analysis of Nasir’s claim of plain error will be confined to the trial record and the evidence the government actually presented to the jury. 3. Applying Plain-Error Review Turning to the trial record, and with the first two steps of the plain-error test from Olano not in dispute, the only questions left for our consideration are whether the admitted plain error of a conviction on proof of less than all of the elements of the 922(g) charge affected Nasir’s substantial rights (Olano step three) and whether we should exercise our discretion to notice the error (Olano step four). On this record, the answer to both questions is yes.29 Supreme Court seeing an issue the same way and, given the Supreme Court’s position in our judicial hierarchy, all of them being wrong. 29 That is not to say that all post-Rehaif cases should be resolved in favor of the defendant. Despite the Dissent’s assertions to the contrary, we are not advocating nor effectively establishing a per se rule. Each case must be decided on its own facts. For example, there have been cases where sufficient evidence was presented at trial to show that the defendant was aware of his status as a felon at the time of the crime. See, e.g., United States v. Moss, 812 F. App’x 108, 111 (4th Cir. 2020) (rejecting a Rehaif-based challenge because “[d]uring his direct testimony, [the defendant] stated that he was well aware of his prohibited status because of his prior convictions.”); United States v. Velázquez-Aponte, 940 F.3d 785 , 800 (1st Cir. 2019) (reciting evidence supporting a § 922(g) conviction after Rehaif and noting that, at trial, “the government submitted a 50  a) Olano step three To show that an error affected his substantial rights, Nasir must “‘show a reasonable probability that, but for the error,’ the outcome of the proceeding would have been different.”30 Molina-Martinez v. United States, 136 S. Ct. certified copy of a prior Puerto Rico court judgment reflecting that [the defendant] was convicted of a felony in state court” at trial and “read portions of it to the jury,” including the sentence). The Dissent asserts that these cases are “inapposite” because they did not feature Old Chief stipulations. (Dissent at 11.) But whether there is an Old Chief stipulation is irrelevant. Old Chief was explicit that it does not prevent the introduction of evidence of a prior conviction “for any purpose beyond proving status,” 519 U.S. at 190, so proving knowledge of status was never forbidden by Old Chief and is expressly sanctioned by Federal Rule of Evidence 404(b), which states that “[e]vidence of a crime, wrong, or other act is … admissible for … proving … knowledge[.]” Therefore, as explained further herein, Old Chief stipulations do not prevent the government from introducing knowledge-of-status evidence, as is evident from their continued use post-Rehaif. The Dissent engages in pure speculation when it insists that, but for the stipulation in this case, the government would have introduced such evidence, or that the trial court would have sustained an objection to it. (See Dissent at 11.) 30 Although we agree with Nasir that his conviction under § 922(g) was plainly erroneous after Rehaif, we do not agree with his assertion that the error was structural. The Supreme Court has said that “structural errors are a very 51 1338, 1343 (2016) (quoting United States v. Dominguez Benitez, 542 U.S. 74 , 76 (2004)). As to his sufficiency-of-the- evidence challenge,31 we ask whether the evidence the government presented at trial would have been sufficient to sustain a conviction on the knowledge-of-status element. Because literally no evidence was presented concerning Nasir’s knowledge of his status as a felon, it is at least limited class of errors[.]” United States v. Marcus, 560 U.S. 258 , 263 (2010) (citation and internal quotation marks omitted). Those circumstances are not present here, and we are not inclined to extend the structural error doctrine. We have already said that “[t]rial errors resulting from a failure to submit an element of an offense to the jury are not structural defects, but instead, are subject to harmless or plain error analysis.” United States v. Vazquez, 271 F.3d 93 , 103 (3d Cir. 2001) (en banc). That is consistent with the Supreme Court’s decisions in Neder and Johnson, which held that a judge’s mistake in taking from the jury the responsibility to determine the existence of an element of the crime was not structural error. (See supra II.E.1.) 31 Nasir also alleges plain error with respect to the jury instruction on the elements of a § 922(g) offense, but we need not consider those arguments, given our disposition of the sufficiency-of-the-evidence challenge. Failure to instruct the jury as to an element of the crime is trial error, and “[t]he prosecution therefore is free to retry [the] defendant.” McMullen v. Tennis, 562 F.3d 231 , 237 (3d Cir. 2009); see also United States v. Cohen, 301 F.3d 152 , 158 (3d Cir. 2002) (Alito, J.) (“The usual remedy for an error in a jury instruction is retrial[.]”). 52 reasonably probable, if not certain, that the jury would not have found there was proof beyond a reasonable doubt of the knowledge-of-status element, if it had known it was required to consider that element. The government nevertheless argues that the situation here calls for a different result because the defendant stipulated that he was a felon, pursuant to Old Chief, 519 U.S. 172 . According to the government, it was prohibited from giving any further details about Nasir’s criminal record, so it could not have adduced evidence that he knew of his status. That argument echoes a concern raised by Justice Alito in his dissent in Rehaif, in which he said that, now that the government has to prove knowledge-of-status, “under … [Old Chief], it is questionable whether a defendant, by offering to stipulate that he has a prior conviction, can prevent the prosecution from offering evidence about the nature of that offense. And the admission of that information may work to a § 922(g) defendant’s detriment.” Rehaif, 139 S. Ct. at 2209 (Alito, J., dissenting). We understand Justice Alito as making the point that discovering a knowledge-of-status element in § 922(g) was potentially inconsistent with the protections the Supreme Court intended Old Chief to extend to defendants, and that inconsistency, Justice Alito indicated, stood as another reason why the Court’s interpretation of § 922(g) in Rehaif was incorrect. We do not, however, read anything in Rehaif, or Old Chief itself, as suggesting that the government could not have introduced knowledge-of-status evidence at trial. To the contrary, the Supreme Court was explicit in Old Chief that its restrictions on evidence concerning the defendant’s previous felony applied “only when the record of conviction would not 53 be admissible for any purpose beyond proving status,” so that “if, indeed, there were a justification for receiving evidence of [the conviction] on some issue other than status (i.e., to prove . . . ‘knowledge, . . .’), [then Federal Rule of Evidence] 404(b) [would] guarantee[] the opportunity to seek its admission.” 519 U.S. at 190 (emphasis added). Nor did Old Chief preclude adding a simple knowledge- of-status statement to the stipulations the government regularly enters with defendants in § 922(g) cases. By its plain terms, Old Chief only prevents the government from presenting evidence about the name or nature of the defendant’s prior felony conviction. A knowledge-of-status statement included in a stipulation addresses neither of those things. Indeed, such additional language need not reveal any information about a defendant’s felonious past, only that he was aware of it at the time of the offense under consideration. Events in the real world bear that out. As the Seventh Circuit has noted, “[i]n the wake of Rehaif, defendants and the government have begun agreeing to modified Old Chief stipulations that also include knowledge of felon status.” Maez, 960 F.3d at 959. The government also argues that a fair inference, especially on plain-error review, is that Nasir’s acknowledgement of his conviction in the Old Chief stipulation32 means he also acknowledged he knew of his status as a felon ever since becoming one. But Rehaif itself blocks 32 For the language of the stipulation in its entirety, see supra note 3. 54 that line of reasoning.33 The Supreme Court said there that it did not believe “Congress would have expected defendants under § 922(g) … to know their own status[ ].” Rehaif, 139 S. Ct. at 2197 . If one were to conclude otherwise, the Court said, “these provisions might apply to a person who was convicted of a prior crime but sentenced only to probation, who does not know that the crime is ‘punishable by imprisonment for a term exceeding one year.’” Id. at 2198 (quoting 18 U.S.C. § 922 (g)(1)). In the natural course, a defendant agrees to an Old Chief stipulation after having committed the crime of unlawfully possessing a firearm. Nasir’s stipulation, for example, post- dates his offense by sixteen months. All the stipulation demonstrates is that he knew he was a felon at the time he signed the stipulation; based on the stipulation alone, it cannot rightly be said that he knew of his status as a felon when he possessed the firearms at issue.34 In other words, a stipulation 33 That is not to say that the government’s argument is without support. See Ward, 957 F.3d at 696 (“A rational juror could also have inferred that [the defendant] knew he was a felon when he possessed the gun. [He] made an Old Chief stipulation at trial, pursuant to which he acknowledged that he ‘was a convicted felon on and prior to the date of the charged conduct[.]’ [His] lawyer also told the jury that [the defendant] was ‘stipulating that he has a felony. So you can check that one off the box.’ The jury could have inferred from these statements that [the defendant] also knew that he was a felon.”). 34 While the Dissent agrees that the stipulation does not “necessarily prove that [Nasir] knew he was a felon when he 55 of the sort submitted in this case will not, on its own, suffice to prove that, at the relevant time, the defendant had knowledge of his status as a person prohibited to possess a firearm.35 was arrested with the gun[,]” it nonetheless asserts that “[a] thoughtful observer drawing upon her reason, experience, and common sense might easily infer from Nasir’s June 2017 stipulation that he knew of his felon status when apprehended with a gun in December 2015.” (Dissent at 15-16 n.9.) How a thoughtful observer would get to that conclusion at all, let alone easily, can only be explained by going outside the trial record. On the basis of what is in that record, only an illogical leap could get to that conclusion. Again, Nasir entered into his Old Chief stipulation long after he was apprehended with the guns, and he stipulated only that he was a felon; he did not stipulate to his state of knowledge at the time of the alleged crime. A thoughtful observer, therefore, would not – indeed could not – rightly infer knowledge-of-status at the relevant time from the Old Chief stipulation, either alone or in combination with anything else the Dissent can point to. There simply is no basis for that inference in the trial record. 35 The government also argues that, because Nasir agreed to an Old Chief stipulation, the situation is analogous to one where the defendant invited the error. But that argument is a non-starter since, under our precedent, the invited-error doctrine does not apply where the law changes between trial and appeal. United States v. Andrews, 681 F.3d 509 , 517 n.4 (3d Cir. 2012); United States v. West Indies Transp., Inc., 127 F.3d 299 , 305 (3d Cir. 1997). 56  The government tries to get around its lack of evidence by saying that, at trial, it showed Nasir was furtive about his drug dealing and so he must have known when he possessed his guns that he was a convicted felon.36 But the inference simply does not follow. Criminal behavior is nearly always furtive; it’s in the very nature of the thing. Criminals know enough to hide their criminality, if they can. Nasir’s furtiveness proves only that he knew his drug dealing could get him into trouble, not that he knew he was a previously convicted felon.37 If the government’s argument were accepted, prosecutors in a typical case involving drugs and guns could put on no more evidence than was offered before Rehaif and then, by calling the defendant’s behavior furtive, gain a conviction. That would render Rehaif a nullity and is 36 Specifically, the government points to “the evidence of subterfuge involving the use of the separate storage facility to store drugs and drug paraphernalia [and] the fact that he had a secondary vehicle in which he had an arsenal of five semiautomatic firearms.” (En Banc Oral Argument at 1:03:45–1:04:35; see also App. at 393–94 (trial testimony describing Nasir’s behavior at the storage facility as involving “frequent visits” to a “small unit” where Nasir “would go inside and come back out”).) 37 The government further argues that the fact Nasir kept his weapons hidden and locked in the trunk of his car shows he knew he was prohibited from possessing firearms. If we were to accept that argument, it might imply that a gun owner who responsibly keeps his guns safely locked away is somehow admitting his ownership of them is illicit. We think the inference unwarranted. 57 obviously not an option. Rehaif declares knowledge of status to be an element of a § 922(g) offense, and that cannot be ignored. The Fourth Circuit has recently come to the same conclusion. In United States v. Medley, 972 F.3d 399 (4th Cir. 2020), it recognized plain error when the government presented no evidence to sustain a conviction on the knowledge-of-status element. 38 Id. at 402-03 . There too, the government asserted that the defendant’s Old Chief stipulation was evidence of knowledge-of-status, as was his “attempt to evade the police[.]” Id. at 414-15 . The court disagreed, noting that “[i]nferring that someone knew he was prohibited from possessing a firearm at the time of the offense based on a stipulation at trial that he was in fact a prohibited person would render the Supreme Court’s language in Rehaif pointless.” Id. at 414 . It also noted that the defendant’s “attempt to evade the police … does not indicate—much less overwhelmingly prove—that he knew his prohibited status under federal law.” Id. at 415 . 38 In Medley, the Fourth Circuit found plain error and prejudice in the indictment, in the jury instructions, and in the sufficiency of the evidence presented at trial. Id. at 419 . It then exercised its discretion to recognize the error at step four of plain-error review, in light of the cumulative effect of those three errors. Id. Rather than delving into our agreements or disagreements with the majority and dissenting opinions in that case, we note that we certainly agree with the foundation of the majority’s analytical approach – that due process and the right to a jury trial are implicated here. 58  As was the Fourth Circuit in Medley, we are faced here with a case in which there is no evidence at all on an essential element of the felon-in-possession charge, and yet the case was submitted to the jury and there was a conviction. We have said in unmistakable terms that “affirming a conviction where the government has failed to prove each essential element of the crime beyond a reasonable doubt ‘affect[s] substantial rights[.]’” United States v. Gaydos, 108 F.3d 505 , 509 (3d Cir. 1997) (quoting Olano, 507 U.S. at 732 ) (first alteration in original). That conclusion is “consistent with the Supreme Court’s instruction that due process requires ‘proof beyond a reasonable doubt of every fact necessary to constitute the crime with which [the defendant] is charged.’” United States v. Xavier, 2 F.3d 1281 , 1287 (3d Cir. 1993) (quoting Winship, 397 U.S. at 364 .). Nasir’s substantial rights were thus definitely affected by his conviction upon proof of less than all of the elements of the offense outlawed by § 922(g), and he has carried his burden at Olano step three. b) Olano step four The final question, at Olano step four, is whether we should exercise our discretion to notice the error because it is of a sort that would “seriously affect the fairness, integrity, or public reputation of judicial proceedings.” Olano, 507 U.S. at 736 . Given the significant due process and Sixth Amendment concerns at issue, which we have already discussed at length, we are convinced that it is indeed that sort of error. The Supreme Court recently affirmed in Rosales- Mireles that an error need not “shock the conscience” or amount to a “powerful indictment of the system” to be “worthy of correction” at step four of a plain-error analysis. 138 S. Ct. 59 at 1906-07 (internal quotation marks omitted). Again, the Court said that “Olano rejected a narrower rule that would have called for relief only” in cases “where a defendant is actually innocent.” Id. at 1906 . It recognized instead “a broader category of errors that warrant correction on plain-error review.” Id. Innocence or guilt, insofar as we may think we apprehend them based on the trial record, may have relevance, but our analysis at the fourth step “focus[es] … on principles of fairness, integrity, and public reputation[.]” Id. That means that sometimes the errors to be corrected are “inadvertent or unintentional errors of the court or the parties below.” Id. In Rosales-Mireles, the error was the District Court’s miscalculation of the guidelines range at sentencing. Id. at 1905 . Such errors had already been recognized as being likely to affect a defendant’s substantial rights, when considered under the third step of plain-error review. See Molina-Martinez, 136 S. Ct. at 1345 (“When a defendant is sentenced under an incorrect [g]uidelines range—whether or not the defendant’s ultimate sentence falls within the correct range—the error itself can, and most often will, be sufficient to show a reasonable probability of a different outcome absent the error.”). The Supreme Court extended that reasoning to Olano step four, saying that “‘[t]o a prisoner,’ th[e] prospect of additional ‘time behind bars is not some theoretical or mathematical concept’ … [and] thus warrants serious consideration in a determination whether to exercise discretion under Rule 52(b).” Rosales-Mireles, 138 S.C.t at 1907 (quoting Barber v. Thomas, 560 U.S. 474 , 504 (2010) (Kennedy, J., dissenting)). The Court observed that “[i]t is crucial in maintaining public perception of fairness and integrity in the justice system that courts exhibit regard for 60 fundamental rights and respect for prisoners as people.” Id. at 1907 (internal quotation marks omitted). If a guidelines miscalculation warrants recognition of plain error, surely a plain error of constitutional dimension going to the conviction itself deserves to be recognized and corrected.39 Nasir was deprived of the right to have a jury 39 We do not suggest, as the Dissent contends, that “plain-error review is inapplicable whenever important constitutional rights are at issue.” (Dissent at 8 n.4.) Instead, we faithfully apply our discretion at Olano step four within the confines of the trial record, evaluating whether the constitutional deprivation at issue seriously impugns the fairness, integrity, and public reputation of judicial proceedings. By limiting the scope of our review to the trial record, we decline to act as a factfinder or to do the government’s job for it. That exercise of judicial restraint does not create a per se rule, nor does it “challenge[ ] the constitutionality of Rule 52(b)’s plain-error standard as explicated in Supreme Court decisions[,]” as the Dissent charges. (Dissent at 9 n.4).) There are cases, as we’ve previously noted (supra note 29), in which sufficient evidence was presented at trial to show that a defendant was aware of his status as a felon at the time of the crime charged. See, e.g., Moss, 812 F. App’x at 111; Velázquez-Aponte, 940 F.3d at 800. Thus, it is not a foregone conclusion that every defendant convicted before Rehaif under § 922(g) – even every such defendant who entered into an Old Chief stipulation – will succeed on plain error review. Old Chief stipulations do not now prevent, nor have they ever prevented, the government from introducing knowledge-of-status evidence. To the contrary, the government has already begun including 61 consider whether the government had proven him guilty beyond a reasonable doubt on every element of the § 922(g) charge. As forcefully described in the concurrence on this point, upholding that outcome would amount to an appellate court, in the jury’s stead, “mak[ing] a factual determination on an unproven element of an offense by considering documents outside the evidentiary record,” in derogation of the Sixth Amendment. (J. Matey Concurrence at 2.) Whether viewed as a matter of the Fifth Amendment’s guarantee of due process or the Sixth Amendment’s promise of trial by jury, or both, a deprivation of those essential rights “seriously impugns ‘the fairness, integrity and public reputation of judicial proceedings[,]’” and thus satisfies step four of Olano. Gaydos, 108 F.3d at 509 (quoting Olano, 507 U.S. at 732 ). That cannot be swept aside because of dissatisfaction with the rule that plain error is decided on the basis of the law as it stands at the time of appeal. See Johnson, 520 U.S. at 468 (plainness of a trial error must be judged “at the time of appellate consideration”). True enough, the rules of the game changed here, when the decision in Rehaif came down after the trial. That, however, does not change our constitutional norms. Members of the public know that the government is supposed to prove a defendant’s guilt at trial. Everybody acknowledges that that was not done in this case, though it was nobody’s “fault.” Were we to ignore that breach of due process and then try to explain our choice by saying, “well, we all know he’s knowledge-of-status affirmations within Old Chief stipulations. Maez, 960 F.3d at 959. The variable, therefore, never was the stipulation; it was the government’s lack of awareness that it had to prove the knowledge-of-status element. 62 guilty,” it should not sit well with thoughtful members of the public. Nor should our taking over the jury’s role, for the sake of efficiency. Disregarding constitutional norms may be taken as tantamount to saying that rules constraining the government really don’t count when we just know someone is guilty.40 40 Faulting us for adhering firmly to the demands of due process, the Dissent asserts that “framing the plain error as a due-process violation does not automatically satisfy Olano prong three or four.” (Dissent at 5.) We agree. Labels are not what matter; substance is. To recap, looking at what happened in this case, and considering Olano prong three, not even our dissenting colleagues try to say that the government actually offered at trial any evidence of Nasir’s knowledge of his status as a previously convicted felon. So, again, there was a complete failure of proof on that essential element of the § 922(g) charge, and it ought to be a matter of common understanding that a failure to prove all the elements of an offense does affect substantial rights, as our past precedent tells us. See United States v. Jones, 471 F.3d 478 , 480 (3d Cir. 2006) (“[A]ffirming a conviction where the government has failed to prove each essential element of the crime beyond a reasonable doubt affect[s] substantial rights … .” (internal quotation marks omitted) (second alteration in original)). So prong three is satisfied here, not because we are “framing” the government’s failure as one of due process but because it indisputably is a matter of due process, implicating one of the most fundamental protections afforded to an accused. As for prong four of Olano, we likewise are not saying that labels carry the day. We are focused on the fundamental right, enshrined in the Due Process Clause, that no one will be deprived of liberty without the government carrying its burden to prove guilt beyond a reasonable doubt. When that is at issue, 63 That is a message likely to call into question the fairness, integrity, and reputation of the justice system. We will therefore exercise our discretion to recognize the plain error in Nasir’s § 922(g) conviction. 4. The Remedy for the Plain Error We view this case as a misapprehension about the law – one shared by everyone in the courtroom, and perhaps across the nation, until Rehaif. That misapprehension led to the government’s failure to present sufficient evidence to sustain the conviction.41 Though a failure of proof usually results in acquittal, the Double Jeopardy Clause is not implicated when as it is here, we believe it does bring the judicial process into disrepute to ignore what the Constitution requires. See id. (“[A]ffirming a conviction where the government has failed to prove each essential element of the crime beyond a reasonable doubt … seriously impugns the fairness, integrity and public reputation of judicial proceedings.” (internal quotation marks omitted)). We are not asking for anything to be “automatic” but are taking this case on its facts, as the government and the defendant developed those facts at trial. That, we believe, is what the Supreme Court meant when it said in Puckett v. United States that “the fourth prong [of Olano] is meant to be applied on a case-specific and fact-intensive basis.” 556 U.S. 129 , 142 (2009). By contrast, the Dissent does seem to have an automatic approach: invoking Olano automatically makes every constitutional protection a matter of pure discretion, for judges to ignore if they choose. 41 See supra note 31. 64 the law has changed on appeal.42 Retrial is thus allowed and warranted. We will therefore vacate Nasir’s conviction on the § 922(g) count of the indictment, and we will remand for a new trial on that charge, at the government’s discretion. III. CONCLUSION The frustration of diligent prosecutors in this case is to be expected and is fully justified. They did not know they had 42 See, e.g., United States v. Ford, 703 F.3d 708 , 711-12 (4th Cir. 2013) (granting a new trial where “the evidence presented at trial has been rendered insufficient only by a post- trial change in law … [and] was therefore akin to a reversal for trial error, [so] retrial did not run afoul of the Double Jeopardy Clause.” (internal quotation marks and citations omitted)); United States v. Wacker, 72 F.3d 1453 , 1465 (10th Cir. 1995) (“Moreover, the government here cannot be held responsible for ‘failing to muster’ evidence sufficient to satisfy a standard which did not exist at the time of trial.” (citation omitted)); United States v. Weems, 49 F.3d 528 , 531 (9th Cir. 1995) (holding that “double jeopardy protections do not bar retrial” when “[t]he government had no reason to introduce such evidence because, at the time of trial, under the law of our circuit, the government was not required to prove” that element); see also Rehaif, 139 S. Ct. at 2201 (Alito, J., dissenting) (noting that, following the majority’s decision, “[a] great many convictions will be subject to challenge, threatening the release or retrial of dangerous individuals whose cases fall outside the bounds of harmless-error review.”). 65 to, and hence did not, present evidence to the jury to prove that the defendant knew he was a felon when he possessed a firearm. Likewise, the burden on the busy District Court is regrettable, since it too was operating on the then-widely shared understanding of the elements of a § 922(g) offense. Nevertheless, “[t]he prosecution’s failure to prove an essential element of the charged offense [is] plain error [and]… a miscarriage of justice.” United States v. Castro, 704 F.3d 125 , 138 (3d Cir. 2013) (citations omitted). In sum, we will affirm Nasir’s conviction under the crack house statute and for possession with intent to distribute marijuana. We will vacate his sentence, as it was based on the application of the career offender enhancement that we have here concluded should not be applied, and we will vacate his conviction as a felon in possession of a firearm. Accordingly, we will remand for a new trial on that charge and for resentencing. 66 BIBAS, Circuit Judge, concurring in part. Judges interpret the law. That applies to the U.S. Sentenc- ing Guidelines too. If the Sentencing Commission’s commen- tary sweeps more broadly than the plain language of the guide- line it interprets, we must not reflexively defer. The judge’s lodestar must remain the law’s text, not what the Commission says about that text. So too here. The plain text of the Guidelines’ career- offender enhancement does not include inchoate crimes. The commentary says that it does. The majority rightly rejects this extra-textual invitation to expand a serious sentencing en- hancement, and I join Part II.D of its opinion. But the narrow scope of today’s holding hints at a broader problem. For decades, we and every other circuit have fol- lowed the Supreme Court’s guidance in Stinson. That meant we gave nearly dispositive weight to the Sentencing Commis- sion’s commentary, not the Guidelines’ plain text. 508 U.S. at 44–46; see also, e.g., United States v. Keller, 666 F.3d 103 , 108–09 (3d Cir. 2011); United States v. Boggi, 74 F.3d 470 , 474–75 (3d Cir. 1996). Now the winds have changed. In Kisor, the Supreme Court awoke us from our slumber of reflexive deference: agency in- terpretations might merit deference, but only when the text of a regulation is truly ambiguous. Before deferring, we must first exhaust our traditional tools of statutory construction. Any- thing less is too narrow a view of the judicial role. We must look at things afresh. Old precedents that turned to the commentary rather than the text no longer hold. See 1 Hassen v. Gov’t of the V.I., 861 F.3d 108 , 114 n.5 (3d Cir. 2017) (noting that we may revisit our precedents when they conflict with intervening Supreme Court precedent). Tools of statutory interpretation have thus been thrust to the fore. And one tool among many stands out as well suited to the task: the rule of lenity. As we rework our Sentencing Guidelines cases, lenity is the tool for the job. I. THE RULE OF LENITY’S VIRTUES As Chief Justice Marshall explained, the rule of lenity is venerable. “The rule that penal laws are to be construed strictly, is perhaps not much less old than construction itself.” United States v. Wiltberger, 18 U.S. (5 Wheat.) 76, 95 (1820). It first arose to mitigate draconian sentences. As English statutes kept expanding the death penalty and curtailing mercy, courts tem- pered them by construing them narrowly. Livingston Hall, Strict or Liberal Construction of Penal Statutes, 48 Harv. L. Rev. 748 , 749–51 (1935). The canon was well established by the time of Blackstone. 1 William Blackstone, Commentaries *88. And it took root in our law soon thereafter. Wiltberger, 18 U.S. (5 Wheat.) at 95. Under the rule of lenity, courts must construe penal laws strictly and resolve ambiguities in favor of the defendant. See, e.g., Liparota v. United States, 471 U.S. 419 , 427 (1985); see also Antonin Scalia & Bryan A. Garner, Reading Law: The In- terpretation of Legal Texts 296 (2012). The touchstone is the text: the “ordinary,” evidently intended meaning of “the words of the statute.” Wiltberger, 18 U.S. (5 Wheat.) at 95. 2  The rule of lenity serves three core values of the Republic. First, it is entwined with notice and thus due process. See McBoyle v. United States, 283 U.S. 25 , 27 (1931) (Holmes, J.); United States v. R.L.C., 503 U.S. 291 , 309 (1992) (Scalia, J., concurring). It gives citizens fair warning of what conduct is illegal, ensuring that ambiguous statutes do not reach beyond their clear scope. Second is the separation of powers. As Chief Justice Mar- shall explained, the rule of lenity stems from “the plain princi- ple that the power of punishment is vested in the legislative, not in the judicial department. It is the legislature, not the Court, which is to define a crime, and ordain its punishment.” Wiltberger, 18 U.S. (5 Wheat.) at 95. If Congress wants to criminalize certain conduct or set certain penalties, it must do so clearly. And third but perhaps most importantly, the rule of lenity serves our nation’s strong preference for liberty. As Judge Henry Friendly explained, lenity expresses our “instinctive dis- taste against men languishing in prison unless the lawmaker has clearly said they should.” Henry J. Friendly, Mr. Justice Frankfurter and the Reading of Statutes, in Benchmarks 196, 209 (1967). That approach fits with one of the core purposes of our Constitution, to “secure the Blessings of Liberty” for all citizens. U.S. Const. pmbl. Penal laws pose the most severe threats to life and liberty, as the Government seeks to brand people as criminals and lock them away. To guard against those threats, the rule of lenity favors respect for individual rights. Wiltberger, 18 U.S. (5 Wheat.) at 95. Together with the Double Jeopardy and Cruel and Unusual Punishments Clauses, 3 lenity is a longstanding safeguard against excessive punish- ment. John F. Stinneford, Dividing Crime, Multiplying Punish- ments, 48 U.C. Davis L. Rev. 1955 , 1982–2001 (2015). II. LENITY, SENTENCING, AND KISOR An agency’s reading of its own regulation used to be almost dispositive. That applied equally to the U.S. Sentencing Com- mission and its commentary. Stinson, 508 U.S. at 44–46. But no more. Now, before a court defers to an agency interpreta- tion, first it “must exhaust all the ‘traditional tools’ of construc- tion.” Kisor, 139 S. Ct. at 2415 (quoting Chevron USA Inc. v. NRDC, 467 U.S. 837 , 843 n.9 (1984)). “[O]nly when that legal toolkit is empty and the interpretive question still has no single right answer” may we give Auer deference to an agency’s read- ing of its own rule. Id.; see Auer v. Robbins, 519 U.S. 452 , 461 (1997). A key tool in that judicial toolkit is the rule of lenity. Rather than defer to the commentary, we should use lenity to interpret ambiguous Guidelines. Even though the Guidelines are advi- sory, they exert a law-like gravitational pull on sentences. See United States v. Booker, 543 U.S. 220 , 265 (2005) (Breyer, J., remedial majority opinion); Peugh v. United States, 569 U.S. 530 , 543–44 (2013); U.S. Sentencing Comm’n, 2019 Annual Report and Sourcebook of Federal Sentencing Statistics 8 (re- porting that last year, 75% of offenders received sentences that were either within the Guidelines range or justified by a Guide- lines ground for departure). So courts must still attend to the rule and its animating principles. 4  Lenity’s third, key purpose applies here. True, one can de- bate the relevance of its first two purposes: whether the com- mentary gives enough notice and whether congressional ap- proval of guidelines with their commentary respects the sepa- ration of powers. Compare Mistretta v. United States, 488 U.S. 361 , 380–411 (1989), with id. at 422–27 (Scalia, J., dissenting). But in any event, the presumption of liberty remains crucial to guarding against overpunishment. When a guideline is ambig- uous, the rule of lenity calls for adopting the more lenient of two plausible readings. It helps ensure that “criminal punish- ment . . . represents the moral condemnation of the commu- nity.” United States v. Bass, 404 U.S. 336 , 348 (1971). There is no compelling reason to defer to a Guidelines com- ment that is harsher than the text. Whatever the virtues of giv- ing experts flexibility to adapt rules to changing circumstances in civil cases, in criminal justice those virtues cannot outweigh life and liberty. Efficiency and expertise do not trump justice. Though expertise improves things for the future, sentencing re- quires justice tethered to the past. The rule of lenity takes prec- edence as a shield against excessive punishment and stigma. That does not mean that lenity displaces all commentary. Only when a comment to an otherwise ambiguous guideline has a clear tilt toward harshness will lenity tame it. Some pro- visions may have no consistent tilt across all defendants. If so, Auer deference might still apply. Here, however, the guideline’s plain text does not include inchoate offenses. The commentary says it does, making it harsher. So we rightly refuse to defer. 5  ***** Courts play a vital role in safeguarding liberty and checking punishment. That includes reading the Sentencing Guidelines. Some provisions are ambiguous. But as Kisor teaches, instead of deferring to the commentary the moment ambiguity arises, judges must first exhaust our legal toolkit. This will require work; our old precedents relying strictly on the commentary no longer bind. In undertaking this task, we must not forget the rule of lenity. 6 MATEY, Circuit Judge, concurring. I concur in the majority opinion in full and write separately as to Part II.E. Start with this question: how many people serving on a jury in the United States know exactly what it means to be “a felon?” Most, we can guess, know that a felon has run into some trouble with the law. Others, that the person has been convicted of a crime. A particularly serious crime, at least some might say. But how many of the twelve would know the precise definition used by Congress in 18 U.S.C. § 922 (g)(1), someone “who has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year”? No matter, of course. The government will explain it all as it proves the elements of § 922(g). And along the way, a few jurors will be surprised to learn that a felony is a very particular kind of crime. That despite countless depictions in culture, both popular and timeless, a “felon” is not just a “villain.” See, e.g., Felon, Webster’s Third New International Dictionary 836 (1993). Now ask a harder question: if at least some of those jurors need the arguments of a lawyer to get to the right meaning of “felon,” then will they all, unanimously and inevitably, conclude that the defendant knew it, too? Perhaps the government’s evidence does not add up. Recollections fade, records fail to materialize, witnesses flounder. Might not the defendant’s attorney find a chance to sow doubt? Then, end with the most challenging question: what if those jurors never heard any evidence that the defendant knew he met the exacting definition of “felon” in § 922(g)? That is 1 the issue before us today, an issue that has in recent years appeared throughout the federal courts. And I believe it requires us to properly frame the question presented. On the one hand, we can view the issue as whether the fourth prong of Olano’s standard of review for plain error should allow an appellate court to “look outside the record” to find proof of guilt that would affirm an otherwise invalid conviction. On the other hand, we can ask whether the Sixth Amendment as originally understood includes an exception to the guarantee that an impartial jury determines a defendant’s guilt. An exception that allows appellate courts to independently find an element of an offense proven beyond a reasonable doubt, using proof never presented to the jury. It is an important distinction because when confronted with a novel question of constitutional law, that is, one not directly controlled by precedent, we should ask if the original understanding of the Constitution tolerates a certain result. No court, it appears, has considered whether the Sixth Amendment, as originally understood, allows judges to make a factual determination on an unproven element of an offense by considering documents outside the evidentiary record. Applying that test, I have sufficient doubt that the scope of judicial authority imagined by the Framers reaches past the horizon of the Sixth Amendment’s guarantee. And I do not read Olano, as best understood in light of the history of the plain error doctrine, to allow for a result contrary to the original understanding of the Sixth Amendment. For those reasons, as I explain below, I concur.1 1 This distinction—whether precedent already answers the question—accounts for the outcome in United States v. 2  I. THE SIXTH AMENDMENT A. The Original Understanding of the Right to a Jury Trial “Only a jury, acting on proof beyond a reasonable doubt, may take a person’s liberty. That promise stands as one of the Constitution’s most vital protections against arbitrary government.” United States v. Haymond, 139 S. Ct. 2369 , 2373 (2019). Ever distrustful of authority, the first generation of Americans skeptically—and belatedly—agreed to sturdier national power as long as certain stipulations bound their new government. Among them, the guarantee that criminal guilt is determined only by an “impartial jury.” U.S. Const. amend. VI. Hardly an American innovation, this “ancient rule,” Haymond, 139 S. Ct. at 2376, between free persons and their governments has “extend[ed] down centuries,” Apprendi v. New Jersey, 530 U.S. 466 , 477 (2000).2 Indeed, “[a]s Blackstone explained, no Jabateh, where the panel held that prior decisions precluded application of the plain error rule. See 974 F.3d 281 , 298–300 (3d Cir. 2020). 2 For examples of this history, begin with the outrages that drove the Stamp Act Congress of 1765 to pronounce that “trial by jury is the inherent and invaluable right of every British subject in these colonies.” Resolutions of the Stamp Act Congress § 7 (1765) reprinted in Select Charters and Other Documents Illustrative of American History 1606–1775, 315 (William McDonald ed., 1906); see also “To Benjamin Franklin from Charles Thomson, Sept. 24, 1765,” Founders Online, National Archives, https://founders .archives.gov/documents/Franklin/01-12-02-0149 (“It is not 3 property only we contend for. Our Liberty and most essential privileges are struck at: Arbitrary courts are set over us, and trials by juries taken away.”); and see “To Benjamin Franklin from Thomas Wharton, June 24, 1765,” Founders Online, National Archives, https://founders.archives.gov/documents /Franklin/01-12-02-0091 (objecting to a single judge deciding what was “heretofore only to be Assertained by a trial by Jury; and thereby depriving Us, of one of the most Essential priviledges of An Englishman.”). This “essential privilege” enjoyed by the colonists “by the immutable laws of nature” included entitlement “to the common law of England, and more especially to the great and inestimable privilege of being tried by their peers of the vicinage, according to the course of that law.” Declaration and Resolves of the First Continental Congress Resolution 5 (1774), available at https://avalon.law .yale.edu/18thcentury/resolves.asp; see also Declaration and Resolves of the First Continental Congress (noting that Britain passed “several acts” which “deprive the American subject of trial by jury” and “deprive[] the American subject of a constitutional trial by jury of the vicinage”). As the evidence for independence mounted, the right to jury trial emerged as profound motivation for the colonies to join in revolt. “IV. The Declaration as Adopted by Congress, [6 July 1775],” Founders Online, National Archives, https://founders.archives.gov /documents/Jefferson/01-01-02-0113-0005 (“Statutes have been passed . . . for depriving us of the accustomed and inestimable Privilege of Trial by Jury in Cases affecting both Life and Property”). It would become a cornerstone of a “new Government,” one of the foundational principles “most likely to effect . . . Safety and Happiness.” The Declaration of 4 Independence ¶ 1, 19 (1776) (“For depriving us in many cases, of the benefits of Trial by Jury”). With freedom won, the future of the right to trial by jury became a central cause for supporters and opponents of the Constitution. Writing as Phocion to persuade New York to ratify, Alexander Hamilton urged, “Let us not forget that the constitution declares that trial by jury in all cases in which it has been formerly used, should remain inviolate forever[].” Second Letter from Phocion, [Apr. 1784], Founders Online, National Archives, https://founders.archives.gov/documents /Hamilton/01-03-02-0347. Fearing a loss of the jury stirred Anti-Federalist Patrick Henry to exclaim: “Why do we love this trial by jury? Because it prevents the hand of oppression cutting you off.” 3 Debates on the Adoption of the Federal Constitution 545 (Philadelphia, Jonathan Elliot ed., 1836) (1787) (statement of Patrick Henry)); see also Nathaniel Breading, Edmund Randolph, and Samuel Bryan, Observations on the Proposed Constitution for the United States of America 23, 1788 (“We abhor the idea of losing the transcendent privilege of trial by jury.”). Indeed, “[t]he friends and adversaries of the plan of the Convention, if they agree in nothing else, concur at least in the value they set upon the trial by jury; or if there is any difference between them it consists in this: the former regard it as a valuable safeguard to liberty; the latter represent it as the very palladium of free government.” Alexander Hamilton, The Federalist No. 83. And so the Anti-Federalists campaigned vigorously to formally recognize the right to jury trial as “essential in every free country, that common people should have a part and share of influence, in the judicial as well as in the legislative department.” Letters From The Federal Farmer (IV), in 2 The 5 person could be found guilty of a serious crime unless ‘the truth of every accusation . . . should . . . be confirmed by the unanimous suffrage of twelve of his equals and neighbors, indifferently chosen, and superior to all suspicion.’” Ramos v. Louisiana, 140 S. Ct. 1390 , 1395 (2020) (citing 4 W. Blackstone, Commentaries on the Laws of England *343 (1769)). And so the Constitution’s jury trial guarantee “reflect[s] a fundamental decision about the exercise of official power—a reluctance to entrust plenary powers over the life and liberty of the citizen to one judge or to a group of judges.” Duncan v. Louisiana, 391 U.S. 145 , 156 (1968). It is a belief that Blackstone called “the grand bulwark of . . . libert[y].” 4 W. Blackstone, Commentaries *349. The Sixth Amendment provides, “as its most important element, the right to have the jury, rather than the judge, reach Complete Anti-Federalist 249 (Herbert J. Storing ed., 1981); see also Letters From The Federal Farmer (XV), in 2 The Complete Anti-Federalist 320 (Herbert J. Storing ed., 1981) (“Juries are constantly and frequently drawn from the body of the people, and freemen of the country; and by holding the jury’s right to return a general verdict in all cases sacred, we secure to the people at large, their just and rightful controul in the judicial department.”). As summed up by Thomas Jefferson, “[a]nother apprehension is that a majority cannot be induced to adopt the trial by jury; and I consider that as the only anchor, ever yet imagined by man, by which a government can be held to the principles of its constitution.” “From Thomas Jefferson to Thomas Paine, 11 July 1789,” Founders Online, National Archives, https://founders.archives.gov/documents /Jefferson/01-15-02-0259. 6 the requisite finding of ‘guilty.’” Sullivan v. Louisiana, 508 U.S. 275 , 277 (1993) (citing Sparf v. United States, 156 U.S. 51 , 105–06 (1895)). From this flows the “unmistakable” condition that a “jury must reach a unanimous verdict in order to convict.” See Ramos, 140 S. Ct. at 1395. And for a jury to be unanimous, the Fifth Amendment requires a unanimous finding of guilt on “all elements” of the charged offense. Sullivan, 508 U.S. at 277–78. “Together, these pillars of the Bill of Rights,” Haymond, 139 S. Ct. at 2376 , ensure that “[t]he Constitution gives a criminal defendant the right to have a jury determine, beyond a reasonable doubt, his guilt of every element of the crime with which he is charged.” United States v. Gaudin, 515 U.S. 506 , 522–23 (1995) (emphasis added). It is, in short, a bedrock precept that remains unmoved by the perpetual current that otherwise defines our Republic. B. Judicial Interpretations of the Jury Trial Right As Justice Scalia so aptly analogized, “[w]hen this Court deals with the content of th[e] [right to jury] guarantee— the only one to appear in both the body of the Constitution and the Bill of Rights—it is operating upon the spinal column of American democracy.” Neder v. United States, 527 U.S. 1 , 30 (1999) (Scalia, J., concurring in part and dissenting in part). Indeed, “together with the right to vote, those who wrote our Constitution considered the right to trial by jury ‘the heart and lungs’ . . . of our liberties, without which ‘the body must die.’” Haymond, 139 S. Ct. at 2375 (quoting Letter from Clarendon to W. Pym (Jan. 27, 1766), in 1 Papers of John Adams 169 (R. Taylor ed. 1977)). Complex surgery on one part of the body, however, can throw another part out of alignment. Similar consequences often follow judicial interpretations of our constitutional guarantees. For instance, consider a defendant 7 on trial for murder. The jury finds him not guilty. But the prosecution remains convinced the jury got it wrong. It brought forth a mountain of evidence that proved guilt beyond a reasonable doubt and wants to appeal. Unlike a group of laypersons, a panel of jurists, far more learned and wiser, will unquestionably find for the prosecution. Can the government appeal? Of course not, any first-year law student will answer, because of the Double Jeopardy Clause of the Fifth Amendment. Now suppose the defendant is tried for first-degree murder. The defendant acknowledges he is the killer, but the jury finds that he did not act with malice aforethought, and returns a not guilty verdict. Wait, argues the government, all the elements for an uncharged lesser crime are found in the record. So the prosecution appeals and asks those same wise judges to simply find the defendant guilty of another crime. No again, answers the student. Or perhaps the jury just can’t decide one way or another. Nine say that he definitely did it; three say that there’s no way. Like a low inside curve, can a judge make the call that decides the matter? No, because the jury verdict must be unanimous, a point recently steadied by the Supreme Court. Ramos, 140 S. Ct. at 1395. What about a defendant acquitted over an “erroneous addition of a statutory element”? Evans v. Michigan, 568 U.S. 313 , 316 (2013) (emphasis added). Can the government appeal? No, because “our cases have defined an acquittal to encompass any ruling that the prosecution’s proof is insufficient to establish criminal liability for an offense,” even if that purported insufficiency turns on an extraneous element of the offense. Id. at 318 . Indeed, an acquittal must stand even if “predicated upon a clear misunderstanding of what facts the 8 [prosecution] needed to prove under [governing] law,” without regard to “whether the court’s decision flowed from an incorrect antecedent ruling of law,” and even when “the product of an erroneous interpretation of governing legal principles.” Id. at 320 (internal quotation marks omitted). Try another: suppose after the defendant is convicted it becomes clear that the prosecution charged and proved less than every essential element of the offense. No problem, says the government, most of the elements were proven. And a guilty verdict that “omits an element of the offense,” the Supreme Court has concluded, “does not necessarily render a criminal trial fundamentally unfair.” Neder, 527 U.S. at 9 . After all, it would be awfully burdensome to retry the case just to prove what everyone seemingly already knows. But this time, the government notes, there’s a catch: there is no evidence in the record that could prove the missing element. There is other reliable proof, however, outside the trial record that establishes the unproven portion of the crime.3 Can a court consider this material—information everyone agrees the jury never saw—and then find the defendant guilty beyond a reasonable doubt? Well, the answer is complex. In the past, tests have weighed cardinal constitutional guarantees against judicial efficiency and the chance of success on retrial. See id. at 15 (“We do not think the Sixth Amendment requires 3 Perhaps, for example, the evidence was suppressed. Or the parties stipulated to bar its introduction. Maybe the prosecution did not choose to offer the evidence. Maybe none of the parties, or the court, thought the evidence was relevant. Whatever the reason, the result is the same: the jury never saw it. 9 us to veer away from settled precedent” to grant “[r]eversal without any consideration of the effect of the error upon the verdict[.]”). More recently, the Supreme Court recoiled at even the suggestion of such a balancing test. See Ramos, 140 S. Ct. at 1402 (“When the American people chose to enshrine [the Sixth Amendment] in the Constitution, they weren’t suggesting fruitful topics for future cost-benefit analysis.”). All of which brings us to Malik Nasir. II. THE DOCTRINE OF PLAIN ERROR REVIEW There is no disagreement about the road leading to this case. In Rehaif v. United States, the Supreme Court held “that the Government must prove that a defendant charged with violating [18 U.S.C.] § 922(g) knew both that he possessed a firearm and that he belonged to the relevant class of persons barred from possessing a firearm.” In re Sampson, 954 F.3d 159 , 161 (3d Cir. 2019) (per curiam) (citing Rehaif v. United States, 139 S. Ct. 2191 , 2200 (2019)). But Nasir’s indictment did not allege,4 and the Government did not prove, that Nasir knew about his prohibited status.5 Those errors are 4 Count Three of the indictment charged that Nasir “did knowingly possess in and affecting interstate and foreign commerce, firearms . . . after having been convicted of a crime punishable by imprisonment for a term exceeding one year, in the United States District Court for the Eastern District of Virginia, in violation of Title 18, United States Code, Sections 922(g)(1) and 924(a)(2).” (App. at 40–41.) 5 The District Court instructed the jury that “in order to find the defendant guilty of [ 18 U.S.C. § 922 (g)], you must find that the government proved each of the following three 10 unsurprising since, before Rehaif, “every single Court of Appeals” relied on the same “long-established interpretation” attributed to 18 U.S.C.§ 922(g) “in thousands of cases for more than 30 years.” Rehaif, 139 S. Ct. at 2201 (Alito, J., dissenting). But it was still erroneous and, since Rehaif arrived while Nasir’s direct appeal remained pending, “we apply [Rehaif] retroactively.” Johnson v. United States, 520 U.S. 461 , 467 (1997). That, one might assume, is the end of the story. Since the jury did not decide a necessary element of § 922(g), Nasir could not have received the guarantees of the Fifth and Sixth Amendments as originally understood. See Sullivan, 508 U.S. at 277–78. Not so, owing to the ever-expanding discretion afforded courts under the plain error doctrine. See, e.g., United States v. Maez, 960 F.3d 949 , 956 (7th Cir. 2020) (explaining that under Johnson, courts are to apply plain-error review to changes in constitutional law after conviction).6 elements beyond a reasonable doubt: First, that the defendant has been convicted of a felony, that is, a crime punishable by imprisonment for a term exceeding one year; Second, that after this conviction, the defendant knowingly possessed the firearm described in Count Three of the Indictment; and Third, that the defendant’s possession was in or affecting interstate or foreign commerce.” (App. at 615–16.) 6 But see Rehaif, 139 S. Ct. at 2201, 2213 (Alito, J., dissenting) (“A great many convictions will be subject to challenge, threatening the release or retrial of dangerous individuals whose cases fall outside the bounds of harmless-error review,” and “[t]hose for whom direct review has not ended will likely be entitled to a new trial.” (emphasis added)). 11 A. The Original Understanding of Plain Error Review The current authority of a federal appellate court to notice unpreserved error grew from the early practices of the Supreme Court. By the late nineteenth century, the Court’s general rule confining review “to a discussion of the errors stated” still permitted the Court, “at its discretion, [to] notice any other errors appearing in the record.” 78 U.S. (11 Wall.) x (1871) (adopting Sup. Ct. R. 21 (amended 81 U.S. (14 Wall.) xi, xii (1872), repealed 1939)). In 1874, the Court cabined that discretion and coined the now familiar “plain error” doctrine. See Sup. Ct. R. 21 § 8, 16 (1874) (“Without such an assignment of errors, counsel will not be heard, except at the request of the court, and errors not assigned according to this rule will be disregarded, though the court, at its option, may notice a plain error not assigned.”); see O’Neil v. Vermont, 144 U.S. 323 , 365 (1892) (Field, J., dissenting) (explaining “[t]he right of the court to consider [an] alleged error of its own motion is within its authority under the [plain error] rule”). As Justice Field explained, the plain error rule focused on mistakes “affecting the liberty of the citizen.” Id. at 360 . Using that authority, the Court applied the plain error rule to invalidate a constitutionally infirm conviction. Wiborg v. United States, 163 U.S. 632 , 658 (1896). In Wiborg, the Court spoke of the judicial “liberty” to review questions “not properly raised” if “a plain error was committed in a matter so absolutely vital to defendants.” Id. The Court reaffirmed that perspective in Clyatt v. United States, holding that Wiborg “justifies us in examining the question in case a plain error has been committed in a matter so vital to the defendant.” 197 U.S. 207 , 221–22 (1905). See also Crawford v. United States, 212 12 U.S. 183 , 194 (1909) (“[Courts] will, in the exercise of a sound discretion, sometimes notice error in the trial of a criminal case, although the question was not properly raised at the trial by objection and exception.”); Brasfield v. United States, 272 U.S. 448 , 450 (1926) (“[F]ailure of petitioners’ counsel to particularize an exception to the court’s inquiry does not preclude this Court from correcting the error.”). And this focus on issues “vital” to the defendant flows directly from the guarantees of the Constitution. Those commitments make the plain error rule “not a rigid one,” and courts have had “less reluctance to act under it when rights are asserted which are of such high character as to find expression and sanction in the Constitution or Bill of Rights.” Weems v. United States, 217 U.S. 349 , 362 (1910). The plain error rule, as first applied by the Supreme Court, recognizes “[t]he right of trial by Jury is a fundamental law, made sacred by the Constitution,” and enjoyed by all persons before the Founding. Vanhorne’s Lessee v. Dorrance, 2 Dall. 304 , 309 (Patterson, Circuit Justice, C.C.D.Pa.1795) (discussing the language of the 1790 Constitution of the Commonwealth of Pennsylvania mirroring the Sixth Amendment). Jury trials are a firewall against a process that would devalue natural rights, unsuitable for sacrifice on the altar of efficiency. But though conceived as a reminder of the highest principles of ordered liberty, the plain error doctrine pivoted in United States v. Atkinson, 297 U.S. 157 (1936). Departing from its prior focus on “vital” errors impacting foundational rights, Atkinson turned to concerns about the integrity of judicial proceedings. This new theory of plain error produced an oft-cited principle: “In exceptional circumstances, especially in criminal cases, appellate courts, in the public interest, may, of their own motion, notice errors to which no exception has been 13 taken, if the errors are obvious, or if they otherwise seriously affect the fairness, integrity, or public reputation of judicial proceedings.” Id. at 160 . B. The Text of Rule 52(b) The turn did not take. Rule 52(b) codified the plain error doctrine in 1944, choosing fundamental rights over structural anxieties by shedding the baggage of Atkinson in favor of a straightforward definition: “[a] plain error that affects substantial rights may be considered even though it was not brought to the court’s attention.” Fed. R. Crim. P. 52(b). It is, of course, “the text of the Rule that controls.” Krupski v. Costa Crociere S.p.A., 560 U.S. 538 , 557 (2010) (Scalia, J., concurring in part). Rule 52(b) limits the power to notice unpreserved errors to only those affecting “substantial rights.” That language traces straight back to Wiborg. See, e.g., Storgard v. France & Canada S.S. Corp., 263 F. 545 , 546 (2d Cir. 1920) (“[A]ppellate courts may consider plain errors, not excepted to nor assigned, though this is rarely done except in criminal cases” that impact “substantial rights.”) (citing Oppenheim v. United States, 241 F. 625 , 628 (2d Cir. 1917) (citing Wiborg and Crawford)); McCormick v. United States, 9 F.2d 237 , 240 (8th Cir. 1925) (“The substantial rights of defendants in criminal cases have always been amply protected. . . . [W]here plain error has been committed in a matter vital to defendants, . . . it is considered.”) (citing Wiborg). Against that backdrop, there is little reason to conclude that Rule 52(b) disregarded the traditional meaning of the plain error rule. See Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of Legal Texts 318 (2012) (explaining the canon of interpretation that “statutes will not be interpreted as changing the common law unless they effect 14 the change with clarity”). And while “not authoritative,” Black v. United States, 561 U.S. 465 , 475 (2010) (Scalia, J., concurring in part and concurring in the judgment), the commentary provided by the Advisory Committee confirms that is the best reading of the rule. See Fed. R. Crim. P. 52 advisory committee’s note to subsection (b) (“Th[e] [plain error] rule is a restatement of existing law[.]”) (citing Wiborg, 163 U.S. at 658 ); see also Krupski, 560 U.S. at 557 (Scalia, J., concurring in part and concurring in the judgment) (“The Advisory Committee’s insights into the proper interpretation of a Rule’s text are useful to the same extent as any scholarly commentary.”). C. The Olano Framework Despite all of this, the Court would later state that “the ‘standard laid down in United States v. Atkinson [was] codified in [Rule] 52(b).’” United States v. Olano, 507 U.S. 725 , 736 (1993). Olano provides a four-pronged inquiry that remains our standard today. Courts may provide remedies under Rule 52(b) only if (1) there is an “error[,]” (2) the error is “plain[,]” and (3) the plain error “affect[s] substantial rights.” Id. at 732– 34; see also Johnson, 520 U.S. at 466–67 (1997). Satisfying all three prongs creates discretion to (4) “correct a plain forfeited error affecting substantial rights if the error ‘seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.’” Olano, 507 U.S. at 736 (citing Atkinson, 297 U.S. at 160 ). So now, “a plain error affecting substantial rights does not, without more, satisfy the Atkinson standard, for otherwise the discretion afforded by Rule 52(b) would be illusory.” Id. at 736–37. 15  Recent applications of Rule 52(b) have focused on its discretionary character. See Johnson, 520 U.S. at 469–70 (“When the first three parts of Olano are satisfied, an appellate court must then determine whether the forfeited error ‘seriously affect[s] the fairness, integrity or public reputation of judicial proceedings’ before it may exercise its discretion to correct the error.”) (citing Olano, 507 U.S. at 736 ). These cases make clear that any “per se approach to plain-error review is flawed,” United States v. Young, 470 U.S. 1 , 16 n.14 (1985), because “[t]he fourth prong is meant to be applied on a case-specific and fact-intensive basis.” Puckett v. United States, 556 U.S. 129 , 142 (2009). That, of course, is nothing new, as the original application of plain error always assumed searching scrutiny. See Weems, 217 U.S. at 362 ; Crawford, 212 U.S. at 194; Clyatt, 197 U.S. at 221–22; Wiborg, 163 U.S. at 658 . But the Court expressly tied that probing inquiry to violations of natural, substantial rights “of such high character as to find expression and sanction in the Constitution or Bill of Rights.” Weems, 217 U.S. at 362 . That, in my view, is the best reading of Olano, one that harmonizes the guarantees of the Sixth Amendment and the tradition of noticing errors that, though unpreserved, uniquely threaten fundamental rights. Not one that licenses endless tradeoffs to efficiency. Rather, as the Supreme Court recently cautioned, while “[t]here may be instances where countervailing factors satisfy the court of appeals that the fairness, integrity, and public reputation of the proceedings will be preserved absent correction,” we must perform a “searching” inquiry. Rosales-Mireles v. United States, 138 S. Ct. 1897 , 1909 (2018) (emphasis added). Searching should, as always, begin with the original public understanding of the right in question. Looking to that history, I conclude that 16 allowing an appellate court to find facts and inferences outside the record to rescue a conviction that all agree lacked an essential element of proof usurps the role of the jury and therefore cannot be a countervailing factor under Olano. Put simply, it is difficult to imagine a countervailing consideration more fundamental than the fundamental right to a trial by jury secured by the Constitution. III. CONTRACTING PLAIN ERROR REVIEW IS INCONSISTENT WITH HISTORY AND TRADITION In many respects, we have already traveled far from the guarantees of the Sixth Amendment to the conclusion that failing to submit every element of a crime to the jury does not “seriously affect the fairness, integrity, or public reputation of judicial proceedings.” Johnson, 520 U.S. at 469–70; see also United States v. Cotton, 535 U.S. 625 , 632–33 (2002) (“As in Johnson, we need not resolve whether respondents satisfy this element of the plain-error inquiry, because even assuming respondents’ substantial rights were affected, the error did not seriously affect the fairness, integrity, or public reputation of judicial proceedings.”) (citation omitted); Neder, 527 U.S. at 9 (“[A]n instruction that omits an element of the offense does not necessarily render a criminal trial fundamentally unfair or an unreliable vehicle for determining guilt or innocence.”). Now, even under harmless-error review, an appellate court is free to step into the role of the jury and peruse the record for facts supporting the missing element of a crime. Id. at 17 . At least, the court may step in for now, so long as those facts are “overwhelming,” “uncontroverted,” and “[o]n [the] record.” Johnson, 520 U.S. at 470 (internal quotation marks omitted); see also Neder, 520 U.S. at 16–17 (upholding conviction relying on “overwhelming record evidence”); Cotton, 535 U.S. 17 at 633 (finding no plain error where record evidence was “overwhelming” and “essentially uncontroverted”). So while “we do not know . . . how many elements can be taken away from the jury with impunity, so long as appellate judges are persuaded that the defendant is surely guilty,” we know we would be free to affirm Nasir’s conviction looking solely to evidence in the record. Neder, 527 U.S. at 33 (Scalia, J., concurring in part and dissenting in part). But we have no such evidence to reach for. To uphold Nasir’s conviction, we must supplement the evidentiary record with information never presented to the jury. “The most [we] can conclude is that a jury would surely have found petitioner guilty beyond a reasonable doubt—not that the jury’s actual finding of guilty beyond a reasonable doubt would surely not have been different absent the constitutional error.” Sullivan, 508 U.S. at 280. I am doubtful that the Sixth Amendment was first understood to provide courts the power “to hypothesize a guilty verdict that was never in fact rendered.” Id. at 279. Some might find it tempting to glance outside the record for proof, perhaps even compelling proof, that Nasir knew he was a felon. But that is just the sort of temptation that informed a “healthy suspicion” of government power and drove the demand for written confirmation of our most sacred rights. Neder, 527 U.S. at 32 (Scalia, J., concurring in part and dissenting in part); see also 3 J. Story, Commentaries on the Constitution of the United States § 1774, at 653 (1833) (“[Protection] against a spirit of oppression and tyranny on the part of rulers, and against a spirit of violence and vindictiveness on the part of the people” demands “the severe control of courts of justice, and by the firm and impartial verdict of a jury sworn to do right and guided solely by legal evidence and a sense of duty. In such a course there is a double security against the prejudices of 18 judges, who may partake of the wishes and opinions of the government, and against the passions of the multitude, who may demand their victim with a clamorous precipitancy.”); cf. Duncan, 391 U.S. at 160 (“So-called petty offenses were tried without juries both in England and in the Colonies and have always been held to be exempt from the otherwise comprehensive language of the Sixth Amendment’s jury trial provisions. There is no substantial evidence that the Framers intended to depart from this established common-law practice.”). This history is reason alone to decline a fresh contraction of the plain error doctrine. The theory of plain error review exists, as must all laws, as a validation of our natural and fundamental rights. It is best imagined as a shield against arbitrary expansions of government, not a sword of efficiency striking at the very impediments to easier oppression demanded by the Framers, Ratifiers, and People. Failing to notice error here would necessarily contravene the original understanding of the Sixth Amendment and, therefore, necessarily flout the rule of Olano prohibiting courts to ignore errors that “seriously affect the fairness, integrity or public reputation of judicial proceedings.” Olano, 507 U.S. at 736 . Many courts have held differently. Some say it is of no moment that the government did not prove knowledge because it is obvious the defendant knew he was a felon. Reliable records tell us so, they say, and disregarding what a jury did not see would jeopardize the fairness, integrity, and reputation of the proceedings. See, e.g., United States v. Miller, 954 F.3d 551 , 558 (2d Cir. 2020). Others conclude that “because convicted felons typically know they’re convicted felons,” any error is “almost always harmless.” United States v. Lavalais, 19  960 F.3d 180 , 188 (5th Cir. 2020); see also United States v. Gary, 963 F.3d 420 , 423 (4th Cir. 2020) (Wilkinson, J., concurring) (“[T]he vast majority of defendants who will seek to take advantage of a structural Rehaif error are perfectly aware of their felony status. Felony status is simply not the kind of thing that one forgets.”). Still others find post-Rehaif extra-record review to be a natural evolution to reviewing documents outside the record at sentencing. See United States v. Reed, 941 F.3d 1018 , 1021 (11th Cir. 2019) (quoting United States v. Vonn, 535 U.S. 55 , 59 (2002)). Perhaps. But I do not read these post-Rehaif cases to proceed from the common law tradition of plain error review and, as a corollary, the original understanding of the Sixth Amendment. I find no evidence that the guarantees enumerated in the Bill of Rights are measured for modern efficiency. To the contrary, our Framers expected these rights would protect us all from encroachment by the government they hesitantly accepted. That fear explains why, “[w]hen our more immediate ancestors removed to America, they brought this great privilege with them, as their birth-right and inheritance, as a part of that admirable common law, which had fenced round, and interposed barriers on every side against the approaches of arbitrary power.” 3 J. Story, Commentaries on the Constitution of the United States § 1773, at 652–53 (1833); see also Thompson v. Utah, 170 U.S. 343 , 350 (1898) (“The trial per pais, or by a jury of one’s country, is justly esteemed one of the principal excellencies of our constitution; for what greater security can any person have in his life, liberty, or estate than to be sure of the being devested of nor injured in any of these without the sense and verdict of twelve honest and impartial men of his neighborhood?” (quoting Juries, 3 Matthew Bacon, A New Abridgment of the Law (1736)). Put simply: “If you’re 20 charged with a crime, the Sixth Amendment guarantees you the right to a jury trial. From this, it follows that the prosecutor must prove to a jury all of the facts legally necessary to support your term of incarceration.” Hester v. United States, 139 S. Ct. 509 , 509 (2019) (Gorsuch, J., dissenting). For that reason, I prefer the certainty of the “great rights” Madison captured in the Constitution, including “trial by jury, freedom of the press, [and] liberty of conscience.” 1 Annals of Cong. 453 (1789) (Joseph Gales ed., 1834). Rather than see them eroded, I find “it is proper that every Government should be disarmed of powers which trench upon those particular rights.” Id. at 458 . While that differs from the conclusions of other courts, we should recall that “[t]hose who wrote our constitution[] knew from history and experience that it was necessary to protect against unfounded criminal charges . . . and against judges too responsive to the voice of higher authority.” Duncan, 391 U.S. at 156 . IV. CONCLUSION I readily acknowledge that retrying defendants like Nasir might end up with juries returning the same verdict of guilt. But isn’t that the point? Like Justice Scalia, and Blackstone long before him, I bear deep reservations about any holding that “scorn[s]” our “formal requirements . . . when they stand in the way of expediency.” Neder, 527 U.S. at 39–40 (citing 4 W. Blackstone, Commentaries *350 (“[H]owever convenient [intrusions on the jury right] may appear at first, (as, doubtless, all arbitrary powers, well executed, are the most convenient,) yet let it be again remembered that delays and little inconveniences in the forms of justice are the price that all free nations must pay for their liberty in more substantial 21 matters[.]”). Pillars of liberty are rarely toppled, but sanded down into forms unrecognizable to their creator. The right to be judged by impartial peers under the due process of law stands as an antagonist against such erosion, and “[s]o long . . . as this palladium remains sacred and inviolable, the liberties of a free government cannot wholly fall.” 3 J. Story, supra § 1774, at 653 (citing 4 Blackstone Commentaries at *349–50). For all these reasons, I conclude that “[i]n the end, the best anyone can seem to muster . . . is that, if we dared to admit in his case what we all know to be true about the Sixth Amendment, we might have to say the same in some others.” Ramos, 140 S. Ct. at 1408 (plurality opinion). I therefore concur. 22 judicial proceedings. Id. at 1021–22. Because the defendant’s presentence report “stated that he had been incarcerated for lengthy terms before possessing the firearm,” id. at 1020, he could not prove that the error affected “the fairness, integrity, or public reputation of his trial,” id. at 1022. Accordingly, the Eleventh Circuit declined to set aside his conviction. Id. at 1022. The majority chides the Eleventh Circuit for relying on United States v. Vonn, 535 U.S. 55 (2002), and concluding that a court need not confine itself to the trial record at prong four, because Vonn involved review of a guilty plea rather than a conviction after a jury trial. Maj. Op. 39–40. But the majority ignores the Eleventh Circuit’s discussion of United States v. Young. See Reed, 941 F.3d at 1021. In Young, the Supreme Court denied plain-error relief where a prosecutor made im- proper comments during rebuttal because the remarks were made in response to defense counsel’s own improper remarks during summation and “were not such as to undermine the fun- damental fairness of the trial and contribute to a miscarriage of justice.” 470 U.S. at 16–19. The Court explained that it could not “properly evaluate [the defendant’s claims of error] except by viewing [them] against the entire record,” id. at 16 (empha- sis added), because Rule 52(b) “authorizes the Courts of Ap- peals to correct only ‘particularly egregious errors,’” id. at 15 (quoting Frady, 456 U.S. at 163). The Supreme Court has never held that the “entire rec- ord” that Young instructs us to examine means just the trial rec- ord.8 That would make no sense: reasonable people will 8 In Makiel v. Butler, 782 F.3d 882 (7th Cir. 2015), the Seventh Circuit discussed the difference between the “entire record” and the “trial record” in a case involving the materiality 18 consider all relevant information in assessing whether our de- cision to affirm Nasir’s conviction works a miscarriage of jus- tice that is inconsistent with fairness, integrity, and the good reputation of our judicial system. And unlike the majority, they will not arbitrarily ignore the indisputable fact of Nasir’s sci- enter and guilt. Maj. Op. 59–64. In deciding whether to exer- cise our discretion, we should consider reliable materials within and outside of the trial record just as thoughtful mem- bers of the public certainly will.9 standard of the Compulsory Process Clause. Id. at 908–10. Alt- hough Makiel was not a plain-error case, the court’s discussion assists our consideration of the scope of discretionary review prescribed by Olano. Similar to our task at prong four, the court in Makiel had to evaluate the defendant’s argument in light of public interests such as “the integrity of the adversary process, the interest in the fair and efficient administration of justice, and the potential prejudice to the truth-determining function of the trial process.” Id. at 909 . The Seventh Circuit concluded that when the Supreme Court instructs circuit courts to evaluate claims of trial error in the context of the “entire record,” that is broader than the “trial record.” Id. 9 Consider the prong-four significance of Nasir’s Old Chief stipulation, which of course was part of the trial record. The majority suggests that it could never be even circumstantial ev- idence of his scienter, Maj. Op. 55–57, but that assertion is not compelled by Rehaif. And it wars against common sense and experience. As a strictly logical proposition, it is true that Nasir’s stipulation proved only that he knew of his felon status as of the date of the stipulation; it did not necessarily prove that he knew he was a felon when he was arrested with the gun. But just as a factual statement can be strictly true and yet fraudulent 19  The majority also assails the Second Circuit’s decision in Miller and the Seventh Circuit’s decision in Maez. Its criti- cism of the approach taken by those two circuits is similarly unpersuasive. Miller involved a defendant whose presentence inves- tigation report showed that he spent several years in prison prior to his firearm possession, rendering it obvious that he knew he was a felon at the time of possession. 954 F.3d at 560. The Second Circuit “ha[d] no doubt that, had the Rehaif issue been foreseen by the district court, [the defendant] would have stipulated to knowledge of his felon status to prevent the jury from hearing evidence of his actual sentence.” Id. at 560. So, the court concluded, the fairness, integrity, and public reputa- tion of the judicial system would not be seriously affected by upholding the conviction; in fact, the defendant was so obvi- ously guilty that vacating his conviction “would have that ef- fect.” Id. at 559. In Maez, the Seventh Circuit largely adopted the Second Circuit approach, concluding that vacating the con- victions of two defendants whose presentence reports indicated that they served more than one year in prison on prior felony because of a material omission, Nasir’s stipulation does not foreclose the possibility that he also understood that he was a felon every day after his knowing and voluntary guilty pleas in 2000, 2001, and 2007. A thoughtful observer drawing upon her reason, experience, and common sense might easily infer from Nasir’s June 2017 stipulation that he knew of his felon status when apprehended with a gun in December 2015. Such an in- ference, though not logically required, would be patently sen- sible to many people. And surely, many will consider his stip- ulation in this light when evaluating our discretionary decision whether to notice the plain error created by Rehaif. 20 convictions would negatively affect the fairness, integrity, and public reputation of judicial proceedings. 960 F.3d at 964–66. The majority faults the Second and Seventh Circuits for “treat[ing] judicial discretion as powerful enough to override the defendant’s right to put the government to its proof when it has charged him with a crime.” Maj. Op. 46–47. But Nasir has not been deprived of that right. He had the opportunity to insist that the government be required to prove that he knew he was a felon at the time of his firearm possession. He did not do so, instead agreeing that no such proof need be presented. As a direct result of that choice, the government did not introduce evidence as to Nasir’s knowledge of his status at the time of possession though such evidence was readily available. I do not see why Nasir’s failure to object to the jury instruction and decision to instead avail himself of an Old Chief stipulation should continue to redound to his benefit now that we are ex- ercising remedial discretion. F. Nasir does not satisfy Olano’s step-four stand- ard for error-correction Our sister circuits’ approach does not “imply that relief on plain-error review is available only to the innocent.” Maj. Op. 47.10 If, for example, an error so corrupts a judicial 10 Indeed, as the Seventh Circuit recognized, “defendants can sometimes show an effect on fairness or integrity without a claim of innocence.” Maez, 960 F.3d at 962. But “though a de- fendant’s likelihood of actual guilt or innocence does not nec- essarily control the third prong of plain-error review, it may play a role at prong four.” Id. That is because a court has “broad discretion under prong four to leave even plain errors 21 proceeding as to make its verdict completely unreliable, no court would require a defendant to prove on appeal that he was actually innocent before vacating a conviction resulting from such a proceeding. See Medley, 972 F.3d at 424–25 (Quattle- baum, J., dissenting) (explaining that “central” to prong-four analysis in a criminal case “is a determination of whether, based on the record in its entirety, the proceedings against the accused resulted in a fair and reliable determination of guilt” (internal quotation marks omitted) (quoting United States v. Ramirez-Castillo, 748 F.3d 205 , 217 (4th Cir. 2014))). That is because the Third Branch would not want to put its imprimatur on a proceeding that makes a mockery of justice and reduces the system’s standing in the eyes of the public. But that is not a problem here. A simple, unobjected-to error in jury instruc- tions, where the defendant’s conviction would have been cer- tain had an objection been made at the proper time, does not cry out for an exercise of our discretion. Remanding this case for retrial is unnecessarily burden- some and seriously undermines the fairness and public reputa- tion of judicial proceedings. That broad inquiry is the standard governing our exercise of discretion. The majority compounds its error by explicitly limiting our prong-four discretion to Nasir’s trial, which, it insists, “is the only judicial proceeding at issue.” Maj. Op. 41 n.22. Not so. At prong four we ask whether refusing to cure the plain error would “seriously affect the fairness, integrity or public reputation of judicial proceed- ings” generally, not merely the particular defendant’s proceed- ing. Puckett, 556 U.S. at 135 . As the Court elaborated in Puckett, we consider whether affirming Nasir’s conviction uncorrected where [it has] no doubt as to the ultimate result of further proceedings.” Id. at 963. 22 would call into question “the integrity of the system” and be so ludicrous as to “compromise the public reputation of judicial proceedings.” Id. at 142–43 (emphasis added); see also United States v. Edgell, 914 F.3d 281 , 291 (4th Cir. 2019); United States v. Marroquin, 884 F.3d 302 , 304 (5th Cir. 2018) (Smith, J., dissenting from denial of rehearing en banc); United States v. Gonzalez-Huerta, 403 F.3d 727 , 739 (10th Cir. 2005) (en banc); id. at 742 (Ebel, J., concurring); id. at 747 (Hartz, J., concurring). Because the majority asks the wrong prong-four question, it refuses to consider information that would suggest the correct answer. Even if we improperly limited our prong-four inquiry to what the majority erroneously describes as “the actual field of play – the trial,” Maj. Op. 41 n.22, we should still affirm. When asked twice at oral argument how Nasir would attempt to dis- prove the knowledge-of-status element if the case were sent back for retrial, his counsel was unable to give a responsive answer. (That is not a criticism of counsel’s performance; there is no plausible explanation.) Instead, counsel allowed that Nasir would strategically use a remand to try to negotiate a bet- ter plea deal. In light of that revelation, I believe that thoughtful members of the public would view the majority’s judgment and Nasir’s windfall with bemused cynicism rather than reputation- enhancing admiration. G. We are bound by the Supreme Court’s plain- error precedent The majority at least purports to apply Olano and its progeny. Judge Matey’s opinion strikes out in an entirely dif- ferent direction, citing first principles. I endorse that approach in cases where lower court judges write on a blank slate, but in this appeal we are guided by ample Supreme Court precedent. 23 In any event, although we have not had the benefit of original- ist briefing and argument, I doubt that Rule 52(b)’s remedial discretion as currently applied offends the Sixth Amendment and note that Justices Scalia and Thomas both joined Olano without any reservation, originalist or otherwise. Cf. Concur- ring Op. 13–16 (criticizing Atkinson and Olano as allegedly unwarranted expansions of original plain-error doctrine). Moreover, I fail to grasp how a purportedly originalist applica- tion of plain-error review can affirm the conviction of non- criminal conduct but disallows the conviction of conduct that was certainly criminal but not properly proven. Cf. United States v. Jabateh, 974 F.3d 281 , 287 (3d Cir. 2020). ***** The Supreme Court has disapproved “a reflexive incli- nation by appellate courts to reverse because of unpreserved error,” a tendency contrary to the “strictly circumscribed” appellate-court authority to remedy unpreserved error only where necessary due to exceptional circumstances. Puckett, 556 U.S. at 134 (internal quotation marks omitted) (quoting United States v. Padilla, 415 F.3d 211 , 224 (1st Cir. 2005) (Boudin, C.J., concurring)). Yet the majority persists in the face of overwhelming, reliable information supporting Nasir’s conviction. Its error stems from a basic misunderstanding of the nature of plain-error review. I respectfully dissent from Section II.E of the majority opinion. 24 PORTER, Circuit Judge, joined by SMITH, Chief Judge, CHAGARES, HARDIMAN, SHWARTZ, BIBAS, and PHIPPS, Circuit Judges, concurring in part and dissenting in part. I concur with Sections I and II.D of the majority opin- ion. But I depart from the majority’s plain-error discussion in Section II.E because it is profoundly mistaken, it dismisses the collective wisdom of nearly every other circuit court, and— ironically—it derogates the fairness, integrity, and public rep- utation of judicial proceedings. After reviewing the entire rec- ord, I would affirm Malik Nasir’s conviction rather than re- mand it for a pointless retrial. I. ADDITIONAL BACKGROUND A. Nasir pleaded guilty to felony charges on three separate occasions and actually served over seven years’ imprisonment On September 6, 2000, Nasir pleaded guilty to attempt- ing to possess cocaine with intent to distribute. As a result of his guilty plea and felony conviction, Nasir was sentenced to seven years’ imprisonment. After serving one year in prison, his sentence was suspended, and he was placed on supervised probation. On June 21, 2001, Nasir pleaded guilty to possession of cocaine with intent to distribute. As a result of his guilty plea and felony conviction, Nasir was sentenced to ten years’ and thirty days’ imprisonment. After serving eighteen months in prison, his sentence was suspended and he was placed on su- pervised probation. 1  On June 20, 2007, Nasir pleaded guilty to possession of a firearm by a convicted felon in violation of 18 U.S.C. § 922 (g)(1). As a result of his guilty plea and felony convic- tion, Nasir was sentenced to eighty-four months’ imprison- ment. He actually served five and one-half years of that sen- tence before being released on December 14, 2012. B. Nasir stipulated to his prior felony conviction and did not make a scienter objection at trial In 2015, Nasir was indicted for violating the felon-in- possession statute, together with several drug-related charges. At his 2017 trial, Nasir stipulated that he had been “convicted of a felony crime punishable by imprisonment for a term ex- ceeding one year, in the United States District Court for the Eastern District of Virginia.” S.A. 21. Although Nasir’s stipu- lation did not specify the prior felony conviction, it was for possession of a firearm by a convicted felon in violation of 18 U.S.C. § 922 (g)(1)—the same crime for which he was being tried. Nasir’s stipulation prevented the government from intro- ducing evidence to prove the nature and circumstances of his prior felony conviction. See Old Chief v. United States, 519 U.S. 172 , 174–75 (1997). Under the law at the time of Nasir’s trial, the govern- ment adduced sufficient evidence to secure a conviction under § 922(g)(1) and the district court properly instructed the jury on the elements of that crime. Nasir did not object to the district court’s jury instruction or to the sufficiency of the govern- ment’s evidence on the § 922(g)(1) charge. But while his ap- peal was pending the Supreme Court decided Rehaif v. United States, 139 S. Ct. 2191 (2019), holding that in order to secure a conviction under § 922(g), the government must prove that the defendant “knew he belonged to the relevant category of 2 persons barred from possessing a firearm.” Id. at 2200. Nasir then supplemented his briefing by adding new arguments based on Rehaif. II. NASIR CANNOT SATISFY OLANO PRONG FOUR, SO HIS CONVICTION SHOULD BE AFFIRMED A. The purpose of plain-error review The majority duly notes that because Nasir did not ob- ject to the sufficiency of the evidence on the knowledge-of- status element, we review for plain error. Maj. Op. 27. But the majority fails to consider the reason for plain-error review and how that reason informs our decision. Federal Rule of Criminal Procedure 52(b) exists to promote compliance with claim- presentation rules. When a defendant forfeits an issue by fail- ing to timely object, we have discretion to correct the plain er- ror. But that discretion is bounded by the four factors discussed in United States v. Olano, 507 U.S. 725 , 732–36 (1993), par- ticularly the prong-four focus on the fairness, integrity, and public reputation of judicial proceedings. The link between forfeiture and plain-error review is relevant here because Nasir failed to raise a knowledge-of-sta- tus objection at his trial. True, the Supreme Court did not change the rule until two years later when it decided Rehaif. But even if a solid wall of circuit authority makes objection at trial apparently futile, Rule 52(b) applies when the source of plain error is a supervening decision. Johnson v. United States, 520 U.S. 461 , 468 (1997). Contra United States v. Keys, 95 F.3d 874 , 878 (9th Cir. 1996) (Rule 52(a), rather than Rule 52(b), governs appellate review of unpreserved error when de- fendant “faced with a solid wall of circuit authority” at trial), vacated, 520 U.S. 1226 (1997). 3  Contrary to the majority’s suggestion, Maj. Op. 28–30, the scienter issue was hardly a secret at the time of Nasir’s trial. The Supreme Court highlighted the constitutional importance of mens rea in Staples v. United States, 511 U.S. 600 , 619–20 (1994) (government required to prove that defendant knew that the features of his AR-15 rifle brought it within the scope of machine-gun provision of National Firearms Act), and United States v. X-Citement Video, Inc., 513 U.S. 64 , 78 (1994) (in prosecution under Protection of Children Against Sexual Exploitation Act, government required to prove that defendant knew he was sending or receiving pictures of minors engaged in sexually explicit conduct). In 1995, a divided Fourth Circuit held that the government need not prove that the defendant in a § 922(g)(1) prosecution had the requisite scienter regarding his felony status. United States v. Langley, 62 F.3d 602 (4th Cir. 1995) (en banc). Subsequently, the scienter issue in § 922(g) cases continued to percolate in courts throughout the country. See, e.g., United States v. Games-Perez, 695 F.3d 1104 , 1116–24 (10th Cir. 2012) (Gorsuch, J., dissenting from denial of rehearing en banc); United States v. Games-Perez, 667 F.3d 1136 , 1140–42 (10th Cir. 2012); United States v. Butler, 637 F.3d 519 , 523–25 (5th Cir. 2011); United States v. Olender, 338 F.3d 629 , 637 (6th Cir. 2003); United States v. Enslin, 327 F.3d 788 , 798–99 (9th Cir. 2003); United States v. Wilson, 159 F.3d 280 , 293–96 (7th Cir. 1998) (Posner, J., dis- senting). In our circuit, a district court anticipated Rehaif by a decade, holding that in a § 922(g)(1) prosecution the govern- ment must prove that the defendant knew of his felon status. United States v. Kitsch, No. 03-594-01, 2008 WL 2971548 , at *7 (E.D. Pa. Aug. 1, 2008). And in prosecutions for the closely related charge of aiding and abetting a violation of § 922(g)(1), 4 we have long required the government to prove beyond a rea- sonable doubt that the defendant knew the possessor’s status as a felon. United States v. Xavier, 2 F.3d 1281 , 1286–87 (3d Cir. 1993). Even though a timely scienter-based objection would likely have been overruled in 2017, the objection itself could have prompted the government to supplement the record with additional evidence of Nasir’s mens rea. See Pfeifer v. Jones & Laughlin Steel Corp., 678 F.2d 453 , 457 n.1 (3d Cir. 1982) (contemporaneous objection rule “affords an opportunity for correction and avoidance in the trial court in various ways: it gives the adversary the opportunity either to avoid the chal- lenged action or to present a reasoned defense of the trial court’s action; and it provides the trial court with the alterna- tive of altering or modifying a decision or of ordering a more fully developed record for review”), judgment vacated on other grounds, 462 U.S. 523 (1983). But Nasir—unlike Rehaif—did not preserve his scienter-based objection, so he deprived the government and trial court of these opportunities. B. The nature of plain-error review Rule 52(b) gives us discretion to correct plain error in such cases, but the rule is “permissive, not mandatory.” Olano, 507 U.S. at 735 . And our discretionary authority to remedy a forfeited error is “strictly circumscribed,” Puckett v. United States, 556 U.S. 129 , 134 (2009), though not as the majority appears to believe. The majority asserts that we have only “a degree of discretion in determining whether to correct [plain] error,” which seems to suggest a presumption in favor of error- correction and that our discretion to ignore plain error is quite narrow. Maj. Op. 27. 5  The majority’s parsimonious view of our Rule 52(b) discretion is contrary to Supreme Court precedent. We are to correct plain errors “sparingly,” Jones v. United States, 527 U.S. 373 , 389 (1999), and only in “exceptional circumstances,” United States v. Atkinson, 297 U.S. 157 , 160 (1936), where it is necessary to set aside “particularly egregious errors,” United States v. Young, 470 U.S. 1 , 15 (1985) (internal quotation marks omitted) (quoting United States v. Frady, 456 U.S. 152 , 163 (1982)). Meeting all four prongs of the plain-error standard “is difficult, ‘as it should be.’” Puckett, 556 U.S. at 135 (quot- ing United States v. Dominguez Benitez, 542 U.S. 74 , 83 n.9 (2004)). That is particularly true when, as here, curing the plain error would require the district court to conduct a burdensome jury retrial. Rosales-Mireles v. United States, 138 S. Ct. 1897 , 1909 (2018). The reviewing court’s exercise of prong-four discretion is an independent barrier to relief on a forfeited claim of error. Even “a plain error affecting substantial rights does not, with- out more, satisfy the Atkinson standard, for otherwise the dis- cretion afforded by Rule 52(b) would be illusory.” Olano, 507 U.S. at 737 . Regrettably, we have sometimes conflated prongs three and four with little to no separate prong-four analysis. See United States v. Gaydos, 108 F.3d 505 , 509 (3d Cir. 1997) (suggesting, without any prong-four analysis, that the plain er- ror automatically satisfied prong four); Xavier, 2 F.3d at 1287 (same). This case affords a rare opportunity for the en banc Court to disavow such imprecision and fine-tune its approach to plain-error review. Alas, the majority exacerbates the prob- lem by declaring that the plain error in Nasir’s case derogated his substantial rights thus satisfying Olano step four. Maj. Op. 62 (citing Gaydos, 108 F.3d at 509 ). Rather than conduct “a 6 case-specific and fact-intensive” review in light of the entire record, Puckett, 556 U.S. at 142 , the majority simply assumes that plain error of an undefined “magnitude” categorically re- quires correction at Olano prong four. Maj. Op. 62. C. Plain-error review requires consideration of the entire record Casting aside the case-specific and fact-intensive ap- proach required by Puckett, the majority asserts that “constitu- tional norms” require error-correction because the Supreme Court’s decision in Rehaif retroactively created due process concerns. Maj. Op. 62. But framing the plain error as a due- process violation does not automatically satisfy Olano prong three or four. See United States v. Marcus, 560 U.S. 258 , 264– 66 (2010). That is because even constitutional rights “may be forfeited in criminal as well as civil cases by the failure to make timely assertion of the right before a tribunal having jurisdic- tion to determine it.” Olano, 507 U.S. at 731 (internal quotation marks omitted) (quoting Yakus v. United States, 321 U.S. 414 , 444 (1944)). So a defendant’s failure to object at trial, even though the error was not plain at the time, “may well count against the grant of Rule 52(b) relief.” Henderson v. United States, 568 U.S. 266 , 278–79 (2013). The Court in Johnson held only that an error that was not plainly incorrect at the time of trial becomes plain when the law is subsequently clarified. Johnson, 520 U.S. at 468 . That is, the timing question concerned the “plainness” of the error, which relates only to Olano prong two. See Henderson, 568 U.S. at 279 (time-of-review rule adopted in Johnson and Henderson applies specifically to the second part of the four- part Olano test). The majority’s insistence that our prong-four analysis is likewise limited to the time of trial (as memorialized 7 in the trial record) is unwarranted and finds no support in Johnson. Indeed, having found that the error was plain, the Court in Johnson assumed without deciding that Olano prong three was satisfied and denied relief under prong four because the error did not “seriously affect[] the fairness, integrity or public reputation of judicial proceedings.” Johnson, 520 U.S. at 469– 70 (internal quotation marks omitted) (quoting Olano, 507 U.S. at 736 ). Two aspects of the Court’s discussion are relevant here. First, the Court itself—and not the jury—found that the record contained enough evidence on materiality that no rea- sonable juror could have decided the materiality question1 in any other way. Id. at 470; see also United States v. Johnson, 899 F.3d 191 , 200 (3d Cir. 2018) (finding the trial record con- tained sufficient evidence to support defendant’s conviction and declining to cure plain error at prong four, even though the jury was not instructed to find, and did not find, a required el- ement). Second, in making that finding the Court did not confine its review to information available only at the time of trial. Ra- ther, it noted that “[m]ateriality was essentially uncontroverted at trial and has remained so on appeal.” Johnson, 520 U.S. at 470 (emphasis added) (footnote omitted). Reviewing the case under the prong-four standard, the Court considered whether petitioner made a plausible showing2—not just at trial but 1 The plain error in Johnson concerned the trial court’s failure to submit materiality to the jury, as subsequently required in United States v. Gaudin, 515 U.S. 506 (1995). Johnson, 520 U.S. at 464 . 2 We have also previously used a “no-plausible-argument” or “no-plausible-explanation” test in deciding plain-error cases at 8 afterwards, before the Eleventh Circuit or the Supreme Court—that the false statement for which she was convicted was not material. Id. Satisfied that she had not, the Court af- firmed the court of appeals’ exercise of its discretion to decline to correct the plain error. So while the “plainness” of an error (prong two) is pegged to the time of trial, the broader question whether the plain error seriously affects the fairness, integrity, and public reputation of judicial proceedings (prong four) has a longer time horizon extending throughout the appeal process. See Henderson, 568 U.S. at 275 (the reviewing court examines Olano’s third and fourth criteria by “looking at the circum- stances that now are,” i.e., at the time of the appeal rather than by looking back to the time of trial). The majority attempts to narrow the discretion provided by Rule 52(b) by ignoring its expansive text and cabining its temporal scope. Throughout its opinion, the majority insists that the discretion afforded by Rule 52(b) must be restricted to the time of the trial itself and to facts in the trial record. This is necessary, the majority warns, to avoid trampling on Fifth and Sixth Amendment rights in violation of In re Winship, 397 U.S. 358 (1970). Maj. Op. 32–33. The majority misapprehends the nature and purpose of plain-error review, particularly at prong four. We do not pur- port to “find facts” in order to overcome a deficiency in the evidence and on that basis pronounce the defendant’s convic- tion while relieving the government of its burden. Rather, as is clear from the entire line of plain-error cases before and after Olano, there is a material difference between our remedial prong four. See, e.g., United States v. Greenspan, 923 F.3d 138 , 154–56 (3d Cir. 2019); United States v. W. Indies Transp., Inc., 127 F.3d 299 , 306 (3d Cir. 1997). 9 discretion under Rule 52(b) and the jury’s factfinding role at trial. At prong four, we answer a question that no jury could ever appropriately entertain: whether, considering the entire record, reasonable observers would conclude that declining to correct the plain error creates a miscarriage of justice or would seriously affect the fairness, integrity, and public reputation of judicial proceedings generally. Conversely, remanding for retrial on an uncontestable element may be “[t]he real threat” to fairness and undermine the reputation of judicial proceedings—a powerful truism that the majority does not acknowledge. United States v. Cotton, 535 U.S. 625 , 634 (2002); see also Dominguez Benitez, 542 U.S. at 82 (plain-error review should enforce Rule 52(b)’s pol- icy of reducing “wasteful reversals”). The majority’s misconception of plain-error review in- fects its entire discussion of the record that we review under Rule 52(b). Because the majority regards plain-error review as a kind of extension of the jury trial rather than a discretionary act tethered to Rule 51(b)’s forfeiture rule, it fixates on Winship’s requirement of proof beyond a reasonable doubt in criminal trials. Maj. Op. 32–37.3 Were we reviewing Nasir’s conviction for sufficiency of the evidence, the majority’s scru- ples would be more persuasive. But we are merely exercising remedial discretion over a forfeited objection, so unless the 3 In response, the majority contends that what separates us is nothing less than fidelity to the “Constitution itself.” Maj. Op. 34 n.17. But the majority ignores the thrust of my criticism. In a different case the majority’s fixation on Winship would be salutary, but here it is misplaced because plain-error review is not a continuation of the jury trial. 10 majority intends to attack the constitutionality of Rule 52(b) generally, its analysis is misdirected.4 D. By limiting plain-error review to the trial rec- ord, the majority creates a per se rule requir- ing error correction We evaluate a claim of plain error “against the entire record” because “[i]t is simply not possible for an appellate court to assess the seriousness of the claimed error by any other means.” Young, 470 U.S. at 16 . This case nicely illustrates why it is “simply not possible” to perform a prong-four assessment without considering the whole record. At prong three, we re- view only the trial record to determine whether the error af- fected the outcome of the district court proceedings. See United States v. Maez, 960 F.3d 949 , 961 (7th Cir. 2020). If it did, then we move to Olano prong four. But if at prong four we continue to limit our consideration to the trial record we see only the prejudice that satisfied prong three in the first place. We cannot see—or more precisely, we pretend not to notice—Nasir’s 4 We do not “[d]isregard[] constitutional norms” in refusing to remand a case to the district court on plain-error review when the jury’s verdict was obviously correct. Maj. Op. 62. Surely the majority is not suggesting that plain-error review is inap- plicable whenever important constitutional rights are at issue; nor (I hope) is it suggesting that nearly all of our sister circuits are so unconcerned with the preservation of constitutional guarantees that they would disregard an obvious Sixth Amendment violation just for the sake of keeping a person be- hind bars. See infra at 12–13. Simply put, the majority’s ap- proach challenges the constitutionality of Rule 52(b)’s plain- error standard as explicated in Supreme Court decisions. 11 three prior felony guilty pleas5 and his seven and one-half years of imprisonment. Thus blinkered, we cannot adopt the broader, outward-looking perspective necessary to determine whether public perceptions of fairness, integrity, and the reputation of judicial proceedings require us to cure the error. The majority’s crucial move—limiting the scope of our prong-four review—is dispositive in appeals from Rehaif- infected felon-in-possession convictions where, as here, the de- fendant stipulated to his felon status. Because of Nasir’s stipu- lation, the government was precluded from adducing evidence relating to the nature and circumstances of his prior felony con- victions. Old Chief, 519 U.S. at 174–75. For the reasons 5 The majority is comfortable inferring a defendant’s knowledge-of-felon status from his prior guilty plea because “when a defendant pleads guilty, the district court must ensure that the plea is knowing and voluntary.” Maj. Op. 40. But the majority refuses to apply that same logic to Nasir, who know- ingly and voluntarily pleaded guilty to felony charges on three separate occasions. Indeed, he even pleaded guilty to a prior felon-in-possession charge. So as the majority acknowledges, when he was tried for the same offense in this case he neces- sarily knew that he was a felon. This is precisely the sort of information that should inform our discretionary judgment at prong four. See, e.g., United States v. Huntsberry, 956 F.3d 270 , 285 (5th Cir. 2020); United States v. Ward, 957 F.3d 691 , 695 (6th Cir. 2020). Nasir’s plea to a felon-in-possession charge, which is the offense embodied in the Old Chief stipu- lation, is a central reason why this case is not one where allow- ing the conviction to stand would impugn the fairness, integ- rity, or reputation of judicial proceedings. See also infra at 16– 18. 12 explained in Old Chief, shielding Nasir in that manner was ap- propriate at his jury trial. But post-trial, the unfair-prejudice and jury-misleading rationales of Federal Rule of Evidence 403 no longer obtain, which highlights the tension between Rehaif and Old Chief that Justice Alito noted in his Rehaif dis- sent. Rehaif, 139 S. Ct. at 2209 (Alito, J., dissenting). The ma- jority’s restriction of our prong-four review to the trial record effectively converts Nasir’s Old Chief stipulation from a jury- trial shield into an appellate sword preventing this Court from considering facts relating to his scienter. Allowing Nasir to deploy Old Chief offensively itself adversely affects the fairness, integrity, and public reputation of judicial proceedings. But limiting our prong-four review to the trial record is even more consequential. By short-circuiting the Olano analysis at step three, the majority predestines the result in appeals of Rehaif-infected felon-in-possession convic- tions involving an Old Chief stipulation—always in favor of error-correction. The combination of Old Chief and the major- ity’s insistence that we may consider only the trial record, even at prong four, creates a per se rule requiring remand in every such case. That is precisely the type of “flawed” approach that the Supreme Court has disapproved because it renders our prong-four discretion “illusory.” Olano, 507 U.S. at 737 ; Young, 470 U.S. at 16 n.14. Given the Supreme Court’s clear and repeated admoni- tions, the majority offers assurance that it is not advocating the adoption of a per se rule. Maj. Op. 50 n.29. But that disclaimer is meaningless; whether the majority intends to “advocate” the adoption of a per se rule, it has in fact created one. Gamely trying to demonstrate the flexibility of its per se rule, the ma- jority offers two examples “where sufficient evidence was pre- sented at trial to show that the defendant was aware of his status 13 as a felon at the time of the crime.” Id. (citing United States v. Moss, 812 F. App’x 108, 111 (4th Cir. 2020), and United States v. Velázquez-Aponte, 940 F.3d 785 , 800 (1st Cir. 2019)). Both cases are inapposite, however, because in neither did the de- fendant invoke the Old Chief bar by stipulating to his prior fel- ony conviction. Throughout its opinion, the majority discounts the im- pact of Nasir’s Old Chief stipulation. Maj. Op. 47 n.26 (“[W]e think the existence of an Old Chief stipulation has little rele- vance to the analysis . . . .”). That is a massive blind spot. Because defendants typically avail themselves of Old Chief when they have multiple or damning felony records, it should come as no surprise that a reviewing court, conducting plain-error review, will find that the fairness, integrity, or public rep- utation of judicial proceedings has not been af- fected, when considering evidence of the defend- ant’s felony status beyond just the trial record. United States v. Miller, 954 F.3d 551 , 559 n.23 (2d Cir. 2020). That is true here, as well. But by limiting our review to the trial record—which of course includes the Old Chief bar—the ma- jority makes it impossible for us to perform the required prong- four analysis. The majority has no answer to the outsized role of Old Chief in this case, except to implausibly suggest that Nasir’s stipulation did not prevent the government from introducing his knowledge-of-status at trial. Maj. Op. 50 n.29. But pre- cisely because of Nasir’s stipulation, the trial court would al- most certainly have sustained the inevitable unfair-prejudice objection because the evidence proving his felon status and 14 knowledge of status is substantially the same, or at least inex- tricably intertwined. E. The “entire record” is broader than the trial record The majority leans heavily on Johnson for its holding that we may consider only the trial record on plain-error re- view, rather than the entire record. Maj. Op. 34–35. But Johnson was not a felon-in-possession case, so the trial record was not constrained by Old Chief. As a result, the evidence supporting materiality was so “overwhelming” that petitioner had “no plausible argument” at trial or on appeal. Johnson, 520 U.S. at 470. The lack of an Old Chief stipulation is highly rel- evant to the analysis in Johnson and distinguishes it from this case. The majority’s discussion of Neder v. United States, 527 U.S. 1 (1999), is even less persuasive. Maj. Op. 35 n.18. Neder was a harmless-error case decided under Rule 52(a), not a Rule 52(b) plain-error case. 527 U.S. at 7–8. Olano step three is essentially harmless-error analysis, and as the majority itself acknowledges, all agree that it is based on the trial record. Maj. Op. 44–45 (discussing Maez). But the move from step three to step four distinguishes this and other plain-error cases from Neder, and it is at step four that we are required to evaluate the case “against entire record.” Young, 470 U.S. at 16 . The ma- jority’s reliance on Neder in support of its trial-record-only holding underscores its persistent tendency to conflate Olano prongs three and four.6 6 The majority’s emphasis on the amount of evidence in the Neder trial record is curious, considering its heavy reliance on 15  Our sister circuits understand this quite well. As the ma- jority concedes, the Second, Fifth, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits have repeatedly affirmed jury ver- dicts in § 922(g) cases and rejected arguments similar to those accepted by the majority. Miller, 954 F.3d at 560; Huntsberry, 956 F.3d at 285–87; Ward, 957 F.3d at 695; Maez, 960 F.3d at 963–64; United States v. Owens, 966 F.3d 700 , 706–07 (8th Cir. 2020); United States v. Benamor, 937 F.3d 1182 , 1188–89 (9th Cir. 2019); United States v. Reed, 941 F.3d 1018 , 1021– 22 (11th Cir. 2019). Even United States v. Medley, 972 F.3d 399 (4th Cir. 2020), which the majority enlists for support, Maj. Op. 57–58, does not explicitly foreclose consideration of matters outside the trial record when addressing forfeited Rehaif claims under the plain-error standard. Medley, 972 F.3d at 417. Medley is already an outlier; the majority would go even further and place this Court beyond the pale. At last count, 140 appellate judges and 15 district judges sitting by designation have voted to uphold a felon-in-posses- sion conviction on plain-error review of a Rehaif claim. How could so many federal judges approve the obvious violation of important Fifth Amendment and Sixth Amendment rights? The In re Winship. Maj. Op. 35 n.18. The defendant’s Sixth Amendment right is to have all evidence proven beyond a rea- sonable doubt to a jury, not simply to have the government put a surfeit of evidence into a record. Yet, applying the harmless- error standard the Supreme Court affirmed Neder’s conviction because there was enough evidence in the record to find an el- ement of the offense—even though the jury never made such a finding. 527 U.S. at 16–18. Neder thus undermines rather than supports the majority’s primary rationale in this plain-error case. 16 answer is that they haven’t; our colleagues overwhelmingly understand the difference between judicial factfinding and plain-error remedial discretion.7 By holding that we may not review the whole record at prong four, the majority positions us on the short end of a lop- sided circuit split. It fails to identify a “compelling basis” to do so, in defiance of our Court’s “general[] reluctan[ce]” to create such splits. In re Asbestos Prod. Liab. Litig. (No. VI), 921 F.3d 98 , 109 (3d Cir. 2019) (internal quotation marks omitted) (quoting Parker v. Montgomery Cty. Corr. Facility/Bus. Office Manager, 870 F.3d 144 , 152 (3d Cir. 2017)). More im- portantly, the majority’s criticisms of our sister circuits’ posi- tions are mistaken. Consider the majority’s handling of the Eleventh Circuit’s decision in United States v. Reed. The defendant in Reed was convicted by a jury of possessing a firearm as a felon, and the Eleventh Circuit affirmed his conviction. 941 F.3d at 1019. The Supreme Court vacated the Eleventh Circuit’s judg- ment of affirmance in light of Rehaif and remanded for recon- sideration. Id. On remand, the Eleventh Circuit once again af- firmed. Id. at 1022. It held that an appellate court may review the whole record when assessing a Rehaif error’s effect, or lack thereof, on the fairness, integrity, or public reputation of 7 The majority sniffs that its decision is based upon “independ- ent judgment” rather than simple nose-counting. Maj. Op. 49 n.28. That misses the point. Respectfully, my suggestion is that in exercising its independent judgment the majority has inade- quately considered the extreme unlikelihood that so many of our judicial colleagues have somehow missed, or would casu- ally ignore, the due process and Sixth Amendment concerns that the majority finds so troubling. 17 judicial proceedings. Id. at 1021–22. Because the defendant’s presentence report “stated that he had been incarcerated for lengthy terms before possessing the firearm,” id. at 1020, he could not prove that the error affected “the fairness, integrity, or public reputation of his trial,” id. at 1022. Accordingly, the Eleventh Circuit declined to set aside his conviction. Id. at 1022. The majority chides the Eleventh Circuit for relying on United States v. Vonn, 535 U.S. 55 (2002), and concluding that a court need not confine itself to the trial record at prong four, because Vonn involved review of a guilty plea rather than a conviction after a jury trial. Maj. Op. 39–40. But the majority ignores the Eleventh Circuit’s discussion of United States v. Young. See Reed, 941 F.3d at 1021. In Young, the Supreme Court denied plain-error relief where a prosecutor made im- proper comments during rebuttal because the remarks were made in response to defense counsel’s own improper remarks during summation and “were not such as to undermine the fun- damental fairness of the trial and contribute to a miscarriage of justice.” 470 U.S. at 16–19. The Court explained that it could not “properly evaluate [the defendant’s claims of error] except by viewing [them] against the entire record,” id. at 16 (empha- sis added), because Rule 52(b) “authorizes the Courts of Ap- peals to correct only ‘particularly egregious errors,’” id. at 15 (quoting Frady, 456 U.S. at 163 ). The Supreme Court has never held that the “entire rec- ord” that Young instructs us to examine means just the trial rec- ord.8 That would make no sense: reasonable people will 8 In Makiel v. Butler, 782 F.3d 882 (7th Cir. 2015), the Seventh Circuit discussed the difference between the “entire record” and the “trial record” in a case involving the materiality 18 consider all relevant information in assessing whether our de- cision to affirm Nasir’s conviction works a miscarriage of jus- tice that is inconsistent with fairness, integrity, and the good reputation of our judicial system. And unlike the majority, they will not arbitrarily ignore the indisputable fact of Nasir’s sci- enter and guilt. Maj. Op. 59–64. In deciding whether to exer- cise our discretion, we should consider reliable materials within and outside of the trial record just as thoughtful mem- bers of the public certainly will.9 standard of the Compulsory Process Clause. Id. at 908–10. Alt- hough Makiel was not a plain-error case, the court’s discussion assists our consideration of the scope of discretionary review prescribed by Olano. Similar to our task at prong four, the court in Makiel had to evaluate the defendant’s argument in light of public interests such as “the integrity of the adversary process, the interest in the fair and efficient administration of justice, and the potential prejudice to the truth-determining function of the trial process.” Id. at 909 . The Seventh Circuit concluded that when the Supreme Court instructs circuit courts to evaluate claims of trial error in the context of the “entire record,” that is broader than the “trial record.” Id. 9 Consider the prong-four significance of Nasir’s Old Chief stipulation, which of course was part of the trial record. The majority suggests that it could never be even circumstantial ev- idence of his scienter, Maj. Op. 55–57, but that assertion is not compelled by Rehaif. And it wars against common sense and experience. As a strictly logical proposition, it is true that Nasir’s stipulation proved only that he knew of his felon status as of the date of the stipulation; it did not necessarily prove that he knew he was a felon when he was arrested with the gun. But just as a factual statement can be strictly true and yet fraudulent 19  The majority also assails the Second Circuit’s decision in Miller and the Seventh Circuit’s decision in Maez. Its criti- cism of the approach taken by those two circuits is similarly unpersuasive. Miller involved a defendant whose presentence inves- tigation report showed that he spent several years in prison prior to his firearm possession, rendering it obvious that he knew he was a felon at the time of possession. 954 F.3d at 560. The Second Circuit “ha[d] no doubt that, had the Rehaif issue been foreseen by the district court, [the defendant] would have stipulated to knowledge of his felon status to prevent the jury from hearing evidence of his actual sentence.” Id. at 560. So, the court concluded, the fairness, integrity, and public reputa- tion of the judicial system would not be seriously affected by upholding the conviction; in fact, the defendant was so obvi- ously guilty that vacating his conviction “would have that ef- fect.” Id. at 559. In Maez, the Seventh Circuit largely adopted the Second Circuit approach, concluding that vacating the con- victions of two defendants whose presentence reports indicated that they served more than one year in prison on prior felony because of a material omission, Nasir’s stipulation does not foreclose the possibility that he also understood that he was a felon every day after his knowing and voluntary guilty pleas in 2000, 2001, and 2007. A thoughtful observer drawing upon her reason, experience, and common sense might easily infer from Nasir’s June 2017 stipulation that he knew of his felon status when apprehended with a gun in December 2015. Such an in- ference, though not logically required, would be patently sen- sible to many people. And surely, many will consider his stip- ulation in this light when evaluating our discretionary decision whether to notice the plain error created by Rehaif. 20 convictions would negatively affect the fairness, integrity, and public reputation of judicial proceedings. 960 F.3d at 964–66. The majority faults the Second and Seventh Circuits for “treat[ing] judicial discretion as powerful enough to override the defendant’s right to put the government to its proof when it has charged him with a crime.” Maj. Op. 46–47. But Nasir has not been deprived of that right. He had the opportunity to insist that the government be required to prove that he knew he was a felon at the time of his firearm possession. He did not do so, instead agreeing that no such proof need be presented. As a direct result of that choice, the government did not introduce evidence as to Nasir’s knowledge of his status at the time of possession though such evidence was readily available. I do not see why Nasir’s failure to object to the jury instruction and decision to instead avail himself of an Old Chief stipulation should continue to redound to his benefit now that we are ex- ercising remedial discretion. F. Nasir does not satisfy Olano’s step-four stand- ard for error-correction Our sister circuits’ approach does not “imply that relief on plain-error review is available only to the innocent.” Maj. Op. 47.10 If, for example, an error so corrupts a judicial 10 Indeed, as the Seventh Circuit recognized, “defendants can sometimes show an effect on fairness or integrity without a claim of innocence.” Maez, 960 F.3d at 962. But “though a de- fendant’s likelihood of actual guilt or innocence does not nec- essarily control the third prong of plain-error review, it may play a role at prong four.” Id. That is because a court has “broad discretion under prong four to leave even plain errors 21 proceeding as to make its verdict completely unreliable, no court would require a defendant to prove on appeal that he was actually innocent before vacating a conviction resulting from such a proceeding. See Medley, 972 F.3d at 424–25 (Quattle- baum, J., dissenting) (explaining that “central” to prong-four analysis in a criminal case “is a determination of whether, based on the record in its entirety, the proceedings against the accused resulted in a fair and reliable determination of guilt” (internal quotation marks omitted) (quoting United States v. Ramirez-Castillo, 748 F.3d 205 , 217 (4th Cir. 2014))). That is because the Third Branch would not want to put its imprimatur on a proceeding that makes a mockery of justice and reduces the system’s standing in the eyes of the public. But that is not a problem here. A simple, unobjected-to error in jury instruc- tions, where the defendant’s conviction would have been cer- tain had an objection been made at the proper time, does not cry out for an exercise of our discretion. Remanding this case for retrial is unnecessarily burden- some and seriously undermines the fairness and public reputa- tion of judicial proceedings. That broad inquiry is the standard governing our exercise of discretion. The majority compounds its error by explicitly limiting our prong-four discretion to Nasir’s trial, which, it insists, “is the only judicial proceeding at issue.” Maj. Op. 41 n.22. Not so. At prong four we ask whether refusing to cure the plain error would “seriously affect the fairness, integrity or public reputation of judicial proceed- ings” generally, not merely the particular defendant’s proceed- ing. Puckett, 556 U.S. at 135 . As the Court elaborated in Puckett, we consider whether affirming Nasir’s conviction uncorrected where [it has] no doubt as to the ultimate result of further proceedings.” Id. at 963. 22 would call into question “the integrity of the system” and be so ludicrous as to “compromise the public reputation of judicial proceedings.” Id. at 142–43 (emphasis added); see also United States v. Edgell, 914 F.3d 281 , 291 (4th Cir. 2019); United States v. Marroquin, 884 F.3d 302 , 304 (5th Cir. 2018) (Smith, J., dissenting from denial of rehearing en banc); United States v. Gonzalez-Huerta, 403 F.3d 727 , 739 (10th Cir. 2005) (en banc); id. at 742 (Ebel, J., concurring); id. at 747 (Hartz, J., concurring). Because the majority asks the wrong prong-four question, it refuses to consider information that would suggest the correct answer. Even if we improperly limited our prong-four inquiry to what the majority erroneously describes as “the actual field of play – the trial,” Maj. Op. 41 n.22, we should still affirm. When asked twice at oral argument how Nasir would attempt to dis- prove the knowledge-of-status element if the case were sent back for retrial, his counsel was unable to give a responsive answer. (That is not a criticism of counsel’s performance; there is no plausible explanation.) Instead, counsel allowed that Nasir would strategically use a remand to try to negotiate a bet- ter plea deal. In light of that revelation, I believe that thoughtful members of the public would view the majority’s judgment and Nasir’s windfall with bemused cynicism rather than reputation- enhancing admiration. G. We are bound by the Supreme Court’s plain- error precedent The majority at least purports to apply Olano and its progeny. Judge Matey’s opinion strikes out in an entirely dif- ferent direction, citing first principles. I endorse that approach in cases where lower court judges write on a blank slate, but in this appeal we are guided by ample Supreme Court precedent. 23 In any event, although we have not had the benefit of original- ist briefing and argument, I doubt that Rule 52(b)’s remedial discretion as currently applied offends the Sixth Amendment and note that Justices Scalia and Thomas both joined Olano without any reservation, originalist or otherwise. Cf. Concur- ring Op. 13–16 (criticizing Atkinson and Olano as allegedly unwarranted expansions of original plain-error doctrine). Moreover, I fail to grasp how a purportedly originalist applica- tion of plain-error review can affirm the conviction of non- criminal conduct but disallows the conviction of conduct that was certainly criminal but not properly proven. Cf. United States v. Jabateh, 974 F.3d 281 , 287 (3d Cir. 2020). ***** The Supreme Court has disapproved “a reflexive incli- nation by appellate courts to reverse because of unpreserved error,” a tendency contrary to the “strictly circumscribed” appellate-court authority to remedy unpreserved error only where necessary due to exceptional circumstances. Puckett, 556 U.S. at 134 (internal quotation marks omitted) (quoting United States v. Padilla, 415 F.3d 211 , 224 (1st Cir. 2005) (Boudin, C.J., concurring)). Yet the majority persists in the face of overwhelming, reliable information supporting Nasir’s conviction. Its error stems from a basic misunderstanding of the nature of plain-error review. I respectfully dissent from Section II.E of the majority opinion. 24

2020-03-05 23:34:10.856384+00

http://www.search.txcourts.gov/RetrieveDocument.aspx?DocId=70383&Index=%5c%5coca%2dpsql12%2ecourts%2estate%2etx%2eus%5cTamesIndexes%5ccoa14%5cOrder

Abatement Order filed March 5, 2020 In The Fourteenth Court of Appeals ____________ NO. 14-20-00068-CV ____________ MARY ANN YAMIN AND TEXAS BLACK IRON. INC., Appellant V. NORTH AMERICAN INTERPIPE, INC., Appellee On Appeal from the 113th District Court Harris County, Texas Trial Court Cause No. 2017-39172 ABATEMENT ORDER The court has determined that this case is appropriate for referral to mediation, an alternative dispute resolution process. See Tex. Civ. Prac. & Rem. Code §§ 154.021—.073. Mediation is a forum in which an impartial person, the mediator, facilitates communication between parties to promote reconciliation or settlement. Id.§ 154.023(a). Any communication relating to the subject matter of the appeal made by a participant in the mediation proceeding is confidential. See Tex. Civ. Prac. & Rem. Code § 154.053. After mediation, the parties shall advise the court whether the case settled, or whether any further negotiation efforts are planned.  The court ORDERS the appeal ABATED for a period of sixty days and refers the underlying dispute to mediation. Any party may file a written objection to this order with the clerk of this court within 10 days of the date of this order. See Tex. Civ. Prac. & Rem. Code § 154.022. If this court finds that there is a reasonable basis for the objection, the objection shall be sustained and the appeal reinstated on this court’s active docket. See id. The court ORDERS that the mediation be held within 60 days of the date of this order. The court ORDERS that all parties or their representatives with full settlement authority shall attend the mediation process, with their counsel of record. The court FURTHER ORDERS that within 48 hours of completion of the mediation, the parties shall advise the court in writing whether the case settled. If mediation fully resolves the issues in the case, the court ORDERS the parties to file a motion to dismiss the appeal, other dispositive motion, or a motion for additional time to file the dispositive motion, within 10 days of the conclusion of the mediation. The court ORDERS the appellate timetable in this case suspended for 60 days from the date of this order. The appeal is ABATED, treated as a closed case, and removed from this court’s active docket for a period of sixty days. The appeal will be reinstated on this court’s active docket after sixty days. Any party may file a motion stating grounds for reinstating the appeal before the end of the sixty-day period. Any party may also file a motion to dismiss the appeal or other dispositive motion at any time. Any party may file a motion to extend the abatement period for completion of mediation or to finalize a settlement. PER CURIAM Panel consists of Justices Christopher, Wise, and Zimmerer. 2  RULES FOR MEDIATION i. Definition of Mediation. Mediation is a process under which an impartial person, the mediator, facilitates communication between the parties to promote reconciliation, settlement or understanding among them. The mediator may suggest ways of resolving the disputes, but may not impose his own judgment on the issues for that of the parties. ii. Agreement of Parties. Whenever the parties have agreed to mediation they shall be deemed to have made these rules, as amended and in effect as of the date of the submission of the dispute, a part of their agreement to mediate. iii. Consent to Mediator. The parties consent to the appointment of the individual named as mediator in their case. The Mediator shall act as an advocate for resolution and shall use his best efforts to assist the parties in reaching a mutually acceptable settlement. iv. Conditions Precedent to Serving As Mediator. The mediator shall not serve as a mediator in any dispute in which he has any financial or personal interest in the result of the mediation. Prior to accepting an appointment, the Mediator shall disclose any circumstances likely to create a presumption of bias or prevent a prompt meeting with the parties. In the event that the parties disagree as to whether the Mediator shall serve, the Mediator shall not serve. v. Authority of the Mediator. The Mediator does not have the authority to decide any issue for the parties, but will attempt to facilitate the voluntary resolution of the dispute by the parties. The Mediator is authorized to conduct joint and separate meetings with the parties and to offer suggestions to assist the parties achieve settlement. If necessary, the Mediator may also obtain expert advice concerning technical aspects of the dispute, provided that the parties agree and assume the expenses of obtaining such advice. Arrangements for obtaining such advice shall be made by the Mediator or the parties, as the Mediator shall determine. vi. Commitment to Participate in Good Faith. While no one is asked to commit to settle their case in advance of mediation, all parties commit to participate in the proceedings in good faith with the intention to settle, if at all possible. vii. Parties Responsible for Negotiating Their Own Settlement. The parties understand that the Mediator will not and cannot impose a settlement in their case and agree that they are responsible for negotiating a settlement acceptable to them. The Mediator, as an advocate for settlement, will use every effort to facilitate the negotiations of the parties. The Mediator does not warrant or represent that settlement will result from the mediation process. viii. Authority of Representatives. PARTY REPRESENTATIVES MUST HAVE AUTHORITY TO SETTLE AND ALL PERSONS NECESSARY TO THE DECISION TO SETTLE SHALL BE PRESENT. The names and addresses of such persons shall be communicated in writing to all parties and to the Mediator prior to the mediation. ix. Time and Place of Mediation. The Mediator shall fix the time of each mediation session. The mediation shall be held at the office of the Mediator, or at any other convenient location agreeable to the Mediator and the parties, as the Mediator shall determine. x. Identification of Matters in Dispute. Prior to the first scheduled mediation session, each party shall 3  provide the Mediator with confidential information in the form requested by the Mediator setting forth its position with regard to the issues that need to be resolved. At or before the first session, the parties will be expected to produce all information reasonably required for the Mediator to understand the issues presented. The Mediator may require any party to supplement such information. xi. Privacy. Mediation sessions are private. The parties and their representatives may attend mediation sessions. Other persons may attend only with the permission of the parties and with the consent of the Mediator. xii. Confidentiality. Confidential information disclosed to a Mediator by the parties or by witnesses in the course of the mediation shall not be divulged by the Mediator. All records, reports or other documents received by a mediator while serving in that capacity shall be confidential. The Mediator shall not be compelled to divulge such records or to testify in regard to the mediation in any adversary proceeding or judicial forum. Any party that violates this agreement shall pay all fees and expenses of the Mediator and other parties, including reasonable attorney's fees incurred in opposing the efforts to compel testimony or records from the Mediator. The parties shall maintain the confidentiality of the mediation and shall not relay on, or introduce as evidence in any arbitral, judicial, or other proceeding: a) views expressed or suggestions made by another party with respect to a possible settlement of the dispute; b) admissions made by another party in the course of the mediation proceedings; c) proposals made or views expressed by the Mediator; or d) the fact that another party had or had not indicated willingness to accept a proposal for settlement made by the Mediator. xiii. No Stenographic Record. There shall be no stenographic record made of the mediation process. xiv. No Service of Process at or near the Site of the Mediation Session. No subpoenas, summons, complaints, citations, writs or other process may be served upon any person at or near the site of any mediation session upon any person entering, attending or leaving the session. xv. Termination of Mediation. The mediation shall be terminated: a) by the execution of a settlement agreement by the parties; b) by declaration of the Mediator to the effect that further efforts at mediation are no longer worthwhile; or c) after the completion of one full mediation session, by a written declaration of a party or parties to the effect that the mediation proceedings are terminated. xvi. Exclusion of Liability. The Mediator is not a necessary or proper party in judicial proceedings relating to the mediation. Neither Mediator nor any law firm employing Mediator shall be liable to any party for any act or omission in connection with any mediation conducted under these rules. xvii. Interpretation and Application of Rules. The Mediator shall interpret and apply these rules. xviii. Fees and Expenses. The Mediator's daily fee shall be agreed upon prior to mediation and shall be paid in advance of each mediation day. The expenses of witnesses for either side shall be paid by the party producing such witnesses. All other expenses of the mediation, including fees and expenses of the Mediator, and the expenses of any witness and the cost of any proofs or expert advice produced at the direct request of the Mediator, shall be borne equally by the parties unless they agree otherwise. 4  Fourteenth Court of Appeals MEDIATORS REPORT Date: ____________________________ Christopher A. Prine, Clerk 301 Fannin, Room 245 Houston, TX 77002 Re: Appellate number: Case style: In compliance with this court’s order dated ________________________________, I conducted a mediation proceeding in this case on _____________________________. The mediation [ did / did not ] result in a [ full / partial ] resolution of the matters in dispute. To my knowledge, further negotiation efforts [ are / are not ] planned. The parties and mediator have agreed that the mediator shall be paid as follows: $_______________________ paid by ______________________ $_______________________ paid by ______________________ $_______________________ paid by ______________________ $_______________________ paid by ______________________ Mediator: Address: Telephone E-Mail Address Return immediately after mediation to: 14th Court of Appeals; 301 Fannin, Room 245, Houston, Texas 77002 (713) 274-2800 5

2020-12-01 20:01:21.658543+00

http://www.cit.uscourts.gov/sites/cit/files/20-171.pdf

Slip Op. 20- UNITED STATES COURT OF INTERNATIONAL TRADE ROYAL BRUSH MANUFACTURING, INC., Plaintiff, v. Before: Mark A. Barnett, Judge UNITED STATES, Court No. 19-00198 Defendant, and DIXON TICONDEROGA CO., Defendant-Intervenor. OPINION AND ORDER [Remanding U.S. Customs and Border Protection’s affirmative determination as to evasion in EAPA Case No. 7238.] Dated: December 1, 2020 Ronald A. Oleynik, Holland & Knight LLP, of Washington, DC, argued for Plaintiff. With him on the brief were Antonia I. Tzinova, Liliana V. Farfan, and Dariya V. Golubkova. Ashley Akers, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Joseph F. Clark, Attorney, Office of the Chief Counsel, U.S. Customs and Border Protection. Felicia L. Nowels, Akerman LLP, of Tallahassee, FL, argued for Defendant-Intervenor. With her on the brief was Sheryl D. Rosen. Barnett, Judge: This matter is before the court on Plaintiff Royal Brush Manufacturing, Inc.’s (“Royal Brush”) motion for judgment on the agency record Court No. 19-00198 Page 2 pursuant to U.S. Court of International Trade (“USCIT” or “CIT”) Rule 56.2. Confidential Pl. [Royal Brush’s] Mot. for J. on the Agency R., ECF No. 33. Royal Brush challenges U.S. Customs and Border Protection’s (“Customs” or “CBP”) affirmative determination of evasion of the antidumping duty order on certain cased pencils from the People’s Republic of China (“China”) issued pursuant to Customs’ authority under the Enforce and Protect Act (“EAPA”), 19 U.S.C. § 1517 (2018). 1 Confidential Pl. [Royal Brush’s] Mem. in Supp. of its Mot. for J. on the Agency R. (“Pl.’s Mem.”) at 1, ECF No. 33-1. 2 Customs issued two relevant determinations: (1) Notice of Final Determination as to Evasion, EAPA Case No. 7238 (May 6, 2019) (“May 6 Determination”), CR 131, PR 57; and (2) Decision on Request for Admin. Review, EAPA Case No. 7238 (Sept. 24, 2019) (“Sept. 24 Determination”), PR 64 (Customs’ de novo review of the May 6 Determination). Royal Brush raises four overarching challenges to Customs’ evasion determination. Royal Brush argues that: (1) Customs improperly rejected Royal Brush’s 1 All citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, and all references to the U.S. Code are to the 2018 edition unless otherwise specified. EAPA was enacted as part of the Trade Facilitation and Trade Enforcement Act of 2015, Pub. L. No. 114–125, § 421, 130 Stat. 122 , 161 (2016). 2 The administrative record for the underlying proceeding is contained in a Confidential Administrative Record (“CR”), ECF Nos. 24-1 (CR 1–12), 24-2 (CR 13–14), 24-3 (CR 15–19), 24-4 (CR 20–27), 24-5 (CR 28–34), 24-6 (CR 35–37), 24-7 (CR 38–41), 24-8 (CR 42–44), 24-9 (CR 45–47), 24-10 (CR 48–50), 24-11 (CR 51), 24-12 (CR 52–54), 24-13 (CR 55–57), 24-14 (CR 58–69), 24-15 (CR 70–86), 24-16 (CR 87–122), 24-17 (CR 123–24), 24-18 (CR 125–26), 24-19 (CR 127–32), and a Public Administrative Record (“PR”), ECF Nos. 23-1 (PR 1–35), 23-2 (PR 36–43), 23-3 (PR 44–64). The court references the confidential version of the record document unless otherwise specified. Court No. 19-00198 Page 3 filing seeking to rebut purportedly new factual information contained in Customs’ verification report, Pl.’s Mem. at 9–13; (2) CBP denied Royal Brush procedural due process and redacted material evidence in an arbitrary and capricious manner, id. at 13–20; (3) CBP’s use of an adverse inference constituted an abuse of discretion and was arbitrary and capricious, id. at 20–24; and (4) Customs drew irrational conclusions from the available evidence, id. at 24–26; see also Confidential Reply Br. of Pl. [Royal Brush] (“Pl.’s Reply”), ECF No. 43. Defendant United States (“the Government”) and Defendant-Intervenor Dixon Ticonderoga Company (“Dixon”) urge the court to sustain Customs’ evasion determination. Confidential Def.’s Resp. in Opp’n to Pl.’s Mot. for J. on the Agency R. (“Def.’s Resp.”), ECF No. 38; Def.-Int.’s Resp. in Opp’n to Pl.’s Mot. for J. on the Agency R. (“Def.-Int.’s Resp.”), ECF No. 40. For the following reasons, the court remands Customs’ determination for reconsideration and further explanation regarding the aforementioned arguments (1) and (2) and defers resolution of arguments (3) and (4) pending Customs’ redetermination. BACKGROUND I. Legal Framework for EAPA Investigations As noted, EAPA investigations are governed by 19 U.S.C. § 1517 . 3 Section 1517 directs Customs to initiate an investigation within 15 business days of receipt of an allegation that “reasonably suggests that covered merchandise has been entered into 3 On August 22, 2016, CBP promulgated interim regulations that further guide Customs’ conduct of EAPA investigations. See Investigation of Claims of Evasion of Antidumping and Countervailing Duties, 81 Fed. Reg. 56,477 (CBP Aug. 22, 2016) (interim regulations; solicitation of cmts.); 19 C.F.R. pt. 165 (2017). Court No. 19-00198 Page 4 the customs territory of the United States through evasion.” 19 U.S.C. § 1517 (b)(1). “Covered merchandise” refers to “merchandise that is subject to” antidumping or countervailing duty orders issued pursuant to 19 U.S.C. § 1673e or 19 U.S.C. § 1671e, respectively. Id. § 1517(a)(3). “Evasion” is defined as: entering covered merchandise into the customs territory of the United States by means of any document or electronically transmitted data or information, written or oral statement, or act that is material and false, or any omission that is material, and that results in any cash deposit or other security or any amount of applicable antidumping or countervailing duties being reduced or not being applied with respect to the merchandise. Id. § 1517(a)(5)(A). 4 Once Customs initiates an investigation, it has 90 calendar days to decide “if there is a reasonable suspicion that such covered merchandise was entered into the customs territory of the United States through evasion” and, if so, to impose interim measures. Id. § 1517(e). Interim measures consist of: (1) suspend[ing] the liquidation of each unliquidated entry of such covered merchandise that entered on or after the date of the initiation of the investigation; (2) . . . extend[ing] the period for liquidating each unliquidated entry of such covered merchandise that entered before the date of the initiation of the investigation; and (3) . . . such additional measures as [Customs] determines necessary to protect the revenue of the United States . . . . Id. Pursuant to section 1517(c), Customs’ determination whether covered merchandise entered the United States through evasion must be “based on substantial 4Section 1517(a)(5)(B) contains exceptions for clerical errors, which are not relevant here. 19 U.S.C. § 1517 (a)(5)(B). Court No. 19-00198 Page 5 evidence.” Id. § 1517(c)(1)(A). Customs may, however, “use an inference that is adverse to the interests of” the person alleged to have engaged in evasion or the foreign producer or exporter of the covered merchandise when “selecting from among the facts otherwise available” if that person “failed to cooperate by not acting to the best of the party or person’s ability to comply with a request for information.” Id. § 1517(c)(3)(A). Within 30 days of Customs’ determination as to evasion, the person alleging evasion, or the person found to have engaged in evasion, may file an administrative appeal with Customs “for de novo review of the determination.” Id. § 1517(f)(1). From the date that Customs completes that review, either of those persons have 30 business days in which to seek judicial review. Id. § 1517(g)(1). II. Factual and Procedural History In 2015, Royal Brush, a U.S. importer, began importing pencils from a company located in the Republic of the Philippines (“the Philippines”). 5 Importer Request for Information (Oct. 3, 2018) (“Importer RFI”) at 3, CR 66, PR 26. 6 On February 27, 2018, Dixon lodged an allegation with CBP in which it averred that Royal Brush was transshipping pencils made in China—and subject to an antidumping duty order on certain cased pencils from China—through the Philippines. Allegation under [EAPA] 5 The name of the alleged manufacturer is treated as confidential in the parties’ briefs and is immaterial to the outcome of this case; therefore, the court will refer to the company as “the Philippine Shipper.” 6 When possible, the court refers to the page numbering embedded in the cited document. Otherwise, the court cites to the applicable CBP Bates stamp on the page(s). Court No. 19-00198 Page 6 (Feb. 27, 2018) (“Allegation”) at 3–4, CR 1, PR 2; see also Certain Cased Pencils from the People’s Republic of China, 59 Fed. Reg. 66,909 (Dep’t Commerce Dec. 28, 1994) (antidumping duty order) (“Pencils Order”); Certain Cased Pencils From the People’s Republic of China, 82 Fed. Reg. 41,608 (Dep’t Commerce Sept. 1, 2017) (continuation of antidumping duty order). The scope of the Pencils Order covers “certain cased pencils . . . that feature cores of graphite or other materials encased in wood and/or man-made materials, whether or not decorated and whether or not tipped (e.g., with erasers, etc.) in any fashion, and either sharpened or unsharpened.” 59 Fed. Reg. at 66,909. On March 27, 2018, CBP initiated an investigation in EAPA Case No. 7238. Initiation of Investigation in EAPA Case No. 7238 (Mar. 27, 2018), CR 4, PR 5. Because CBP had acknowledged receipt of Dixon’s allegation on March 6, 2018, “the entries covered by this investigation are those that were entered for consumption, or withdrawn from a warehouse for consumption, from March 6, 2017 through the pendency of this investigation.” Notice of Initiation of Investigation and Interim Measures (June 26, 2018) (“Initiation Notice”) at 1, CR 8, PR 14. 7 On May 25, 2018 (with revisions submitted on July 19, 2018), Royal Brush responded to CBP’s Form 28 Request for Information. EAPA Case No. 7238 – Resp. to CBP Form 28 (July 19, 2018), CR 10, PR 19. 7Pursuant to 19 C.F.R. § 165.2 , subject entries “are those entries of allegedly covered merchandise made within one year before the receipt of an allegation,” but, “at its discretion, CBP may investigate other entries of such covered merchandise.” Court No. 19-00198 Page 7 On June 6, 2018, a CBP Attaché conducted an unannounced site visit at the Philippine Shipper’s facility in Subic Bay, Philippines, and, thereafter, produced a report summarizing the Attaché’s findings. EAPA 7238–Site Visit Report: [Philippine Shipper], Subic Bay, Philippines (June 15, 2018) (“Attaché Report”), CR 5, PR 8; see also May 6 Determination at 4 (identifying the date of the visit as June 6, 2018). 8 The Attaché concluded that the Philippine Shipper had “the capacity to finish some product, but the on-site evidence clearly reveal[ed] the repacking of completely finished products from China.” Attaché Report at CBP0002540. During the visit, the Attaché observed the Philippine Shipper’s “staff . . . making minor alterations or simply sharpening pencils” and “repacking China origin products into boxes labeled, ‘Made in Philippines.’” Id. at CBP0002541. The Attaché noted that manufacturing equipment was covered in dust or cobwebs; the “manufacturing warehouse did not indicate production of any products for some time”; raw materials such as lead or cores were absent from the facility; and the storage area contained “boxes with Chinese characters and English language boxes stating, ‘Made in the Philippines.’” Id. On June 26, 2018, CBP informed Royal Brush of the initiation of the investigation and imposition of interim measures. Initiation Notice at 1, 3–6. With respect to the imposition of interim measures, Customs explained that evidence gathered during the Attaché site visit, documents provided by Royal Brush in its response to CBP’s Form 8The Attaché Report indicates that the visit occurred on July 6, 2018; however, this appears to be a typographical error given that the report is dated June 15, 2018. Attaché Report at CBP0002540. Court No. 19-00198 Page 8 28, and documents submitted by Dixon in support of its allegation 9 “collectively create[d] a reasonable suspicion as to evasion.” Id. at 6 . Accordingly, Customs suspended liquidation for any entries that entered on or after March 27, 2018, the date of initiation of this investigation, and extended liquidation for all unliquidated entries that entered before March 27, 2018. Id. Following the imposition of interim measures, Royal Brush and the Philippine Shipper responded to Customs’ further requests for information. See, e.g., EAPA Case No. 7238 - Resp. to CBP Importer Request for Information (Part I) – Updated Submission per Request of Sept. 28, 2018 (Oct. 3, 2018), CR 12, PR 24 (submitted by the Philippine Shipper); Importer RFI (submitted by Royal Brush). From November 14, 2018, through November 17, 2018, Customs conducted a scheduled verification at the Philippine Shipper’s facility. On-Site Verification Report (Feb. 11, 2019) (“Verification Report”) at 2, CR 129. 10 Prior to verification, Customs informed the Philippine Shipper that it would be required to discuss its production process and submit documentation corresponding to five identified invoice numbers. 9 Customs pointed to a purchase contract allegedly entered into between the alleged Chinese Manufacturer and a Trading Company that contained instructions on marking merchandise identified in Royal Brush’s online catalog as “Made in Philippines.” Initiation Notice at 2 (citing Allegation, Ex. 1). Customs pointed to additional documentation allegedly demonstrating that the merchandise would be shipped to Subic Bay. Id. (citing Allegation, Ex. 2). 10 Customs released a public version of the verification report on February 25, 2019. See On-Site Verification Report (Feb. 25, 2019), PR 47. Court No. 19-00198 Page 9 Site Verification Engagement Letter (Nov. 7, 2018) (“Verification Agenda”) at 2, CR 121, PR 33–34. In the report, Customs explained that it “[i]nterviewed company officials about their company operations and record keeping”; “[t]oured the facilities”; and “[r]eviewed original records to verify the on-the-record responses” submitted by the Philippine Shipper. Verification Report at 2. CBP summarized the “relevant facts and observations” with respect to the Philippine Shipper’s: (1) company ownership, operations, and recordkeeping; (2) co-mingled raw material and Chinese pencils; (3) verification of the five identified invoices plus two additional invoices; (4) production capability and capacity; and (5) payroll records. Id. at 3–10. Customs also attached to the Verification Report 32 photographs taken inside the Philippine Shipper’s facility. Id., Attach. II. Customs explained that the Philippine Shipper was unable to provide inventory receipt records for pencils purchased from Chinese suppliers and, at times, handwrote “pencils” with inventory receipts ostensibly related to the purchase of raw materials. Id. at 5 . CBP encountered difficulties verifying the identified invoices as a result of the Philippine Shipper’s failure to provide requested documents, deletion of documents, or provision of documents that had been altered or redacted. Id. at 6–8. CBP found that the Philippine Shipper’s payroll records indicated that the company’s production capacity was far less than the amount claimed and, thus, that the Philippine Shipper’s amount of exports to the United States substantially exceeded its production capacity as calculated by CBP’s verification team. Id. at 8–9. Lastly, “[e]vidence obtained during Court No. 19-00198 Page 10 the verification” indicated that the Philippine Shipper’s previously-submitted payroll documents “were unsupported.” Id. at 9 ; see also id. at 10 (stating that the verification team was “unable to verify that the stated employees were, in fact, paid and/or that there was production during those time periods”). On March 6, 2019, Customs informed Royal Brush that because the Verification Report contained “new information,” Royal Brush was entitled to submit rebuttal information “related specifically to the information that was provided in the verification report.” Email from Kareen Campbell to Ron Oleynik (March 6, 2019, 16:04 EST) at CBP0002287, PR 49. While Royal Brush timely filed its rebuttal, on March 19, 2019, Customs informed Royal Brush that it was rejecting the submission. Email from Kareen Campbell to Ron Oleynik (March 19, 2019, 20:34 EST) at CBP0002295, PR 50. Customs explained that it rejected the rebuttal, in part, because of the inclusion of new factual information that was “not furnished during the verification.” Id. On March 21, 2019, Customs stated that it had previously misinterpreted its regulation, 19 C.F.R. § 165.23 (c), 11 and now determined that because “the verification report does not contain new information,” Royal Brush’s “rebuttal to the verification report [was] not 11Section 165.23(c) provides that [i]f CBP places new factual information on the administrative record on or after the 200th calendar day after the initiation of the investigation (or if such information is placed on the record at CBP’s request), the parties to the investigation will have ten calendar days to provide rebuttal information to the new factual information. 19 C.F.R. § 165.23 (c)(1). Court No. 19-00198 Page 11 warranted.” Email from Kareen Campbell to Liliana Farfan (March 21, 2019, 15:14 EST) (“2nd Rejection Email”) at CBP0002290, PR 50. On March 25, 2019, Royal Brush submitted written arguments pursuant to 19 C.F.R. § 165.26 . 12 EAPA Case No. 7238 – Resubmission of Written Arguments to be Placed on the Admin. R. (March 25, 2019) (“Royal Brush’s Case Br.”), CR 130, PR 51. Among other things, Royal Brush argued that its procedural due process rights had been violated by virtue of the extensive redactions to the Allegation, Attaché Report, and Verification Report and CBP’s rejection of Royal Brush’s rebuttal submission. Id. at 22–29. CBP further argued that CBP’s rejection of the rebuttal was arbitrary and capricious. Id. at 29–35. On May 6, 2019, Customs issued an affirmative determination as to evasion. See May 6 Determination. Customs found “that substantial evidence, in conjunction with an assumption of adverse inferences related to information requested but not provided, indicates [that] Royal Brush’s imports were merchandise entered through evasion.” Id. at 5 ; see also id. at 8 (finding substantial evidence to support a finding of evasion based on the available evidence “and the absence of information due to [the] 12Customs permits “parties to the investigation” to submit “written arguments that contain all arguments that are relevant to the determination as to evasion and based solely upon facts already on the administrative record in that proceeding.” 19 C.F.R. § 165.26 (a)(1). The term “[p]arties to the investigation” encompasses both the person “who filed the allegation of evasion and the importer . . . who allegedly engaged in evasion.” 19 C.F.R. § 165.1 . The term “interested party” is defined more broadly to include, among others, the parties to the investigation and the “foreign manufacturer, producer, or exporter . . . of covered merchandise.” Id. Court No. 19-00198 Page 12 Philippine[] Shipper’s failure to cooperate and comply to the best of its ability”). Customs did not address Royal Brush’s due process arguments except to state that the information and findings contained in the verification report were “covered by” Customs’ regulation, 19 C.F.R. § 165.25 . Id. at 5 n.15. 13 On June 18, 2019, Royal Brush filed a request for an administrative review of Customs’ Determination. Request for Admin. Review (June 18, 2019) (“Req. for Admin. Review”), CR 132, PR 58. On September 24, 2019, CBP completed its de novo review. Sept. 24 Determination at 1. CBP concluded that substantial evidence supported a finding that the pencils imported by Royal Brush during the period of investigation were manufactured in China. Id. at 11 , 18–19; see also id. at 12–18 (discussing the evidence). Further, while stating that they were not necessary to its decision, CBP concluded that “adverse inferences were warranted, inasmuch as the importer, as well as the alleged foreign producer and exporter, failed to provide sufficient evidence to demonstrate that the pencils imported by Royal Brush were manufactured in the Philippines.” Id. at 18 . CBP thus “reasonably filled those evidentiary gaps with some adverse inferences.” Id. Royal Brush timely sought judicial review pursuant to 19 U.S.C. § 1517 (g)(1). See Summons, ECF No. 1; Compl., ECF No. 2. The court heard confidential oral argument on October 6, 2020. Docket Entry, ECF No. 49. 13 The regulation states that, following a verification, “CBP will place any relevant information on the administrative record and provide a public summary.” 19 C.F.R. § 165.25 (b). Court No. 19-00198 Page 13 JURISDICTION AND STANDARD OF REVIEW The court has jurisdiction pursuant to section 517(g) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1517 (g), and 28 U.S.C. § 1581 (c). EAPA directs the court to determine whether a determination issued pursuant to 19 U.S.C. § 1517 (c) or an administrative review issued pursuant to 19 U.S.C. § 1517 (f) was “conducted in accordance with those subsections.” 19 U.S.C. § 1517 (g)(1). In so doing, the court “shall examine . . . whether [CBP] fully complied with all procedures under subsections (c) and (f)” and “whether any determination, finding, or conclusion is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Id. § 1517(g)(2). 14 “The scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 , 43 (1983). However, Customs “must examine the relevant data and articulate a satisfactory explanation for its action[,] including a ‘rational connection between the facts found and the choice 14 Customs’ regulation refers to an “initial determination,” 19 C.F.R. § 165.41 , and a “final administrative determination” that is subject to judicial review, id. § 165.46. The statute does not use those terms or explicitly limit the scope of judicial review to Customs’ de novo review of the earlier determination. See 19 U.S.C. § 1517 (g). At oral argument, Royal Brush opined that only the September 24 Determination is judicially reviewable because it constitutes CBP’s de novo reconsideration of the May 6 Determination. Oral Arg. 4:40–4:48 (reflecting the time stamp of the recording); see also Pl.’s Mem. at 1; Pl.’s Reply at 10 n.11. The Government and Dixon argued that both determinations are subject to judicial review. Oral Arg. 11:05–11:15, 19:11–19:55. The court’s disposition of the matter herein on procedural grounds rather than the substantive merits of Customs’ affirmative evasion determination does not require the court to resolve these competing arguments. Court No. 19-00198 Page 14 made.’” Id. (quoting Burlington Truck Lines v. United States, 371 U.S. 156 , 168 (1962)). “An abuse of discretion occurs [when] the decision is based on an erroneous interpretation of the law, on factual findings that are not supported by substantial evidence, or represents an unreasonable judgment in weighing relevant factors.” Consol. Bearings Co. v. United States, 412 F.3d 1266 , 1269 (Fed. Cir. 2005) (citation omitted). “Courts look for a reasoned analysis or explanation for an agency's decision as a way to determine whether a particular decision is arbitrary, capricious, or an abuse of discretion.” Wheatland Tube Co. v. United States, 161 F.3d 1365 , 1369 (Fed. Cir. 1998). DISCUSSION I. CBP’s Rejection of Royal Brush’s Rebuttal Submission A. Parties’ Contentions Royal Brush contends that CBP’s Verification Report contained new factual information and, thus, CBP’s rejection of its rebuttal submission was arbitrary, capricious, and an abuse of discretion. Pl.’s Mem. at 9–13; Pl.’s Reply at 2–3. 15 Recognizing that neither the EAPA statute nor CBP’s regulations define “factual information,” Royal Brush finds support for its position in the definition used by the U.S. 15 Royal Brush also contends that Customs’ rejection of the rebuttal submission denied Royal Brush “a meaningful opportunity to be heard.” Pl.’s Mem. at 9; see also Pl.’s Reply at 4. Royal Brush did not, however, substantiate its due process concerns with respect to this issue and, thus, the court does not further address the contention. See, e.g., United States v. Great Am. Ins. Co. of N.Y., 738 F.3d 1320 , 1328 (Fed. Cir. 2013) (“It is well established that arguments that are not appropriately developed in a party’s briefing may be deemed waived.”). Court No. 19-00198 Page 15 Department of Commerce (“Commerce”) in antidumping and countervailing duty proceedings. Pl.’s Mem. at 10–11 (discussing 19 C.F.R. § 351.102 (b)(21) and related case law). Royal Brush further contends that Customs’ assertion that the contents of the Verification Report are “covered by 19 C.F.R. § 165.25 ” lacks merit because the regulation does not preclude information in the Verification Report from constituting “new factual information.” Id. at 12 n.7. The Government contends that Customs properly rejected Royal Brush’s rebuttal submission because the Verification Report did not contain new factual information. Def.’s Resp. at 14–15. Rather, the Government contends, CBP conducted “a quintessential verification” in order to test the accuracy of the submitted data, id. at 16 , and simply “summarized its findings in the [V]erification [R]eport,” id. at 18 . The Government further contends that Customs provided an adequate explanation for its decision to reject Royal Brush’s rebuttal submission. Id. at 19–20. Dixon advances substantially similar arguments. Def.-Int.’s Resp. at 4–5. B. CBP Must Reconsider and Further Explain its Rejection of Royal Brush’s Rebuttal Submission Customs’ rejection of Royal Brush’s rebuttal submission turned on Customs’ conclusion that the Verification Report did not contain new factual information. 2nd Rejection Email at CBP0002290. CBP is required to provide “a reasoned analysis or explanation” for that decision, Wheatland Tube, 161 F.3d at 1369 , but has not done so here. Court No. 19-00198 Page 16 Customs’ regulations permit parties to the investigation “to provide rebuttal information” to any “new factual information” that Customs “places . . . on the administrative record on or after the 200th calendar day after the initiation of the investigation.” 19 C.F.R. § 165.23 (c)(1). Customs’ conclusory statement that “the verification report does not contain new information,” 2nd Rejection Email at CBP0002290, lacks any identification of the standard CBP used to define “new factual information” or application of that standard to the Verification Report. Customs’ subsequent assertion that the Verification Report and its exhibits “are covered by [19 C.F.R.] § 165.25” fares no better. May 6 Determination at 5 n.15; Sept. 24 Determination 16 n.16. While the regulation directs CBP to “place any relevant [verification] information on the administrative record and provide a public summary,” 19 C.F.R. § 165.25 , it does not explicitly preclude that information from being “new” for purposes of 19 C.F.R. § 165.23 (c)(1). The Government’s argument that the purpose of verification is to test the accuracy of submitted data is not persuasive. Def.’s Resp. at 15–16 (citing Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United States, 39 CIT ___, ___, 61 F.Supp.3d 1306 , 1349 (2015); Özdemir Boru San. ve Tic. Ltd. Sti. v. United States, 41 CIT ___, ___, 273 F.Supp.3d 1225 , 1242 (2017); Tianjin Mach. Imp. & Exp. Corp. v. United States, 28 CIT ___, 353 F. Supp. 2d 1294 , 1304 (2004)). The cited cases indicate Commerce’s views on verification, not Customs’ views. See, e.g., Borusan, 61 F. Supp. 3d at 1349. Further, at oral argument, the Government explained that CBP does not take the position that the contents of a verification report may never constitute Court No. 19-00198 Page 17 new factual information. Oral Arg. at 28:00–28:07. Thus, the Government’s argument sheds no light on CBP’s basis for deciding that the Verification Report at issue here did not contain new factual information. It is not the court’s role to “supply a reasoned basis for [Customs’] action that [Customs] itself has not given.” State Farm, 463 U.S. at 43 (quoting SEC v. Chenery Corp., 332 U.S. 194 , 196 (1947)). Accordingly, the court may not adopt Commerce’s definition of factual information for purposes of an EAPA proceeding and apply that definition to the Verification Report to resolve the issue. 16 When, as here, the court is tasked with reviewing a decision based on an agency record, and that record does not support the contested decision, the court must remand for further proceedings. See, e.g., Fla. Power & Light Co. v. Lorion, 470 U.S. 729 , 744 (1985) (“If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.”); Nippon Steel Corp. v. Int’l Trade Comm’n, 345 F.3d 1379 , 1381–82 (Fed. Cir. 2003). 16 At oral argument, the Government opined that, in the absence of a Customs definition of “factual information,” the court may find Commerce’s definition instructive. Oral Arg. 22:57–23:11, 24:07–24:10. Court No. 19-00198 Page 18 Accordingly, this issue is remanded to CBP for reconsideration and further explanation. 17 II. Royal Brush’s Procedural Due Process Claims A. Parties’ Contentions Royal Brush contends that CBP’s administration of the EAPA proceeding denied Royal Brush procedural due process and was arbitrary and capricious. Pl.’s Mem. at 13–20; see also Pl.’s Reply at 5–9. In particular, Royal Brush argues: (1) CBP redacted or otherwise withheld substantial amounts of record information, some of which CBP relied on to support its affirmative evasion determination, Pl.’s Mem. at 14–17; (2) Royal Brush lacked adequate notice concerning the information that would be requested or was considered missing from the record, id. at 17–18; (3) CBP “maintain[ed] a secret administrative record” to which Royal Brush lacked full access until it obtained judicial review, id. at 18–19; and (4) Customs’ regulatory definition of “parties to the investigation” as a subset of “interested parties” prevented the Philippine Shipper “from fully participating in the proceedings,” Id. at 19–20. Royal Brush further contends that 17 Because the court is remanding this issue, the court does not reach Royal Brush’s alternative argument that Customs failed to weigh the factors set forth in Grobest & I- Mei Indus. (Vietnam) Co. v. United States, 36 CIT 98 , 123, 815 F. Supp. 2d 1342 , 1365 (2012), regarding the acceptance of untimely information. Pl.’s Mem. at 12–13; see also Pl.’s Reply at 4–5. Additionally, Dixon’s contention that CBP’s determination should be affirmed even if the Verification Report contains new information because CBP relied on evidence other than the information contained in the Verification Report lacks merit. Def.-Int.’s Resp. at 5. If the Verification Report contains new information that Royal Brush is entitled to rebut, CBP will need to incorporate that rebuttal information into its remand redetermination. Court No. 19-00198 Page 19 Customs’ failure to explain why it redacted or withheld information from Royal Brush amounts to arbitrary and capricious action. Id. at 20 . The Government contends that Royal Brush has failed to “identify any protected interest of which it was allegedly deprived” by CBP’s management of the administrative record and, thus, Royal Brush’s due process claims must fail. Def.’s Resp. at 24; id. at 27 . The Government further contends that Royal Brush had adequate notice of the claim against it, id. at 23–24, and its “generalized complaints about the EAPA process do not entitle it to relief,” id. at 25 . 18 B. A Remand is Required for CBP to Comply with Procedural Requirements Concerning Royal Brush’s Access to Information While Royal Brush raises various challenges to CBP’s administration of the underlying proceeding, at oral argument, it inferred that each claim is grounded in Royal Brush’s overarching concern that CBP procedurally erred in failing to disclose information that CBP relied on in its determination. See Oral Arg. 1:41:45–1:42:37, 1:56:04–1:57:39, 2:29:22–2:31:07, 2:35:25–2:36:15. As discussed below, the record indicates that Customs failed to ensure that confidential filings were accompanied by the requisite public summaries. Thus, on remand, CBP must address and remedy this deficiency. “The Fifth Amendment prohibits the deprivation of life, liberty, or property without due process of law.” U.S. Auto Parts Network, Inc. v. United States, 42 CIT ___, ___, 319 F. Supp. 3d 1303 , 1310 (2018) (citing U.S. Const. amend. V). Thus, “[t]he first 18 Dixon did not respond to Royal Brush’s due process arguments. Court No. 19-00198 Page 20 inquiry in every due process challenge is whether the plaintiff has been deprived of a protected interest in property or liberty.” Int’l Custom Prods., Inc. v. United States, 791 F.3d 1329 , 1337 (Fed. Cir. 2015) (citation omitted). While “engaging in foreign commerce is not a fundamental right protected by notions of substantive due process,” NEC Corp. v. United States, 151 F.3d 1361 , 1369 (Fed. Cir. 1998), an importer participating in an administrative proceeding has a procedural due process right to “notice and a meaningful opportunity to be heard,” PSC VSMPO-Avisma Corp. v. United States , 688 F.3d 751 , 761–62 (Fed. Cir. 2012) [hereinafter Avisma] (quoting LaChance v. Erickson, 522 U.S. 262 , 266 (1998)); 19 see also Nereida Trading Co. v. United States, 34 CIT 241 , 248, 683 F. Supp. 2d 1348 , 1355 (2010) (assuming that the plaintiff had “a protected interest in the proper assessment of tariffs on goods already imported” and further examining “what process is due”) (citation omitted); Transcom, Inc. v. United States, 24 CIT 1253 , 1271, 121 F. Supp. 2d 690 , 707 (2000) (“It is impossible to comprehend how an importer’s lack of a vested right to import merchandise in the future negates the obligation to provide the importer with notice prior to imposing an 19 The Government argues that the court should not address Royal Brush’s arguments because Royal Brush failed to adequately identify a protected interest. Def.’s Resp. at 24, 27. Royal Brush argued, however, that as “an importer[] participating in an administrative proceeding” it had a due process right to “notice and a meaningful opportunity to be heard.” Pl.’s Mem. at 13 (quoting Avisma, 688 F.3d at 761–62). Waiver is not implicated when the parties’ briefs on an issue “do[] not deprive [the court] in substantial measure of that assistance of counsel which the system assumes.” MTZ Polyfilms, Ltd. v. United States, 33 CIT 1575 , 1579, 659 F. Supp. 2d 1303 , 1308 (2009) (alteration original) (quoting Carducci v. Regan, 714 F.2d 171 , 177 (D.C. Cir. 1983)) (discussing, but ultimately declining to apply, the doctrine of waiver). While Royal Brush could have been more explicit as to the nature of the protected interest, the parties’ briefing on these matters is sufficient for the court to address the competing arguments. Court No. 19-00198 Page 21 antidumping duty for the merchandise already imported.”). In general, “notice [must be] reasonably calculated, under all the circumstances, to appri[s]e interested parties of the pendency of the action and afford them an opportunity to present their objections.” Transcom, 24 CIT at 1272, 121 F. Supp. 2d at 708 (quoting Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306 , 314 (1950)). Such opportunity must occur “at a meaningful time and in a meaningful manner.” Mathews v. Eldridge, 424 U.S. 319 , 333 (1976)). During the investigation, Royal Brush alerted Customs to its concerns regarding the extent of the redactions to various documents and Royal Brush’s corresponding inability to fully defend its position. See Submission of Written Args. to be Placed on the Admin. R. (Nov. 13, 2018), PR 36 (arguing that due process required CBP to provide copies of the photographs of the Philippine Shipper’s facility attached to the Attaché Report to Royal Brush or to the Philippine Shipper before verification, and there was no reason to withhold the photographs from the Philippine Shipper since the photographs pertained to that company’s business information); Royal Brush’s Case Br. at 4, 22–25 (arguing that Royal Brush had been denied procedural due process based on CBP’s treatment of confidential information in the Allegation, Attaché Report, and Verification Report); Req. for Admin. Review at 24 (same). Customs did not respond to Royal Brush’s request for disclosure of the photographs attached to the Attaché Report or address Royal Brush’s due process arguments in the May 6 Determination or the September 24 Determination. Customs therefore “failed to consider an important aspect of the problem,” resulting in a determination that is arbitrary and capricious. SKF Court No. 19-00198 Page 22 USA Inc. v. United States, 630 F.3d 1365 , 1374 (Fed. Cir. 2011) (quoting State Farm, 463 U.S. at 43 ). Further, while “procedural due process guarantees do not require full-blown, trial- type proceedings in all administrative determinations,” Kemira Fibres Oy v. United States, 18 CIT 687 , 694, 858 F. Supp. 229 , 235 (1994), due process “forbids an agency to use evidence in a way that forecloses an opportunity to offer a contrary presentation,” Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281 , 289 n.4 (1974). Thus, to comply with due process, Customs’ procedures must afford adequate opportunity for importers to respond to the evidence used against them. EAPA does not require or establish a procedure for the issuance of an administrative protective order (“APO”) akin to the procedure used in antidumping and countervailing duty proceedings or otherwise address Customs’ management of confidential information. Compare 19 U.S.C. § 1517 (governing EAPA investigations), with 19 U.S.C. § 1677f(c)(1)(A)–(B) (establishing procedures for the disclosure of proprietary information pursuant to a protective order in Commerce proceedings). However, Customs has promulgated a regulation governing the release of information provided by interested parties, 19 C.F.R. § 165.4 . Subsection (a)(1) of the regulation contains instructions for interested parties to request business confidential treatment of information contained in submissions and states the requirements that must be met. 19 C.F.R. § 165.4 (a)(1). Subsection (a)(2) further requires the submitter to file “a public version of the submission” that, when possible, “contain[s] a summary of the bracketed information in sufficient detail to permit a reasonable understanding of the substance of Court No. 19-00198 Page 23 the information.” Id. § 165.4(a)(2). Subsection (e) also directs that “[a]ny information that CBP places on the administrative record, when obtained other than from an interested party subject to the requirements of this section, will include a public summary of the business confidential information.” Id. § 165.4(e). While Royal Brush did not explicitly reference 19 C.F.R. § 165.4 in its papers, CBP’s compliance with its regulation concerning public summarization of confidential information is relevant to assessing Royal Brush’s claim that CBP denied Royal Brush a meaningful opportunity to participate in the administrative proceeding. See Sichuan Changhong Elec. Co. v. United States, 30 CIT 1886 , 1890–92, 466 F. Supp. 2d 1323 , 1327–29 (2006) (due process claim did not succeed when the agency complied with its statutory and regulatory obligations, which otherwise constituted “a reasonable means to bring an administrative procedure to closure”); Kemira Fibres, 18 CIT at 694–95, 858 F. Supp. at 235–36 (failure to comply with regulatory procedures constituted “arbitrary and capricious” conduct that “deprived [the plaintiff] of its constitutional due process right”). The court’s review of the administrative record reveals CBP’s inattention to the requirement for a public summary of information designated business confidential. The record shows, for example, that the public version of Dixon’s Allegation redacts the confidential information in the narrative portion and omits the exhibits but does not separately summarize the confidential information in a public document. See generally Allegation (public version). Likewise, there are no public summaries of the confidential information redacted from the Attaché Report or Verification Report, including their respective photographs or exhibits. See generally Attaché Report (public Court No. 19-00198 Page 24 version); Verification Report (public version); Foreign Party – Verification Exhibits (Nov. 30, 2018), PR 39–46. The lack of public summaries accompanying the Attaché Report and Verification Report are particularly concerning given CBP’s reliance on those reports in its determination. See, e.g., Sept. 24 Determination at 13–14 (“The CBP Attaché’s Report, complete with observations and photographs, unequivocally demonstrates repackaging of Chinese pencils into boxes labeled as made in the Philippines and destined for the United States.”). There is no indication that the redacted information was not susceptible to public summarization and CBP has not indicated that is the case. Thus, the court finds that, in this respect, CBP failed to afford Royal Brush “the opportunity to be heard at a meaningful time and in a meaningful manner.”20 Eldridge, 424 U.S. at 333 . 21 20 The Government asserted at oral argument that Royal Brush, after obtaining access to the complete administrative record on judicial review, has failed to articulate arguments it would have made if given greater access during the investigation. Oral Arg. 1:31:53–1:32:43. While Royal Brush’s counsel has access to sealed filings during judicial review pursuant to a protective order, counsel is not able to share that information with Royal Brush for the purpose of forming arguments. See generally Protective Order (Dec. 16, 2019), ECF No. 22. Thus, the Government’s argument fails to persuade the court that a remand to produce public summaries in accordance with CBP’s regulation is not required. Furthermore, access to the complete record on judicial review cannot cure improper withholding of information by Customs because the court applies a deferential standard of review to Customs’ evasion determination. Cf. S.D. v. U.S. Dept. of Interior, 787 F. Supp. 2d 981 , 996–99 (D.S.D. 2011) (failure by administrative agency to provide plaintiffs with 23 documents on which the agency based its decision constituted a due process violation that was not cured by review of the decision by an appellate board before which plaintiffs had access to the complete record because the board applied a deferential standard of review). 21 As previously noted, Plaintiff’s additional due process arguments are facets of its overarching claim regarding the lack of access to relevant evidence. Because the court is remanding the matter for CBP to remedy this deficiency, the court declines to address Court No. 19-00198 Page 25 Accordingly, the court remands the matter to Customs to address and remedy the lack of public summaries by providing Royal Brush an opportunity to participate on the basis of information that it should have received during the underlying proceeding. To be clear, the court does not hold that Royal Brush is entitled to receive business confidential information. Congress has not mandated that Royal Brush be afforded such access and Royal Brush has not shown that due process requires it. However, Customs must ensure compliance with the public summarization requirements provided in its own regulations. 22 CONCLUSION AND ORDER In accordance with the foregoing, it is hereby ORDERED that Customs’ evasion determination is remanded to CBP for reconsideration and further explanation regarding the existence of new factual information in the Verification Report and, to the extent the Verification Report contains new factual information, Royal Brush must be afforded an opportunity to rebut that information; it is further Royal Brush’s remaining arguments. To the extent these arguments continue to represent live controversies, Royal Brush must renew the arguments on remand to ensure that CBP has adequate opportunity to respond and, thus, produce a judicially reviewable determination on those issues. 22 The court is mindful that parties sometimes question whether Commerce always complies with a substantially similar requirement in its regulations, 19 C.F.R. § 351.304 (c)(1). Commerce’s actions are not now before the court and the court cannot ignore the robust APO procedures that mitigate any impact that might result in the case of Commerce’s noncompliance. Court No. 19-00198 Page 26 ORDERED that Customs’ evasion determination is remanded for CBP to comply with the public summary requirement set forth in 19 C.F.R. § 165.4 and afford Royal Brush an opportunity to present arguments based on that information; it is further ORDERED that the court will defer resolution of Royal Brush’s remaining arguments pending Customs’ redetermination; it is further ORDERED that Customs shall file its remand redetermination on or before March 1, 2021; it is further ORDERED that, within 14 days of the date of filing of Customs’ remand redetermination, Customs must file an index and copies of any new administrative record documents; it is further ORDERED that the deadline for filing comments after remand shall be governed by USCIT Rule 56.2(h)(2)–(3); and it is further ORDERED that any comments or responsive comments must not exceed 5,000 words. /s/ Mark A. Barnett Mark A. Barnett, Judge Dated: December 1, 2020 New York, New York

2021-01-26 20:03:19.867548+00

https://www.courts.state.hi.us/wp-content/uploads/2021/01/CAAP-16-0000891sdo.pdf

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 26-JAN-2021 08:02 AM Dkt. 60 SO NO. CAAP-XX-XXXXXXX IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I ML, Plaintiff-Appellant, v. HL, Defendant-Appellee APPEAL FROM THE FAMILY COURT OF THE FIRST CIRCUIT (FC-D. NO. 11-1-0899) SUMMARY DISPOSITION ORDER (By: Ginoza, Chief Judge, Hiraoka and Wadsworth, JJ.) Plaintiff-Appellant ML (Husband) appeals from the "Decision and Order After Remand" entered by the Family Court of the First Circuit1 on December 1, 2016. For the reasons explained below, we affirm the Decision and Order After Remand in part; vacate the Decision and Order After Remand in part; and remand this case to the family court for clarification of the reimbursement or payment obligations of the parties, and for entry of an amended property division chart. BACKGROUND Husband filed for a divorce from Defendant-Appellee HL (Wife) on May 27, 2011. After a trial, a "Decision and Order" was entered on January 7, 2014. Attached to the Decision and Order was a property division chart dated January 3, 2014 (2014 Property Division Chart). An "Amended Decision and Order" was entered on January 10, 2014. The 2014 Property Division Chart 1 The Honorable Catherine H. Remigio presided.  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER was attached to the Amended Decision and Order. A divorce decree was entered on March 4, 2014. The decree required that Husband pay to Wife an equalization payment of $128,987.87. Husband appealed. The family court entered findings of fact and conclusions of law on August 12, 2014 (2014 Findings & Conclusions). The 2014 Property Division Chart was attached to the 2014 Findings & Conclusions. We temporarily remanded the case to allow the family court to amend the divorce decree. On September 15, 2015, the family court entered an order amending the divorce decree, and amended the findings of fact and con- clusions of law relating to Husband's child support obligation. The case then returned to us and we issued a summary disposition order, MHL v. HJKL, No. CAAP-XX-XXXXXXX, 2016 WL 806200 (App. Mar. 1, 2016) (SDO) (First SDO). We noted: [Husband] contends that the family court abused its discretion by declining to award [him] a Category 3 credit for a portion of his Schwab One account. [Husband] contends that he deposited a $136,254 gift or inheritance received from [his mother]'s revocable trust after [his mother]'s death in 2008 into the investment account. Id. at *5. We also noted: This is generally in line with [Husband's father]'s testimony that he believed [Husband] had received around $90,000 from [Husband's mother]'s trust, which was deposited in [Husband]'s account. Id. The family court did not award Husband any Category 3 credit for his inheritance from his mother's trust. We concluded that the family court erred in denying [Husband] any Category 3 credit. While the family court was entitled to exercise its discretion in the valuation of the Category 3 claim, it should not have awarded [Husband] no credit. On remand, we direct the family court to use the available evidence to determine a reasonable value for [Husband]'s Category 3 claim. Id. at *6 (first underscore in original, second underscore added). We otherwise affirmed the divorce decree and the order amending it. 2  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER On remand the family court issued an order stating, in relevant part: Counsel shall submit memorandum [sic] supporting each party's position regarding a reasonable value for [Husband]'s Category 3 claim. Exhibits shall be limited to evidence available at trial. Husband submitted a trial exhibit showing the balance of his mother's investment account to have been around $250,000 when she died. Husband and his sister were the account beneficiaries; accordingly, he claimed half of the balance, or $125,000. Alternatively, he argued, because we had recognized there had been a $200,000 withdrawal from his mother's account after the date of her death, "at a minimum [he] should receive a credit of $100,000[,] which is also consistent to [sic] [his father]'s testimony that [he] had received around $90,000" after his mother's death. Husband did not submit evidence showing any actual deposit into his Schwab One account. Wife also submitted a memorandum and exhibits. She pointed out there were no trial exhibits showing when Husband's inheritance was deposited into his Schwab One account, or what the value was at that time. The only evidence was Husband's father's testimony that about $90,000 was deposited into Husband's Schwab One account after Husband's mother died. Wife then argued there should be a $90,000 deviation based upon the Hawaii Revised Statutes (HRS) § 580-47(a) equitable considerations. The Decision and Order After Remand was entered on December 1, 2016. The family court found that the amount of Husband's inheritance was $90,000; recognized equitable con- siderations justifying a departure from the marital partnership model; and ordered a deviation of $70,000 in favor of Wife. Husband filed this appeal. The family court entered findings of fact and conclusions of law on January 31, 2017 (2017 Findings & Conclusions). The family court ordered that Wife reimburse Husband $20,000 of the "$129,987.87 [sic]" equalization amount at the rate of no less than $5,000 per calendar year or, if Husband had not yet paid the equalization amount, the amount 3  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER was adjusted to "$109,987.87 [sic]." The family court did not amend the 2014 Property Division Chart or attach an amended property division chart to the 2017 Findings & Conclusions. DISCUSSION Husband's statement of the points of error does not comply with Rule 28(b)(4) of the Hawai#i Rules of Appellate Procedure. Husband appears to argue that: (1) the family court disregarded our mandate by applying equitable considerations to reduce the amount of Husband's Category 3 credit or, even if equitable considerations were properly recognized, none of them justified deviation from the marital partnership model of property division; (2) the family court erred by granting Wife four years to repay Husband's excess equalization payment; and (3) Wife's request for attorneys' fees should have been denied because it was contrary to the family court's previous ruling that each party pay their own fees. 1. The family court did not err by recognizing equitable considerations. Husband contends that the family court "exceeded the scope of [the] narrow remand — to determine a reasonable value for [Husband]'s Category 3 claim — when it deviated from partner- ship principles based on equitable considerations never addressed in the original divorce proceedings or listed in the 2014 Find- ings." "Equitable considerations" justifying a deviation from marital partnership principles are also referred to as "valid and relevant considerations" and "valid and relevant circumstances," or "VARCs," by Hawai#i courts. Gordon v. Gordon, 135 Hawai#i 340, 349 n.15, 350 P.3d 1008 , 1017 n.15 (2015). The First SDO recognized that "the family court was entitled to exercise its discretion in the valuation of the Category 3 claim," but "it should not have awarded [Husband] no credit." First SDO, at *6. Our mandate to the family court was "to use the available evidence to determine a reasonable value for [Husband]'s Category 3 claim" for the inheritance from his mother. Id. Category 3 net market values "are to be repaid to 4  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER the contributing spouse absent equitable considerations justify- ing a deviation." Gordon, 135 Hawai#i at 349, 350 P.3d at 1017 (underscoring added) (footnote and citations omitted). To divide Category 3 property the family court must: (1) find the facts necessary for assignment of the relevant net market value (NMV); (2) identify any equitable considerations justifying deviation from total repayment to the contributing spouse; (3) decide whether or not there will be a deviation; and (4) decide the extent of any deviation. See id. at 350, 350 P.3d at 1018. To comply with our mandate the family court was required, after determining the NMV of Husband's inheritance from his mother, to identify any equitable considerations justifying a deviation from the marital partnership principle of crediting Husband with all of his inheritance, decide whether or not there will be a deviation and, if so, decide the amount of any deviation. Husband contends that Wife waived all equitable considerations because she did not raise them before the family court, or with us during Husband's first appeal. We disagree. The family court considered Husband's interest in his father's irrevocable trust "as a valid and relevant consideration in deviating from the Partnership Model[,]" First SDO, at *5 n.7, and noted the VARC in Part E of the 2014 Property Division Chart. There was no reason for the family court to consider any equitable considerations related to Husband's inheritance from his mother before the last remand because the family court did not award Husband "any Category 3 credit" for the inheritance. First SDO, at *5-6. Husband also contends that Wife is barred from raising equitable considerations by the doctrine of res judicata. Res judicata, or claim preclusion, is a legal doctrine that limits a party to one opportunity to litigate a claim to prevent incon- sistent results among multiple suits, and to promote finality and judicial economy. Bremer v. Weeks, 104 Hawai#i 43, 53, 85 P.3d 150 , 160 (2004). Claim preclusion "prohibits a party from relitigating a previously adjudicated cause of action." Id. (citation omitted). The party asserting claim preclusion has the burden of establishing that (1) there was a final judgment on the 5  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER merits, (2) the parties to the action in question are the same or in privity with the parties in the original suit, and (3) the claim decided in the original suit is identical with the one presented in the action in question. Id. at 54, 85 P.3d at 161 . Claim preclusion does not apply here because there was no final judgment on the merits in a previous suit between Husband and Wife. 2. The family court did not abuse its discretion by ordering payment over time. Husband contends the family court erred by granting Wife four years to repay Husband's excess equalization payment. [T]he family court possesses wide discretion in making its decisions and those decision[s] will not be set aside unless there is a manifest abuse of discretion. Thus, we will not disturb the family court's decisions on appeal unless the family court disregarded rules or principles of law or practice to the substantial detriment of a party litigant and its decision clearly exceeded the bounds of reason. Fisher v. Fisher, 111 Hawai#i 41, 46, 137 P.3d 355 , 360 (2006) (citation omitted). On the record before us, and subject to section 4. of this summary disposition order, we cannot say that the family court erred by ordering Wife to repay Husband's excess equalization payment over time. 3. The family court did not award attorneys' fees to Wife. Husband argues that the family court should have denied Wife's request for attorneys' fees because it was contrary to the family court's previous ruling that each party pay their own fees. The Decision and Order After Remand made no mention of attorneys' fees. The 2017 Findings & Conclusions — entered after Husband filed his notice of appeal — states: 30. Upon the conclusion of this appeal, Wife intends to request an award of attorney's [sic] fees as "just and equitable" under the criteria of HRS § 580-47, namely: the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, the concealment of or failure to disclose income or an asset, and all other circumstances of the case. 6  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER The family court did not award attorneys' fees to Wife. There is no basis for Husband's appeal on that point. 4. The family court erred when it calculated Husband's equalization credit and/or Wife's reimbursement amount. The family court must file, as part of its findings and conclusions, a property division chart. Gordon, 135 Hawai#i at 351, 350 P.3d at 1019. The Decision and Order After Remand amended the division of marital partnership property, but the family court did not amend the 2014 Property Division Chart or attach an amended property division chart to its 2017 Findings & Conclusions. It also appears that the family court erred when it calculated the amount of Husband's Category 3 VARC credit, the amount of Wife's reimbursement obligation, or both. The Decision and Order After Remand stated, among other things: 2. The amount of [Husband]'s Category 3 inheritance credit is $90,000.00.[sic] . . . . 7. [T]he Court finds that there will be a deviation in the amount of $70,000.00 in favor of [Wife]. 8. In the event that [Husband] has already paid [Wife] the previously-ordered equalization amount of $129,987.87, [sic] [Wife] shall reimburse [Husband] $20,000.00 at the rate of no less than $5,000.00 total per calendar year (January 1 through December 31), beginning January 1, 2017. (Underscoring in original.) The 2017 Findings & Conclusions stated, among other things: 44. Based on the totality of the relevant and credible evidence that was provided at trial, the Court finds that there will be a deviation in the amount of $70,000 in favor of Wife. 45. In the event that Husband has already paid Wife the previously-ordered equalization amount of $129,987.87, then Wife shall reimburse Husband $20,000.00 at the rate of no less than $5,000.00 total per calendar year (January 1 through December 31), beginning January 1, 2017. . . . 45(a). In the event that Husband has not paid Wife the previously-ordered equalization amount of $129,987.87, said amount is herein adjusted to $109,987.87. 7  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER The 2014 Property Division Chart shows the equalization payment amount (Part B, line 4) as $128,987.87, not $129,987.87. Accordingly, we vacate those portions of the Decision and Order After Remand and the 2017 Findings & Conclusions that reflect an incorrect equalization payment amount; and remand this case to the family court for clarification of the payment or reimburse- ment obligations of the parties, and for entry of an amended property division chart. DATED: Honolulu, Hawai#i, January 26, 2021. On the briefs: /s/ Lisa M. Ginoza Peter Van Name Esser, Chief Judge for Plaintiff-Appellant. /s/ Keith K. Hiraoka Thomas E. Crowley, III, Associate Judge for Defendant-Appellee. /s/ Clyde J. Wadsworth Associate Judge 8

2020-01-17 22:01:44.001049+00

Artindell

*513OPINION. • ARTindell: The petitioner contends that the respondent erred in including in 1921 income the gain realized from the Mitsui contract because the regular practice of petitioner was to take up income in the year in which the goods manufactured under contract are accepted by the purchaser, which in this case it is claimed was in the year 1922. This practice it is argued is in accordance with that part of section 212(b) of the 1921 Act which provides that income shall be computed in accordance with the method regularly employe'd in keeping the books and subdivision (b) of article 36, Regulations 62, which deals with long-term contracts. The contract here involved ivas executed October 1, 1920, and was to be completed by delivery of all parts f. o. b. Worcester “about May, 1921.” As a matter of fact completion was delayed until September of 1921. Petitioner’s argument on this point is that the contract was not completed within the meaning of article 36, Regulations 62, until the machines were set up in 1922 and operated, and cites section 47 of the Uniform Sales Act and several court decisions dealing with the question of right of inspection before acceptance. The citations are not in point. The contract we have here specifically provides that “ the time of delivery is understood to be the date of shipment from the works of the builder.” The contract reserved title in the builder until the machinery was fully paid for, which occurred in September, 1921. The contract was purposely so drawn in order to avoid difficulties that might have been encountered in enforcing payment after the machines reached Japan. The only conclusion that we can arrive at from these provisions is. that upon the final loading of parts and payment therefor the sale was completed and the income from the transaction realized. True, there was petitioner’s guarantee that any parts built by it shown to have been defective at the time of shipment would be replaced free of charge, but this, as said with respect to a maintenance clause in contracts involved in Receivers of Thomas Cronin Co. v. Heiner, 28 Fed. (2d) 985, was collateral to the main contract. See also Morris v. Bradley Fertilizer Co., 64 Fed. 55, 58. This is not contrary to Pope v. Allis, 115 U. S. 363, relied upon by petitioner. That case dealt with the right of a vendee to rescind the contract and sue for recovery of the purchase price. That right may or may not exist under the present contract, but we have no occasion in this proceeding to declare either way. All that we are concerned with is to determine whether *514the gain realized from the contract is income in the year 1921. Petitioner had complied with its share of the bargain when it manufactured the machinery and delivered it to the vendee at the place specified. The vendee had discharged its obligations by acceptance at the place of delivery and payment of the contract price. Nothing remained to be done. The possibility of subsequent adjustments under the guarantee places the petitioner in no different situation than were the taxpayers in Uvalde Co., 1 B. T. A. 932; Mesta Machine Co., 12 B. T. A. 523; Cronin Co. v. Lewellyn, 9 Fed. (2d) 974; and Receivers of Thomas Cronin Co. v. Heiner, supra. As to petitioner’s method of keeping its books, the evidence is that they were kept according to the “ finished contract method,” that is, that profit or loss was not entered on the books until the machinery contracted for was put into operation and accepted, and that this method was used during the years 1920, 1921, and 1922. The terms of other contracts under which the petitioner manufactured goods for domestic purchasers are not in evidence, butit appears from the testimony that in such cases petitioner had but little fear of being unable to secure payment from the purchasers. The Mitsui contract, however, was entirely different. There petitioner entertained some doubt as to its ability to enforce collection in a foreign country and it accordingly protected itself by specifically providing in the contract for delivery within the United States and payment at that time. While for conservative accounting purposes it may have been proper to defer accounting for income under this contract until the machines were set up in Japan, such postponement is not proper under Federal taxing statutes. It is said in Receivers for Thomas Cronin Co. v. Heiner, supra, that: For its own purposes the plaintiff had the right to keep its books in such a manner that it could determine whether it had gained or lost upon each of its contracts. From that viewpoint its original method of bookkeeping may be quite correct, as, indeed, may be the method used in the amended return; but when, for tax purposes, gross income is carried as a liability for five years, with, the result that the company is made to appear to have lost money during a particular year in which it actually made a considerable gain, then the method does not clearly reflect taxable income. We have the same situation here except in the time of withholding income, which is a matter of degree only. In our opinion the gain realized from the Mitsui contract should have been reported in the year 1921 in order to correctly reflect income for that year. There are several arguments made against the inclusion in income by the respondent of the $20,000 received from the Biordan Company. One is that the amount was a gift. This theory does not impress us. It was claimed, as shown by the correspondence, as the amount of .additional cost to build the machine which was caused by the delay *515in construction at the purcháser’s request. It was, as said by the purchaser in its letter, a further payment on the drying machine. Regardless of whether the claim was enforceable or not, the payment was clearly one growing out of a business transaction and was not merely a gratuity. See Ira A. Kip, Jr., 3 B. T. A. 50. It is further urged that the $20,000 is only a diminution of a loss and therefore can not be income. It is agreed by the parties that the cost to petitioner of manufacturing the machine was $20,000 more than the contract price. But petitioner had the benefit of this loss as a deduction against income in 1920 and consequently when the payment was received later it was income, Cf. Chicago, Rock Island & Pacific Rwy. Co., 13 B. T. A. 988. The argument proceeds that if the amount is income in any year it is income in 1920 because the check was received in that year and the petitioner was on the accrual and completed-contract basis. The evidence is not at all clear as to when the check was received. All that we have on this is that receipt of the check was acknowledged on January 3, 1921, and entered on the books on that date. This is not sufficient to overcome the presumption of correctness attaching to the respondent’s finding. In view of petitioner’s insistence that there was no enforceable obligation in respect to this payment, it hardly seems that it had anything to accrue prior to actual receipt. Judgment will he entered for the respondent.

2020-11-20 19:28:31.110164+00

BENJAMIN H. HATHAWAY and MARY L. HATHAWAY, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Hathaway v. Commissioner Docket No. 7368-79. United States Tax Court T.C. Memo 1981-209; 1981 Tax Ct. Memo LEXIS 543; 41 T.C.M. (CCH) 1376; T.C.M. (RIA) 81209; April 27, 1981. Thomas G. Foley, Jr., for the petitioners. Jordan P. Weiss, for the respondent. SCOTT MEMORANDUM FINDINGS OF FACT AND OPINION SCOTT, Judge: Respondent determined a deficiency in petitioner's income tax in the amount of $ 721 for the calendar year 1975. The issue for decision is whether petitioner is entitled to a deduction of $ 19,000 either as a nonbusiness bad debt under section 166(d), I.R.C. 1954, 1 or as a theft loss under section 165(c)(3). *544 FINDINGS OF FACT Some of the facts have been stipulated and are found accordingly. Ben Hathaway (petitioner) and Mary Hathaway, husband and wife, resided in Goleta, California, at the time of the filing of their petition in this case. Petitioners filed their joint Federal income tax return for the calendar year 1975 with the Internal Revenue Service. During the year in issue petitioner listed his occupation as a rancher and he had just begun the operation of an avocado farm. Petitioner spent 13 years in college pursuing various courses of study. Although he graduated from law school, he was never a practicing attorney. Petitioner has an extensive business background including the ownership at one time or another of apartment complexes, a restaurant named "Tiffys" located in Disneyland, a casino in Virginia City, Nevada, and a business called "Otts Power, Garden and Fencing." Dr. John Putnam was a wealthy man and a close friend and business associate of petitioner. They entered into a number of real estate transactions in which Dr. Putnam would supply the money to purchase an apartment complex and, in return for an ownership interest, petitioner would supply the work*545 in preparing and maintaining the property. Dr. Putnam also loaned petitioner various amounts of money for some of his personal investment activities. In 1973, petitioner was a licensed pharmacist and owned a Rexall drug store franchise in Santa Barbara, California. Petitioner had in years prior to 1973 arranged for the purchase of gold coins for Dr. Putnam. In early 1973, Dr. Putnam told petitioner that he wanted to purchase placer gold or gold nuggets. Some months prior to February 1973 petitioner had met a Mr. Max Gumple when Mr. Gumple had come into his drug store. Mr. Gumple's family lived in Santa Barbara, California and he came on occasion to Santa Barbara to visit his family. Mr. Gumple informed petitioner that he had access to gold nuggets. Petitioner knew that the company Mr. Gumple worked for was very reputable and he had learned through a long-standing friend, Mr. Al Pfau, that Mr. Gumple was a credible individual. Petitioner notified Dr. Putnam of Mr. Gumple's offer to obtain gold for sale. It was petitioner's understanding that the gold Mr. Gumple could obtain would come from the Collinsville Twin Creek mine located near Anchorage, Alaska. Petitioner later learned*546 that the mine was a placer operation in which the gold is washed out of the gravel obtained from a stream. Mr. Gumple was a partner in the organization and his job was to supervise the operation of the equipment at the mine. Dr. Putnam was a trustee under a trust agreement dated April 23, 1970, and was a trustee for the separate express trusts for the benefit of Anne A. Putnam and Gregory W. Putnam. As trustee, Dr. Putnam caused a cashier's check in the amount of $ 40,000 to be issued to petitioner dated February 23, 1973. The $ 40,000 was broken down into three parts: $ 10,000 on behalf of the April 23, 1970, trust, $ 10,000 on behalf of the Anne A. Putnam trust, and $ 20,000 on behalf of the Gregory W. Putnam trust. The $ 40,000 cashier's check drawn by Dr. Putnam to petitioner's order was endorsed by petitioner and cashed. Some of the funds from the $ 40,000 cashier's check were given by petitioner to Mr. Gumple for the purchase of gold for Dr. Putnam. There was no specific date set for delivery of the gold to Dr. Putnam and there was no written documentation or contract entered into by either petitioner or Dr. Putnam with Mr. Gumple. Due to their long-standing friendship, *547 the transaction was to be arranged by petitioner as a favor to Dr. Putnam and petitioner was not paid a fee by Dr. Putnam nor was he investing any of his personal funds. Later in 1973, Dr. Putnam began calling petitioner day and night. Dr. Putnam's position was that he had not received $ 40,000 worth of gold or gold nuggets and that he wanted either the remainder of the gold or his money back. Thereafter, Dr. Putnam insisted that a document be drafted acknowledging that he had not received either gold or the return of his money for part of his advance to petitioner. Dr. Putnam came over to petitioner's drug store and dictated language which was to be contained in a document to be signed by petitioner. The letter, handwritten by petitioner and dated August 30, 1973, stated as follows: Dr. John Putnam, Dear John This letter is to confirm the fact that approximately eight months ago you, John Putnam did advance a sum of $ 19,000.00, nineteen thousand dollars in United States Currency to be used to purchase gold nuggets. I Ben Hathaway do qualify myself to be responsible for the delivery or in the event that the nuggets are not forth coming to be liable and responsible for said*548 moneys owed you. [Signed Ben H. Hathaway] Under date of March 5, 1974, Dr. Putnam wrote a letter to petitioner which stated in part: You recently signed the acknowledgment that you were responsible I feel that we have waited long enough for your friend to show up with the remaining placer gold and nuggets, particularly since the price of gold is now about $ 165.00 an ounce, and as I understand it his assertion to you was that he would furnish this to us at the price of $ 100.00 an ounce. I have continuously asked you to come and check our figures so that there could be no question about the amount that you owed. I will have this placer gold analyzed as 99% purity and furnish you with what the true balance is that should be returned to me. We have waited much too long for your friend to show up with the gold. Of course, if this is done before April 15th, I shall be pleased to have the gold, otherwise I feel that you must pay me the balance due from the original $ 40,000.00 advance to you. Petitioner made further attempts to contact Mr. Gumple but was unsuccessful. In September 1974, petitioner arranged to fly to Alaska to meet with Mr. Gumple. In order to fly from Anchorage*549 to the Collinsville Twin Creek mine petitioner obtained the permission of Mr. Pfau, who was a partner in the operation, and whose permission was required before any of the bush pilots in the area would agree to fly to the mine. Upon arriving at the mine petitioner was met by Mr. Gumple who gave him a tour of the mine area. He talked with Mr. Gumple and Mr. Pfau and they both explained that they had encountered many problems including excessive rains during the short mining season which lasted from the latter part of May until the middle of September. However, Mr. Gumple showed petitioner the operations which were being conducted at the mine in an effort to produce gold and also informed him that he had his own stake near the mine and that the gold nuggets would be forthcoming. After two days petitioner left, satisfied that Mr. Gumple would produce the gold. In fact, about all the gold that was produced out of the mine other than a few samples was $ 3,000 worth of gold which was sold to a jeweler in Anchorage at $ 36 an ounce. After petitioner's visit, Mr. Gumple's employment at the mine was terminated because he had disregarded Mr. Pfau's instructions and established camp rules. *550 Mr. Gumple then left the mine and petitioner and Mr. Pfau have been totally unable to locate him although a Mr. Blaser, who had accompanied petitioner on his trip to Alaska, had contacted Mr. Gumple on occasions at least through 1977. An itemization as of November 20, 1973, of the contents of three safe deposit boxes held by Dr. Putnam, trustee, was as follows: CONTENTS OF BOX 486 JAP, TRUSTEE U/A 4-23-70Check was for $ 10,000.00 2/23 1 Bag Plastic Placer 13 oz. - at 100 oz.1300.00 1 " " " 12 oz.1200.00 1 " " " 2 oz.200.00 1 Clear Plastic Nuggets 10 oz.1000.00 3700.00 CONTENTS OF BOX 374 JAP, TRUSTEE FOR ANNE A. PUTNAMCheck was for $ 10,000.00 2/23 2 Bags Plastic Placer at 12 oz. each $ 100.00 oz.2400.00 1 White Plastic Bottle Nuggets Est. 14-16 oz.1400.00 3800.00 CONTENTS OF BOX 375 JAP, TRUSTEE FOR GREGORY W. PUTNAMCheck was for $ 20,000.00 2/23 3 Plastic Sacks each labelled 12 oz. at 100 oz.3600.00 1 Plastic sack not labelled est 12 oz.1200.00 2 White plastic bottles est 14-16 oz. each.3000.00 7800.00 40000.00 15300.00 On December 13, 1974, Dr. Putnam wrote a letter to*551 his attorney with respect to the amounts owed to him by petitioner. This letter stated in part: $ 19,000.00 Letter of Responsibility for funds advanced for purchase of Gold Nuggets. The nuggets were never received and therefore he owes me $ 19,000.00 Note: I would also be glad to exchange the placer gold and nuggets that were received and are in my possession for the amount paid for them of $ 21,000.00. The total advanced in regard to the transaction was $ 40,000.00. On December 16, 1974, Dr. Putnam wrote a letter to his attorney which stated in part: To clarify the last segment of my letter of December 13th regarding the money advanced to Hathaway, it was $ 40,000.00. In return I received gold nuggets and placer gold for which he estimated the value of at $ 21,000.00. He was unable to contact his man again, so he owes me $ 19,000.00 which is covered by a letter of responsibility for funds advanced. On December 18, 1974, Dr. Putnam made a written demand upon petitioner to pay him $ 19,000. On January 21, 1975, Dr. Putnam filed a complaint in the Superior Court of California for the County of Santa Barbara which alleged in part: III. On or about February 23, 1973 plaintiff, *552 John A. Putnam as Trustee for Gregory W. Putnam, in the County of Santa Barbara, State of California, delivered to the defendant the sum of $ 20,000.00 for the purpose of defendant purchasing for the plaintiff gold nuggets of the value of $ 20,000.00. Thereafter, the defendant did purchase for the plaintiff gold nuggets of the value of $ 1,000.00 and defendant delivered said gold nuggets to the plaintiff. IV. Thereafter, defendant did not purchase further gold nuggets of the value of $ 19,000.00 for the plaintiff and on August 30, 1973 in the County of Santa Barbara, State of California, the defendant acknowledged in writing to the plaintiff, that he, the defendant would either supply gold nuggets of the value of $ 19,000.00 to the plaintiff, or that he, the defendant, would be liable and responsible to the plaintiff for said sum of $ 19,000.00. V. Since August 30, 1973 the defendant has not delivered to the plaintiff gold nuggets of the value of $ 19,000.00, or of any other value or at all. On December 18, 1974, plaintiff made written demand upon the defendant to forthwith pay said sum of $ 19,000.00 that defendant is holding for the purchase of gold nuggets for the*553 plaintiff. Defendant has not paid said sum of $ 19,000.00 to the plaintiff in any amount or at all up to the time of filing this Complaint. WHEREFORE, plaintiff John A. Putnam as Trustee for Gregory W. Putnam demands judgment against the defendant under the cause of action set forth in Count III above, for the sum of $ 19,000.00 together with his costs of suit incurred herein. Petitioner and Dr. Putnam entered into a stipulation for judgment in the suit filed by Dr. Putnam on March 3, 1975. In settlement of the $ 19,000 owed to Dr. Putnam, petitioner agreed to sell his one-third interest in all property of H-T-P Co., a limited partnership, to Dr. Putnam for the sum of $ 94,000. In satisfying the purchase price, Dr. Putnam dismissed his lawsuit, released certain debts owed to him by petitioner and was to be given credit for the $ 19,000 which petitioner had agreed to be responsible for, with the balance of the $ 94,000 to be paid to petitioner in cash. An escrow agreement was entered into on April 1, 1975, and the parties completed the purchase and sale of the partnership interest with the closing of escrow on April 2, 1975. After the payment of the $ 19,000 to Dr. Putnam, *554 petitioner has been unable to locate the whereabouts of Mr. Gumple. Petitioner did not file a written police report with respect to his transactions with Mr. Gumple. Petitioner on his 1975 Federal income tax return for the calendar year 1975 claimed a short-term capital loss on Schedule D of $ 19,000, describing the loss as a nonbusiness bad debt--gold investment. In his notice of deficiency to petitioner for the calendar year 1975 respondent disallowed the claimed $ 19,000 short-term capital loss and explained as follows: The bad debt deduction of $ 19,000 shown on your return as a short-term capital loss is not allowable under Section 166 of the Internal Revenue Code because it has not been established that a debt existed, or that there was a debtor-creditor relationship involved in the transaction. OPINION It is petitioner's position that he is entitled to deduct the $ 19,000 he paid to Dr. Putnam either as a theft loss under section 165 or as a nonbusiness bad debt under section 166. Before reaching any argument that petitioner may have as to the nature of any loss he may have sustained it is necessary to determine whether petitioner has in*555 fact shown that he sustained any loss. Respondent takes the position that petitioner has not shown that he in fact sustained any loss on the transaction with respect to the purchase of gold for Dr. Putnam. Respondent points out that the evidence clearly shows that on February 23, 1973, Dr. Putnam advanced $ 40,000 to petitioner. We agree with respondent that the evidence on this point is clear.The evidence is also clear that petitioner returned to Dr. Putnam in the form of an offset against the selling price of his interest in a partnership the amount of $ 19,000 of the $ 40,000 advanced. However, the record is totally unclear with respect to the $ 21,000 balance. Petitioner in his testimony referred only to a $ 20,000 advance to him from Dr. Putnam. He was unable to say how or when this $ 20,000 was transferred from him to Mr. Gumple. In fact, his testimony was that he did not know whether it was by cash or check and he did not produce a copy of a check he had written to Mr. Gumple. We conclude that whatever sum petitioner transferred to Mr. Gumple was out of the $ 21,000 that petitioner was unable to account for from the $ 40,000 he received. At one point petitioner stated: *556 I never did buy any placer gold for Dr. Putnam. I bought nuggets. Dr. Putnam got no placer gold from me. The only thing that Dr. Putnam ever got from me was $ 1,000.00 worth of nuggets. * * * When this testimony is viewed in light of the evidence showing that (1) the contents of Dr. Putnam's safe deposit boxes on November 20, 1973, included placer gold with a notation that it was bought with some of the $ 40,000 advanced to petitioner on February 23, 1973; (2) Dr. Putnam in his letter dated March 5, 1974, to petitioner referred to having placer gold in his possession analyzed and furnishing petitioner with the true balance of the $ 40,000 which should be returned to him; (3) Dr. Putnam in a letter to his attorney with respect to instituting a suit against petitioner stated that in return for the $ 40,000 advanced to petitioner, he had received gold nuggets and placer gold on which petitioner estimated a value of $ 21,000; and (4) petitioner's total inability to explain when or how he transferred money to Mr. Gumple, we conclude that petitioner did not transfer to Mr. Gumple out of the $ 40,000 advanced to him by Dr. Putnam, an amount in excess of the $ 21,000 which Dr. Putnam*557 credited against the placer gold and nuggets he had in his safe deposit boxes on November 20, 1973. From the above conclusion, it follows that petitioner retained in his possession or appropriated to some other use $ 19,000 of the $ 40,000 advanced to him by Dr. Putnam, and in the settlement of the suit brought against him by Dr. Putnam merely returned to Dr. Putnam the unexpended $ 19,000. As we analyze the evidence in this case, petitioner had no loss of the $ 19,000 which he claimed on his return to be a nonbusiness bad debt--gold investment. The record shows unmistakably that on February 23, 1973, Dr. Putnam advanced $ 40,000 to petitioner. Petitioner's testimony is far from clear as to the disposition of this $ 40,000. In attempting to explain the receipt of the $ 40,000, petitioner stated that on many different occasions he bought gold or gold coins for Dr. Putnam and that "The $ 40,000.00 in question was probably, and I don't know, a purchase of gold coins." He stated: it was illegal to own gold, other than in gold coins or in gold nuggets, at that period of time. * * * I never did buy any placer gold for Dr. Putnam. I bought nuggets. Dr. Putnam got no placer gold*558 from me. The only thing that Dr. Putnam ever got from me was $ 1,000.00 worth of nuggets. * * * 2 *559 However, the letter written by Dr. Putnam to petitioner under date of March 5, 1974, refers to the $ 40,000, the placer gold and gold nuggets which he had received, and that he had waited long enough for petitioner's friend to "show up with the remaining placer gold and nuggets." There is no evidence in the record of the reply, if any, that petitioner made to this letter. In fact, there is no documentary evidence of any kind which supports petitioner's contention of receiving from Dr. Putnam any amount other than the $ 40,000 cashier's check which petitioner received on February 23, 1973. The letters from Dr. Putnam to his own lawyer with respect to instituting the suit to recover the $ 19,000 refer to the total amount advanced being $ 40,000 and the placer gold and gold nuggets he had received which petitioner estimated to account for $ 21,000 of the $ 40,000. The stipulated contents of Dr. Putnam's safe deposit boxes as of November 20, 1973, show placer gold and gold nuggets in these boxes. Also, in the complaint in the suit brought against petitioner by Dr. Putnam it is alleged that Dr. Putnam, as trustee for Gregory W. Putnam, delivered $ 20,000 to petitioner on or about*560 February 23, 1973, for the purpose of petitioner purchasing for Dr. Putnam gold nuggets with a value of $ 20,000. The memorandum attached to the $ 40,000 cashier's check drawn to petitioner under date of February 23, 1973, shows that it was composed of $ 10,000 withdrawn from each of two other tursts of which Dr. Putnam was trustee and $ 20,000 withdrawn from the Gregory W. Putnam trust. The clear implication is that the placer gold which Dr. Putnam had received was credited by him to the other two trusts and the $ 1,000 of gold nuggets to the Gregory W. Putnam trust, with the remaining $ 19,000 of the $ 20,000 advanced from that trust being allocated to that trust. Petitioner, in attempting to explain the receipt of the $ 20,000 which he claims to have given to Mr. Gumple, testified: But the way I recall it is that, sometime before Christmas, and it must have been September, I received $ 1,000.00 worth of nuggets. I gave them to John Putnam. A couple of weeks or a week or several days later, he gave me the $ 20,000.00, which I gave Mr. Gumple. * * * However, the letter which petitioner gave to Dr. Putnam dated August 30, 1973, referred to an advance of $ 19,000 "approximately*561 eight months ago." Also, it should be noted that this letter makes no reference to petitioner's having transferred the $ 19,000 to Mr. Gumple. There are other aspects of the record which cast grave doubt on petitioner's testimony that he gave Mr. Gumple $ 19,000 for which he did not receive either gold nuggets or the money in return. Petitioner testified that he had no written records, checks, letters or any other documents with respect to his transactions with Dr. Gumple. He could not recall how long he had known Mr. Gumple when he entered into the transaction with him, or in what form he gave him the $ 20,000. When petitioner's attention was called to his testimony that he had written a number of letters to Mr. Gumple and he was asked if he had any copies of those letters, he answered: No. Because afterwards, when I got back from Alaska, I didn't expect any problems and I didn't save them. They were personal letters to him. Although petitioner in his testimony was confused as to when he went to Alaska to see Mr. Gumble, he finally stated that it was in the fall of 1974, over a year after he had signed the letter acknowledging his responsibility for either obtaining gold*562 for Dr. Putnam or returning the $ 19,000 to Dr. Putnam, and at least 6 months after Dr. Putnam had written petitioner the letter of March 5, 1974, with respect to petitioner's producing the gold or returning the $ 19,000. Petitioner testified that prior to his going to Alaska, Dr. Putnam had threatened to sue him for the $ 19,000 unless he returned the sum of furnished him gold of that value. While in Alaska, petitioner had seen the mining operation where Mr. Gumple worked and discovered that it was a placer operation. It is incredulous that a man who had graduated from law school would, under these circumstances, destroy the only written documentation he had with respect to a transaction involving such a large sum of a close friend's money entrusted to him to purchase gold. In short, after carefully considering petitioner's entire testimony, we believe that, in connection with the entire gold transaction which he was arranging with Mr. Gumble, petitioner received $ 40,000 from Dr. Putnam and that any amount which he gave to Mr. Gumble was from the $ 21,000 of this $ 40,000 that he did not return to Dr. Putnam. This record does not support petitioner's contention that any portion*563 of the $ 19,000 which petitioner repaid to Dr. Putnam was ever given by petitioner to Mr. Gumble. Petitioner in his brief argues extensively that respondent has not shown that petitioner did not transfer $ 20,000 to Mr. Gumble for which he received only $ 1,000 in gold nuggets. However, the burden is on petitioner to establish that he is entitled to the claimed loss of $ 19,000 and not on respondent to show that he is not entitled to that claimed loss. Welch v. Helvering, 290 U.S. 111 (1933). On the basis of this record, petitioner has totally failed to show that he sustained a loss of $ 19,000 in the year 1975 which is the year before the Court. Since we have concluded that petitioner did not sustain a loss of any kind of $ 19,000 in the year 1975 in connection with a transaction involving Dr. Putnam, Mr. Gumble and himself, we do not reach the question of whether, if any such loss was sustained, the loss might be deductible as a theft loss or a bad debt loss. Decision will be entered for the respondent. Footnotes

2020-01-17 22:01:40.945693+00

Littleton

*1395OPINION. Littleton: The antenuptial agreement made in Alsace-Lorraine, as between petitioner and his wife, remained in force during 1925, the taxable year in question, but it did not have the effect of changing the law of New York, in which State the community property system does not prevail, nor did the agreement operate to relieve the petitioner from taxation under the Federal statute upon his entire earnings. Notwithstanding the rights and privileges of petitioner and his wife as they existed under the antenuptial agreement and community property law of Alsace-Lorraine, neither was effective to make an exception in their favor in New York in the matter of reporting their taxable income arising from the salary of the husband, first earned and received by him in New York from two corporations. The income in question, one-half of the salary of petitioner for 1925, was not in existence until more than twenty years after the agreement was made. Under the laws of New York and section 213 of the Revenue Act of 1924, the salary of petitioner was taxable income to him before any rights of his wife could vest by virtue of the antenuptial agreement. Neither the Federal statute nor the law of New York was affected or changed by the community system of property prevailing in Alsace-Lorraine, where the antenuptial contract was made. As the community system of property does not exist in New York, the wife of petitioner could acquire no vested interest in his 1925 salary by virtue of the law of Alsace-Lorraine, or by reason of the *1396antenuptial contract, in such way as to prevent the entire salary being taxable to the petitioner. In In re Black, 123 N. Y. Supp. 371, 373, the court said: An assignment of something which has no present, actual or even potential existence when the assignment is made does not operate to transfer the legal title to that thing when it does come into existence. * * ⅜ Such an instrument, if made in good faith for a valuable consideration and not void as against public policy, operates as an executory contract to transfer such after acquired property, and creates an equitable lien thereon. * ⅜ * But the legal title remains in the assignor. * * ⅜ And at law that title is not transferred until either the equitable lien is enforced by judicial decree or some new act intervenes by which the assignor puts the assignee in possession thereof. In Bing v. Bowers, 22 Fed. (2d) 450, the court states: To permit the assignor of future income from his own property to escape taxation thereon by a gift grant in advance of the receipt by him of such income would by indirection enlarge the limited class of deductions established by statute. As long as he remains the owner of the property the income therefrom should be taxable to him as fully, when he grants it as a gift in advance of its receipt, as it clearly is despite a gift thereof immediately after its receipt. In Ormsby McKnight Mitchel, 1 B. T. A. 143, 148, this Board said: * * ⅜ No one is permitted to make his own tax law and if it were permitted to modify the express provisions of a taxing statute by agreement any taxpayer could say what should or should not be income. To merely state the proposition is to expose its fallacy, and it is of no importance that the taxpayer, as stated in his brief, believes in the community property theory in effect in some of the States. The answer to such a contention is that even if it would effect the result desired it is not in force in New York State and that a community created by positive law has attributes which cannot be given effect m a community created by agreement. * * * We think the Commissioner properly held petitioner liable for tax upon his entire salary for the taxable year. Cf. Florence V. Cruickshank, 13 B. T. A. 508. Reviewed by the Board. Judgment will be entered for the respondent.

2020-12-01 20:02:11.173655+00

http://www.courts.ca.gov/opinions/documents/E074178.PDF

Filed 11/9/20; Certified for publication 12/1/20 (order attached) IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO In re D.H., a Person Coming Under the Juvenile Court Law. THE PEOPLE, E074178 Plaintiff and Respondent, (Super.Ct.No. J278867) v. OPINION D.H., Defendant and Appellant. APPEAL from the Superior Court of San Bernardino County. Denise Trager Dvorak, Judge. Affirmed. Connie A. Broussard, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Julie L. Garland, Assistant Attorney General, Charles C. Ragland, Scott Taylor, and Laura Baggett, Deputy Attorneys General, for Plaintiff and Respondent. 1  I INTRODUCTION Defendant and appellant D.H. (minor) has a history of defiant and criminal behavior, resulting in him being placed on formal probation in two juvenile delinquency matters. Throughout his probationary period, minor violated the law and the terms and conditions of his probation. While still on probation, the juvenile court dismissed the Welfare and Institutions Code1 section 602 petitions and terminated minor’s probation as unsuccessfully completed based on a joint request from the San Bernardino County Children and Family Services (CFS) and the probation department to transfer jurisdiction to the dependency court under section 300. Minor requested the juvenile court seal his section 602 juvenile delinquency records, and the juvenile court denied his request. On appeal, minor argues the juvenile court was required to seal his records under section 786, subdivision (e). Alternatively, minor contends the juvenile court abused its discretion in denying his motion to seal his records under section 786, subdivision (a). We find no error and affirm the judgment. II FACTUAL AND PROCEDURAL BACKGROUND On November 30, 2018, minor, along with his minor brother, R.H., and another coparticipant, went to a residence to confront a female about stolen property. While at 1 All future statutory references are to the Welfare and Institutions Code unless otherwise stated. 2 the residence, minor repeatedly punched the female victim and his brother stabbed the victim numerous times. At the time of the incident, minor was 13 years old and resided with his mother and nine siblings at his grandmother’s house. Minor’s father was deceased. Minor was involved in numerous physical altercations at school due to other students bullying him over his stuttering issues. In addition, minor had received a citation for felony vandalism on October 18, 2017. That matter was settled out of court on March 8, 2018. On December 4, 2018, a section 602 petition was filed alleging minor committed one count of assault with a deadly weapon (Pen. Code, § 245, subd. (a)(1)), to wit, a knife. While in juvenile hall, minor was disrespectful to staff and his peers, failed to follow staff directives, lied to staff, and argued with other youths on his unit. Minor, however, attended school every day without any issues. On December 20, 2018, the juvenile court released minor from juvenile hall under the House Arrest Program (HAP) pending further hearing. Minor complied with the terms and conditions of HAP. At a further pretrial hearing on January 30, 2019, minor’s counsel requested the court terminate HAP. The probation officer did not object to terminating minor’s house arrest. The juvenile court was not inclined to terminate minor’s house arrest at that time. By February 7, 2019, minor continued to be on HAP. The probation officer noted that minor had been successful on HAP. 3  At a further pretrial hearing on February 7, 2019, the juvenile court granted minor’s counsel’s request to terminate HAP. In addition, the court ordered minor to have no contact with the victim and to follow all of his mother’s rules. On March 12, 2019, the People added a misdemeanor battery (Pen. Code, § 242) allegation to the petition. Minor thereafter admitted to the battery offense and the People dismissed the assault with a deadly weapon allegation. The juvenile court found there was a factual basis for the admission, adjudged minor a ward of the court, and placed him on formal probation under various terms and conditions in the custody of his mother. Approximately three months later, on June 9, 2019, at 10:37 p.m., minor and his brother R.H. broke into an elementary school by jumping a fence. Once inside, minor and R.H. went to a large locked “conex” box, forced the sliding door open by kicking the door several times, and stole several bags of candy. Later, minor and R.H. entered a classroom through an unlocked window, ransacked the classroom, and stole several cans of soda. After they set off several motion detectors, an on-call maintenance worker responded to the school and saw minor and R.H. jump a fence and run. A deputy located minor and R.H. upon an area check and arrested them. On June 11, 2019, a subsequent petition pursuant to section 602 was filed alleging minor committed one count of misdemeanor second degree commercial burglary (Pen. Code, § 459; count 1); one count of misdemeanor trespass (Pen. Code, § 602, subd. (m); count 2); and one count of misdemeanor petty theft (Pen Code, § 488; count 3). 4  While in juvenile hall, minor displayed unsafe, irresponsible, and disrespectful behavior. He also displayed gang signs to another youth and threatened to fight the youth. Furthermore, minor had not begun his anger management/victim awareness classes as required under the terms and conditions of his probation. On June 12, 2019, minor admitted he committed second degree commercial burglary. In return, the juvenile court dismissed the other two allegations. On June 13, 2019, the probation officer interviewed minor’s mother. Minor’s mother reported that she did not understand why minor committed the offenses because “she had just purchased snacks for him.” She also stated that minor had not “comprehended how serious his actions” were. Minor’s mother did not like the situation and reported to be “heart broken.” Minor informed the probation officer that he committed the offenses because he was bored and believed it was not a big deal. Minor’s school records indicated that he had excessive unexcused absences and truancies. On June 26, 2019, the juvenile court again declared minor a ward of the court, ordered him to serve 30 days in juvenile hall with 18 days’ credit for time served, and continued him on formal probation on various terms and conditions in the custody of his mother.2 On October 10, 2019, minor’s probation officer received information from a CFS social worker that minor and his siblings were being removed from minor’s mother’s 2 Minor requested that he be released into the custody of his adult sister or his uncle. However, because his sister’s home was deemed unsuitable, and his uncle’s home was out of state, these requests were denied. 5 home. The social worker explained that minor’s five-year-old half sister ingested prescription medication that belonged to minor’s mother while his half sister was unsupervised. Minor’s half sister was in the Intensive Care Unit at Loma Linda Medical Center, and minor’s mother was resistant to disclose any information to doctors in fear she would be arrested. Minor’s younger half siblings were placed in the custody of their father, and minor and R.H. were placed in a group home pending foster placement. On October 29, 2019, a section 241.1 committee recommended minor be removed from his mother’s custody and made a ward under section 300. The committee also recommended that minor’s charges under section 602 be dismissed and that his records be sealed “as he would best benefit from services offered through CFS.” On November 1, 2019, a special hearing was held based on a request from the probation department pursuant to the section 241.1 committee report recommending minor be placed under the authority of the dependency court. At that hearing, minor’s counsel argued the petitions should be dismissed and minor’s records sealed in light of the section 241.1 committee report, minor’s mother having “some significant issues,” and minor being at a significant risk of being abused or neglected. The prosecutor agreed that both section 602 petitions should be dismissed, but objected to sealing minor’s records due to the cases being recent and minor having committed a new offense while on probation. The prosecutor noted that minor can submit another request to seal his records at a later date. 6  The juvenile court dismissed the two petitions based on the probation officer’s recommendation, ordered formal probation terminated as unsuccessfully completed, and denied minor’s request to seal his records without prejudice. The court noted minor’s behavior and his failure to complete any of the required community service or counseling, despite being on probation for over a year. The court also stated that minor “can come back and ask to have [his records] sealed at a later time after he’s shown that he is not committing any new crimes.” Minor’s counsel then responded: “And I would just like to add for the record, because I do intend to at least file an appeal in this matter, I think it’s kind of a first impression just because it is a 241 issue where they are dismissing this case. Due to the minor’s age, I believe that if he did not complete his community service and his counseling, that that would require parental involvement, and if he did not complete those things that those would not entirely be his fault as he cannot transport himself to counseling, he cannot attend counseling on his own. And I don’t know what this court does, but typically in San Bernardino if a kid is under 14, they’re doing community service as chores at home. So if mom was not arranging that for him, there’s not much this minor could do in facilitating that without some support from his mother.” Minor filed a timely notice of appeal on November 14, 2019. 7  III DISCUSSION A. Sealing of Juvenile Records Under Section 786, Subdivision (e) Minor contends the juvenile court erred in failing to seal his records because the plain meaning of section 786, subdivision (e), requires sealing the records when a section 602 petition is dismissed. We disagree. Normally, we review a juvenile court’s decision to seal or to refuse to seal records for abuse of discretion. (In re A.V. (2017) 11 Cal.App.5th 697 , 711 (A.V.).) But where, as here, the court’s decision raises an issue of statutory interpretation, our review is de novo. (In re Joshua R. (2017) 7 Cal.App.5th 864 , 867.) “We start with the statute’s words, which are the most reliable indicator of legislative intent. [Citation.] ‘We interpret relevant terms in light of their ordinary meaning, while also taking account of any related provisions and the overall structure of the statutory scheme to determine what interpretation best advances the Legislature’s underlying purpose.’” (In re R.T. (2017) 3 Cal.5th 622 , 627.) Section 786, subdivision (e), provides, in relevant part, “If a person who has been alleged to be a ward of the juvenile court has their petition dismissed by the court, whether on the motion of the prosecution or on the court’s own motion, or if the petition is not sustained by the court after an adjudication hearing, the court shall order sealed all records pertaining to the dismissed petition in the custody of the juvenile court, and in the 8 custody of law enforcement agencies, the probation department, or the Department of Justice.” (Italics added.) The Legislature amended section 786, subdivision (e), effective January 1, 2018. (Stats. 2017, ch. 685, § 1.5; In re W.R. (2018) 22 Cal.App.5th 284 , 290-291 (W.R.).) The W.R. court explained the legislative history of subdivision (e) of section 786 as follows: “The Legislative Counsel’s Digest states: ‘Existing law authorizes a judge of the juvenile court to dismiss a petition, or set aside the findings and dismiss a petition, if the court finds that the interests of justice and the welfare of the minor require that dismissal, or if the court finds that the minor is not in need of treatment or rehabilitation. [¶] This bill would require, if a person who has been alleged to be a ward of the juvenile court and has his or her petition dismissed or if the petition is not sustained by the court after an adjudication hearing, the court to seal all records pertaining to that dismissed petition that are in the custody of the juvenile court, and in the custody of law enforcement agencies, the probation department, or the Department of Justice in accordance with a specified procedure.’ (Legis. Counsel’s Dig., Assem. Bill No. 529 (2017-2018 Reg. Sess.) as filed Oct. 11, 2017.) According to the bill’s cosponsor, ‘under most circumstances a youth that has his case dismissed due to insufficient evidence, or in the interest of justice, without an adjudication must wait until he is at least 18 to petition the court to seal his record. However, minors that commit and are adjudicated for non- serious or non-violent offenses can have their records automatically sealed upon completion of probation. This means that the court orders the petition be dismissed and 9 the juvenile court records are sealed immediately. [Assembly Bill No.] 529 . . . extend[s] this same process to similar cases where a minor has had his delinquency petition dismissed without an adjudication due to insufficient evidence, in the interest of justice or because he is incompetent and not likely to become competent in the foreseeable future, regardless of the alleged offense.’ (Assem. Com. on Public Safety, Analysis of Assem. Bill No. 529 (2017-2018 Reg. Sess.) as introduced Feb. 13, 2017, p. 4.)” (W.R., at p. 291, italics added.) The plain language of the statute refers to dismissals of a petition for a minor “alleged to be a ward.” In addition, the statute plainly states the court “shall” or must dismiss a petition for insufficient evidence or if “the petition is not sustained by the court after an adjudication hearing.” (§ 786.) Here, minor admitted both offenses in the initial section 602 petition and the subsequent section 602 petition and was declared a ward of the court in both cases following adjudicated hearings. Although section 786, subdivision (e), mandates sealing of records upon the dismissal of a section 602 petition, the language also indicates that subdivision (e) is only applicable before the juvenile court declares a minor to be a ward or for a minor “alleged to be a ward.” Minor is not a “minor alleged to be a ward.” W.R., supra, 22 Cal.App.5th 284 is instructive. In that case, the minor was found incompetent to stand trial on a section 602 petition for felony assault. The minor’s counsel made an oral motion to dismiss the petition under section 782 and the juvenile court granted it. But the court denied the minor’s motion to seal his juvenile records. 10 (W.R., at pp. 289-290.) The Court of Appeal reversed the juvenile court’s decision. The court explained, “[T]he petition . . . was dismissed by the court in the interests of justice, after the minor was found incompetent to stand trial and not likely to become competent in the foreseeable future. Thus, section 786, subdivision (e) requires the sealing of records pertaining to that petition as well.” (Id. at p. 292.) The court emphasized that, where the petition had not been sustained, (1) following an adjudication hearing, (2) dismissed as part of a plea, or (3) dismissed by the court in the interests of justice after the minor was found incompetent to stand trial, the minor was entitled to seal his records under section 786, subdivision (e). (W.R., at pp. 291-292.) The plain language of the statute, the legislative history, and governing cases such as W.R. make clear subdivision (e) of section 786 is not applicable under the circumstances of this case where minor had been declared a ward of the court and his petitions had been sustained following adjudicated hearings. As the People point out, a comparison of the language in both subdivision (e) and subdivision (a) of section 786 also supports our position that subdivision (e) is inapplicable under the circumstances of this case. Section 786, subdivision (a), states in relevant part: “If a person who has been alleged or found to be a ward of the juvenile court satisfactorily completes (1) an informal program of supervision pursuant to Section 654.2, (2) probation under Section 725, or (3) a term of probation for any offense, the court shall order the petition dismissed. The court shall order sealed all records . . . .” (Italics added.) Notably, the Legislature chose not to use the phrase, “or 11 found to be a ward of the juvenile court” in subdivision (e) of section 786. The absence of this language shows the Legislature’s intent in subdivision (e), to provide sealing relief only to a minor who has not yet been declared a ward of the juvenile court. Based on the foregoing, we find subdivision (e) of section 786 is not applicable to minors who were declared wards by the juvenile court following an adjudication hearing, whether or not the petition was later dismissed. To conclude otherwise would contradict the statutory framework as a whole. (See A.V., supra, 11 Cal.App.5th at p. 705 [court must harmonize the various parts of a statutory enactment by considering the particular clause or section in the context of the statutory framework as a whole].) As always, our role in statutory interpretation is to effect the intent of the Legislature. (People v. Johnson (2006) 38 Cal.4th 717 , 723.) Accordingly, we conclude the juvenile court did not err in refusing to seal minor’s juvenile records under section 786, subdivision (e). B. Sealing of Records Under Section 786, Subdivision (a) Alternatively, minor contends even if sealing of his records was governed by section 786, subdivision (a), the juvenile court abused its discretion in denying his request to seal his records because dismissal of his petitions and termination of his probation denied him the opportunity to successfully complete probation. He further asserts that sealing his records would be in the interest of justice. Under section 786, subdivision (a), if a ward of the court “satisfactorily completes (1) an informal program of supervision pursuant to Section 654.2, (2) probation under 12 Section 725, or (3) a term of probation for any offense,” then the court must dismiss the petition and “order sealed all records pertaining to the dismissed petition.” (§ 786, subd. (a).) A minor satisfactorily completes a term of supervision or probation if “[1] the person has no new findings of wardship or conviction for a felony offense or a misdemeanor involving moral turpitude during the period of supervision or probation and [2] if the person has not failed to substantially comply with the reasonable orders of supervision or probation that are within their capacity to perform.” (§ 786, subd. (c)(1).) “Substantial compliance is not perfect compliance. Substantial compliance is commonly understood to mean ‘compliance with the substantial or essential requirements of something (as a statute or contract) that satisfies its purpose or objective even though its formal requirements are not complied with.’” (A.V., supra, 11 Cal.App.5th at p. 709.) By contrast, “successful” completion of probation has been construed as compliance with every condition of probation. (Ibid.) Whether a minor has any new wardship findings or convictions, and whether a minor has not failed to substantially comply with the probation terms that are within his or her capacity to perform, are factual matters. (See People v. Superior Court (Jones) (1998) 18 Cal.4th 667 , 680-681.) “Findings of fact are reviewed under a ‘substantial evidence’ standard.” (Ibid.) A decision to grant or deny section 786 relief is reviewed for abuse of discretion. (A.V., supra, 11 Cal.App.5th at p. 701 [“court has the discretion under section 786 to find the ward has or has not substantially complied with . . . probation so as to be deemed to 13 have satisfactorily completed it”].) Under this standard, “‘a trial court’s ruling will not be disturbed, and reversal of the judgment [or order] is not required, unless the trial court exercised its discretion in an arbitrary, capricious, or patently absurd manner that resulted in a manifest miscarriage of justice.’” (People v. Hovarter (2008) 44 Cal.4th 983 , 1004; see People v. Kipp (1998) 18 Cal.4th 349 , 371 [“[a] court abuses its discretion when its ruling ‘falls outside the bounds of reason’”].) Here, the juvenile court expressly found that minor had not successfully completed probation. Substantial evidence supports that finding. The record, as set out above, overwhelmingly shows minor had not substantially complied with his probation requirements. Minor admitted to committing second degree burglary while on formal probation and failed to comply with other terms and conditions of his probation. Hence, under the plain language of section 786, subdivision (a), minor was not entitled to sealing of his juvenile records. (See A.V., supra, 11 Cal.App.5th at p. 705.) Relying on In re G.F. (2017) 12 Cal.App.5th 1 (G.F.), minor claims the People cannot use the dismissal of a section 602 petition to deprive him of the opportunity to successfully complete probation. That case, however, is distinguishable from the present matter. In G.F., supra, 12 Cal.App.5th 1 , upon the prosecutor’s motion, the section 602 petition was dismissed and the minor was placed on informal supervision pursuant to section 654, instead of section 654.2. After the minor satisfactorily completed his program of informal supervision, he moved to seal his records pursuant to section 786. 14 The prosecutor opposed the motion, on the ground section 786 did not apply because the minor did not complete a program of supervision under 654.2, as specified in section 786. The trial court found the equities with the minor, but the law with the People, and denied minor’s motion to seal his records. (G.F., at p. 4.) The Court of Appeal reversed, finding that supervision under sections 654 and 654.2 were, in that case, essentially indistinguishable, the dismissal procedure employed by the prosecutor was not contemplated by the statutory scheme, and the minor was not told, when he acquiesced to the dismissal under section 654, that his lack of opposition would result in the loss of his right to record sealing under section 786. (G.F., supra, 12 Cal.App.5th at p. 6.) The court concluded the minor’s entitlement “to relief under section 786 is also consistent with the purpose of the statute, which is to provide a streamlined sealing process for minors who satisfactorily complete a program of supervision or term of probation after a delinquency petition has been filed against them. (In re Y.A. (2016) 246 Cal.App.4th 523 , 526-528.) The People cannot deprive minors of their right to this relief simply by initiating a premature dismissal of their section 602 petitions pursuant to a ‘motion’ that is contrary to the controlling statutory scheme.” (G.F., at p. 7.) The circumstances of this case are patently different. Here, the section 602 petitions were dismissed so that minor could fall under the jurisdiction of the dependency 15 court.3 In any event, unlike in G.F., minor had failed to comply with the terms of his formal probation and admitted to committing a second degree burglary while on formal probation. Lastly, minor argues that his records should have been sealed in the interest of justice. Although minor cannot obtain relief to seal his records under subdivisions (a) and (e) of section 786, he is not indefinitely precluded from sealing his juvenile records. Indeed, both the juvenile court and the prosecutor stated that minor can bring a motion at a later date to seal his records. And, minor may seek relief under section 781. That statute provides that once minor turns 18 and has not committed any felonies or crimes of moral turpitude since the juvenile court terminated probation, he may seek to seal his record under section 781, subdivision (a)(1)(A). (In re O.C. (2019) 40 Cal.App.5th 1196 , 1200, 1204.) The petition is required to show that, since the juvenile court’s jurisdiction was terminated or the section 626 action was dismissed, the person was not convicted of a felony or a misdemeanor involving moral turpitude, and the person has attained rehabilitation to the satisfaction of the court. (§ 781, subd. (a)(1)(A).) We conclude the juvenile court did not abuse its discretion in denying minor’s request to seal his records pursuant to section 786, subdivision (a). 3 “Effective April 30, 2019, San Bernardino County became a single status county, having previously been a dual status/lead agency county. (§ 241.1, subd. (d); see the committee’s ‘Single Status Protocol.’)” (In re S.O. (2020) 48 Cal.App.5th 781 , 785, fn. omitted.) Therefore, dual jurisdiction over minor was prohibited and the juvenile court had to terminate his probation. (Ibid.) 16  IV DISPOSITION The juvenile court’s order denying minor relief under section 786 is affirmed. CODRINGTON Acting P. J. We concur: SLOUGH J. FIELDS J. 17 Filed 12/1/20 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO In re D.H., a Person Coming Under the Juvenile Court Law. THE PEOPLE, E074178 Plaintiff and Respondent, (Super.Ct.No. J278867) v. ORDER CERTIFYING D.H., OPINION FOR PUBLICATION Defendant and Appellant. THE COURT A request having been made to this court pursuant to California Rules of Court, rule 8.1120(a), for publication of a nonpublished opinion heretofore filed in the above- entitled matter on November 9, 2020, and it appears that the opinion meets the standard for publication as specified in California Rules of Court, rule 8.1105(c). IT IS ORDERED that said opinion be certified for publication pursuant to California Rules of Court, rule 8.1105(c). The opinion filed in this matter on November 9, 2020, is certified for publication. CERTIFIED FOR PUBLICATION CODRINGTON Acting P. J. We concur: SLOUGH J. FIELDS J. 1

2020-12-01 20:02:15.193406+00

https://www.courts.ca.gov/opinions/nonpub/A160382.PDF

Filed 12/1/20 P. v. Williams CA1/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE THE PEOPLE, Plaintiff and Respondent, A160382 v. (San Francisco City & County MARCELLIS WILLIAMS, Super. Ct. No. 13015322, SCN221214) Defendant and Appellant. Defendant Marcellis Williams appeals the trial court’s order denying his petition for resentencing pursuant to Penal Code1 section 1170.95. Because defendant is ineligible for relief as a matter of law, we affirm the court’s order. PROCEDURAL BACKGROUND In November 2013, an information was filed by the San Francisco District Attorney charging defendant with one count of murder (§ 187, subd. (a)) with an allegation he was armed with a firearm (§ 12022, subd. (a)(1)), one count of residential burglary (§ 459), and one count of robbery (§ 211).2 1 All statutory references are to the Penal Code. The robbery count was later dismissed pursuant to defense counsel’s 2 section 995 motion.  The prosecutor, in April 2014, orally moved to add a charge of voluntary manslaughter. (§ 192, subd. (a).) Pursuant to a negotiated agreement, defendant pleaded guilty to manslaughter and first degree burglary, and admitted the arming allegation in exchange for dismissal of the murder charge and a sentence of 13 years 4 months. In July 2014, defendant was sentenced to the agreed-upon state prison term. After the passage of Senate Bill No. 1437 (2017–2018 Reg. Sess.) (Senate Bill 1437), on August 20, 2019, defendant filed a petition to vacate his 2014 conviction for voluntary manslaughter and to be resentenced pursuant to section 1170.95. In the petition, defendant alleged the information filed against him allowed the prosecution to proceed under a theory of felony murder, he pled guilty to first or second degree murder in lieu of going to trial, he was not the actual killer, he did not with the intent to kill aid and abet the actual killer, he was not a major participant nor did he act with reckless indifference, and the victim was not a peace officer. He requested appointment of counsel. Counsel was appointed to represent defendant. Defense counsel filed a supplemental memorandum in support of defendant’s petition, asserting the language of the preamble to Senate Bill 1437 indicates the statute applies to someone who pleads guilty to manslaughter to avoid a conviction for first or second degree murder under one of the applicable theories. Defense counsel also filed a memorandum citing to recent published decisions on manslaughter pleas and eligibility for relief under section 1170.95. 2  In opposition, the prosecutor argued the petition should be denied because section 1170.95 applies only to murder convictions, not to voluntary manslaughter. The trial court found, as a matter of law, defendant was not entitled to relief under the statute because it could not find any published or nonpublished cases suggesting “that if someone plead[s] guilty to a voluntary manslaughter because they feared a felony murder conviction at trial, . . . that person is entitled to relief under the statute.” This timely appeal followed. DISCUSSION After review of the record, defendant’s counsel filed an opening brief raising no issues and requesting this court conduct an independent review of the record pursuant to People v. Wende (1979) 25 Cal.3d 436 . Thereafter, defendant filed a supplemental brief contending that had Senate Bill 14373 been in effect when he entered his 2014 manslaughter plea, he would “not have been convicted or in hindsight been charged with first degree murder” under a felony-murder theory because he did not shoot the victim or harbor an intent to kill. The trial court properly denied defendant’s section 1170.95 petition. By its plain terms, section 1170.95 does not encompass crimes other than murder. (People v. Cervantes (2020) 44 Cal.App.5th 884 , 886–887 [§ 1170.95 unequivocally applies to murder convictions]; People v. Flores (2020) 3 Senate Bill 1437, which became effective on January 1, 2019, “amend[ed] the felony murder rule and the natural and probable consequences doctrine, as it relates to murder, to ensure that murder liability is not imposed on a person who is not the actual killer, did not act with the intent to kill, or was not a major participant in the underlying felony who acted with reckless indifference to human life.” (Stats. 2018, ch. 1015, § 1, subd. (f).) 3  44 Cal.App.5th 985 , 993, [by its plain terms, § 1170.95 limits relief to persons convicted of murder, not manslaughter]; People v. Turner (2020) 45 Cal.App.5th 428 , 435–438; People v. Sanchez (2020) 48 Cal.App.5th 914 , 916; People v. Paige (2020) 51 Cal.App.5th 194 , 204.) Because defendant was convicted of voluntary manslaughter, not murder, he is statutorily ineligible for section 1170.95 relief. We recognize that barring defendants who entered a plea to manslaughter from pursuing relief under section 1170.95 might lead to situations, such as here, in which they receive longer prison sentences than they would have had they gone to trial and been convicted of murder. We reaffirm, however, that “[t]he remedy for any potentially inequitable operation of section 1170.95 lies with the Legislature,” not with this court, as we are bound to follow its clear intent to provide relief only for those convicted of murder. (People v. Munoz (2019) 39 Cal.App.5th 738 , 760, review granted Nov. 26, 2019, S258234; see People v. Turner, supra, 45 Cal.App.5th at pp. 440–441.) We have examined the record and are satisfied no arguable issues exist and defendant’s attorney ably represented him. DISPOSITION The order is affirmed. 4  MARGULIES, ACTING P. J. WE CONCUR: BANKE, J. SANCHEZ, J. A160382 People v. Williams 5

2020-12-01 20:02:15.61343+00

https://www.courts.ca.gov/opinions/nonpub/F080476.PDF

Filed 12/1/20 P. v. Macias CA5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT THE PEOPLE, F080476 Plaintiff and Respondent, (Super. Ct. No. F19904263) v. MONICA MARIE MACIAS, OPINION Defendant and Appellant. THE COURT* APPEAL from a judgment of the Superior Court of Fresno County. Heather Mardel Jones, Judge. William D. Farber, under appointment by the Court of Appeal, for Defendant and Appellant. Xavier Becerra, Attorney General, Lance E. Winters, Chief Assistant Attorney General, Michael P. Farrell, Assistant Attorney General, Louis M. Vasquez and Cavan M. Cox II, Deputy Attorneys General, for Plaintiff and Respondent. -ooOoo- * Before Poochigian, Acting P.J., Detjen, J. and Peña, J.  Defendant Monica Marie Macias contends on appeal that her one-year prior prison term enhancement should be stricken pursuant to Penal Code section 667.5, subdivision (b),1 as amended by Senate Bill No. 136 (2019–2020 Reg. Sess.) (Senate Bill 136). The People concede the enhancement should be stricken. We strike the prior prison term enhancement, remand for resentencing, and affirm in all other respects. PROCEDURAL SUMMARY On June 28, 2019,2 the Fresno County District Attorney charged defendant with identity theft with prior convictions for the same (§ 530.5, subd. (c)(2); count 1). The complaint further alleged defendant had served three prior prison terms (§ 667.5, subd. (b)). On October 15, pursuant to a plea agreement, defendant pled no contest to the charge and admitted the truth of one prior prison term allegation3 in exchange for a stipulated term of two years four months’ imprisonment. On the prosecutor’s motion, the trial court dismissed the other two prior prison term enhancement allegations. On the same date, prior to entry of the plea, the prosecutor and trial court discussed the impact of Senate Bill 136 on the sentence. The trial court explained that Senate Bill 136 “eliminates the one-year prison prior enhancement under [section] 667.5[, subdivision (b)], except for a sexually-violent offense.” In response, the prosecutor indicated that he “made this offer and [would] stand by it .…” The trial court asked the prosecutor whether “the People [were] going to argue that they’ve lost the benefit of their bargain” if the court imposed two years and declined to impose the prior prison term enhancement. 1 All further statutory references are to the Penal Code unless otherwise stated. 2 All further dates refer to the year 2019 unless otherwise stated. 3 The parties agreed that defendant would admit the most recent prior prison term allegation, served for a conviction of identity theft with a prior conviction for the same (§ 530.5, subd. (c)(2)). 2. The prosecutor responded that the People would not “mak[e] that argument if the Court were to impose two years. That [resolution] … me[t] … the spirit of the agreement.” On November 13, the trial court imposed a term of imprisonment of two years four months as follows: on count 1, the mitigated term of 16 months, plus a one-year prior prison term enhancement. On December 18, defendant filed a notice of appeal. DISCUSSION4 Defendant argues her prior prison term enhancement must be stricken based on the retroactive application of Senate Bill 136. The People agree, as do we. Effective January 1, 2020, Senate Bill 136 amended section 667.5, subdivision (b) to limit application of prior prison term enhancements to only prior prison terms that were served for sexually violent offenses as defined by Welfare and Institutions Code section 6600, subdivision (b). (§ 667.5, subd. (b).) (Stats. 2019, ch. 590, § 1.) That amendment applies retroactively to all cases not yet final on Senate Bill 136’s effective date. (People v. Lopez (2019) 42 Cal.App.5th 337 , 341–342, citing In re Estrada (1965) 63 Cal.2d 740 , 742.) Here, the trial court imposed a one-year section 667.5, subdivision (b) prior prison term enhancement for a term served for a conviction of identity theft, which is not a sexually violent offense as defined in Welfare and Institutions Code section 6600, subdivision (b). On January 1, 2020, defendant’s case was not yet final. Therefore, as the parties agree, defendant is entitled to the ameliorative benefit of Senate Bill 136’s amendment to section 667.5, subdivision (b). The People argue that the matter should be remanded for the trial court to resentence defendant. Defendant disagrees, contending that (1) “the policy allowing 4 Because defendant raises only sentencing issues, the facts underlying the offenses are not relevant and are omitted from this opinion. 3. consideration of the entire sentencing structure [on remand] primarily applies to cases on remand for resentencing after the reversal of” a count of conviction, (2) the prosecutor agreed to “ ‘stand by’ the tentative and negotiated” one-year four-month base term that was eventually imposed, and (3) the trial court already “actually exercised sentencing discretion in respect to count 1 when it considered and evaluated … circumstances in mitigation and aggravation before imposing the” term of imprisonment. We agree with the People. First, where an appellate court strikes a portion of a sentence, remand for “ ‘a full resentencing as to all counts is [generally] appropriate, so the trial court can exercise its sentencing discretion in light of the changed circumstances.’ ” (People v. Buycks (2018) 5 Cal.5th 857 , 893.) That rule applies equally to resentencing after reversal of a count of conviction or striking of an enhancement. (See ibid., citing with approval People v. Sanchez (1991) 230 Cal.App.3d 768 , 771–772 [consideration of all sentencing choices on remand is appropriate after reversal for erroneous application of a section 12022.1 bail enhancement]; People v. Lopez, supra, 42 Cal.App.5th at p. 342.) Second, the prosecutor did not, as defendant suggests, say that he would stand by the base term. The prosecutor remarked that he “made th[e] offer and [would] stand by it” despite the impact of Senate Bill 136. However, the plea agreement did not specify how the term of imprisonment would be calculated, and the prosecutor, during the change of plea hearing, indicated his preference that the trial court impose a base term of two years and no prior prison term enhancement because that sentence best met “the spirit of the agreement.” Third, the fact that the trial court imposed the mitigated term is not binding on remand. “A court conducting a full resentencing … may … revisit sentencing choices such as a decision … to impose an upper term instead of a middle term” or, as relevant to this case, a middle term instead of a lower term. (People v. Valenzuela (2019) 7 Cal.5th 4 . 415, 425.) Here, on remand, the trial court could, lawfully and consistent with the plea agreement, impose a middle term of two years. Because we struck a portion of the term, and because an alternative method of sentence calculation exists that would permit the trial court to impose a term closer to the stipulated term, we remand. (People v. Buycks, supra, 5 Cal.5th at pp. 893–894.) DISPOSITION Defendant’s prior prison term enhancement (§ 667.5, subd. (b)) is stricken and the sentence is vacated. The matter is remanded to the trial court for resentencing. The trial court is directed to prepare an amended abstract of judgment and forward a copy to the appropriate entities. In all other respects, the judgment is affirmed. 5.

2020-12-01 20:02:37.481866+00

http://courts.delaware.gov/Opinions/Download.aspx?id=313690

COURT OF CHANCERY OF THE SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DELAWARE 19947 Date Submitted: October 12, 2020 Date Supplemented: November 18, 2020 Date Decided: December 1, 2020 Blake A. Bennett, Esq. Raymond J. DiCamillo, Esq. COOCH AND TAYLOR, P.A. Srinivas M. Raju, Esq. The Nemours Building Robert L. Burns, Esq. 1007 N. Orange St., Suite 1120 Matthew D. Perri, Esq. Wilmington, Delaware 19899 Angela Lam, Esq. RICHARDS, LAYTON & FINGER, P.A. One Rodney Square 920 North King Street Wilmington, Delaware 19801 RE: In re USG Corporation Stockholder Litigation, C.A. No. 2018-0602-SG Dear Counsel: This Letter Opinion considers, and rejects, the Plaintiffs’ Motion for Reargument of my August 31, 2020 Memorandum Opinion 1 (the “Opinion”) dismissing this matter against all Defendants. Under Chancery Rule 59(f), the road to reargement is straitened; a successful movant must demonstrate that the court overlooked a controlling precedent or principle of law, or misapprehended the facts, 1 In re USG Corp. S’holder Litig., 2020 WL 5126671 (Del. Ch. Aug. 31, 2020) [hereinafter, the “Opinion”]. and that such error resulted in the outcome for which reargument is sought.2 Where a court has considered the law and the facts, but applied them in a way with which the movant disagrees—that is, where the movant simply disagrees with the court’s decision—relief must be through appeal, not reargument. 3 Here, the Plaintiffs seek reargument on two grounds: first, that I overlooked the fact that one Defendant, Jennifer Scanlon, was an officer as well as a director of USG, and that, in her officer role, she was not exculpated from damages for a violation of a duty of care in relation to a disclosure to stockholders; and second, that I misapprehended the law on the meaning of bad-faith breach of the duty of loyalty in way of a transaction implicating Revlon. With respect to Ms. Scanlon, the Plaintiffs argue that I overlooked that their Complaint adequately alleged that she breached the duty of care in her role as an officer facilitating distribution of proxy materials, and that my rationale that the Plaintiffs had not pled a non-exculpated claims thus must be reconsidered. I have reviewed the Complaint, the briefing on the Defendants’ Motion to Dismiss, and the oral argument on that Motion. It does not appear that the Complaint alleges Ms. Scanlon, as a corporate officer, was grossly negligent in the dissemination of 2 In re Hawk Sys., Inc., 2019 WL 5681447 , at *2 (Del. Ch. Nov. 1, 2019). 3 Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 2019 WL 3814453 , at *1 (Del. Ch. Aug. 14, 2019) (“A motion for reargument, as this Court has pointed out on numerous occasions, does not provide a forum to relitigate issues decided by the trial judge, and if the trial court is in error on those issues, vindication is available on appeal, not via reargument.”). 2 disclosures. To the extent that, given the Plaintiff-friendly pleading standard on this Motion to Dismiss, it may be so read, the Plaintiffs failed to brief the issue in response to the Motion sufficiently to consider it raised, and failed to raise it at oral argument as well. The claim, accordingly, was waived. 4 Thus, reargument is inappropriate on this ground. The second ground alleged to support reargument is that I misapprehended the meaning of bad faith in the context of a change-in-control transaction, and accordingly reached an unsupportable legal conclusion. However, this argument too is misplaced; I considered the Plaintiffs’ contentions and rejected them in the Opinion. 5 Therefore, reconsideration is inappropriate; relief, if any, must be via appeal. Finally, the parties provided memoranda on the Chancellor’s recent opinion in Baker Hughes,6 a case decided after the Opinion issued. That case involved a pleading, found to be sufficient to sustain a claim, that an action in signing an inaccurate disclosure by a corporate officer implicated the duty of care. While Baker Hughes is well reasoned, it did not change substantive law. And while the parties’ memoranda were thoughtful, the case is inapplicable here, where I have found that 4 See Thor Merritt Square, LLC v. Bayview Malls LLC, 2010 WL 972776 , at *5 (Del. Ch. Mar. 5, 2010) (failure to brief an issue may result in waiver). 5 The Opinion, at *29–*31. 6 In re Baker Hughes Inc. Merger Litig., 2020 WL 6281427 (Del. Ch. Oct. 27, 2020). 3 the issue of Scanlon’s exercise of the duty of care in disseminating disclosures to stockholders was not adequately before me. Thus, reconsideration is not required. For the forgoing reasons, the Plaintiffs’ Motion for Reargument is DENIED. IT IS SO ORERED. Sincerely, /s/ Sam Glasscock III Sam Glasscock III cc: All counsel of record (by File & ServeXpress) 4

2021-03-18 20:00:34.083597+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2021/03/18/15-55129.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 18 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT ARNOLDO ANTONIO GARCIA, No. 15-55129 Plaintiff-Appellant, D.C. No. 5:14-cv-02533-MWF-AN v. JEH CHARLES JOHNSON, as Secretary of MEMORANDUM* Homeland Security; et al., Defendants-Appellees. Appeal from the United States District Court for the Central District of California Michael W. Fitzgerald, District Judge, Presiding Argued and Submitted March 2, 2021 San Francisco, California Before: BALDOCK,** WARDLAW, and BERZON, Circuit Judges. Arnoldo Antonio Garcia appeals a district court order dismissing his action, brought pursuant to Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971), against the Secretary of Homeland Security, the * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Bobby R. Baldock, United States Circuit Judge for the U.S. Court of Appeals for the Tenth Circuit, sitting by designation. Panel Acting Director of the Bureau of Immigration and Customs Enforcement (“ICE”), the Assistant Field Office Director responsible for the Adelanto Detention Facility, and various John Doe officers from the Adelanto Detention Facility. We have jurisdiction under 28 U.S.C. § 1291 , and we reverse and remand.1 1. The district court erred by concluding it lacked jurisdiction over Garcia’s Bivens claim. “It is clear that district courts do have jurisdiction over Bivens actions,” even in cases where the plaintiff ultimately cannot state a cause of action. Janicki Logging Co. v. Mateer, 42 F.3d 561 , 563 (9th Cir. 1994). Bivens actions “are brought against employees of the federal government in their individual capacities and are brought to redress violations of citizens’ constitutional rights” and thus fall “firmly within the subject matter jurisdiction of the district courts.” Id. 2. In its form disposition the district court also dismissed Garcia’s complaint as frivolous, malicious, or failing to state a claim upon which relief may be granted. Garcia’s complaint was not malicious or frivolous, but it did fail to state a claim. Garcia alleged that ICE did not permit him to leave its custody to attend state court proceedings and as a result Garcia was unable to withdraw his plea in a criminal case. There is a “fundamental constitutional right of access to 1 This case was previously consolidated with Garcia v. Garland, 14-72775. We now sever the cases for the purpose of disposition. 2 the courts.” Bounds v. Smith, 430 U.S. 817 , 828 (1977). The facts Garcia alleged suggest his right to access the courts may have been violated. However, that right arises under the First and Fourteenth Amendments. See e.g., Silva v. Di Vittorio, 658 F.3d 1090 , 1103 (9th Cir. 2011), overruled on other grounds as stated by Richey v. Dahne, 807 F.3d 1202 , 1209 n.6 (9th Cir. 2015). Garcia’s complaint did not mention the right to access the courts or either relevant constitutional amendment. Instead, Garcia alleged that ICE’s actions deprived him “of his liberty and his freedom from personal harm” under the Fifth and Sixth Amendments. Garcia’s complaint thus failed to state a claim even under the liberal construction afforded pro se filings. See Watison v. Carter, 668 F.3d 1108 , 1112 (9th Cir. 2012). 3. The district court erred by not giving Garcia leave to amend his complaint. “A pro se litigant must be given leave to amend his or her complaint, and some notice of its deficiencies, unless it is absolutely clear that the deficiencies of the complaint could not be cured by amendment.” Cato v. United States, 70 F.3d 1103 , 1106 (9th Cir. 1995). While Garcia’s complaint failed to state a claim, it was not “absolutely clear” that its faults were incurable. He alleged sufficient facts to show a potential constitutional violation. With proper judicial guidance, he could have revised the complaint to allege a violation of his right to access the courts under the proper constitutional amendments. Additionally, to the extent the 3 district court was concerned that the complaint sought monetary damages against defendants who are immune, Garcia could have named individual ICE officers. Finally, as to whether a Bivens action would lie under the standards of Ziglar v. Abbasi, 137 S. Ct. 1843 (2017), those standards are situation-specific and legally complex, so their applicability can only be determined once an otherwise proper complaint has been filed. Because the district court erred in concluding it lacked jurisdiction and failing to allow Garcia leave to amend his complaint, we REVERSE and REMAND for further proceedings consistent with this disposition. 4

2020-12-01 22:04:05.947381+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/1stDistrict/1191907.pdf

2020 IL App (1st) 191907 SIXTH DIVISION November 30, 2020 No. 1-19-1907 IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT THE PEOPLE OF THE STATE OF ILLINOIS, ) ) Appeal from the Plaintiff-Appellee, ) Circuit Court of Cook County. ) v. ) 01 CR 17493 ) BENARD McKINLEY, ) Honorable Kenneth J. Wadas, ) Judge Presiding. Defendant-Appellant. ) JUSTICE CONNORS delivered the judgment of the court, with opinion. Presiding Justice Mikva and Justice Griffin concurred in the judgment and opinion. OPINION ¶1 Defendant, Benard McKinley, 1 was convicted when he was 16 years old of first degree murder and sentenced to 100 years in prison. Following an unsuccessful direct appeal and postconviction proceedings, defendant filed a habeas petition in the United States District Court for the Northern District of Illinois. The Northern District denied the petition, and defendant appealed to the United States Court of Appeals for the Seventh Circuit. The Seventh Circuit reversed based on the United States Supreme Court case of Miller v. Alabama, 567 U.S. 460 (2012). McKinley v. Butler, 809 F.3d 908 (7th Cir. 2016). The Seventh Circuit remanded with instructions to the district court to stay the habeas proceedings and allow defendant to pursue 1We note that while defendant spells his name “Benard,” certain documents in the record and on appeal spell it as “Bernard.” No. 1-19-1907 resentencing in the state trial court. Defendant then filed a successive petition for postconviction relief pursuant to the Post-Conviction Hearing Act (725 ILCS 5/122-1 et seq. (West 2016)), which the trial court granted. After a resentencing hearing, defendant was sentenced to 39 years in prison for one count of first degree murder. Defendant filed a motion to reconsider, which the trial court denied. Defendant now appeals, arguing that the trial court abused its discretion by failing to properly consider his youth and its attendant circumstances in conflict with Miller. For the reasons that follow, we reduce defendant’s sentence to 25 years in prison. ¶2 I. BACKGROUND ¶3 A. Trial ¶4 The following evidence was presented at defendant’s trial. On June 24, 2001, 16-year-old defendant shot and killed a 23-year-old man named Abdo Serna-Ibarra, as he tried to enter a Chicago park. One of defendant’s friends, a 15-year-old named Edward Chavera, may have handed defendant the gun. See McKinley, 809 F.3d at 909. Chavera then told defendant to shoot Serna-Ibarra. Defendant obeyed, shooting the victim in the back. When Serna-Ibarra turned around with his hands raised, defendant shot him several more times, killing him. ¶5 The jury found defendant guilty of first degree murder and personally discharging a firearm that caused the death of another person. The trial court sentenced defendant to 50 years’ imprisonment for the murder and a consecutive term of 50 years’ imprisonment for the firearm enhancement, for a total of 100 years in prison. ¶6 B. Direct Appeal ¶7 On direct appeal, defendant argued that (1) the trial court abused its discretion when it responded to a jury question and provided the jury with certain transcripts, (2) the identification evidence was vague and uncertain, and (3) the sentence imposed was excessive. This court 2 No. 1-19-1907 affirmed defendant’s conviction and sentence. People v. McKinley, No. 1-04-2759 (2007) (unpublished order under Illinois Supreme Court Rule 23). ¶8 C. Postconviction Petitions ¶9 On June 2, 2008, defendant filed a pro se postconviction petition that contained 15 arguments. The trial court found that the issues raised by defendant were frivolous and patently without merit. The postconviction petition was dismissed. That decision was affirmed on appeal. People v. McKinley, No. 1-08-2790 (2010) (unpublished order under Illinois Supreme Court Rule 23). ¶ 10 On November 15, 2010, defendant sought leave to file a successive postconviction petition, which was denied. This court affirmed the denial on November 13, 2012. People v. McKinley, No. 1-11-0513 (2012) (unpublished order under Illinois Supreme Court Rule 23). ¶ 11 D. Habeas Petition—Northern District of Illinois ¶ 12 On June 9, 2011, defendant filed a writ of habeas corpus in federal court—the Northern District of Illinois—partly on the ground that his sentence violated the United States Constitution. The petition was initially stayed pending the outcome of the appeal of his successive postconviction petition. On April 18, 2013, defendant moved to lift the stay, representing that he had exhausted all available appeals of the denial of his successive postconviction petition in state court. The court lifted the stay and denied the habeas petition on March 31, 2014. McKinley v. Harrington, No. 11 C 04190, 2014 WL 1292798 (N.D. Ill. Mar. 31, 2014). Defendant appealed to the Seventh Circuit Court of Appeals. ¶ 13 E. Seventh Circuit Court of Appeals ¶ 14 The Seventh Circuit Court of Appeals reversed. McKinley, 809 F.3d 908 . Judge Posner noted in the opinion that “[w]ith no good-time credit or other chance of early release permitted to 3 No. 1-19-1907 persons sentenced for first-degree murder in Illinois, [defendant] will be imprisoned for the full 100 years unless, of course, he dies before the age of 116.” Id. at 909. The court further stated that “[h]is accomplice, Chavera, pleaded guilty to second-degree murder and was sentenced to 17.5 years in prison.” Id. ¶ 15 The court stated that to be allowed to argue in federal court that his sentence violated the federal constitution, defendant “had to have pressed it in the state judicial system first.” Id. This requirement was partly designed to “diminish the burden on the federal courts of post-conviction proceedings by state prisoners.” Id. The court stated that while defendant had made claims about the constitutionality of his sentence in state court, he “had failed to argue to the state courts on direct appeal that his prison sentence violated the cruel and unusual punishments clause of the Eighth Amendment, which the Supreme Court has made applicable to the states by interpretation of the due process clause of the Fourteenth Amendment.” Id. at 910. The Seventh Circuit found that by failing to alert the state court to the possible presence of a federal claim, defendant forfeited the right to seek federal habeas corpus on the ground that his sentence violated the eighth amendment, “unless he can show that his failure to raise the claim in state court had been excusable.” Id. ¶ 16 The court noted that defendant argued it was excusable based on the United States Supreme Court’s 2012 decision of Miller, which held that the eighth amendment forbids a sentencing scheme that mandates life in prison without possibility of parole for juvenile offenders. Id. The court noted that Miller stated when sentencing a minor, “we require [the sentencing judge] to take into account how children are different, and how those differences counsel against irrevocably sentencing them to a lifetime in prison.” (Internal quotation marks omitted.) Id. 4 No. 1-19-1907 ¶ 17 The Seventh Circuit found that the “sentencing judge in this case didn’t do that. He said nothing to indicate that he considered the defendant’s youth to have the slightest relevance to deciding how long to make the sentence.” Id. Rather, the judge noted “ ‘multiple factors in aggravation apply’ ” and that the 100-year sentence was “ ‘necessary to deter others from committing the same crime.’ ” Id. at 911. The court stated that the trial court should have considered whether, in a situation of excitement, defendant had the maturity to consider whether to obey his confederate’s order or was prevented by the circumstances from making a rational decision about whether to obey. Id. at 911-12. ¶ 18 The court noted that defendant had “no opportunity to invoke Miller either in his direct appeal or in any of his state post-conviction proceedings,” so “the Illinois state courts have had no opportunity to consider the bearing of Miller on the appropriateness of reconsidering [defendant’s] sentence.” Id. at 913. The court stated that “Miller speaks to the propriety of a life sentence for juveniles, and an Illinois court might well believe as do we that the sentencing judge in this case utterly failed to consider that ‘children are different.’ ” Id. The court went on to state: “Murder is of course one of the most serious crimes, but murders vary in their gravity and in the information they reveal concerning the likelihood of recidivism by the murderer. In the case of a 16-year-old kid handed a gun by another kid and told to shoot a designated person with it, it is difficult to predict the likelihood of recidivism upon his release from prison or to assess the deterrent effect of imposing a long sentence on him, without additional information. A competent judicial analysis would require expert psychological analysis of the murderer and also of his milieu. Does he inhabit a community, a culture, in which murder is routine? Are other potential murderers likely to be warned off murder 5 No. 1-19-1907 upon learning that a 16-year-old kid has been sentenced to life in prison, or are they more likely to think it a fluke? Is the length of a sentence a major factor in deterrence? Given that criminals tend to have high discount rates, meaning that they weight future events very lightly, does it matter greatly, so far as deterrence is concerned, whether a murderer such as [defendant] is sentenced to 20 years in prison or 100 years? And here is where Miller plays a role. It does not forbid, but it expresses great skepticism concerning, life sentences for juvenile murderers.” Id. at 913-14. ¶ 19 Finally, the court stated that the trial court had treated defendant “as if he were not 16 but 26 and as such obviously deserving of effectively a life sentence.” Id. at 914. The Seventh Circuit vacated the judgment of the district court and remanded the case with instructions to stay further consideration of the habeas petition pending defendant’s filing of a successive postconviction petition in state court seeking resentencing on the basis of Miller and the “concerns expressed in this opinion regarding the sentencing proceeding that resulted in a 100- year prison sentence for a 16-year-old.” Id. ¶ 20 F. Successive Postconviction Petition ¶ 21 Defendant then requested leave to file a successive postconviction petition in the circuit court based on Miller. Defendant argued that his 100-year sentence was a de facto life sentence and therefore unconstitutional. The circuit court granted petitioner leave to file his successive postconviction petition and found that petitioner’s sentence was unconstitutional. It ordered a new sentencing hearing. ¶ 22 G. Resentencing Hearing 6 No. 1-19-1907 ¶ 23 The sentencing hearing took place over the course of two days, April 12, 2019, and June 3, 2019, before the same trial judge that originally sentenced him to 100 years in prison. The first witness in mitigation was Dr. James Garbarino, a professor of psychology at Loyola University Chicago, who testified as an expert in the field of developmental psychology. Dr. Garbarino evaluated defendant and reviewed Department of Corrections reports, various certificates of achievement, school records, the presentencing investigation (PSI), and anything else available to him about defendant’s life. ¶ 24 Dr. Garbarino testified that normal teenagers have difficulties in executive function, “which is good decision making.” He stated that chronic trauma, where there are repeated incidents, tends to reduce an adolescent’s “future orientation.” In Dr. Garbarino’s opinion, defendant experienced chronic trauma growing up in both his family and community. Defendant had witnessed a shooting, he had friends who were killed or injured growing up, he was rejected by his father, at some point he was rejected by his mother in favor of a man, and he was bullied. Defendant was involved with gangs, which Dr. Garbarino testified was very common with adolescents that did not have a support system at home. He stated that the presence of an intact family, or a supportive family, is “often seen as a buffer to gang recruitment and gang membership.” ¶ 25 Dr. Garbarino stated that the susceptibility to peer pressure peaks in adolescence “maybe” starting at 12 years old. It was Dr. Garbarino’s opinion that defendant was particularly susceptible to peer pressure given his upbringing. Defendant’s mother told defendant that she did not want him in her life and turned him over to his grandmother to be raised. ¶ 26 Dr. Garbarino testified that the likelihood was “very high” that defendant would avoid future criminal, antisocial, or violent behavior. Defendant demonstrated an intelligent, active 7 No. 1-19-1907 mind and was engaged in a “massive” program of education and learning. He had been able to function within the academic programs in prison, as well as a college program offered by Northwestern University (Northwestern) that had a very selective admissions process. ¶ 27 Dr. Garbarino stated that human brains do not mature until about 25 years old. Educational experiences can change adult brains. They change thinking patterns, cognitive structures, and the sophistication of analysis. Dr. Garbarino did not see any evidence of deficiency in defendant’s decision-making or executive function. Defendant had the ability to maintain a coherent, prosocial posture even in the difficult environment of prison. Dr. Garbarino spoke highly of defendant’s ability to manage his educational activities, accumulate certificates of achievement, and complete training programs. He opined that when defendant talked about his perfect attendance in classes he said it would be “crazy” not to have perfect attendance, which Dr. Garbarino saw as “reflecting a mature mind and bodes very well for his future when and if released because there is certainly no social purpose served by continuing to incarcerate him when he has achieved this level of sophisticated rehabilitation.” ¶ 28 Nelson Holman, a correctional officer at Stateville Correction Center (Stateville) testified that he had been working there for 24 years and interacted with defendant on a daily basis when he was assigned to work in defendant’s cell house. Holman testified that defendant was cooperative and compliant. ¶ 29 Andrew Fox, a correctional sergeant at Stateville testified that he had been working there for 20 years and had recently been assigned to work in the same cell house as defendant. He had worked in that cell house for a little over a year and a half. Defendant was one of the porters of the cell house, so he interacted with defendant every day. To be assigned the position of porter, an inmate must put in a request through the placement officer, and internal affairs investigates 8 No. 1-19-1907 and checks the inmate’s background. Inmates typically stay on as porters for 60 to 90 days. Defendant was a porter in his cell house for the duration of Fox’s time at the cell house, which was rare. Fox had put a request in for defendant to stay on after the 60 to 90 days as porter. Fox described defendant as quiet, reserved, and “pretty much to himself.” Defendant always tried to walk away from confrontations. Other inmates asked defendant for legal advice because defendant’s previous job had been a law clerk. Fox never had any issues with defendant and never had to write him up for disciplinary issues. ¶ 30 Jennifer Lackey, a professor of law at Northwestern and the director of the Northwestern Prison Education Program, testified that she had been a professor at Northwestern for 13 years. The Northwestern Prison Education Program is the only degree-granting program in the state of Illinois offering a full liberal arts curriculum. Students at Statevillle are enrolled as Northwestern students. All of the classes are offered by Northwestern faculty members at Stateville, and the program has a “very rigorous admissions process.” There is an admissions committee made up of one associate dean and two faculty members, and they invite 20 students per year into the program. ¶ 31 Professor Lackey founded the Stateville prison program because there are other states that have very successful prison education programs. She stated that prison education has been shown “over and over again” that it is one of the most positive interventions in the criminal justice system. National recidivism rates are at about 76.6% “at the five-year mark.” Students who graduate in prison with a bachelor’s degree have a 5.6% recidivism rate, and with a master’s degree, the rate goes down to 0%. Illinois was a state that did not have any postsecondary education programs that were degree-granting, so Lackey worked with Northwestern to start one. 9 No. 1-19-1907 ¶ 32 Applications for the program were distributed in the prison, and the committee narrowed the pool of applicants to 40 students based on the submissions. They then held in-person interviews at the prison and invited the top 20 candidates to the program, one of them being defendant. The curriculum is a full liberal arts curriculum. Defendant is in class four days a week, for three hours a day. There are six or seven hours of homework each night. ¶ 33 Professor Lackey testified that defendant was ranked third out of the pool of handwritten submissions they received from Stateville and was admitted into the program after his in-person interview. Lackey testified that she was currently teaching defendant and had previously taught him as well. She spends approximately three hours a week with him. He is a “quiet leader” in the classroom. He participates and is thoughtful in his remarks and interactions with other students. He defuses disagreements rather than inflames them. He is self-motivated and determined. His attendance is impeccable. He comes to class prepared. He is one of the most driven and focused students “in the cohort.” He turns in “A level” work, which is graded on the same scale as the Northwestern students on campus. ¶ 34 Professor Lackey testified that if defendant were to be released, it was her opinion that he would do “exceptionally well.” Part of the program is “to work on reentry at the other end of students graduating from the program.” One of defendant’s goals is to attend law school, and Professor Lackey stated, “I think that is an extremely realistic goal.” When asked if Professor Lackey had any concerns about his character or temperament, she stated, “I have no concerns whatsoever.” ¶ 35 Dr. Christina Rivera testified that she teaches political science at DePaul University (DePaul) and is the director of the Black Diaspora. She met defendant when she started teaching at Stateville in 2018, as part of DePaul’s Inside Out Prison Exchange Program. Stateville 10 No. 1-19-1907 applicants submitted a “blind” written application, without any identifying information. Defendant was selected to participate based on his submission. Dr. Rivera taught “Law and Politics,” which was an entry course for students interested in law or law school. She grades the students at Stateville in the exact same manner as she grades her students on campus. ¶ 36 Dr. Rivera testified that there were 45 applicants the year defendant applied. She narrowed it down to 15, and the chaplain selected the final 11 students. The applicants must have completed a GED and not have any “tickets” from inside the jail. Defendant was an excellent, hard-working student. He was quiet in class but interacted well with other students in small- group discussions. He was an encouraging classmate. It was clear that he had always done the reading and had thought about the reading. ¶ 37 Dr. Rivera stated that defendant’s small group project in her class dealt with LBGTQ rights, particularly the rights of transgender women in the Department of Corrections. The project was to structure a legislative proposal that the students would hypothetically give to legislatures. The end result of their legislative proposal was “quite comprehensive.” Dr. Rivera noted that defendant was part of the “State Build a Debate” team. The debate took place in March 2018, where they debated the issue in front of 20 or 30 state legislators and some members of the media. At the end of the debate they were given a chance to speak with the legislators in the audience. From what Dr. Rivera understood, one of the members of the state legislature subsequently met with the students and presented their bill in the last session. ¶ 38 Dr. Rivera stated that she started a law policy “think tank” so that members of the class, both DePaul and Stateville members, could continue to get together and discuss materials from the class that they had rushed through in 10 weeks. Defendant was a consistent member of the think tank up until he began his classes through Northwestern. 11 No. 1-19-1907 ¶ 39 Several exhibits were attached to defendant’s sentencing memorandum. These included a copy of his GED that he received in 2003 and several educational certificates. Those certificates included behavior management (2001), parenting without violence (2001-02), learning skills for life (2009), handling suppression (2010), conditions of life (2010), successful parenting skills (2011), personal integrity (2011), master craftsman for installation (2016), vinyl decking and railing education program (2016-18), composite railing education program (2016-18), vinyl siding and polymer shake education program (2016-18), CertaWrap master craftsman (2016), Bufftech Fence education program (2016-18), restoration millwork education program (2016- 18), CertainTeed shingle quality specialist (2016-18), and a stress management course (2017). ¶ 40 Defendant’s Diploma of Legal Assistant/Paralegal from Blackstone Career Institute, which was issued in June 2011, was included in the exhibits. Defendant’s transcript from Blackstone Career Institute showed that he completed over 900 hours of classes with an average grade of 94.6% overall. ¶ 41 A certificate for DePaul’s Inside Out Prison Exchange Program was attached, showing that he completed the program on June 8, 2018. Professor Rivera submitted a letter describing the workload as daunting. She described defendant’s work as “top-notch” and described him as “a mature, reflective person who is motivated to help at-risk youth avoid making tragic mistakes, and instead recognize their worth and value [to] their community.” ¶ 42 A certificate for completing a summer workshop in 2018 through Northeastern Illinois University’s “The Prison and Neighborhood Arts Project” was also attached. An instructor in the program, Professor Lopez, submitted a letter stating that he was impressed by defendant’s “preparedness” and his “ability to work with fellow classmates in a constructive manner.” 12 No. 1-19-1907 Defendant was an avid reader and a “positive and calming influence.” He was committed to completing the course and served as a model to other students. ¶ 43 Northwestern Professor Mary Patillo wrote a letter stating that defendant distinguished himself in class by his preparedness and improvement and for his gentle demeanor. He responded well to feedback and learned from his mistakes in class. Defendant had “much to offer.” ¶ 44 Defendant’s work history was detailed showing that he worked as a law clerk in the law library for six months and was a porter in Unit E cellhouse for a year and a half. ¶ 45 Defendant received four certificates of excellence in 2014 for his participation in a program called “Incarcerated Voices,” which was a radio program aimed at educating the community about prison life. ¶ 46 Defense counsel noted that defendant’s grandmother was in court and had submitted a letter to the court indicating that she would provide a place for him to live when defendant was released. She was in a good neighborhood and would make sure he got to any probation officer appointments, work, or school. ¶ 47 Finally, defense counsel stated, “we urge that 25 years is the appropriate sentence. Bearing in mind that [defendant]’s crime occurred after the truth-in-sentencing statute. So whatever sentence is imposed will be served at one hundred percent. We are urging the court to total 25 actual years.” Defense counsel noted that, since Miller, there had been 46 cases where a juvenile had been resentenced based on the Miller factors in Cook County. Most of those offenders were 17, and “quite a few” were 16 years old like defendant. Almost all the cases were for crimes committed prior to truth-in-sentencing so they would serve 50 % of their sentences. Forty out of forty-six of those cases involve multiple victims murdered. The average of all those 13 No. 1-19-1907 sentences were 31 years, and the median was 30 years. Taking away those that involved more than one victim, there were only six offenders on the chart. Of the six, one received 20 years, three received 25-year sentences, and one received 30 years. The average was 25.2 years for those juveniles resentenced after Miller who committed murder as a juvenile. ¶ 48 The State then argued in aggravation. It submitted a letter written by the victim’s aunt, Maribel Ibarra, stating that her life had changed dramatically since defendant killed “the only family member that I have here in the United States.” The victim had come to Chicago to work and support his family in Mexico. When he was killed, Ibarra had to break the news to his mother in Mexico and then take his body back to Mexico to be buried. She stated, “[s]omeone who kills without mercy will never change; therefore, he should receive no mercy.” ¶ 49 The State noted that “the maximum sentence that you can give this defendant is 40 years in the Illinois Department of Corrections. I would submit that this is not a case, even considering all the aggravation and all of the mitigation, that is a minimum sentence.” The State asked the court “to sentence this defendant to a substantial period of time above the minimum in the Illinois Department of Corrections.” ¶ 50 Defendant then addressed the court. He apologized to the victim’s family stating, “Every day, I regret doing it *** I shouldn’t have listened to what was told to me.” He stated that he could not take it back, but he could show that the mistake will never happen again. He never communicated with the gang he was in since the offense and “suffered some backlash” for it. He stated that after he received his 100-year sentence, he began bettering himself. He wants to help younger people walking down the same path he did and steer them from that because he understands how it destroys lives. He then stated, “I don’t want to take the court’s time too much. But I also want to apologize to you. 18 years ago, we were standing in this same 14 No. 1-19-1907 courtroom or downstairs, and you asked me a question after you had sentenced me and I ignored you. That was a sign of immaturity and I apologize and I am sorry for that.” He continued, “I ask you to have mercy on me and give me at least a chance to be a productive *** person within my community.” ¶ 51 The trial judge then spoke. He stated that Dr. Garbarino was “at best a poor witness with very little credibility. I don’t give his testimony a lot of weight at all.” The trial judge stated that “I think expert witnesses in murder cases should read the police reports so they understand what the facts are in the case.” The trial judge stated that when the State asked Dr. Garbarino if he had given defendant an IQ test, Dr. Garbarino responded that defendant was in college, “[l]ike with a certain amount of disdain and disrespect to the lawyer that was asking the question.” ¶ 52 The trial judge continued, “[t]here were discussions about like diagnosis like conduct disorder. And I agree with [the State] that [Dr. Garbarino] was trying to fashion justification for why [defendant]’s brain was not fully developed.” He said, “There is no question that gang, peer pressure, his [sic] irrelevant factor to consider when trying to figure out what was in [defendant]’s brain at that time when he chose to be the original aggressor.” The trial judge stated that “various people have mischaracterized the evidence in this case as gang related. There was one gang and one gang only. That’s [defendant]’s gang.” He continued: “One of the key facts was and we hear this phrase a lot, it’s come up a lot in the last few years, hands up. Don’t shoot. All lives matter. [Defendant] didn’t give that any consideration. Was his actions which resulted in murder heartless and merciless? I say, yes. When a man puts his hands up in the air after being shot and doesn’t want any more and [defendant] unloaded on him, fired multiple shots into that victim, that is a heartless and merciless act. 15 No. 1-19-1907 And coupled with the fact that [defendant] and his gang waited in ambush for these individuals that were going to play soccer after they bought the soccer ball and came out so there was plenty of opportunity to walk away. [Defendant] could not have fired any more bullets when the victim raised his hand in surrender. The facts in this case warrant a harsh punishment. A 20 year sentence or even a 25 year sentence would be insufficient for this type of factual pattern, gang related shooting on the streets of Chicago. Unarmed victims trying to play soccer. When I consider all the factors in aggravation and mitigation, I do find that there are a number of factors that weigh in the defendant’s favor. He does have rehabilitative potential. There is no question about it. The evidence from the various teachers and individuals that have been involved with his education have all testified that he does have that pattern. In addition his conduct in the penitentiary has been admirable. He’s not gotten himself into problems and is recognized for some leadership traits within the Illinois Department of Corrections. I have considered his youth, his recklessness, the suggestibility, the potential for rehabilitation, there’s evidence of immaturity, the failure to appreciate the consequences, I am not so sure about that. His family environment had a lot to be desired. No question about that. Nevertheless, he was in a loving home of a family member. He found a different life on the streets and resulted in tragedy, not only for the victim in the case but for the defendant. 16 No. 1-19-1907 In reviewing all those factors in aggravation, I do cite the factor. I don’t give it any greater weight than any other factor in aggravation and mitigation and have considered all of those new factors for someone who is 16 years old but the sentence must deter future criminal conduct. And defendant’s criminal conduct neither caused or threatened physical harm to another. That, of course, is not applicable as a factor in mitigation. Not only that, by multiple firing in a park in the broad daylight in the afternoon hours with other people around, serious physical harm could have happened to other people that were in the park at that time. The defendant did not contemplate that his criminal conduct would cause or threaten serious physical harm to another. Nothing in Dr. Garbarino’s testimony indicated—would indicate to me that he did not have the ability to contemplate that pulling a handgun and firing it in a crowded park in the afternoon was not the type of conduct that would cause or threaten serious physical harm to another. The defendant acted under a strong provocation. Not applicable is the factor in mitigation. There were grounds to excuse or justify the defendant’s criminal conduct, though failing to establish a defense. There was some evidence of some fist-to-cuff going on beforehand, a fistfight. It was the defendant that brought the gun to the fistfight. The defendant was only 16 years old. The gun made him older. The defendant’s criminal conduct was induced or facilitated by someone other than 17 No. 1-19-1907 the defendant. No. He was part of a pack. Part of the gang. They moved that way and they get strength from each other when they act in that fashion. *** The defendant did not have a history of prior delinquency or criminal activity. The defendant’s criminal conduct was a result of circumstances unlikely to recur. I believe based on the defendant’s rehabilitative potential that this is a possibility. The character and attitudes of the defendant indicate that he is unlikely to commit another crime. I would give points or credits on that factor in mitigation. I have discussed the factors in aggravation and I have analyzed what the appropriate sentence should be. I have listened to the defense make an argument and considered these other juvenile sentencing outcomes, the Miller application in this case and all the implications that arise from that. The fact that the Illinois Supreme Court has now made the determination that 40 years is the equivalent of—well, the term now is virtual life, I believe. I don’t believe that—and the defense was emphatic in that, in that idea that a 40 year sentence would be a life sentence for defendant. I don’t believe it is a life sentence for the defendant. I think the defendant was entitled to more time in the penitentiary than even a 40-year sentence. But nevertheless, on Count 5, I will sentence the defendant to 39 years in the Illinois Department of Corrections, with three years of mandatory supervised release.” 18 No. 1-19-1907 ¶ 53 Defendant filed a motion to reconsider his sentence, which was denied. Defendant now appeals. ¶ 54 II. ANALYSIS ¶ 55 On appeal, defendant argues that the trial court abused its discretion in sentencing defendant to 39 years in prison because it failed to correctly consider defendant’s youth and its attendant circumstances, as well as defendant’s demonstrated rehabilitation, in sentencing. ¶ 56 The eighth amendment to the United States Constitution prohibits “cruel and unusual punishment” (U.S. Const., amend. VIII) and applies to the states through the fourteenth amendment. People v. Buffer, 2019 IL 122327 , ¶ 15. The Supreme Court stated in Miller that the “Eighth Amendment’s prohibition of cruel and unusual punishment ‘guarantees individuals the right not to be subjected to excessive sanctions.’ ” Miller, 567 U.S. at 469 (quoting Roper v. Simmons, 543 U.S. 551 , 560 (2005)). The eighth amendment’s ban of excessive punishment flows from the basic precept that criminal punishment should be graduated and proportioned both to the offender and the offense. Id. Our supreme court has stated, “The United States Supreme Court has repeatedly instructed courts to look beyond history to ‘the evolving standards of decency that mark the progress of a maturing society’ [citation] to determine whether a punishment is so disproportionate as to be cruel and unusual.” Buffer, 2019 IL 122327 , ¶ 15 (quoting Trop v. Dulles, 356 U.S. 86 , 101 (1958)). ¶ 57 The Supreme Court in Miller established that “children are constitutionally different from adults for purposes of sentencing.” 567 U.S. at 471 . Our supreme court, relying on Miller, summarized the three ways in which this was apparent: “First, juveniles lack maturity and a fully developed sense of responsibility, which leads to dangerous behavior that is careless, impulsive, and reckless. Second, 19 No. 1-19-1907 juveniles are more vulnerable to negative influences and outside pressures, they have limited control over their own environment, and they lack the ability to extricate themselves from crime-producing settings. Third, juveniles are more capable of change than adults, and their actions are less likely to be evidence of irretrievable depravity.” Buffer, 2019 IL 122327 , ¶ 16 (citing Miller, 567 U.S. at 471 ). ¶ 58 As noted in Miller, the distinctive attributes of youth diminish the penological justifications for imposing the harshest sentences on juvenile offenders, even when they commit terrible crimes. Miller, 567 U.S. at 472 . Because the rationale for retribution relates to an offender’s blameworthiness, the case for retribution is not as strong with a minor as an adult. Id. “Nor can deterrence do the work in this context, because ‘ “the same characteristics that render juveniles less culpable than adults” ’—their immaturity, recklessness, and impetuosity—make them less likely to consider potential punishment.” Id. (quoting Graham v. Florida, 560 U.S. 48 , 72 (2010), quoting Roper, 543 U.S. at 571 ). The Court noted that by removing youth from the balance in imposing life sentences without the possibility of parole, a sentencing authority was prohibited from assessing whether the law’s harshest term of imprisonment proportionately punished a juvenile offender. Id. at 474. The Court stated: “To recap: Mandatory life without parole for a juvenile precludes consideration of his chronological age and its hallmark features—among them, immaturity, impetuosity, and failure to appreciate risks and consequences. It prevents taking into account the family and home environment that surrounds him—and from which he cannot usually extricate himself—no matter how brutal or dysfunctional. It neglects the circumstances of the homicide offense, including the 20 No. 1-19-1907 extent of his participation in the conduct and the way familial and peer pressures may have affected him. Indeed, it ignores that he might have been charged and convicted of a lesser offense if not for incompetencies associated with youth—for example, his inability to deal with police officers or prosecutors (including on a plea agreement) or his incapacity to assist his own attorneys. [Citations]. And finally, this mandatory punishment disregards the possibility of rehabilitation even when the circumstances most suggest it.” Id. at 477-78. ¶ 59 The Court in Miller declared that the eighth amendment therefore forbade a sentencing scheme that mandated life in prison without possibility of parole for juvenile offenders. “By making youth (and all that accompanies it) irrelevant to imposition of that harshest prison sentence, such a scheme poses too great a risk of disproportionate punishment.” Id. at 479. The Court declined to consider whether the “Eighth Amendment requires a categorical bar on life without parole for juveniles.” Id. However, the Court stated: “[G]iven all we have said *** about children’s diminished culpability and heightened capacity for change, we think appropriate occasions for sentencing juveniles to this harshest possible penalty will be uncommon. That is especially so because of the great difficulty *** of distinguishing at this early age between ‘the juvenile offender whose crime reflects unfortunate yet transient immaturity, and the rare juvenile offender whose crime reflects irreparable corruption.’ [Citations.] Although we do not foreclose a sentencer’s ability to make that judgment in homicide cases, we require it to take into account how children are different, and how those differences counsel against irrevocably sentencing them to a lifetime in prison.” Id. at 479-80. 21 No. 1-19-1907 ¶ 60 Eighth amendment jurisprudence continued to evolve, and in People v. Reyes, 2016 IL 119271 , our supreme court held: “A mandatory term-of-years sentence that cannot be served in one lifetime has the same practical effect on a juvenile defendant’s life as would an actual mandatory sentence of life without parole—in either situation, the juvenile will die in prison. Miller makes clear that a juvenile may not be sentenced to a mandatory, unsurvivable prison term without first considering in mitigation his youth, immaturity, and potential for rehabilitation. *** Accordingly, we hold that sentencing a juvenile offender to a mandatory term of years that is the functional equivalent of life without the possibility of parole constitutes cruel and unusual punishment in violation of the eighth amendment.” Id. ¶ 9. ¶ 61 Our supreme court has since noted that “a juvenile defendant may be sentenced to life imprisonment without parole, but only if the trial court determines that the defendant’s conduct showed irretrievable depravity, permanent incorrigibility, or irreparable corruption beyond the possibility of rehabilitation. The court may make that decision only after considering the defendant’s youth and its attendant circumstances.” People v. Holman, 2017 IL 120655 , ¶ 46. ¶ 62 Subsequently, our supreme court in Buffer held that a de facto life sentence was equivalent to 40 years or more in prison when sentencing a juvenile. In Buffer, the defendant was found guilty of four counts of first degree murder and specifically that he personally discharged a firearm that caused the victim’s death. Buffer, 2019 IL 122327 , ¶ 5. He was sentenced in July 2010. At that time in Illinois, law prescribed a sentencing range of 20 to 60 years for first degree murder (730 ILCS 5/5-4.5-20(a) (West 2008)) and mandated a minimum 25-year additional 22 No. 1-19-1907 prison term for personally discharging a firearm that caused the victim’s death (id. § 5-8- 1(a)(1)(d)(iii)). Buffer, 2019 IL 122327 , ¶ 5. The court merged the first degree murder counts and sentenced defendant to 25 years on the first degree murder conviction and 25 years for the mandatory firearm add-on, for an aggregate of 50 years, followed by 3 years of mandatory supervised release. Id. ¶ 63 The State urged the court to decide when a prison sentence for a term of years imposed on a juvenile defendant is the functional equivalent of life without parole. Id. ¶ 29. The State contended that experience and common sense compelled the conclusion that a 50-year sentence for a juvenile offender was not unsurvivable and thus not prohibited for juvenile homicide offenders whose crimes reflect the transient immaturity of youth. Id. ¶ 30. ¶ 64 Our supreme court noted that the nature, character, and extent of penalties for a particular criminal offense are matters for the legislature, which may prescribe definite terms of imprisonment or specific amounts as fines or fix the minimum and maximum limits thereof. Id. ¶ 35. “We generally defer to the legislature in the sentencing arena because the legislature, institutionally, is better equipped to gauge the seriousness of various offenses and to fashion sentences accordingly.” Id. “Also, when statutes are enacted after judicial opinions are published, it must be presumed that the legislature acted with knowledge of the prevailing case law.” Id. ¶ 65 The Buffer court noted that the General Assembly, since Miller, had determined that the specified first degree murders that would justify natural life imprisonment for adult offenders would warrant a mandatory minimum sentence of 40 years for juvenile offenders. Id. ¶ 39. “The legislature evidently believed that this 40-year floor for juvenile offenders who commit egregious crimes complies with the requirements of Miller.” Id. The court stated, “[i]n 23 No. 1-19-1907 determining when a juvenile defendant’s prison term is long enough to be considered de facto life without parole, we choose to draw a line at 40 years.” Id. ¶ 40. ¶ 66 That brings us to the case at bar. Defendant was sentenced in 2004 to 100 years in prison for a crime he committed when he was 16 years old. He received a new sentencing hearing in 2019 in front of the same trial judge. At resentencing, the trial judge was tasked with considering the Miller factors when fashioning a sentence. Those factors are (1) the juvenile’s chronological age at the time of the offense and any evidence of his particular immaturity, impetuosity, and failure to appreciate risk and consequence; (2) the juvenile defendant’s family and home environment; (3) the juvenile defendant’s degree of participation in the homicide and any evidence of familial or peer pressures that may have affected him; (4) the juvenile defendant’s incompetence, including his ability to deal with police officers or prosecutors and his incapacity to assist his own attorneys; and (5) the juvenile defendant’s prospects for rehabilitation. Miller, 567 U.S. at 477-78 . Considerations of these factors is consistent with section 5-4.5-105 of the Unified Code of Corrections, which now requires the trial court to consider factors taken from the Supreme Court’s list when sentencing a juvenile. 730 ILCS 5/5-4.5-105(a) (West 2016). Those factors are: “(1) the person’s age, impetuosity, and level of maturity at the time of the offense, including the ability to consider risks and consequences of behavior, and the presence of cognitive or developmental disability, or both, if any; (2) whether the person was subjected to outside pressure, including peer pressure, familial pressure, or negative influences; 24 No. 1-19-1907 (3) the person’s family, home environment, educational and social background, including any history of parental neglect, physical abuse, or other childhood trauma; (4) the person’s potential for rehabilitation or evidence of rehabilitation, or both; (5) the circumstances of the offense; (6) the person’s degree of participation and specific role in the offense, including the level of planning by the defendant before the offense; (7) whether the person was able to meaningfully participate in his or her defense; (8) the person’s prior juvenile or criminal history; and (9) any other information the court finds relevant and reliable, including an expression of remorse, if appropriate. However, if the person, on advice of counsel chooses not to make a statement, the court shall not consider a lack of an expression of remorse as an aggravating factor.” Id. ¶ 67 Because section 4 of the Statute on Statutes (5 ILCS 70/4 (West 2014)) entitles a defendant “to be sentenced under either the law in effect at the time the offense was committed or that in effect at the time of sentencing,” the proper remedy was to apply this new sentencing scheme at resentencing. By applying this new sentencing scheme, the circuit court had the discretion not to apply the firearm sentencing enhancement. 730 ILCS 5/5-4.5-105(b), (c) (West 2016); Reyes, 2016 IL 119271 , ¶ 4. ¶ 68 Here, the resentencing hearing spanned two days and included five witnesses who testified on defendant’s behalf. Defendant also submitted several letters for the trial judge’s 25 No. 1-19-1907 consideration. After hearing all the evidence, the trial judge noted that he could sentence defendant to anywhere from 20 years up to just under 40 years in prison, as 40 years or over would amount to a de facto life sentence pursuant to Buffer. The trial court then resentenced defendant to 39 years in prison, with no possibility of parole, plus three years of mandatory supervised release. ¶ 69 Defendant claims that the trial court abused its discretion at resentencing when it (1) incorrectly considered defendant’s youth after stating that the “gun made him older,” (2) failed to properly consider the role of peer pressure, and (3) failed to properly consider defendant’s demonstrated and well-documented rehabilitation. The State maintains that the trial court did not abuse its discretion where it considered all of the relevant factors, including defendant’s youth and attendant circumstances. ¶ 70 A circuit court has “broad discretionary powers in imposing a sentence, and its sentencing decisions are entitled to great deference.” People v. Alexander, 239 Ill. 2d 205 , 212 (2010). We must give “substantial deference” to the circuit court’s sentencing decision “because the trial judge, having observed the defendant and the proceedings, is in a much better position to consider factors such as the defendant’s credibility, demeanor, moral character, mentality, environment, habits, and age.” People v. Snyder, 2011 IL 111382 , ¶ 36. Accordingly, we will not disturb the court’s sentencing decision absent an abuse of discretion. Id. ¶ 71 One basis for reversing a sentence within statutory limits is where the sentence is greatly at variance with the spirt and purpose of the law, or manifestly disproportionate to the nature of the offense. People v. Stacey, 193 Ill. 2d 203 , 210 (2000). “[T]he phrase ‘excessive sentence’ ” “is reserved for a sentence within the statutory range but without regard for a particular 26 No. 1-19-1907 defendant’s rehabilitative potential.” People v. Daly, 2014 IL App (4th) 140624 , ¶ 25 (citing People v. Perruquet, 68 Ill. 2d 149 , 154-55 (1977)). ¶ 72 The Illinois Constitution provides that penalties are to be determined both according to the seriousness of the offense and with the objective of restoring the offender to useful citizenship. Ill. Const. 1970, art. I, § 11; Perruquet, 68 Ill. 2d at 154-55 . This constitutional mandate calls for balancing the retributive and rehabilitative purposes of punishment, and the process requires careful consideration of all factors in aggravation and mitigation. People v. Quintana, 332 Ill. App. 3d 96 , 109 (2002). Applying these principles to the instant case, the trial court abused its discretion in sentencing defendant to a 39-year prison term because the sentence was imposed with little regard to defendant’s significant rehabilitation. ¶ 73 Evidence of defendant’s rehabilitation was overwhelming. Defendant obtained his GED in prison on December 15, 2003. He received over 10 different educational certificates from prison ranging from 2001 to 2018. He obtained a diploma of legal assistant/paralegal from Blackstone Career Institute in June 2011, which required more than 900 hours of classes. He was admitted to DePaul’s Inside Out Prison Exchange Program, and his professor described him as hardworking and encouraging to other classmates. He participated in a summer workshop through Northeastern Illinois University’s “The Prison and Neighborhood Arts Project.” Professor Lopez stated that he was impressed by defendant’s “preparedness” and his “ability to work with fellow classmates in a constructive manner.” Defendant was a “positive and calming influence.” He was committed to completing the course and served as a model to other students. ¶ 74 Defendant was recently admitted after a rigorous admissions process to Northwestern and expects to earn a BA while in prison through the Northwestern Prison Education Program. Professor Lackey described defendant as one of her most driven and self-motivated students and 27 No. 1-19-1907 that his attendance was “impeccable.” She testified that defendant’s goal was to attend law school, and she believed that was an extremely realistic goal. ¶ 75 Beyond his impressive education credentials, defendant has been a model inmate. He has had zero tickets throughout his 17 plus years in prison. He worked in the law library as an offender law clerk for six months in 2017, and as a porter in Unit E cellhouse for a year and a half in 2017 and 2018. The correctional officers that testified described defendant as cooperative, compliant, quiet, reserved, and “pretty much to himself.” Defendant always walked away from confrontations, and he helped other inmates with their legal questions. ¶ 76 Defendant has also found time to give back to his community while in prison. He participated in “Incarcerated Voices,” a radio program aimed at educating the community about prison life. He joined the initiative to reach young people and warn them away from gang activity. He received four certifications of excellence for participating in this program in 2014. ¶ 77 And finally, defendant has shown remorse. He told Dr. Garbarino that on the day of the murder he “should have been thinking rather than me just reacting.” He apologized to the victim’s family at resentencing, stating, “Every day, I regret doing it.” He stated that he could not take what he did back, but he could show that the mistake would never happen again. He also apologized to the court. ¶ 78 After hearing this testimony and reading the letters submitted on defendant’s behalf, the trial judge’s only comments on defendant’s rehabilitation were “he does have rehabilitative potential. There is no question about it.” He stated that defendant’s “conduct in the penitentiary had been admirable” and that defendant had not “gotten himself into problems and is recognized for some leadership traits within the Illinois Department of Corrections.” The trial judge’s brief, 28 No. 1-19-1907 general references to defendant’s rehabilitation indicate that the trial judge disregarded the extent of defendant’s rehabilitation and did not afford it adequate weight. ¶ 79 As noted above, the Illinois Constitution provides that “[a]ll penalties shall be determined both according to the seriousness of the offense and with the objective of restoring the offender to useful citizenship.” (Ill. Const. 1970, art. I, § 11). This constitutional mandate calls for the balancing of the retributive and rehabilitative purposes of punishment. Quintana, 332 Ill. App. 3d at 109. “A reasoned judgment as to the proper penalty to be imposed must therefore be based upon the particular circumstances of each individual case.” People v. Saldivar, 113 Ill. 2d 256 , 268 (1986). Looking at the circumstances in the case at bar, defendant is the epitome of an offender who has been restored to useful citizenship. His sentence, however, does not reflect this. ¶ 80 While we recognize the seriousness of defendant’s offense in taking another human’s life, we also recognize that the Illinois legislature took the seriousness of the offense into account when fashioning the sentencing range for first degree murder. See People v. Sharpe, 216 Ill. 2d 481 , 487 (2005) (“the legislature is institutionally better equipped to gauge the seriousness of various offenses and to fashion sentences accordingly”). The sentencing range for a juvenile who commits first degree murder, and who is not irretrievably depraved (Holman, 2017 IL 120655 , ¶ 46), is 20 to 40 years in prison. The fact that the trial judge in this case sentenced defendant to one year shy of the maximum prison sentence he could give without the sentence amounting to a de facto life sentence, indicates that he failed to give proper weight to defendant’s extensive rehabilitation evidence. The trial judge, in recognizing that the Illinois Supreme Court’s determination that 40 years is the equivalent of a life sentence, stated, “I don’t believe that. I think the defendant was entitled to more time in the penitentiary than even a 40-year sentence.” The trial court’s comments suggest a predisposition to punish certain types of offenders more 29 No. 1-19-1907 harshly, and we have found that a trial judge “may not refuse to consider an alternative [sentence] simply because the defendant is in a class disfavored by the court.” People v. Jones, 284 Ill. App. 3d 975 , 980 (1996). ¶ 81 We note that a few days before oral argument, the State made a motion to cite People v. Lusby, 2020 IL 124046 , as additional authority. The State made the following assertion in its motion: “Logic dictates that if the de facto life sentence of 100 years’ [sic] imposed on the defendant in Lusby—who was also 16 years old at the time of his offense and who presented similar mitigation evidence—can pass constitutional muster, the instant petitioner’s sentence of 39-years’ [sic] surely is capable of withstanding a constitutional challenge.” ¶ 82 In response to the State’s reliance on this additional authority, we note that defendant is not arguing that his 39-year sentence is unconstitutional. Rather, he is arguing that the trial court abused its discretion in imposing the sentence because it was excessive in light of defendant’s extensive rehabilitation evidence, as well as other factors. ¶ 83 Additionally, the Lusby court’s finding that a de facto life sentence of 130 years was proper was based on the fact that the trial court, after considering the defendant’s youth and attendant circumstances, found the murder to be “ ‘clearly a depraved act’ ” and found defendant to be incorrigible. Id. ¶¶ 35, 50. This finding of incorrigibility was made after hearing evidence that the defendant broke into a woman’s apartment, sexually assaulted her, cut her neck with a knife, and then shot her in the head. Id. ¶ 4. The defendant had an extensive criminal history before committing the sexual assault and murder at the age of 16. Id. ¶ 13. Since being incarcerated, he had attacked another inmate who suffered a broken nose and a broken orbital bone. Id. ¶ 15. 30 No. 1-19-1907 ¶ 84 As stated above, our supreme court has noted several times that if the trial court determines that the defendant’s conduct showed irretrievable depravity, permanent incorrigibility, or irreparable corruption beyond the possibility of rehabilitation, it can impose a life sentence on a juvenile, as was done in the case of Lusby, as long as it has first considered the defendant’s youth and attendant circumstances. Holman, 2017 IL 120655 , ¶ 46. However, in the case at bar, the trial court made no such finding of irretrievable depravity, permanent incorrigibility, or irreparable corruption beyond the possibility of rehabilitation, and such a finding would have been wholly unsupported by the record. Accordingly, the trial court in this case could not have sentenced defendant to 40 years or more in prison. ¶ 85 And finally, the State argued in its motion that “Lusby instructs that a sentence is constitutional if the record demonstrates that the court received evidence relating to each of the Miller factors before imposing sentence.” Again, the constitutionality of defendant’s sentence is not disputed in this case. There is no question that the 39-year sentence imposed was within the sentencing range of 20 to 40 years. ¶ 86 To the extent that the State is arguing that as long as the court heard evidence on each of the Miller factors before pronouncing a sentence, then there can be no abuse of discretion, we disagree. While the Lusby court found that the 130-year sentence for the defendant was appropriate due to the trial court’s consideration of the Miller factors and its finding of incorrigibility, it did not state that as long as a court hears evidence of a defendant’s youth and attendant circumstances, any sentence the court fashions within statutory limits will not be an abuse of discretion. We are not meant to merely be a rubber stamp for the sentencing decisions of the trial courts. See Daly, 2014 IL App (4th) 140624 , ¶ 26. As stated above, a reviewing court may disturb a sentence within statutory limits if the sentence is greatly at variance with the spirt 31 No. 1-19-1907 and purpose of the law, or manifestly disproportionate to the nature of the offense. Stacey, 193 Ill. 2d at 210 . Accordingly, we find Lusby to have no bearing on our analysis in the case at bar. ¶ 87 Here, the sentencing ruling also demonstrated that the trial judge did not properly weigh other relevant factors. The trial judge stated that peer pressure was an “irrelevant factor” to consider when trying to determine what was in “[defendant]’s brain when he chose to be the original aggressor.” He stated, “The defendant’s criminal conduct was induced or facilitated by someone other than defendant. No. He was part of a pack. Part of the gang. They moved that way and they get strength from each other when they act in that fashion.” ¶ 88 In contrast to the trial court’s analysis, the role of peer pressure is clearly identified as a mitigating factor in the sentencing statute for juveniles. It states that when a sentencing judge is sentencing a person who committed a crime when that person was under the age of 18, the court shall consider “whether the person was subjected to outside pressure, including peer pressure, familial pressure, or negative influences.” 730 ILCS 5/5-4.5-105(a)(2) (West 2016). The influence of peers is to be considered in mitigation, not aggravation. See id. (“the court *** shall consider the following additional factors in mitigation in determining the appropriate sentence”). This is because the Supreme Court has specifically found that juveniles are more susceptible to negative influences and outside pressures, including peer pressure. See Miller, 567 U.S. at 471 . They have limited control over their own environment and lack the ability to extricate themselves from horrific, crime-producing settings. Id. Here, however, the trial judge used the fact that defendant was influenced by his peers as a factor in aggravation, stating that being part of a pack or a gang gave defendant strength. This is especially egregious in light of the fact that defendant’s peer specifically instructed defendant to shoot the victim. 32 No. 1-19-1907 ¶ 89 Further, the trial judge gave improper weight to the need to deter future criminal conduct, stating he had “considered all of those new factors for someone who is 16 years old but the sentence must deter future criminal conduct.” The United States Supreme Court has found that deterrence does not necessary apply to juvenile sentences. In People v. Morris, 2017 IL App (1st) 141117 , ¶ 33, this court noted, relying on Montgomery v. Louisiana, 577 U.S. ___, ___, 136 S. Ct. 718 , 726 (2016), that “deterrence is diminished in juvenile sentencing because juveniles’ recklessness, immaturity, and impetuosity make them less likely to consider possible punishment.” ¶ 90 Finally, the trial judge improperly considered defendant’s age as it applied to his offense. The trial judge noted that “defendant was only 16 years old. The gun made him older.” This statement is directly contrary to the holdings in Miller and its progeny, which note that juveniles lack maturity and have an underdeveloped sense of responsibility, leading to recklessness, impulsivity, and heedless risk-taking. Miller, 567 U.S. at 471 . The fact that defendant used a gun certainly did not cancel out the characteristics that defined him as a juvenile. Rather, it lends support to the fact that defendant lacked maturity which led to recklessness and heedless risk- taking. In fact, the Illinois Supreme Court in Buffer remanded the case for resentencing where a 16-year-old had committed first degree murder with a firearm because the court failed to consider his youth and attendant circumstances when sentencing the defendant to 50 years in prison. 2019 IL 122327 , ¶ 47. That defendant was resentenced to 25 years in prison on remand. That defendant used a gun does not relieve the trial court from considering defendant’s youth as a mitigating factor. The trial court’s comments in this case were improper and has no basis in law. 33 No. 1-19-1907 ¶ 91 Accordingly, looking at the record in its entirety, we find that the trial court abused its discretion by disregarding evidence of defendant’s extensive rehabilitation and improperly considering certain sentencing factors during the resentencing hearing. Pursuant to Illinois Supreme Court Rule 615(b)(4) (eff. Jan. 1, 1967), this court is empowered to reduce sentences. Specifically, the rule states that on appeal, the reviewing court may “reduce the punishment imposed by the trial court.” Ill. S. Ct. R. 615(b)(4) (eff. Jan. 1, 1967). Our supreme court has acknowledged that the rule itself “does not set forth the scope of this power or the circumstances under which it should be exercised.” Stacey, 193 Ill. 2d at 209 . As noted above, however, one such example of when this power can be exercised is when, as is the case here, a sentence within the statutory range was excessive. Id. at 210 . Depending on the surrounding circumstances, we can choose to impose a new sentence or remand the matter for resentencing by the trial court. See People v. Jones, 168 Ill. 2d 367 , 378 (1995). While we recognize that a reviewing court’s power to reduce a sentence should be exercised cautiously and sparingly, we find that in this case it is appropriate for us to impose a new sentence rather than exhaust additional judicial resources that would be expended by ordering a new sentencing hearing. Saldivar, 113 Ill. 2d at 268 ; People v. O’Neal, 125 Ill. 2d 291 , 300 (1988). Accordingly, we invoke our authority under Rule 615(b)(4) to reduce defendant’s sentence to 25 years in prison, followed by 3 years of mandatory supervised release. 730 ILCS 5/5-8-1(d)(1) (West 2016) (the mandatory supervised release term shall be written as part of the sentencing order; for first degree murder that term is 3 years). ¶ 92 III. CONCLUSION ¶ 93 For the foregoing reasons, we reduce defendant’s sentence to 25 years in prison, followed by 3 years of mandatory supervised release. ¶ 94 Sentence modified. 34 No. 1-19-1907 35 No. 1-19-1907 No. 1-19-1907 Cite as: People v. McKinley, 2020 IL App (1st) 191907 Decision Under Review: Appeal from the Circuit Court of Cook County, No. 01-CR- 17493; the Hon. Kenneth J. Wadas, Judge, presiding. Attorneys Brian Nisbet, of Winston & Strawn LLP, of Chicago, for for appellant. Appellant: Attorneys Kimberly M. Foxx, State’s Attorney, of Chicago (Alan for J. Spellberg, Clare Wesolik Connolly, and Hareena Meghani- Appellee: Wakely, Assistant State’s Attorneys, of counsel), for the People. 36

2020-01-17 22:01:41.29315+00

Fossan

*19OPINION. Van Fossan : The amount of, and the right to, the deduction from gross income, are not in controversy. The parties differ only as to the year in which the deduction is allowable. Petitioner contends that its liability became fixed'for the first time by its acceptance of the compromise adjustment made in 1921 and that deduction may be taken in that year. The respondent contends that petitioner’s liability relates to 1920, at the time of billing charges not authorized by the contract; that the adjustment in 1921 was only a bookkeeping correction and that, accordingly, the deduction must be taken in 1920. The deduction arises from the adjustment in 1921 of billings covering work performed under the March 1, 1919, contract from the beginning to the date of the adjustment. The billings were rendered and paid semimonthly. Although the Fisher Company did not exercise its right to make an independent detailed audit of petitioner’s cost records prior to July, 1921, it examined the records and checked the invoices upon the completion of each order. The billings were rendered by petitioner in accordance with its understanding of the contract and were accepted as correct by. the Fisher Company until the audit was begun in July, 1921. After this audit — a complete check by its new auditor of all work completed to date — the Fisher Company for the first time questioned the invoices that had been rendered and paid. Then it claimed that the items billed by petitioner included prices for lumber, and expense and overhead charges which were not allowable under the contract, and claimed a credit for the excess payment. Petitioner and the Fisher Company after some negotiations, agreed to a compromise adjustment and petitioner credited $149,713.30 to the Fisher Company in October, 1921. The credit is clearly the result of a compromise and settlement of conflicting interpretations of the contract, which conflict first arose in the year 1921. Prior to the July, 1921, audit there was no disagreement or controversy between the parties over the terms of the contract or the construction placed- thereon. Until that time they were apparently in entire accord. No suggestion, intimation or claim of excessive billing was made at any time prior to July, 1921. Then for the first time petitioner received' notice that its invoices were questioned and its charges disputed. The amount of ■ the adjustment was first fixed in 1921. The assertion of the claim alone did not impose or establish the liability. Not until petitioner and the Fisher Company agreed to the adjustment, with the resulting credit, did liability therefor become fixed and ascertained. Until the adjustment and credit were agreed to and made not only the amount thereof; but also the liability there*20for was undetermined. Russel Wheel & Foundry Co., 3 B. T. A. 1168. Nor could petitioner have set up a reserve to meet this rebate and deducted it from 1920 income, no liability to reimburse the Fisher Company having been established or even claimed. Consolidated Asphalt Co., 1. B. T. A. 79. It is not material that the expense incurred or the liability arises from the same contract or circumstances which produces the income. Uvalde Co,, 1. B. T. A. 932. And this is true although the contract provides that an audit may be made at any time and that the compensation shall be adjusted in accordance with the audit. Such a provision does not defer or postpone the receipt or accrual of income under the contract. (Mesta Machine Co., 12 B. T. A. 523), and any adjustment that is made as a result of the audit does not revert to the year in which the income was received or accrued. As we view the record in this case, the contention of the respondent that the liability was fixed in 1920, and that the deduction is to be taken only in that year, because petitioner must have known that its billings included charges not allowable under the contract, is without merit. Petitioner rendered bills in accordance with its understanding of the contract, which apparently was acquiesced in by the Fisher Company until July, 1921. The existence of a cause of action or facts upon which a claim for compensation may be asserted is not determinative of liability. The credit of $149,713.30 to the Fisher Company in October, 1921, is deductible in the taxable year 1921. The respondent erred in refusing to allow its deduction from income of the year 1921 and in applying the same against income of the year 1920. Reviewed by the Board. Judgment will he entered under Rule 50.

2012-04-17 05:16:08+00

http://bulk.resource.org/courts.gov/c/F3/50/50.F3d.1039.94-8551.html

50 F.3d 1039 Romero v. Stock*** NO. 94-8551 United States Court of Appeals, Eleventh Circuit. Mar 06, 1995 1 Appeal From: N.D.Ga., No. 93-01517-1-CV-RCF 2 AFFIRMED. * Fed.R.App.P. 34(a); 11th Cir.R. 34-3 ** Local Rule 36 case

2020-01-17 22:01:41.619516+00

Teammell

*195OPINION. Teammell: With respect to the payment of $14,000 by the petitioner in connection with the building of the spur track, it is contended by the petitioner that this amount represents ordinary and necessary expenses and is deductible as such. On the other hand, it is contended by the respondent that the expenditure represents a capital asset and is not deductible' as expense. Even if we concede for the sake of argument in this case that the expenditure does not represent a capital acquisition on the part of the petitioner, it does not follow that the amount is deductible as an ordinary and necessary expense in 1920 when it is claimed by the petitioner. The expenditure was made for the petitioner by Jones as an individual for and in behalf of the corporation over the years 1915 and 1916. The money was advanced by Jones in the way of a loan to the corporation, which the corporation became obligated to repay. The expenditures actually made by the petitioner in 1919 and 1920 were in payment of advances or loans made to it, or money expended for it and clearly the repayment of loans or money so advanced can not be considered as an ordinary and necessary expense. On the other hand, there is no clear and positive testimony that any amount was actually paid out by the corporation to Jones or to any one else in this connection in 1920 except the amount of $669.61, which appears to have been paid on December 22, 1920. Jones testified that he did not know when the balance was paid to him, but that he does know that the entire amount was repaid to him at some time. This is not sufficient evidence to warrant us in finding that the petitioner either paid or incurred an expense of $14,000 in 1920 as claimed by the petitioner, even if all the other contentions of the petitioner in this respect were conceded to be correct. But, since the petitioner was on the accrual basis, only the amounts of expense which were accrued in that year are deductible and we find no evidence of the accrual of any liability with respect to this railroad spur track in 1920. All of the transactions occurred in prior years except the repayment to Jones for the advances he had made. In view of the foregoing, it becomes unnecessary for us to decide whether the amount constituted a capital expenditure or an ordinary *196and necessary expense. If it were admittedly an ordinary and necessary expenese it would not be deductible in 1920. The respondent, on the other hand, has determined that it represents a capital expenditure. In either event, the expenditure is not deductible in 1920. With respect to the acquisition of the lease, the petitioner contends that the evidence establishes the fact that the lease was worth $60,000, which is the par value of the stock claimed to have been issued therefor, and that this amount should be included in invested capital. It appears, however, that Jones, acting as trustee for and in behalf of the corporation, actually acquired the lease for the consideration of $1,900 in cash and one-third of the capital stock of the corporation, that is to say, one-sixth each to Leek and Bowman and the further consideration in the way of royalties set out in the instrument. The consideration paid by Jones as trustee, who was acting for and on behalf of the corporation, represented the payment by the corporation, and the fact that the $60,000 stock was issued to Jones and Leek and Bowman does not indicate that the entire $60,000 stock was issued for the lease. Not in excess of $20,000 par value of stock and $1,900 in cash represented the payment for the leasehold. However, this fact would not prevent the petitioner from having included in its invested capital the actual value of the lease, acquired for stock, although only $20,000 of stock and $1,900 in cash was paid therefor. The question is, What was the value of the lease so acquired? These facts might indicate, however, that it was not worth $60,000 as contended by the petitioner. There is some evidence as to the sales of stock by the persons who acquired it from the persons to whom the corporation originally issued it, but there is no evidence as to when these sales occurred or as to any circumstances connected'therewith, and, in view of these facts, such sales have very little if any bearing upon the value of the lease acquired. It may well be that the portion of the stock which was issued to Jones, who was acting as trustee for the corporation, might have been for services rendered or for other considerations not set out in the record. In any event, Jones, acting in behalf of the corporation in acquiring the lease for the corporation, clearly did not acquire it for himself, and when he turned it over to the corporation for the stock, the corporation already had the beneficial ownership thereof. That transaction merely amounted to the transfer from a trustee to the beneficiary. On the question of the value of the leasehold to Jones, from all the evidence we find that its value is not shown to have been in excess of $1,900. No amount in excess of that amount can therefore be included in invested capital with respect to the lease. Judgment will be entered under Bule 50.

2020-12-01 20:11:35.101693+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2020/2020-Ohio-5487.pdf

[Cite as State ex rel. Page v. Phipps, 2020-Ohio-5487 .] IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT State ex rel. Nagui Page, : Relator, : No. 19AP-347 v. : (REGULAR CALENDAR) Honorable Karen Held Phipps, : Judge, Franklin County Common Pleas Court, General Division, : Respondent. : D E C I S I O N Rendered on December 1, 2020 On brief: Nagui Page, pro se. On brief: Ron O'Brien, Prosecuting Attorney, and Bryan B. Lee, for respondent. IN MANDAMUS ON MOTION TO DISMISS BROWN, J. {¶ 1} Relator, Nagui Page, has filed an original action requesting this court issue a writ of mandamus ordering respondent, the Honorable Karen Held Phipps, a judge of the Franklin County Court of Common Pleas, to grant additional expenses for relator to fund expert services at the state's expense in his pending criminal case in Franklin C.P. No. 18CR-626. Respondent has filed a motion to dismiss the petition, asserting relator has an adequate remedy at law by way of an appeal after final judgment is entered in the underlying criminal proceeding. {¶ 2} This matter was referred to a magistrate of this court pursuant to Civ.R. 53 and Loc.R. 13(M) of the Tenth District Court of Appeals. On April 22, 2020, the magistrate issued the appended decision, including findings of fact and conclusions of law, recommending this court grant respondent's motion to dismiss and deny the petition on No. 19AP-347 2 the basis that relator has an adequate remedy in the ordinary course of law that precludes a writ of mandamus. No objections have been filed to that decision. {¶ 3} Finding no error or other defect on the face of the magistrate's decision, we adopt the decision of the magistrate as our own, including the findings of fact and conclusions of law. In accordance with the magistrate's recommendation, we grant respondent's motion to dismiss and deny relator's request for a writ of mandamus. Motion to dismiss granted; writ of mandamus denied. KLATT and BEATTY BLUNT, JJ., concur. ___________________ No. 19AP-347 3 APPENDIX IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT The State ex rel. Nagui Page, : Relator, : v. : No. 19AP-347 Honorable Karen Held Phipps, : (REGULAR CALENDAR) Judge, Franklin County Common Pleas Court, General Division, : Respondent. : MAGISTRATE'S DECISION Rendered on April 22, 2020 Nagui Page, pro se. Ron O'Brien, Prosecuting Attorney, and Bryan B. Lee, for respondent. IN MANDAMUS ON RESPONDENT'S MOTION TO DISMISS {¶ 4} Relator, Nagui Page, has filed this original action requesting this court issue a writ of mandamus ordering respondent, the Honorable Karen Held Phipps, judge of the Franklin County Court of Common Pleas, to order and grant additional expenses for relator to fund expert services at state's expense in his criminal case, C.P. No. 18CR-626. Findings of Fact: {¶ 5} 1. Relator is charged in the Franklin County Court of Common Pleas with felonious assault, abduction, and violating a protective order. No. 19AP-347 4 {¶ 6} 2. Concerned that the state might call a police officer to testify (in conjunction with the observations of another witness) about certain physical indicia of strangulation based on concepts learned at a law enforcement seminar, relator filed motions in liminie to prohibit the testimony of a Columbus Police Department officer and to disqualify the state's expert police witness from testifying. {¶ 7} 3. Based on relator's representations, the trial court indicated that a detective may offer his layman's opinion pursuant to Ohio Evid.R. 701. {¶ 8} 4. The following month, relator requested authorization and funding to hire an expert who would be willing to consult with the defense to rebut any purported testimony from a Columbus police officer. {¶ 9} 5. The trial court authorized payment up to $1,500 and noted that the defense could seek additional amounts. {¶ 10} 6. After relator posted bond and was released from confinement, the trial court determined that he was no longer indigent and that no further funds would be approved for the defense expert. {¶ 11} 7. In a decision and entry dated May 28, 2019, the trial court denied relator’s motions for funding. {¶ 12} 8. On May 29, 2019, relator filed a notice of appeal from the denial of expert funding. {¶ 13} 9. The same day, relator filed this mandamus action to compel the trial court to provide him with adequate funding to enable him to rebut the testimony of the Columbus police officer. {¶ 14} 10. The magistrate held relator's mandamus action in abeyance during the pendency of his appeal. {¶ 15} 11. Finding that relator had not appealed from a final appealable order, this court granted the state's motion and dismissed his appeal for want of jurisdiction. State v. Page, 10th Dist. No. 19AP-346, 2020-Ohio-816 , rendered March 5, 2020. {¶ 16} 12. In this mandamus case, respondent filed a motion to dismiss on November 21, 2019. Respondent argues that relator has an alternate remedy at law by way of appeal at the conclusion of his criminal case. {¶ 17} 13. Relator filed a memorandum contra arguing that his ability to appeal at the conclusion of his criminal case is not an adequate remedy at law because he could be confined unjustly for a substantial period of time before succeeding on appeal. Citing State No. 19AP-347 5 v. Collins, 24 Ohio St.2d 107 (1970), relator argues any time of incarceration would represent unacceptable breach of justice. {¶ 18} 14. The matter is currently before the magistrate on respondent's motion to dismiss and relator's memorandum contra. Conclusions of Law: {¶ 19} For the reasons that follow, it is this magistrate's decision that this court should grant respondent's motion and deny relator's request for a writ of mandamus. {¶ 20} The Supreme Court of Ohio has set forth three requirements which must be met in establishing a right to a writ of mandamus: (1) that relator has a clear legal right to the relief prayed for; (2) that respondent is under a clear legal duty to perform the act requested; and (3) that relator has no plain and adequate remedy in the ordinary course of the law. State ex rel. Berger v. McMonagle, 6 Ohio St.3d 28 (1983). {¶ 21} Relator acknowledges that he has a right to challenge the trial court's action in an appeal. Although relator acknowledges he has an alternative remedy in the ordinary course of the law which would render him ineligible for a writ of mandamus, he argues that alternative remedy in the ordinary course of the law is not adequate. {¶ 22} Relator cites a paragraph from the Supreme Court of Ohio's decision in Collins. In Collins, the question presented to the court was whether the state, in a criminal case, may prosecute an appeal from an order granting a defendant's pre-trial motion to suppress evidence. The court considered the jurisdiction of the Court of Appeals and legislation enacted by the general assembly and then considered similar cases from court's in other states. Thereafter, the court noted there are only four delineated instances wherein the state can appeal in a criminal case, and noted that the state is in a position distinctly different from that of an accused. Specifically, if a defendant's motion to suppress evidence is overruled, the defendant may challenge the correctness of that order in appellate proceedings following the conviction. Although the court did find that the granting of a defendant's motion to suppress evidence was a final order, that order was not appealable because of the exclusive nature of R.C. 2945.70. {¶ 23} In the middle of the court's decision as the court was wrestling with the issue at hand, the court considered whether or not it was fair to the issues to permit the state to appeal from the granting of a defendant's motion to suppress evidence. In that regard, the court stated: No. 19AP-347 6 A further and most persuasive distinction between the four procedural devices set forth in R. C. 2945.70 and a motion to suppress evidence is the present complete absence of legal guidelines in this state regarding the status of an accused, pending appellate determination of the propriety of the order of suppression. An unbonded accused, under present law, would spend months and perhaps years behind bars while the efficacy of the state's appeal was determined. If the sustaining of the motion was eventually upheld and the accused then released from custody, a reasonable person would be hard pressed to offer any excuse for such a failure of our judicial system to move with constitutional swiftness and fairness in maintaining the essential balance between society and those charged with crime. If the sustaining of the motion were reversed upon appeal, but the defendant later won acquittal, those months or years of incarceration would represent an equally unacceptable breach of justice.1 (Emphasis added.) Id. at 112. {¶ 24} The court's decision in Collins explains why the state cannot appeal from a court decision to grant a criminal defendant’s motion to suppress evidence–it would unduly delay a determination of guilt or innocence. Contrary to relator's assertion, the Collins case does not require this court grant a writ of mandamus here so he can challenge the denial of his motion for funds. As this court stated in relator's appeal, at this point in time, no one knows whether or not the police officer will testify nor does anyone know about what that officer would testify. Further, while relator is currently considered not indigent because he was able to post bond and is no longer incarcerated, it is conceivable that he could present evidence that he is indigent and therefore the question would come before the court again. At this time, relator's request for writ of mandamus is, at best, premature. Further, as this court stated in dismissing relator's appeal, relator does have an adequate remedy in the ordinary course of the law by way of appeal. {¶ 25} Because relator has an alternative remedy in the ordinary course of the law, relator cannot establish that he is entitled to a writ of mandamus. As such, this court should grant respondent's motion and dismiss relator's case. /S/ MAGISTRATE STEPHANIE BISCA 1 This is the paragraph upon which relator relies. No. 19AP-347 7 NOTICE TO THE PARTIES Civ.R. 53(D)(3)(a)(iii) provides that a party shall not assign as error on appeal the court's adoption of any factual finding or legal conclusion, whether or not specifically designated as a finding of fact or conclusion of law under Civ.R. 53(D)(3)(a)(ii), unless the party timely and specifically objects to that factual finding or legal conclusion as required by Civ.R. 53(D)(3)(b).

2020-12-01 20:11:35.467516+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2020/2020-Ohio-5489.pdf

[Cite as Sangeri v. Yerra, 2020-Ohio-5489 .] IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT Ashok K. Sangeri, : Plaintiff-Appellant, : No. 19AP-675 v. : (C.P.C. No. 17DR-4286) Sahitya Yerra, : (REGULAR CALENDAR) Defendant-Appellee. : D E C I S I O N Rendered on December 1, 2020 On brief: Wood Long Family Law, and Jessica M. Wood, for appellant. Argued: Jessica M. Wood. On brief: Sanjay K. Bhatt, for appellee. Argued: Sanjay K. Bhatt. APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations BRUNNER, J. {¶ 1} Plaintiff-appellant, Ashok K. Sangeri ("Sangeri"), appeals from the judgment entry and final divorce decree entered by the Franklin County Court of Common Pleas, Division of Domestic Relations on September 4, 2019. For the following reasons, we affirm. I. FACTS AND PROCEDURAL HISTORY {¶ 2} Sangeri and Sahitya Yerra ("Yerra") entered into an arranged marriage on April 17, 2016. No children were born as issue of the marriage. The parties separated just over one year after the marriage. On November 20, 2017, Sangeri filed a complaint for divorce. On February 10, 2018, Yerra filed her answer; she did not file a counterclaim. On January 15, 2019, Sangeri filed an amended complaint to include, as an additional ground for divorce, that the parties were living separate and apart without cohabitation for more than one year. Yerra did not contest that allegation. No. 19AP-675 2 {¶ 3} During the pendency of the case, Yerra filed a motion for temporary orders. Upon review of the parties' respective affidavits and in consideration of the parties' incomes, assets, and liabilities, the magistrate ordered Sangeri to pay spousal support in the amount of $1,500 per month for 8 months, commencing February 1, 2018. On June 21, 2019, the trial court denied Sangeri's motion for a de facto termination date of the marriage. {¶ 4} A contested two-day trial was conducted on June 25 and 26, 2019 before a judge of the Division of Domestic Relations. It is undisputed that the parties were married in India on April 17, 2016, and that their parents had brokered the marriage. At the time of their engagement, Yerra lived in India, whereas Sangeri was living in Columbus, Franklin County, Ohio and working for L-Brands, where he had been employed for at approximately 8 years at that time. Sangeri earned $125,103 in 2016 and $126,900 in 2017 at L-Brands. {¶ 5} It also is undisputed that Yerra, after becoming engaged to Sangeri, came to the United States on a student visa and began her studies at New Hampshire University. Yerra testified she wanted to transfer to Indiana Technical University in order to be closer to Sangeri, but he did not agree to the transfer. {¶ 6} The parties dispute the basis for their marriage. Yerra asserted throughout her testimony her belief that she was fraudulently induced to marry Sangeri. She testified that, not long after their wedding, Sangeri told her he only married her so that his younger brother could marry. Yerra testified Sangeri and she returned to India for the wedding of Sangeri's younger brother. Thereafter, Sangeri told her that, with his brother's marriage accomplished, the purpose of their own marriage was over, and he was going to file for divorce. {¶ 7} Sangeri disputed Yerra's account of these events. He testified that he entered the marriage at his parents' instigation. He also testified that his brother did not meet the woman he later married until after Sangeri's engagement to Yerra. Sangeri testified that it was his understanding at the time he became engaged to Yerra that Yerra planned to come to the United States on a dependent visa until she could secure a student visa and attend the New Hampshire University. Sangeri testified that, after the parties' wedding in India, they returned to the United States separately, about two days apart. Sangeri returned to Columbus, and Yerra returned to New Hampshire. Sangeri testified that the parties' relationship after their wedding was good, and that they spoke regularly and met many No. 19AP-675 3 times. He testified that he noticed a shift in Yerra's attitude toward him when they went to India for his brother's wedding. He described their subsequent communications as argumentative and the marriage as "rocky." (June 25, 2019 Tr. at 40.) Sangeri testified his relationship with Yerra continued to deteriorate to the point that he told her he thought their marriage was over, and he felt she agreed. Sangeri testified that he sought legal advice to terminate the marriage in September 2017. He filed for divorce November 20, 2017. {¶ 8} Yerra testified that, while she was attending school in New Hampshire, she wanted to come to Columbus to visit Sangeri, but that Sangeri dissuaded her, claiming financial distress and refusing to pay for Yerra's travel to Columbus. Sangeri denied refusing to have Yerra visit but acknowledged he had not wanted to purchase the more expensive airline tickets for last-minute trips because it was a financially stressful time for him. {¶ 9} Yerra disputes Sangeri's claim of financial stress, testifying that he received income as a silent partner in an information technology service company, Telligen Tech. Sangeri denied being a silent partner in Telligen Tech or receiving income from it. He testified the company belonged to friends he helped out occasionally, even lending them substantial amounts of money while he was married to Yerra. He acknowledged the company has office locations at Airport Drive in Columbus, Ohio and in Hyderabad, India. Yerra also pointed to money Sangeri transferred to India, asserting the money was to pay Telligen Tech employees in India. Sangeri denied Yerra's assertion, testifying that the money transfers of $9,996 and $16,491 he made during the marriage were to his family and friends in India. {¶ 10} Yerra testified that, following her graduation from university, she continued to be in the United States on a student visa, on Optional Practical Training ("OPT") status. The expiration date of her OPT status was August 2020, with no guarantee that it would be renewed. Yerra's employment required her to live in the New York/New Jersey area. She testified that her net income was $4,000 a month. She shared a three bedroom home with four to five people, and her monthly rent fluctuated from $1,000 to $2,000, depending on the number of people living in the house. She incurred additional expenses for transportation, food, and other necessities. No. 19AP-675 4 {¶ 11} Yerra testified she wanted to stay married to Sangeri. She stated she would be the first person in her community to be divorced and was reluctant to return to India, due to the stigma attached to a divorced woman. {¶ 12} After the trial concluded, the parties submitted their respective proposed findings of facts and conclusions of law. {¶ 13} On September 4, 2019, the trial court issued a judgment entry for decree of divorce, findings of fact and conclusions of law. The trial court found that the duration of the marriage was from April 17, 2016 to June 26, 2019. The trial court granted the divorce to Sangeri on the grounds that the parties had lived separate and apart for a period in excess of one year without cohabitation. Additionally, the trial court allocated martial and non- marital assets and made a distributive award to Yerra. Based on the parties' testimony and evidence adduced at trial, the trial court set forth in the divorce decree the following Conclusions of Law, directly addressing the parties' respective credibility: This Court is vested with broad discretion when fashioning a division of both marital property and marital debt. The award need not be equal but it must be equitable. The Court considers that spousal support is justifiable in this case, but based on the positions of the parties, a strict division of assets as revealed in testimony and by evidence presented at trial, as well as an award to [Yerra] for Attorney Fees, may be most appropriate in this matter. Awarding [Yerra] all marital equity in the Claver Condo is an appropriate substitute for spousal support in this matter. [Sangeri] attempts to make arguments for reducing the marital equity in the home based on the argument that "he alone contributed". The Court rejects this argument as an inappropriate attempt to reintroduce a de facto termination theory of the case, which with this Court has already disposed. [Yerra] testified she believed she was fraudulently induced to marry [Sangeri] in a scheme for an elder brother to marry first in order that [Sangeri's] younger brother be able to make a match considered advantageous to his family. The Court heard persuasive testimony on this topic. But the Court does not need to make a decision on these emotionally-laden matters in order to craft an equitable award based on the needs and relative dependencies of the parties. [Yerra] credibly demonstrated, through testimony and evidence, that she is vocationally vulnerable due to her visa limitations in the United States. Equally persuasive was her testimony that she is reluctant to return to her home country No. 19AP-675 5 where she would face extreme stigma in her own culture of being a divorced woman, and has [sic] lacks significant personal resources. The Court found [Sangeri] to lack credibility on the issue of transfers he made before filing for divorce and regarding his role in Telligen Tech. [Yerra] and her Counsel were required to expend time and resources to substantiate funds due to [Sangeri's] lack of transparency and non-disclosure. If full transparency existed, it may be that [Sangeri's] assets are far greater than what has been established in this Court. (Decree of Divorce at 5-6.) {¶ 14} The trial court, based on its findings of fact and conclusions of law, issued the following orders in the Division of Property section of the divorce decree: 1. Yerra was awarded all the marital equity of $18,210.43 in the rental property located at 4120 Claver Drive, Columbus, Ohio ("Claver Condo"). The trial made this award in lieu of spousal support. 2. Sangeri was ordered to pay Yerra the following sums of money:  $19,563, the amount equal to one-half the funds Sangeri withdrew prior to filing for divorce;  $9,996, the amount equal to one-half the marital funds transferred to India;  $20,000, the amount equal to one-half the monies Sangeri was then known to have received from Telligen Tech during the marriage;  $16,491, the amount equal to the funds Sangeri transferred to his friends and family prior to filing for divorce. 3. Each party to maintain their bank accounts as titled in their own name.  Each party to retain any and all personal property in their respective possession and control, including jewelry, household goods, and furniture.  Sangeri to retain the 2007 Infiniti G35 and any other vehicles in his possession. No. 19AP-675 6 (Decree of Divorce at 7-9.) {¶ 15} Additionally, the trial court found there was no marital debts. {¶ 16} The trial court awarded Yerra $10,000 in attorney fees and ordered Sangeri to pay the same. {¶ 17} Finally, the trial court issued orders regarding the parties' stipulations with respect to determining the marital value of Sangeri's 401(k) plan with L-Brands, a Morgan Stanley investment account, and an AST Equity Plan Solutions account. {¶ 18} In conclusion, the trial court stated it was "not required to make factual findings regarding each piece of evidence, and the omission of a fact from this decision does not suggest that the court did not consider that fact." (Decree of Divorce at 11.) {¶ 19} Sangeri now appeals. II. ASSIGNMENTS OF ERROR {¶ 20} Sangeri presents for our review 11 assignments of error: [1.] The trial Court erred and abused its discretion by granting 100% of the equity in the 4120 Claver Drive property to [Yerra]. [2.] The trial court erred and abused its discretion by ordering [Sangeri] to pay $20,000 to [Yerra]. [3.] The trial court erred and abused its discretion by ordering [Sangeri] to pay $19,563 to [Yerra]. [4.] The trial court erred and abused its discretion by ordering [Sangeri] to pay $9,996 to [Yerra]. [5.] The trial court erred and abused its discretion by ordering [Sangeri] to pay $16,491 to [Yerra] to the extent this was ordered twice. [6.] The trial court erred and abused its discretion by granting $10,000 in attorney fees to [Yerra]. [7.] The trial court erred and abused its discretion by finding the jewelry given to the parties as part of their wedding ceremony was [Yerra's] separate property. [8.] The trial court erred and abused its discretion by finding there was no marital debt. No. 19AP-675 7 [9.] The trial court erred and abused its discretion by failing to find the parties['] bank accounts to be marital assets and failing to equitably divide such. [10.] The trial court erred and abused its discretion by ordering [Sangeri] to pay to [Yerra] one-half the marital value of the L- Brands Stock. [11.] The trial court erred and abused its discretion by ordering a division of assets and debts that was not equitable. III. DISCUSSION A. Determination and Division of Marital Property {¶ 21} Ten of Sangeri's 11 assignments of error—all except his sixth assignment of error regarding attorney fees—relate to the trial court's determinations regarding the parties' marital and non-marital property and how to divide any marital property equitably. We first address those 10 assignments of error. 1. Law and Standards of Review {¶ 22} In divorce proceedings, the trial court is required to determine what constitutes marital property and what constitutes separate property. R.C. 3105.171(B). Marital property does not include separate property. R.C. 3105.171(A)(3)(b). Separate property is defined by statute, in relevant part, as "[a]ny gift of any real or personal property or of an interest in real or personal property that is made after the date of the marriage and that is proven by clear and convincing evidence to have been given to only one spouse." R.C. 3105.171(A)(6)(a)(vii). The statute further provides that the commingling of separate property with any other type of property does not destroy its identity, unless the separate property is not traceable. R.C. 3105.171(A)(6)(b). When the parties contest whether an asset is marital or separate property, it is presumed to be marital property unless proven otherwise. Wolf-Sabatino v. Sabatino, 10th Dist. No. 10AP-1161, 2011-Ohio- 6819, ¶ 11. The party requesting that an asset be classified as separate property bears the burden of tracing it to his or her separate property. Id. {¶ 23} We review a trial court's determination of property as marital or separate under a manifest weight standard and will affirm a trial court's determination if it is supported by some competent, credible evidence. Roush v. Roush, 10th Dist. No. 15AP- 1071, 2017-Ohio-840 , ¶ 18, citing Banchefsky v. Banchefsky, 10th Dist. No. 09AP-1011, 2010-Ohio-4267 , ¶ 36. No. 19AP-675 8 {¶ 24} After determining what constitutes marital property and what constitutes separate property, the court is required to divide the marital and separate property equitably. R.C. 3105.171(B). With respect to marital property, R.C. 3105.171(C)(1) provides that marital property shall be divided equally, unless an equal division would be inequitable, in which case the property shall be divided in the manner the court determines equitable. The trial court must value the marital property to determine an appropriate division. See Raymond v. Raymond, 10th Dist. No. 11AP-363, 2011-Ohio-6173 , ¶ 22 ("To comply with its duty [under R.C. 3105.171(C)(1)], the trial court must value and divide all marital property in a divorce, and in most cases, the failure to do so amounts to an abuse of discretion. Although a trial court possesses broad discretion to determine the value of marital property, it may not omit valuation altogether.") (Citations omitted.) {¶ 25} We review a trial court's determination of the value of marital property for abuse of discretion. Beagle v. Beagle, 10th Dist. No. 09AP-353, 2009-Ohio-6570 , ¶ 11 ("A trial court has broad discretion to determine the value of marital property, and its determination will not be disturbed on appeal absent an abuse of that discretion."); Grody v. Grody, 10th Dist. No. 07AP-690, 2008-Ohio-4682 , ¶ 20 ("A trial court has broad discretion in developing a measure of value for property in a divorce case."). 2. First Assignment of Error {¶ 26} In his first assignment of error, Sangeri asserts the trial Court erred and abused its discretion by granting 100 percent of the equity in the Claver Condo to Yerra. The trial court found Sangeri's assertion essentially renewed his motion for a de facto termination date of the marriage, a motion the trial court had already denied. We agree. {¶ 27} It is undisputed that Sangeri purchased the Claver Condo in January 2017, while the parties were married. The trial court determined that the Claver Condo is marital property. {¶ 28} In the divorce decree, the trial court explicitly found it was more appropriate and equitable to award Yerra the full amount of the condo's equity in lieu of spousal support. The trial court found that "[c]redible testimony and evidence was shown to indicate [Sangeri] wanted [Yerra] to be dependent on him, he maintained financial control in such a manner that she was dependent on him, and the marriage itself was arranged in a way to increase her dependence." (Decree of Divorce at 4.) The trial court explained that its reasoning in making this award "is based on observation and weighing of the credibility No. 19AP-675 9 of each party, the lack of transparency by [Sangeri] regarding financial transactions, and the clear disparity of income and financial vulnerability which puts [Yerra] in a weaker position." (Decree of Divorce at 7.) Additionally, as noted previously, the decree contains the trial court's specific rejection of Sangeri's argument that he alone contributed to the Claver Condo, finding his argument "an inappropriate attempt to reintroduce a de facto termination theory of the case, which with this Court has already disposed." (Decree of Divorce at 6.) {¶ 29} "The first step in making an equitable distribution of marital property is to determine the duration of the marriage." Heyman v. Heyman, 10th Dist. No. 05AP-475, 2006-Ohio-1345 , ¶ 31. R.C. 3105.171(A)(2)(a) creates a presumption that the term of a marriage for purposes of property valuation is the time from the date of the marriage through the date of the final hearing in an action for divorce. Meeks v. Meeks, 10th Dist. No. 05AP-315, 2006-Ohio-642 , ¶ 50. If the court determines use of that date would be inequitable, however, it may select a termination date that it considers equitable. R.C. 3105.171(A)(2)(b). "[A] trial court may use a de facto termination of marriage date when the evidence clearly and bilaterally shows that it is appropriate based upon the totality of the circumstances." Meeks at ¶ 50. The court has discretion whether to use the final hearing date or a de facto termination date and this decision is subject to review for abuse of discretion. Id. {¶ 30} In the matter before us, the trial court's explanation as to why it rejected the de facto termination date of the marriage requested by Sangeri is supported by competent, credible evidence. The trial court's decision clearly sets forth a rational evidentiary basis for awarding Yerra the full marital equity in the Claver Condo. Moreover, the trial judge was best situated to access the credibility of the witnesses and the evidence. Therefore, we find the trial court did not err or abuse its discretion in making this award, and this Court will not disturb the award. {¶ 31} Accordingly, the first assignment of error is overruled. 3. Depleted Marital Funds – Second, Third, Fourth, and Fifth Assignment of Error {¶ 32} In his second, third, fourth, and fifth assignments of error, Sangeri asserts the trial Court erred and abused its discretion by ordering him to pay Yerra $20,000, representing one-half of the money Sangeri was known to have received from Telligen Tech No. 19AP-675 10 during the marriage; $19,563, representing one-half the amount of money Sangeri withdrew before he filed for divorce; $9,996, representing one-half of the marital funds Sangeri transferred to India; and $16,491, representing one-half of the funds Sangeri transferred to his family and friends before he filed for divorce, an amount that Sangeri argues he is being ordered to pay twice. {¶ 33} The decree contains the trial court's rationale with respect to these four orders. The trial court determined that, based on Sangeri's Affidavit of Property and credible evidence adduced at trial, the record demonstrated that Sangeri had depleted marital assets prior to filing for divorce. The decree contains the trial court's findings of facts based on testimony, including the following: d. Credible testimony, including admissions by [Sangeri], during the trial suggest that [Sangeri] is a silent partner in * * * Telligen Tech * * *. The Court is convinced that sufficient testimony and physical evidence was shown at trial to support a finding that [Sangeri] has unreported ownership stake or some form of business relationship in or with this company that increases his assets and access to capital. The parties do not appear to be in a position to undertake a more thorough forensic analysis. Consequently, the Court must simply include this evidentiary issue in its weighing of equities. e. [Sangeri] received a check on June 6, 2017 for $40,000 from Telligen Tech. [Sangeri] claimed the check was repayment for a loan made to the company. Credible testimony and physical evidence shows [sic] that this amount represents potential income to [Sangeri]. Whether it is income or a loan, there are no credible business documentation to support [Sangeri's] position in the matter. It is, at the very least, an informal transfer of marital property. Therefore, the Court will treat it as a marital asset. *** g. [Sangeri] testified that he sought legal advice to terminate his marriage around September 2017. He filed for divorce November 20, 2017. h. [Sangeri] holds the following accounts. According to credible testimony and evidence, various sums totaling $39,125.93 were withdrawn in close proximity to [Sangeri] filing for divorce: i. Digital Federal Credit Union (DUC) # *849 No. 19AP-675 11 ii. Chase Bank # *839 [Sangeri] was unwilling or unable to state a credible or appropriate business or personal reason for these transfers. i. [Sangeri] transferred funds totaling $19,992.29 to India from 2/1/17 to 5/28/19. {Sangeri] contends these funds were to his parents for support. [Yerra] testified the transfers were related to [Sangeri's] interest in Telligen Tech and its India operations. The parties were subject to a Standard Mutual Temporary Restraining Order November 21, [2017]1. The Court finds that regardless of the purpose of the transfers, they were not exempted by the TRO, as they are not "day to day spending" in the sense of the agreement[.] j. In his Affidavit of Property, [Sangeri] acknowledged transfers to friends and family totaling $32,982. These transfers included $20,000 to Telligen Tech principal Ashwin Puppala. [Sangeri] was unwilling or unable to state a credible or appropriate business or personal reason for these transfers. He claimed he wanted to "help his friends." The Court does not find this to be an appropriate answer and the large transfer in particular raises questions about whether [Sangeri] and the recipient of this large gift followed applicable federal regulations for cash transfers. In any event, the Court considers these marital assets depleted without the consent or knowledge of [Yerra], and [Sangeri] is required to make her whole. (Decree of Divorce at 3-5.) {¶ 34} In the divorce decree, the trial court summarized its findings that Sangeri had depleted these martial assets, stating: [Sangeri] seeks to ignore this depletion of these marital assets and additionally credit him $4,613.50 for a payment made to [Yerra] that he had already been required to pay, had not paid, and made the payment in Court. The Court will not countenance either argument. It is clear from the evidence and testimony provided that [Sangeri] not only depleted marital assets prior to divorce, he transferred funds to India outside the mutual standard Temporary Restraining Order; and displayed a thorough lack of transparency regarding his assets and interests. [Sangeri's] behavior amounts to either willful or reckless financial misconduct. The Court addresses this 1 A typographical error in the September 4, 2019 divorce decree states the TRO issued November 21, 2019. The record in this matter clearly reflects that the TRO issued November 21, 2017, the day after Sangeri filed his divorce complaint. No. 19AP-675 12 imbalance by requiring [Sangeri] to make payment of these funds to [Yerra] as her half of marital assets that were either willfully or recklessly depleted. (Decree of Divorce at 8.) {¶ 35} Both parties provided conflicting testimony as to the source and dispersal of these funds. The trial court found Yerra's testimony credible and Sangeri's testimony not credible. Moreover, the trial court Sangeri's actions violated the mutual standard temporary restraining order the trial court had issued. {¶ 36} "It is the place of the trial court, not the reviewing court, to assess the credibility of the witnesses." Heyman at ¶ 18. Under the circumstances in this case, we conclude there was competent, credible evidence to support the trial court's conclusions and, therefore, the findings that Sangeri willfully or recklessly depleted these funds. Consequently, there is no abuse of discretion. {¶ 37} The second, third, fourth, and fifth assignments of error are overruled. 4. Jewelry – Seventh Assignment of Error {¶ 38} Sangeri's seventh assignment of error asserts the trial Court erred and abused its discretion by finding the jewelry given to the parties as part of their wedding ceremony was Yerra's separate property. {¶ 39} In divorce proceedings, the trial court is required to determine what constitutes marital property and what constitutes separate property. R.C. 3105.171(B). Marital property does not include separate property. R.C. 3105.171(A)(3)(b). Separate property is defined by statute, in relevant part, as "[a]ny gift of any real or personal property or of an interest in real or personal property that is made after the date of the marriage and that is proven by clear and convincing evidence to have been given to only one spouse." R.C. 3105.171(A)(6)(a)(vii). The statute further provides that the commingling of separate property with any other type of property does not destroy its identity, unless the separate property is not traceable. R.C. 3105.171(A)(6)(b). When the parties contest whether an asset is marital or separate property, it is presumed to be marital property unless proven otherwise. Wolf-Sabatino at ¶ 11. The party requesting that an asset be classified as separate property bears the burden of tracing it to his or her separate property. Id. We review a trial court's determination of property as marital or separate under a manifest No. 19AP-675 13 weight standard and will affirm a trial court's determination if it is supported by some competent, credible evidence. Roush at ¶ 18, citing Banchefsky at ¶ 36. {¶ 40} The parties gave conflicting testimony regarding who had provided the jewelry, to whom, and when. Sangeri testified that Yerra and he received gold jewelry from her parents and his parents. He stated he had received a bracelet, a ring, and a necklace chain, while she received a couple of necklaces. However, Sangeri was unable to produce any admissible documentary evidence to support his testimony that his parents had purchased some of the jewelry and the jewelry provided by both sets of parents had been given to the parties jointly. {¶ 41} Yerra testified that no jewelry in her possession had been given to her by Sangeri's parents. She acknowledged that she had had some jewelry while she was staying with Sangeri in Columbus, but she had taken that jewelry with her when the parties traveled to India for the wedding of Sangeri's younger brother and left it with her parents when she returned to the United States. Yerra testified on cross-examination that the jewelry that was given to her at her wedding was purchased by her parents, and that was the jewelry she left with her parents. On redirect, she testified that neither Sangeri nor his parents had given her any jewelry at the time of the parties' wedding or thereafter. She stated that the jewelry Sangeri was describing had been given to her by her parents prior to her marriage. {¶ 42} In the divorce decree, the trial court found that the jewelry belonged solely to Yerra and thus was not marital property. The trial court explained its finding as follows: [Sangeri] claims he gave certain jewelry, valued according to his estimate to be $20,000, to [Yerra] which he now deems marital property. He provided grainy black and white photos and "receipts" as evidence. The Court is unable to make any determination regarding the composition or value of the jewelry in these photos. The "receipts" shown appear to be a calculation of numbers written on a jewelers' letterhead. [Sangeri] fails to establish any relationship between the "receipts" and the jewelry in the photos, and has also not established that he purchased the jewelry at all, or that he gave it to [Yerra]. Any jewelry in [Yerra's] possession, or any she placed with her family, is her separate property and shall remain her separate property. [Sangeri's] attempts to raise an issue of [Yerra] not including wedding jewelry on her Affidavit No. 19AP-675 14 of Property, but, in the Court's view, the inclusion of wedding jewelry on Property Affidavits is not typical. (Decree of Divorce at 9.) {¶ 43} To the extent Sangeri challenges the credibility of Yerra's testimony, those issues were raised at trial and the trial court was able to consider them in evaluating and weighing the evidence. The trial court found that Yerra's testimony overcame the presumption that the jewelry was marital property. "It is the place of the trial court, not the reviewing court, to assess the credibility of the witnesses." Heyman at ¶ 18. Although nothing in the record appears to support the trial court's finding that "the inclusion of wedding jewelry on Property Affidavits is not typical," we find that to be harmless error. (Decree of Divorce at 9.) Under the circumstances in this case, we conclude there was competent, credible evidence to support the trial court's conclusion and, therefore, the finding that the jewelry was Yerra's separate property was not against the manifest weight of the evidence. {¶ 44} The seventh assignment of error is overruled. 5. Eighth Assignment of Error {¶ 45} In his eighth assignment of error, Sangeri asserts the trial Court erred and abused its discretion by finding there was no marital debt. {¶ 46} In its Findings of Fact, the trial court found that "[Sangeri's] credit card liabilities include $2,164.07 (Chase Bank) and $14,946.99 (Bank of America). [Sangeri] confirmed that a portion was for payment of his attorney fees, and did not confirm the sources of the other liabilities." (Decree of Divorce at 5.) {¶ 47} In the divorce decree, the trial court stated did not find any marital debt in this matter. {¶ 48} The property to be divided in a divorce proceeding includes not only the parties' assets but also any debts incurred by the parties. Marrero v. Marrero, 9th Dist. No. 02CA008057, 2002-Ohio-4862 . Marital debt has been defined as any debt incurred during the marriage for the joint benefit of the parties or for a valid marital purpose. Ketchum v. Ketchum, 7th Dist. No. 2001 CO 60 , 2003-Ohio-2559 , citing Turner, Equitable Distribution of Property, Section 6.29, at 455 (2d Ed.1994, Supp.2002). {¶ 49} Sangeri's testimony indicated that his credit card debt immediately prior to his marriage of $12,981, and at the time of trial was $17,111.06, an increase of $4,130.06. No. 19AP-675 15 Sangeri also testified he paid approximately $10,000.00 to his divorce attorneys using his Chase Bank and Bank of America credit cards. He was unable, however, to provide an accounting of what amount of the debt of either of these credit cards was for and whether it related to payments to his attorneys in the underlying matter. He conceded in his brief that any monies paid to his divorce counsel via credit card may be "grounds to consider some debt not marital." (Sangeri's Brief at 37.) {¶ 50} The parties stipulated that the allocation of credit card debt "shall be left to the determination of the Court." (Tr. at 71.) In the absence of any credible testimony or evidence as to what portion of Sangeri's credit card was for valid marital purposes, the trial court could not determine what, if any, of Sangeri's credit card debt was a marital debt. Consequently, the trial court did not find it equitable under the circumstances to consider any portion of the parties' debt to be marital debt. The trial found, therefore, no marital debt in this matter and ordered each party "to pay for and hold the other harmless on all personal debts and obligations." (Decree of Divorce at 9.) Given the record before us, we find the trial court did not abuse its discretion in reaching this determination. {¶ 51} According, the eighth assignment of error is overruled. 6. Ninth Assignment of Error {¶ 52} In his ninth assignment of error, Sangeri asserts the trial Court erred and abused its discretion by failing to find the parties' bank accounts to be marital assets and failing to equitably divide such. {¶ 53} R.C. 3105.171(F)(2) requires the trial court to consider the parties' assets and liabilities in the event the trial court makes an equitable distribution of the marital assets. The record before us demonstrates that the trial court considered this and other factors and set forth the basis for an equitable distribution in the divorce decree. As previously discussed, the trial court specifically addressed Sangeri's lack of transparency regarding financial matters as well as the evidence that Sangeri had depleted the marital assets prior to filing for divorce, violating the TRO in the process. Having addressed those inequities, the trial court determined that, in other regards, it was equitable that each party maintain their bank accounts as titled in their own name. {¶ 54} Yerra submits that, by ordering each party to keep their own bank accounts, the trial court made an equal division of the total bank account balances. Given the No. 19AP-675 16 circumstances of this case, we agree, and find the trial court did not abuse its discretion in this regard. {¶ 55} The ninth assignment of error is overruled. 7. Tenth Assignment of Error {¶ 56} In his tenth assignment of error, Sangeri asserts the trial Court erred and abused its discretion by ordering Sangeri to pay to Yerra one-half the marital value of the L-Brands Stock. {¶ 57} The trial court addressed this issue under the Stipulations section of the divorce decree. The parties had stipulated that 300.88457 of Sangeri's share in L-Brands, from his Employee Stock Purchase Plan, were marital property. The parties further stipulated that, as of the date of the trial, the stock price was $24.17 per share. Thus, these shares had a total value of $7,235.14, as stipulated by the parties. Divided equally, each party would receive $3,617.57. {¶ 58} The trial court's determination incorporated the parties' stipulations as to how many shares constituted marital property and what the value of those shares was as of a date certain designated by the parties. The parties also stipulated that "[t]he division of the marital portion and whether or not it is equitable for defendant to receive value for such shall be left to the determination of the court." (Tr. at 71.) The trial court stated in the decree that the ordered distribution was determined under principles of equity. Consequently, we find the trial court did not abuse its discretion with respect to the division of the L-Brands shares. {¶ 59} The tenth assignment of error is overruled. 8. Eleventh Assignment of Error {¶ 60} In his eleventh assignment of error, Sangeri asserts the trial court erred and abused its discretion by ordering a division of assets and debts that was not equitable. {¶ 61} We disagree. For all the foregoing reasons, we find the trial court did not err or abuse its discretion in division of marital assets and debts. Accordingly, the eleventh assignment of error is overruled. B. Attorney's Fees – Sixth Assignment of Error {¶ 62} Sangeri's sixth assignment of error assets the trial court erred and abused its discretion by granting $10,000 in attorney fees to Yerra. We disagree. No. 19AP-675 17 {¶ 63} In divorce proceedings, a trial court may award "all or part of reasonable attorney's fees and litigation expenses to either party if the court finds the award equitable." R.C. 3105.73(A). A trial court " "may consider the parties' marital assets and income, any award of temporary spousal support, the conduct of the parties, and any other relevant factors the court deems appropriate' " to determine whether an award is equitable. Rodgers v. Rodgers, 8th Dist. No. 105095, 2017-Ohio-7886 , ¶ 60, quoting Gentile v. Gentile, 8th Dist. No. 97971, 2013-Ohio-1338 , ¶ 69. {¶ 64} We have held that an award of attorney fees under R.C. 3105.73 lies within the sound discretion of the trial court and will not be reversed absent an abuse of discretion. Wehrle v. Wehrle, 10th Dist. No. 12AP-386, 2013-Ohio-81 ¶ 47, citing Huffer v. Huffer, 10th Dist. No. 09AP-574, 2010-Ohio-1223 , ¶ 19, citing Parker v. Parker, 10th Dist. No. 05AP-1171, 2006-Ohio-4110 , ¶ 36. {¶ 65} Yerra testified that she had been able to pay only $2,500 to her attorney as of the time of trial. In comparison, Sangeri had paid his attorneys $10,000. Yerra directs our attention to a holding of Rodgers at ¶ 70: "Where the amount of an attorney's time and work is evident to the trier of fact, an award of attorney fees, even in the absence of specific evidence to support the amount, is not an abuse of discretion." Dotts v. Schaefer, 5th Dist. Tuscarawas No. 2014 AP 06 0022, 2015-Ohio-782 , ¶ 17. Indeed, domestic relations courts often rely on their own knowledge and experience to determine the reasonableness of attorney fees. See e.g., Long v. Long, 10th Dist. Franklin No. 11AP-510, 2012-Ohio-6254 , ¶ 20 ("The trial court * * * is not required to hear [expert] testimony and may rely on its own knowledge and experience to determine the reasonableness of the amount claimed."); Lundy v. Lundy, 11th Dist. Trumbull No. 2012-T- 0100, 2013-Ohio-3571 , ¶ 55 (Trial court "may evaluate the work performed by an attorney in a domestic-relations action * * * [a]nd * * * may use its own knowledge and experience to determine the reasonableness [of] the amount claimed."); Groza-Vance v. Vance, 162 Ohio App.3d 510 , 2005-Ohio-3815 , 834 N.E.2d 15 , ¶ 44 (10th Dist.) (same); Gore v. Gore, 2d Dist. Greene No. 09-CA-64, 2010-Ohio-3906 , ¶ 39. {¶ 66} The trial court explained its decision on the subject matter ordering Sangeri to pay Yerra for her attorney's fees: Due to [Sangeri's] lack of transparency regarding transfers of funds around the time of his filing for divorce, large checks No. 19AP-675 18 written to friends and family without an identified purpose, and receipt of funds from Telligen Tech, he required [Yerra] and her attorney to use time and resources to address those issues. Whether the financial misconduct is deliberate on the part of [Sangeri] or merely his manner of doing business, it put [Yerra] in a detrimental position. Therefore, the Court awards [Yerra] $10,000 in attorney fees, and orders [Sangeri] to pay the same. (Decree of Divorce at 10.) {¶ 67} We find the trial court's award of attorney fees and expenses was readily explained and within the trial court's discretion. {¶ 68} The sixth assignment of error is overruled. IV. CONCLUSION {¶ 69} For the foregoing reasons, having independently examined the record, reviewed the parties' briefs, and listened to the parties' oral arguments, we conclude the trial court did not err in its decision. Accordingly, we overrule all eleven of Sangeri's assignments of error and affirm the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations. Judgment affirmed. SADLER, P.J., and NELSON, J., concur.

2020-12-01 20:11:36.413602+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2020/2020-Ohio-5488.pdf

[Cite as Katsande v. Ohio Dept. of Medicaid, 2020-Ohio-5488 .] IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT Cecilia Katsande, : Appellant-Appellant, : No. 19AP-375 (C.P.C. No. 18CV-10810) v. : (REGULAR CALENDAR) Ohio Department of Medicaid, : Appellee-Appellee. : D E C I S I O N Rendered on December 1, 2020 On brief: Wright & Noble, L.L.C., and Robert D. Noble, for appellant. Argued: Robert D. Noble. On brief: Dave Yost, Attorney General, and Morgan Tendam, for appellee. Argued: Morgan Tendam. APPEAL from the Franklin County Court of Common Pleas BROWN, J. {¶ 1} This is an appeal by appellant, Cecilia Katsande, from a judgment of the Franklin County Court of Common Pleas affirming an order of appellee, Ohio Department of Medicaid ("ODM"), finding Medicaid overpayments to appellant for services during an audit period from July 1, 2011 through June 30, 2014. {¶ 2} The following background facts are taken primarily from the trial court's decision and entry of May 13, 2019, as well as from a report and recommendation of a hearing examiner for Ohio Department of Developmental Disabilities ("DODD"), filed August 10, 2018. Appellant is certified by DODD as an independent provider and receives No. 19AP-375 2 Medicaid reimbursement through ODM as a provider of services to R.D., a developmentally disabled individual. {¶ 3} On June 12, 2017, DODD issued a "Notice of Intended Action and Opportunity for Hearing" to appellant, advising her of DODD's intention to recover $53,568.32 in Medicaid overpayments, and further advising appellant of the right to request a hearing. Appellant requested a hearing and the matter came for hearing before a DODD hearing examiner on July 10, 2018. {¶ 4} In its decision, the trial court noted the following evidence presented during the administrative hearing. By letter dated October 26, 2016, appellant "was notified of a pending review of the payments she received as a provider during the period from July 1, 2011 through June 30, 2014." (Decision at 2.) The letter requested appellant provide all service and support documentation for "homemaker personal care services (APC service code), on site/on call services (AOC service code), and transportation (ATN service code) for the selected months." (Decision at 2.) {¶ 5} In response to the October 26, 2016 letter, appellant "provided her purported service documentation for APC and AOC services." (Decision at 2.) Appellant "did not provide documentation for ATN services, but instead wrote a note stating: 'I did not include my HPC Transportation Monthly Mileage Sheets because they were destroyed when we had an accident at [R.D.'s] apartment in 2015.' " (Decision at 2.) Inasmuch as "no documentation was provided for ATN services, DODD issued full findings for recovery of amounts paid for those services for the months selected for review." (Decision at 2.) {¶ 6} DODD reviewed the documentation provided by appellant for the APC and AOC services, and "compared the units of service [appellant] was paid to provide each day with the units of service actually provided according to the service documentation." (Decision at 2.) On March 28, 2017, Joel Speyer, a DODD auditor, called appellant to discuss the preliminary findings of the review. During this conversation, appellant told Speyer "that the APC and AOC documentation she had submitted had been recreated after her original documentation had been destroyed in an accident." (Decision at 2.) The review by DODD gave appellant "no credit for documentation allegedly destroyed in the accident or for the documentation that had been recreated," and the findings indicated a total "overpayment of $53,568.32." (Decision at 3.) No. 19AP-375 3 {¶ 7} Speyer requested "additional information about the accident and insurance claim," and "prepared a memorandum memorializing his conversations with [appellant] regarding the claims involving the accident." (Decision at 3.) According to the memorandum, appellant stated during the initial conversations "that the accident occurred in 2015," but she "later stated that the accident occurred in 2013." (Decision at 3.) In response to Speyer's request, appellant "provided insurance documentation regarding a claim relating to a 2013 accident in which an automobile struck R.D.'s apartment." (Decision at 3.) The documents "contained an itemized list of destroyed property," but the list "did not include service documentation." (Decision at 3.) {¶ 8} Appellant "testified that she observed the aftermath of the automobile colliding with R.D.'s apartment." (Decision at 3.) According to appellant, "she kept the service documentation 'underneath the TV cabinet' on the wall where the car collided with the apartment." (Decision at 3.) Appellant "stated that she reported the accident to the service coordinator, Lisa Robinson." (Decision at 3.) {¶ 9} Tracey Crawford, a compliance manager with the Franklin County Board of Developmental Disabilities ("FCBDD"), testified she "followed up with Ms. Robinson, who was then on extended medical leave, with questions about the accident." (Decision at 3.) In an e-mail to Crawford, Robinson "replied that [appellant] did not report that her documentation was destroyed." (Decision at 3.) Robinson further stated appellant "did not typically keep documents in the client's home, but kept them in her own home." (Decision at 4.) {¶ 10} Halina Schroeder, DODD's audit chief, testified that DODD's waiver review committee met to discuss the matter, and the committee "did not accept the claim that the documents were destroyed in an accident for several reasons." (Decision at 4.) Specifically, Schroeder noted that: (1) "the service coordinator stated in an email that she never saw service documentation within R.D.'s home," (2) appellant had "initially submitted documentation to DODD's auditor without mentioning an accident, and did not claim the APC and AOC documentation was destroyed until after the auditor stated that she would have monetary findings," (3) "Schroeder stated that her office did not receive a police report or incident report regarding the accident," and (4) "[t]he allegedly destroyed documents were not mentioned in the insurance claim." (Decision at 4.) Schroeder further testified No. 19AP-375 4 the committee was "skeptical that the documentation was in the home of the individual at the time that the accident occurred." (Decision at 4.) {¶ 11} On August 10, 2018, the hearing examiner issued a 31-page report and recommendation concluding the agency's audit findings "were legally and factually valid." (Decision at 4.) The hearing examiner determined the testimony and documentary evidence presented at the hearing established that appellant "recreated documentation she claimed was destroyed in the 2013 accident; that she did not enlist the assistance of the Department or the Franklin County Board in the aftermath of the accident; and that she did not inform the Department of the fact she recreated the documentation until after the waiver review was completed." (Report and Recommendation at 28.) The hearing examiner found "no direct evidence at hearing, other than [appellant's] uncorroborated testimony, that R.D.'s service documentation was destroyed in the 2013 accident," and that the record contained "no copies of retrieved documentation or photographs of damaged documents." (Report and Recommendation at 28.) {¶ 12} The hearing examiner found appellant "not credible in her explanation of the accident and the destruction of the documents." (Report and Recommendation at 28.) The hearing examiner noted appellant was "inconsistent in her reporting of the date of the accident to the Department," and that appellant "stated she kept the destroyed documentation in a cabinet in R.D.'s apartment, at the exact spot where the car struck the apartment, while other documentation kept in another location was not damaged." (Report and Recommendation at 28.) The hearing examiner cited testimony by appellant that the documentation "was kept in 'kind of a box,' * * * and that the documents remained in the box when the car struck the apartment, but all of the documents were apparently ruined by oil." (Report and Recommendation at 28.) The hearing examiner recommended the director of ODM issue an adjudication order of overpayment to appellant in the amount of $53,568.32. {¶ 13} Appellant filed objections to the hearing examiner's report and recommendation. On December 17, 2018, the director of ODM issued an adjudication order adopting the hearing examiner's report and recommendation and implementing the findings against appellant of an overpayment of $53,568.32. No. 19AP-375 5 {¶ 14} On December 31, 2018, appellant filed an appeal with the trial court from the order of ODM. On May 13, 2019, the trial court issued its decision and entry affirming the adjudication order, finding it was supported by reliable, probative, and substantial evidence and was in accordance with law. {¶ 15} On appeal, appellant sets forth the following single assignment of error for this court's review: THE TRIAL COURT COMMITTED REVERSIBLE ERROR AND ABUSED ITS DISCRETION WHEN IT DETERMINED THAT THE DIRECTOR OF THE OHIO DEPARTMENT OF MEDICAID ISSUED AN ADJUDICATION ORDER SUPPORTED BY RELIABLE, PROBATIVE, AND SUBSTANTIAL EVIDENCE, AND IS IN ACCORDANCE WITH LAW. {¶ 16} Under her single assignment of error, appellant asserts the trial court abused its discretion in determining the order of ODM, finding an overpayment, was supported by reliable, probative, and substantial evidence, and was in accordance with law. Appellant contends the DODD hearing examiner relied on impermissible and prejudicial hearsay evidence, and further argues the trial court either failed to consider evidence relevant to the waiver of overpayment, or similarly considered impermissible hearsay and inferences. {¶ 17} In considering an administrative appeal under R.C. 119.12, "a common pleas court 'may affirm the order of the agency complained of in the appeal if it finds, upon consideration of the entire record and any additional evidence the court has admitted, that the order is supported by reliable, probative, and substantial evidence and is in accordance with law.' " Mocznianski v. Ohio Dept. of Medicaid, 10th Dist. No. 18AP-894, 2020-Ohio- 165, ¶ 20, citing R.C. 119.12(M); Pons v. Ohio State Med. Bd., 66 Ohio St.3d 619 (1993). In order "[t]0 be 'reliable,' evidence must be dependable and true within a reasonable probability." Mocznianski at ¶ 20, quoting Our Place, Inc. v. Ohio Liquor Control Comm., 63 Ohio St.3d 570 , 571 (1992). In order "[t]o be 'probative,' evidence must be relevant or, in other words, tend to prove the issue in question." Id. In order "[t]o be 'substantial,' evidence must have importance and value." Id. Further, in reviewing an administrative appeal " 'the common pleas court does not provide a trial de novo, but rather "the Court of Common Pleas must give due deference to the administrative resolution of evidentiary conflicts." ' " Id., quoting Capital Care Network of Toledo v. Ohio Dept. of Health, 153 Ohio No. 19AP-375 6 St.3d 362, 2018-Ohio-440 , ¶ 25, quoting Univ. of Cincinnati v. Conrad, 63 Ohio St.2d 108 , 110-11 (1980). {¶ 18} By contrast, "[t]he standard of review for a court of appeals in an administrative appeal is even more limited." Id. at ¶ 21. With respect to "factual issues, we must determine whether the common pleas court abused its discretion." Id., citing Avalon Resort & Spa LLC v. State Unemp. Comp. Rev. Comm., 10th Dist. No. 18AP-212, 2018- Ohio-4294, ¶ 20, citing Miracle Home Health Care, L.L.C. v. Ohio Dept. of Job & Family Servs., 10th Dist. No. 12AP-318, 2012-Ohio-5669 , ¶ 18. However, in determining whether the decision of the agency "was in accordance with law, we exercise plenary review." Id., citing Avalon at ¶ 20, citing BNA Constr., Ltd. v. Dir. of Ohio Dept. of Job & Family Servs., 10th Dist. No. 16AP-317, 2017-Ohio-7227 , ¶ 25, citing BRT Transp. LLC v. Ohio Dept. of Job & Family Servs., 10th Dist. No. 14AP-800, 2015-Ohio-2048 , ¶ 15. {¶ 19} R.C. 5164.58(A) states, "[i]f a state agency that enters into a contract with the department of medicaid under section 5162.35 of the Revised Code identifies that a medicaid overpayment has been made to a medicaid provider, the state agency may commence actions to recover the overpayment on behalf of the department." Thus, R.C. 5164.58 affords "state agencies in contract with ODM for the administration of components of the Medicaid program with the authority to commence actions to recover Medicaid overpayments made to a Medicaid provider." Mocznianski at ¶ 17. {¶ 20} Pursuant to R.C. 5164.58(B)(1), "[t]he state agency shall attempt to recover the overpayment by notifying the medicaid provider of the overpayment and requesting voluntary repayment." In accordance with R.C. 5164.58(B)(2), "[i]f the state agency is unable to obtain voluntary repayment of an overpayment, the agency shall give the medicaid provider notice of an opportunity for a hearing in accordance with Chapter 119. of the Revised Code." In the event a Medicaid provider timely requests a hearing under R.C. 119.07 "the state agency shall conduct the hearing to determine the legal and factual validity of the overpayment." Id. On completion of such hearing, "the state agency shall submit its hearing officer's report and recommendation and the complete record of proceedings, including all transcripts, to the medicaid director for final adjudication." Id. {¶ 21} Similar to the facts and circumstances in a recent decision of this court, the waiver review period at issue in the instant case (i.e., the audit period of July 1, 2011 through No. 19AP-375 7 June 30, 2014) "encompasses multiple revisions to the controlling administrative code provisions." Mocznianski at ¶ 18. In this respect, former Ohio Adm.Code 5123:2-9-05(B) (rescinded effective April 19, 2012) provided in part as follows: " 'Service documentation' means the maintenance of all records and information on one or more documents, including documents that can be printed from electronic software programs, in such a manner as to fully disclose the nature and extent of the services delivered." {¶ 22} Former Ohio Adm.Code 5123:2-9-30(B)(20), effective April 19, 2012, stated as follows: "Service documentation" means all records and information on one or more documents, including documents that may be created or maintained in electronic software programs, created and maintained contemporaneously with the delivery of services, and kept in a manner as to fully disclose the nature and extent of services delivered that shall include the items delineated in paragraph (E) of this rule to validate payment for medicaid services.1 {¶ 23} Former Ohio Adm.Code 5123:2-9-06(J)(8), effective April 19, 2012, stated in part: "Providers of HCBS waiver services shall maintain the records necessary and in such form to disclose fully the extent of HCBS waiver services provided, for a period of six years from the date of receipt of payment or until an initiated audit is resolved, whichever is longer." Further, "[t]he records shall be made available upon request to the department," and providers "who fail to produce the records requested within thirty days following the request shall be subject to decertification and/or loss of their medicaid provider agreement." Ohio Adm.Code 5123:2-9-06(J)(8). {¶ 24} Appellant contends the trial court's decision seems to "suggest," because of her failure to provide the APC, AOC and ATN service records for the relevant time period (July 1, 2011 through June 30, 2014), that ODM's payments are recoverable regardless of whether or not she presented evidence explaining the destruction of the documents. (Appellant's Brief at 15.) Appellant argues the trial court "appears to have accepted" the position that no calamity causing the destruction of service records overcomes ODM's authority to recoup payments for services not documented. (Appellant's Brief at 16.) 1 Former Ohio Adm.Code 5123:2-9-30(B)(22), effective January 1, 2014, contained a similar provision. No. 19AP-375 8 Appellant maintains the trial court "may not have consider[ed] the destruction of the documents or the potential for waiver of the overpayments." (Appellant's Brief at 17.) {¶ 25} At the outset, we do not find support for appellant's contention that the trial court deemed the payments recoverable regardless of whether she presented evidence explaining the destruction of documents. While the trial court noted it was "uncontested" appellant "does not have service documentation for services provided for which she received payment," we do not read the court's decision as simply disregarding appellant's testimony as to the circumstances surrounding the lack of documentation. (Decision at 6.) Rather, the trial court, in considering the record presented, accepted the findings and conclusions of the hearing examiner that appellant's testimony (i.e., her explanation as to the events) was not credible.2 {¶ 26} Appellant also requests this court to "presume that the evidence relied upon by Appellee was not admissible and inherently unreliable." (Appellant's Brief at 18.) Appellant's argument is based on her claim the hearing examiner impermissibly relied on hearsay evidence in affirming the order of ODM. Appellant acknowledges the hearsay rule is relaxed in administrative hearings; she maintains, however, that ODM and the hearing examiner utilized inherently unreliable and prejudicial hearsay evidence to support its decision as to overpayment. Specifically, appellant points to evidence of an e-mail exchange between witness Crawford and a non-witness, Robinson, admitted during the administrative hearing as state's Exhibit No. 20. Appellant contends the hearing examiner relied on these e-mails, albeit not exclusively, to discredit her testimony that she reported the collision to Robinson, and appellant challenges the trial court's determination that the evidence at issue was not inherently unreliable. {¶ 27} By way of background, Crawford testified during the administrative hearing that she serves as a point of contact for DODD's audit office with respect to claims in Franklin County. Crawford provided testimony regarding an inquiry she received from 2 We also find unpersuasive appellant's suggestion that this court is "left to guess" whether the trial court applied the burden of persuasion to the correct party because its decision is "devoid of any language acknowledging that DODD bore the burden of production and persuasion." (Appellant's Brief at 19-20.) Appellant acknowledges the lack of any case law "stating specifically that the common pleas court must acknowledge the party bearing the burden." (Appellant's Brief at 20.) Here, appellant does not argue the trial court misstated the appropriate standard, and we note the hearing examiner indicated "[t]he Department has the burden of proof of its allegations by a preponderance of the evidence." (Report and Recommendation at 5.) No. 19AP-375 9 DODD regarding a provider (i.e., appellant), and she identified state's Exhibit No. 20 as "an e-mail chain between DODD Bureau Chief Halina Schroeder and myself." (Tr. at 59.) {¶ 28} Crawford testified that Schroeder "wanted to know if our service coordinator knew that [appellant's] documentation was destroyed in a car accident. She wanted to know if I could talk to the service coordinator and try to gather information for her." (Tr. at 59-60.) In response, Crawford informed Schroeder that "the service coordinator was on an extended medical leave, and we were waiting to hear from her." (Tr. at 60.) {¶ 29} During direct examination, Crawford identified an e-mail she received "from the service coordinator, Lisa Robinson." (Tr. at 61.) Crawford had asked Robinson if she "recalled [appellant] telling her that she had been in a car accident that destroyed her provider documentation," and whether appellant "had ever asked her for copies of her own documentation that she had previously submitted to the service coordinator." (Tr. at 61.) Over objection by appellant's counsel, Crawford testified that Robinson "did not recall any accident that the provider is speaking of," and appellant "did not report that her documentation was destroyed." (Tr. at 62.) Crawford further testified the service coordinator related "[appellant] did not typically keep the documents in the client's home. She kept them in her own home." (Tr. at 63.) Crawford sent the e-mail documents to DODD as part of the waiver review. {¶ 30} Under Ohio law, "administrative agencies are, generally, not bound by the strict rules of evidence applied in court." Westlake v. Ohio Dept. of Agriculture, 10th Dist. No. 08AP-71, 2008-Ohio-4422 , ¶ 19, citing Haley v. Ohio State Dental Bd., 7 Ohio App.3d 1 , 6 (2d Dist.1982). Accordingly, "hearsay is not precluded in administrative hearings." Id., citing Black v. State Bd. of Psychology, 160 Ohio App.3d 91 , 2005-Ohio-1449 , ¶ 17 (10th Dist.). Although the hearsay rule is relaxed, "the discretion to consider hearsay evidence may not be exercised in an arbitrary manner." Id., citing Haley at 6; Holzhauser v. State Med. Bd., 10th Dist. No. 06AP-1031, 2007-Ohio-5003 . {¶ 31} The Supreme Court of Ohio "has recognized that 'evidence which might constitute inadmissible hearsay where stringent rules of evidence are followed must be taken into account in proceedings * * * where relaxed rules of evidence are applied.' " Id., quoting Simon v. Lake Geauga Printing Co., 69 Ohio St.2d 41 , 44 (1982). Similarly, this court has held that "hearsay evidence may be considered in administrative proceedings No. 19AP-375 10 where the statement is not inherently unreliable and constitutes substantial, reliable, and probative evidence." Id., citing Doersam v. Gahanna, 10th Dist. No. 96APF12-1766 (Sept. 30, 1997). {¶ 32} In addressing appellant's objection to the hearing examiner's reliance on state's Exhibit No. 20, the trial court concluded appellant "has not shown that Exhibit 20 is inherently unreliable" as it contained e-mails from "Robinson, who dealt with Appellant and [R.D.] as the service coordinator, and thus had personal knowledge of these matters." (Decision at 7.) The trial court further found appellant had "not shown that the Hearing Examiner's conclusions were based solely or primarily on Exhibit 20," as such exhibit "was only one piece of evidence considered." (Decision at 7.) Rather, the trial court noted, the hearing examiner citied "a number of factors," including findings that: (1) appellant's explanation of the accident and the destruction of documents was " 'not credible,' " (2) "there was no direct evidence the documents were destroyed," (3) the evidence contained "no copies of retrieved damaged documents or photographs of damaged documents," and (4) appellant was "inconsistent in her reporting of the date of the accident," claiming that "she kept the documents at the exact spot where the car struck the apartment," and stating "the documents were 'kept in a box' but were apparently ruined by oil, etc." (Decision at 7.) {¶ 33} Appellant primarily contends the e-mail exchange was inherently unreliable because it contained hearsay. As noted, however, administrative agencies are "not bound by the strict rules of evidence applied in court." Haley at 6. As to the issue of reliability, the e-mail exchange itself was prompted by a request from DODD to gather information as part of an internal agency review. During the hearing, the FCBDD compliance manager (Crawford) testified as to her e-mail correspondence with the service coordinator (Robinson) assigned to the case and, as noted by the trial court, the service coordinator dealt directly with appellant and R.D. and had personal knowledge of the information at issue. On review, we find no abuse of discretion by the trial court in failing to find the hearing examiner relied on inherently unreliable evidence in admitting the e-mail exchange. See Holzhauser at ¶ 20 (trial court did not abuse its discretion in failing to find agency erred in admitting hearsay evidence; nothing in administrative hearing record No. 19AP-375 11 indicated testimony of former spouse was inherently unreliable where he testified about his personal observations and experiences with ex-wife). {¶ 34} Further, "[w]hen evidence is admitted despite being hearsay, a trier of fact must evaluate its reliability and the weight to give that evidence." Groves v. Ohio State Racing Comm., 10th Dist. No. 19AP-577, 2020-Ohio-1250 , ¶ 18, citing In re Petition for Annexation, 52 Ohio App.3d 8 , 15 (10th Dist.1988). See also Rudd v. Ohio Dept. of Job & Family Servs., 2d Dist. No. 2015-CA-9, 2015-Ohio-3796 , ¶ 14 ("When evidence is admitted despite being hearsay, the trier of fact must consider whether the evidence is reliable enough to be considered substantial and probative."). Here, the record supports the trial court's determination that ODM did not rely solely on the challenged evidence to reach its determination. Groves at ¶ 21 (no error in commission's consideration of hearsay evidence where record does not support appellant's claim that commission relied entirely on hearsay evidence to reach its conclusion, and because the appellant fails to identify any inherently unreliable hearsay relied on by commission). Accordingly, we discern no abuse of discretion by the trial court in failing to find error in the hearing examiner's decision to admit the exhibit at issue. {¶ 35} Appellant next contends the hearing examiner erred in finding her testimony not credible. According to appellant, the hearing examiner's credibility determination relied upon "six (6) facts and/or inferences" improperly drawn and not supported by reliable or probative evidence. (Appellant's Brief at 32.) {¶ 36} In response, ODM disputes appellant's contention that the hearing examiner laid out six specific facts and/or inferences in determining that her documentation was not actually destroyed in the accident; rather, ODM argues, appellant extrapolates facts and inferences she believes the hearing examiner relied on. {¶ 37} Appellant first contests the hearing examiner's finding that the record contained no copies of retrieved documentation, nor any photographs of destroyed documents. Appellant, citing her own testimony that service documents were destroyed when an automobile crashed into the apartment of her client (R.D.), maintains she was prohibited from entering the residence after the collision due to safety concerns. {¶ 38} In addressing this challenge to the hearing examiner's report, the trial court noted appellant did not dispute the finding at issue (i.e., that there were no copies of No. 19AP-375 12 retrieved documentation or photographs of the destroyed documents) but, instead, argued the hearing examiner failed to consider her testimony. The trial court determined, however, upon review of the report and recommendation, that the hearing examiner "considered Appellant's testimony at length, but * * * found the testimony not credible as to the explanation of the destruction of the documents." (Decision at 8.) {¶ 39} The record supports the trial court's determination that the hearing examiner considered appellant's testimony on this issue. Specifically, the hearing examiner noted appellant's testimony that she stored "the documentation for the APC, AOC, and ATN service codes 'underneath the TV cabinet' on the wall where the car collided with the apartment.' " (Report and Recommendation at 21.) The hearing examiner cited appellant's statement that, upon arriving at the apartment, she "observed that '[t]he car broke, like, the engine, and there's water flowing, like, oil flowing on the floor,' " and that appellant "stated * * * the point of impact with the apartment was where she normally sits in the living room." (Report and Recommendation at 20.) The hearing examiner further cited appellant's testimony that " '[h]alf of the car was inside the apartment,' " " 'there was water leaking from the trunk of the car,' " oil was leaking out, and the fire department " 'sprayed because there was smoke coming out of the engine of the car.' " (Report and Recommendation at 20.) {¶ 40} As noted by the trial court, while the report and recommendation detailed appellant's explanation for the destruction of the records, the hearing examiner specifically found appellant "not credible in her explanation of the accident and the destruction of the documents." (Report and Recommendation at 28.) To the extent appellant contests the hearing examiner's finding that there were no copies of retrieved documentation, such finding is factually correct, and we find no error by the trial court in rejecting this argument. {¶ 41} Appellant next challenges the hearing examiner's finding that she was inconsistent in reporting the date of the accident to ODM. Appellant notes that ODM witness Speyer recorded in a memorandum that appellant initially reported the accident occurred in 2015 when, in fact, it occurred in 2013. Appellant argues she mistakenly stated 2015, but was just confused and maintains she did not intentionally misrepresent such fact. {¶ 42} In response, ODM argues the evidence indicates appellant herself wrote that the ATN documentation was destroyed in 2015. ODM contends this fact is significant No. 19AP-375 13 because, if service documentation actually was destroyed in an accident in June 2013, appellant should have been able to provide such documentation subsequent to that date (i.e., from June 2013 through the end of the audit period in June 2014). ODM notes, however, appellant failed to provide any ATN documentation whatsoever, and ODM asserts appellant's failure to submit documentation after the accident casts doubt on whether she maintained it contemporaneously before the accident. {¶ 43} The record indicates appellant argued before the trial court Speyer "recorded in a memo that Appellant initially reported that the accident occurred in 2015." (Appellant's Trial Brief at 11.) In addressing this contention, the trial court, noting that appellant "suggests the inconsistency came from one of [ODM's] witnesses," pointed to the fact "the record contains a written statement by Appellant that the accident occurred in 2015." (Decision at 8.) {¶ 44} The record supports the trial court's finding that appellant herself reported the accident occurred in 2015. Specifically, on a DODD form titled "Documentation of Interruption of Service," appellant wrote in the comments section: "I did not include my HPC Transportation Monthly Mileage Sheets because they were destroyed when we had an accident at [R.D.'s] apartment in 2015." (State's Ex. No. 27 at 2.) The trial court also noted appellant's hearing testimony that the documents were destroyed in 2013, and we discern no error by the trial court in failing to find the hearing examiner relied on an improper inference as to this issue. {¶ 45} Appellant next challenges the hearing examiner's finding as to her testimony that she kept the destroyed service documents in a cabinet in the same spot where the vehicle crashed into the apartment, but that other documentation was kept in a location not damaged by the collision. According to appellant, this factor does nothing to discredit her testimony. {¶ 46} In addressing this argument, the trial court noted appellant "does not dispute that she testified, as the Hearing Examiner stated, that documents were kept in the exact location where the car struck the apartment, and that the documents remained in a box, yet were ruined by oil." (Decision at 9.) The trial court concluded that "[t]he cited testimony was weighed along with the other evidence in assessing credibility." (Decision at 9.) On review, we agree with the trial court's determination that the hearing examiner's finding No. 19AP-375 14 was based on appellant's own direct testimony, and the record indicates the hearing examiner properly considered and weighed this evidence in determining credibility. {¶ 47} Appellant also contends the hearing examiner erred in finding that "other witnesses, primarily Ms. Crawford, cast doubt on" appellant's claimed version of the facts. (Report and Recommendation at 28.) According to appellant, the hearing examiner's reliance on doubt expressed by DODD witnesses usurped the role of the factfinder to independently assess appellant's credibility. {¶ 48} The trial court, in addressing this objection, held that the "quoted statement" from the report and recommendation indicates the hearing examiner was "referring to doubt about the facts stated by Appellant," and that the hearing examiner "expressly assessed Appellant's credibility, and set forth reasons for his determination." (Decision at 9.) We agree with the trial court that, in context, the "doubt" cited by the hearing examiner was in reference to appellant's version of the events (i.e., appellant's testimony that she kept the destroyed documentation in the exact spot where the vehicle struck the apartment). On review, the record does not support appellant's claim that the hearing examiner abdicated his responsibility to independently assess or weigh the credibility of appellant. {¶ 49} As reflected in the above challenges to the administrative findings of fact and conclusions of law, appellant's primary contention on appeal is that the hearing examiner and trial court failed to properly credit her testimony, relying instead on the testimony and evidence presented by ODM. As set forth under the facts, appellant testified she maintained documentation for services provided from July 2011 to June 2014, but that service records were destroyed when a vehicle crashed into the home of R.D. Appellant stated she kept the AOC, APC, and ATN service records "underneath the TV cabinet" in R.D.'s living room, at the location where the vehicle struck the residence. (Tr. at 157.) According to appellant, those records were stored "in a box, kind of a box." (Tr. at 169.) {¶ 50} During cross-examination, in response to an inquiry as to why the box was not depicted in photographs of the accident, appellant stated: "If I knew all this would have happened, I would have pictured the box." (Tr. at 170.) When asked how she knew she had "performed all the services," appellant responded: "Because I'm there all the time. I know I did all that." (Tr. at 163.) No. 19AP-375 15 {¶ 51} Appellant first became aware of the waiver review "[w]hen they sent me the letter." (Tr. at 162.) She knew that documents "were missing." (Tr. at 163.) Appellant acknowledged she recreated the destroyed documentation to comply with DODD's request for documentation and agreed she did not list the destroyed documentation on the insurance policy. When asked how she recreated the documents, appellant testified she did not "know the dates," and that she "had to go through the ISP." (Tr. at 15-16.) Appellant could not remember when she prepared the recreated documents; she did not reference any old records because she "didn't have any." (Tr. at 16.) When asked how far back the records went, appellant responded: "I don't remember." (Tr. at 161.) She testified the accident happened in 2013, but that "I wrote 2015 * * * but when I went back, it was a mistake. It was 2013." (Tr. at 15.) {¶ 52} Speyer, the auditor assigned to appellant's waiver review, testified he had a phone conversation with appellant (on March 28, 2017) to discuss the preliminary findings of the audit. After Speyer informed her of the results, including monetary findings, appellant then indicated she had to "recreate the documentation because it had been destroyed in an accident." (Tr. at 22.) This was the "first time" Speyer was made aware of "an accident." (Tr. at 22.) Later that day, Speyer requested that appellant provide further information, including "[a] letter from the insurance company regarding the claim, a listing of items that were submitted as a claim, the date of the accident, and the general statement from the provider about the accident." (Tr. at 22.) Appellant subsequently informed Speyer she did not list the missing documentation on the insurance claim, and she also told Speyer the accident occurred in June 2013, "which conflicts with the initial statement." (Tr. at 24.) Upon reviewing the recreated documents, Speyer found inaccuracies, including "dates on the claims pay listings [that] didn't always match the dates on the documentation," as well as "discrepancies on the number of hours on any given day." (Tr. at 44.) {¶ 53} Crawford, an FCBDD compliance manager, testified she received an e-mail from DODD audit chief Schroeder asking "if our service coordinator knew that the provider's documentation was destroyed in a car accident." (Tr. at 59.) Crawford subsequently e-mailed the service coordinator, Robinson, asking "if she recalled [appellant] telling her that she had been in a car accident that destroyed her provider documentation." (Tr. at 61.) Robinson, who was on medical leave at the time, sent Crawford an e-mail stating No. 19AP-375 16 she "did not recall any accident that [appellant] is speaking of," and appellant "also did not report that her documentation was destroyed." (Tr. at 62.) Robinson further stated "the provider did not typically keep the documents in the client's home" but, rather, "kept them in her own home." (Tr. at 63.) {¶ 54} Schroeder, the audit chief for DODD, testified there was inadequate service support documentation for the claims paid to appellant during the period July 1, 2011 through June 30, 2014 for APC, AOC, and ATN service codes. With respect to the ATN service code, Schroeder noted "we could not perform any testing regarding those claims that were paid" because appellant stated "she did not have the documentation since they were damaged in an accident in 2015." (Tr. at 82.) Schroeder became aware that appellant reported the accident occurred in 2013 after Speyer "was holding the exit conference with her." (Tr. at 88.) Regarding the APC and AOC findings, Schroeder testified DODD could not accept documentation appellant "had previously submitted" as it "did not validate the nature and extent of the services * * * that were provided at the time." (Tr. at 82-83.) With respect to documentation for claims dated after the accident (June 23, 2013), Schroeder testified that "we accepted her documentation, and then we had findings for the discrepancies that existed between the documentation she submitted to us, compared to the claims that she was paid." (Tr. at 83.) According to Schroeder, the information submitted by appellant "did not agree to the number of units that she billed and was ultimately paid for * * * the APC and the AOC service codes." (Tr. at 91.) {¶ 55} Schroeder denied that DODD disputed the fact there was an accident at R.D.'s apartment. She stated, however, the waiver review committee was "skeptical that the documentation was in the home of the individual at the time that the accident occurred" in light of the service coordinator's statement "she had never seen the provider's documentation within the home of [R.D.]." (Tr. at 98.) According to Schroeder, the service coordinator's e-mails "added to the decision by the waiver review committee," but they were not the controlling factor as "a lot of factors were considered." (Tr. at 101.) {¶ 56} Schroeder noted appellant submitted documentation "to us never telling us it was recreated," and that it was "provided * * * to the auditor as if it was true and factual documentation." (Tr. at 101.) Not until after "the auditor called" and indicated there would be financial findings "was it brought up that there was an accident where the No. 19AP-375 17 documentation was destroyed." (Tr. at 101.) Schroeder further noted appellant initially reported that only transportation (ATN) documentation "was destroyed in an accident in 2015." (Tr. at 103.) Schroeder stated that "all of these items made the * * * committee skeptical about the situation." (Tr. at 102.) {¶ 57} In reaching the determination that the agency's findings of an overpayment were factually and legally valid, the hearing examiner, upon consideration of the hearing testimony and evidence, found appellant's explanation of the events not credible. Following objections, the director of ODM issued an adjudication order adopting the report and recommendation, noting in part that "the hearing examiner did not find the provider's explanation for the absence of these documents credible" based "in part" on "observance of the witnesses' demeanor," and that such finding "is afforded due deference." (ODM Adjudication Order at 1.) The trial court, upon review of the administrative record, deferred to the hearing examiner's credibility determinations and found reliable, probative, and substantial evidence to support the order of ODM. {¶ 58} On review, we find no abuse of discretion. The evidence presented during the administrative hearing indicated that appellant, in response to DODD's first request for documentation as part of the waiver review, reported that only her transportation (ATN) records had been destroyed when a vehicle struck the residence of R.D. In submitting documentation for APC and AOC services, appellant did not initially state those records had been destroyed in the accident, nor did she disclose the fact she had recreated the APC and AOC documents to comply with the waiver review request; rather, only after Speyer informed appellant of financial findings did she reveal the documents were not original copies. Based on the record presented, the hearing examiner (and waiver review committee) could have reasonably concluded that omissions by appellant during the audit process undermined her credibility. The evidence also indicated the recreated documentation for the AOC and APC service records contained billing discrepancies and inaccuracies. {¶ 59} Further, as noted by DODD, while appellant stated that her ATN service records were destroyed in the 2013 accident, appellant produced no ATN service records for the period subsequent to the accident (i.e., from June 2013 until the end of the audit period on June 30, 2014). Again, the hearing examiner could have reasonably viewed the No. 19AP-375 18 failure of appellant to produce any ATN records post-accident as casting doubt on whether she kept such records prior to the accident. The hearing examiner also noted an inconsistency in the reporting of the ATN records, i.e., appellant's written representation that they were destroyed in 2015 rather than 2013. While appellant defended this as a mistake, the hearing examiner was free to accept or reject her explanation for the inconsistency. The hearing examiner also cited the lack of corroborating evidence to support appellant's version of the events (i.e., the lack of photographic evidence and the failure to list the documents with the insurance company). {¶ 60} Appellant maintains the hearing examiner should have credited her testimony as the only reasonable explanation for her inability to produce the service records for the stated period. Under Ohio law, however, "a fact-finder is free to believe all, some or none of a witness's testimony." Mahajan v. State Med. Bd. of Ohio, 10th Dist. No. 11AP- 421, 2011-Ohio-6728 , ¶ 45, citing D'Souza v. State Med. Bd. of Ohio, 10th Dist. No. 09AP- 97, 2009-Ohio-6901 , ¶ 17. While the hearing examiner was free to accept appellant's version of events to explain the lack of documentation, such a finding was not required, and the record, as outlined above, contained evidence upon which the trier of fact could have found appellant's testimony lacked credibility. Here, the trial court declined to substitute its judgment for that of the hearing examiner with respect to the credibility of witnesses, and we find no abuse of discretion by the trial court in its determination that the order of ODM was supported by reliable, probative, and substantial evidence and was in accordance with law. {¶ 61} Based on the foregoing, appellant's single assignment of error is overruled, and the judgment of the Franklin County Court of Common Pleas, affirming the order of the director of Ohio Department of Medicaid, is affirmed. Judgment affirmed. SADLER, P.J., and LUPER SCHUSTER, J., concur. ______________________

2020-12-01 20:11:36.704521+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2020/2020-Ohio-5490.pdf

[Cite as In re A.S., 2020-Ohio-5490 .] IN THE COURT OF APPEALS OF OHIO TENTH APPELLATE DISTRICT In the Matter of: : No. 20AP-18 A.S., a minor child, : (C.P.C. No. 18JU-12900) Defendant-Appellant. : (REGULAR CALENDAR) D E C I S I O N Rendered on December 1, 2020 On brief: Ron O'Brien, Prosecuting Attorney, and Michael P. Walton, for appellee. Argued: Michael P. Walton. On brief: David K. Greer, for appellant. Argued: David K. Greer. APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations, Juvenile Branch SADLER, P.J. {¶ 1} Defendant-appellant, A.S., appeals from the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, Juvenile Branch, overruling his objections to the magistrate's decision to deny his motion to suppress and adjudicating him a delinquent minor as a result of having committed the offense of receiving stolen property. For the following reasons, we affirm. I. FACTS AND PROCEDURAL HISTORY {¶ 2} On November 5, 2018, a complaint was filed in Franklin County Court of Common Pleas, Division of Domestic Relations, Juvenile Branch, against appellant, a juvenile, alleging he received stolen property in violation of R.C. 2913.51, a felony of the fourth degree. Appellant entered a denial on January 18, 2019. {¶ 3} On February 1, 2019, appellant filed a motion to suppress statements made to law enforcement during an interview on September 16, 2018. Appellant argued he was No. 20AP-18 2 subjected to a custodial interrogation without knowingly and intelligently waiving his Miranda rights. Miranda v. Arizona, 384 U.S. 436 , 444 (1966). The case was referred to a magistrate pursuant to Juv.R. 40. {¶ 4} On May 30, 2019, the magistrate conducted a suppression hearing. At the hearing, the sole witness of plaintiff-appellee, State of Ohio, was Detective Jeremy Gabriel. Gabriel testified he has been a detective with the Franklin County Sheriff's Office for nearly 14 years. On September 16, 2018, a deputy contacted Gabriel concerning a juvenile detained for allegedly receiving a stolen vehicle. Gabriel was assigned to interview appellant regarding the stolen automobile. {¶ 5} The interview was recorded and played at the suppression hearing. While only a portion of the video was played during the hearing, the entire video was introduced as an exhibit. The video revealed Gabriel began the interview at 4:32 a.m. Gabriel entered the room and informed appellant he had attempted to contact appellant's mother but was unsuccessful. Appellant stated his mother will be "disappointed" and "shocked" when she hears about what had happened. (Suppression Tr. at 21.) Appellant requested a trash can stating that he might vomit. Gabriel asked if he had taken any drugs or ingested anything, which appellant denied. Appellant stated "[j]ust the situation is terrible, sir." (Suppression Tr. at 22.) Gabriel asked appellant his age and where he went to school. Appellant stated he was 15 years old and was a sophomore at Gahanna-Lincoln. When asked how he was doing in school, appellant said his grades were "alright." (Trial Tr. at 39.)1 Gabriel informed appellant that he was going to read him his rights and to let him know if he had any questions. Appellant inquired when he should ask the questions. Gabriel instructed appellant to wait to ask any questions until after he finished reading the waiver. Gabriel asked if appellant understood, which appellant responded in the affirmative. Gabriel read appellant the Miranda waiver and then engaged him in a series of questions: [Detective]: Do you have to talk to me? [Appellant]: Yes, sir. [Detective]: Do you have to talk to me? No. You understand? 1 The suppression hearing transcript does not document appellant's recorded response to Gabriel's question. The transcript from the trial documents shows appellant's response as "alright." After an independent review of the video, we find the trial transcript accurately reflects appellant's response to Gabriel's question. No. 20AP-18 3 [Appellant]: Oh, yeah. [Detective]: You understand what- [Appellant]: You're going to ask me if I have to talk to you? [Detective]: Yeah, do you have to? [Appellant]: No. [Detective]: Okay. Can you have a lawyer present with you at any time during our conversation? [Appellant]: Yes, sir. [Detective]: Yes. If you can't afford one, can you still have a lawyer? If you or your mother or anybody in your family can't afford it, do you still get one? [Appellant]: Yes. [Detective]: Yes. The Courts will appoint one to you for free, okay? [Appellant]: Okay. [Detective]: So, at any point during our conversation can you stop talking to me? [Appellant]: Yes, sir. [Detective]: Yes, you can. Do you understand your rights? [Appellant]: Yes, sir. [Detective]: Do you have any questions about your rights? [Appellant]: No, sir. [Detective]: No? [Appellant]: No. (Suppression Tr. at 23-25.) {¶ 6} The interrogation lasted a total of 13:35 minutes. There is no dispute that the waiver was not signed by appellant. In response to why Gabriel did not have appellant sign the waiver, Gabriel explained "[w]e don't have a policy necessarily in place where the defendant has to sign, it is more imperative that we demonstrate that I see that he understands [his] rights." (Suppression Tr. at 19.) Gabriel also testified he felt it was important to give further clarifying questions for juveniles. No additional witnesses were presented at the hearing. {¶ 7} On July 12, 2019, the magistrate denied the motion to suppress. Appellant filed objections to the magistrate's ruling on July 15, 2019. On August 28, 2019, the trial No. 20AP-18 4 court heard oral arguments on the objections and allowed supplemental briefing in the case. On September 19, 2019, the court overruled appellant's objections finding the issue was not ripe for review. {¶ 8} On October 17, 2019, the case proceeded to trial. Appellee called B.C. as its first witness. B.C. testified he has been a resident of Franklin County for ten years and is the registered owner of a red 2011 Mitsubishi Lancer. According to B.C., on September 2 or 3, 2018, his automobile was stolen outside his girlfriend's apartment. B.C. testified he reported the theft to the police immediately after noticing the car was missing. B.C. stated he did not give anyone permission to use the vehicle. According to B.C., law enforcement later informed him that the vehicle was recovered and to pick it up. B.C. stated he picked up the vehicle from the impound lot and noticed damage to the back bumper. B.C. paid $500 for his deductible to repair the damage to the vehicle. {¶ 9} Appellee called Deputy Jason Davis as its next witness. Davis testified he has been employed with the Franklin County Sheriff's Office for the last eight and one-half years. On September 16, 2018, Davis was working the third shift patrol in a marked cruiser. According to Davis, during the early morning hours, he was traveling westbound near the intersection of Hamilton Road and Morse Road when he ran a vehicle registration on his mobile data terminal for the vehicle next to him. The search of the automobile's registration indicated the vehicle had been reported stolen, and he initiated a traffic stop.2 Davis described the vehicle as a maroon four door. Davis stated when he approached, appellant was the sole occupant of the automobile. According to Davis, when asked to provide identification, appellant indicated that he did not have any identification on him. Davis testified he determined appellant was a juvenile without a valid driver's license. Davis placed appellant under arrest and took him to the I.D. Bureau and then Detective Bureau. Davis identified appellant in the courtroom as the driver that he arrested on September 16, 2018. Davis testified he made efforts to contact appellant's mother but ultimately had to transport appellant to Franklin County Children Services. {¶ 10} Appellee called Gabriel as its final witness. Gabriel testified Davis contacted him regarding a minor child arrested for possession of a stolen vehicle. According to 2 Appellant objected to this statement. The magistrate overruled the objection accepting the testimony not for the truth of the matter asserted but effect on the receiver as the cause for the stop. No. 20AP-18 5 Gabriel, he attempted to call the minor's mother prior to interviewing appellant but was unsuccessful. Gabriel identified appellant in the courtroom as the juvenile he interviewed on September 16, 2018 at the Detective Bureau. After a brief discussion of the Miranda warning, Gabriel testified as to the substance of his interview with appellant. According to Gabriel, appellant confessed he "kinda [sic] knew it [the vehicle] was stolen." (Trial Tr. at 29.) The video recording of the interview was then played for the magistrate. During the interview, appellant stated he got the vehicle around the fifth or sixth of September from a friend named "Jue." (Trial Tr. at 43.) Appellant stated he would use the vehicle as transportation for school, and the vehicle had been in his possession for one week or so. There is no dispute that appellee presented no evidence of the vehicle's license plate or vehicle identification number. {¶ 11} At the conclusion of appellee's case-in-chief, appellant moved for acquittal arguing that appellee presented insufficient evidence to prove ownership of the vehicle. The magistrate overruled the motion determining B.C. testified he was the daily driver, used the vehicle everyday going to work, and picked up the vehicle after it was impounded. Counsel for appellant declined to call any witnesses, and the parties proceeded with closing arguments. {¶ 12} On October 21, 2019, the magistrate issued his initial ruling finding appellant delinquent having committed the offense of receiving stolen property in violation of R.C. 2913.51, a felony of the fourth degree. On October 28, 2019, appellant objected to the magistrate's findings arguing there was insufficient evidence appellant was driving B.C.'s vehicle, and the magistrate erred in overruling the motion to suppress appellant's statements because he had not knowingly and intelligently waived his Miranda rights. {¶ 13} On November 25, 2019, the magistrate issued its findings of facts and conclusions of law. Appellant filed objections to the magistrate's decision on November 27, 2019, which were opposed by appellee. The court heard oral arguments on appellant's objections on December 4, 2019. {¶ 14} On January 3, 2020, the trial court overruled appellant's objections and adopted the magistrate's findings. The trial court concluded appellee proved beyond a reasonable doubt that appellant was a delinquent minor for committing the offense of receiving stolen property in violation of R.C. 2913.51. On the suppression issue, the trial No. 20AP-18 6 court agreed with the magistrate's findings allowing the statements of appellant as admissible evidence. The trial court required a $500 restitution order. {¶ 15} Appellant filed a timely appeal. II. ASSIGNMENTS OF ERROR {¶ 16} Appellant assigns the following as trial court error: [1.] The trial court erred in overruling the minor child's motion to suppress his statements to Detective Gabriel because the state failed to establish that the minor child, without a parent present, without sleep and not feeling well and the interrogation conducted in the middle of the night, and without a written waiver for him to review and sign, knowingly and intelligently waived his Miranda rights. [2.] The trial court erred in finding the minor child delinquent of receiving stolen property-motor vehicle when the state failed to establish that the vehicle the minor child was driving was that of [B.C.], the owner named in the Complaint. The trial court's delinquency finding therefore violated the Due Process Clause of the Fourteenth Amendment of the United States Constitution, which required sufficient proof for a conviction. III. LEGAL ANALYSIS A. Appellant's First Assignment of Error {¶ 17} In his first assignment of error, appellant argues the juvenile court erred by denying his motion to suppress. Specifically, appellant alleges he did not knowingly and intelligently waive his Miranda rights during the custodial interrogation on September 16, 2018. {¶ 18} The applicable standard of review on appeal from a trial court judgment that adopts a magistrate's decision varies based on the issues that were "(1) preserved for review through objections before the trial court and (2) raised on appeal by assignment of error." (Internal quotations omitted.) Fraley v. Ohio Dept. of Rehab. & Corr., 10th Dist. No. 18AP- 731, 2019-Ohio-2804 , ¶ 9; Feathers v. Ohio Dept. of Rehab. & Corr., 10th Dist. No. 16AP- 588, 2017-Ohio-8179 , ¶ 10; In re Adoption of N.D.D., 10th Dist. No. 18AP-561, 2019-Ohio- 727, ¶ 27. Accordingly, we will note the standard of review as they are presented in each assignment of error. {¶ 19} Appellate review of a motion to suppress presents a mixed question of law and fact. State v. Castagnola, 145 Ohio St.3d 1 , 2015-Ohio-1565 , ¶ 32, citing State v. No. 20AP-18 7 Burnside, 100 Ohio St.3d 152 , 2003-Ohio-5372 , ¶ 8. We are required to accept the trial court's findings of fact if supported by competent, credible evidence. Burnside at ¶ 8, citing State v. Fanning, 1 Ohio St.3d 19 (1982). "Accepting these facts as true, the appellate court must then independently determine, without deference to the conclusion of the trial court, whether the facts satisfy the applicable legal standard." Burnside at ¶ 8, citing State v. McNamara, 124 Ohio App.3d 706 , 710 (4th Dist.1997). We therefore review the trial court's application of the law de novo. {¶ 20} The Fifth Amendment to the United States Constitution and Article I, Section 10 of the Ohio Constitution ensure that no person shall be forced to be a witness against himself in a criminal proceeding. In re D.B., 10th Dist. No. 17AP-83, 2018-Ohio-1247 , ¶ 16, citing State v. Arnold, 147 Ohio St.3d 138 , 2016-Ohio-1595 , ¶ 30. In Miranda, the United States Supreme Court held that to protect against the inherent risk of coercion during a custodial interrogation, procedural safeguards are needed to ensure the defendant's right against self-incrimination. Miranda, 384 U.S. at 444 . A custodial interrogation is defined as " '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.' " In re D.B. at ¶ 17, quoting Miranda at 444. Accordingly, "[a] suspect in police custody 'must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires.' " State v. Lather, 110 Ohio St.3d 270 , 2006-Ohio-4477 , ¶ 6, quoting Miranda at 479. {¶ 21} The Supreme Court of Ohio has concluded that to determine whether a suspect is knowingly, intelligently, and voluntarily waiving his Miranda rights, the reviewing court must engage in a totality of the circumstances analysis. State v. Barker, 149 Ohio St.3d 1 , 2016-Ohio-2708 , ¶ 24, citing State v. Clark, 38 Ohio St.3d 252 , 261 (1988). The totality of circumstances includes: "(1) the accused's age, mentality, and prior criminal experience, (2) the length, intensity, and frequency of the interrogation, (3) the existence of physical deprivation or mistreatment, and (4) the existence of inducement or threat." In re D.B. at ¶ 18, citing State v. Valentine, 10th Dist. No. 14AP-893, 2016-Ohio- 277, ¶ 11. When the suspect is a juvenile, the factors include: " 'the juvenile's age, No. 20AP-18 8 experience, education, background, and intelligence' as well as his 'capacity to understand the warnings given him, the nature of his Fifth Amendment rights, and the consequences of waiving those rights.' " Barker at ¶ 24, quoting Fare v. Michael C., 442 U.S. 707 , 725 (1979). {¶ 22} The state of Ohio has declined to join other states that provide per se rules that invalidate a juvenile's Miranda waiver without additional protections, such as requiring a parent or guardian present, during an interrogation. State v. Barker, 1st Dist. No. C-130214, 2016-Ohio-7059 , fn. 1, citing Juvenile Miranda Waiver and Parental Rights, 126 Harv.L.Rev. 2359, 2362 (2003). The Supreme Court of Ohio has also declined to require a parent or guardian present during the interrogation of a juvenile writing, " '[w]e perceive no requirement in Miranda that the parents of a minor shall be read his constitutional rights along with their child, and that, by extension, both parent and child are required to intelligently waive those rights before the minor makes a statement.' " Barker, 2016-Ohio-7059 , at ¶ 13, quoting State v. Bell, 48 Ohio St.2d 270 , 276-77 (1976), rev'd on other grounds, Bell v. Ohio, 438 U.S. 637 (1978). The Supreme Court of Ohio did acknowledge the lack of a parent is a factor in determining whether the waiver was knowing, intelligent, and voluntary. Barker, 2016-Ohio-2708 , at ¶ 24, citing In re C.S., 115 Ohio St.3d 267 , 2007-Ohio-4919 , ¶ 96. {¶ 23} Considering the totality of the circumstances, we conclude appellant knowingly and intelligently waived his Miranda rights. As set forth previously, appellant was arrested in the morning hours of September 16, 2018. Prior to the interview, the record reflects Gabriel attempted to reach appellant's mother but was unsuccessful. While appellant was only 15 years old, the video evidence reveals he understood the rights as read to him by the detective, and appellant was alert and engaged during the interview. Appellant noted he was in high school and doing well in school. Throughout the interview, the detective made no overt threats, raised his voice, or coerced information from appellant. There is also no evidence of physical deprivation or mistreatment. While Gabriel did not have appellant sign the Miranda warning, the detective orally read the warning and asked appellant several additional questions to ensure he understood his rights before beginning the interview. In fact, when appellant misstated one of the rights, the detective corrected appellant then restated the question. While appellant was not offered food or water given No. 20AP-18 9 the interrogation only lasted 13 minutes, we find this factor insignificant. The fact that no parent was present during the interview is not enough to conclude appellant did not knowingly and intelligently waive his rights. {¶ 24} Appellant argues the detective's decision to interview him at 4:32 a.m. while appellant was not feeling well affected his ability to knowingly and intelligently waive his Miranda rights. We find this argument unpersuasive. First, when appellant requested a trash can, Gabriel asked if he had taken any drugs or ingested anything, which appellant denied. Appellant stated "[j]ust the situation is terrible, sir." (Suppression Tr. at 22.) The trial court concluded that appellant was upset as a result of the situation rather than physically ill. We find the trial court's factual interpretation reasonable as the video reflects appellant was engaged throughout the interview and appeared unaffected by the upset stomach. Regarding the late hour of the interview, the traffic stop occurred around 3:00 a.m., and appellant was interviewed at 4:32 a.m. It is logical the interrogation would occur after the arrest. Given the interview was only 13 minutes, we conclude the time of the interview did not meaningfully impact appellant's ability to knowingly and intelligently waive his Miranda rights. {¶ 25} While appellant relies on the Supreme Court of Ohio's ruling in Barker, 2016- Ohio-2708, the case does not stand for the proposition that appellant has claimed. In Barker, the Supreme Court of Ohio considered whether the statutory presumption of voluntariness under R.C. 2933.81(B), based on an electronically recorded interrogation, applied to juveniles. The Barker court found the presumption was unconstitutional for juveniles, and the case was remanded back to the First District Court of Appeals to consider, without the R.C. 2933.81(B) presumption, whether the juvenile knowingly, intelligently, and voluntarily waived his Miranda rights. On remand, the First District found that based on the totality of the circumstances, the juvenile had knowingly, intelligently, and voluntarily waived his Miranda rights. {¶ 26} The present case is analogous to Barker in a number of ways. Like Barker, appellant was a 15-year-old interrogated late at night with no parent present. While appellant was interviewed for approximately 13 minutes, Barker's interview lasted over 1 hour and 15 minutes. Barker, 2016-Ohio-7059 , at ¶ 31. In both cases, the juveniles were engaged and asked questions during various points in their interviews. While minimized No. 20AP-18 10 by the First District, there was also evidence the juvenile in Barker had borderline intelligence only reading at a third-grade level. Here, appellant was enrolled as a sophomore in high school and doing well in school. {¶ 27} Appellant also relies heavily on our decision in State v. Pablo, 10th Dist. No. 16AP-888, 2017-Ohio-8834 , in support of his position that appellant did not knowingly and intelligently waive his Miranda rights. In Pablo, the juvenile was charged with three counts of rape, two counts of kidnapping, one count of gross sexual imposition, and one count of felonious assault originating out of two separate incidents. The juvenile filed a motion to suppress statements made to law enforcement during an interrogation, which the trial court granted. The state appealed, and we affirmed the trial court's ruling finding the juvenile in Pablo did not knowingly and intelligently waive his Miranda rights. {¶ 28} While Pablo addressed similar issues of law, the facts in the case are distinguishable in several important ways. First, while the juvenile in Pablo was 16, the evidence suggested his level of intelligence was not high testifying he was a "D" student. Id. at ¶ 7. Next, while the juvenile in Pablo spoke English, his first and primary language was Spanish. Finally, the juvenile testified he believed he was required to sign the Miranda waiver. Id. Here, appellant testified he was enrolled in school and doing well. There is also no dispute that appellant's primary language was English and no testimony from appellant that he felt required to waive his Miranda rights. Considering all the above, we find appellant's argument to be without merit. Accordingly, we conclude appellant knowingly and intelligently waived his Miranda rights, and his statements to the police were admissible evidence. {¶ 29} Appellant's first assignment of error is overruled. B. Appellant's Second Assignment of Error {¶ 30} In his second assignment of error, appellant argues the trial court erred in concluding there was sufficient evidence to find appellant delinquent for the offense of receiving stolen property. Appellant alleges appellee failed to establish that the vehicle appellant was driving was owned by the victim named in the complaint. {¶ 31} Sufficiency of the evidence is a legal standard that tests whether the evidence is legally adequate to support the verdict. State v. Wright, 10th Dist. No. 18AP-770, 2019- Ohio-5201, ¶ 16. "In a sufficiency of the evidence inquiry, appellate courts do not assess No. 20AP-18 11 whether the prosecution's evidence is to be believed but whether, if believed, the evidence supports the conviction." State v. Cook, 10th Dist. No. 19AP-353, 2020-Ohio-2844 , ¶ 19, citing State v. Yarbrough, 95 Ohio St.3d 227 , 2002-Ohio-2126 , ¶ 79-80. A reviewing court must not weigh witnesses' credibility but presume that the state's witnesses were honest and determine if their testimony demonstrates the necessary elements of the crime. Wright at ¶ 17, citing State v. Bankston, 10th Dist. No. 08AP-668, 2009-Ohio-754 , ¶ 4. "In determining whether the evidence is legally sufficient to support the jury verdict as a matter of law, '[t]he relevant inquiry is whether, after viewing the evidence in a light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime proven beyond a reasonable doubt.' " State v. Robinson, 124 Ohio St.3d 76 , 2009- Ohio-5937, ¶ 34, quoting State v. Jenks, 61 Ohio St.3d 259 , 272 (1991), paragraph two of the syllabus, superseded by state constitutional amendment on other grounds as stated in State v. Smith, 80 Ohio St.3d 89 , 102 (1997), fn. 4. We will not reverse a verdict based on insufficient evidence unless we find "reasonable minds could not reach the conclusion reached by the trier-of-fact." State v. Dennis, 79 Ohio St.3d 421 , 430 (1997). {¶ 32} Pursuant to R.C. 2913.51(A), the offense of receiving stolen property is defined as follows: "No person shall receive, retain, or dispose of property of another knowing or having reasonable cause to believe that the property has been obtained through commission of a theft offense." R.C. 2913.01(D) defines "owner" as "any person, other than the actor, who is the owner of, who has possession or control of, or who has any license or interest in property or services, even though the ownership, possession, control, license, or interest is unlawful." The Committee Comment to R.C. 2913.01 provides additional clarification stating " '[o]wner' is defined so as to retain the concept that a thief can steal stolen property from a thief. * * * The gist of theft is a wrongful taking rather than a particular ownership, and it is sufficient that a thief knows that property or services are not his to take." R.C. 2913.01, 1974 Committee Comment to H 511. {¶ 33} The crime of receiving stolen property is statutorily defined as a theft offense. See R.C.2913.01(K)(1) (a "[t]heft [o]ffense means any of the following * * * [a] violation of section * * * 2913.51"). When proving a theft offense, the inquiry is not whether the person from whom the property was stolen was the owner but "whether the accused had any lawful right to possess the property." State v. Jeantine, 10th Dist. No. 09AP-296, 2009-Ohio- No. 20AP-18 12 6775, ¶ 23, citing State v. Rhodes, 2 Ohio St.3d 74 , 77 (1982) (finding title ownership is not an element of a theft offense); see also State v. Mason, 10th Dist. No. 91AP-1012 (July 14, 1992) (concluding while the name of the person from whom the property was stolen is usually named in the indictment, ownership is not an element of a theft offense). {¶ 34} Accordingly, there is no requirement that appellee prove ownership of the stolen vehicle at issue for the purpose of demonstrating the offense of receiving stolen property. State v. Edwards, 9th Dist. No. 21705, 2004-Ohio-1595 , ¶ 17 (finding ownership was not required to prove the offense of receiving stolen property). Appellee is only required to demonstrate that appellant was not the owner of the vehicle and that he received the vehicle when he knew or had reasonable cause to believe that the vehicle was obtained through the commission of a theft offense.3 As such, appellant's argument that the evidence was insufficient based on appellee failing to present evidence of ownership is without merit. {¶ 35} Based on the forgoing, appellant's second assignment of error is overruled. IV. CONCLUSION {¶ 36} Having overruled appellant's first and second assignments of error, we affirm the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, Juvenile Branch. Judgment affirmed. BROWN and LUPER SCHUSTER, JJ., concur. _____________ 3 Even if ownership was a required element of the offense, it appears there was sufficient evidence B.C. was the owner of the stolen vehicle.

2021-03-18 20:10:53.671027+00

http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2021/2021-Ohio-831.pdf

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State ex rel. Miller v. Hamilton Cty. Bd. of Elections, Slip Opinion No. 2021-Ohio-831 .] 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. 2021-OHIO-831 THE STATE EX REL. MILLER v. HAMILTON COUNTY BOARD OF ELECTIONS ET AL. [Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as State ex rel. Miller v. Hamilton Cty. Bd. of Elections, Slip Opinion No. 2021-Ohio-831 .] Elections—Prohibition—Writ of prohibition sought to prevent board of elections from placing mayoral candidate’s name on the May 4, 2021 primary- election ballot—Relator failed to show that the board abused its discretion or clearly disregarded applicable law by accepting candidate’s nominating petitions with circulator statements that were not in the form of sworn affidavits but did substantially comply with the nominating-petition form prescribed by the city charter—Writ denied. (No. 2021-0274—Submitted March 12, 2021—Decided March 18, 2021.) IN PROHIBITION. __________________ Per Curiam.  SUPREME COURT OF OHIO {¶ 1} Relator, Mark W. Miller, seeks a writ of prohibition barring respondents Hamilton County Board of Elections and its members1 from placing the name of respondent Aftab Pureval on the ballot as a candidate for mayor of Cincinnati in the May 4, 2021 nonpartisan primary election. Miller claims the board abused its discretion and clearly disregarded applicable law by denying his protest of Pureval’s candidacy, because Pureval’s part-petitions did not include sworn affidavits of the petition circulators, which Miller claims the Cincinnati City Charter requires. Respondents and amicus curiae, the city of Cincinnati, counter that when all applicable sections of the charter are considered, Pureval’s petition met the requirements. We agree, and we therefore deny the writ. I. FACTUAL AND PROCEDURAL BACKGROUND {¶ 2} The Cincinnati City Charter provides that “candidates for mayor shall be determined at a nonpartisan primary election to be held on the first Tuesday after the first Monday in May * * *.” Article IX, Section 1a, Cincinnati City Charter. To be placed on the primary-election ballot, a mayoral candidate must submit a petition to the board of elections. Article IX, Section 2, Cincinnati City Charter. Pureval submitted his nominating petition, consisting of 76 part-petitions, to the board on February 10, 2021. {¶ 3} On February 24, the board received from Miller, a registered elector in the city of Cincinnati, a written protest of Pureval’s petition under R.C. 3501.39(A). Miller’s protest letter alleged that under the Cincinnati City Charter, circulator statements on part-petitions must be by sworn affidavit. The letter claimed that Pureval’s part-petitions contained only unsworn circulator statements and that the board should therefore reject his petition. On February 24, the board set a protest hearing for March 2. 1. The respondent board members are Gwen L. McFarlin, Joseph L. Mallory, Charles H. Gerhardt III, and Alex M. Triantafilou. 2  January Term, 2021 {¶ 4} At the hearing, the board heard arguments from counsel for Miller and counsel for Pureval. The latter argued that the Cincinnati City Charter prescribes a form of petition that Pureval’s part-petitions complied with; that under R.C. 3501.38(L), Pureval’s petition could not be rejected because he obtained his petition forms from the board within 90 days of the filing deadline; and that all of the other mayoral candidates had used the same forms. These last two claims were based on unsworn factual assertions made by Pureval’s attorney. {¶ 5} The board’s counsel then advised that Pureval needed only to “substantially compl[y]” with the charter and that his petitions (as well as those of the other mayoral candidates) did substantially comply. The board voted unanimously to deny the protest, without comment. The board then certified Pureval and five other mayoral candidates to the ballot. {¶ 6} Miller filed this prohibition action on March 3. We ordered expedited briefing, see __ Ohio St.3d __, 2021-Ohio-574 , __ N.E.3d __, which is now complete. The city of Cincinnati filed an amicus curiae brief in support of the board. II. ANALYSIS A. Threshold Issues {¶ 7} Pureval asserts four threshold arguments. We reject all four. 1. S.Ct.Prac.R. 12.02’s Affidavit Requirements {¶ 8} Pureval first argues that we must dismiss the cause because the affidavit accompanying the complaint does not comply with S.Ct.Prac.R. 12.02(B), which states that a complaint in an original action “shall be supported by an affidavit specifying the details of the claim,” S.Ct.Prac.R. 12.02(B)(1). The affidavit “shall be made on personal knowledge, setting forth facts admissible in evidence, and showing affirmatively that the affiant is competent to testify to all matters stated in the affidavit.” S.Ct.Prac.R. 12.02(B)(2). “We have routinely dismissed original actions, other than habeas corpus, that were not supported by an 3  SUPREME COURT OF OHIO affidavit expressly stating that the facts in the complaint were based on the affiant’s personal knowledge.” State ex rel. Hackworth v. Hughes, 97 Ohio St.3d 110 , 2002- Ohio-5334, 776 N.E.2d 1050 , ¶ 24. {¶ 9} Miller’s complaint was accompanied by an affidavit in which his attorney, Curt C. Hartman, declares that Hartman “has personal knowledge of the factual allegations above and such allegations are true and accurate.” Pureval argues that the affidavit is insufficient because it is devoid of specific details or admissible facts and contains no information establishing that Hartman is competent to testify to the matters alleged in the complaint. {¶ 10} We rejected a similar argument in Wellington v. Mahoning Cty. Bd. of Elections, 117 Ohio St.3d 143 , 2008-Ohio-554 , 882 N.E.2d 420 . In that case, the relator’s affidavit “state[d] that he ha[d] ‘reviewed the facts contained in the foregoing Petition for Writ of Prohibition, and affirm [sic] that they are accurate based on my personal knowledge.’ ” Id. at ¶ 16. We reasoned, By specifying in his affidavit that he swore to the accuracy of the facts in the petition and stating that those facts are based on his personal knowledge, Sheriff Wellington satisfied the rule because his petition—as verified by his affidavit—specified the details of his claim, set forth facts admissible in evidence, and affirmatively established that he is competent to testify to the material facts—i.e., he filed a protest challenging Aey’s candidacy for sheriff, and the board denied the protest at the conclusion of a hearing at which he testified and presented evidence. He did not need to repeat these same statements in his affidavit, which already verified the truth of these statements. Id. at ¶ 19. 4  January Term, 2021 {¶ 11} Similarly, here, the complaint specifies the details of the claim, sets forth admissible facts, and establishes Hartman’s competency to testify to the material facts, as he was present for and involved in the protest proceedings. We will not dismiss the complaint for failure to comply with S.Ct.Prac.R. 12.02. 2. Laches {¶ 12} Pureval next argues that Miller’s claim is barred by the doctrine of laches. “The elements of laches are (1) unreasonable delay or lapse of time in asserting a right, (2) absence of an excuse for the delay, (3) knowledge, actual or constructive, of the injury or wrong, and (4) prejudice to the other party.” State ex rel. Polo v. Cuyahoga Cty. Bd. of Elections, 74 Ohio St.3d 143 , 145, 656 N.E.2d 1277 (1995). {¶ 13} Miller filed his complaint one day after the board rejected his protest. Pureval does not, however, challenge Miller’s delay in the context of this case. Rather, he asserts that Miller’s true challenge is not to Pureval’s candidacy but to the board’s interpretation of the Cincinnati City Charter, which he claims has been consistent since 2001. He therefore argues that Miller unreasonably delayed for 20 years, without excuse—causing prejudice to Pureval by making this case an expedited election matter. {¶ 14} We reject this argument, which ignores such questions as whether Miller had knowledge of the board’s longstanding interpretation or was eligible to challenge it before he protested Pureval’s petition. Moreover, despite the potential for broader implications, the subject matter of this prohibition action is the board’s rejection of Pureval’s 2021 mayoral petitions, see R.C. 3501.39(A). Because Miller filed this action one day after the board rejected his protest, we find that laches does not bar his claim. 3. Unclean Hands {¶ 15} Pureval next argues that Miller’s claim is barred by the doctrine of unclean hands. Pureval argues that Miller has, without explanation, singled him 5  SUPREME COURT OF OHIO out by challenging his petition but not those of the other mayoral candidates who used the same forms. He argues that this calls Miller’s motives into question and amounts to discriminatory targeting. {¶ 16} Pureval cites no authority for applying the equitable doctrine of unclean hands in this prohibition action. We have, however, occasionally recognized its potential applicability in mandamus actions. See State ex rel. Morgan v. New Lexington, 112 Ohio St.3d 33 , 2006-Ohio-6365 , 857 N.E.2d 1208 , ¶ 53, quoting State ex rel. Albright v. Haber, 139 Ohio St. 551 , 553, 41 N.E.2d 247 (1942) (“On rare occasions, we have recognized that ‘while mandamus is considered a legal remedy, equitable principles often govern its issuance, and it may be denied to those who do not come before the court with clean hands’ ”). {¶ 17} In any event, “the doctrine of unclean hands requires a showing that [the relator] engaged in reprehensible conduct, not merely negligent conduct,” State ex rel. Columbus Coalition for Responsive Govt. v. Blevins, 140 Ohio St.3d 294 , 2014-Ohio-3745 , 17 N.E.3d 578 , ¶ 12, yet the record here is undeveloped on the question of Miller’s motivations. We find that the doctrine of unclean hands does not bar Miller’s claim. 4. Failure to Join Necessary Parties under Civ.R. 19(A) {¶ 18} Finally, Pureval argues that we must deny Miller’s requested relief for failure to join necessary parties under Civ.R. 19(A). He argues that the equal- protection clauses of the Ohio and United States Constitutions would prohibit the selective enforcement of the Cincinnati City Charter, instead requiring the rejection of all mayoral petitions if his is rejected. He therefore argues that complete relief cannot be accorded in this action without joinder of the other five mayoral candidates. {¶ 19} However, Pureval’s equal-protection argument is undeveloped, and he has not established that this court (as opposed to the board) would be able—let alone required—to reject petitions that were not protested before the board under 6  January Term, 2021 R.C. 3501.39(A). As the scope of this prohibition action is limited to whether the board abused its discretion by rejecting the protest to Pureval’s petition, we will not dismiss the complaint for failure to join parties necessary to accord complete relief. B. Elements of the Prohibition Claim {¶ 20} To be entitled to a writ of prohibition, Miller must prove that the board exercised quasi-judicial power, that it lacked the authority to do so, and that he lacks an adequate remedy in the ordinary course of the law. State ex rel. Keith v. Lawrence Cty. Bd. of Elections, 159 Ohio St.3d 128 , 2019-Ohio-4766 , 149 N.E.3d 449 , ¶ 5. Miller lacks an adequate remedy due to the proximity of the May 4 election. State ex rel. Tam O’Shanter Co. v. Stark Cty. Bd. of Elections, 151 Ohio St.3d 134 , 2017-Ohio-8167 , 86 N.E.3d 332 , ¶ 15. 1. Quasi-Judicial Power {¶ 21} “Quasi-judicial authority is the power to hear and determine controversies between the public and individuals that require a hearing resembling a judicial trial.” State ex rel. Wright v. Ohio Bur. of Motor Vehicles, 87 Ohio St.3d 184 , 186, 718 N.E.2d 908 (1999). Miller argues that the board exercised quasi- judicial power by hearing and rejecting his protest, which was brought pursuant to R.C. 3501.39(A), noting our observation that “R.C. 3501.39(A) requires a board of elections to conduct a quasi-judicial hearing on a petition protest,” State ex rel. Barney v. Union Cty. Bd. of Elections, 159 Ohio St.3d 50 , 2019-Ohio-4277 , 147 N.E.3d 595 , ¶ 12. {¶ 22} The board conceded in its answer and acknowledged at the protest hearing that it was exercising quasi-judicial power. However, Pureval argues that the board did not exercise quasi-judicial power because it did not consider sworn testimony at the hearing. And in its brief, the board appears to hedge on its previous admission. On the one hand, it cites our statement that “[a] board of elections exercises quasi-judicial power when it ‘conducts a protest hearing pursuant to statute,’ ” Keith at ¶ 6, quoting State ex rel. Save Your Courthouse Commt. v. 7  SUPREME COURT OF OHIO Medina, 157 Ohio St.3d 423 , 2019-Ohio-3737 , 137 N.E.3d 1118 , ¶ 29. On the other hand, the board allows that quasi-judicial proceedings “generally involve the taking of sworn testimony.” {¶ 23} Our recent opinions have included statements such as, “A board of elections exercises quasi-judicial authority when it makes a decision regarding a protest after a mandatory hearing that includes sworn testimony.” E.g., Barney at ¶ 12; see also State ex rel. Meyer v. Warren Cty. Bd. of Elections, ___ Ohio St.3d ___, 2020-Ohio-4863 , ___ N.E.3d ___, ¶ 9, citing Barney at ¶ 12. And in Save Your Courthouse, we stated, When a public entity takes official action but does not conduct proceedings akin to a judicial trial, prohibition will not issue. For example, a board of elections did not exercise quasi- judicial authority when it denied an election protest, because it did not consider sworn testimony, receive documents into evidence, or in any other fashion “conduct a hearing sufficiently resembling a judicial trial.” Id. at ¶ 27, quoting State ex rel. Baldzicki v. Cuyahoga Cty. Bd. of Elections, 90 Ohio St.3d 238 , 242, 736 N.E.2d 893 (2000). {¶ 24} However, we took care to clarify in Baldzicki that the protest at issue was not brought pursuant to any statute, distinguishing it from “statutory protests requiring quasi-judicial proceedings.” Baldzicki at 242. And as the statement quoted above indicates, we have acknowledged that sworn testimony is one—but not the only—indicator that a hearing resembled a judicial trial. {¶ 25} As we have noted on many occasions, R.C. 3501.39(A)(2) requires the board to conduct a quasi-judicial hearing. E.g., State ex rel. Wright v. Cuyahoga Cty. Bd. of Elections, 120 Ohio St.3d 92 , 2008-Ohio-5553 , 896 N.E.2d 706 , ¶ 9 8  January Term, 2021 (“This is not a case involving written protests against petitions or candidacies, which would have required quasi-judicial proceedings. Cf. R.C. 3501.39(A)(1) and (2)” [emphasis sic]); State ex rel. Upper Arlington v. Franklin Cty. Bd. of Elections, 119 Ohio St.3d 478 , 2008-Ohio-5093 , 895 N.E.2d 177 , ¶ 16 (“Here, R.C. 3501.39(A)(2) required that the board of elections conduct a quasi-judicial hearing on relators’ protest”); State ex rel. Cooker Restaurant Corp. v. Montgomery Cty. Bd. of Elections, 80 Ohio St.3d 302 , 306, 686 N.E.2d 238 (1997) (“a board of elections, like a board of revision, is a quasi-judicial body when it considers protests”); State ex rel. Harbarger v. Cuyahoga Cty. Bd. of Elections, 75 Ohio St.3d 44 , 45, 661 N.E.2d 699 (1996) (“A protest hearing in election matters is a quasi- judicial proceeding”); State ex rel. Thurn v. Cuyahoga Cty. Bd. of Elections, 72 Ohio St.3d 289 , 291, 649 N.E.2d 1205 (1995) (“Since R.C. 3501.39 required a hearing which in some respects resembled a judicial trial, the board exercised quasi- judicial authority in denying Thurn’s protest and deciding to place the proposed ordinances on the ballot”). {¶ 26} The secretary of state’s Election Official Manual likewise advises boards that “[w]hen resolving a protest, a board is acting in a quasi-judicial capacity.” Secretary of State Directive 2021-08, Section 1.04, Ohio Election Official Manual, at 12-9 available at https://www.sos.state.oh.us/globalassets /elections/directives/2021/dir2021-08-ch12.pdf [https://perma.cc/4GUX-4EGM]. The secretary’s guidelines for “Acting in a Quasi-Judicial Capacity” advise boards to “[p]lace anyone who will provide testimony under oath” and that decisions should be “based on evidence provided to the board at the hearing and information the board may retain on its own, such as voter registration information.” Secretary of State Directive 2021-02, Section 1.03, Ohio Election Official Manual, at 2-32, available at https://www.sos.state.oh.us/globalassets/elections/directives/2021/ dir2021-02-ch02.pdf [https://perma.cc/7UMB-F588]. 9  SUPREME COURT OF OHIO {¶ 27} The board was doubtless under an obligation to conduct a quasi- judicial hearing. Pureval’s attorney offered factual statements at that hearing. The board failed to adhere to the secretary’s directive to place him under oath; however, as the attorney pointed out at the hearing, he referred to facts that were documented by information retained by the board. We conclude that under these circumstances, the board conducted a hearing sufficiently resembling a judicial trial such that it was exercising quasi-judicial power. 2. Lack of Authority {¶ 28} The question whether the board lacked authority hinges on whether it “acted fraudulently or corruptly, abused its discretion, or clearly disregarded applicable law.” State ex rel. Brown v. Butler Cty. Bd. of Elections, 109 Ohio St.3d 63 , 2006-Ohio-1292 , 846 N.E.2d 8 , ¶ 23. There is no allegation of fraud or corruption here. {¶ 29} Miller argues that the board abused its discretion and disregarded applicable law by denying his protest, because the Cincinnati City Charter requires circulator statements on mayoral petitions to be sworn affidavits, yet the statements on Pureval’s part-petitions were unsworn statements made on penalty of elections falsification. We reject this argument and conclude that the board did not abuse its discretion or clearly disregard applicable law, because the charter prescribes a form demonstrating what constitutes an affidavit for purposes of the circulator-statement requirement and Pureval’s part-petitions substantially complied with the charter’s prescribed form. {¶ 30} The Cincinnati City Charter sets forth specific requirements for mayoral and council elections in the city. With respect to mayoral-candidate petitions, the charter states the following: “to each separate [petition] paper there shall be attached an affidavit of the circulator thereof stating that each signature thereto was made in the circulator’s presence and is the genuine signature of the 10  January Term, 2021 person whose name it purports to be.” Article IX, Section 2, Cincinnati City Charter. {¶ 31} Miller argues that “affidavit” means a statement sworn before an officer authorized to administer oaths, citing Toledo Bar Assn. v. Neller, 102 Ohio St.3d 1234 , 2004-Ohio-2895 , 809 N.E.2d 1152 , ¶ 10, and State ex rel. Johnson v. Ohio Adult Parole Auth., 95 Ohio St.3d 463 , 2002-Ohio-2481 , 768 N.E.2d 1176 , ¶ 5. However, those cases were applying provisions of the Ohio Revised Code. {¶ 32} The Cincinnati City Charter provides, “[T]he provisions of the general election laws of the state shall apply to all such elections except as provision is otherwise made by this charter.” (Emphasis added.) Article IX, Section 1, Cincinnati City Charter. The charter does not expressly define “affidavit.” However, Article IX, Section 3a of the charter sets forth a prescribed form of petition for mayoral candidates. Section 3a states that the “form of the nominating petition papers shall be substantially as follows,” and the circulator statement of the form that follows reads: Statement of Circulator I, _______ [name of circulator of petition], declare under penalty of the election falsification laws of the state of Ohio that I am a qualified elector of the city of Cincinnati; that I reside at the address appearing below my signature; that this petition paper contains _____(number) signatures; that I witnessed the affixing of every signature; and that every signature is to the best of my knowledge and belief the signature of the person whose signature it purports to be. Signed: _____ Address: _____ Date: _____ 11  SUPREME COURT OF OHIO Article IX, Section 3a, Cincinnati City Charter. The form clearly does not provide for a circulator statement in the manner of a sworn affidavit, but rather one that is styled after the form set forth in R.C. 3513.261. {¶ 33} “[W]hen construing city charters, we apply general rules of statutory interpretation.” State ex rel. Harris v. Rubino, 155 Ohio St.3d 123 , 2018-Ohio- 3609, 119 N.E.3d 1238 , ¶ 19. One of these rules is that we do not simply consider words in isolation, but consider the text as a whole. Vossman v. AirNet Sys., Inc., 159 Ohio St.3d 529 , 2020-Ohio-872 , 152 N.E.3d 232 , ¶ 14. Pureval, the board, and the city all argue that Section 2 and Section 3a must be read in pari materia and that when read together, it is clear that Section 3a provides the wording and the form of the “affidavit” required by Section 2. We agree. It would be nonsensical to read the charter otherwise—for example, as requiring both a sworn affidavit and a nearly identical circulator statement made under penalty of elections falsification. Miller argues that State ex rel. Ditmars v. McSweeney, 94 Ohio St.3d 472 , 764 N.E.2d 971 (2002), controls this issue. In Ditmars, we held that the Columbus City Charter required circulator statements in the form of sworn affidavits. Id. at 474-475. However, in Ditmars, the charter did not define “affidavit” or contain a prescribed petition form. Id. Because Section 3a of the Cincinnati City Charter includes a prescribed petition form clarifying the meaning of the affidavit requirement set forth in Section 2, we conclude that Ditmars is inapplicable. {¶ 34} Pureval’s part-petitions included circulator statements substantially in the form prescribed in Section 3a of the Cincinnati City Charter. We therefore conclude that the board did not abuse its discretion by rejecting Miller’s protest. III. CONCLUSION {¶ 35} Based on the foregoing, we deny the writ. Writ denied. 12  January Term, 2021 O’CONNOR, C.J., and DEWINE, DONNELLY, STEWART, and BRUNNER, JJ., concur. KENNEDY, J., concurs in judgment only. FISCHER, J., dissents. _________________ The Law Firm of Curt C. Hartman and Curt C. Hartman, for relator. Joseph T. Deters, Hamilton County Prosecuting Attorney, and David T. Stevenson and Jesse K. Daley, Assistant Prosecuting Attorneys, for respondent Hamilton County Board of Elections. McTigue & Colombo, L.L.C., Donald J. McTigue, and Derek S. Clinger; Katz Teller Brant & Hild, Peter J. O’Shea, and Evan T. Nolan, for respondent Aftab Pureval. Andrew W. Garth, City Solicitor, Emily Smart Woerner, Deputy City Solicitor, and Erica Faaborg, Assistant City Solicitor, urging denial of the writ for amicus curiae, city of Cincinnati. _________________ 13

2020-01-17 22:01:41.848408+00

Teammell

*220OPINION. Teammell: In the original petition filed under Docket No. 14831, the petitioner sought the redetermination of its tax liability for the calendar years 1920 and-1921. No deficiency, however, was asserted for 1920, and we have no jurisdiction for that year. See Revenue Act of 1926, section 274 (g); Cornelius Cotton Mills, 4 B. T. A. 255; *221Belridge Oil Co., 11 B. T. A. 127; D. L. Blackstone, Administrator, 12 B. T. A. 456. Accordingly, this appeal, in so far as it purports to involve the calendar year 1920, is dismissed. With respect to the deficiency in tax determined by the respondent for the calendar years 1921 and 1922, the sole issue presented is whether taxable income, consisting of discounts or commissions, was derived by the petitioner in the year in which certain mortgage loans were made, under the circumstances set out in our findings of fact above. These discounts or commissions were treated on the books of the petitioner as earned income at the time the loans were made, and were included by the respondent in the petitioner’s taxable income for the years in which the loans were made. The petitioner contends substantially that it was in effect a dealer in securities, which it purchased at less than par with the object of reselling them at a profit, and that it could not be considered to have realized a profit until the securities were sold, or were paid at maturity, or otherwise. With this contention of the petitioner, we are unable to agree. The stipulated facts, which we have adopted in our findings of fact, show that the petitioner made real estate or mortgage loans, bearing interest at a stated rate, on Avhich, in addition to the interest, a fee of from 1 per cent to 10 per cent was charged for each loan. The borrower received from the petitioner the amount of the loan, less the discount and commission charged and the expenses incurred in connection therewith, and, in the event of the payment of a loan before maturity, there was no rebate to the borrower of any part of the commission charged by the petitioner. The petitioner kept its books upon an accrual basis. It thus appears that the commissions charged by the petitioner were in the nature of compensation for services rendered, and that when a loan was made the transaction was fully completed in so far as concerned the petitioner’s right to its commission. The liability of the borrower to pay the commission Avas in no way contingent or dependent upon the passage of time, as is the case with respect to an obligation to pay interest for the use of borrowed money. Upon the execution of the note the borrower’s liability to pay the commission became definitely fixed and determined. The petitioner’s right to its commission definitely accrued at the time each loan Avas made, and since the petitioner kept its books of account upon an accrual basis, the aggregate amount of the commissions on loans made within each taxable year should have been accrued on the books as income for that year. It is shoAvn that the petitioner treated the commissions on its books as earned income for the year in which *222the loans were made, and this treatment, we think, correctly reflected the income. In Chicago Acceptance Co., 12 B. T. A. 150, the petitioner purchased at less than par series of 12 notes payable one each momh, and we held that only so much of the discount as was earned within the taxable year constituted income to the petitioner for that year. The petitioner there also kept its books upon an accrual basis. That case is distinguished from the present proceeding in that when notes were paid before the due date, the payer obtained a discount winch reduced the petitioner’s brokerage in a proportionate amount. Therefore, it could not be said that the liability of the borrower to pay the brokerage or commission became definitely fixed and determined at the time the loan was made. The liability was contingent upon the passage of time. Hence, we said in our opinion: Manifestly no discount or profit accrued upon such notes until the discount thereon was earned. The principle involved is essentially no different than that of bank discount, wherein we have several times held that discount neither received nor accrued within a taxable year is not income subject to tax in that year. (Italics supplied.) In the instant case, even if the income was not received, it was accrued in the year in which the loans were made and constituted income subject to tax in such year, for the reason that it became at that time definitely fixed obligations of the makers of the notes and was not subject to reduction in the event of prepayment. The action of the respondent is approved. Reviewed by the Board. Judgment will he entered for the respondent,

2021-03-18 21:00:14.733833+00

http://media.ca1.uscourts.gov/pdf.opinions/20-1234P-01A.pdf

United States Court of Appeals For the First Circuit No. 20-1234 UNITED STATES OF AMERICA, Appellee, v. ROBERT McCULLOCK, Defendant, Appellant. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. William G. Young, U.S. District Judge] Before Lynch, Lipez, and Thompson, Circuit Judges. Brendan Kelley, Assistant Federal Public Defender, for appellant. Donald C. Lockhart, Assistant United States Attorney, with whom Andrew E. Lelling, United States Attorney, was on brief, for appellee. March 18, 2021  THOMPSON, Circuit Judge. We affirm the district judge's imposition of three special conditions of supervised release. The how, what, and why behind our decision follows. How the Case Got Here1 Robert McCullock has spent much of his life on the wrong side of the law. And his rap sheet is quite disturbing, to say the least. First there is his state conviction for two counts of child molestation: In separate incidents in 1999 and 2000, McCullock sexually abused five- and nine-year-old girls in Georgia. And the three-year-old brother of the five-year-old girl witnessed his sister's molestation. McCullock admitted both offenses, going so far as to reveal that he had tried to (but could not) put his penis in the five-year-old girl's vagina. He ended up with an eight-year prison sentence in 2002. Then there is his federal conviction for using a computer to send child pornography: In 2001, while on bond during the pendency of the molestation case, McCullock participated in a child-porn file-sharing service. German police downloaded three child-porn images from his computer located in the United States (two of the images showed adult men raping girls as young as six). 1 The major background events are undisputed. - 2 - And Georgia police discovered hundreds of kiddie-porn images — and thousands of erased images — on a computer he had pawned. During his presentence interview in that case, he told authorities that he watched child pornography on his computer to lessen his desire to abuse children and that he "felt he had no cravings for children anymore at that point" when "he sold his computer" (these are not direct quotes from McCullock but rather probation's summary of what he said). After pleading guilty to using a computer to transport child porn, he got sentenced to ninety-two months in prison, to run consecutively with the state-prison term, and to three years of supervised release. His conditions of supervised release there included bans on committing any state or federal crime; possessing or viewing sexual materials depicting children or adults; having any contact with minors unless accompanied by an adult who is approved by probation and who knows of his child-sex- abuse history; and using or possessing a computer with internet access without probation's prior say-so. And finally there is his state conviction for indecent assault and battery on a person over the age of fourteen: In 2017, while on supervised release for the child-porn offense, McCullock (according to a report by police in Massachusetts) tried to rape his then-girlfriend. During the violent encounter, he (according to her) said that "he was going to rape her" and that she had to - 3 - "'suck[]' and 'fuck him'" — and then he "threw [her] pants across the room and threw [her] on the bed numerous times." Charged with "assault to rape," he later pled down to the just-mentioned indecent-assault-and-battery offense. This time he got two years in prison. McCullock's last run-in with the law resulted in the revocation of his supervised release — the revocation occurred after his stint in state prison for what he had done to his onetime- girlfriend and after his civil commitment as a sexual predator. We will have more to say about the revocation later. But for now it is enough to note that following a hearing, a district judge sentenced him to six months in prison plus thirty months (or 2½ years) of supervised release, and imposed a series of special post- release conditions suggested by probation in its violation report. Three are relevant here. Special condition 6 says that McCullock "shall not possess, access, subscribe, or view any videos, magazines, literature, or Internet websites depicting children or adults in the nude and/or engaged in sexual activities." Special condition 9 provides that McCullock "must not possess or use any computer or internet-capable device without prior approval from the Probation Office" and adds that "[a]ny such device should not be used to knowingly access or view sexually explicit materials as defined in - 4 -  18 U.S.C. § 2256 (2)(A)." And special condition 12 states that McCullock "must not knowingly have direct contact, or contact through a 3rd party, with children under the age of 18, unless previously approved by the Probation Office, or in the presence of a responsible adult who has been" preapproved "by the Probation Office, and who is aware of the nature of [McCullock's] background and current offense."2 Unhappy with these special conditions, McCullock appeals.3 What McCullock Argues And Why We Affirm Reduced to its essence, McCullock argues that the judge "procedurally" erred by failing to adequately explain the basis for these special conditions, and then "substantively" erred by 2 We took these quotes from the written judgment, which mimics language in the violation report. McCullock says that the "judgment differs from the [judge's] oral pronouncement" at sentencing "with respect to [special] conditions 6 and 9." But he makes no claim that the differences are "material," noting instead that the judge clearly "included the adult content in [his] prohibitions in both the oral and written conditions." See generally United States v. Fey, 834 F.3d 1 , 6 n.5 (1st Cir. 2016) (mentioning the general rule that when "the conditions imposed orally conflict in a material way with the conditions that ended up on the judgment, the oral conditions control" (quoting United States v. Santiago, 769 F.3d 1 , 10 (1st Cir. 2014)). So we need say no more on this subject. 3 For anyone wondering: McCullock completed the six-month prison term and is now on supervised release, subject of course to the complained-of special conditions. - 5 - making them "overly broad" (we will give more specifics shortly) — in other words, he challenges these special conditions as "unreasonable." But like the government, we find his arguments unconvincing. Standards of Review We review preserved challenges to the imposition of special-supervised-release conditions for abuse of discretion and unpreserved ones for plain error. See, e.g., United States v. Vega-Rivera, 866 F.3d 14 , 20 (1st Cir. 2017). The abuse-of-discretion standard is multi-dimensional, however. Within it, we inspect fact findings for clear error, legal issues de novo (in nonlegalese, with fresh eyes), and judgment calls with some deference. See, e.g., United States v. Hood, 920 F.3d 87 , 92-93 (1st Cir. 2019). And we will find an abuse of discretion only when left with a definite conviction that "no reasonable person could agree with the judge's decision." See United States v. Cruz-Ramos, 987 F.3d 27 , 41 (1st Cir. 2021) (internal quotations and citation omitted). As for plain error, the standard is quite formidable. The complaining party must show that the judge erred, and glaringly so (such that the judge should have acted without an objection from counsel), and that the error affected that party's substantial rights — typically, because it likely influenced the proceeding's - 6 - outcome. See United States v. Takesian, 945 F.3d 553 , 565 (1st Cir. 2019). And even if he meets those conditions, we will use our discretion to fix the error only if he also shows that it "seriously imperil[s]" the judiciary's public reputation. See id.; see also Cruz-Ramos, 987 F.3d at 39. Explanation (The Procedural-Reasonableness Challenges) We begin with McCullock's procedural-reasonableness challenges to the sufficiency of the judge's explanation for the special conditions, starting with conditions 6 and 9 — which (to borrow McCullock's paraphrase) ban, for 2½ years, "any possession or access to materials involving adult nudity or sexual activity."4 The parties dispute what standard of review applies to this aspect of McCullock's procedural-reasonableness claim. McCullock pushes for abuse of discretion, the government for plain error. We side with the government. To save the reader the need to flip back to where we quoted 4 these conditions before: Special condition 6 says that, for 2½ years, McCullock "shall not possess, access, subscribe, or view any videos, magazines, literature, or Internet websites depicting children or adults in the nude and/or engaged in sexual activity." And special condition 9 says that, for 2½ years, he "must not possess or use any computer or internet-capable device without prior approval from the Probation Office" and notes that "[a]ny such device should not be used to knowingly access or view sexually explicit materials as defined in 18 U.S.C. § 2256 (2)(A)." - 7 -  True, as both sides agree, McCullock objected to special conditions 6 and 9, telling the judge in his predisposition memo and at the final revocation hearing that nothing in the record supported adult-content restrictions. And having read every word of the hearing transcript, we agree with McCullock that the judge gave no justifications for their imposition. Nor — as McCullock also notes, without contradiction from the government — did the prosecutor or probation give any justifications below. But the hearing transcript does reveal that McCullock never objected to the judge's lack of explanation — despite having the chance to do so. And had he protested, the judge could have cured any problem then and there — thus avoiding the need for an appeal. See, e.g., Puckett v. United States, 556 U.S. 129 , 134 (2009) (noting that plain-error review "serves to induce the timely raising of claims and objections, which gives the district court the opportunity to consider and resolve them"); United States v. Dominguez Benitez, 542 U.S. 74 , 82 (2004) (stating that the plain- error standard "encourage[s] timely objections and reduce[s] wasteful reversals by demanding strenuous exertion to get relief for unpreserved error"); United States v. Correa-Osorio, 784 F.3d 11 , 22 (1st Cir. 2015) (explaining that the plain-error test "deters unsavory sandbagging by lawyers" — "i.e., their keeping mum about an error, pocketing it for later just in case" things do - 8 - not work out in the district court — and "gives judges the chance to fix" any problem so cases do not needlessly bounce back and forth between district and circuit courts). Put bluntly, McCullock's objection to the substantive constraints imposed by special conditions 6 and 9 does nothing to preserve a claim that the judge did not sufficiently explain the reasons for imposing them. See United States v. Hunt, 843 F.3d 1022 , 1029 n.2 (D.C. Cir. 2016) (collecting cases from other circuits). So plain-error review it is. This hard-to-meet standard puts McCullock in a bind, however. For even if he has shown error that is plain — after all, no one "question[s] that a district court is required to provide a reasoned and case-specific explanation for the sentence it imposes," see United States v. Gilman, 478 F.3d 440 , 446 (1st Cir. 2007) — he never even tries to carry his burden of showing both that the error likely changed the case's result and that enforcing these conditions in these circumstances would seriously imperil the judiciary's reputation for fairness and integrity. Which means he has not done enough here to win on plain error. See Fey, 834 F.3d 1 , 7 (1st Cir. 2016); United States v. Mulero- Díaz, 812 F.3d 92 , 96-97 (1st Cir. 2016); see also Cruz-Ramos, 987 F.3d at 44. - 9 -  We shift then to McCullock's procedural-reasonableness challenge to special condition 12 — which (as a matter of helpful repetition) we note says that, for 2½ years, he must not knowingly have direct contact . . . with children under the age of 18, unless previously approved by the Probation Office, or in the presence of a responsible adult who has been approved by the Probation Office, and who is aware of the nature of [his] background and current offense. Despite conceding that he must prove plain error to succeed — because he neither questioned this condition's relevance below, nor complained about the judge's missing explanation at sentencing — he has not shown that applying special condition 12 would jeopardize his substantial rights and the public's perception of the fairness and integrity of our criminal-justice system. Which dashes his plain-error hopes on this issue as well. See Fey, 834 F.3d at 7; Mulero-Díaz, 812 F.3d at 96-97; see also Cruz-Ramos, 987 F.3d at 44. Looking to turn the tables, McCullock's reply brief faults the government for not proving with record-based facts that the judge would unlikely change any of these special conditions on remand. But it is on McCullock to prove all four plain-error factors, not on the government to disprove them. See, e.g., United States v. López, 957 F.3d 302 , 310 (1st Cir. 2020). So this argument does not alter our conclusion. - 10 -  On to the next set of issues. Overbroadness (The Substantive-Reasonableness Challenges) We now take up McCullock's substantive-reasonableness attacks on the contested special conditions, leading off with special conditions 6 and 9 — which (to copy another of McCullock's sum-ups) disallows "adult pornography and content" for 2½ years.5 As he sees things, "[n]othing in the record" — not his "child molestation conviction," not his "child pornography conviction," and not his "indecent assault and battery conviction" — links "viewing adult pornography or adult content containing sexually explicit scenes" to his criminal conduct. And, his argument continues, because the facts in no way justify these special conditions, they are too "broad" and "restrictive" to stand. Reviewing for abuse of discretion, as the parties agree we should, we keep the following checklist in mind: 5 Here we again quote these special conditions, for the reader's convenience: Special condition 6 declares that, for 2½ years, McCullock "shall not possess, access, subscribe, or view any videos, magazines, literature, or Internet websites depicting children or adults in the nude and/or engaged in sexual activity." And special condition 9 declares that, for 2½ years, McCullock "must not possess or use any computer or internet-capable device without prior approval from the Probation Office" and stresses that "[a]ny such device should not be used to knowingly access or view sexually explicit materials as defined in 18 U.S.C. § 2256 (2)(A)." - 11 - • Judges have "significant flexibility" in crafting special conditions. See United States v. Marino, 833 F.3d 1 , 10 (1st Cir. 2016) (quoting United States v. Garrasteguy, 559 F.3d 34 , 41 (1st Cir. 2009)). • A special condition must be "reasonably related" to certain factors, including "the nature and circumstances of the offense and the history and characteristics of the defendant," see 18 U.S.C. §§ 3583 (d)(1), 3553(a)(1) — as well as three goals of punishment: "deter[ring] and protect[ing] others and . . . rehabilitat[ing] the defendant," see Marino, 833 F.3d at 10 (citing 18 U.S.C. § 3553 (a)(2)(B)-(D). Of note too is that the special condition must "involve[] no greater deprivation of liberty than is reasonably necessary" to accomplish those goals, see 18 U.S.C. § 3583 (d)(2), and "be supported by the record," see Marino, 833 F.3d at 10 (quoting Garrasteguy, 559 F.3d at 42 ). • In applying the abuse-of-discretion standard here, we focus on the "reasonableness" of the judge's judgment, taking into account the totality of the circumstances and knowing that "any one of several sentences may be reasonable in a particular case." See id. (internal quotations and citation omitted). So, looking to see if the sentence reflects "a plausible view of the circumstances and culminates in a - 12 -  defensible overall result," see id. at 12 (internal quotations and citations omitted), we will undo "the judge's sentencing decision only if it falls outside the expansive boundaries of the entire range of reasonable sentences," see id. at 10 (internal quotations and citations omitted). Ultimately, what "separates" a "permissible" condition from an "impermissible" one "is whether, given the facts," the "restriction was 'clearly unnecessary.'" United States v. Santiago, 769 F.3d 1 , 9 (1st Cir. 2014) (quoting United States v. Brown, 235 F.3d 2 , 7 (1st Cir. 2000)). McCullock cites a quintet of First Circuit cases striking down supervised-release conditions banning the possession or viewing of adult sex-related materials where the defendant stood convicted of child-sex or child-porn crimes. See United States v. Hinkel, 837 F.3d 111 , 127 (1st Cir. 2016); United States v. Gall, 829 F.3d 64 , 76-77 (1st Cir. 2016); United States v. Medina, 779 F.3d 55 , 61-64 (1st Cir. 2015); United States v. Ramos, 763 F.3d 45 , 63-64 n.28 (1st Cir. 2014); United States v. Perazza- Mercado, 553 F.3d 65 , 74-79 (1st Cir. 2009). But his case is very different from those. Recall McCullock's convictions for two child-molestation crimes, one involving his admitted attempt to force his penis into a five year old's vagina. Recall too his possessing and trading - 13 - child porn on a mind-blowing scale, with at least two images showing an adult man raping a very young girl. This concatenation of circumstances justifies an inference — unlike in the quintet of cases — that porn plays a role in McCullock's sexual misconduct.6 See generally Ramos, 763 F.3d at 64 (indicating that the reasonable inference only has to be that "a ban on adult pornography" is "reasonably related to" the offense's "nature and circumstances" and to the defendant's "history and characteristics"). Now recall his aiming his violent sexual impulses not only at young girls but also at an adult woman: the revocation-triggering conduct, remember, involved his viciously attacking his adult girlfriend, telling her that "he was going to rape" her and that she had to "suck[] and fuck him" — just before chucking her pants aside and tossing her on a bed. And given how his perverse interests extend beyond young girls and to adult women, one can also reasonably infer that his porn problem in the child context could spill over into the adult context. Which means that the conditions here — unlike in the quintet of cases — draw on this lawbreaker's history and characteristics, providing case-specific reasons to believe To the extent the judge did not review the presentence 6 report in the child-porn case — a report included in the parties' sealed joint appendix, by the way — we simply point out that we can affirm on any basis supported by the record. See, e.g., United States v. Etienne, 772 F.3d 907 , 923 n.9 (1st Cir. 2006). - 14 - that adult-sexual materials could play a role in his re-offending. See generally, e.g., Gall, 829 F.3d at 76 (explaining that the record evidence in Perazza-Mercado and Medina did not "support the conclusion that pornography had 'contributed to [the defendant's] offense or would be likely to do so in the future'" (quoting Perazza-Mercado, 553 F.3d at 66 , and Medina, citing 779 F.3d at 57)). At least we cannot say on this record that such a conclusion amounts to an abuse of discretion, which would require us to hold that "no reasonable person" could have done what the judge did here. See, e.g., United States v. Rivera-Carrasquillo, 933 F.3d 33 , 44 (1st Cir. 2019), cert. denied, 140 S. Ct. 2691 (2020); United States v. Maldonado, 708 F.3d 38 , 42 (1st Cir. 2013). McCullock raises several counterarguments, none of which succeed. For example, McCullock makes much out of how he pled guilty to "indecent assault and battery" on his then-girlfriend, not to the original charge of "assault to rape" her. But he is still stuck with his threat to "rape" her and his demand that she "suck[]" and "fuck[]" him, as well as his actions of flinging her pants across the room and dumping her on the bed. And as to these threats/demands, he never denies making them, offers no convincing ground for not crediting them, and gives us no persuasive reason why we cannot factor them into our analysis. - 15 -  McCullock also protests that "no evidence" shows "that adult pornography or content played any role" in his "background . . . , much less in or contemporaneous to any criminal offense." But our decisions have not "forclos[ed] the imposition of" conditions like the ones here even if "pornography was not involved in the offense of conviction and there is no documented history of the defendant viewing such material" — so long as "a reason to impose" such conditions is "apparent from the record." See Perazza-Mercado, 553 F.3d at 76 . And as we pointed out three paragraphs ago, the record justifies the conditions' imposition — which undermines his suggestion that this is all "post hoc conjecture." Still searching for a winning argument, McCullock says that because German authorities downloaded the child porn from his computer "some 18 months" after his state child-molestation conviction, one cannot infer that child porn "likely caused the molestation conduct." But the record offers no support for the idea that he began his child-porn file-sharing after the molestation crimes — do not forget, he had hundreds of images of child-porn on his computer, with thousands of other images erased from there as well. The bottom line is that because in this instance we cannot say that special conditions 6 and 9 were "clearly - 16 - unnecessary," see Santiago, 769 F.3d at 9 (quoting Brown, 235 F.3d at 7 ), McCullock's first substantive-unreasonableness challenge fails. That leaves us only with McCullock's substantive- unreasonableness challenge to special condition 12 — which we again note (one last time) says that, for 2½ years, he must not knowingly have direct contact . . . with children under the age of 18, unless previously approved by the Probation Office, or in the presence of a responsible adult who has been approved by the Probation Office, and who is aware of the nature of [his] background and current offense. Conceding that our review is for plain error — which again requires him "to show error; plainness; an adverse effect on his substantial rights; and a serious compromise of the fairness, integrity, or reputation of" the sentencing process, see Cruz-Ramos, 987 F.3d at 44 — he offers many reasons why we should vacate this special condition. But while we respect his effort, we cannot do what he asks us to do. McCullock, for instance, complains that special condition 12 bans any "incidental" contact with minors even if "unexpected" or not "purposeful." But the special condition says (emphasis ours) that he "must not knowingly have direct contact . . . with children under the age of 18," language that limits the condition to intentional contacts with minors. Also and - 17 - importantly, the special condition is not a flat ban on knowing contacts with minors. And we know this because such contacts simply require preapproval from probation. See United States v. Cabrera-Rivera, 893 F.3d 14 , 26 (1st Cir. 2018) (placing some weight on the condition's preapproval component); United States v. Pabon, 819 F.3d 26 , 31-32, 35 (1st Cir. 2016) (same, adding that "associational restrictions" work "to protect the public, especially children, from the defendant, as well as to promote the defendant's rehabilitation," and noting that such restrictions "are usually read to exclude incidental encounters"). Moving on, McCullock objects that special condition 12 does not distinguish between girls and boys. Admittedly, as he emphasizes, his two molestation crimes involved very young girls. And, as he also implies, we have no clue on this record if his stash of child porn had images of boys. But even he concedes that the record shows that when he tried to sexually penetrate the five- year-old girl, her three-year-old brother was "present" (to quote McCullock's brief) — viewing so much that he could tell his mother what had happened. From all this one could infer that McCullock either wanted the boy to see the crime or was indifferent to his seeing it. Which makes the boy another one of McCullock's victims. McCullock also protests that special condition 12 applies to minors "irrespective of age" and covers contacts with - 18 - "older minors." Again, the molestation crimes and the specific child-porn images in the record involved prepubescent minors. But there is no reason to think that his appetite for sexual violence is limited to that age group. And there is reason to think the opposite, given his revocation-triggering acts — e.g., his "rape" threat and demands for sex directed at his then-girlfriend. Lastly, McCullock stresses that the molestations occurred about twenty years ago and that he has no child-sex-crime convictions since then. But he spent the bulk of that intervening stretch locked up in prison and away from children. So any suggestion by him that this "time was marked by lawful social activity" is off base. See Pabon, 819 F.3d at 31. As for the plain-error standard, knowing that "[t]he simplest way to decide [an issue] is often the best," see Stor/Gard, Inc. v. Strathmore Ins. Co., 717 F.3d 242 , 248 (1st Cir. 2013) (quoting Chambers v. Bowersox, 157 F.3d 560 , 564 n.4 (8th Cir. 1998)), we jump straight to the plainness prong — which requires McCullock to show that the judge flouted "controlling precedent" in imposing special condition 12, see United States v. Morosco, 822 F.3d 1 , 21 (1st Cir. 2016) (quoting Correa-Osorio, 784 F.3d at 22). McCullock does say that the judge "clear[ly] and obvious[ly] err[ed]" here. But he never convincingly explains how binding authority makes this so, given the key particulars - 19 - highlighted in the last four paragraphs — that (a) the special condition is textually limited to intentional contacts with minors and is not a flat ban because of the probation-preapproval option; that (b) a boy was a casualty of his horrific conduct; that (c) there is no clear prepubescent/postpubescent demarcation line when it comes to his violent-sexual inclinations; and that (d) he sat in prison for many years between the molestations and the revocation-triggering behavior. See, e.g., United States v. López, 957 F.3d 302 , 310 (1st Cir. 2020) (stating that the truism that "[t]he proponent of plain error must carry the burden of establishing each" facet of the plain-error test). Perhaps McCullock thinks that his discussion of Fey fills in the blanks. If so, he is wrong. Fey got convicted under state law for raping a sixteen-year-old girl in 1999. See Fey, 834 F.3d at 3. He later pled guilty in 2014 to failing to register as a sex offender under federal law. See id. Applying plain- error review, we vacated a supervised-release condition barring "direct" and "indirect" contact with all children. See id. at 3- 6. But unfortunately for McCullock, Fey's case is readily distinguishable from his. Fey — unlike McCullock — "ha[d] not committed any sexual or violent crimes in the [roughly fifteen] intervening years." See id. at 4 (noting that Fey had only failed to register and violated a condition banning him from living with - 20 - children). Fey's condition — unlike McCullock's — also lacked a "knowingly" requirement and forbade "indirect contact" (again, McCullock's forbids him from "knowingly hav[ing] direct contact"). And the government in Fey — unlike the government here — "made no argument" based on "a danger" to boys. See id. at 5. So Fey does not help McCullock. If more were needed, we point out that McCullock is free to ask the judge to modify the special condition under 18 U.S.C. § 3583 (e)(2). See, e.g., United States v. Mercado, 777 F.3d 532 , 539 (1st Cir. 2015).7 The net result is that because McCullock has failed to prove the judge plainly erred in imposing special condition 12, his second substantive-unreasonableness challenge fails too. Final Words For the reasons recorded above, we affirm the judgment entered below. 7 McCullock is right that caselaw says that "[t]o approve problematic conditions because a judge or a probation officer might, in her or his discretion, relax them in the future, undermines the command to sentencing courts to not deprive offenders of more liberty than is necessary to carry out the goals of supervised release." See Ramos, 763 F.3d at 61. The difficulty for him is that his special-condition-12-is-problematic thesis necessarily depends on his establishing plain error — which he has not done. - 21 -

2020-01-17 22:01:41.972725+00

Lansdon

*229ORINION. LaNsdoN : There being no dispute as to the selling price of the stock received by petitioner in exchange for his stock in the Red Cliff Land & Lumber Co., Ltd., ,it remains only for us to determine the cost of said stock to him, as shown by its market value on November .4, 1918. The probate court of St. Louis County, Minnesota, found the value of this stock to be $194.64 per share for inheritance and estate tax purposes. This valuation was adopted by the respondent in determining the profit to petitioner from the sale, and this finding we are bound to approve, unless the presumption in favor of its correctness is overcome by convincing proof presented by the petitioner. Elizabeth J. Bray, 4 B. T. A. 42. The findings made by the probate court were in accordance with the laws of that State and based upon estimates upon the value of the assets of the Red Cliff Co. These assets consisted of 24,000 shares of the Alberni-Pacific Land & Lumber Co., Ltd., out of a total issue of 30,000 shares of stock, or a four-fifths interest in said latter company. The state court made an exhaustive survey and appraisal of the assets of the Alberni-Pacific Land & Lumber Co., Ltd., and the petitioner in his testimony before this Board, in effect admits that, under conditions existing at said time, the valuation found by the *230court was in harmony with his own judgment. In this connection the petitioner, under cross-examination by respondent’s counsel, admitted that he was present at the hearings of the probate court when the valuation of this stock was under consideration, and that he thought at the time that the valuation fixed by the probate court was about right. When asked for his reasons for this conclusion, he explained that at that time he felt rather pessimistic about things; that the Alberni-Pacific Lumber Co. was a new corporation which had only been jn existence since April, 1918; that it was without operating capital; and that Arthur Gilbert, who had theretofore selected the lands of the Red Cliff Co. and had given these holdings his personal attention, was the president of the new company and that in the latter part of November, 1918, he had died, which circumstance seriously affected the company.” When further pressed for an expression of his opinion as to whether or not the valuation of $194 per share was not too high at said time, he replied by saying that he did not believe that any minority holding could have been sold, but that “ It might be that the entire holding of the company might have been sold at that price at that time.” After all, it is the value of these assets on November 4, 1918, under conditions existing at said time, and not at the date of sale in 1925, as seems to be the theory of petitioner, that must govern. Edwin M. Brown, 1 B. T. A. 502. A great deal of testimony was presented by petitioner of expert timber men who were familiar with values of properties similar to these, which compose the bulk of the assets of these corporations, but none of the witnesses had ever seen these properties or claimed to have any personal knowledge of their value. The petitioner sought to establish a value for the timber properties by introducing in evidence the contract of sale of them made in 1911 with the Von Alvensteben Co. for the expressed consideration of $2,228,100 and treating this fixed sum as their true market value in 1911. He then attempted to establish their value as of November, 1918, by testimony of expert witnesses to the effect that values of like properties, once established, rarely receded or diminished. The infirmity of this evidence, aside from its novelty and remoteness, is that it is based upon a false hypothesis, in assuming that the figure expressed in the Von Alvensteben contract is any evidence whatever as to the value of the properties at that time. The transaction provided for in that contract was an installment sale in which the purchase price was payable in amounts spread over a period of five years. In these circumstances the actual price received by the seller was not the sum total of the payments provided in the contract, but the cash paid, plus the *231value of the contract itself at date of sale. Appeal of Six Hundred and Fifty West End Avenue Co., 2 B. T. A. 958; Somers Lumber Co., 2 B. T. A. 106. On the whole, the evidence before the Board tends to support the findings of the probate court as being the nearest approach to a true valuation for said stock on November 4, 1918, that could be made under conditions existing at that time. The action of the respondent in respect of his determination of the value of this stock is approved. Petitioner further contends that respondent erred in including in his determination of taxable gain to petitioner from the sale of his Red Cliff corporation stock the bonds received as part of the sales price, claiming that, inasmuch as this transaction was one that involved an exchange of corporate stock for securities in another corporation, such securities are excluded from such consideration under section 203(d) (1) of the Revenue Act of 1926. The section cited provides: If an exchange would be within the provisions of paragraph (1), (2), or (4) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. From a careful study of the above section in connection with paragraphs (1), (2) and (4) of section 203, it is seen that it provides the one exception in this entire section that authorizes the inclusion of securities taken in such transactions as we have under consideration here in the computation of taxable gain. Paragraphs (1), (2) and (4) deal exclusively in transactions where property other than money is involved, and exempt all such as fall within the classes therein described from gain or loss consideration. Other transactions, however, were considered, wherein the holder of corporation stock might partially liquidate his interests and take both cash and stock, or other corporate property in exchange therefor. Hence, the addition of paragraphs (d)(1), which takes such out of the exempted classes enumerated in paragraphs (1), (2) and (4) by providing that in such cases the gain to recipient, if any, shall be recognized, but in an amount not in excess of the sum of the money and the fair market value of the other property received. It is clear that in this determination.the respondent followed the law. John B. Atkins et al., 9 B. T. A. 140. Judgment will be entered for the respondent.

2016-07-06 06:31:28.318717+00

OPINION {¶ 1} Defendant-appellant, Hua Lei ("appellant"), appeals from the March 9, 2005 judgment of the Franklin County Municipal Court overruling her motion for a new trial. For the reasons that follow, we affirm the judgment of the trial court. {¶ 2} The procedural and factual history pertinent to this appeal follows. Appellant is a native of the People's Republic of China and is a legal permanent resident of the United States. On August 14, 2003, appellant was charged with domestic violence in violation of R.C. 2903.13(A). On January 8, 2004, appellant was convicted following a bench trial. Appellant was fined and placed on probation. {¶ 3} On March 2, 2004, United States immigration officials took appellant into custody for violations of the Immigration and Nationality Act. Specifically, the immigration officials alleged that she was subject to removal from the United States as a result of her conviction for domestic violence.1 Appellant was released from the custody of immigration officials on bond pending the disposition of her immigration status. {¶ 4} On June 7, 2004, appellant filed a motion "to vacate convictions due to ineffective assistance of counsel" pursuant to Crim.R. 32.1, which appellant later recast as a petition for post-conviction relief pursuant to R.C. 2953.21. The trial court overruled appellant's motion.2 Appellant did not appeal this judgment. {¶ 5} On November 24, 2004, appellant filed a motion for a new trial due to ineffective assistance of counsel, pursuant to Crim.R. 33(A)(1) and (5). Therein, appellant conceded that the motion was untimely but asserted that she was unavoidably prevented from filing the motion within the time period provided within the rule. According to appellant, her trial counsel did not advise her that a conviction for domestic violence would result in deportation. Appellant alleged two specific instances in which the ineffective assistance of trial counsel prejudiced her. First, appellant alleged that she declined an offer from the prosecution for a plea bargain on a reduced charge of disorderly conduct, which carries no risk of deportation, and instead chose to go to trial. But for counsel's ineffectiveness, she said, she would have accepted the plea agreement. Second, appellant argued that she would have taken the stand and testified that she acted in self-defense, had her trial counsel advised her properly as to the risk of deportation. {¶ 6} In support of her motion for a new trial, appellant resubmitted the affidavit she had originally attached to her motion to vacate her conviction pursuant to Crim.R. 32.1 and R.C.2953.21. Therein, appellant described her initial meeting with her trial counsel, Eric Johnson ("Johnson"), in which appellant described her version of the events underlying the criminal charge. Appellant explained to Johnson that her husband attempted to rape her, and that she pushed her husband to get him off of her. According to appellant, Johnson stated that because she had no proof and because "it would be `throwing too much stuff yo (sic) the court,'" she should not testify as to her version of events. Appellant also stated that Johnson told her that she should not testify because "pushing my husband was domestic violence." In another affidavit attached in support of her motion, appellant averred that had Johnson properly advised her that she risked deportation if convicted, she would have acted differently. Appellant stated that she would have accepted the plea, and that she "would take the witness stand to tell the judge my story regardless of Mr. Johnson telling me not to be questioned." {¶ 7} The State of Ohio ("appellee"), opposed the motion, arguing that it was untimely and that appellant was not unavoidably prevented from filing the motion. Appellee asserted that appellant's decision to decline a plea agreement because she was not aware of deportation consequences is not a basis upon which a court can grant a new trial. In addition, appellee argued that appellant's decision not to testify at trial did not result from ineffective assistance of counsel. {¶ 8} On February 25, 2005, the trial court conducted a hearing on the motion. Appellee moved to dismiss the motion as untimely. The trial court stated that it would "not find that the motion was untimely filed," and proceeded with testimony. (Tr. 7.) {¶ 9} Appellant testified through an interpreter. According to appellant, Johnson only spoke to her about her immigration status twice. Both times the conversation was similar, in which Johnson asked appellant, "Do you know [if] there's any immigration consequences out of this?" (Tr. 13.) Both times appellant replied that she did not know, and asked Johnson if he knew, to which he replied, "I don't know." (Tr. 13.) Appellant testified that Johnson never told her that deportation would result if she were convicted of domestic violence. {¶ 10} On cross-examination, appellant explained that although she and Johnson had discussed the possibility of accepting a plea agreement Johnson never told her that she would be deported if convicted of domestic violence. Appellant testified on redirect examination that if she had known that a conviction for domestic violence would result in deportation, she would have accepted the plea bargain instead of going to trial. {¶ 11} Johnson testified on behalf of appellee. He stated that he had previously represented immigrants on criminal matters and depending upon the criminal charge, he "would make them aware of deportation possibilities under the INS code." (Tr. 26.) Johnson stated that he met with appellant at least 12 times on her domestic violence case, and that he believed she understood him at all of the meetings. Johnson testified that during one of the meetings, he discussed the possibility of appellant being deported. According to Johnson, he explained the plea bargain offered to appellant, and informed her that a conviction for disorderly conduct does not fall within the category of deportable offenses. {¶ 12} Johnson testified that although she was aware of the terms of the plea bargain and the fact that a conviction for disorderly conduct would not result in deportation, she refused to plead guilty. When asked whether he "explain[ed] to her the possibilities if she were found guilty of the domestic violence charge," Johnson testified that "[i]n my discussions with her during the time that that offer was available, I explained to her — if not every occasion, nearly every occasion, we discussed the immigration consequences that she could face." (Tr. 30.) Johnson believed that she understood him. On cross-examination, Johnston testified that he had told appellant "domestic violence and assault was a deportable offense." (Tr. 45.) Johnson's testimony contained no mention of how he advised appellant regarding testifying in her own defense, and he offered no details of his trial strategy. {¶ 13} Philip Miele ("Miele"), the attorney who prosecuted the case against appellant, testified on behalf of appellee. Miele testified that he offered appellant a plea bargain for a reduced charge of disorderly conduct. The only reason disorderly conduct was offered to appellant, according to Miele, was because of the "urgings and persuasions, strong persuasions of defense counsel * * * due to deportation issues." (Tr. 56.) {¶ 14} In rebuttal, appellant called a Chinese language expert and interpreter, Wendy Lee ("Lee"). According to Lee, a native Chinese speaker who proficiently understands written English may nevertheless not understand spoken English well. Lee explained that appellant might have misunderstood Johnson when he explained to her that he did not know the immigration consequences because in Chinese, "I don't know" means, "I have not knowledge of and I do not know." (Tr. 64.) On cross-examination, Lee conceded that simply because an individual cannot speak a language does not necessarily mean that the individual does not understand when that language is spoken to her. {¶ 15} The trial court determined that the appellant was represented by competent counsel who advised appellant "that a guilty finding at trial would subject her to the possibility of being deported and that it was a risk of going to trial." The trial court also determined that appellant declined the plea bargain in order to go to trial. The trial court overruled appellant's motion for a new trial. {¶ 16} Appellant presents the following assignment of error for our review: The Municipal Court erred when it held that Ms. Lei did not receive ineffective assistance of counsel and found that Ms. Lei knowingly, voluntarily and willfully rejected the plea bargain and waived her right to testify in her own defense because she understood that deportation was a mandatory consequence of a domestic violence conviction. {¶ 17} Appellant's assignment of error presents the two-part issue whether she received ineffective assistance of counsel when her attorney allegedly failed to inform her that a conviction would expose her to deportation; and whether she is entitled to a new trial because, as a consequence of counsel's alleged ineffective assistance, appellant's decisions to reject a plea agreement and to refrain from testifying at trial were not made knowingly, voluntarily and willfully. {¶ 18} Although several Ohio courts have addressed aliens' ineffective assistance claims when such claims form the basis of a motion to withdraw a guilty plea,3 our research indicates that no Ohio court has addressed an ineffective assistance-based claim such as that advanced by appellant. {¶ 19} The decision to grant or deny a motion for a new trial rests in the sound discretion of a trial court. State v.Schiebel (1990), 55 Ohio St.3d 71, 564 N.E.2d 54, paragraph one of the syllabus. It is within a trial court's discretion to determine credibility of witnesses when considering testimony in a motion for a new trial. State v. Kirkland (Apr. 9, 1998), 10th Dist. No. 97AP-873. Therefore, a reviewing court will not disturb the decision of a trial court on a motion for a new trial absent an abuse of discretion. Id. "The term `abuse of discretion' connotes more than an error of law or judgment; it implies that the court's attitude is unreasonable, arbitrary or unconscionable." Blakemore v. Blakemore (1983),5 Ohio St.3d 217, 219, 5 OBR 481, 450 N.E.2d 1140. {¶ 20} Moreover, "[t]he decision to grant a motion for new trial is an extraordinary measure which should be used only when the evidence presented weighs heavily against the conviction. It is clear from the language of Crim.R. 33 that a new trial is not to be granted unless it affirmatively appears from the record that a defendant was prejudiced by one of the grounds stated in the rule, or was thereby prevented from having a fair trial. See Crim.R. 33(E)." State v. Samatar, 152 Ohio App.3d 311,2003-Ohio-1639, 787 N.E.2d 691, ¶ 35. (Citations omitted.) {¶ 21} Crim.R. 33 governs motions for a new trial.4 As it relates to this appeal, Crim.R. 33 states in relevant part: (A) Grounds A new trial may be granted on motion of the defendant for any of the following causes affecting materially his substantial rights: (1) Irregularity in the proceedings, or in any order or ruling of the court, or abuse of discretion by the court, because of which the defendant was prevented from having a fair trial; * * * (5) Error of law occurring at trial; * * * (B) Motion for new trial; form, time. Application for a new trial shall be made by motion which, except for the cause of newly discovered evidence, shall be filed within fourteen days after the verdict was rendered * * * unless it is made to appear by clear and convincing proof that the defendant was unavoidably prevented from filing his motion for a new trial; in which case the motion shall be filed within seven days from the order of the court finding that the defendant was unavoidably prevented from filing such motion within the time provided herein. {¶ 22} Crim.R. 33(B) requires a two-step process for filing an untimely motion for a new trial. If a defendant files a motion for a new trial for any reason except newly discovered evidence after the fourteen-day period set forth in Crim.R. 33(B), the defendant must seek leave of court to file a delayed motion.State v. Warwick, 2nd Dist. No. 01CA33, 2002-Ohio-3649 at ¶ 13, citing State v. Mathis (1999), 134 Ohio App.3d 77, 79,730 N.E.2d 410. See, also, State v. Lordi (2002),149 Ohio App.3d 627, 2002-Ohio-5517 at ¶ 25, 778 N.E.2d 605 ("[l]eave must be granted before the merits are reached"). A court may only grant leave when a defendant proves by clear and convincing evidence that she was unavoidably prevented from filing a timely motion.State v. Wilson, 10th Dist. No. 02AP-1350, 2003-Ohio-5892 at ¶ 12. Once a court determines that a defendant was unavoidably prevented from filing a timely motion and grants leave, the defendant must then file the motion for new trial setting forth the substantive grounds thereof. State v. Walden (1984),19 Ohio App.3d 141, 146, 19 OBR 230, 483 N.E.2d 859. {¶ 23} Appellee asserts that the trial court lacked jurisdiction to consider appellant's motion for a new trial because it was untimely, and because the trial court did not first issue an order granting appellant leave to file the motion out of rule. We disagree. The trial court found that the motion was not untimely filed, proceeded to hear testimony, and issued a decision and entry on the merits. Thus, we conclude that the trial court implicitly determined that appellant satisfied her burden that she was unavoidably prevented from filing her motion. Moreover an order granting leave is "clearly not a condition to the trial court's authority to grant a motion for new trial."State v. Blankenship (1996), 111 Ohio App.3d 198, 201,675 N.E.2d 1303. Though the court's failure to issue such an order was, "error, [it] did not defeat the court's jurisdiction." Ibid. Because the trial court had jurisdiction to rule on appellant's motion, this appeal is properly before us. {¶ 24} We now proceed to a determination of the merits of appellant's assignment of error. A new trial may be granted on one of the grounds contained in Crim.R. 33(A), but may not be granted for any other reason, unless it affirmatively appears from the record that the defendant was prejudiced thereby or was prevented from having a fair trial. Crim.R. 33(E). {¶ 25} A claim of ineffective assistance of counsel is cognizable in a motion for a new trial pursuant to Crim.R. 33(A)(1). State v. Farley, 10th Dist. No. 03AP-555,2004-Ohio-1781, ¶ 11. But, see State v. Judy (July 23, 1986), 1st Dist. No. C-850796 (recognizing that ineffective assistance of counsel may be addressed in a Crim.R. 33(A)(1) motion but observing that a petition for post-conviction relief pursuant to R.C. 2953.21 may provide a more effective and appropriate vehicle for relief on a claim for ineffective assistance of counsel because the dispositive facts are found outside the record). {¶ 26} In order to prevail on a claim for ineffective assistance of counsel, a defendant must satisfy a two-prong test.Strickland v. Washington (1984), 466 U.S. 668, 687,104 S.Ct. 2052, 80 L.Ed.2d 674; State v. Bradley (1989),42 Ohio St.3d 136, 538 N.E.2d 373. The first prong requires that the defendant demonstrate that the performance of counsel was deficient.Strickland at 687. This involves a showing that counsel made errors so serious that counsel was not functioning as the "counsel" guaranteed by the Sixth Amendment to the United States Constitution. A defendant may demonstrate that the conduct of counsel was deficient by identifying acts or omissions that were not the result of reasonable, professional judgment. A court must then determine whether, in light of all the circumstances, the identified acts or omissions were outside the wide range of professionally competent assistance. Id. at 690. {¶ 27} In analyzing the first prong of Strickland, there is a strong presumption that the conduct of counsel falls within a wide range of reasonable professional assistance. Id. at 689. A defendant must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. Id., citing Michel v. Louisiana (1995),350 U.S. 91, 101, 76 S.Ct. 158, 100 L.Ed. 83. An error by counsel, even if unreasonable under prevailing professional standards, does not warrant setting aside a judgment unless the error affected the outcome of the trial. Strickland, at 691. {¶ 28} Under the second prong of Strickland, a defendant must demonstrate that the performance of counsel prejudiced her. Id. This requires showing that, but for the unprofessional errors of counsel, a reasonable probability existed that the result of the trial would have been different. "A reasonable probability is a probability sufficient to undermine confidence in the outcome." Id. at 694. Although a claim for ineffective assistance of counsel comprises two analytical prongs, a court is not required to approach each prong in the same order, or even address both prongs if a defendant makes an insufficient showing on one prong. {¶ 29} As discussed above, appellant asserts that her trial counsel's failure to inform her that deportation is a consequence of a domestic violence conviction constitutes ineffective assistance, and because the ineffective assistance prejudiced her, she is entitled to a new trial pursuant to Crim.R. 33(A)(1) and (5). {¶ 30} Appellant argues that a criminal defense attorney has a duty to advise clients on the deportation consequences of a conviction. She asserts that her counsel was aware that federal law requires deportation for a conviction for domestic violence but that he failed to discuss the precise issue with her, and failed to adequately determine whether she understood him, given the fact that appellant is not a native speaker of English. She claims that but for counsel's failure to advise her regarding deportation, she would have accepted the plea agreement. She also argues that counsel's ineffective assistance prejudicially affected her decision to not testify on her own behalf. She argues that because she was not fully informed of the consequences of a domestic violence conviction, her decision not to testify was not knowing, intelligent or voluntary. {¶ 31} In response, appellee argues that appellant was not denied a fair trial pursuant to Crim.R. 33(A)(1), and that an error of law did not occur at trial pursuant to Crim.R. 33(A)(5). According to appellee, because appellant was adequately advised of the consequences of domestic violence and disorderly conduct convictions, appellant's decision to forgo the plea agreement and to exercise her right to a trial cannot be considered the result of ineffective assistance of counsel. Appellee also argues that the decision by a defendant to not testify at trial is a valid trial strategy.5 {¶ 32} We note initially that, "criminal defense lawyers ordinarily are not required to inform defendants of collateral consequences." Creary, supra, at ¶ 8. A collateral consequence is a consequence that is not definite, immediate, or automatic.State v. Yun, 10th Dist. No. 04AP-494, 2005-Ohio-1523 at ¶ 12. See, also, State v. Lambert (May 25, 1999), 10th Dist. No. 98AP-941. Deportation is considered a collateral consequence of a criminal conviction. Yun at ¶ 12. As we stated in Yun: Deportation remains beyond the control and responsibility of the court in which that conviction was entered and it thus remains a collateral consequence thereof. U.S. v. Amador-Leal (C.A.9, 2002), 276 F.3d 511, 516. Immigration consequences will not surface until the court's sentence has been served. Before a defendant can be deported, the [immigration officials] must follow certain administrative procedures and must exercise its discretion to commence deportation proceedings. The proceedings are wholly independent of the court that imposes sentence. Deportation is a "purely civil action" separate and distinct from a criminal proceeding.I.N.S. v. Lopez-Mendoza (1984), 468 U.S. 1032, 1038,104 S.Ct. 3479, 82 L. Ed.2d 778. Id. at ¶ 12-13. Though the court must inform defendants of deportation consequences prior to accepting a plea of guilty or no contest, pursuant to R.C. 2943.031, no statutory or decisional authority requires trial counsel to advise a defendant of the civil, collateral consequence of deportation for purposes of the defendant's decision as to whether to accept a plea agreement or to exercise her constitutional right to trial, or whether to testify at trial. {¶ 33} The ultimate basis of the trial court's decision to deny appellant's motion was its specific finding that Johnsondid properly advise appellant of the deportation consequences of a conviction. At the hearing on her motion appellant had the opportunity to fully present her version of the substance of her conversations with Johnson. However, as the court stated in its judgment entry, after considering appellant's evidence, as well as that presented by appellee, it found that Johnson had not rendered ineffective assistance and that he had advised appellant that a guilty verdict would subject her to the possibility of deportation. The court also found that, despite counsel's advice with respect to deportation, appellant "was adamant about not taking a negotiated plea" and that she was determined to proceed to trial. It was within the trial court's discretion to assess the credibility of the witnesses' testimony. Kirkland, supra. We find no abuse of discretion in the court's determination that there was no ineffective assistance of counsel. Therefore, appellant has not met the first prong of Strickland. {¶ 34} Although appellant declined the plea bargain and did not testify at trial, she exercised her rights to a trial before an impartial finder of fact. Appellant has not demonstrated any irregularity in the proceedings of the trial court that prevented her from having a fair trial, or an error of law occurring at trial. {¶ 35} Accordingly, we conclude that the trial court did not abuse its discretion by overruling appellant's motion for a new trial. We therefore overrule appellant's sole assignment of error and affirm the judgment of the Franklin County Municipal Court. Judgment affirmed. Petree and Brown, JJ., concur. 1 The Immigration and Nationality Act ("Act"), as amended, states in relevant part: (a) Classes of deportable aliens. Any alien * * * in and admitted to the United States shall, upon the order of the Attorney General, be removed if the alien is within one or more of the following classes of deportable aliens: * * * (2) Criminal Offenses. * * * (E) Domestic violence, stalking, and child abuse. (i) Any alien who at any time after admission is convicted of a crime of domestic violence * * * is deportable. Section 1227(a)(2)(E)(i), Title 8, U.S. Code. The Act subjects an alien to deportation if the alien falls within certain statutorily defined categories, such as violation of immigration status, conviction by a state or federal court for specific criminal offenses, or failure to register with immigration officials. The Act permits an alien to seek a waiver of deportation, or cancellation of removal, provided the alien can meet criteria defined by the statute. See, generally, Sections 1227(a)(7), 1229(b), Title 18, U.S. Code. 2 See State v. Cowan, 101 Ohio St.3d 372, 805 N.E.2d 1085,2004-Ohio-1583 (municipal courts are without jurisdiction to entertain petitions for post-conviction relief because such authority is not granted in Chapter 1901 of the Revised Code). 3 See, generally, State v. Arvanitis (1986),36 Ohio App.3d 213, 522 N.E.2d 1089 (court considered ineffective assistance claim of alien with respect to vacating guilty plea); State v.Yanez, 150 Ohio App.3d 510, 782 N.E.2d 146, 2002-Ohio-7076 at ¶41-43 (court considered role of trial counsel in advising alien-defendant in entering a guilty plea); State v. Creary, 8th Dist. No. 82767, 2004-Ohio-858 (alien-defendant entitled to hearing on motion to withdraw guilty plea due to ineffective assistance of trial counsel by misstating deportation law). 4 Although R.C. 2945.79 also governs motions for a new trial, Crim.R.33 is a substantive duplication of the statute and has superseded it. See State v. Reed (1981), 65 Ohio St.2d 117,418 N.E.2d 1359, 19 O.O.3d 311. 5 Appellee also asserts that appellant waived any argument regarding her decision not to testify at her trial because she did not testify on this matter at the hearing on her motion for a new trial. Although a review of the record reveals that neither appellant nor appellant's trial counsel testified at the motion hearing regarding appellant not testifying in her own defense at trial, we note that appellant asserted this issue in her affidavits in support of her motion at the trial court, and therefore may raise the issue for our review on appeal.

2020-12-01 22:04:06.759983+00

http://www.illinoiscourts.gov/Opinions/AppellateCourt/2020/5thDistrict/5200099.pdf

2020 IL App (5th) 200099 NOTICE Decision filed 11/30/20. The text of this decision may be NO. 5-20-0099 changed or corrected prior to the filing of a Peti ion for IN THE Rehearing or the disposition of the same. APPELLATE COURT OF ILLINOIS FIFTH DISTRICT ______________________________________________________________________________ In re MARRIAGE OF ) Appeal from the ) Circuit Court of SANDRA D. DAHM-SCHELL, ) St. Clair County. ) Petitioner-Appellant, ) ) and ) No. 14-D-637 ) MARK R. SCHELL, ) Honorable ) Patricia H. Kievlan, Respondent-Appellee. ) Judge, presiding. ______________________________________________________________________________ JUSTICE MOORE delivered the judgment of the court, with opinion. Justices Boie and Wharton concurred in the judgment and opinion. OPINION ¶1 On February 18, 2020, upon the motion of the petitioner, Sandra D. Dahm-Schell, the circuit court of St. Clair County certified the following question for interlocutory appeal pursuant to Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019): “Whether inherited mandatory retirement distributions are income for purposes of child support and maintenance calculations.” For the following reasons, we find that answering the certified question, as written, will not materially advance the ultimate termination of this litigation. As such, we limit the scope of our answer to the facts of this case. Accordingly, we answer the following question: “Whether mandatory distributions or withdrawals taken from an inherited individual retirement account (IRA) 1 containing money that has never been imputed against the recipient for the purposes of maintenance and child support calculations constitute ‘income’ under 750 ILCS 5/504(b-3) (West 2018) and 750 ILCS 5/505(a)(3) (West 2018).” Under these circumstances, we answer the certified question, as we have framed it, in the affirmative, holding that “gross income” and “net income,” as defined in sections 504 and 505 of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS 5/504(b-3), 505(a)(3) (West 2018)), includes distributions or withdrawals taken from a party’s IRA when said IRA only contains money received via inheritance and said inheritance has not previously been imputed on the party as income for the purposes of calculating child support and maintenance. Having answered the certified question as we have reframed it in order to materially advance the termination of this litigation, and in the interests of judicial economy and the need to reach an equitable result, we vacate the circuit court’s order entered on September 5, 2018, refusing to consider the distributions from the inherited IRA as income and remand this cause with instructions that the circuit court recalculate the respondent’s required child support and maintenance amounts with the inherited IRA distributions considered in its calculations as required by the Act. ¶2 I. BACKGROUND ¶3 The petitioner and the respondent were married on November 7, 1992. On August 12, 2014, the petitioner filed for a dissolution of marriage. While the dissolution of marriage action was pending, the respondent’s mother died, and he inherited approximately $615,000. The inheritance was held in various checking accounts and investment accounts, the majority being held in two IRAs. On October 11, 2016, the circuit court entered a judgment of dissolution of marriage in the parties’ divorce case, No. 14-D-637. At the time the judgment was entered, the respondent was 56 years old and worked as a civil engineer. The parties had five children, three of whom were minors 2 at the time of the dissolution of the marriage. In the judgment of dissolution of marriage, the circuit court found that based upon the 2015 financial statements provided by the respondent, he earned a monthly gross income of $8301.83 at his place of employment. He also earned $462.33 per month in dividends from the inherited IRAs, bringing his monthly gross income to $8764.16 per month or $105,169.92 per year. The parties stipulated in the circuit court proceedings that the inheritance was the respondent’s nonmarital property and the respondent was subsequently awarded all of the inheritance he received from his mother. When initially calculating child support and maintenance in its October 11, 2016, order, the circuit court did not include the respondent’s inheritance as part of his income; instead, the circuit court only included the respondent’s dividend earnings from the inherited IRAs. ¶4 On November 10, 2016, and November 21, 2016, respectively, the respondent and the petitioner filed motions to reconsider the circuit court’s October 11, 2016, order. Relevant to this case, the petitioner in her November 21, 2016, motion to reconsider argued that the circuit court should have considered the respondent’s inheritance when determining the proper amount of child support and maintenance required to be paid by the respondent. In the circuit court’s amended judgment and rulings entered on December 18, 2017, and its second amended judgment and rulings entered on December 28, 2017, the circuit court reaffirmed its prior position and ordered that only “the dividends from [the respondent’s] inheritance shall be considered and added to his monthly income for maintenance and child support purposes.” ¶5 On March 28, 2017, prior to any rulings on the motions to reconsider or the circuit court’s amended judgments discussed above, the respondent filed pleadings petitioning the circuit court to reduce the amount of child support and maintenance he was obligated to pay to the petitioner. The basis for the reduction articulated in the respondent’s motion was that his employer reduced 3 his pay by 20% due to the company’s financial issues and one of the previous three minor children had now graduated high school and was no longer a minor. In the respondent’s financial affidavit prepared on March 21, 2018, in support of his petition to modify child support and maintenance, he claimed his gross monthly income at that time was $7800 from his regular employment as an engineer, with additional income as follows: (1) interest income of $1.67, (2) dividend income of $743.92, and (3) distributions and draws of $894.25 (from the inherited IRAs). ¶6 Thus, the respondent, at the time of the preparation of the 2018 financial statement, had a gross income of $9439.84 per month or $113,278.08 annually if the mandatory distributions and withdrawals from the inherited IRAs were included or a gross income of $8545.59 per month or $102,547.08 annually if the distributions were not included. In other words, $10,731 per year of the respondent’s income could be attributed to distributions and withdrawals from the inherited IRAs. It is this portion of the respondent’s income that the certified question before us seeks to have properly categorized by this court. ¶7 On May 3, 2018, a hearing was held in the circuit court on the respondent’s March 28, 2017, motion to reduce child support and maintenance. The respondent testified at the hearing that he filed for the reduction because his employer cut his pay by 20% and one of his children was no longer a minor. He testified that he received $10,731 in mandatory IRA distributions from the inherited accounts as indicated by his financial statement, but noted that upon receiving those distributions, he immediately transferred the money into another “non-marital account” held in his name. He testified that these distributions were the mandatory minimum distributions required under federal law. He also testified that he received dividends on the inherited IRAs but clarified that he doesn’t actually “receive the dividends. They’re in an account that’s reinvested.” He then went on to affirm that these dividends were still considered income. 4 ¶8 It was the respondent’s position during the hearing that his mandatory withdrawals of $894.25 per month should not be considered income for the purpose of calculating child support and maintenance because he had no choice but to take the distributions from the inherited IRAs (now transferred into his own IRA) and the inheritance was not marital property. He further stated that “[the circuit court] ruled that [the petitioner] was not entitled to my nonmarital inheritance.” ¶9 On September 5, 2018, the circuit court entered an order declining to include the respondent’s inherited mandatory retirement distributions when calculating child support and maintenance. Following the circuit court’s entry of the September 5, 2018, order, the petitioner filed a motion to reconsider the September 5, 2018, order on October 5, 2018. The circuit court denied the petitioner’s motion to reconsider on January 29, 2019. The petitioner then attempted to appeal the circuit court’s September 5, 2018, order in this court in case No. 5-19-0075. However, that appeal was dismissed for lack of jurisdiction because the September 5, 2018, order was not a final and appealable order. ¶ 10 On February 18, 2020, the petitioner made an oral motion before the circuit court requesting that it certify the issue of whether mandatory IRA distributions constituted income as a question for interlocutory appeal pursuant to Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019). On that same day, the circuit court granted the motion and entered an order pursuant to Rule 308, certifying the aforementioned certified question for our review, and we subsequently granted the petitioner’s petition for leave to appeal. ¶ 11 II. ANALYSIS ¶ 12 We begin our analysis with an outline of the applicable standard of review. This appeal concerns questions of law certified by the circuit court pursuant to Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019); therefore, our standard of review is de novo. In re M.M.D., 213 Ill. 2d 105 , 5 113 (2004). “Although the scope of our review is generally limited to the questions that are certified by the circuit court, if the questions so certified require limitation in order to materially advance the ultimate termination of the litigation, such limitation is proper.” Crawford County Oil, LLC v. Weger, 2014 IL App (5th) 130382 , ¶ 11. “In addition, in the interests of judicial economy and the need to reach an equitable result, we may consider the propriety of the circuit court order that gave rise to these proceedings.” Id. ¶ 13 The issue of whether IRA distributions or withdrawals constitute “income” as it relates to child support and maintenance payments is currently unsettled in Illinois. Before we get into our analysis of the main issue raised by the certified question before us, we first quickly discuss the definition of “income” under the Act that controls child support and maintenance payments. The term “gross income” has the same meaning in regard to both child support payments and maintenance payments, “except maintenance payments in the pending proceedings shall not be included.” 750 ILCS 5/504(b-3), (b-3.5) (West 2018). The term “gross income” is simply defined in the Act as “all income from all sources.” Id. § 505(a)(3)(A). The definition then goes on to list numerous specific benefits or payments that are exempted from being counted as income, none of which are applicable to this case. Id. The Act does not separately define the term “income” despite it being used within the definition for “gross income.” Thus, as our Illinois Supreme Court did in In re Marriage of Rogers, 213 Ill. 2d 129 (2004), we look to the plain meaning. “As the word itself suggests, ‘income’ is simply ‘something that comes in as an increment or addition ***: a gain or recurrent benefit that is usu[ually] measured in money ***: the value of goods and services received by an individual in a given period of time.’ ” Id. at 136-37 (quoting Webster’s Third New International Dictionary 1143 (1986)). Black’s Law Dictionary defines income as “ ‘[t]he money or other form of payment that one receives, usu[ually] periodically, from employment, business, 6 investments, royalties, gifts and the like.’ ” Id. at 137 (quoting Black’s Law Dictionary 778 (8th ed. 2004)). “Under these definitions, a variety of resources that would not be taxable under the Internal Revenue Code will qualify as income for the purposes of child support.” In re Marriage of Verhines, 2018 IL App (2d) 171034 , ¶ 54. Our Illinois Supreme Court has held that income “includes gains and benefits that enhance a noncustodial parent’s wealth and facilitate that parent’s ability to support a child or children.” In re Marriage of Mayfield, 2013 IL 114655 , ¶ 16 (citing Rogers, 213 Ill. 2d at 137 ). ¶ 14 Having discussed the definition of the term “income” under the Act, we now turn to Illinois case law for guidance as to the certified question before this court. While a number of appellate court cases have addressed the specific issue of IRA distributions in the context of child support and maintenance payments, our Illinois Supreme Court has not. Instead, the most analogous case to the present in which our Illinois Supreme Court has given guidance is In re Marriage of McGrath, 2012 IL 112792 . At issue in McGrath was whether money that an unemployed parent regularly withdrew from a savings account must be included in the calculation of income when setting child support under section 505 of the Act. Id. ¶ 10. The facts of McGrath were unique because although the parent was unemployed, he was using his savings to “maintain a lifestyle in which his household expenses were similar to [the] petitioner’s expenses for a household of three.” Id. ¶ 6. The Illinois Supreme Court noted the following in relation to the money withdrawn from the savings account: “Money that a person withdraws from a savings account simply does not fit into any of these definitions. The money in the account already belongs to the account’s owner, and simply withdrawing it does not represent a gain or benefit to the owner. The money is not 7  coming in as an increment or addition, and the account owner is not ‘receiving’ the money because it already belongs to him.” Id. ¶ 14. ¶ 15 The Illinois Supreme Court went on to state that, even though the money withdrawn from a savings account would not constitute “income” because it was money that “already belongs to him” (id.), it might be appropriate for a court to determine if a deviation may be necessary under section 505(a)(2) of the Act (id. ¶ 16), which allows for the circuit court to deviate from the standard child support and maintenance calculations where the income amount does not properly represent the financial status of the party required to pay support. Thus, focusing on the issue before us of what constitutes “income,” the takeaway from McGrath is the Illinois Supreme Court’s holding that the withdrawals from the savings account were not income under the Act because “[t]he money in the account already belongs to the account’s owner, and simply withdrawing it does not represent a gain or benefit to the owner.” Id. ¶ 14. ¶ 16 The respondent in this case argues that the holding in McGrath supports his position that an IRA distribution, which is similar to a savings account withdrawal, does not constitute income under the Act. Specifically, he argues that “the money that [the respondent] has in his IRA already belongs to him. It belonged to him the minute that the October 11, 2016, judgment of dissolution became final.” We disagree and believe the respondent oversimplifies the McGrath holding. ¶ 17 First, we take issue with the respondent’s assertion that the money “belonged to him the minute that the October 11, 2016, judgment of dissolution became final.” While it is true that the October 11, 2016, order awarded the respondent the inheritance based upon the parties’ stipulation that the inheritance was nonmarital property, there was no finding in the circuit court’s order or any language in the parties’ property settlement agreement that indicated that the inheritance was now barred from being considered income for the purposes of child support and maintenance. The 8 order simply stated “[t]hat [the respondent] is awarded all of his inherited funds, including his Vanguard Inherited IRA, his Vanguard Inherited Roth IRA, his Bank of America account (#8827), his Bank of America Money Market Savings account (#4302), and his TD Ameritrade account.” Nowhere in the order or any other pleadings did the petitioner relinquish her right to or claim to the inheritance. See In re Marriage of McLauchlan, 2012 IL App (1st) 102114 (property settlement agreement in the dissolution of marriage case controlled where former wife had specifically waived any and all interests in former husband’s retirement plans). Instead, this order merely acknowledged that this inheritance constituted nonmarital property that should be awarded to the respondent. This court has previously held that retirement benefits awarded to a party following a dissolution of marriage are not barred from use in determining income for child support purposes. See In re Marriage of Klomps, 286 Ill. App. 3d 710 , 715-17 (1997). Whether the money was awarded to the respondent and whether that money can later be considered income for the purposes of determining the amount of child support and maintenance are two separate questions. Thus, here, where there was no waiver of the petitioner’s interests in the inheritance and, in fact, the petitioner challenged the circuit court’s refusal to include the inheritance in its initial calculation of child support and maintenance in her petition to reconsider following the original October 11, 2016, order, the inherited IRAs are not immune from later being considered as income for the purposes of determining child support and maintenance. ¶ 18 Understanding that the circuit court’s awarding of the inheritance to the respondent does not preclude it from being included in child support and maintenance calculations, we now look at the holding of McGrath to see if it still controls this case as the respondent contends. The Illinois Supreme Court in McGrath was addressing withdrawals from a savings account, not an IRA distribution. In fact, despite the lower court’s reliance on cases that dealt with IRA withdrawals, 9 the McGrath court did not specifically speak to IRAs in its opinion. However, despite this, we still find the reasoning behind the McGrath court’s holding to be instructive, especially when read alongside the case law specifically dealing with IRAs. The McGrath court ruled that the withdrawals from the savings account did not constitute income because “[t]he money in the account already belongs to the account’s owner, and simply withdrawing it does not represent a gain or benefit to the owner.” McGrath, 2012 IL 112792 , ¶ 14. In other words, the McGrath court looked past the type of account, choosing not to make a bright-line rule, and instead looked at the money held within the account being withdrawn to determine if that money should be considered as income. Because the money held within the savings account was already earned and placed into the account, the withdrawal did not represent a “gain” or a “benefit.” Though the McGrath court does not expressly state so in its opinion, it appears the money contained within the savings account had already been considered “income” at some point prior. Thus, because that money had already been considered income at some time prior to the withdrawal, the money withdrawn could not now also constitute income. This issue has been referred to by the appellate courts as the issue of “double counting.” We believe it is now helpful to turn to the case law that specifically addresses IRAs and discusses the “double counting” issue. ¶ 19 There are three cases that we find warrant discussion. The first case is In re Marriage of Lindman, 356 Ill. App. 3d 462 (2005). Lindman is a Second District case in which the court held generally that distributions from an IRA constituted “income” for the purpose of calculating income under the Act. Id. at 466-67. The court noted that under Illinois law, for the purpose of calculating child support, such items as worker’s compensation awards, military allowances, deferred compensation payments, and even pensions, constituted “income.” Id. at 466. The court went on to state, “[w]e see no reason to distinguish IRA disbursements from these items. Like all 10 of these items, IRA disbursements are a gain that may be measured in monetary form.” Id. at 466. Importantly, the Lindman court separately acknowledged that there might be “a potential ‘double counting’ issue that petitioner does not raise.” Id. at 470. The court went on to explain the issue of “double counting”: “Consider, for example, the following situation. In year one, a court sets a parent’s child support obligation at X. This amount is based on a calculation of the parent’s year one net income, which includes money the parent puts into an IRA. In year five, the parent begins receiving disbursements from the IRA, and, that same year, the parent asks the court to modify his or her child support obligation. To determine whether modification is proper, the court looks to see whether there has been a change in the parent’s net income. See 750 ILCS 5/510 (West 2002). In making that determination, the court considers as part of the parent’s year five net income the amount of the disbursements from the IRA. It may be argued that the court is double counting this money, that is, it is counting the money on its way into and its way out of the IRA. In other words, the money placed into the IRA from year one to year five is being counted twice. To avoid double counting in this situation, the court may have to determine what percentage of the IRA money was considered in the year one net income calculation and discount the year five net income calculation accordingly.” Id. While the court acknowledged the potential issue, it went on to decline to take a firm position because the petitioner in Lindman did not raise the issue or claim that the IRA money had been double counted. Id. at 470-71. ¶ 20 Following Lindman, the Fourth District heard the case of In re Marriage of O’Daniel, 382 Ill. App. 3d 845 (2008). The court in O’Daniel disagreed with the Lindman decision, stating that 11 the “Second District’s decision does not adequately take into account that IRAs are ordinarily self- funded by the individual possessing the retirement account.” Id. at 850. The court went on to note: “Except for the tax benefits a person gets from an IRA and the penalties he or she will incur if he or she withdraws the money early, an IRA basically is no different than a savings account, although the risks may differ. The money the individual places in an IRA already belongs to that individual. When an individual withdraws money he placed into an IRA, he does not gain anything as the money was already his. Therefore, it is not a gain and not income. The only portion of the IRA that would constitute a gain for the individual would be the interest and/or appreciation earnings from the IRA.” Id. The court finally noted that it did not have before it “what portion of [the former husband’s] IRA was made up of his contributions. As a result, [the court could not] say what portion of [the former husband’s] withdrawals might have constituted income for child-support purposes.” Id. Thus, following O’Daniel, it appeared that the appellate court case law was split as to how to handle IRA distributions when calculating child support and maintenance. ¶ 21 In 2018, the Second District revisited the issue in Verhines, 2018 IL App (2d) 171034 . The court in Verhines opined that despite the appearances of Lindman and O’Daniel, the cases may not directly contradict each other. The court explained: “We are not convinced that Lindman and O’Daniel are in absolute conflict. Lindman stated that IRA withdrawals are income, after subtracting for ‘double counting.’ (It did not consider ‘double counting,’ because the appellant did not raise the issue.) O’Daniel stated that IRA withdrawals are not income, except for that portion representing interest and appreciation. (It did not consider interest and appreciation because the 12  appellant did not raise the issue.) Thus, both Lindman and O’Daniel allow for the possibility that a portion of IRA withdrawals would constitute income. Lindman stated that double counting would occur if earnings deposited into IRA were counted as income both in the year they were deposited and in the year they were withdrawn. [Citation.] To avoid that double counting, the court might have to determine what percentage of the IRA was considered income in the year it was deposited and discount that amount from the calculation of income in the year of withdrawal. [Citation.] The Lindman court detailed a double-counting hypothetical where the father contributed to and withdrew from the IRA during years that he was paying child support. However, we did not preclude the double-counting scenario set forth in O’Daniel. The double-counting scenario set forth in O’Daniel was broader. O’Daniel excluded as income not only what had already been documented as income in a prior support year, but anything that was not new growth, interest, or appreciation.” Id. ¶¶ 65-66. ¶ 22 After reviewing the case law as discussed above, and taking McGrath, Lindman, O’Daniel, and Verhines together, we find that the proper mechanism for determining if an IRA distribution or withdrawal is “income” for the purposes of child support and maintenance is to first determine the source of the money at issue and whether or not that money has been previously imputed against the individual receiving the distribution or withdraw so as to avoid double counting. If the money that constitutes the IRA has already been imputed against the party receiving the distribution or withdrawal as “income” for child support and maintenance purposes, then as stated in O’Daniel, “[t]he money the individual places in an IRA already belongs to that individual. When an individual withdraws money he placed into an IRA, he does not gain anything as the money 13  was already his. Therefore, it is not a gain and not income. The only portion of the IRA that would constitute a gain for the individual would be the interest and/or appreciation earnings from the IRA.” O’Daniel, 382 Ill. App. 3d at 850. We believe it would be improper to count the money both as “income” first when it is earned or initially received and then again when it is withdrawn. It is our opinion that this is in accordance with the reasoning of the Illinois Supreme Court’s decision in McGrath that double counting should be avoided. ¶ 23 Turning to the present case, we note that we have different facts from the previous cases discussed above. Here, the respondent has inherited a large sum of money from his mother. The bulk of this money is held in IRAs that have been left to him. Due to federal law, the respondent is required to take distributions from these IRAs in the sum of approximately $10,700 per year. He has petitioned the circuit court to lower the amount of child support and maintenance he is required to pay, mainly due to the fact that he now works for a different employer and is not making as much money as he was in 2016. However, if we factor the approximately $10,700 worth of IRA distributions into his income when determining his child support and maintenance payments, the respondent’s income is actually higher than it was in 2016 by approximately $8000. ¶ 24 “The Act creates a rebuttable presumption that all income, unless specifically excluded by the statute, is income for support purposes.” In re Marriage of Sharp, 369 Ill. App. 3d 271 , 280 (2006). In Rogers, 213 Ill. 2d at 137 , the Illinois Supreme Court held that gifts or “loans” from parents received by a father constitute income for the purpose of child support payments because “[t]hey represented a valuable benefit to the father that enhanced his wealth and facilitated his ability to support [his child].” Although there are no published Illinois decisions directly addressing the question of whether inheritance constitutes income for the purposes of child support 14 or maintenance, based upon the Illinois Supreme Court’s holding in Rogers, remaining consistent with our dicta in In re Marriage of Fortner, 2016 IL App (5th) 150246 , ¶ 11 n.1, and in keeping with the spirit of the Act, we find that the statutory definition of “income” as found within the Act is broad enough that it includes an individual’s inheritance when determining child support and maintenance. ¶ 25 Therefore, because an individual’s inheritance must be considered as income under the Act and, in the present case before us, there is no evidence in the record that the circuit court has ever factored the $615,000 inheritance into any child support or maintenance calculations, we now answer the certified question in the affirmative: the distributions that the respondent is receiving from the inherited IRAs must be included as income in the calculations for determining child support and maintenance. To further clarify, we distinguish the present case from that in McGrath, in that the money being withdrawn here is not money that “already belonged to the [account] owner” but, instead, was a gift from his mother that he inherited upon her death, money that has never been imputed to him as income in child support or maintenance calculations. Thus, because the money has never been imputed to him as income, we do not have an issue of “double counting.” If, however, the circuit court had imputed the inheritance as income to the respondent in its initial determination of child support and maintenance in the October 11, 2016, order, we would not now do so upon his receipt of the distributions because the money received would have already been counted as income. The fact that the respondent is required by law to take the distributions, or the fact that he chooses to move the distributions immediately into another IRA, is of no concern. Because the money is being distributed, the respondent is receiving the benefit of the money to use as he pleases, and it has not previously been imputed to him as income, the circuit court must now include it as income for the purpose of calculating child support and maintenance. 15 ¶ 26 III. CONCLUSION ¶ 27 For the foregoing reasons, and having answered the certified question as we have reframed in the affirmative, we vacate the circuit court’s September 5, 2018, order and remand these proceedings to the circuit court with directions that the circuit court recalculate the child support and maintenance amounts in accordance with this opinion. ¶ 28 Certified question answered and order vacated; cause remanded with directions. 16  No. 5-20-0099 Cite as: In re Marriage of Dahm-Schell, 2020 IL App (5th) 200099 Decision Under Review: Appeal from the Circuit Court of St. Clair County, No. 14-D-637; the Hon. Patricia H. Kievlan, Judge, presiding. Attorneys Rhonda D. Fiss, of Law Office of Rhonda D. Fiss, P.C., of for Belleville, for appellant. Appellant: Attorneys Dustin S. Hudson, of Neubauer, Johnston & Hudson, P.C., of for Fairview Heights, for appellee. Appellee: 17

2020-11-21 02:40:51.583843+00

MACON, DUBLIN & SAVANNAH RAILROAD COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Macon, D. & S. R. Co. v. Commissioner Docket No. 90592. United States Board of Tax Appeals 40 B.T.A. 1266; 1939 BTA LEXIS 739; December 22, 1939, Promulgated *739 1. In the absence of considerations invoking equitable estoppel, held parol evidence offered by taxpayer is properly admissible to show that a transaction, described in certain written instruments as an absolute sale, with an option granted to the vendor to repurchase, was in fact intended and understood by the parties to be merely a transfer of shares of stock into the name of a nominee. 2. A parent corporation, owning more than 95 per centum of the capital stock of a subsidiary, transferred approximately 54 per centum of the subsidiary's stock into the name of a nominee. Held, (1) the ownership of such transferred stock by the parent corporation was "direct" within the meaning of section 141, Revenue Act of 1932; (2) the corporations were affiliated within the purview of the same statute; and (3) were entitled to file a consolidated income tax return for the taxable year 1933. Harold J. Gallagher, Esq., for the petitioner. Conway N. Kitchen, Esq., for the respondent. HILL *1266 OPINION. HILL: Respondent determined a deficiency in petitioner's income tax liability for the year 1933 in the amount of $3,206.48. Such deficiency*740 results from respondent's holding that petitioner, sometimes hereinafter called the M.D. & S., was not affiliated during the tax able year, within the purview of the applicable revenue act, with the Seaboard Air Line Railway Co., hereinafter for convenience called the Seaboard. Petitioner was included in a consolidated income tax return filed by the Seaboard for 1933, and it is conceded that if petitioner was not affiliated with Seaboard in that year for tax purposes, the deficiency determined by respondent is correct, but if so affiliated, no deficiency in tax is due. The Revenue Act of 1932, in section 141(a), (d), provides that an affiliated group of corporations shall have the privilege of filing a consolidated return for the taxable year in lieu of separate returns, and defines the term "affiliated group" as meaning one or more chains of corporations connected through stock ownership, if at least 95 per centum of the voting stock of each corporation, except the parent, is owned directly by one or more of the other corporations and the parent corporation owns directly at least 95 per centum of the voting stock of one of such other corporations. Thus, the ultimate*741 question presented for decision here is whether or not Seaboard *1267 owned directly at least 95 per centum of the stock of the M.D. & S. during the taxable year. Petitioner is a railroad corporation, organized under the laws of the State of Georgia, with its principal office at Macon, Georgia, and its principal accounting office in Portsmouth, Virginia. The Seaboard Air Line Railway, also referred to as Seaboard, a railroad corporation organized under the laws of Virginia and other states and predecessor of the Seaboard Air Line Railway Co., purchased all of the outstanding securities of the M.D. & S. from the Atlantic Coast Line Co. in January 1907, pursuant to an agreement dated October 11, 1906. The securities so acquired by Seaboard included all of petitioner's outstanding capital stock, consisting of 20,400 shares. On October 23, 1907, the board of directors of Seaboard adopted a resolution authorizing a committee to sell, under advice of counsel, all or any part of the company's holdings of M.D. & S. stock, reserving an option, if the committee deemed it advisable or practicable, to repurchase the stock at a figure to be determined by the committee. Pursuant*742 to such resolution, Seaboard entered into a written agreement dated November 29, 1907, with S. D. Loring & Son of Boston, Massachusetts, sometimes hereinafter referred to as Loring, whereby Seaboard purported to sell to the latter firm 11,000 shares of M.D. & S. stock for a consideration of $1,000, and Seaboard purportedly was granted an option to repurchase the stock at any time within five years for the sum of $2,000. The instrument further provided that the stock should be transferred into the name of S. D. Loring & Son and deposited with the New York Trust Co., endorsed or assigned in blank, to be held by the trust company subject to the terms of the instrument. At the time of the transfer of stock to Loring, the shares had a value substantially in excess of the "purchase price." At the time the purported option to repurchase was granted by Loring, and at the dates of subsequent similar options hereinafter referred to, the 11,000 shares of stock had a value substantially in excess of the respective option prices. It was further provided in the agreement between Seaboard and Loring that if Seaboard exercised its "option to repurchase" within the five-year period, the trustee*743 should deliver the 11,000 shares t0 Seaboard and the stock should "thereupon become the absolute property of Seaboard Air Line Railway, its successors or assigns." The agreement also provided that until Seaboard exercised its option, S. D. Loring & Son should be "clothed with all rights of ownership, and * * * entitled to all rights and privileges incident to said stock." Each of the subsequent agreements hereinafter mentioned contained similar provisions. *1268 Petitioner offered evidence to establish that, although the transaction between Seaboard and Loring took the form of a sale with an option to repurchase, Loring had no intention to buy, and Seaboard had no intention to sell, the 11,000 shares of petitioner's stock. The understanding of both parties was that Loring would act as nominee of the stock for Seaboard. Loring regarded the transaction as an accommodation to Seaboard, with which the firm then had close connections. The transaction between Seaboard and the Loring firm was negotiated in behalf of the latter by Homer Loring, who, at the suggestion of Seaboard, became president and a director of the M.D. & S. during the time the stock stood in the name of*744 his firm. However, Loring never participated in the management of the M.D. & S. nor attended any of its stockholders' or directors' meetings. Loring executed proxies for the annual meetings of the M.D. & S. in accordance with the request of Seaboard. The stock was not considered an investment by Loring and was not carried as such on its books. In 1912 Loring requested Seaboard to relieve the firm of its relationship to the 11,000 shares of M.D. & S. stock. Thereupon the secretary of Seaboard made arrangements with one James A. Blair, Jr., of New York City, to transfer the stock into his name. Blair at that time was associated with Blair & Co. which controlled Seaboard. A written assignment was executed by Loring to Blair, dated November 23, 1912, for the recited consideration of $2,000 in cash. On the same date Loring and Seaboard by letter directed the New York Trust Co. to cause the 11,000 shares of petitioner's stock to be transferred into the name of Blair and to continue to hold the stock subject to the terms of the option agreement. A written instrument was executed between Blair and Seaboard under date of November 29, 1912, which purported to grant to Seaboard an*745 option to repurchase the shares of stock from Blair within one year for $2,120. This instrument was substantially the same as that previously executed by Loring and Seaboard. The pruported option price represented the $2,000 paid by Blair, plus 6 percent interest. The agreement was renewed from year to year to and including November 29, 1924. It was the intention of both parties to the agreement between Seaboard and Blair that Blair was to serve as Seaboard's nominee. Blair considered that Seaboard was the owner of the stock, and consented to have the stock transferred into his name as an accommodation to Seaboard. Blair did not regard the stock as an investment. He served as president and director of the M.D. & S. during the time the stock stood in his name, but took no part in its management and received *1269 no compensation. He executed proxies for the annual meetings in accordance with instructions of officers of Seaboard. In 1915, during which year the 11,000 shares of stock stood in Blair's name, the Seaboard Air Line Railway was consolidated with another company to form Seaboard Air Line Railway Co., which succeeded to all of the rights of the Seaboard Air*746 Line Railway in the M.D. & S. stock. The Seaboard had agreed on request to take the 11,000 shares of stock out of Blair's name at any time, and accordingly at his request in 1925 Seaboard arranged to transfer the stock to the Continental Trust Co., Baltimore, Maryland, hereinafter called Continental. The relationship between Seaboard and Continental at that time was close, and has continued through the Maryland Trust Co., Continental's successor, down to the present time. In 1925 the president of Continental was also president of Seaboard. On November 14, 1930, the Maryland Trust Co., successor to Continental, executed a written instrument purporting to grant to Seaboard an option to repurchase the 11,000 shares of petitioner's stock within one year for $4,265.86, the recited consideration for the transfer of the stock from Blair to Continental. Provision was made for an automatic annual extension of the so-called option up to and including November 14, 1935, and thereafter until 60 days after notice of termination by the trust company. In October 1933 petitioner's outstanding capital stock was reduced from 20,400 to 17,500 shares, and this resulted in the reduction of*747 the number of shares held by the Maryland Trust Co., from 11,000 to 9,434 shares. The agreement of November 14, 1930, was amended accordingly. In entering into the transactions above mentioned, neither the Continental Trust Co. nor the Maryland Trust Co. had any intention to buy, nor did Seaboard have any intention to sell, the 11,000 shares of petitioner's stock. At the time the stock was transferred to it, Continental made no inquiry as to the value of the stock, and considered the amount paid to Blair as an advance to Searboard. Both Continental and the Maryland Trust Co. caused their nominees, in whose names the stock was registered, to follow Seaboard's instructions as to voting and giving proxies in respect of the stock. At the hearing respondent objected to admission of the evidence offered by petitioner to show that the transactions above mentioned were in fact not what they purported to be according to the terms of the various written instruments. The objection is based on the ground that the testimony violated the parol evidence rule. The presiding Board Member reserved ruling on the objection until consideration of the case on the merits. *1270 Decision*748 of the issue submitted herein turns upon this point. On brief respondent quotes an extract from Jones on Evidence to the effect that "parol evidence can not be received to contradict, vary, add to or subtract from the terms of a valid written instrument", and argues that such rule is applicable in suits involving third persons, not parties to the written instrument. Respondent further contends that one of the chief functions of the parol evidence rule is to protect innocent third parties, and says that admission in evidence of the oral testimony offered by petitioner "would prejudice an innocent third party, namely, the Commissioner of Internal Revenue." We are unable to agree with the respondent's contentions. If it be true that Seaboard did in fact own directly more than 95 percent of petitioner's capital stock during the taxable year, then under the statute there is no deficiency in tax due from petitioner, and it is difficult to comprehend, in the absence of any considerations invoking equitable estoppel, how the admission of evidence to establish the true facts could be prejudicial to the rights of respondent, or how in that connection he could properly be regarded as an*749 innocent third party. We see no question of estoppel involved here. There is no suggestion that respondent has been induced to change his position to his injury in reliance upon the written instruments in controversy, and hence, if no tax is due, respondent has no rights in the premises and is not an innocent third party. Surely, the doctrine urged by respondent, even if applicable in some circumstances, could not be invoked by respondent to permit him to collect as a tax, upon a purely technical ground, an amount not rightly owing by petitioner. In support of the second proposition that the parol evidence rule is applicable in cases involving third persons who are not parties to the written instrument, respondent cites Pugh v. Commissioner, 49 Fed.(2d) 76, affirming 17 B.T.A. 429">17 B.T.A. 429; certiorari denied, 284 U.S. 642">284 U.S. 642; and also Mountain Producers Corporation,34 B.T.A. 409">34 B.T.A. 409, which was reversed by the Circuit Court at 92 Fed.(2d) 78, which decision of the Circuit Court was reversed at *750 303 U.S. 376">303 U.S. 376. The Pugh decision, we think, is not in point. There the parol evidence, excluded by the Board, was offered to show that the parties to a written instrument had agreed that the depletion allowance on oil sold by Pugh should go to him, contrary to the terms of the statute allowing such deduction only to the owner, which there was the purchaser from Pugh. The court held that parol evidence could not be used "to give to the recorded instrument an effect according to the wishes of the parties rather than that attributable to it by law, and thus to control as against the United States the application of the tax laws." The court further pointed out that the parol evidence rule "operates to protect all whose rights depend upon the instrument *1271 though not parties to it", only where such evidence "is offered merely to vary the legal effect" of the terms of the instrument. It is to be noted that the parol evidence offered in the instant case was not intended to vary the legal effect of the terms of the instruments, but to show that the transactions in fact were entirely different from what the instruments purported to indicate. *751 What we said in Mountain Producers Corporation, supra, respecting application of the parol evidence rule was not necessary to a decision of any issue in the case, and the point was not discussed in the opinion of either the Circuit Court of Appeals or the Supreme Court. We are not persuaded, therefore, in the light of the conclusions reached below, that the decision in that case is authority for application of the parol evidence rule in the case at bar. In other cases cited by respondent, parol evidence was held inadmissible for the prupose of interpreting or construing the terms of written instruments. Such decisions are so obviously distinguishable from the instant proceeding as not to require discussion here. Application of the parol evidence rule under the facts of the present case would be inconsistent with the broad, general principles of construction applied to taxing statutes. "Taxation is an intensely practical matter, and laws in respect of it should be construed and applied with a view of avoiding, so far as possible, unjust and oppressive consequences." *752 Farmers Loan & Trust Co. v. Minnesota,280 U.S. 204">280 U.S. 204. To deny petitioner the right here to show the true and controlling facts respecting affiliation and thereby to require payment of a tax not lawfully due would, it seems to us, be both unjust and oppressive. Again, it was said by the court in Central Life Assurance Society v. Commissioner (C.C.A., 8th Cir.), 51 Fed.(2d) 939, 941, that it is a basic principle in the application of tax laws that substance and not mere form be regarded as governing. Substantially the same view was expressed by another court in Board v. Commissioner (C.C.A., 6th Cir.), 51 Fed.(2d) 73, 75, where it was said that "tax laws should be applied, as equitable principles are applied, with regard to substance rather than to form." While extraneous evidence is not generally admissible for the purpose of construing the terms of a written instrument, "it is competent to show by parol what the transaction was." Brick v. Brick,98 U.S. 514">98 U.S. 514, 516. In determining the true nature of a transaction, this Board is not confined "to an inspection alone of the written instruments by which*753 it was consummated." Extraneous evidence is admissible "to inform it of the material facts bearing upon it." Commissioner v. Neighbor Realty Co., 81 Fed.(2d) 173, 175. The question of the application of the parol evidence rule, in cases similar to the present proceeding, has been specifically considered by *1272 us many times and its application uniformly denied. In J. W. Solof,1 B.T.A. 776">1 B.T.A. 776, we admitted parol evidence to show that a transfer of stock, described in a written instrument as a sale, was in fact a loan, saying at page 785: The rule against varying or contradicting writings by parol evidence obtains only in suits between and is confined to parties to the writing and their privies and has no operation with respect to third persons nor even upon the parties themselves in controversies with third persons. [Citing authorities.] This rule is supported by the great weight of authority. See 22 C.J. 1291, 1292, P1725. Arthur B. Grover,3 B.T.A. 508">3 B.T.A. 508, held that a written instrument, in form a contract creating the relation of principal and agent, was in fact a contract for the sale of land. *754 In Stratton Grocery Co.,8 B.T.A. 317">8 B.T.A. 317, oral evidence was admitted to show that a written contract for the sale of the assets of a corporation, which purported to include therein only one item of good will at a profit, was intended to include two items of good will at cost. Dome Co.,26 B.T.A. 967">26 B.T.A. 967, involved a question of affiliation which turned upon the ownership of stock as in the present case. There it appeared that one Robbins was the owner of a portion of the stock in controversy; the certificates were issued in his name; the contract recited that he was a stockholder; and he was made an officer and director of the company. On extraneous evidence, we held that Robbins was merely the nominee of Warner Brothers, saying: "But, in the absence of estoppel, the corporate record will not serve to bind petitioner if it is contrary to facts, as we believe it was." In United National Corporation,33 B.T.A. 790">33 B.T.A. 790, the taxpayer delivered certain stock to another corporation, subject to a purported repurchase agreement. Notwithstanding the transaction was described in the written agreement between the parties as an absolute sale, subject*755 to the right to repurchase, we held on the evidence that the transfer was not a sale but security for a loan, and that hence no taxable profit was realized thereon by the petitioner. In many cases both this Board and the courts have denied loss deductions claimed on transactions appearing from contracts or other written instruments to be sales, where such instruments were contradicted or varied by other evidence indicating a lack of intent to change ownership. See cases cited in United National Corporation, supra, beginning on page 799. In Indianapolis Glove Co. v. United States (C.C.A., 7th Cir.), 96 Fed.(2d) 816, the court pointed out that the parol evidence rule could not be invoked by a third person not a party to the written instrument, and held that, in an action to recover income taxes paid, oral evidence was properly admissible to show that purported purchases *1273 of taxpayer's stock by its employees were in fact intended as additional compensation, contrary to the terms of the written instruments involved. Respondent's objection to the admission of the oral testimony in the present case is overruled, and exception noted. *756 Respondent makes one further contention which requires brief consideration, namely, that even if admissible the oral evidence establishes only beneficial ownership in Seaboard of the 11,000 shares of petitioner's stock, and this does not meet the statutory requirement of direct ownership. In other words, respondent here urges the proposition that ownership through a nominee is not "direct ownership." This contention, in our opinion, is not only untenable but contrary to the conclusions reached in G.C.M. 7331, C.B. VIII-2, p. 135, the syllabus of which reads as follows: Where a parent corporation, for a legal intra vires purpose, has placed the record ownership of a share of stock of a subsidiary in a nominee, such nominee being at all times legally obligated to hold and deal with such share according to such orders and directions as the parent corporation may, from time to time, give him, the ownership of the parent corporation is "direct" within the meaning of section 141(d) of the Revenue Act of 1928. Section 141(d) of the Revenue Act of 1928 is identically the same in terms as section 141(d) of the 1932 Act, which governs the instant proceeding. The direct*757 ownership required by the statute is not merely possession of the naked legal title, but beneficial ownership, which carries with it dominion over the property. Any other conclusion would lead to absurd and ridiculous results. For illustration, if Seaboard had transferred to the Continental Trust Co., as its nominee, the legal title to more than 95 percent of petitioner's stock, for some lawful intra vires purpose, would the trust company and petitioner thereby have become affiliated and entitled to file a consolidated return within a fair interpretation of the "direct ownership" clause of section 141(d)? To state the question is to indicate its answer beyond the need of discussion. "But taxation is not so much concerned with the refinements of title as it is with actual command over the property taxed * * *", that is, the beneficial ownership. Corliss v. Bowers,281 U.S. 376">281 U.S. 376, 378. We hold that petitioner was affiliated with Seaboard during the taxable year, and hence there is no deficiency in tax due from petitioner. Decision will be entered for the petitioner.

2021-03-18 21:00:38.514202+00

https://www2.ca3.uscourts.gov/opinarch/202100np.pdf

NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ______________ No. 20-2100 ______________ WILLIAM DUNLEAVY, IV; ERIN E. FRANCIS, Appellants v. MID-CENTURY INSURANCE COMPANY, doing business as FARMERS INSURANCE COMPANY, INC.; FARMERS INSURANCE GROUP ______________ On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 2-19-cv-01304) District Judge: J. Nicholas Ranjan ______________ Submitted under Third Circuit L.A.R. 34.1(a) March 18, 2021 ______________ Before: SHWARTZ, MATEY, and TRAXLER, Circuit Judges.* (Filed: March 18, 2021) ______________ OPINION** ______________ * The Honorable William Byrd Traxler, Jr., United States Circuit Judge for the Court of Appeals for the Fourth Circuit, sitting by designation. ** This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. SHWARTZ, Circuit Judge. William Dunleavy and Erin Francis (“Plaintiffs”) were injured in a motorcycle accident and sought underinsured motorist coverage under their automobile policy with Mid-Century Insurance Company (“Mid-Century”). Because the District Court correctly held that the Mid-Century policy excluded underinsured motorist coverage for Plaintiffs’ motorcycle, we will affirm the order granting Mid-Century’s motion for judgment on the pleadings. I Plaintiffs were riding on Dunleavy’s motorcycle when they crashed with a car. Plaintiffs were injured. The car’s insurance policy contained a $100,000 liability limit, which was paid to Plaintiffs, but the amount did not fully compensate them for their injuries. Because the car was underinsured, Dunleavy sought compensation based upon other coverage. Dunleavy’s motorcycle was insured by Progressive, but he rejected underinsured motorist coverage on that policy. As a result, Plaintiffs sought underinsured motorist coverage under their Mid-Century automobile policy. The Mid-Century policy did not list the motorcycle and excluded underinsured coverage for “bodily injury sustained by you or any family member while occupying or when struck by any motor vehicle owned by you or any family member which is not insured for this coverage under any similar form.” App. 67 (emphasis omitted). Based on this exclusion, Mid-Century disclaimed coverage, explaining that Plaintiffs were not entitled to underinsured coverage because “the vehicle [Plaintiffs] were occupying is owned by [them], [they] did not list it on 2 [their] Mid-Century policy and [they] did not elect Uninsured/Underinsured Motorist Coverage on [their Progressive motorcycle policy].” App. 86. Plaintiffs sued Mid-Century, alleging breach of contract, bad-faith insurance practices, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”). Mid-Century counterclaimed for a declaratory judgment, seeking a declaration that its denial decision was appropriate, and filed a motion for judgment on the pleadings. The District Court granted Mid-Century’s motion and entered a declaratory judgment in its favor. Plaintiffs appeal. II1 When interpreting insurance contracts, “[t]he proper focus regarding issues of coverage . . . is the reasonable expectation of the insured.” Frain v. Keystone Ins. Co., 640 A.2d 1352 , 1354 (Pa. Super. Ct. 1994). To determine those expectations, “courts must examine the totality of the insurance transaction involved.” Id. “In most cases, the 1 The District Court had jurisdiction under 28 U.S.C. § 1332 . We have jurisdiction under 28 U.S.C. § 1291 . We review a district court’s order granting judgment on the pleadings under Fed. R. Civ. P. 12(c) de novo. See In re Fosamax (Alendronate Sodium) Prod. Liab. Litig. (No. II), 751 F.3d 150 , 156 n.11 (3d Cir. 2014). “A motion for judgment on the pleadings based on the defense that the plaintiff has failed to state a claim is analyzed under the same standards that apply to a Rule 12(b)(6) motion.” Revell v. Port Auth. of N.Y., N.J., 598 F.3d 128 , 134 (3d Cir. 2010). That is, a motion for judgment on the pleadings should be granted if the movant shows that “there are no material issues of fact, and he is entitled to judgment as a matter of law.” Sikirica v. Nationwide Ins. Co., 416 F.3d 214 , 220 (3d Cir. 2005). “In considering a motion for judgment on the pleadings, a court must accept all of the allegations in the pleadings of the party against whom the motion is addressed as true and draw all reasonable inferences in favor of the non-moving party.” Zimmerman v. Corbett, 873 F.3d 414 , 417-18 (3d Cir. 2017). 3 language of the insurance policy will provide the best indication of the content of the parties’ reasonable expectations.” Liberty Mut. Ins. Co. v. Treesdale, Inc., 418 F.3d 330 , 344 (3d Cir. 2005) (quoting Reliance Ins. Co. v. Moessner, 121 F.3d 895 , 903 (3d Cir. 1997)). Thus, an insured typically “may not complain that his or her reasonable expectations were frustrated by policy limitations which are clear and unambiguous.” West v. Lincoln Ben. Life Co., 509 F.3d 160 , 169 (3d Cir. 2007) (quoting Frain, 640 A.2d at 1354 ). Plaintiffs’ Mid-Century policy unambiguously excludes underinsured coverage for “any motor vehicle owned by you or any family member which is not insured for this coverage under any similar form.” App. 67. Dunleavy rejected underinsured motorist coverage for his motorcycle and thus it did not have underinsured coverage.2 Thus, Mid- Century’s underinsured provision did not cover the motorcycle and Plaintiffs could not have reasonably expected coverage.3 2 Plaintiffs argue that the District Court “employed a faulty methodology” by considering the motorcycle policy because it is “irrelevant” to this case. Appellant’s Br. at 7. Plaintiffs are incorrect. The District Court appropriately examined the motorcycle policy because the Mid-Century policy required consideration of the insurance status of the vehicle Plaintiffs occupied at the time of the accident to determine if coverage was available. See App. 67 (excluding underinsured coverage for “any motor vehicle owned by you or any family member which is not insured for this coverage under any similar form”). 3 Plaintiffs’ reliance on Gallagher v. GEICO Indem. Co., 201 A.3d 131 (Pa. 2009), is misplaced. Gallagher addressed the concept of stacking underinsured motorist coverage. Section 1738 of the Motor Vehicle Financial Responsibility Law (“MVFRL”) establishes a default of stacked underinsured coverage “[w]hen more than one vehicle is insured under one or more policies providing uninsured or underinsured motorist coverage” and permits insureds to waive that coverage only by signing the statutorily prescribed form. See 75 Pa. Cons. Stat. § 1738 . In Gallagher, the plaintiff bought underinsured motorist coverage for his motorcycle and car under separate policies issued 4  Eichelman v. Nationwide Insurance Company, 711 A.2d 1006 (Pa. 1998), supports this conclusion. In that case, the plaintiff—like Plaintiffs here—had motorcycle insurance but did not have underinsured motorist coverage under his motorcycle policy when his motorcycle was struck by a pick-up truck. Id. at 1007 . After that accident, the plaintiff sought coverage under the underinsured provision in his mother’s and her husband’s automobile policies. Id. Those automobile policies, however, contained a clause excluding underinsured coverage for “a motor vehicle owned by you or a relative not insured for Underinsured Motorists coverage under this policy.” Id. The Court determined that a person who has voluntarily elected not to carry underinsured motorist coverage on his own vehicle is not entitled to recover underinsured motorist benefits from separate insurance policies issued to family members with whom he resides where clear and unambiguous ‘household exclusion’ language explicitly precludes underinsured motorist coverage for bodily injury suffered while occupying a motor vehicle not insured for underinsured motorist coverage. by Geico, paid a premium to stack his underinsured coverage, and never signed the statutory form waiving such coverage. 201 A.3d at 132-33. Geico sought to rely on an exclusion in the automobile policy, which eliminated coverage for “bodily injury while occupying or from being struck by a vehicle owned or leased by you or a relative that is not insured for Underinsured Motorists Coverage under this policy.” Id. at 133. The court held that the clause was invalid because it acted “as a de facto waiver of stacked [underinsured motorist] coverage” without complying with the “statutorily-prescribed . . . waiver form.” Id. at 138. In sum, Gallagher prevents insurance companies from circumventing the statutorily prescribed method for an insured to waive stacked coverage through household vehicle exclusions that act as de facto waivers of stacked coverage. Here, there is no stacked coverage because Dunleavy rejected underinsured motorist coverage on his motorcycle policy. 5 Id. at 1010.4 Here, as in Eichelman, Dunleavy waived underinsured motorist coverage in his motorcycle policy and Plaintiffs tried to secure underinsured coverage through a separate policy. In both cases, the policy under which coverage was sought clearly stated that the coverage was unavailable if the vehicle in which the accident occurred did not itself have underinsured motorist coverage. Based on such language, the parties here and in Eichelman had no reasonable basis to expect coverage. Moreover, the lack of premium payments supports applying the exclusion. See id. (“[T]here is a correlation between premiums paid by the insured and the coverage the claimant should reasonably expect to receive.” (quoting Hall v. Amica Mut. Ins. Co., 648 A.2d 755 , 761 (Pa. 1994))). Plaintiffs did not list their motorcycle on the Mid-Century policy and did not pay a premium to any insurer to secure underinsured coverage for it.5 4 Gallagher does not affect Eichelman. Both cases make clear that insurers and insureds should receive bargained-for premiums and benefits, consistent with statutory requirements, but Gallagher only implicates stacking. In Gallagher, the insurer knew about the added risks it insured against when stacking policies and charged a premium for them, thus there was “no reason” it could not comply with the MVFRL’s directives to offer stacked policies unless it secured a waiver complying with § 1738. 201 A.3d at 138. In Eichelman, the plaintiff (1) “chose not to purchase underinsured motorist coverage” and thus paid reduced insurance premiums for his motorcycle insurance; and (2) had no reasonable basis to expect that his mother’s and her husband’s policies could cover him because (a) he admitted that he did not know that the policies could have covered him, and (b) his mother and her husband did not pay premiums that would have reflected that the insurer understood it would provide underinsured coverage on a motorcycle that did not itself have underinsured coverage. 711 A.2d at 1010. 5 Plaintiffs argue that they paid a premium to secure stacked underinsured coverage under the Mid-Century policy. As explained, however, there is only one source of possible coverage and hence no opportunity for inter-policy stacking. Furthermore, the Mid-Century policy’s exclusion of underinsured coverage for the motorcycle did not prevent stacking. Rather, Dunleavy’s decision to waive underinsured motorist coverage 6 Had Mid-Century known about the added risk of Dunleavy’s motorcycle, it could have adjusted the underinsured coverage premiums to account for that risk. Cf. id. (denying coverage in part because insurer did not know of the plaintiff when it issued policies and because his mother’s and her husband’s premiums did not show their intent to provide underinsured motorist coverage to him). As a result, Plaintiffs could not have reasonably expected that the Mid-Century policy provided underinsured coverage for the motorcycle. III For the reasons stated above, we will affirm. on his motorcycle policy did as his waiver lead him to be denied coverage under the policy. 7

2020-01-17 22:01:42.211358+00

Murdock

Murdock, dissenting: I dissent from that portion of the foregoing opinion which holds that the fraud penalty should be asserted, for the reason that I think the facts indicate no more than negligence. Shith, Tbussell, YaN FossaN, and Siefkin agree with this dissent.

2020-01-17 22:01:42.250305+00

Siefein

*262OPINION. Siefein: The petitioner sold 555 shares of stock of the Morris Smokeless Coal Co. to H. K. Tribou for $136,250, and derived a profit thereon of $70,000. The sole question to decide is whether all of this stock was sold in 1920 or whether one-half of it was sold in each of the years 1920 and 1921. The respondent held that all the stock was sold in 1920 and asserted the deficiency in tax herein upon the basis of the receipt of the full amount of the profit in 1920. The real test of when the title to property passes is the intent of the parties. In Hood v. Bloch, 11 S. E. 910, the Supreme Court of West Virginia stated: * * * In Morgan v. King, 28 W. Va. 1, this court, after an elaborate review of the authorities on the subject, held that “ the question whether a sale of personal property is complete or only executory is to be determined from the intent of the parties as gathered from the contract, the situation of the thing sold, and the circumstances surrounding the sale.” By an option executed by petitioner and delivered to Tribou, the former agreed to sell all the stock to Tribou at any time within 15 days after December 7, 1920. During that period, on December 22, 1920, the parties held a conference and the petitioner refused to sell according to the terms of the option. He then proposed to sell Tribou one-half of the stock immediately and to sell him the other half on January 2, 1921. This was done in order to distribute the profit between the two years in order to reduce the amount of tax upon the sale. Tribou accepted the offer and petitioner instructed Hedrick to deliver the remaining half of the stock to Tribou on January 2, 1921, if Tribou on that date paid $68,125. Petitioner immediately left the conference. The contract entered into between petitioner and Tribou on December 22, 1920, discharged any prior agreement between them. In Poteet v. Imboden, 77 W. Va. 570; 88 S. E. 1024, the Supreme Court of Appeals of West Virginia stated: *263* * * It is well settled by this court and by other authorities, that a contract may be discharged by the parties thereto, by an entirely new one entered into by them with reference to the same subject matter, the terms of which are co-extensive with but repugnant to the original contract, Marsh v. Despard, 56 W. Va. 132, 49 S. E. 24; 3 Page on Contracts § 1354; Grand Trunk W. Ry. Co. v. Chicago & E. I. R. Co., 141 Fed. 785, 73 C. C. A. 43. * * * From all the evidence we are of the opinion that the parties intended that title to one-half of the stock should not pass until January 2, 1921. The fact that Hedrick did deliver the stock to Tribou in 1920 and that Tribou gave Hedrick a check for $68,125 in 1920, in our opinion does not affect the case. The check was dated January 2, 1921, and the petitioner’s account was not credited with the amount until January 8, 1921. In the absence of evidence as to the basis used in accounting and in making his return, we assume that the petitioner was on the cash receipts basis. See John A. Brander, 3 B. T. A. 231. Only one-half of the stock was sold in 1920 and only $35,000 of the total profit derived from the sale of all the stock was income to petitioner in 1920. Reviewed by the Board. Judgment will be entered under Rule 50. VAN FossaN concurs in the result only.

2020-01-17 22:01:42.302564+00

Tkammell

*268OPINION. Tkammell : The petition filed herein purports to constitute an appeal from the determination by the respondent of the petitioner’s tax liability for the calendar years 1920 and 1921, and states that the taxes in controversy are income and profits taxes for said years. It appears from the deficiency letter, as well as from the allegations of the petition, that the respondent determined an 'overassessment in the amount of $42,615.85 for the year 1920, and a deficiency in the amount of $62,452.12 for the year 1921, said overassessment representing the difference between the tax shown on the original return for 1920 and the amount of the tax liability as determined by the respondent for said year. In this situation we have no jurisdiction to redetermine the tax liability for the calendar year 1920, and the appeal, in so far as it involves said year, is hereby dismissed. See Revenue Act of 1926, section 274(g); Cornelius Cotton Mills, 4 B. T. A. 255. The facts material in this proceeding have been stipulated by the parties, and the sole issue of law raised by the pleadings relates to the correct method of computing the consolidated invested capital of a group of class A affiliated corporations, except that the petitioner alleges that it is entitled to special assessment of its profits tax in the event the respondent’s action in reducing its invested capital should be sustained. Section 326 of the Revenue Act of 1921 defines invested capital as including the “ actual cash value of tangible property, other than cash, bona fide paid in for stock or shares, at the time of such payment.” Section 240 (a) of the Revenue Act of 1918, made applicable to the calendar year 1921 by section 240 (e) of the 1921 Act, provides in part material here, as follows: *269That corporations which are affiliated within the meaning of this section shall, under regulations to be prescribed by the Commissioner with the approval of the Secretary, make a consolidated return of net income and invested capital for the purposes of this title and Title III, and the tas thereunder shall be computed and determined upon the basis of such return. In December, 1910, a certain leasehold estate and office building Located at 127 North Dearborn Street, in the City of Chicago, were paid into the Unity Safe Deposit Co., hereinafter referred to as the deposit company, for its entire capital stock of the aggregate par value of $650,000. The tangible property so paid in for stock, had a value, at the time of such payment, of not less than $650,000, and the stock so issued therefor was fully paid at the time of issue. In April, 1919, capital stock of the deposit company, of the par value of $250,000, was surrendered by the stockholders and canceled without any payment therefor being made by the company to the stockholders. The outstanding capital stock of the company was thus reduced to $400,000, consisting of 4,000 shares of the par value of $100 each. In May, 1919, Mrs. Hattie K. Moore, wife of the president of the American Bond & Mortgage Co., petitioner herein, purchased the entire outstanding capital stock of the deposit company, of the par value of $400,000, for $50,000 cash. On August 30, 1919, Mrs. Moore sold 1,000 shares and donated 3,000 shares of the capital stock of the deposit company to the petitioner corporation. In this manner the petitioner acquired all of the outstanding capital stock of the deposit company at a total cost to it of $51,710 cash, and at said date the value of said stock was not less than $400,000. In computing the consolidated invested capital of the affiliated corporations, the petitioner included the amount of $348,290 as paid-in surplus, this being the difference between $400,000, the par value of the capital stock of the deposit company, and $51,710, the amount paid by the petitioner for said stock. The respondent eliminated or disallowed said amount, and thus reduced the consolidated invested capital to that extent, which action the petitioner has assigned as error. The respondent in his brief contends substantially that decision of the issue presented here must be controlled by the limitation of section 331 of the Revenue Act of 1921, which provides that in the case of the change of ownership of property after March 3, 1917, if an interest or control in such property of 50 per centum or more remains in the same person and if the previous owner was not a corporation, the value of any asset so transferred or received shall, for the purpose of determining invested capital, be taken at its cost pf acquisition, at the date when acquired by such previous owner. *270Accordingly, the respondent urges that, since the petitioner acquired the stock of the deposit company from Mrs. Moore on August 30, 1919, which was subsequent to March 3, 1917, and since Mrs. Moore, on and after August 30, 1919, retained an interest or control in such property of more than 50 per centum by virtue of the fact that she owned 62 per centum of the voting stock of the petitioner corporation, the case falls squarely within the provisions of section 331 sufra, and the value of the stock can not be included in the invested capital at more than the amount of $50,000, the cost of its acquisition when acquired by the previous owner, Mrs. Moore. In support of his argument that section 331 constitutes a complete bar to the allowance of the petitioner’s claim, the respondent cites a number of our previous decisions, applying the provisions of said section. However, the cases cited are easily distinguishable from the present proceeding, for the reason that in no instance was the computation of consolidated invested capital of affiliated corporations involved. If we were concerned here only with the computation of the statutory invested capital of the petitioner, American-Bond & Mortgage Co., as a separate corporation, it might well be that the respondent’s argument would be predicated upon a sound basis. But in the instant case the issue presented concerns the proper method of computing the consolidated invested capital of the affiliated group, and the value of the stock of the deposit company, purchased by the petitioner from Mrs. Moore, does not enter into that computation as a capital asset of the petitioner. Hence, the provisions of section 331 have no application. We have repeatedly held that consolidated invested capital should be determined by computing separately the statutory invested capital of each corporation, as defined by section 326, and then eliminating from the combined statutory invested capital of the affiliated group, so determined, the amount of any duplications which may appear. In addition to duplications, if any, the statutory invested capital, as defined by section 326, must also be reduced by the amount of any liquidating dividend, or amount otherwise withdrawn from the original investment and returned to the stockholders. In Middlesex Ice Co. et al., 9 B. T. A. 156, we had before us a question involving the determination of consolidated invested capital, and in the course of our opinion, we said: Each member of the affiliated group enters the consolidation with its invested capital as defined by section 326 of the Revenue Acts of 1918 and 1921. From this preliminary exhibit there is then eliminated such items or amounts as are shown to be duplications either of investment or of earned surplus and undivided profits. The law does not specifically provide for, and we are unable to find, that it in any sense contemplates any reduction or elimination of actual assets not appearing as duplications. *271Under the taxing statutes, two or more affiliated corporations are to be treated for tax purposes as a single corporation. Farmers Deposit National Bank and Affiliated Banks, 5 B. T. A. 520. And the acquisition by one company of the stock of another, thereby creating affiliation, creates no additional investment in the affiliated group. By the act which creates the affiliation, the group acquires a part of its own capital stock. H. S. Crocker Co., 5 B. T. A. 537. In Appeal of Grand Rapids Dry Goods Co., 12 B. T. A. 696, we considered substantially the same issue as is presented here; that is, the proper method of computing the consolidated invested capital of a group of class A affiliated corporations. In that case, we expressed the opinion that cash paid in for stock of the subsidiary retained .its character as such only so long as it was invested in the business, and that when any part of the amount so paid in was withdrawn from the business, it could no longer be classified as “ cash bona fide paid in for stock,” within the meaning of section 326. Accordingly, we held that, in computing the consolidated invested capital, the cash originally paid in to the subsidiary for its stock should be reduced by the amount paid by the parent company for the stock of the subsidiary, which amount was thus returned to the stockholders and withdrawn from investment in the business, and taken outside of the consolidated group. In the case at bar, tangible property other than cash was originally paid in to the subsidiary for its stock, and the property so paid in had a value of not less than the par value of the stock at the time of such payment. Hence, the same principle would apply here. It seems clear that the deposit company, when it was organized in 1910, started off with a statutory invested capital of not less than $650,000. The surrender and cancellation of $250,000 par value of its stock in April, 1919, without any payment therefor being made by the corporation, did not effect any reduction of the statutory invested capital. The amount of the outstanding capital stock was reduced to $400,000 thereby, but its statutory invested capital remained at not less than $650,000, so far as this transaction was concerned. Thus, the statutory invested capital of the deposit company, at August 30, 1919, when it entered the affiliated group, was not less than $650,000 unless during the years from 1910 to 1919, there occurred a partial liquidation of its capital assets. Whether any liquidating dividends were paid out of capital during said years, we are not informed. While the parties have stipulated that the value of the assets of the Unity Safe Deposit Co. at August 30, 1919, was not less than *272$740,000, we are not advised whether such value was in excess of that amount. There is no evidence as to whether consideration was taken of proper depreciation in determining the amounts of any dividends, nor as to whether any money was borrowed and distributed. It may well be that the value of $400,000 in excess of liabilities represented in whole or in part appreciation in value of assets. Even if the value of the assets did not exceed $740,000, this would indicate that at least $90,000 represented in the net assets was appreciation, which could not be included in invested capital. If proper depreciation was not taken and distributions were made to stockholders, clearly the invested capital, as determined by the petitioner, was erroneous. So far as the record discloses, the actual value of the assets may have been much greater than $740,000. It was merely stipulated that the value was at least that great. If it was greater, then the difference between $650,000 and the excess could not be included in the consolidated invested capital. The debts, including mortgages, if any, may, so far as we are informed by the record, have exceeded the total amount of the value of the assets at the time paid in for stock, in which event the entire excess of assets over liabilities would be appreciation. We can not make assumptions as to the facts, and in the absence of evidence to show that the determination of the respondent is erroneous in amount, we must approve his determination, although it is shown that it is based on an erroneous principle. Having reached the conclusion on the first issue, above indicated, it becomes necessary to consider the alternative issue raised by the petitioner that the exclusion of said amount of $348,290 from the consolidated invested capital constitutes an abnormality within the meaning of section 327 (d) of the Revenue Act of 1921, which entitles it to special assessment of its profits tax as provided in section 328 of said Act. We have heretofore held that where the excluded asset was a material factor in the production of the taxable income, its exclusion might create an abnormal condition. In Clarence Whitman & Sons, Inc., 11 B. T. A. 1192, we said: It was these intangible assets which were the principal cause of the large income which the petitioner enjoyed during the taxable years and on which the deficiencies in question are based. * * * The exclusion must be such as to create an abnormal condition. Where, as here, the asset excluded is the most substantial part of its capital and is the principal contributing factor in the production of taxable income of the petitioner, it is our opinion that such an abnormality exists. *273Again, In J. M. & M. S. Browning Co., 8 B. T. A. 914, we said: * * * ⅝ petitioner acquired from the Browning's on January 2, 1915, the contracts involved herein, which had at that time a fair market value of $4,190,000. For the reason hereinbefore stated, the value of these contracts may not be included in the petitioner’s invested capital for the year 1918. The contracts produced, however, a large part of the petitioner’s income for that year. These conditions, we think, constitute an abnormality within the meaning of section 327(d) of the Revenue Act of 1918, which entitles the petitioner to have its tax liability computed under the provisions of section 328 of that Act. In the instant case, it is not shown that the excluded assets were a material income-producing factor. However, the deficiency letter discloses that the consolidated net income for the taxable year, as computed by the respondent, was $395,079, while that part of the consolidated net income produced by the Deposit Company was only $19,715.60, or less than 5 per cent of the total. The consolidated invested capital was determined by the respondent to be $905,077.22, and the amount excluded as paid-in surplus was $348,290. Since the excluded assets produced less than 5 per cent of the taxable net income, as determined by the respondent, and with respect to which no issue was raised by the petitioner, the situation presented in and of itself does not, in our opinion, constitute an abnormality within the meaning of section 327 (d) of the Revenue Act of 1921. The petitioner can not, therefore, be sustained on this issue. Reviewed by the Board. Judgment will be entered for the respondent.

2020-01-17 22:01:42.350708+00

Littleton

*282OPINION. Littleton: The major issue presented in this case is the fair market price or value on March 1,1913, of certain undeveloped coal property owned by the United Thacker Coal Co. on that date and sold by it on September 17, 1917. The Commissioner determined that the March 1,1913, value of the entire property sold (including coal, sur*283face and timber lands) was $4,179,537 and that the difference between this amount and the net amount received for the property, $5,569,200 ($6,903,000 less commissions, attorney’s fees, etc., of approximately $1,333,000) constituted taxable income. The assignment of error is that the value determined by the Commissioner as of March 1, 1913, is less than the true value on that date. In an amended answer the Commissioner alleged that the March 1, 1913, value as shown by him in his deficiency notice was excessive and accordingly asked that the Board find a greater deficiency than that previously determined. During the hearing this allegation of error and request for affirmative relief were withdrawn. It further appears that in the original petition the petitioners alleged that the cost of the property sold was less than its value on March 1, 1913, and also less than its selling price, but this allegation was denied by the Commissioner. Later, in his answer to the first amended petition the Commissioner admitted that a portion of the lands in question was acquired prior to March 1, 1913, at a cost less than the value thereof at March 1, 1913, and less than the price for which sold, but denied that all of the lands sold were acquired prior to March 1, 1913. This allegation with respect to the acquisition of some of the properties subsequent to March 1, 1913, was repeated in a second amended answer. However, during the hearing the Commissioner withdrew the allegation that any of the lands sold were acquired subsequent to March 1, 1913, and stated that he would stand on his original determination, which was a taxable profit based upon the difference between the March 1, 1913, value and the selling price. That is, as we understand the situation, the basis of the Commissioner’s denial, that cost was less than the March 1, 1913, value, was that some of the properties sold were acquired subsequent to March 1, 1913, and with the withdrawal of this allegation the parties are in agreement that the taxable profit is to be determined upon the difference between the March 1,1913, value, and the selling price, and that the cost of the properties sold was less than the March 1, 1913, value and also less than the selling price. That cost was less than the selling price is further confirmed by evidence showing that substantially- all of the lands held by United Thacker on March 1,1913, were acquired by this petitioner long prior to that date and that there was an increase in value during this period. We will therefore proceed in our determination on the theory that the parties are agreed that cost was less than the March 1, 1913, value and also less than the selling price. In support of the contentions of the parties as to the March 1, 1913, value, a voluminous record of oral testimony, in addition to various exhibits, consisting of maps, statistical data of a technical nature, deeds, etc., has been submitted. Coal operators, engineers, timber experts, and other witnesses were called by both parties and *284from these sources we have a variety of opinions difficult of reconcilement. On the one hand, if we accept the most extreme position of petitioner’s witnesses we would visualize a remarkable coal property that was underladen in its entirety with three excellent seams of coal which substantially began and ended within the confines of this property; that this property was adapted for mining under ideal conditions there prevailing, both as to character of mining to be employed and also as to roof and floor conditions within the mines; that the transportation conditions afforded an exceptional advantage; and that the surface was covered with an abundant supply of high-grade merchantable timber. On the other hand, we have a picture presented by the Commissioner to the effect that the coal contained in this property did not possess highly superior qualities as compared with coal in nearby properties; that roof conditions in some respects were bad; that there was a fault line in the properties sold; that there was comparable coal property adjoining or adjacent to the tract in question; that the transportation facilities were not of a decided advantage; and that there was no merchantable timber on the property sold. All of the evidence was not of the foregoing types, though that of petitioners tended to present the former picture and that of the Commissioner the latter. The evidence is conflicting and we must look with true perspective, having in mind that neither an unduly optimistic, nor an unduly pessimistic view should be the guide in arriving at what would have moved a willing seller or willing buyer to have become a party to a sale at March 1, 1913. The first difficulty in fixing a fair market price or value at March 1, 1913, is that we do not have what we regard as comparable sales of similar property as a guide for our determination. It is true that we do have evidence of sales of nearby or adjoining coal properties, but either the necessary elements of similarity were not shown to be present or fatal elements of dissimilarity were shown to exist. In one instance, a group of five sales of small tracts was offered as one of the factors used by one of the Commissioner’s witnesses to determine the value in question. Not only was it affirmatively shown that these properties were inferior, either on account of the quantity and quality of the coal or account of location or for some other reason, to the United Thacker properties, but also it was shown that the sales took place three or four years prior to March 1, 1913. The evidence as to the sale of a large tract and the valuation of still another larger tract was far from satisfactory as to comparability and afforded no conclusive guide from which we could make our determination. The witness who testified as to these sales presented certain evidence as to assessed valuations, but its reliability was not shown *285to be greater than that of similar evidence which we have often been forced to disregard as having no reasonable relation to the value sought to be ascertained. By taking the aforementioned sales and assessed valuations into consideration, the witness who testified in regard thereto fixed a value on the property sold of approximately $50 per acre. This is the lowest value which we were asked to accept and represents what, in our opinion, might be termed the unduly pessimistic view of the situation. That even the Commissioner does not consider it of great weight is shown by the fact that while his determination on which the deficiency is based is more than twice that fixed by this witness, and while a request for affirmative relief had been made on the ground that the value was less than that previously determined, such request was withdrawn. Next we are unable to accept the extreme view presented by one of petitioner’s witnesses that the value of the coal lands (exclusive of the value for surface, other than that required for plant, and timber lands), was $165 per acre. When to this are added the minimum values contented for by the petitioners for surface and timber, we have a value at March 1, 1913, substantially in excess of that for which the tract was sold in 1917, even if we leave out of account the very substantial commissions paid on account of the sale. In the light of the testimony of witnesses on both sides as to the condition in the. coal industry in 1913 as compared with 1917, we do not consider this valuation reasonable, nor consistent with other facts herein presented. It is predicated upon the theory that at March 1, 1913, it would have been reasonable to have considered that the entire tract of 39,300 acres could have been leased to responsible operators on the basis of 12 cents per ton and $10 per acre minimum royalty; and that over a period of 40 j^ears the minimum royalty would have been exceeded by at least 50 per cent, thus making a return of $15 per acre over the 40-year period, or $589,500 per year. This would have meant an average annual production over the 40-year period beginning on March 1, 1913, of 5,000,000 tons. While the evidence shows that leases could have been made on the basis outlined in our findings and also that in many instances it would have been reasonable to expect that the minimum royalty would have been exceeded by 50 per cent, we are not satisfied that a purchaser on March 1, 1913, would have purchased the mineral rights in the property in question on March 1, 1913, on the basis of an expected royalty of 12 cents per ton on 5,000,000 tons for 40 years. In fact, the witness who testified as to this basis of valuation disclaimed any intent to testify as to market value other than that he thought the market value would be close to the intrinsic or potential value which he arrived at on the basis of his formula. He stated further that he knew of no case where the basis *286used by him had been applied to determine the price at which coal property was sold. The potential earning power of this property is evidence entitled to be considered and weighed in an ultimate determination as to the fair market value of the property, but, in view of the many factors (some of which are unknown) which enter into such a determination, we are unwilling to accept this as the final criteria of value in this case. In arriving at this conclusion, we are not overlooking the “ reasonable royalty ” rule to which our attention has been called by the petitioners and for which the petitioners cite as authority Dowagiac Manufacturing Co. v. Minnesota Plow Co., 235 U. S. 641. An examination of that case, however, shows that the situation there presented merely involved the question of how much damage had been suffered on account of certain infringing sales which had been made of articles covered by a patent and where, on account of the monopolistic character of the patent, there was no established royalty. The court held that in determining the damages, it was permissible to show what would have been a reasonable royalty. That situation was vastly different from this case, where we have a large tract of undeveloped coal land about which we must accept a myriad of estimates as to the factors necessary to make our calculation. For example, we must be able to say that there was a given quantity of .coal, that the entire tract could have been leased on March 1, 1913, on the basis herein set forth, that the market would have been able to absorb a quantity of coal sufficient to produce the royalties on which the valuation is based, that the quality of coal and mining-conditions as revealed by operations would be at least equal to that which was known on March 1, 1913, and that other factors, unnecessary to mention, would likewise be favorable to such a development. Some of the foregoing factors we regard as having been reasonably known on March 1, 1913, but we are not prepared to say that all of them were so established that on the basis of a mathematical computation it would have been reasonable to compute, in the manner done by the petitioner, what a reasonably prudent man would pay for the property. In view of the many uncertainties attending the development of an operation of this character, would not the more reasonable view be that the prudent man would discount many -.of these factors before investing on the basis thereof? We think so,. From the foregoing observations we do not mean that the valuation reached on the basis of expected royalty is entitled to no weight in disposing of the issue presented; what we do say is that we are not willing to accept it as the true measure of the fair market price or value of the property in question at March 1, 1913. See United Fuel Gas Co. v. Railroad Commission of Kentucky, 278 U. S. 300. Between the two foregoing valuations, the former of which might be denominated the “ low ” of the Commissioner and the latter the *287“ high ” of the petitioners, we have other valuations which we regard as likewise inconclusive. We deem it sufficient to say, as to a valuation of $80 per acre fixed by one of the Commissioner’s witnesses, that the lands sold which formed the basis of this opinion were shown not to be comparable to those here in question and that conditions surrounding the sale took from it some of its character as an open and arm’s-length sale. As to the value of $140 to $160 fixed by one of petitioner’s witnesses, this was arrived at in a manner somewhat similar to that of the other witness of petitioners, who fixed a value of $166 per acre, and similar objections may be made against it. A not inconsiderable part of the evidence presented had to do with the merchantable timber on the property sold. If anything, the conflict here was greater than that with respect to the other testimony to which we have referred, varying from the opinion of one of the Commissioner’s witnesses that there was no merchantable timber on the land to that of petitioner’s witnesses who assigned a value in excess of $600,000. In our final conclusion we did not attempt to set a value for the timber separate and apart from the value of the mineral and surface lands, but have considered it sufficient to fix a value for the entire boundary, which would include timber and which gives due weight to the evidence presented on account thereof. Finally, we have the fact that the entire boundary of the 61,000 acres was offered for sale in or about 1913 for $110 per acre and the further fact that the same property was again offered for sale in 1916 at $150 per acre. This latter offer finally resulted in the sale in 1917 of 39,300 acres at $175 per acre. The evidence is conclusive that the part sold was more valuable than that retained, some testimony being to the effect that the part sold had approximately twice the value per acre of that retained. It is, of course, well recognized that an offer to sell, not followed by a completed sale, lacks the probative value of a sale itself in fixing values, though the offers in this instance would at least indicate that the United Thacker considered the properties of decidedly more value in 1916 than in 1913, which is at variance with the testimony of its witness that the value in 1913 was greater than in 1917. The further conclusion seems to us reasonable that when the offer was made to sell the property in 1913, the price at which it was offered was an “ outside ” or maximum market value for the property. The owners of the property were offering it for sale when they were not unacquainted with its virtues — in fact, were doubtless better acquainted with its value than anyone else at this time, and when they were not forced to dispose of the property. In other words, we have the seller willing but not forced to sell, and aware of the merits of the property offered for sale. Further, the offer was furnished to a representative who was expected to use it as •a basis for starting negotiations with coal men in England, and could *288hardly be expected to represent the minimum figure at which the owners would be willing to dispose of the property. While this ofer was made of the entire property, from the evidence presented as to the relative values of the part sold and that retained, it is possible to arrive at what might likewise be considered as the maximum value for the tract here involved. We likewise have the Commissioner’s determination that the property had a value on March 1, 1913, of approximately $107 per acre and that he elected to stand on this valuation after having abandoned his former position that the value of the property was less than this amount, though, of course, his determination is entitled only to a consideration of prima facie correctness. The foregoing comments are by no means an exhaustive discussion of the strength and weaknesses of the mass of evidence presented, but are considered sufficient to show the difficulties with which we have been confronted. We have, however, considered and weighed all of the evidence presented, and have reached the conclusion that the March 1, 1913, market price or value of the 39,300 acres of land sold including coal, timber, and surface land, had a total value of $4,833,900, or an average per acre of $123. In arriving at this determination of value we have not attempted to assign any definite weight to a particular part of evidence, nor have we disregarded any evidence which seemed pertinent. While we have discussed the evidence as to events subsequent to March 1, 1913, we have confined our judgment to the value to the conditions existing on March 1,1913. In James Couzens, 11 B. T. A. 1040, at page 1165, we stated: * * * Value on March 1, 1913, is not to be judged by subsequent events. There is, however, substantial importance in the reasonable expectations entertained on that date. Subsequent events may serve to .establish both that the expectations were entertained and also that such expectations were reasonable and intelligent. Our consideration oí them has been confined to this purpose. Such subsequent events as have no reasonable relation to the considerations of the date in question have been disregarded. We have not, by looking at the subsequent events now known, found what the value would have been had they ■been definitely known on March 1, 1913. The only facts upon which our judgment of value has been predicated are those reasonably known on that date.These included not only those which had completely occurred, but also those - which were in process and those which were reasonably in contemplation. The next issue is whether the Ohio <& Big Sandy and the United Thacker were affiliated for the period April 30, 1917, to December 20,1917. Section 1331, Revenue Act of 1921, defines affiliation under the Revenue Act of 1917, in so far as pertinent to the issue here, under consideration, as follows: *289(a) That Title II of the Revenue Act of 1917 shall be construed to impose the taxes therein mentioned upon the basis of consolidated returns of net income and invested capital in the case of domestic corporations and domestic partnerships that were affiliated during the calendar year 1917. (b) For the purpose of this section a corporation or partnership was affiliated with one or more corporations or partnerships (1) when such corporation or partnership owned directly or controlled through closely affiliated interests or by a nominee or nominees all or substantially all the stock of the other or others, or (2) when substantially all the stock of two or more corporations or the business of two or more partnerships was owned by the same interests: Provided, That such corporations or partnerships were engaged in the same or a closely related business, or one corporation or partnership bought from or sold to another corporation or partnership products or services at prices above or below the current market, thus effecting an artificial distribution of profits, or one corporation or partnership in any way so arranged its financial relationships with another corporation or partnership as to assign to it a disproportionate share of net income or invested capital. * * * The first objection made by the petitioners to their affiliation under the foregoing provision is that the period for which the Commissioner has held them affiliated is only a fractional part of a year and .not the entire calendar year 191T; that is, as we understand the petitioners, they contend that the only affiliated status cognizable for 1917 is a calendar year of 12 months, beginning January 1, 1917, and ending December 31, 1917. We are unable to agree with this iposition. Prior to the enactment of the'Revenue Act of 1921, there existed no statutory authority for consolidated returns in 1917; whatever authority existed was contained in regulations promulgated by !the Commissioner. (Articles 77 and 78, Regulations 41.) These ¡regulations provided for consolidated returns for the purposes of :the excess-profits tax. There was no excess-profits tax prior to 1917 and consequently these regulations did not apply prior to such year. The Revenue Act of 1918 (section 240) specifically provided the terms and conditions under which consolidated returns were to be filed for 1918. The situation, therefore,- which Congress had before it was that under the Commissioner’s regulations corporations were permitted or required to file consolidated returns for 1917, when no specific statutory authority appeared to exist for such action. In arder to remove anj' doubt as to the legality of this procedure and validate the existing regulations for 1917, section 1331 was enacted. (H. Rept. No. 350, 67th Cong., p. 16, and S. Rept. No. 275, 67th Dong., p. 34.) That is, what we understand Congress was seek-,ng to accomplish was the enactment of legislation which would make ralid the acceptance of consolidated returns for the whole of 1917 — > lot 1916 nor 1918. i Admittedly, as the petitioners point out, section 1331 is applicable b corporations that “ were affiliated during the calendar year 1917,” aid it is also true that the word “ during ” is often used in the sense *290of “ throughout,” but we can not agree that the word “ during ” as here used requires that the affiliation should continue throughout the whole of the calendar year 1917 in order to make the provisions , applicable. In fact, at least two of the cases cited by petitioners tend to support our view of the issue here under consideration, and , the others deal with situations where the interpretation given is con- i sistent with the state of facts presented. The court in Christie, Lowe & Heyworth v. Patton, 148 Ala. 324; 42 So. 615, stated, in reference to the meaning of the word “ during,” as follows: ⅜ * * while the contractors state in their letter that they would put on ; the work any number of teams the plaintiff cared to furnish, and give them ; work “ during the construction of locks 4, 5 and 6,” the word “ during ” does not \ necessarily mean that the employment would extend over the whole period of . construction. While one meaning ascribed to the word is “ throughout the course of,” it also means “ in time of“ in course of.” Another case, American Linseed Co. v. Eberson, 126 Mo. App. 426; 104 S. W. 121, gives the following definitions: * * ⅜ It is true the word “ during ” has one meaning which is not incon- i sistent with the idea of continuous delivery throughout a given period, but it ¡ has another meaning compatible with total delivery on any date within the period. It is defined as follows: “ In or within the time of; at some period in; or throughout the course, action, existence, or continuance of; as ‘ it happened during the war’; ‘it continued during the night.’” (Standard Dictionary.) In this case the conditions outlined in section 1331, requisite to' affiliation, as to the ownership of stock in one corporation by another corporation were satisfied from April 30, 1917, to December 20, 1917, ■ and we are of the opinion that this satisfies these requirements for an affiliation during or at some.femod in the calendar year 1917. The further objection raised to the affiliated status is that the Ohio & Big Sandy and the United Thacker were not “ engaged in the same or a closely related business.” The business of the United: Thacker was the ownership of coal and timber lands which it was engaged in prospecting and rounding out. No direct evidence was, given as to the business of the Ohio & Big Sandy other than that it; held the stock of the United Thacker, but whether this was its sole business, we do not know. Likewise, we know nothing as to what, arrangements or agreements may have existed between the two companies which would have caused them to be affiliated regardless of the character of their businesses. The Commissioner has determined that they were affiliated for the period in question and, on the record, we do not find sufficient evidence to disturb his action, A further contention is advanced that the deficiencies are void because they comprehend a period for which no tax is imposed. The Ohio & Big Sandy Coal Co. kept its books and made its returns on the basis of a fiscal year ended April 30, and the United Thackei *291Coal Co. kept its boobs and made its returns on the basis of a fiscal year ended June 30. The Commissioner held that the two corporations were affiliated from April 30, 1917, to December 20, 1917, the latter date being the date when the Ohio & Big Sandy, which held all of the stock of the United Thacker, distributed all of its stock to its stockholders, thus ending the affiliation between the companies. The Ohio & Big Sandy was dissolved on or about December 29, 1917, but the United Thacker continued in existence after the close of its fiscal year ended June 30, 1918. Since the period of affiliation ended on December 20, 1917, the Commissioner computed an excess-profits tax on the consolidated net income of the two companies for the period of 7 months and 20 days and also computed an income tax for each of the companies on their respective separate incomes for the same period. In so far as this contention of the petitioners relates to excess-profits tax, we are of the opinion that it is not well taken. For 1917, consolidated returns were permitted or required only for excess-profits-tax purposes, but wherever it was necessary to file a consolidated return in 1917, we do not understand that a different rule should be applied as to the period to be covered by such return than under the Bevenue Act of 1918, as to which we have held that where corporations were affiliated for only a part of a year a consolidated return should be filed for the period of affiliation and separate returns for the corporations for the part of the year when they occupied a ilonaffiliated status. American La Dentelle, Inc., 1 B. T. A. 575; Sweets Company of America, Inc., 12 B. T. A. 1285. In this case, the Ohio & Big Sandy and the United Thacker were held to be affiliated for excess-profits-tax purposes for the period April 30, 1917, to December 20,1917, and, accordingly, a consolidated return for such purpose and for such period was required. That it comprehended a period less than 12 months, or that it did not coincide with the fiscal year of the United Thacker is immaterial; a separate tax status for excess-profits-tax purposes existed for this period. The action of the Commissioner in computing an excess-profits tax on the basis of a period of 7 months and 20 days is accordingly sustained. The Commissioner, however, determined not only the excess-profits tax on the basis of 7 months and 20 days, but also the income tax for both the Ohio & Big Sandy and the United Thacker for the same period. No great objection is made to this action in so far as Ohio & Big Sandy is concerned, since the end of the affiliation period was likewise the approximate end of its corporate existence, but objection is made in so far as United Thacker is concerned, and as to this we are of the opinion that the Commissioner was in error. It is true, as pointed out by the Commissioner, that the income tax for the United Thacker was computed on its separate income for the period *292of 7 months and 20 days, and not on the consolidated net income, but wherein lies authority for the computation of income tax to this company on the basis of such a period? We think no authority to do so exists. The affiliation in 1917 is recognized for excess-profits tax only, and whatever separate tax status arose on account of the affiliation was for this purpose and no other. The income tax must be computed as if this affiliation never existed. In the case of the United Thacker, its taxable period, for income-tax purposes, did not begin on April 30, 1917, nor ctid it end on December 20, 1917; its income tax would be computed on the basis of a fiscal year ended June 30. In view of the foregoing, we are of the opinion that to the extent ■that the deficiency in the case of the United Thacker arises from the ■determination of an income tax for the period April 30, 1917, to December 20, 1917, such deficiency is in error. That is, the correct deficiency for this period, in so far as it pertains to United Thacker, is the difference between the excess-profits-tax liability as determined hereunder and the excess-profits tax as paid, if any, for the same period on account of returns previously filed. With reference to the contention of the petitioners that the deficiency as determined for the United Thacker is void because the deficiency notice erroneously referred to a letter dated August 17,1924, when a letter of such date was not issued and also referred to a deficiency for periods other than that from April 30, 1917, to December 20, 1917, we are of the opinion that such position is without merit. We have set forth in our findings a detailed statement of the various letters issued, and from that it is apjaarent that the |>eriod at all times contemplated was the period beginning April 30, 1917, and ending December 20, 1917, and that the erroneous reference to a letter dated August 17, 1924, was not such as in any- way misled the petitioners. Wilkens & Lange, 9 B. T. A. 1127. In the next place the petitioners challenge the Commissioner’s determination of the total deduction (credit) for excess-profit tax in these respects: (a) The reduction of the consolidated invested capital on which the excess-profits credit was computed by $1,660,-746.61, such action being taken to provide what the Commissioner considered a proper basis where a period of 7 months and 20 days was being used instead of a full year; (b) a similar reduction in the specific credit of $3,000 and the failure to allow a specific credit of $3,000 for each member of the affiliated group, or a total of $9,000; and (c) the reduction of the consolidated invested capital as otherwise computed by subtracting therefrom the amount of $1,019,342.24, being the excess of the book value of the properties of the United 'Thacker over the value allowable for invested capital. *293With respect to tbe first objection raised above and also the first part of the second objection which relates to the proration of the specific exemption, the Commissioner in his brief filed subsequent to the hearing, admitted that his action in both instances was in error and that no reduction should be made either in invested capital or the specific exemption on account of this determination in 1917 for a period less than 12 months. As to the contention made that a specific credit of $3,000 for excess-profits-tax purposes should be allowed on account of each corporation included in the consolidated return instead of one credit of $3,000 for the entire group, we are of the opinion that this position can not be sustained. While no specific provision is contained in the statute as to the exemption allowable in 1917 to a consolidated group, we think that the same rule which applies under the Revenue Act of 1918 should apply under the Revenue Act of 1917. It is, of course, true that the 1918 Act (section 240 (a)) specifically provided that only one specific exemption of $3,000 should be allowed to the consolidated group, whereas we had no such provision under the 1917 Act, but for that, matter no specific provision was made for consolidated returns under the 1917 Act. The matter was covered only by regulations (articles 77 and 78, Regulations 41) and these regulations were likewise silent as to the exemption allowable. It was not until the Revenue Act of 1921 that we had statutory authority for consolidated returns in 1917 and the statute then enacted (section 1331) merely sought to validate existing regulations and again made no statement as to the exemption allowable. The regulations did provide, however, that the tax will be computed * * * as a unit upon the basis of the consolidated returns,” and section 1331 stated that the tax shall be imposed upon the “ basis of consolidated returns of net income and invested capital.” Our conception of the effect of a consolidation was set out in Farmers Deposit National Bank, 5 B. T. A. 520, as follows: The effect of the consolidation of two or more companies is to weld them together for the purpose of computing the tax, as though they existed, in fact, as a single business enterprise. Their separate and distinct identities are merged in the interest of their community, just as effectively, so far as concerns the determination of the income and profits taxes, as though they existed under a single charter. While the foregoing statement was made with respect to a case which arose under the Revenue Act of 1918, the general principles would likewise be applicable to the determination of excess-profits-tax liability under a consolidated return for 1917. In view of the foregoing, we are of the opinion that in computing an excess-profits tax for 1917 on the basis of a consolidated return only one specific exemption of $3,000 should bo allowed. *294The third objection raised by the petitioners in this connection relates to a reduction of invested capital on account of the excess of book values of the United Thacker’s properties over the amount allowable for invested capital purposes. From the deficiency notice it appears that the book value of these properties at April 30, 1917, was $5,770,315.20, whereas the amount allowable for invested capital purposes was $4,750,972.96, or a difference of $1,019,342.24. When the value of $5,770,315.20 is used, the total of assets is equal to the total of the liabilities plus the capital stock, that is, no surplus is shown to exist for this company on April 30, 1917. In the balance sheet as prepared by the Commissioner, which was used as a basis for computing invested capital, the reduced value of $4,750,972.96 was used, and there was shown a deficit as of the same date of $1,019,342.24. The Commissioner alleged that this correction was made in order to reduce the book value of the properties to the value allowable for invested capital purposes. This allegation was admitted by the petitioners; that is, as we understand the situation, there is no contention made by the petitioners that the reduction as made is not correct in order to reflect the true value of these properties for invested capital purposes. No evidence was introduced as to the primary cause of this deficit; we know only that a deficit existed after making the proper correction in the property values, but whether a surplus was created by this appreciation in value which surplus was later distributed or otherwise dissipated, or whether the excess of liabilities and capital stock over the corrected book value may be attributed to operating losses, or whether some other cause resulted in this condition, we are not informed. The first of the above-mentioned situations would produce what is sometimes called a capital deficit, on account of which it would be proper to reduce invested capital, whereas the second situation results in an operating-deficit as to which invested capital is not reduced. See Willcuts v. Milton Dairy Co., 275 U. S. 215. No contention is advanced by the petitioners that the deficit shown to exist on the adjusted balance sheet resulted from losses, but the treatment accorded this item by the Commissioner was, in effect, to consider that the deficit is of a capital nature. While the Commissioner did not determine the invested capital of each of the companies separately, the effect of his action was to consider that the United Thacker was entitled to an invested capital of $2,981,475.76 (capital stock, $4,000,800 less a deficit of $1,019,374.24). On the basis of the evidence presented, we see no reason for disturbing his action. With the invested capital of the United Thacker determined at $2,981,475.76 and with the parties in agreement that the invested capital of the Ohio & Big Sandy and of the Federal Gas, Oil & Coal *295Co. were $5,589,794.76 and $950,000, respectively, each company being considered separately and without reference to its affiliated status, the question then to be determined is the invested capital for the consolidated group. This would not be the sum of the separate invested capital of the three companies, but this sum less duplications on account of intercompany holdings. See Gould Coupler Co., 5 B. T. A. 499, and Farmers Deposit National Bank, supra. An examination of the consolidated balance sheet shows that the Ohio & Big Sandy held the entire capital stock of the United Thacker, $4,000,800, and $940,500 of the capital stock of the Federal Gas, Oil & Coal Co. When elimination is made of these items and certain minor adjustments are made, over which there is no dispute, we arrive at the invested capital determined by the Commissioner and which may be shown as follows: Invested capital: Ohio & Big Sandy_$5, 589, 794. 70 United Thacker_ 2, 981, 457. 76 Federal Gas, Oil & Coal Oo_ 950,000. 00 - $9, 521, 252. 52 Less: Stock of United Thacker held by Ohio & Big Sandy_ 4,000, 800. 00 Stock of Federal Gas, Oil & Coal Oo. held by Ohio & Big Sandy_ 940, 500.00 Minor adjustments_ 920.03 - 4,912,220.03 Consolidated invested capital_ 4, 579, 032.49 The petitioners agree that the reduction as made above on account of the stock of the Federal Gas, Oil c% Coal Co. is correct, but contend that if the separate invested capital of the United Thacker is to be reduced by $1,019,342.24 and is to be determined as $2,981,457.76 ($4,000,800 less $1,019,842.24), then it must follow that the correct elimination for purposes of the consolidated invested capital would be $2,981,457.76 instead of $4,000,800. This contention, however, overlooks the fact that the elimination to be made is the investment of Ohio & B,ig Sandy in the United Thacker, and not the invested capital of the United Thacker. The investment of Ohio & Big Sandy in United Thacker was $4,000,800 and not $2,981,457.76. It is this actual investment of Ohio & Big Sandy in United Thacker which must be eliminated from the consolidated invested capital in order to prevent any duplications through intercompany holdings. To eliminate only so much of Ohio & Big Sandy’s investment in United Thacker as is equal to the invested capital of the latter would *296fall short of a complete elimination and the result would be a duplication of consolidated invested capital to the extent of $1,019,342.24. In view of the foregoing considerations, we are of the opinion that the action of the Commissioner in reducing invested capital on account of the excess of book values over the amount allowable for invested capital should be sustained. A constitutional question was raised by the petitioners to the effect that the valuation of the Commissioner in this case, with the resulting determination of deficiencies on the basis thereof, amounted to a violation of the uniformity clause of the Constitution with respect to the levying of taxes, as well as the provision prohibiting the taking of property without due process of law. In support of an assignment of error to this effect, the petitioners sought to have the Commissioner produce papers and documents which would show the other valuations made by him, which they now contend are inconsistent with the valuation which we are now considering. The objection of the Commissioner to the introduction of this evidence was sustained on the ground that what is here sought to be determined is the true value of certain properties and that the mere fact that other properties were given a different value by the Commissioner would not necessarily prove the incorrectness or inconsistency of either valuation. What may be the value of given properties on a given date is a question of fact which must be determined in the light of all evidence pertaining thereto. To make such evidence as the petitioners would have had introduced serve the purpose which they apparently had in mind, would in effect require a revaluation of all properties with which it is now sought to make a comparison. In other words, we are not dealing with properties which are shown to be comparable, rather with properties which are admitted on all sides to differ in many respects. That a mistake may have been made in this case would not prove that a mistake was made in other cases, nor would a mere showing that other valuations were made of other properties which showed a different value for the properties valued, without a detail showing as to the true value or the comparable nature of the properties sought to be compared, afford any basis for considering the constitutional questions raised. In view of the foregoing, we are of the opinion that the evidence offered with respect to this issue was properly excluded, and accordingly further consideration is unnecessary. Eeviewed by the Board. Judgment will be entered under Rule 50. ^■ReeN did not participate.

2020-01-17 22:01:42.381239+00

Geebn

*304OPINION. Geebn : In the deficiency letter proposing to assess the taxes, here involved, appears the following statement: This office is not in agreement with the Revenue Agent in regard to the computation of your invested capital under section 331 of the Revenue Act of 1918, as it is held that control passed and an actual reorganization took place at the time the old company was bought by William Leary. The respondent in his brief contends that this section is applicable and that the 'petitioner’s invested capital should be computed in accordance therewith. No such issue is raised by the pleadings and accordingly we have entirely disregarded the contention made by the respondent in his brief. A consideration of this question at this time would impose a hardship on the petitioner in that it has had no opportunity to offer evidence with respect to the question. If the respondent felt that the section was applicable, he having previously held it inapplicable, it was incumbent upon him to raise the issue by appropriate affirmative allegations in his answer, which allegations must then be supported by proper proof. The principal question in this case has to do with the petitioner’s statutory invested capital and the value of the assets acquired by *305the petitioner in exchange for its stock. The facts may be summarized as follows: Leary, being desirous of acquiring the name and all of the assets of the old company, entered into an agreement with Williams as the representative of all of the stockholders of the old company, by the terms of which Leary agreed to organize a corporation with an authorized capital stock of $2,500,000, to be divided in $500,000 preferred and $2,000,000 common stock, each share to have a par value of $100, and Williams agreed that the old company would accept all of the stock in the new company in exchange for all of the assets of the old, which stock was to be forthwith distributed to the old stockholders and that, of the stock so distributed, said old stockholders would sell all the common to Leary for $450,000. Thereafter the new. corporation was organized and a contract entered into between it and the old for the exchange of the assets of the old for the stock of the new. This contract was carried out and the stock thus received distributed to the old stockholders and they, pursuant to the agreement made for them by Williams, sold the common stock to Leary for $450,000, $200,000 of which was paid to the stockholders in cash in proportion to their stockholdings and $250,000 by notes payable to the various stockholders in the same proportion. Section 326 of the Revenue Act of 1918 provides, among other things, that there shall be included in invested capital the actual cash value of tangible property actually paid in for stock and, subject to the limitations therein provided, the cash value of intangible property so paid in. . The petitioner acquired all of the assets of the old company in exchange for all of its stock and is, therefore, entitled to have its invested capital determined in accordance with the above summarized provisions of section 326. That is to say, there should be included in invested capital an amount equal to the sum of the cash value of the .tangibles and the value of the intangibles subject to the limitations. From the deficiency letter we gather that the respondent proceeded upon the theory that the sale to Leary determined the market value of the stock and that such market value determined the value of the assets acquired in exchange therefor. We think that the provision of the statute requires the 'inclusión in invested capital of the cash value of the assets subject to the limitations. This value and not the market value of the stock is the test. In the absence of better proof, recourse may be had to value of stock as a measure of the value of assets acquired therefor, but the statute prescribes cash value of assets and in the determination of such cash value all facts and circumstances tending to establish such value should be considered and if it appears that the value of the assets exceeds the market value of the stock, the true value of the assets should be used. Even if the sale of the common stock to Leary did establish its market value, we believe that the cash value of the assets acquired *306in exchange for both the common and preferred stock exceeded $950,000, which is the sum of the par of the preferred and the market value of the common stock, and have accordingly found the total value of assets to be $1,500,000, which we have in our findings of fact allocated to tangibles and the two classes of intangibles. The petitioner’s invested capital and depreciation should be computed accordingly. Judgment will be entered wader Bule 50.

2020-01-17 22:01:42.414187+00

Smith

*310OPINION. Smith : The petitioner kept his books of account and made his income-tax returns for 1919 and 1920 upon the basis of cash receipts and disbursements. On December 22, 1919, he received $45,000 as a consideration for entering into a contract by which he agreed to dispose of his shares of stock in the Syracuse Washer Corporation for an agreed amount of cash, a given number of shares of class A common stock of a new corporation, and an undertaking on the part of the new corporation to pay a note to a bank upon which he was jointly liable. He considered this to be income received in the year 1919 and treated it accordingly. At the hearing of this proceeding counsel for the respondent stated that the theory upon which the respondent held it to be income of 1920 was: * * * That it ⅛ a payment on a 1920 contract consummated in the year 1920, otherwise the $45,000 would be a payment on an option to purchase the stock and the assets of the Washer Corporation, and inasmuch as it was a substantial payment, it was a payment on account of the purchase and not a payment of an option, being a part of the purchase price it was income for 1920, as the contract of sale was closed in 1920, consummated in 1920. A reference to the letter of the petitioner and Wilkinson to the board of directors of the Syracuse Washing Machine Corporation dated December 18, 1919, does not show that the $45,000 was to be received as part payment for the assets to be sold by Derschug and Wilkinson. It clearly was not so understood by the petitioner. To secure the $45,000 the petitioner parted with nothing. True, he had undertaken for a consideration named to do certain things on January 2, 1920, that is, to transfer certain assets to the Syracuse Washing Machine Corporation for a named consideration. ' For a breach of such agreement the petitioner would undoubtedly have been liable for damages. But this does not mean that the $45,000 received was a part payment for the assets sold. It was no part of the consideration named to be received in exchange for assets. If the $45,000 was income to the petitioner, we think it was income in the year 1919 when the petitioner received it and placed it to his credit upon his own books of account. The second point in issue is whether the 10,010 shares of class A common stock of the Syracuse Washington Machine Corporation received by the petitioner in 1920 had a fair market value in 1920 and, if so, how much. In his income-tax return for 1920 the peti*311tioner returned the stock as having a value of $1 per share. Presumably this was predicated upon the fact that 6,000 shares of the stock were sold on January 2, 1920, for $6,000. The petitioner now contends that the stock had no ascertainable fair market value at the date of receipt within the meaning of section 202(b) of the Revenue Act of 1918, which provides in part as follows: When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any; but when in connection with the reorganization, merger, or consolidation of a corporation a person receives in place of stock or securities owned by him new stock or securities of no greater aggregate par or face value, no gain or loss shall be deemed to occur from the exchange, and the new stock or securities received shall be treated as taking the place of the stock, securities, or property exchanged. The transaction between the petitioner and the Syracuse Washing Machine Corporation was more than an exchange of stock for stock. The petitioner exchanged his shares of stock in the Syracuse Washer Corporation and undertook to perform certain services for the new corporation in exchange for cash and a certain number of shares of class A common stock of the new corporation. The transaction is governed by the first clause of section 202(b) of the 1918 law, above quoted. If the value of the shares of stock received in exchange was in excess of the basis laid down by the statute the excess, in our opinion, constituted taxable income of the petitioner of 1920. The evidence with respect to the value of the class A common stock at the date of receipt by the petitioner is in detail. The Syracuse Washer Corporation had obligated itself to purchase supplies for manufacture beyond its immediate needs. It had likewise obligated itself to employ the petitioner and Wilkinson on five-year contracts at large salaries. In order to produce a surplus upon its balance sheet it had set up good will at a value of $200,000 and had appreciated its patent account to the extent of nearly $300,000. There were no sales of the class A common stock of the new corporation in the open market during 1920 and one holder of 30 shares of the stock acquired by inheritance could find no market for it. Soon after the beginning of 1920 operating conditions became bad and it was questionable whether the corporation could escape receivership. The corporation sold 6,000 shares of its common stock at $1 per share on January 2, 1920. We think that this evidence indicates that the fair market value of the common stock was $1 per share at the date of receipt. Petitioner’s tax liability for 1920 should be redetermined accordingly. Judgment will he entered under Rule 50.

2020-01-17 22:01:42.478583+00

Fossan

OPINION. Van Fossan : The petitioner in this proceeding, George L. Rickard, popularly known as “ Tex ” Rickard (now deceased), was a professional promoter whose enterprise lead him from the gold fields of Alaska and Nevada to the cattle ranches of South America and thence to the City of New York, where he was manager of Madison Square Garden. The range of his activities as pertinently shown by the record in this case extended from the operation of a saloon and dance hall in Rawhide, Nev., to the promotion of world championship prize fights. From this latter activity arose the first ground of error alleged in the petition. During the taxable year 1921 Rickard promoted the Dempsey-Carpentier prize fight. In this enterprise he had as a “ silent partner ” John Ringling, with whom he agreed to share equally the profits of the enterprise. Motion pictures had been taken of the fight and distribution thereof was made through various persons. The net profits received by Rickard for his (and Ringling’s) share in the pictures were $40,900, of which sum Rickard paid Ringling one-*317half. The interstate transportation of the fight pictures being in violation of law, indictments were returned against Rickard and others in several jurisdictions. Rickard kept no personal books, but believing that he would be obliged to incur legal expenses and possibly be required to pay fines as a result of the indictments which would equal the amount in his hands as profits of the motion picture venture, he did not return as income for 1921 the profits so received. Respondents added said sum to income and determined a deficiency of $5,911.47, to which was added a fraud penalty of 50 per cent. Rickard’s belief that he would be called on to pay lawyer’s fees and fines constituted no valid reason for failure to report as income the profits so received. The expenditure had not been incurred and even if already expended such items would not have been deductible expenses. Columbus Bread Co., 4 B. T. A. 1126. Nor would the illegal aspect of the enterprise make the profits thereof tax exempt. United States v. Sullivan, 274 U. S. 259. The respondent, therefore, correctly held that such profits wore taxable. The amount so received by Rickard was $20,450. YVe do not agree, however, with respondent’s finding that Rickard was guilty of fraud with intent to evade tax. Since this case was heard after the Revenue Act of 1928 became effective, the burden of establishing fraud was on respondent. To establish fraud the production of clear and convincing evidence is necessary. The evidence fails to sustain the charge. Rickard acted ignorantly but without intent to defraud. Likewise, the evidence does not establish that Rickard acted negligently or with intentional disregard of rules and regulations. The fraud penalty is disapproved. The above disposes of the questions raised by the petition in the case. There were, however, a number of additional items placed in issue by affirmative averments of respondent, in his answer as amended. They deal with items of deductions previously allowed by respondent, now claimed to have been allowed in error. As to all of these the burden of proof is on respondent. Such being the case his proof must be measured by the same yardstick as 4s applied to petitioner’s evidence when he has the burden of proof. In October, 1918, Rickard acquired 997 shares out of a total of 4,000 shares of Frigorífico San Salvador del Paraguay, a corporation engaged in meat packing in South America. During 1918 the corporation prospered. But in the spring of 1919 the bottom dropped out of the market and the company was caught with large stocks which were unsalable. The corporation immediately began to liquidate and in his tax return for the year 1919 petitioner claimed a loss of $75,000 on his investment valued at $200,000. This loss was disallowed by respondent and petitioner was required to pay an addi*318tional tax of $42,000. In 1921 petitioner claimed and was allowed a further loss of $125,000 on account of this investment. Respondent now alleges the allowance to have been erroneous and in his brief claims the entire loss was suffered in 1919. The only evidence directly bearing on the precise point is Rickard’s admission that he knew in 1919 that they “ were sunk.” We do not deem this admission enough to establish respondent’s contention that the entire loss was sustained in that year. Petitioner evidenced his belief in the amount of joss sustained in 1919 by claiming a deduction of $75,000. He deemed the investment to have been proven a total loss and fully established when he filed his return for 1921. Passing without comment the practical injustice that would be done the petitioner by sustaining respondent’s position that the entire loss was suffered in 1919, in spite of respondent’s previous disallowance of a partial loss for that year, and petitioner’s payment of additional taxes on account thereof, it is sufficient to state that in our opinion respondent has failed to prove that his original action in allowing the deduction for 1921 was in error. As to the deduction of $14,407.50 on account of the investment in 1906 in United Ely Copper Co., we believe the record amply shows that this stock was worthless long before the taxable year 1921. There were no sales of the stock after 1907. No mining was done after 1909. Except for assessment work performed in order to maintain title the property lay idle for all the following years. Rickard held to this stock-in the faint hope that some day it might prove valuable. The fact of a loss, however, is not to be determined solely by an attitude of mind. The ascertainment of worthlessness of property or investment is a practical matter to be gauged by practical business standards. The illusory hope of a speculator or a professional promoter that his investments, proven unprofitable for years past, may some day prove valuable is not sufficient basis to postpone from year to j^ear the cold fact of actual worthlessness already reasonably established. Nor does the fact that in furtherance of such hope he may “ send good money after bad ” and spends small sums periodically to keep the investment legally alive stay the operation of those economic laws which have brought about practical worthlessness. The respondent is sustained as to this item. Similar observations apply to the investment in 1908 in stock of the Bovard Strike Gold Mining Co., as to which a deduction of $7,400 was allowed. This mine was successful for a short time after 1908 but the ore “ spaced out.” Rickard held his stock until his tax advisor sold it at auction in 1921 to establish a loss for income-tax purposes. We are convinced that the stock became practically worthless years before and accordingly disallow the deduction. *319In Northern Rawhide Incorporated the legal phases are the same, the type of activity only being changed. This was an investment made in 1908 in a saloon and gambling property in Rawhide, Rev., on which Rickard claimed a loss of $1,000 in 1921. The evidence is that the original investment of $15,000 was made during the boom time of the mining town of Rawhide. With the passing of the gold rush the town dwindled to a few inhabitants. Rickard himself was never there after 1910 and did not consider the stock as worth much after 1915. We believe it became worthless long prior to the year 1921 and accordingly disallow the deduction. The remaining items in the case reveal yet another side of the life of Rickard — that showing him to have been a man to whom appeals for financial help were seldom made in vain and with whom generosity with friends and associates amounted almost to a business fault. In July, 1919, Rickard loaned W. A. Gavin $5,000, taking a check to cash to cover the same. The check was never paid and in 1921 Gavin went to Europe and has never been heard from since. A receiver was appointed for his interests but nothing was left for creditors. The deduction was properly allowed. Louis H. Goldsoll borrowed $3,000 on a note dated July 15, 1919. Throughout 1920 and 1921 Rickard expected to obtain repayment and as evidence of his confidence loaned him an additional $1,500 in 1921. In the fall of 1921 Goldsoll committed suicide, leaving nothing. The deduction was proper. Again, in 1919 Rickard “ loaned ” Kenneth Donellson $100 to enable him to get back to Nevada. The evidence indicated no reasonable expectation that the sum would ever be repaid when made and the deduction of this item is accordingly disallowed. A. D. Meyers borrowed $500 bn a note of March 1, 1919, and $620 in July of the same year. As to him Rickard testified he was a “ money maker ” and the discoverer of Goldfield, Rev. Rickard fully expected repayment. Meyers went west and in 1921 his address was unknown. The allowance will stand. O. C. Relson was “ loaned ” $50 in April, 1919. Since Rickard frankly admitted on the stand he did not expect to be repaid at the time he made the loan this item is disallowed. As to $90 loaned to Thomas Kelly the witness had no recollection. Respondent having failed to prove the previous allowance to have been improper the same will stand. A similar ruling is made as to $100 loaned to Battling Relson. Though Rickard stated that through family adjustments he now expected to get this money back, the record fails to establish that in 1921 it was not a bad debt. The allowance will stand. *320Respondent introduced no evidence as to the loan to R. G. Ward amounting to $180. The allowance accordingly will not be disturbed. In August, 1921, Rickard loaned $25,000 to Trippe & Co., who went into receiver’s hands in a few weeks and never paid anything to creditors. The allowance was correct. The last item was $2,300 loaned in 1915 to William Dewey on a note which was renewed several times and on which some interest was paid. Dewey died in 1921 leaving no assets. The allowance will stand. Judgment will be entered under Rule 50.

2020-12-01 21:00:21.663163+00

http://www.ca4.uscourts.gov/Opinions/191334.P.pdf

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-1334 TRAVIS YOUNG; MICHELLE BEE YOUNG, Plaintiffs − Appellees, v. EQUINOR USA ONSHORE PROPERTIES, INC., Defendant – Appellant, and SWN PRODUCTION COMPANY; STATOIL USA ONSHORE PROPERTIES, INC., Defendants. ------------------------------ THE WEST VIRGINIA OIL AND NATURAL GAS ASSOCIATION; THE INDEPENDENT OIL AND GAS ASSOCIATION OF WEST VIRGINIA, INC., Amici Supporting Appellant. No. 19-1335 TRAVIS YOUNG; MICHELLE BEE YOUNG, Plaintiffs − Appellees, v. SWN PRODUCTION COMPANY, Defendant – Appellant, and STATOIL USA ONSHORE PROPERTIES, INC.; EQUINOR USA ONSHORE PROPERTIES, INC., Defendants. ------------------------------ THE WEST VIRGINIA OIL AND NATURAL GAS ASSOCIATION; THE INDEPENDENT OIL AND GAS ASSOCIATION OF WEST VIRGINIA, INC., Amici Supporting Appellant. Appeal from the United States District Court for the Northern District of West Virginia, at Wheeling. John Preston Bailey, District Judge. (5:17-cv-00082-JPB) Argued: September 10, 2020 Decided: December 1, 2020 Before DIAZ, THACKER, and HARRIS Circuit Judges. Vacated and remanded by published opinion. Judge Diaz wrote the opinion, in which Judge Thacker and Judge Harris joined. ARGUED: Elbert Lin, HUNTON ANDREWS KURTH, LLP, Richmond, Virginia, for Appellants. Jeremy Matthew McGraw, BORDAS & BORDAS, PLLC, Moundsville, West Virginia, for Appellees. ON BRIEF: Ryan A. Shores, William J. Haun, SHEARMAN & STERLING LLP, Washington, D.C.; Bridget D. Furbee, Kristen Andrews Wilson, STEPTOE & JOHNSON PLLC, Bridgeport, West Virginia, for Appellant Equinor USA Onshore Properties Inc. Marc S. Tabolsky, SCHIFFER HICKS JOHNSON PLLC, Houston, Texas; Timothy M. Miller, Katrina N. Bowers, BABST CALLAND, Charleston, West Virginia, for Appellant SWN Production Company, LLC. James G. Bordas, Jr., 2 BORDAS & BORDAS, PLLC, Wheeling, West Virginia, for Appellees. Don C.A. Parker, William M. Herlihy, SPILMAN THOMAS & BATTLE, PLLC, Charleston, West Virginia, for Amici Curiae. 3 DIAZ, Circuit Judge: Equinor USA Onshore Properties and SWN Production Company appeal a district court’s decision granting summary judgment in favor of Travis Young and Michelle Bee Young. The Youngs sued Equinor and SWN to challenge the deduction of post-production costs from royalties paid to the Youngs pursuant to an oil and gas lease between the parties. The district court agreed with the Youngs, holding that the lease failed to properly provide for the method of calculating post-production costs. But we reach the opposite conclusion. Accordingly, we vacate the judgment and remand for the district court to enter judgment for SWN and Equinor. I. A. The Youngs are the lessors of 69.5 acres of land in Ohio County, West Virginia (the “Property”). SWN (as the lessee) and Equinor (as an assignee under the lease) have the rights to drill and operate wells on the Property for the production and sale of oil and gas. In exchange, the Youngs receive royalties based on a share of the proceeds. Specifically, the royalty clause in the “PAYMENTS TO LESSOR” section of the lease states: (B) ROYALTY: To pay Lessor as Royalty, less all taxes, assessments, and adjustment on production from the Leasehold, as follows: .... 2. GAS: To pay Lessor on actual volumes of gas sold from said land, fourteen percent of the net amount realized by Lessee, computed at the wellhead. As used in this Lease, the term ‘net amount realized by Lessee, computed at the 4  wellhead’ shall mean the gross proceeds received by Lessee from the sale of oil and gas minus post-production costs incurred by Lessee between the wellhead and the point of sale. As used in the Lease, the term ‘post- production costs’ shall mean all costs and expenses of (a) treating and processing oil and/or gas, and (b) separating liquid hydrocarbons from gas, other than condensate separated at the well, and (c) transporting oil and/or gas, including but not limited to transportation between the wellhead and any production or treating facilities, and transportation to the point of sale, and (d) compressing gas for transportation and delivery purposes, and (e) metering oil and/or gas to determine the amount sold and/or the amount used by Lessee, and (f) sales charges, commissions and fees paid to third parties (whether or not affiliated) in connection with the sale of the gas, and (g) any and all other costs and expenses of any kind or nature incurred in regard to the gas, or the handling thereof, between the wellhead and the point of sale. Lessee may use its own pipelines and equipment to provide such treating, processing, separating, transportation, compression and metering services, or it may engage others to provide such services; and if Lessee uses its own pipelines and/or equipment, post-production costs shall include without limitation reasonable depreciation and amortization expenses relating to such facilities, together with Lessee’s cost of capital and a reasonable return on its investment in such facilities . . . . J.A. 55–56. In short, the royalty clause (1) grants the Youngs a royalty share equal to “fourteen percent of the net amount realized” by SWN and Equinor; (2) states that post-production costs shall be deducted from the “gross proceeds” to calculate the net amount realized; (3) specifies seven types of such post-production costs, including a “catchall” provision for “any and all other” post-production costs; and (4) allows SWN and Equinor to either contract with others to perform the post-production operations or perform them using their own pipelines and equipment, in which case post-production costs also include the “reasonable depreciation and amortization expenses related to such facilities, together with Lessee’s cost of capital and a reasonable return on its investment.” Id. 5  Two other lease provisions are relevant to this appeal. First, the lease provides that royalty payments shall be proportional to the Youngs’ actual ownership percentage of the Property in the event that they divest some of their leased fee interest. J.A. 56. Second, the lease allows SWN and Equinor to pool or combine the Property with other lands to create drilling or production “units.” Id. In the event of such pooling, which occurred here, royalty payments shall be proportional to the Property’s share of the total land acres included in the unit. Id. The lease also expressly disclaims a duty to market the resources on the Property during the “primary term or any extension of term of this Lease.” Id. In the absence of such a provision, West Virginia’s default rule is “that a lessee impliedly covenants that he will market oil or gas produced” on leased land. Wellman v. Energy Resources, Inc., 557 S.E.2d 254 , 265 (W. Va. 2001). The “primary term” refers to the original five-year term of the lease, which ran from September 8, 2009 to September 8, 2014. J.A. 55. The lease has since been extended indefinitely. In April 2016, SWN began deducting post-production costs from the Youngs’ royalty payments. 1 The Youngs objected, contending that deductions were not allowed under West Virginia law. SWN responded that the lease provided for the deductions, which were calculated by “tak[ing] their decimal interest in the unit,” or the fraction that 1 Before then, SWN had chosen not to deduct such costs. The record is silent as to the reason for the change. 6 the Property bears in relation to the total pooled acreage, “and multiply[ing] it times each specific deduction” in the lease. J.A. 59. B. Not satisfied with that explanation, the Youngs sued in state court for damages and a declaratory judgment that the lease failed to satisfy West Virginia’s requirements for allocating post-production costs to the lessors in an oil and gas lease under Estate of Tawney v. Columbia Natural Resources, LLC, 633 S.E.2d 22 (W. Va. 2006). In Tawney, the West Virginia Supreme Court of Appeals held that an oil and gas lease must satisfy a three-pronged test to rebut a presumption that the lessee bears all post- production costs and to thereby allocate some of those costs to the lessor. 633 S.E.2d at 30 . Specifically, the lease must (1) “expressly provide that the lessor shall bear some part of the [post-production] costs”; (2) “identify with particularity the specific deductions the lessee intends to take from the lessor’s royalty”; and (3) “indicate the method of calculating the amount to be deducted from the royalty for such post-production costs.” Id. SWN and Equinor removed the case to the Northern District of West Virginia. At the close of discovery, the parties filed cross-motions for summary judgment. The district court granted summary judgment to the Youngs, holding that the lease failed to properly provide for the method of calculating the amount to be deducted from the Youngs’ royalties under Tawney. In lieu of conducting a trial on damages, the parties stipulated “that the sum of $6,980.94 against Equinor and $36,633.30 against SWN shall be treated as if it were the 7 jury’s verdict” against SWN and Equinor, subject to their right to appeal. J.A. 75. The district court entered judgment accordingly, and this appeal followed. II. SWN and Equinor contend that they properly deducted post-production costs from the Youngs’ royalty payments either because the lease satisfies Tawney’s requirements for deducting such costs, or because the lease’s disclaimer of the implied duty to market means that it’s not subject to Tawney at all. Alternatively, SWN and Equinor ask us to certify two questions to the West Virginia Supreme Court of Appeals: (1) whether Tawney remains good law; and if so, (2) whether the lease suffices under Tawney to allocate post-production costs to the lessor. As we explain, the lease provisions regarding royalty payments satisfy Tawney and are otherwise consistent with West Virginia law. The district court erred in holding otherwise. We therefore vacate the district court’s judgment, finding it unnecessary to certify any issue of state law. See Roe v. Doe, 28 F.3d 404 , 407 (4th Cir. 1994) (“Only if the available state law is clearly insufficient should the court certify the issue to the state court.”). A. We review the district court’s ruling on cross-motions for summary judgment de novo. Libertarian Party of Va. v. Judd, 718 F.3d 308 , 312 (4th Cir. 2013). We also review de novo the district court’s contract interpretation underlying its summary judgment ruling. 8 FindWhere Holdings, Inc. v. Sys. Env’t Optimization, LLC, 626 F.3d 752 , 755 (4th Cir. 2010). B. Because this case invokes our diversity jurisdiction, we apply controlling state law on settled issues and predict how the state’s highest court would rule on unsettled issues. See McFarland v. Wells Fargo Bank, N.A., 810 F.3d 273 , 279 (4th Cir. 2016). Thus, we summarize the relevant decisions of the West Virginia Supreme Court of Appeals. We begin with Wellman v. Energy Resources, Inc., 557 S.E.2d 254 (W. Va. 2001). In that case, West Virginia’s high court held that where “an oil and gas lease provides for a royalty based on proceeds received by the lessee, unless the lease provides otherwise, the lessee must bear all costs incurred in exploring for, producing, marketing, and transporting the product to the point of sale.” Id. at 265 . The court reasoned that the lessee’s implied duty to market the minerals produced on leased property makes the lessee presumptively responsible for all post-production costs until the product is sold. Id. at 264–65. Thus, for a lessor to share in post-production costs, Wellman instructs that a lease must expressly allocate such costs to the lessor and that the lessee must prove that it “actually incurred such costs and that they were reasonable.” Id. at 265 . Tawney expanded on the court’s analysis in Wellman. As we noted earlier, Tawney explained that an oil and gas lease that intends to allocate post-production costs between the lessor and lessee must: (1) “expressly provide that the lessor shall bear some part of the costs incurred between the wellhead and the point of sale”; (2) “identify with particularity 9 the specific deductions the lessee intends to take from the lessor’s royalty”; and (3) “indicate the method of calculating the amount to be deducted from the royalty for such post-production costs.” 633 S.E.2d at 30 . Applying this test, Tawney held that lease language that provides for the lessor’s royalty to be calculated “at the wellhead” is ambiguous, and therefore fails to rebut the Wellman presumption under the first prong. Id. The West Virginia Supreme Court of Appeals most recently expounded on Wellman and Tawney in Leggett v. EQT Production Co., 800 S.E.2d 850 (W. Va. 2017). There, the court considered whether those cases applied in the context of West Virginia Code section 22-6-8(e) (1994), which provides that a lessee must pay to the lessor “not less than one eighth of the total amount paid to or received . . . at the wellhead for the oil and gas” extracted from wells leased at a flat rate. 2 The lessors there argued that the statute’s “at the wellhead” language was inadequate for the reasons explained in Tawney, such that the lessees couldn’t overcome the Wellman presumption and deduct post-production costs from the lessors’ flat-rate royalties. Leggett, 800 S.E.2d at 854. The court ultimately concluded that Wellman and Tawney’s common law principles didn’t inform the interpretation of the statute, and that the statute permitted the deduction of post-production costs. Id. at 862. But in doing so, 2 The lease in Leggett “provide[d] for payment of a sum certain per well, per year,” and was thus subject to the statute. 800 S.E.2d at 853. By contrast, the Youngs receive royalties that vary based on a percentage of the net proceeds realized by SWN and Equinor. 10 the court went out of its way to “illustrate the faulty legs” upon which Wellman and Tawney “purport[ ] to stand.” Id. The court recited an array of “stinging” criticism from scholars complaining that Wellman and Tawney rest on an “unwillingness to accept the realities of deregulation in the natural gas market.” Id. at 863. From 1938 until the “deregulation” that occurred in 1993, buyers “purchased gas at or near the wellhead, thereby absorbing most post-wellhead [i.e., post-production] costs.” Id. at 857 n.10. Today, however, “most gas is purchased away from the wellhead,” giving rise to vastly greater post-production costs incurred by the seller. Id. Given this new reality, the court hinted (without formally holding) that Wellman and Tawney are “nothing more than a re-writing of the parties’ contract to take money from the lessee and give it to the lessor.” Id. at 863. Leggett did, however, expressly reject Tawney’s assertion that the phrase “at the wellhead” is facially ambiguous. Instead, it interpreted the statutory phrase to require the calculation of royalties based on “the value of the gas at the well, before it is transported, treated, compressed or otherwise prepared for market.” Id. at 864–65. The court determined that “the most logical way to ascertain the wellhead price” under section 22-6- 8 is “to deduct the post-production costs from the ‘value-added’ downstream price.” 3 Id. at 866. This “‘work-back’ method of royalty calculation” prevents lessors from “unfairly 3 The downstream price is the value of the resources when sold, which reflects the value of the raw resources at the point of extraction (the wellhead price) plus any added value from post-production services (such as treatment and transportation). 11 maximiz[ing] their royalty payments without commensurately bearing the costs of achieving that maximum value.” Id. at 867. Reading these cases together, we glean the following principles of West Virginia law: An oil and gas lease must satisfy Tawney’s three-pronged test to rebut the Wellman presumption that the lessee will bear all post-production costs. And although Leggett didn’t overrule Wellman and Tawney, its criticism of those cases and its endorsement of the work-back method inform our analysis here. C. Having sketched out the relevant West Virginia law, we turn to SWN and Equinor’s argument that the lease meets Tawney’s three-pronged test. The parties agree that the lease expressly provides that the Youngs will bear post- production costs, satisfying the first prong. For the most part, the parties also agree that the lease identifies post-production costs with particularity, thus satisfying the second prong. The Youngs half-heartedly argue that the catchall and depreciation provisions fail the second prong. But they don’t identify any deductions actually taken under the catchall provision that would affect our analysis. Nor do we see any imprecision or impropriety in the depreciation provision, so long as the costs deducted are limited to those accrued while providing post-production services—a restriction conceded by SWN and Equinor. Thus, the lease satisfies Tawney’s second prong. 12  The parties’ dispute centers on the third prong—that is, whether the lease adequately “indicates the method of calculating the amount to be deducted from the royalty for such post-production costs.” Tawney, 633 S.E.2d at 30 . The district court found that the lease fails on this third prong of Tawney because it “merely states that the lessee will deduct post-production costs,” yet “says absolutely nothing as to how those costs would be calculated, other than to leave the amount of the deduction wholly to the lessee’s discretion.” J.A. 66. In short, said the court, the lease lacks a “mathematical formula” that would constitute a “method of calculation.” J.A. 67. We disagree. Tawney doesn’t demand that an oil and gas lease set out an Einsteinian proof for calculating post-production costs. By its plain language, the case merely requires that an oil and gas lease that expressly allocates some post-production costs to the lessor identify which costs and how much of those costs will be deducted from the lessor’s royalties. These conditions may be satisfied by a simple formula, like the one here. To begin, the very notion of deduction implies the first component of the formula: We subtract “some part” of the post-production costs specified in the lease from the pot of money from which the royalty percentage is calculated. Tawney, 633 S.E.2d at 30 . Here, the lease tells us that this sum consists of “the gross proceeds received by Lessees from the sale of . . . gas.” J.A. 55. To determine the precise amount of the specified post-production costs to be deducted from the “gross proceeds” and arrive at the “net amount,” we add up “all” of the receipts corresponding to the costs specifically enumerated in the lease and, if applicable, 13 in the depreciation clause. See J.A. 55–56 (“[T]he term ‘net amount realized by Lessee, computed at the wellhead’ shall mean the gross proceeds received by Lessee from the sale of oil and gas minus post-production costs incurred by Lessee between the wellhead and the point of sale . . . . [T]he term “post-production costs” shall mean all costs and expenses of (a) . . . , and (g) . . . . [and] reasonable depreciation and amortization expenses . . . .” (emphases added)). The Youngs argue that the depreciation clause introduces ambiguity by permitting deductions of “reasonable” depreciation expenses. Not so. Recall that Wellman itself requires that all post-production costs deducted must be “reasonable” and “actually incurred.” 557 S.E.2d at 265 . “‘Reasonableness’ is a common legal standard that has been used by courts for more than a century” and simply limits any deductions to those that are rationally related to the specified categories of post-production costs. W.W. McDonald Land Co. v. EQT Prod. Co., 983 F. Supp. 2d 790 , 808 (S.D. W. Va. 2014). Thus, the royalty provision tells us all we need to know to determine “the amount to be deducted from the royalty for such post-production costs.” See Tawney, 633 S.E.2d at 30 . To calculate the Youngs’ royalty payment, we then multiply the “net amount realized by Lessee” by 0.14, or 14 percent. The Youngs also contend that the lease fails Tawney’s third prong because the royalty clause fails to apportion the costs between lessors. But as SWN and Equinor point out, the lease deals with that issue elsewhere. Specifically, the lease explains how to adjust the overall calculation of royalties in the event that the Youngs transfer some of their 14 interest in the Property: by multiplying the “net amount realized” by the fraction of the Property they still own. And it describes how to adjust the calculation where, as here, SWN and Equinor have pooled the Property with other production units: by multiplying the “net amount realized” by the fraction that the Property bears in relation to the total pooled acreage. In setting out these methods for calculating not only the amount of designated post- production costs to be deducted, but also the pool from which to deduct them, and the manner in which to arrive at the ultimate royalty payment, the lease effectively mirrors the work-back method of calculation approved in Leggett. See 800 S.E.2d at 867. Recall that, under that method, one simply “deduct[s] the post-production costs from the ‘value-added’ downstream price” that the gas fetches at the market. Id. at 866. Because that’s exactly what the lease here does, it follows that the language at issue bears the same “precise and definite meaning” that Leggett approved. Id. at 865. The Youngs’ retort practically proves the point. According to them, the lease fails on Tawney’s third prong because it doesn’t include the “exact same explanation” that SWN provided when the Youngs first objected to the deduction of post-production costs. The problem with that claim is that the lease recites the very same formula that SWN conveyed to the Youngs. The district court’s view of why the lease lacks a method for calculating the amount of post-production costs to be deducted is similarly unpersuasive. At bottom, the court failed to recognize that the lease’s directive to add all of the specified, reasonable, and 15 actually incurred post-production costs, then subtract that figure from the gross proceeds, and finally multiply that sum by 0.14 as well as the Youngs’ fractional share of the total pooled acreage, suffices as a method of calculation. As support for its contrary view, the district court relied on its own prior decision in Kay Co., LLC v. EQT Production Co., No. 1:13-cv-151 (N.D. W. Va. Jan. 5, 2018), in which it held that a lease providing for the deduction of “reasonable” and “actually incurred” post-production costs didn’t specify a method for calculating the amount to be deducted. J.A. 66–71. To the extent Kay Co. mirrors the district court’s analysis here, we think it too was wrongly decided. But we note that the real problem in Kay Co. appears to be that the lease in question didn’t “identify with particularity the specific deductions” as required by Tawney’s second prong. That caused the district court there to question whether “post-production costs” included “meals and entertainment, uniforms, meter operations and repair,” and a variety of other expenses. J.A. 71. The same can’t be said here, as the lease undoubtedly satisfies Tawney’s second prong. In sum, we are satisfied that the lease suffices under Tawney to indicate the method for calculating the amount of post-production costs to be deducted when calculating the Youngs’ royalties. That method is simply to add up all of the identified, reasonable, and actually incurred post-production costs, and deduct them from SWN and Equinor’s gross proceeds. The amount is then adjusted for the Youngs’ fractional share of the total pooled acreage and their royalty rate. Especially in light of Leggett, West Virginia law demands nothing more. 16  * * * We therefore vacate the district court’s grant of summary judgment to the Youngs and remand the case to the district court to enter judgment for SWN and Equinor. VACATED AND REMANDED 17

2020-01-17 22:01:45.657781+00

Siefkin

*78OPINION. Siefkin: These proceedings present for our determination the following issues: (1) Whether the petitioner is an organization exempt from income and profits taxes under sections 231 and 304 of the Revenue Acts of 1918 and 1921; (2) whether it is an association taxable in the same manner as a corporation; (3) whether it is entitled to deduct from gross income amounts credited to an account set up in its books as “ Reserve for health, accident and death risks ”; and (4) whether the dues received from its members should be included in its gross income. We have decided the first and second issues adversely to the petitioner in a prior case. Philadelphia, c& Reading Relief Association, 4 B. T. A. 713. In that case we considered the issues involved at length and the decision there is controlling here as far as it is applicable. *79Under the third issue counsel for the petitioner contends that as an insurance company it should be accorded the benefits of sections 234 (a) (10), (11), and (13) of the Revenue Acts of 1918 and 1921, or otherwise be permitted to deduct the annual additions to its reserve for losses. It is admitted on brief, however, that the requirements of section 234 (a) (11) can not be met in the instant case any more successfully than they were met in Philadelphia & Reading Relief Association, supra, where our decision on this point was adverse to the petitioner’s contention. Section 234 (a) (10) of the Revenue Act of 1918, provides, relative to deductions allowed corporations, as follows: (a) That in computing tlie net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * * * * * * * (10) In the case of insurance companies, in addition to the above: (a) The net addition required by law to be made within the taxable year to reserve funds (including in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds) ; and (b) the sums other than dividends paid within the taxable year on policy and annuity contracts. The corresponding section of the Revenue Act of 1921 reads: (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: ******* (10) In the case of insurance companies (other than life insurance companies), in addition to the above (unless otherwise allowed) : (A) The net addition required by law to be made within the taxable year to reserve funds (including in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds) ; and (B) the sums other than dividends paid within the taxable year on policy and annuity contracts. After December 31, 1921, this subdivision shall apply only to mutual insurance companies other than life insurance companies. It is clear that the petitioner is not entitled to a deduction under the provisions of section 234 (a) (10), since it was not required by law to make any addition to reserve funds. Cf. Employes’ Benefit Association of American Steel Foundries, 14 B. T. A. 1168. Section 234 (a) (13) of the Revenue Act of 1918 and section 234 (a) (13) of the Revenue Act of 1921, respectively, read as follows: (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: ******* (13) In the case of mutual insurance companies (other than mutual life or mutual marine insurance companies) requiring their members to make premium deposits to provide for losses and expenses, there shall be allowed, in addition to the deductions allowed in paragraphs (1) to (10), inclusive, (unless otherwise allowed under such paragraphs) the amount of premium deposits returned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and reinsurance reserves. *80(a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions: * ⅜ * * * * * (13) In the ease of mutual insurance companies (including interinsurers and reciprocal underwriters, but not including mutual life or mutual marine insurance companies) requiring their members to make premium deposits to provide for losses and expenses, there shall be allowed, in addition to the deductions allowed in paragraphs (1) to (10), inclusive, and paragraph (14), unless otherwise allowed, the amount of premium deposits returned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and reinsurance reserves. The petitioner is a mutual insurance company within the meaning of the regulations of the Commissioner. Article 1508, Eegulations 45 and Eegulations 65. It is also a mutual insurance company within the decisions of the courts. See Citizens' Life Insurance Co. v. Commissioner of Insurance, 128 Mich. 85; 87 N. W. 126. As a mutual insurance company it is entitled to deduct from gross income the amount of the premium deposits retained for the payment of losses, expenses, and reinsurance reserves, within the meaning of subdivision (13) of section 234 (a) of the Eevenue Acts of 1918 and 1921, unless it is a mutual life insurance company within the meaning of those Acts. The question is whether the petitioner has lost the benefit of this provision by reason of the payment or agreement to pay death benefits on the lives of members in good standing. % It is our opinion that a benefit insurance association of the character of the petitioner is a mutual life insurance company within the meaning of the Act, because it pays a death benefit to members in good standing. It undertakes to pay benefits to its members in case of sickness, accident and death, and the history of the association is that during the taxable years most of its funds were paid out either for sick benefits or for payment of premiums to a life insurance company upon the lives of its members. The petitioner was a mutual life insurance company within the meaning of the taxing acts, and is excepted, by the language of the statutes, from the benefits of section 234 (a) (13) of the Eevenue Acts of 1918 and 1921. In its brief the petitioner makes an extended argument that the dues and assessments received by it from its members were not income within the meaning of the Sixteenth Amendment. It argues that they were contributions of capital and that under the statutes of the State of Michigan the members had an undivided interest in the assets of the Association. We can not grant the soundness of this argument. Under the taxing statute the petitioner is to be regarded the same as a corporation. The dues paid by the members become the property of the Association. They may be paid out for benefits or *81for expenses or for any other legal purpose. We think that the dues thus derived from the conduct of a business constitute taxable income of the Association. Eeviewed by the Board. Judgment will be entered under Bule 60. Lansdon dissents.

2020-11-21 03:13:57.594556+00

APPEAL OF NEW MARTINSVILLE GLASS MFG. CO. New Martinsville Glass Mfg. Co. v. Commissioner Docket No. 3906. United States Board of Tax Appeals 2 B.T.A. 1328; 1925 BTA LEXIS 2093; November 11, 1925, Decided Submitted July 14, 1925. *2093 Deficiency to be computed in accordance with admission in the Commissioner's answer. Robert F. McClure, C.P.A., for the taxpayer. Ellis W. Manning, Esq., for the Commissioner. MARQUETTE *1328 Before MARQUETTE and MORRIS. This appeal is from the determination of a deficiency in income and excess profits taxes for the fiscal years ended June 30, 1918, and June 30, 1920, in the amount of $5,912.27. The Commissioner's answer admitted an error in inventory adjustment for 1918, and further averred that in computing the deficiency the taxpayer's invested capital had been overstated by $12,330.29 for the fiscal year 1918 and $38,860.28 for the fiscal year 1920. No competent evidence was offered by either party to support the allegations in their pleadings. After the commencement of the hearing the taxpayer moved for a continuance and the Commissioner moved to dismiss the appeal under Rule 18 for nonprosecution. FINDINGS OF FACT. The taxpayer is a West Virginia corporation with its principal place of business at New Martinsville. In computing net income for the fiscal year 1918, because of inventory adjustments, the Commissioner reduced*2094 the taxpayer's net *1329 income for that year in the amount of $12,330.29, and now concedes that the net income for that year should be reduced by $26,529.99 instead of the foregoing amount. DECISION. The deficiency should be computed in accordance with the following opinion. Final determination will be settled on 10 days' notice, under Rule 50. OPINION. MARQUETTE: The motion of the taxpayer for a continuance and the motion of the Commissioner to dismiss for nonprosecution under Rule 18 are each denied. The Commissioner's answer has admitted that, because of inventory adjustments, the taxpayer's net income for the fiscal year 1918 should be reduced by $26,529.99 instead of by $12,330.29, as used in computing the deficiency. Neither party has adduced any competent evidence in support of the issues raised by their respective pleadings. With the exception of the above adjustment, the determination of the Commissioner must be approved.

2021-03-18 21:00:43.037662+00

https://www2.ca3.uscourts.gov/opinarch/202118np.pdf

NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _______________ No. 20-2118 _______________ UNITED STATES OF AMERICA v. DEXTRICK LAWTON, Appellant _______________ On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Criminal Action No. 2-12-cr-00295-001) District Judge: Honorable Alan N. Bloch _______________ Submitted Under Third Circuit L.A.R. 34.1(a) March 15, 2021 _______________ Before: SHWARTZ, PORTER, and MATEY, Circuit Judges. (Filed: March 18, 2021) ______________ OPINION ______________  This disposition is not an opinion of the full Court and, under I.O.P. 5.7, is not binding precedent. PORTER, Circuit Judge. Appellant Dextrick Lawton appeals from the District Court’s April 21, 2020 Order denying his Motion for a Reduction of Sentence Pursuant to 18 U.S.C. § 3582 (c)(2). We will affirm. I In 2012, a grand jury indicted Lawton for conspiracy to distribute and possess with intent to distribute heroin in violation of 21 U.S.C. §§ 841 (a)(1), 841(b)(1)(A)(i), and 846. Lawton ultimately consented to a Federal Rule of Criminal Procedure 11(c)(1)(C) (“Type–C”) agreement to plead guilty to the § 846 charge in exchange for an agreed- upon sentence of fifteen years’ imprisonment followed by a five-year term of supervised release and a special assessment fee. The plea included the government’s agreement not to file an Information under 21 U.S.C. § 8511 (“§ 851 Information”) and the parties’ stipulation that the applicable controlled substance for purposes of sentencing was one to three kilograms of heroin. Following that agreement, but before a plea hearing, Lawton submitted a pro se letter to the District Court requesting that it substitute Lawton’s court-appointed counsel with new counsel. During oral argument on that request, the prosecutor indicated that he believed Lawton’s request was intended as a delaying tactic and stated that the government would consider the plea agreement rejected if the District Court granted the motion. The government further explained that there had been a “death of an individual 1 The § 851 Information would have indicated that Defendant had a prior controlled substance offense. 2 in connection with” the conspiracy and said that it would “move forward with the other charges” if Lawton rejected the plea offer. Supp. App. 9–10. After a brief recess, Lawton notified the District Court that he would accept the plea offer, and the District Court denied as moot Lawton’s request for new counsel. A plea hearing ensued shortly thereafter, and the District Court accepted Lawton’s plea. Prior to sentencing, the United States Probation Office prepared a Presentence Investigation Report (“PSR”) that calculated Lawton’s Guideline range of imprisonment as 151 to 188 months. The PSR also stated that Lawton held a leadership role in the drug conspiracy, which resulted in a three-level enhancement under U.S.S.G. § 3B1.1(b), and identified Lawton’s activities as causing the overdose death of an individual. Lawton objected to the inclusion of those paragraphs in the PSR, and the Probation Office issued a PSR addendum addressing those objections and stating that it stood by their inclusion. At sentencing, Lawton asked that those paragraphs be excised from the PSR because they would be used in determining his classification at the Bureau of Prisons. The District Court agreed, reasoning they “may impact the defendant’s placement in a prison,” but did not make any finding as to the veracity of the paragraphs. App. 73. Lawton later moved for a reduction of his 180-month sentence under 18 U.S.C. § 3582 (c)(2), invoking Amendment 782—an amendment to the Sentencing Guidelines that retroactively reduced certain drug crimes by two offense levels. See U.S.S.G. §§ 1B1.10(d), 2D1.1, U.S.S.G. App. C, Amdt. 782 (Supp. Nov. 1, 2014); see also Hughes v. United States, 138 S. Ct. 1765 , 1774 (2018). The District Court denied the motion, 3 reasoning that Lawton received substantial benefits as a result of his guilty plea. This appeal followed. II2 The Supreme Court has set forth a two-step approach to guide courts when reviewing claims brought under § 3582(c)(2). See Dillon v. United States, 560 U.S. 817 , 827 (2010). “At step one, § 3582(c)(2) requires the court to follow the Commission’s instructions . . . to determine the prisoner’s eligibility for a sentence modification and the extent of the reduction authorized.” Id. “At step two of the inquiry, § 3582(c)(2) instructs a court to consider any applicable § 3553(a) factors and determine whether, in its discretion, the reduction authorized by reference to the policies relevant at step one is warranted in whole or in part under the particular circumstances of the case.”3 Id. In appeals arising under § 3582(c), we exercise de novo review over “purely legal question[s] concerning the interpretation and legal status of § 3582(c)(2) and the related policy statement by the Sentencing Commission.” United States v. Ware, 694 F.3d 527 , 531 (3d Cir. 2012). We review all other § 3582(c) rulings for abuse of discretion. Id. 2 The District Court had jurisdiction under 18 U.S.C. §§ 3231 and 3582(c)(2), and this Court has jurisdiction under 28 U.S.C. § 1291 . This Court “may affirm the District Court’s order ‘on any basis supported by the record.’” United States v. Rivera-Cruz, 904 F.3d 324 , 326 (3d Cir. 2018) (quoting Murray v. Bledsoe, 650 F.3d 246 , 247 (3d Cir. 2011) (per curiam)). 3 Here, both parties agree that Lawton is eligible for a sentence reduction. Thus, only the District Court’s analysis at step two is at issue. 4 Further, we review all constitutional questions de novo. See United States v. Gonzalez, 905 F.3d 165 , 205 (3d Cir. 2018). III Lawton’s theory is that the District Court impermissibly considered the parties’ plea negotiations when denying his § 3582(c) motion. His arguments misconstrue the record and are belied by apposite Supreme Court precedent. In Hughes v. United States, 138 S. Ct. 1765 (2018), the Supreme Court explicitly stated that a district court “can consider the benefits the defendant gained by entering a Type–C agreement when it decides whether a reduction is appropriate (or when it determines the extent of any reduction), ‘for the statute permits but does not require the court to reduce a sentence.’” Id. at 1777 (quoting Freeman v. United States, 564 U.S. 522 , 532 (2011)). Further, as we explained in United States v. Baylin, a court may consider factual matters—like Lawton’s benefits from the Type–C agreement—as a basis for a sentence if there is “some minimal indicium of reliability beyond mere allegation” that bears “some rational relationship” to the sentence. 696 F.2d 1030 , 1040 (3d Cir. 1982), superseded by statute on other grounds as recognized in United States v. Essig, 10 F.3d 968 , 970 (3d Cir. 1993). Contrary to the picture of unfounded speculation that Lawton paints, the District Court based its determination on reliable information in the record to determine that Lawton gained a substantial benefit upon entering into the plea agreement such that a reduction in his sentence was unwarranted. Specifically, the District Court appropriately reasoned that by pleading guilty, Lawton avoided “the very real risk that he would face life imprisonment if the Government superseded the indictment to charge that the heroin 5 at issue had resulted in the [overdose] death . . . .” App. 8. As the District Court explained, “[Lawton] benefited immensely from such an agreement [because] it eliminated the risk of a far greater sentence for [Lawton] and essentially represented a compromise between two or more statutory sentencing possibilities.” App. 9. Moreover, the District Court correctly observed that although the government’s allegations pertaining to his role in the overdose death “were never charged and proved,” they heavily influenced Lawton’s plea negotiations. App. 10. The record supports the District Court’s assessment. During oral argument on Lawton’s request for substitute counsel, Lawton chose to move forward with the plea agreement immediately after the government stated it would consider the plea agreement rejected and potentially bring charges associated with the overdose death. Also, Lawton’s initial counsel explained in a letter exhibit that the government agreed not to file a § 851 Information or superseding indictment in exchange for Lawton’s guilty plea, and subsequent counsel agreed that the potential charge pertaining to the overdose death “was likely material” to Lawton’s decision to plead guilty. Supp. App. 23, 34. Thus, the District Court correctly focused upon the benefits the plea agreement conferred upon Lawton, as contemplated in Hughes, 138 S. Ct. at 1777 . Lawton has not shown that the District Court erred in its analysis, and his constitutional and statutory arguments lack merit. * * * We will affirm the order of the District Court. 6

2020-01-17 22:01:42.536169+00

Fossan

*327OPINION'. Van Fossan: The issues regarding the deductions for depreciation and depletion are settled by stipulation in the manner set forth in the findings of fact. Petitioner has waived the assignment of error respecting paid-in surplus. Prior to 1913 petitioner charged off certain capital assets and capital expenditures, which it now seeks to restore to invested capital. Obviously, many of the items written off are of a capital nature and, under proper conditions, might be included in invested capital. The mere fact, however, that capital assets and expenditures have been charged off in prior years is not sufficient to warrant the restoration of such items to invested capital in a later year. It may be that the assets have been consumed or disposed of prior to the later year. There is no evidence that the assets charged off were still in existence and were the property of petitioner during the taxable years or that the capital account at the beginning of the taxable years, as shown by the books, did not accurately reflect the true invested capital. It does not appear that the expenditures were made in connection with assets still in existence, owned and in use by the petitioner during the taxable years. There is no evidence of the amount of deprecia-’ tion actually suffered in any of the years prior to 1919, nor does it appear what the.capital account would have been if all capital assets had been properly included and proper deductions had been taken for depreciation. In the absence of such material facts it can not be said that the assets and expenditures written off should be restored to invested capital. Petitioner has failed to establish that the assets and expenditures charged off prior to 1913 should be restored to invested capital for the taxable years. See Varley Duplex Magnet Co., 4 B. T. A. 1; and Comstock-Castle Stove Co., 4 B. T. A. 114. *328Petitioner claims that $60,000 should be added to invested capital as additional cost of the Cleveland Mine. The agreement of sale provided that the petitioner would pay $285,000 for the Cleveland Mine and the 500 shares of capital stock of the Morris Mining Co. This was the total amount to be paid to the vendors for both the mine and the stock, and was to be paid by petitioner. No segregation of the total consideration of $285,000 to the two classes of property, stock and mine, is made in the agreement, nor does it appear why the petitioner should pay for stock to be sold and conveyed to Morris. In the light of the minutes of the stockholders’ meeting relating to the acquisition by petitioner of the assets of the Morris Mining Co., however, it appears that petitioner paid $60,000, or the equivalent, for the stock on behalf of Morris, charging his account therewith, and that later, upon transfer of the assets of the Morris Mining Co. to it, the liability was canceled. The record of these transactions made by petitioner upon its books of account in March, 1907, is the most reliable evidence we have of the amount paid for the Cleveland Mine. The Black Top Mine was entered upon the books in the amount of $120,000 and the Cleveland Mine in the amount of $225,000. Against these asset charges there was credited $60,000 on account of Morris Mining Company stock, $99,000 on account of bond issue and $186,000 on account of bills payable. In the light of these facts, it seems clear that the total cost of the Cleveland Mine to petitioner was only $225,000, and accordingly we hold that respondent did not err in refusing to include in invested capital $60,000 as additional cost of the mine. Petitioner claims that there were abnormal conditions affecting its capital and income for 1920 and that its profits tax should be assessed under sections 327 and 328 of the Revenue Act of 1918. Practically the only evidence offered in support of this claim was the amount of the salaries paid to officers of the company, which were claimed to have been inadequate. The salaries paid by the petitioner to its officers aggregated $7,633.50, and a like amount was paid as salaries to these officers by the Morris-Poston Coal Co., to which they devoted a part of their time. The relation, if any, between the latter company and petitioner does not appear. For purposes of comparison, evidence was also introduced of the gross sales, invested capital, net income, profits tax and officers’ salaries of one other coal company operating the same vein of coal on property adjacent to petitioner, but it was not established that such company was typical or was operating under normal conditions or that its capital, income and officers’ salaries were normal. No evidence was offered of petitioner’s gross sales or of its invested capital, taxable income and excess-profits tax, as determined by respondent. There is no evidence in this record of abnormal conditions affecting petitioner’s *329capital or income which entitle it to special assessment of its profits tax. Accordingly, we hold that respondent did not err in refusing to assess petitioner’s profits tax under sections 327 and 328 of the Revenue Act of 1918. Judgment will be entered v/nder Bule 50.

2020-01-17 22:01:42.578741+00

Teussell

*337OPINION. Teussell: The various issues herein will be discussed and disposed of in the order in which they are above set out. In respect to petitioner’s contention that the net profits of a partnership in which he held an interest were erroneously increased by respondent for the years 1920 and 1921 by disallowance of depletion on timber, thereby increasing the amount reported by him as his distributive share of such profits, the record shows that the partnership in question was the owner of certain timber rights in two tracts of land, the first, containing 26,667,000 feet, having been acquired in 1918 at a cost of $160,000, or $6 per thousand feet, and the other, containing 40,000,000 feet, having been acquired in 1919 at a cost of $280,000, or $7 per thousand feet. In addition the partnership in 1920 bought 87,223 feet of timber for $916.34 and in 1921 bought 28,701 feet of timber for $455.92. All of the timber cut in *338the years 1919 and 1920 was from the first tract purchased at $6 per thousand, but in computing its allowance for depletion for those years the partnership used various rates estimated to be present value or cost of replacement of the timber cut and in excess of cost. For the year 1921 the timber cut was from all of the timber holdings mentioned, but though the total cut is shown to be 9,179,519 feet, there is no evidence as to the amount cut from each of the tracts. The action of respondent in limiting the depletion allowance for the year 1920 to $6 per thousand feet of timber cut is approved by us, as all timber cut in that year was acquired at that price. For the year 1921, however, the timber cut was from all of the tracts and the correct depletion rate is the average of the cost per thousand feet of all of the timber remaining uncut at the beginning of that year. A reasonable rate for 1921 is computed as follows: [[Image here]] In computing the net income of the partnership for the years 1920 and 1921 the rates above given should be used to arrive at depletion allowances for timber cut. Any amounts by which the depletion as charged off by the partnership for those years exceeds the amounts so computed should be restored to the asset account of timber remaining. As to the deduction, of repair expense to the plant for the year 1920, the record shows $10,000 of the amount so charged by the partnership was disallowed by respondent on the ground that to that extent the expenditures involved were capital in character. Upon the hearing petitioner withdrew this assignment of error and agreed to the disallowance, with the understanding that the amount so disallowed should be restored to capital and this respondent agreed was proper. The action of respondent with respect to this disalloAvance is sustained and capital should be adjusted accordingly. Early in the year 1920 the petitioner turned over to the partnership for its use in the business a new Buick automobile which he had purchased from personal funds. This automobile was used by the partnership for business purposes during 1920 and 1921, and near the close of the latter year it had become damaged from wear and tear and was turned in by the partnership for a new car, and the *339difference in value, $1,375, was paid in cash by the partnership and the new car returned to petitioner. The partnership deducted as an expense of 1921 the sum of $1,375 paid. The payment in question was not a capital transaction. The partnership obtained nothing of asset character for it. The automobile turned in was the property of petitioner and not the partnership and the $1,375 paid represented merely the exhaustion in value by wear and tear in use by the partnership. Had the latter returned the car to petitioner and paid him the $1,375 to compensate for the wear and tear, it would unquestionably represent a normal business expense, and we can see in the transaction as carried out nothing more than a method used to effect the same result. We hold that the payment in question is a business expense. It is a proper deduction for the year 1921 in which paid. Wm. J. Ostheimer, 1 B. T. A. 18; Thatcher Medicine Co., 3 B. T. A. 154; Richmond Light & Railroad Co., 4 B. T. A. 91; Husch Bros., Inc., 6 B. T. A. 1056. For 1920 and 1921 the partnership charged off no depreciation on its plant and respondent in determining the deficiencies appealed from allowed none. Petitioner now asks that allowance be made for reasonable depreciation for those years in determining the net profits of the partnership and his correct distributive shares of same. On the hearing petitioner testified that the action of the partnership in failing to charge depreciation was due to the fact that they had expended large amounts in 1920 on the property and had taken credit for all of this as expense. Now the respondent has disallowed $10,000 of the expenditures taken credit for as expenses, and petitioner asks that allowance be made for depreciation. We have found that the physical life of the mill and plant was 10 years. This is testified to by petitioner, who has qualified sufficiently as a lumber-mill expert. This evidence was not contradicted and is to some extent supported by the proof in the record that this plant was built for the specific purpose of operating this tract of timber alone, no other tracts in reach being then available. At the rate of operation in the three years in evidence the timber would be exhausted in less than 10 years from the beginning of operations, and the building of a permanent or long-lived plant would have been useless. We accept the testimony of petitioner that under these conditions the plant erected was one with a 10-year life. Petitioner insists that the life of the plant, however, should be considered as 6½ years, with a 10 per cent salvage value at the end of that time as the timber available would then be exhausted. This theory assumes that continued operation of the plant would be at the same rate as in the years before us, and we can not assume that guch would be the case. The additional loss of value asked on this *340theory is one due to obsolescence, and no facts are shown indicating that snch loss has yet accrued. We can not say that the plant will not operate its full 10 years of life. Market conditions may operate to curtail production or conditions may change whereby other timber adjoining, and belonging to other operators, may become available. We hold an allowance of 10 per cent for depreciation for the years 1920 and 1921 to be reasonable and proper. Petitioner’s second assignment of error is upon the inclusion in his income for 1921 of the entire profits of the partnership for that year when he owned only a seven-eighths interest prior to November 30, 1921. The additional- one-eighth interest which he purchased on that date included the profits accrued on the same for that year and he contends that such profits were acquired in a capital transaction and consequently did not represent income. With this view we agree. It can not be questioned that the un-drawn profits accrued upon the one-eighth interest acquired by petitioner on November 30, 1921, constituted one of the things of value for which the sum of $21,000 was paid. The partnership stood dissolved on that date and one-eighth of the profit then earned and distributive to Pearson was acquired by petitioner as an item of the interest of Pearson purchased by him. This profit was income taxable to Pearson for that year and not to petitioner. Ella Daly King, 10 B. T. A. 698; Ormsby McKnight Mitchel, 1 B. T. A. 143; Alfred Le Blanc, T B. T. A. 256; Samuel V. Woods, 5 B. T. A. 413. Petitioner’s taxable distributive share of the partnership income for the calendar year 1921 is seven-eighths of the net profits plus one-twelfth of the remaining one-eighth share, the sale of that share having been on November 30, and the books being closed and tqtal income computed on December 31, 1921. Petitioner for the year 1921 reported a total profit upon the sale of the partnership assets to Cowan in the sum of $61,551.51 and returned as income for that year 31.13 per cent of that amount, or $19,160.98, as the proportion of such profit received in that year, treating the sale as one on the installment basis. Respondent increased the total profit to $180,074.82 by the computation set out in the findings, and treated all of such profit as income of the year 1921. An examination of respondent’s computation of petitioner’s net taxable income for the year 1921 shows that he has computed a net loss of $39,535.47 upon the dissolution of the partnership by petitioner’s acquisition of the Pearson one-eighth interest, as realized by petitioner at that time, and has credited this upon a total gain computed upon the subsequent sale of the partnership assets. The loss upon dissolution he has computed as the difference between the cost to petitioner of the partnership assets and their net book cost as of *341the date of dissolution. The gain on the sale of these assets he has computed as the difference between the price received by petitioner and the net book cost of the assets. This computation overlooks the fact that in the acquisition of the one-eighth interest of Pearson by petitioner and the dissolution of the partnership there was no loss realized by petitioner. This transaction merely resulted in his acquisition of certain assets. No gain or loss was realized by him until his sale of these assets two weeks later and the basis for its determination is not the book cost of the assets, which is the cost to the partnership, but their cost to petitioner, as the sale was one by him and not by the partnership. Respondent has determined a cost of the assets to petitioner as follows: J. W. McWilliams’ original investment_$25,000.00 Wells’ capital account transferred_ 10, 000.00 Excess paid Wells over and above bis personal account_ 13, 035.47 Paid Pearson for bis interest___ 21,000. 00 Paid Slater for share of profits_ 10,500.00 J. W. McWilliams’ personal a/c, including accumulated profits, un-drawn salary, net additional money paid to partnership, and corrected profit for 1921 of $38,913.80_ 182, 776. 87 Total cost to McWilliams_ 262,312.34 The item “ Paid to Slater, $10,500,” in the above computation is not explained in the record and we do not know the particular circumstances of the transaction, but it is included by respondent and is not questioned and we accept it as a correct item of cost. The other items included in the total cost are correct with exception of the last one, “ J. W. McWilliams Personal Account — $182,776.87.” This total is the one shown by the books with one adjustment only, the addition of the sum of $1,875, representing an item of automobile expense disallowed for 1921 and increasing to that extent the total profit for that year. We have held that this was a proper item of expense and should be allowed. It is noted also that although respondent has increased by his determination the income of petitioner for 1920 in the sum of $20,404.17 and for 1921 in the sum of $15,000, as additional profit from the partnership resulting from his disallowance of a repair expense and depletion for those years, no corresponding adjustment has been made of the book net profit of the partnership as carried into petitioner’s personal account representing profits distributive to him in those years. The adjustments on account of depreciation, depletion and expense for the taxable years 1920.and 1921 as heretofore directed by us should be made and these adjustments should be carried through and reflected by a correction of net income of the partnership for those years and by a corresponding correction of the book balance in petitioner’s personal account as of December 81, 1921. *342The record shows furthermore that for the year 1919 the partnership deducted depletion at various rates upon the timber cut and depreciation upon its other assets at rates in excess of 10 per cent. We have found that the correct rate for depletion for that year was $6 per thousand feet of timber cut, and also the amount cut, and that the correct rate for depreciation was 10 per cent. These asset accounts should be adjusted by applying these rates and this adjustment reflected by correction of the profit and loss account and petitioner’s personal account for that year and such adjustment reflected in the latter account as of December 31, 1921. The gain realized by petitioner in the sale of the partnership assets is the sum of $390,000, received by him, less the cost to him of those assets as computed above with the adjustments directed and with such cost diminished by the $11,000 cash retained. Section 212(d) of the Revenue Act of 1926, which is provided by section 1208 of that Act to be retroactively applied in computing income for the taxable year 1921, reads as follows : Under regulations prescribed by tbe Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. In the case (1) of a casual sale or other casual disposition of personal property for a price exceeding $1,000 or (2) of a sale or other disposition of real property, if in either case the initial payments do not exceed one-fourth of the purchase price, the income may, under regulations prescribed by the Commissioner, with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this subdivision. As used in this subdivision the term “ initial payments ” means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. In articles 42 to 46, inclusive, of Regulations 69, the Commissioner has promulgated rules for the enforcement of the section of the statute above quoted. By article 44 the meaning of “ total contract price ” and “ purchase price ” as used in the statute is defined as follows: ⅜ * » In the sale of mortgaged property the amount of the mortgage, whether the property is merely taken subject to the mortgage or whether the mortgage is assumed by the purchaser, shall not be considered as a part of the “ initial payments ” or of the “ total contract price ” but shall be included as part of the “purchase price” as those terms are used in section 212(d), in articles 42 and 45, and in this article. * * * In the case before us the unpaid indebtedness of the seller in resp'ect to the property, payment of which was specifically assumed by the purchaser, was not secured by mortgage but in all other respects was similar to a purchase money debt so secured. The seller in the trans*343action before ns had acquired this property under a contract of purchase which obligated him to pay a stated amount and the party from whom it was acquired retained title under that contract until the payments called for should be all made as provided instead of conveying title and then receiving back the legal title under a mortgage executed to secure the indebtedness. Such a transaction we have held is a sale and purchase of property as of the date of the contract. Pacheco Creek Orchard, Co., 12 B. T. A. 1358; Pacific Coast Redwood Co., 5 B. T. A. 423; J. T. Pittard, 5 B. T. A. 929. The partnership of McWilliams & Pearson, the purchaser under this contract, and petitioner, who had succeeded to its interest, had paid all of the purchase price of $440,000, with the exception of $130,000 at the time of the resale in 1921 under which the purchaser from this petitioner specifically assumed the payment of this unpaid balance. In determining whether or not this last sale was one on the installment basis we see no difference between the assumption by the purchaser of the contract obligation of the seller to pay a former owner a balance of $130,000 due upon the property, and his assumption of a mortgage due that party and representing that item and we have in Dalriada Realty Co., 5 B. T. A. 905, and Pacheco Creek Orchard Co., supra, accepted the construction placed upon section 212(d) by article 44 of Regulations 69 in so far as that regulation defines the meaning of “ total contract price ” and “ purchase price ” as used in that section, in respect to a transaction of this character. It follows that the “purchase price” of this property under the transaction before us includes the obligation assumed to make payment to one other than the seller of an indebtedness of $130,000 on the property and is the gross amount for which the purchaser obligates himself, or $520,000. Of this sum the only amount agreed to be paid, or which was paid in 1921, the year of sale, was $125,000, or less than 25 per cent, and in accordance with section 212(d) above quoted, petitioner is entitled to return the income from the transaction on the installment basis, the percentage of the profit to be returned as income for each of the years in question to be determined upon the basis of the. purchase price less the $130,000 of indebtedness assumed, or $390,000. Petitioner insists that his tax liability for the calendar years 1922 and 1923, on income received in those years representing profits on the sale of the partnership assets in 1921 to Cowan, should be computed under section 206 of the Revenue Act of 1921, instead of under sections 210 and 211 of that Act. Section 206 referred to applies to income represented by capital gain and this is defined by that section as “ taxable gain from the sale or exchange of capital assets consummated after December 31, 1921.” The term “ capital assets ” is by *344that section defined as “ property acquired and held by the taxpayer for profit or investment for more than two years.” There is no evidence that the sale of the partnership assets was consummated after December 31, 1921. The contract of sale was executed, the cash payment was made and deferred payment notes were given in that month. We accordingly hold that petitioner is not entitled to have his tax on profits received in 1922 and 1923 from the sale of these assets computed under section 206 of the Revenue Act of 1921. During the calendar years 1920 to 1924, inclusive, and for the first two months of 1925, petitioner was the sole owner of a lumber sales business operating under the name of the J. W. McWilliams Lumber Co. This business was entirely separate and distinct from the partnership of McWilliams & Pearson. Early in the year 1920 petitioner turned over to this lumber business two Cadillac automobiles purchased by him at a cost of $4,000 each. One of these cars was new and the other practically new. These cars were thereafter used exclusively in this business by the lumber buyers and representatives employed by petitioner in traveling for the business. The cars sustained very rough usage over bad roads. In 1922 these cars were traded in for new Buick cars, the business of J. W. McWilliams Lumber Co. paying in addition for the new cars the sum of $1,413.70. In 1923 these Buick cars were traded in for new ones, the business paying a difference of $3,023.55. Subsequently, by other trades, without additional cash payments, the business became the owner of one Buick car in place of two, and upon the liquidation of the business in March, 1925, this car was taken by petitioner and sold for $1,500. Petitioner deducted, as depreciation on automobiles, $1,413.70 for 1922, and $3,023.55 for 1923, these being the amounts paid out in those years on the trades whereby new cars were obtained. These deductions were disallowed by respondent on the ground that they were capital expenditures and depreciation was allowed by him for 1922 and 1923, on the basis of a life of six years, on the amount of these two expenditures. No depreciation was allowed on the cost of the two Cadillac cars turned over to the business in 1920. The business of J. W. McWilliams Lumber Co. from 1920 to 1923, inclusive, was a sole proprietorship. It had no identity separate from petitioner. The record shows that beginning early in 1920 petitioner used exclusively for business purposes two automobiles which he had purchased. It follows that actual depreciation sustained upon these automobiles as a result of this business use, if it can be determined, is a proper deduction from gross income as wear and tear on assets used in trade or business. The record shows the original cost of these automobiles to have been $4,000 each, and that one was new and one “ practically new ” at the time assigned exclusively to business use. Additional amounts *345were expended in 1922 and 1923 in cash payments made on occasions when old cars were traded in for new. The total sum of the depreciated cost of the two Cadillac cars at the time taken over for business use and the later expenditures of $1,413.70 and $3,023.55 represent the capital cost of these assets depreciable over the life of their use in the business. The $1,500 for which the last remaining car was sold represents the portion of that capital cost not exhausted by such use. One of the Cadillac cars at the time taken over by the business was new and should be included at its full cost of $4,000. The other, it was testified, was “ almost new ” and although such description for purposes of determining value is rather general, it indicates that although it had sustained some use it had not depreciated to any marked degree. We consider that such testimony was sufficient to show that it had not depreciated in excess of 25 per cent of cost. If it had in fact not depreciated to this extent our inability to arrive at a depreciated cost in excess of $3,000 is due to lack of evidence to determine the exact amount and the burden of making such proof is upon petitioner. We accordingly determine that these two cars should be included at $4,000 and $3,000, respectively, and that these sums plus the additional expenditures of $1,413.70 and $3,023.55, or a total of $11,437.25, represent the capital cost of these depreciable assets used in the business, and that this total, less $1,500 received for the remaining car in 1925, or $9,937.25, represents the exhaustion of these assets during the years 1920 to 1924, inclusive, and the first two months of 1925. In the absence of evidence as to just when the exchanges of cars were effected and the details of those transactions, we hold that the total of this exhaustion should be apportioned ratably over such period, or $1,923.34 to each of the years 1920 to 1924, involved herein. For each of the years 1920 to 1923, inclusive, petitioner is entitled to deduct the amount of $1,923.34 determined as a reasonable allowance with respect to these assets, but for the year 1924 a different condition is shown to exist, as a one-half interest in the business of J. W. Mc-Williams Lumber Co. was sold by him on April 1 of that year to one Sinks and the depreciation sustained thereafter on these assets was not the subject of a deduction by petitioner, but by the partnership, in determining the net income of the business distributable to petitioner and Sinks. We accordingly hold that petitioner, individually, is entitled to deduct for the year 1924 only three-twelfths of the total exhaustion of $1,923.34 sustained by these assets during that year. For the years 1922, 1923, and 1924, petitioner, in arriving at the net income reported on his returns, deducted $7,637.71, $11,100, and $4,923 as expenses incurred by himself and several employees in *346traveling for the business of J. W. McWilliams Lumber Co., paid by them and for which they were reimbursed by the business in those years. These deductions were disallowed 'by respondent on the ground that the evidence was insufficient to show that the items making up these totals were actually payments made to reimburse for travel expenses paid. These total amounts deducted for 1922 and 1923 are made up of items appearing on the books of J. W. McWilliams Lumber Co., for those years as payments made and charged to general expense, and credits entered on the books to the personal account of petitioner and charged to general expense. The books for those years are in evidence. The amount deducted for the year 1924 is testified to have been similarly recorded in the books for 1924, and the return for that year to have been made up from those books, but the books are not in evidence, except a cheek register covering payments made. The other books it is testified are lost. The book evidence of these items for 1922 and 1928 and their character is accordingly limited to their amounts, the parties to whom paid or credited, and the fact that they were charged to general expense, and for 1924 to certain payments made to individuals and firms, and these are testified to by petitioner to be traveling expenses. The individual travel expenses of petitioner for 1924, not being paid to him as such, but merely credited to his personal account against which his occasional withdrawals were charged, are not shown separately by this check register. The petitioner at the hearing identified the items, other than credits entered to his personal account, as items of travel expense of employees. These amounts, he testified, were not payments of salary and he could positively identify them as reimbursements of travel expense. In respect to the items for 1922 and 1923 credited to his personal account and charged to expense on the books, and as to the balance of the amount for which credit was asked for 1924, over and above the amount shown by the check register, petitioner testified that he traveled for the business, spending nearly all of his time in this way, and visited many of the larger cities obtaining orders for lumber, and that his customers were mainly the large corporations. He stated that he kept pocket memoranda of his expenses of travel and on his return from trips would merely advise the bookkeeper as to the total amount of his expense as shown by such memoranda, and this amount was thereupon credited to his personal account, against which all his withdrawals were charged. He was unable to produce any expense account, stating that all of these were destroyed or discarded as he saw no necessity of keeping them and that he filed no regular itemized expense account, as- the business belonged to him *347alone, and he saw no reason for furnishing one to his bookkeeper. He testified that all of the items credited to him and charged to expense in the years iñ question represented reimbursement for expenses of travel by him for the business and which he had paid. We can see nothing unreasonable in the testimony given. The system of the business in respect to a detail record of expenses of this character, at the most, appears to have been careless, but when we consider that it was for most of the time a sole proprietorship, the failure of petitioner to submit a detailed expense account to his bookkeeper or to keep his personal memoranda of expense, after it had served its purpose Of supplying the information on which he was credited with the amount, carries no peculiar significance discrediting the positive testimony given that the amounts paid or credited represented traveling expenses of the business. The total amounts for the several years do not appear excessive. Petitioner spent nearly all of his time in traveling for the business, visiting-many of the large cities, and, in addition, employed several men whose duties entailed travel. The largest amount, $11,100, is for the year 1923, and as to that year the record shows that included in this amount is the cost of a three-month trip by petitioner to San Domingo, investigating timber properties, on which he took one man from Mobile, and employed guides, helpers and a pack train in that country. We think the proof sufficient as to the expenditures for travel for the business in the three years in question and that petitioner is entitled to the deductions asked for 1922 and 1923. However, as to 1924, a different condition exists, because of the sale of an interest in the business on April 1 of that year. Prior to that time the business was a sole proprietorship. Its business identity was that of the petitioner. Its expense was his expense. The record indicates that the deduction taken by petitioner for 1924 of $4,923 as traveling expenses is the total expense of that character incurred by the business of J. W. McWilliams & Co., for that year. It is not possible from the record to determine the different periods of the year 1924 in which the items of expense making up the total of $4,923 were incurred and under these conditions we hold that the total expense should be distributed ratably over the period of that year and that three-twelfths of this total is travel expense incurred by petitioner in carrying on an individual business and is subject, to deduction in determining his net income for that year. The deficiencies should be redetermined in accord with the findings of fact and foregoing opinion. Judgment will be entered •pursuant to Bule 50.

2020-01-17 22:01:42.8924+00

Marquette

*384OPINION. Marquette: The petitioner contends that, it acquired from the Cyclone Drill Co. assets of the net value of $180,789.51, which it is entitled to include in invested capital for the years 1917 to 1920, inclusive, and that $91,382.54 represents the value of the plant and equipment included in such assets, which value should be used as a basis for computing the allowances for wear and tear of the plant and equipment during the taxable years involved. The respondent has reduced the petitioner’s invested capital claimed on account of said assets by the amount of $⅛9,387.09, but has allowed its claim in the amount of $131,402.42. He "also reduced the value of the petitioner’s plant account by the amount of $49,387.09, and thereby reduced the basis for computing the allowances for exhaustion, wear and tear of the plant and equipment. The record in this case is confusing and entirely unsatisfactory. The petition alleges and the answer admits, that the petitioner purchased 1120½ shares of the capital stock of the Cyclone Drill Co. for $75 per share and immediately thereafter liquidated that company and took over its assets, and that it thereafter paid for the 30½ shares of stock of the Cyclone Drill Co., which it had been unable *385to acquire, at the rate of $110 per share. On the other hand, the minutes of the Cyclone Drill Co., which were introduced in evidence, show that the petitioner purchased the assets of that company, subject to its liabilities, for $86,325, paying 40 per cent in cash and 60 per cent in shares of the petitioner’s preferred stock. Also, the opinion of the Supreme Court of Ohio in Cyclone Drill Co. v. Zeigler, 99 Oh. St. 151; 124 N. E. 131, which was an action brought by certain stockholders of the Cyclone Drill Co., and arising from the transaction under consideration, indicates that it involved the sale by the Cyclone Drill Co. of its assets, to which certain of its stockholders had not consented. If the petitioner purchased the assets of the Cyclone Drill Co. for $86,325, it is not entitled to include them in invested capital or as a basis for computing depreciation allowances at any greater amount than it paid for them. If the petitioner purchased the capital stock of the Cyclone Drill Co. and subsequently liquidated that company and took over its assets, it would be entitled to include the assets in invested capital and to compute depreciation allowances thereof on their fair market value at the date of acquisition. However, we are unable to understand how the owner of only part of the capital stock of a corporation can dissolve the corporation and take over its assets in liquidation to the exclusion of the other stockholders. The petitioner has attempted, by the testimony of several witnesses, to establish a value for the plant and equipment greater than that allowed by the respondent. However, we are of opinion that the evidence falls far short of showing that the plant and equipment had any greater value when the petitioner acquired it than the respondent has allowed. On this point we must affirm the action of the respondent, although the evidence before us indicates that he may have erred in including the property in question in the petitioner’s invested capital at more than $86,325. With respect to the petitioner’s claim that it is entitled to deduct from gross income for the taxable years 1911 to 1920, inclusive, the amounts credited in 1921 to Sanderson as additional salary for those years, we must be governed by section 12 (a) of the Eevenue Act of 1916, which was in force during 1911, and by section 234 (a) of the Eevenue Act of 1918. The 1916 Act provides for the deduction from gross income of: * * * First. All the ordinary and necessary expenses paid within the year in the maintenance and operation of its business and properties, * * *. The 1918 Act allows as deductions: (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, * * *. *386In our opinion the respondent’s determination on this point was correct and the deductions claimed should not be allowed. The additional salaries were neither paid nor incurred during the taxable year. Sanderson, the recipient of the salaries in question, overdrew his salary account in each of the years 1917 to 1920, inclusive, but the petitioner’s directors, who were the managers of the petitioner’s property and business, had never authorized the additional salaries, nor did they cause the bookkeeping entries to be made crediting San-derson’s account with the amounts thereof. The additional salaries were arbitrarily fixed by Sanderson himself in 1921 and the bookkeeping entries were directed by him in that year. See Columbia Textile Co., 2 B. T. A. 472, and cases cited; Williamson Milling Co., 5 B. T. A. 814. Judgment will be entered under Bule 50.

2020-01-17 22:01:42.945013+00

Trussell

*388OPINION. Trussell : Petitioner’s contention is that the dividends in question were paid out of the corporation’s earnings for the years 1918, 1919, and 1920; that he has included in his individual returns one-half of the corporate net earnings for each of those years; that he has paid on that alleged income a tax which respondent still retains; and that he should not now be compelled to again pay a tax on the same income for the years 1920 and 1921. For the purposes of a decision of this case we must assume that the corporation of Brady & Gioe, Inc., has been properly and legally held to be not entitled to a personal service classification during any of the years 1918 to 1921, inclusive. It appears that the interested parties, including petitioner, have accepted and do not now question that determination. Under the theory that Brady & Gioe, Inc., was a personal service corporation petitioner reported his proportionate share of the corporate earnings for the several years and paid both normal and surtax upon the amount so reported. Under the readjustment these amounts must be held to have been erroneously included in petitioner’s returns but in place thereof the petitioner should have reported, in each of such years, the amounts of dividends declared and actually received by him. Thus, in the year 1918, petitioner, instead of reporting $78,559.17 as corporate earnings subject to both normal and surtax, should have reported $68,500 dividends declared and received, subject to surtax only. Likewise, in 1919, instead of reporting $85,614.97 as corporate earnings subject to both normal and surtax he should have reported dividends declared and received in the amount of $92,994.96, subject to surtax only. Likewise, in 1920, instead of reporting $38,413.93 as corporate *389earnings subject to both normal and surtax he should have reported $86,705.45 as dividends declared and received and subject to surtax only. In 1921, when the corporation sustained an operating loss, he should have reported $23,000 as dividends declared and received and subject to surtax only. These adjustments in petitioner’s income tax and surtax liability for the years 1920. and 1921 are now being made as a result of respondent’s investigation and deficiency notice. And, so far as it appears from the record, the respondent’s adjustments are in accord with the accepted interpretation of the taxing statutes and no error has been found in respondent’s accounting. In the testimony and argument of counsel for petitioner there appears an apparent sense of injury based upon the theory that the respondent is now calling upon petitioner to pay tax upon amounts of income upon which he has already paid a tax. We are of the opinion, however, that this apparent sense of injury will disappear when petitioner realizes that during the four years about which testimony has been given he reported corporate earnings in the amount of $202,588.07, while during those same years he received dividends in the amount of $271,150.41. If the total of dividends received had not exceeded the total of petitioner’s share of corporate earnings the readjustment of tax liability would have shown overpayments of taxes in some of these years. It appears probable that the petitioner has overlooked the fact that in 1918 and 1919 he drew out of the company in dividends $91,961.24, earned by the corporation in years prior to 1918 but taxable to the stockholders as dividends declared and received in the years 1918 and 1919, and subject to the surtax rates of those years. Revenue Act of 1918, section 201 (a) and (b). Lynch v. Hornby, 247 U. S. 339. Judgment will be entered for the respondent.

2020-01-17 22:01:42.988352+00

Morris

*395OPINION. Morris : The first question for consideration is whether or not the respondent erred in finding that various transfers of property by the decedent prior to his death were made in contemplation of death within the meaning of section 402 of the Revenue Act of 1921. That section in so far as applicable here, 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 (whether such transfer or trust is made or created before or after the passage of this Act), 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 within the meaning of this title. The books are so replete with decisions in which this question has been considered and the term “ contemplation of death ” defined, that *396to delve into the subject here would result in repetition and duplication of effort, and in the end would serve no useful purpose. The petitioner’s introduced twenty-one witnesses who were intimately acquainted with the decedent at the time of his death and for a great period of years prior thereto, whose testimony convinces us that the various transfers of real and personal property were not motivated “ immediately and directly ” by fear or expectation of impending death. See Cyrus H. McCormick et al., 13 B. T. A. 423; Estate of Charlotte C. Lozier, 7 B. T. A. 1050; Estate of R. H. Boggs, 11 B. T. A. 824; Edmund H. Fleming et al., 9 B. T. A. 419; Joseph Edward Phillips et al., 7 B. T. A. 1054; Fred Wolferman, Executor, 10 B. T. A. 285; and Estate of Charles F. Roe, 14 B. T. A. 312. We are therefore of the opinion that the petitioners have clearly overcome the prima facie correctness of the respondent’s findings and also the statutory presumption operating against them with respect to the transfers made within two years of the death of the decedent. The petitioners having expressly waived the second and third issues herein in the event of a favorable decision on the first issue, it is unnecessary for us to pass upon those questions. Judgment will be entered under Rule SO.

2020-12-01 21:00:22.693795+00

http://www.ca4.uscourts.gov/Opinions/202039A.P.pdf

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 20-2039 SIERRA CLUB; CENTER FOR BIOLOGICAL DIVERSITY; WEST VIRGINIA RIVERS COALITION; WEST VIRGINIA HIGHLANDS CONSERVANCY; INDIAN CREEK WATERSHED ASSOCIATION; APPALACHIAN VOICES; CHESAPEAKE CLIMATE ACTION NETWORK, Petitioners, v. UNITED STATES ARMY CORPS OF ENGINEERS; RYAN D. MCCARTHY, in his official capacity as Secretary of the U.S. Army; LIEUTENANT GENERAL SCOTT A. SPELLMON, in his official capacity as U.S. Army Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers; MAJOR GENERAL ROBERT F. WHITTLE, JR., in his official capacity as Division Commander of the U.S. Army Corps of Engineers, Great Lakes and Ohio River Division; COLONEL JASON A. EVERS, in his official capacity as District Commander of the U.S. Army Corps of Engineers, Huntington District; THERESA SPAGNA, in her official capacity as Chief, Regulatory North Branch, U.S. Army Corps of Engineers, Huntington District, Respondents, MOUNTAIN VALLEY PIPELINE, LLC, Intervenor. No. 20-2042 SIERRA CLUB; CENTER FOR BIOLOGICAL DIVERSITY; WILD VIRGINIA; APPALACHIAN VOICES; CHESAPEAKE CLIMATE ACTION NETWORK,  Petitioners, v. UNITED STATES ARMY CORPS OF ENGINEERS; RYAN D. MCCARTHY, in his official capacity as Secretary of the U.S. Army; LIEUTENANT GENERAL SCOTT A. SPELLMON, in his official capacity as U.S. Army Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers; COLONEL PATRICK V. KINSMAN, in his official capacity as District Commander of the U.S. Army Corps of Engineers, Norfolk District; WILLIAM T. WALKER, in his official capacity as Chief, Regulatory Branch, U.S. Army Corps of Engineers, Norfolk District, Respondents, MOUNTAIN VALLEY PIPELINE, LLC, Intervenor. On Petitions for Review of Actions by the U.S. Army Corps of Engineers. (LRH-2015- 592-GBR; NAO-2015-08998) Argued: November 9, 2020 Decided: December 1, 2020 Before GREGORY, Chief Judge, and WYNN and THACKER, Circuit Judges. Motions for stay granted by published per curiam opinion. Derek Owen Teaney, APPALACHIAN MOUNTAIN ADVOCATES, Lewisburg, West Virginia, for Petitioners. Kevin William McArdle, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondents. George Peter Sibley, III, HUNTON ANDREW KURTH, LLP, Richmond, Virginia, for Intervenor. 2 PER CURIAM: The Sierra Club, Center for Biological Diversity, West Virginia Rivers Coalition, West Virginia Highlands Conservancy, Indian Creek Watershed Association, Appalachian Voices, and Chesapeake Climate Action Network (collectively, “Petitioners”) filed the instant motions to stay certain agency actions of the United States Army Corps of Engineers (“Army Corps”). Specifically, Petitioners challenge decisions of two different Army Corps districts: the Huntington, West Virginia District (“Huntington District”) and the Norfolk, Virginia District (“Norfolk District”). Mountain Valley Pipeline, LLC (“MVP”) asked both districts to verify that, pursuant to the Clean Water Act (“CWA”), 33 U.S.C. § 1344 , MVP’s proposed discharge of dredged and/or fill material into waters of the United States in furtherance of construction of a natural gas pipeline (“Pipeline”) in those districts could be governed by the Army Corps’ 2017 nationwide permit (“NWP”), referred to as NWP 12. By operating under the more general NWP 12, MVP would not have to undertake the more arduous and time-consuming individual CWA permitting process tailored to specific projects. Typically, potential permittees who wish to take advantage of an NWP for a potential project typically must submit pre-construction notifications to the Army Corps for a “verification” that the project would comply with the NWP. Issuance and Reissuance of Nationwide Permits, 82 Fed. Reg. 1860 , 1861, 1986 (Jan. 6, 2017). On September 25, 2020, the Huntington District issued a verification, determining that the Pipeline project met the criteria for operation under the NWP 12, excusing the project from the individual permitting process (the “Verification”). On the same day, the 3 Norfolk District did the same, issuing a reinstatement of its prior verification allowing MVP to use NWP 12 in that district (the “Reinstatement”). Petitioners then filed petitions for agency review of the Verification and Reinstatement pursuant to the Natural Gas Act (“NGA”), 15 U.S.C. § 717r(d)(1), and filed the instant motions to stay. Applying a familiar four-part test, we conclude Petitioners are likely to succeed on the merits of their petitions for review, and other equitable factors weigh in favor of granting the motions for stay. As explained more fully below, the Verification was likely issued in contravention of applicable law because the Army Corps impermissibly incorporated into NWP 12 a modified permit condition from the West Virginia Department of Environmental Protection (“WVDEP”). And because the Verification was likely issued in contravention of law, the Reinstatement (which necessarily depends on the validity of the Verification) is likely defective as well. Therefore, we grant Petitioners’ motions for a stay of the Huntington District’s Verification and the Norfolk District’s Reinstatement until such time as we may consider the petitions for review on their merits. We do not, however, believe Petitioners are likely to succeed on the merits of their challenges to the Army Corps’ 2017 issuance of NWP 12 itself because we likely lack jurisdiction to entertain such challenges. I. This is not our first look at an Army Corps verification allowing the Pipeline to use NWP 12. In 2018, we vacated a prior version of the Huntington District’s Verification, 4 finding it to be in contravention of applicable law. See Sierra Club v. United States Army Corps of Eng’rs, 909 F.3d 635 , 639 (4th Cir. 2018). 1 The Pipeline, which is 42 inches in diameter, “proposes to run 304 miles through parts of Virginia and West Virginia, crossing the [Army] Corps’ Pittsburgh, Norfolk, and Huntington Districts.” Sierra Club, 909 F.3d at 639. Because construction of the Pipeline will involve the discharge of fill material into federal waters, the CWA requires MVP to obtain approval from the Army Corps before beginning construction. See 33 U.S.C. § 1344 (a). [T]he Corps can issue individual permits on a case-by-case basis, through a resource-intensive review requiring extensive site-specific research and documentation, promulgation of public notice, opportunity for public comment, consultation with other federal agencies, and a formal analysis justifying the ultimate decision to issue or refuse the permit. Alternatively, interested parties can try to fit their proposed activity within the scope of an existing general permit, in this case NWP 12, which acts as a standing authorization for developers to undertake an entire category of activities deemed to create only minimal environmental impact. Potential permittees must satisfy all terms and conditions of an NWP for a valid authorization to occur. Sierra Club, 909 F.3d at 640 (citations and internal quotation marks omitted) (emphasis in original). In order to utilize NWP 12, MVP is also required to “‘provide the [Army Corps] a certification from the State in which the discharge originates or will originate,’ unless the 1 Of note, in that opinion we suggested “an individual permit will likely be necessary” for the Pipeline project. Sierra Club, 909 F.3d at 655. MVP maintains, however, that it is entitled to use NWP 12 and has not attempted to seek an individual permit. 5 state waives, either explicitly or by inaction, its right to independently certify the project.” Id. (quoting 33 U.S.C. § 1341 (a)(1)); see also 33 C.F.R. §§ 325.2 (b)(1)(ii), § 330.4(c)(1). When “a state’s certification of the general permit imposes additional ‘special conditions,’” the Army Corps “must ‘make these special conditions regional conditions of the NWP for activities which may result in a discharge into waters of the United States in that state,’” except in certain circumstances not present here. Id. (quoting 33 C.F.R. § 330.4 (c)(2)). II. In determining whether to grant a stay of an agency action, this court considers (1) “whether the stay applicant has made a strong showing that he is likely to succeed on the merits”; (2) “whether the applicant will be irreparably injured absent a stay”; (3) “whether issuance of the stay will substantially injure the other parties interested in the proceeding”; and (4) “where the public interest lies.” Nken v. Holder, 556 U.S. 418 , 426 (2009) (internal quotation marks omitted). In considering the likelihood of the merits inquiry, we are mindful that, pursuant to the Administrative Procedures Act (“APA”), we must “hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706 (2)(A); see Sierra Club, 909 F.3d at 643. III. Likelihood of Success on the Merits In these motions, Petitioners make two distinct challenges to the Verification. First, they claim the Verification is unlawful because the Army Corps violated the Endangered Species Act (“ESA”) when it reissued NWP 12 in January 2017; thus, ostensibly because 6 the Verification relies on NWP 12, it must necessarily be arbitrary, capricious, and not in accordance with law. Second, they claim the Verification impermissibly relies on and incorporates modifications to NWP 12 that were made in contravention of applicable law. As explained below, we conclude that Petitioners are not likely to succeed on the merits of the former argument because we likely lack jurisdiction to entertain Petitioners’ challenge on this point. However, we hold that Petitioners are likely to succeed on the merits of the latter argument. A. The Endangered Species Act and NWP 12 Petitioners’ first argument is that, because the Army Corps failed to engage in programmatic consultation with the United States Fish and Wildlife Service (“FWS”) before reissuing NWP 12 in January 2017, that reissuance violated the ESA. As a result, Petitioners assert that NWP 12 is invalid, and because the Army Corps relied on NWP 12 in issuing the Verification, the Verification too is fatally infected. Petitioners have not made a “strong showing” that they are likely to succeed on the merits of this claim because this court likely lacks jurisdiction to entertain it. Nken, 556 U.S. at 426 (internal quotation marks omitted). “Because district courts have general federal question jurisdiction under 28 U.S.C. § 1331 , the normal default rule is that persons seeking review of agency action go first to district court rather than to a court of appeals.” NMS Healthcare of Hagerstown, LLC v. United States Dep’t of Health & Human Servs., 619 F. App’x 225, 226 (4th Cir. 2015) (quoting Nat’l Mining Ass’n v. Sec’y of Labor, 763 F.3d 627 , 632 (6th Cir. 2014)). “Initial review of agency decisions occurs at the appellate 7 level only when a direct-review statute specifically gives the court of appeals subject- matter jurisdiction to directly review agency action.” Id. (quoting Nat’l Mining Ass’n, 763 F.3d at 632) (emphasis supplied). The burden of establishing subject matter jurisdiction rests upon the party asserting it. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 , 377 (1994). In Sierra Club, our jurisdiction to review prior Army Corps verifications derived from the NGA, 15 U.S.C. § 717r(d)(1), which provides: The United States Court of Appeals for the circuit in which a [natural gas] facility . . . is proposed to be constructed, expanded, or operated shall have original and exclusive jurisdiction over any civil action for the review of an order or action of a Federal agency (other than the [Federal Energy Regulatory] Commission) . . . to issue, condition, or deny any permit, license, concurrence, or approval . . . required under Federal law[.] This provision allows for a narrow exception to the general rule that district courts possess jurisdiction to review agency actions in the first instance. Petitioners contend we possess jurisdiction over their ESA argument based on this provision. We disagree. In form, Petitioners purport to seek review only of the Verification and Reinstatement themselves, not NWP 12. See Pet. for Review, Sierra Club v. United States Army Corps of Eng’rs, No. 20–2039 (4th Cir. filed Sept. 28, 2020), ECF. No. 3; Pet. for Review, Sierra Club v. United States Army Corps of Eng’rs, No. 20–2042 (4th Cir. filed Sept. 28, 2020), ECF No. 3. But in substance, Petitioners are actually seeking collateral review of a separate decision -- the Army Corps Secretary’s findings and conclusions in its reissuance of NWP 12, not the Huntington and Norfolk Divisions’ 8 reliance on NWP 12 in issuing the Verification and Reinstatement. In so doing, Petitioners are attempting an end run around the narrow jurisdictional provisions that govern review of permits for natural gas pipeline projects. Crucially, Petitioners do not contend that they cannot pursue a challenge to NWP 12 in the district court. To the contrary, at least two of the Petitioners here -- the Sierra Club and the Center for Biological Diversity -- already brought a similar ESA challenge in the District of Montana. See N. Plains Res. Council v. United States Army Corps of Eng’rs, 460 F. Supp. 3d 1030 , 2020 WL 3638125 (D. Mont. May 11, 2020). Throughout the briefing on the motions to stay, Petitioners steadfastly contend the Army Corps violated the ESA in its reissuance of NWP 12 by failing to engage in formal consultation and failing to “consider the cumulative impacts of NWP-authorized activities on protected species or their critical habitat.” See Pet’rs’ Mot. Stay 7; 2 see also id. at 9 (arguing the Army Corps “violated the ESA in issuing NWP 12”); id. at 9–10 (challenging the Army Corps’ finding that NWP 12 would have “no effect” on certain species pursuant to the ESA); id. at 12 (noting the “problem with relying on project-specific consultation” in an ESA no-effect determination). These challenges are not contemplated in the NGA review provision set forth above. Section 717r(d)(1) is most logically read to allow review of permits issued pursuant to the construction, expansion, or operation of a natural gas facility (i.e., a pipeline) in the circuit 2 Citations to the Motion to Stay, responses, and replies refer to the briefing in Case No. 20–2039. We recognize that many of the same arguments were repeated in the briefing in Case No. 20–2042. 9 court of appeals where that facility will be operated or constructed. But NWP 12 does not authorize any specific NGA project. Rather, it “governs a broad range of activities that can be undertaken anywhere in the country under a wide variety of circumstances.” Sierra Club, Inc. v. Bostick, 787 F.3d 1043 , 1058 (10th Cir. 2015). Petitioners rely on the idea that “an exclusive judicial review provision applies to all issues inhering in the controversy.” Pet’rs’ Reply Br. 3 (quoting Dow AgroSciences LLC v. Nat’l Marine Fisheries Serv., 637 F.3d 259 , 265 (4th Cir. 2011) (internal quotation marks omitted)). But Dow in inapplicable here. In Dow, this court decided that a Biological Opinion (“BiOp”) challenged by the petitioners was a “final agency action for which there is no other adequate remedy in a court” pursuant to the APA, and thus, properly reviewable in the district court. 637 F.3d at 265 (quoting 5 U.S.C. § 704 ). First, as noted, Petitioners do not contend their specific ESA challenges to NWP 12 are unreviewable elsewhere. Second, in determining whether an issue “inher[es] in the controversy,” the type of challenge matters: [W]hen a court of appeals reviews the EPA’s reliance on a BiOp issued by [FWS], the court’s review would not be the same as if the district court were to review the BiOp itself directly under the APA. When a court of appeals reviews the EPA’s reliance on a BiOp, it would determine only whether the EPA’s reliance was arbitrary and capricious. But only by direct judicial review by the district court under the APA could the BiOp’s findings and conclusions themselves be challenged. Id. at 266–67 (last emphasis supplied). We cannot decide whether the Huntington District impermissibly relied on NWP 12 in issuing the Verification without first reaching Petitioners’ challenges to the findings and 10 conclusions underlying NWP 12. And according to Dow, this type of challenge is properly reviewable in the district court -- not before us. Therefore, Petitioners are not likely to succeed on the merits of the ESA challenge to NWP 12 because we likely do not possess jurisdiction to address such a challenge. 3 B. The Huntington Verification Petitioners fare better, however, on the likelihood of success of their second challenge to the Verification and Reinstatement. 1. Pursuant to the CWA, West Virginia imposed several special conditions as part of its Section 401 4 certification of NWP 12 in 2017. Only one is relevant to these motions: 3 We also note that Petitioners have not demonstrated that they will suffer irreparable harm if we decline to address their ESA claim in this venue. In fact, as mentioned, some Petitioners have already brought an ESA challenge to NWP 12 in the District of Montana, and they were successful there, although the Supreme Court limited the scope of the district court’s decision to pertain only to the Keystone XL Pipeline. See N. Plains, 2020 WL 3638125 , at *14 (“NWP 12 is vacated as it relates to the construction of new oil and gas pipelines pending completion of the consultation process and compliance with all environmental statutes and regulations.”), stay issued, 2020 WL 3637662 (U.S. July 6, 2020) (“The district court’s May 11, 2020 order granting partial vacatur and an injunction is stayed, except as it applies to the Keystone XL pipeline[.]”). Interestingly, only after this stay order did Petitioners attempt to bring their ESA claim in this court. 4 A state water quality certification is also referred to as a “Section 401” certification, in reference to Section 401 of the CWA. In relevant part, Section 401 provides: Any applicant for a Federal license or permit to conduct any activity including, but not limited to, the construction or 11 Special Condition A. Originally, and at the time of this court’s prior Sierra Club decision, Special Condition A provided the following: Individual State Water Quality Certification is required for i. Pipelines equal to, or greater than 36 inches in diameter; [or] ii. Pipelines crossing a Section 10 river [subject to certain exceptions]. . . . Sierra Club, 909 F.3d at 640–41. 5 To comply with this condition, MVP applied to the WVDEP for an individual water quality certification. On March 23, 2017, the WVDEP issued a conditional certification. However, the WVDEP later vacated that certification, operation of facilities, which may result in any discharge into the navigable waters, shall provide the licensing or permitting agency a certification from the State in which the discharge originates or will originate . . . . If the State . . . fails or refuses to act on a request for [water quality] certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request, the certification requirements of this subsection shall be waived with respect to such Federal application. No license or permit shall be granted until the certification required by this section has been obtained or has been waived as provided in the preceding sentence. No license or permit shall be granted if certification has been denied by the State[.] 33 U.S.C. § 1341 (a)(1). 5 A “Section 10 river” is a “navigable-in-fact river[] regulated by Section 10 of the Rivers and Harbors Act of 1899.” Sierra Club, 909 F.3d at 639 (citing 33 U.S.C. § 403 ). The Rivers and Harbors Act was “intended to prevent obstructions in the Nation’s waterways.” Wyandotte Transp. Co. v. United States, 389 U.S. 191 , 201 (1967). The Pipeline proposes to run through three Section 10 rivers: the Elk, Gauley, and Greenbrier. See Sierra Club, 909 F.3d at 639. It is undisputed that the Pipeline is greater than 36 inches in diameter. 12 explaining “the information used to issue the Section 401 Certification needs to be further evaluated and possibly enhanced.” Sierra Club, 909 F.3d at 641 (internal quotation marks omitted). On October 17, 2017, we vacated the Pipeline’s Section 401 certification, and remanded to the WVDEP pursuant to 15 U.S.C. § 717r(d)(3). See id. On remand, the WVDEP “purported to waive its requirement that [MVP] obtain an Individual 401 Water Quality Certification.” Id. In Sierra Club, however, we concluded that the WVDEP was required to engage in proper notice and comment procedures before it could waive the Section 401 requirement set forth in Special Condition A. See 909 F.3d at 651–55. Upon our vacatur of the prior Huntington District verification for this reason, the WVDEP -- rather than waive the Section 401 certification -- decided to modify Special Condition A. After a notice and comment procedure (which Petitioners do not challenge), on April 24, 2019, the WVDEP revised Special Condition A as follows: The Secretary of the West Virginia Department of Environmental Protection, in the Secretary’s sole discretion, reserves the right to require Aan individual water quality certification is required for any of the following facilities or impacts: i. Pipelines equal to or greater than 36 inches in diameter; [or] ii. Pipelines crossing a Section 10 river [subject to certain exceptions][.] Pet’rs’ Mot. Stay, Ex. 8 at 10–11 (modifications supplied). Therefore, according to this WVDEP amendment, an individual water quality certification is only required for pipelines over 36 inches in diameter (like the Pipeline) if the WVDEP Secretary believes it should 13 be. And here, the Secretary issued a general Section 401 certification without an individual water quality certification. See id., Ex. 8 at 1–2; see also id., Ex. 7 at 26 (“On 27 February 2020, the WVDEP provided a letter in accordance with Special Condition A of the general [water quality certification] for NWP 12 stating that the WVDEP will not require an individual [water quality certification] for the MVP.”). The WVDEP then requested the Army Corps to “incorporate this modification into its NWPs for West Virginia, in accordance with 40 C.F.R. § 121.2 (b).” Pet’rs’ Mot. Stay, Ex. 8 at 1. On January 15, 2020, the Division Engineer for the Corps’ Great Lakes and Ohio River Division purported to grant the WVDEP’s request to modify Special Condition A and “incorporated [it] as [a] regional condition[]” to NWP 12. Id., Ex. 12 at 1. Thereafter, on September 25, 2020, the Huntington District issued the Verification, memorializing the modification of Special Condition A into NWP 12. Id., Ex. 7 at 26 (noting the WVDEP’s modified condition). 6 6 The Army Corps and MVP contend that we lack jurisdiction over this challenge as well. We disagree. The precise Special Condition A challenges to the Verification and Reinstatement fit neatly within the NGA’s jurisdictional provision, 15 U.S.C. § 717r(d)(1). The Verification and Reinstatement are both actions of federal agencies; they approve stream crossings in Virginia and West Virginia, as required by the CWA; and they are each decisions approving permits in furtherance of construction of a natural gas pipeline facility. In an attempt to eschew the NGA’s judicial review provisions, the Army Corps maintains “[t]he Corps’ acceptance of West Virginia’s revised conditions is not, as Petitioners assume, equivalent to the Corps’ substitution of its own condition for the State’s condition, which was the issue in Sierra Club.” Resp’ts’ Resp. Br. 19 (emphasis omitted); see also id. at 16 (characterizing Petitioners’ argument as a “challenge to the Corps’ acceptance of West Virginia’s revised Section 401 certification” (emphasis supplied)). But these characterizations are inaccurate. Petitioners seek review not merely of the Army Corps’ “acceptance” of WVDEP’s modified Special Condition A; rather, they contend the Army Corps’ reliance on and incorporation of the modified condition into NWP 12 by way of the 14  2. Petitioners contend that the issuance of the Verification with the WVDEP’s modified Special Condition A was unlawful for two reasons. First, Petitioners assert that the Army Corps Division Engineer lacks the authority to modify NWP 12, yet it did so here by incorporating the revised Special Condition A into NWP 12. Second, Petitioners argue that even if the Division Engineer did possess such authority, it abused its discretion in allowing the modification because the modified Special Condition A is less stringent (and thus, less protective of West Virginia water crossings) than the original version of Special Condition A. We conclude that Petitioners have made a strong showing they are likely to succeed on the merits of the argument that the Division Engineer lacks authority to incorporate modified Special Condition A into NWP 12. a. A series of interweaving statutes and regulations inform our decision. First, “[a] prospective permittee must satisfy all terms and conditions of an NWP for a valid authorization to occur.” 33 C.F.R. § 330.4 (a) (emphasis supplied). Second, the CWA authorizes the Secretary of the Army, acting through the Army Corps’ “Chief of Engineers,” to issue, revoke, or modify NWPs. 33 U.S.C. § 1344 (d)–(e). Third, a Section Verification was improper under the CWA and its regulations. This is a similar challenge to the one we addressed in Sierra Club. See 909 F.3d at 651–53 (assuming jurisdiction over “Petitioners’ argument that the Verification was not in accordance with law” because West Virginia could not waive Special Condition A without proper procedure, once that condition had been incorporated into NWP 12 (alterations and internal quotation marks omitted)). 15 401 certification -- or a waiver thereof -- is “required” from a state “prior to the issuance or reissuance of NWPs authorizing [discharge] activities.” 33 C.F.R. § 330.4 (c)(1). And if a state chooses to add a special condition to the use of an NWP within its borders, it may do so, and such special condition “shall become” a condition of the NWP. 33 U.S.C. § 1341 (d). b. Turning to the facts of the case at hand in relation to this permitting scheme, pursuant to its authority under Section 401 of the CWA, the WVDEP held public notice and comment and adopted the initial version of Special Condition A to provide that all pipelines with a diameter of 36 inches or more or those crossing certain Section 10 rivers must have an individual water quality certification. This special condition automatically became part of NWP 12 in West Virginia in 2017. See 33 U.S.C. § 1341 (d). Then, in ensuing litigation over the Pipeline, the WVDEP attempted to walk back this special condition, purporting to waive Section 401 certification altogether. See Sierra Club, 909 F.3d at 652–53. When this court concluded the WVDEP did not effectively waive Special Condition A pursuant to CWA statutes and regulations, the WVDEP modified Special Condition A such that the Secretary of the WVDEP can now decide on a case-by-case basis whether to require an individual water quality certification for pipelines over 36 inches in diameter and/or those crossing Section 10 rivers. The Verification incorporated the modified Special Condition A into the requirements for NWP 12. 16  c. i. Petitioners are likely to succeed on the merits of their challenge to the Army Corps’ incorporation of the modified Special Condition A because neither the Army Corps nor MVP has provided regulatory or statutory authority for the actions the Army Corps undertook in this case. The CWA is clear that Special Condition A (in its original form) became part of NWP 12 in West Virginia, and we made clear in Sierra Club that the WVDEP has not effectively waived this requirement. See 909 F.3d at 653. The CWA is also clear that only a Chief Engineer can issue, modify, or revoke an NWP. And here, it is undisputed that the Chief Engineer did not do so. It is also undisputed that, at this time, the WVDEP has yet to issue an individual water quality certification for the Pipeline. ii. The Army Corps and MVP contend that in some circumstances, a division engineer may add regional conditions to an NWP. They rely on the following regulation: If, prior to the issuance or reissuance of such NWPs, a state issues a 401 water quality certification which includes special conditions the division engineer will make these special conditions regional conditions of the NWP for activities which may result in a discharge into waters of the United States in that state, unless he determines that such conditions do not comply with the provisions of 33 C.F.R. 325.4. 33 C.F.R. § 330.4 (c)(2) (emphasis supplied). However, the Army Corps and MVP ignore an important distinction between the effect of a state’s adoption of a special condition before the issuance of an NWP, as opposed to a state’s attempt to modify or issue a special condition subsequent to the issuance of an NWP. In fact, MVP conveniently omits this 17 part of the regulation from its response brief. See Intervenor’s Resp. Br. 16. By the plain language of this regulation, the division engineer will make special conditions issued prior to the NWP permitting process regional conditions of the NWP, but the regulation plainly does not allow a division engineer to do so where a state has modified a special condition after the issuance of NWP 12. iii. Finally, we turn to regulations governing the modification of a state’s special condition after the issuance of an NWP. After modifying Special Condition A, the WVDEP asked the Army Corps to “incorporate this modification into its NWPs for West Virginia, in accordance with 40 C.F.R. § 121.2 (b).” Pet’rs’ Mot. Stay, Ex. 8 at 1 (emphasis supplied); see id., Ex. 7 at 26 (“[T]he WVDEP modified its general Section 401 [certification] for the 2017 NWPs in accordance with 40 CFR § 121.2 (b).”). And the division engineer purported to grant WVDEP’s request to modify Special Condition A. See id., Ex. 12 at 1. The regulation cited by the WVDEP, however, does not allow for the modification in this case. At the time the WVDEP modified Special Condition A, in April 2019, section 121.2(b) provided, “The certifying agency [i.e., the state] may modify the [Section 401] certification in such manner as may be agreed upon by the certifying agency, the licensing or permitting agency [i.e., the Corps], and the Regional Administrator.” 40 C.F.R. § 121.2 (b) (effective until Sept. 10, 2020). But on September 11, 2020, the Environmental Protection Agency (“EPA”) amended this regulation to remove any mention of modification of conditions. Thus, now it merely states, “Certification is required for any 18 license or permit that authorizes an activity that may result in a discharge.” Id. (effective Sept. 11, 2020). This change was the culmination of the EPA’s solicitation of comments on whether and to what extent States . . . should be able to modify a previously issued certification, either before or after the reasonable period of time expires, before or after the license or permit is issued, or to correct an aspect of a certification or its conditions if remanded or found unlawful by a federal or State court or administrative body. Clean Water Act Section 401 Certification Rule, 85 Fed. Reg. 42210 , 42279 (July 13, 2020). The agency determined, “[S]ection 401 does not provide authority for a certifying authority to unilaterally modify a certification, either through certification conditions that purport to authorize the certifying authority to reopen the certification in the future or through any other mechanism.” Id. It continued, “[O]nce a certification is issued, the conditions therein are incorporated into . . . a federal license or permit[] for implementation and enforcement. Allowing certifications to be modified after issuance could create significant confusion and regulatory uncertainty within those federal license and permit programs.” Id. Thus, the EPA concluded, “[S]ection 401 does not provide certifying authorities with the authority to modify certifications after they are issued.” Id. at 42280 (emphasis supplied). In rendering this decision, the EPA indicated that it was clarifying a longstanding principle, rather than breaking new ground. See 85 Fed. Reg. at 42236 (“This final rule modernizes and clarifies the EPA’s regulations and will help States, Tribes, federal agencies, and project proponents know what is required and what to expect during a section 19 401 certification process, thereby reducing regulatory uncertainty.”). It noted that “[a]s a general matter, administrative agencies possess the inherent authority to reconsider prior decisions”; however, “section 401 provides express statutory language . . . that displaces the general principle and thus Congress has precluded the certifying authority from reconsidering or modifying a certification.” 85 Fed. Reg. at 42280 (emphases supplied). This “express statutory language,” upon which the EPA relies, includes CWA’s provisions “specifying the time period in which a certifying authority must act on a certification request or waive its right to act,” see 33 U.S.C. § 1341 (a)(1), and “requiring certification conditions to be incorporated into a separate federal permit,” see id. § 1341(d). Id. This clarification weighs heavily in favor of Petitioners on the likelihood of success on their Special Condition A challenge. Indeed, the WVDEP and the Corps rely on this regulation for the state’s authority to amend Special Condition A -- and, accordingly, the Corps to adopt it as part of NWP. See, e.g., Resp’ts’ Resp. Br., Ex. F at 7 (“Pursuant to 40 CFR § 121.2 (b), the certifying agency has the authority to modify a [water quality certification].”); see also id. at 8 (“EPA regulations provide for modification of state certifications ‘as agreed upon’ by the state, the permitting agency, and EPA” (quoting 40 CFR 121.2(b)); id. at 11 (“Under 40 CFR 121.2(b), the state has authority to make subsequent modifications [to the Section 401 certificate].”). But by this clarification from the EPA, the WVDEP did not (and does not) possess such authority. 7 7 To be clear, for purposes of these motions, we do not pass on the legitimacy of this regulation, as no party has challenged the EPA’s promulgation of it. Nor do we believe 20  For these reasons, we conclude the Verification was likely issued in contravention of applicable law because WVDEP likely did not possess the authority to modify Special Condition A in April of 2019, and the division engineer likely did not possess authority to rely on or incorporate this modification into NWP 12. C. The Norfolk Reinstatement Whether Petitioners are likely to succeed on the merits of the Norfolk Reinstatement rises and falls on the legitimacy of the Huntington Verification. NWP 12 contains a note (“Note 2”), which states, “Utility line activities must comply with 33 C.F.R. 330.6(d).” Issuance and Reissuance of Nationwide Permits, 82 Fed. Reg. 1860 , 1986 (Jan. 6, 2017). In turn, 33 C.F.R. § 330.6 (d) states, “[P]ortions of a larger project may proceed under the authority of the NWPs while the [division engineer] evaluates an individual permit application for other portions of the same project, but only if the portions of the project qualifying for NWP authorization would have independent utility and are able to function or meet their purpose independent of the total project.” (emphasis supplied). The Army Corps has explained that, under Note 2, “[i]f one or more crossings of waters of the United States for a proposed utility line do not qualify for authorization by NWP, then the utility line would require an individual permit because of 33 C.F.R. the change in regulation evinces anything but the EPA’s clarification of how state modifications should have operated all along. 21 330.6(d).” 82 Fed. Reg. at 1888. It further stated that Note 2’s purpose was “to ensure that utility lines with one or more crossings that do not qualify for NWP authorization are evaluated under the individual permit process.” Id. Therefore, the Army Corps contemplated that if one pipeline crossing does not qualify for NWP, the entire pipeline would be subject to the individual permitting process. See Sierra Club v. United States Army Corps of Eng’rs, 905 F.3d 285 (4th Cir. Oct. 2, 2018) (per curiam) (order vacating prior Huntington verification, explaining that if any part of a project requires an individual permit, then “the NWP does not apply and all portions of the project must be evaluated as part of the individual permit process” (internal quotation marks omitted)). Therefore, because Petitioners’ challenge to the Huntington Verification is likely to succeed on the merits, its challenge to the Norfolk Reinstatement is likely to succeed on the merits as well. IV. Remaining Stay Factors Finally, we conclude the balance of the stay factors -- whether Petitioners will be irreparably injured absent a stay; whether issuance of the stay will substantially injure the other parties interested in the proceeding; and where the public interest lies -- weighs in favor of granting the motions for stay. See Nken v. Holder, 556 U.S. 418 , 426 (2009). Absent a stay, MVP intends to begin crossing the streams and rivers at issue. MVP submits that it “has spent billions to complete the vast majority of project tasks, including the installation of pipe along nearly 260 miles” and delay until spring 2021 would cost MVP around $140 million in unrecoverable costs. Intervenor’s Resp. Br. 23. 22  But “[e]nvironmental injury, by its nature, can seldom be adequately remedied by money damages and is often permanent or at least of long duration, i.e., irreparable.” Amoco Prod. Co. v. Vill. of Gambell, 480 U.S. 531 , 545 (1987). And “[t]he dredging . . . that may occur while the Court decides the case cannot be undone and, if the end result is that the Corps should not have issued [the permit], irreparable harm will have occurred in the meantime.” Sierra Club v. United States Army Corps of Eng’rs, 399 F. Supp. 2d 1335 , 1348 (M.D. Fla. 2005), vacated on other grounds, 464 F. Supp. 2d 1171 , 1228 (M.D. Fla. 2006). In addition, while the Army Corps and MVP both contend natural gas projects serve the public interest, the NGA yields to the CWA. 15 U.S.C. § 717b(d) (explaining “nothing in this chapter affects the rights of States under [the CWA]”). Therefore, the balance of the four stay factors weigh in favor of Petitioners. V. For these reasons, we grant Petitioners’ motions to stay. 20–2039 - MOTION GRANTED 20–2042 - MOTION GRANTED 23

2020-12-01 21:00:23.403497+00

http://www.ca4.uscourts.gov/Opinions/191484.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-1484 MIRIAM VERONICA ALVAREZ-PINEDA, Petitioner, v. WILLIAM P. BARR, Attorney General, Respondent. On Petition for Review of an Order of the Board of Immigration Appeals. Submitted: November 2, 2020 Decided: December 1, 2020 Before THACKER and QUATTLEBAUM, Circuit Judges, and Stephanie A. GALLAGHER, United States District Judge for the District of Maryland, sitting by designation. Petition for review granted and remand awarded by unpublished opinion. Judge Gallagher wrote the opinion, in which Judge Thacker and Judge Quattlebaum joined. Jay S. Marks, THE LAW OFFICES OF JAY S. MARKS, LLC, Silver Spring, Maryland, for Petitioner. Joseph H. Hunt, Assistant Attorney General, Anthony P. Nicastro, Assistant Director, Patricia E. Bruckner, Civil Division, Office of Immigration Litigation, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent. Unpublished opinions are not binding precedent in this circuit. GALLAGHER, District Judge: I. Miriam Veronica Alvarez-Pineda, Petitioner, is a native and citizen of Guatemala who entered the United States without inspection on or around July 24, 2015, with her daughter, Diana Rachel Carrera-Alvarez. A.R. 299, 310. After the Department of Homeland Security (“DHS”) initiated removal proceedings, Ms. Alvarez-Pineda filed an application for asylum, withholding of removal, and protection under the Convention against Torture (“CAT”). A.R. 181–93, 197–208. Ms. Alvarez-Pineda wrote in her application that although her daughter’s father, Cesar Carrera (“Carrera”), now lived in Texas, she feared his family in Guatemala would attempt to take Diana away from her if she returned to that country. A.R. 201. In an attached affidavit, Petitioner further stated that if she returned to Guatemala, she feared that she would suffer extortion, physical harm, rape, and murder from “gang members and delinquents” who “target single-mothers that lack traditional patriarchs.” A.R. 103. Ms. Alvarez-Pineda wrote that she left Guatemala because she had feared that Carrera’s family would kidnap Diana, id., and that now she feared that gangs in Guatemala could kidnap Diana and make ransom demands if they returned. A.R. 106. In the brief in support of her asylum application, Ms. Alvarez-Pineda identified herself as a member of the proposed particular social group comprised of “single mothers 2 in Guatemala.” 1 A.R. 281 , 284–90. She said she feared returning to Guatemala because, as a “single mother” without “traditional patriarchs,” she “will be easy prey for the criminal groups,” A.R. 281, especially given her assertion that the country conditions reports in the record demonstrated the Guatemalan government’s “complete lack of ability to control [sic] against violence against women.” A.R. 282–83. Ms. Alvarez-Pineda specifically identified “the threat of death and sexual violence” as the future persecution she feared. A.R. 287. At a merits hearing on January 9, 2018, Ms. Alvarez-Pineda testified that, in July 2015, she separated from Carrera and sought to move out of the house she and Diana shared with his family. A.R. 90-91. The family became upset and said that Diana would have to stay in the home if Ms. Alvarez-Pineda left. A.R. 91. She now feared returning to Guatemala because she was unsure how Carrera’s family would react, and she also believed that she would be vulnerable as a single mother to “delinquents” whom she identified as “bums on the street” and “drug addicts” who extorted money and committed theft. A.R. 92–95. At the same hearing, the Immigration Judge asked Ms. Alvarez-Pineda’s counsel to “clarify” the basis of her asylum claim, because her declaration “seem[ed] to differ 1 In order to obtain asylum, an applicant must establish that he or she has suffered persecution or has a well-founded fear of persecution on account of race, religion, nationality, political opinion and/or a particular social group. If claiming membership in a “particular social group,” the BIA requires asylum applicants to clearly delineate the specific group they claim on the record before the immigration judge. Matter of W-Y-C- & H-O-B, 27 I & N Dec. 189, 191 (BIA 2018). 3 significantly from the claim that [was] asserted on the [asylum application].” A.R. 75. Counsel confirmed that the updated particular social group was “single mothers in Guatemala that lack traditional family structure.” A.R. 76. Counsel said that she was asserting a fear of future persecution as a member of this proposed group. Id. In an oral decision, the Immigration Judge denied the application for asylum, withholding of removal, and protection under the CAT, and ordered Petitioners removed to Guatemala. A.R. 47-56. The Immigration Judge found that Ms. Alvarez-Pineda’s proposed particular social group of “single mothers in Guatemala that lack traditional family structure” was not cognizable under the Immigration and Nationality Act (“INA”), because it was not composed of members who share a common immutable characteristic, and it was not defined with particularity. A.R. 53. The Immigration Judge further found that, even if Ms. Alvarez-Pineda’s proposed group were cognizable under the INA, she did not show eligibility for asylum because, to the extent that she feared harm from Carrera’s family that would rise to the level of persecution, that claim was foreclosed by Fourth Circuit law holding that custody disputes are personal conflicts that do not constitute persecution. Id. Thus, the Immigration Judge held that any harm Ms. Alvarez-Pineda feared from Carrera’s family would not be on account of her membership in the particular social group she proposed. Id. Ms. Alvarez-Pineda appealed the Immigration Judge’s decision to the Board of Immigration Appeals (“BIA”). A.R. 29-33. On April 15, 2019, the BIA dismissed her appeal. A.R. 3-4. The BIA stated that it “agree[d] with the Immigration Judge, for the reasons stated in the decision, that [Ms. Alvarez-Pineda] has not established her eligibility 4 for the relief sought.” A.R. 3 (citing the Immigration Judge’s decision at 4-8 (AR 50- 54)). The BIA continued that “[Ms. Alvarez-Pineda] testified that her former domestic partner physically abused her on several occasions in Guatemala,” before concluding that she failed to show, “for example, that victims of domestic violence are perceived as a distinct group within society, rather than each as a victim of a particular abuser in highly individualized circumstances.” A.R. 3 (internal citation omitted). Ms. Alvarez-Pineda timely filed this petition for review. II. “When, as here, the BIA affirms the IJ’s decision with an opinion of its own, we review both decisions.” Salgado-Sosa v. Sessions, 882 F.3d 451 , 456 (4th Cir. 2018). We review factual findings for substantial evidence, and will reverse them only if “any reasonable adjudicator would be compelled to conclude to the contrary.” Cabrera Vasquez v. Barr, 919 F.3d 218 , 222 (4th Cir. 2019) (internal quotation marks omitted); see also 8 U.S.C. § 1252 (b)(4)(B). Legal determinations are reviewed de novo. Salgado-Sosa, 882 F.3d at 456. Specifically, whether a proposed group qualifies as a particular social group pursuant to 8 U.S.C. § 1231 (b)(3)(A) is a question of law, which this Court reviews de novo. Martinez v. Holder, 740 F.3d 902 , 909 (4th Cir. 2014), as revised (Jan. 27, 2014). Because “[n]either the relevant statute nor its associated regulations specifically define the term ‘particular social group,’” the Court affords Chevron deference to the Board’s reasonable interpretation of the term. Lizama v. Holder, 629 F.3d 440 , 446–47 (4th Cir. 2011); see also Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). In the end, the agency’s determination whether to grant relief is conclusive unless 5 “manifestly contrary to law and an abuse of discretion.” Cortez-Mendez v. Whitaker, 912 F.3d 205 , 208 (4th Cir. 2019) (internal quotation marks omitted); see also 8 U.S.C. § 1252 (b)(4)(D). III. The core of this dispute is whether the BIA’s repeated reference to a particular social group, other than the one put forward by Ms. Alvarez-Pineda, constitutes reversible error. To that end, it is well established in this circuit that the BIA commits “legal error” when its “removal order reject[s] a group different from that which the [petitioner] proposed.” Crespin-Valladares v. Holder, 632 F.3d 117 , 125 (4th Cir. 2011); see also Alvarez Lagos v. Barr, 927 F.3d 236 , 253 (4th Cir. 2019) (remanding to the BIA where the Immigration Judge “mischaracterized the group that [the petitioner] had identified”). Here, Ms. Alvarez-Pineda and her attorneys asserted that she was a member of the particular social group “single mothers in Guatemala that lack traditional family [patriarchal] structure.” A.R. 76, 103. That is the particular social group that the Immigration Judge considered as well. A.R. 53. The BIA’s opinion, on the other hand, referenced a different particular social group, “victims of domestic violence.” A.R. 3. Specifically, the BIA concluded that “[Petitioner] has not shown, for example, that victims of domestic violence are perceived as a distinct group within society, ‘rather than each as a victim of a particular abuser in highly individualized circumstances.’” Id. (citing Matter of A-B-, 27 I & N Dec. 316, 336 (A.G. 2018)). The BIA also recounted that Petitioner “testified that her former domestic partner physically abused her on several occasions in Guatemala.” A.R. 3 (citing I.J. 2–4, Tr. at 24–38). 6  The BIA’s characterization of Ms. Alvarez-Pineda’s proposed particular social group, as well as its recounting of her supposed testimony in support of this group and her place in it, is not accurate. Nothing in the record supports the BIA’s finding that Petitioner was basing her asylum claim on allegations that Carrera or his family had abused her. Indeed, at the hearing before the Immigration Judge, the parties explicitly agreed that Petitioner was no longer making a claim based on past persecution, and Petitioner clearly stated that she had “no fear whatsoever” of Carrera or his family. Id. at 84; see also id. at 83 (Petitioner testifying she had “no problem” with Carrera “before he left Guatemala”); id. at 104 (“Until the time that he entered the United States in 2014, I did not have any problems or threats from [Carrera] [or] his family.”). After Carrera was in the United States, he stopped supporting Petitioner and her daughter, but there is no mention of violence or fear of violence from him or his family. Petitioner’s initial asylum application did include some information regarding domestic problems in Ms. Alvarez-Pineda’s relationship with Carrera, but this information does not provide sufficient cover for the BIA’s misplaced rejection of a domestic violence social group far different from the one she asserted. The asylum application alludes to Carrera “attempt[ing] to exert his will over [her]” and “forc[ing] her to stay in his family home” and “attempt[ing]” to take Diana away from her. A.R. 201. But neither the application nor the rest of the record includes any mention of the alleged physical abuse committed by Carrera that the BIA references in its decision. The only mention of violence in Ms. Alvarez-Pineda’s brief is the “threat of death and sexual violence” that stems from her fear of delinquents on the street who know that she is a single mother, not from Carrera 7 or anyone in his family. Id. at 287. All of this suggests that the BIA violated Crespin when it rejected the particular social group of “victims of domestic violence”—and referenced testimony regarding physical violence by Carrera that does not exist in the record—as opposed to considering Ms. Alvarez-Pineda’s explicitly proposed group “single mothers in Guatemala that lack traditional family [patriarchal] structure.” The Government does not dispute the general rule set forth in Crespin, nor does it attempt to justify the BIA’s erroneous statements regarding a domestic violence social group based on the contents of the record. Instead, it relies on the BIA’s general proclamation that it “agree[d] with the Immigration Judge, for the reasons stated in the [IJ’s] decision that [Petitioner] has not established her eligibility for the relief sought.” Gov’t’s Br. 14 (quoting A.R. 3). In this passage, the BIA cited to pages 4 through 8 of the IJ’s opinion, which contains the Immigration Judge’s rejection of the appropriate “single mothers in Guatemala that lack traditional family [patriarchal] structure” social group. The Government thus argues that the fact that the BIA referred to the Immigration Judge’s decision addressing the appropriate particular social group—and “agree[d]” with it—is sufficient to find that the BIA rejected the correct particular social group and thus complied with Crespin. However, the BIA did not explicitly adopt or solely rely on the IJ’s opinion in the way that the Government suggests. On the contrary, the BIA included very specific language—regarding a domestic violence social group not proposed here as well as nonexistent testimony about physical domestic violence—that suggests the BIA misunderstood the Immigration Judge’s decision specifically and the record generally. The 8 fourth paragraph of the BIA’s decision, already referenced in part above, is instructive in demonstrating how these erroneous domestic violence references undermine the language agreeing with the Immigration Judge’s reasoning: We agree with the Immigration Judge that [Petitioner] did not demonstrate membership in a cognizable particular social group. Matter of A-B-, 27 I & N Dec. 316 (A.G. 2018) (overruling Matter of A-R-C-G-, 26 I & N Dec. 388 (BIA 2014)). [Petitioner] has not shown, for example, that victims of domestic violence are perceived as a distinct group within society, “rather than each as a victim of a particular abuser in highly individualized circumstances.” Matter of A-B-, 27 I & N Dec. at 336. We agree with the Immigration Judge that [Petitioner] did not meet her burden of demonstrating a well- founded fear or a likelihood of persecution on account of any protected ground (IJ at 4-8). See 8 C.F.R. §§ 1208.13 , 1208.16(b). A.R. 3 (emphasis added). The BIA approvingly cites the Immigration Judge’s assessment of Ms. Alvarez-Pineda’s proposed social group, but then follows with a supporting example that fundamentally misstates the very social group the Immigration Judge had (correctly) considered. Such confused language cannot be afforded the benefit of the doubt when determining whether the BIA considered and rejected the correct particular social group. The Government argues that if the information about domestic violence were excised from these passages, the BIA decision would be sufficient. See Casalena v. INS, 984 F.2d 105 , 107 (4th Cir. 1993) (“[T]he [BIA] need not ‘write an exegesis’ on every argument presented[.]”). While this may very well be true, the BIA still must get its facts right. The specific and incorrect references in the BIA’s decision illustrate that the BIA misunderstood what happened in the proceedings below. 9  IV. This case ultimately falls squarely within the confines of Crespin, necessitating remand for explicit consideration of Petitioner’s proposed social group “single mothers in Guatemala who lack traditional family [patriarchal] structure.” Although the BIA need not write an “exegesis” on the issues presented to it, it must at the very least first understand and address those presented issues. Pursuant to the foregoing, we grant the petition for review and remand for such other and further proceedings as may be appropriate. PETITION FOR REVIEW GRANTED AND REMAND AWARDED 10

2020-12-01 21:00:24.749852+00

http://www.ca4.uscourts.gov/Opinions/196774.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-6774 JASON KREMBEL, Executor of the Estate of Michael L. Krembel, Plaintiff - Appellant, v. UNITED STATES OF AMERICA, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. Louise W. Flanagan, District Judge. (5:16-ct-03018-FL) Argued: October 28, 2020 Decided: December 1, 2020 Before KING, WYNN, and THACKER, Circuit Judges. Affirmed by unpublished opinion. Judge Thacker wrote the opinion, in which Judge King joined. Judge Wynn wrote a dissenting opinion. ARGUED: Bruce W. Berger, KNOTT & BOYLE, LLP, Raleigh, North Carolina; James B. Craven, III, Durham, North Carolina, for Appellant. Rudy E. Renfer, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee. ON BRIEF: Robert J. Higdon, Jr., United States Attorney, Joshua B. Royster, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee. Unpublished opinions are not binding precedent in this circuit. THACKER, Circuit Judge: Jason Krembel (“Appellant”), representing the estate of Michael L. Krembel (“Krembel”), appeals the district court’s grant of summary judgment on his Federal Tort Claims Act (“FTCA”) claim. Appellant contends that the Bureau of Prisons (“BOP”) was negligent because Krembel did not receive timely, necessary surgery while incarcerated in the Federal Correctional Complex at Butner (“FCC Butner”). We conclude an independent contractor -- not the BOP -- was responsible for scheduling Krembel’s surgery pursuant to a contract with FCC Butner. Therefore, we affirm the judgment of the district court that the United States is not liable for Krembel’s injuries. However, we conclude that rather than granting summary judgment, the district court should have dismissed the suit for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). I. A. Krembel’s Care During Imprisonment The BOP transferred Krembel from the Federal Correctional Institution at Fort Dix, New Jersey to FCC Butner after he was diagnosed with squamous cell carcinoma of his scalp on June 6, 2013. Inmates at FCC Butner receive specialty medical care pursuant to a contract between FCC Butner and the University of Massachusetts Medical School 2 (“UMass”). 1 On July 8, 2013, Krembel was examined by Dr. Stanley Katz, an independent contractor, 2 who “strongly recommend[ed]” Krembel receive Mohs micrographic surgery “as soon as possible.” J.A. 214. 3 By precisely targeting small areas of cancerous skin, Mohs surgery does minimal damage to surrounding healthy tissue and prevents more invasive future surgeries. The surgery could not be conducted, however, if the carcinoma was permitted to spread beyond a certain threshold. It is clear Dr. Katz assumed that the surgery could be done quickly because he noted Krembel “[would] return for follow up in approximately one month for evaluation, assuming the Mohs surgery is done.” Id. Dr. Katz discussed his recommendation with Krembel’s family physician, who concurred with the suggestion. Two days after his examination, on July 10, 2013, the BOP approved a surgical consultation for Krembel. Despite Dr. Katz’s recommendation and the BOP’s prompt approval, Krembel did not see a consulting surgeon until three months later, on October 15, 2013. The consulting surgeon, who was also an independent contractor, 4 agreed that the surgery had “the highest probability of local tumor control.” J.A. 218. Of note, the consulting surgeon did not indicate that the carcinoma had spread so much that the surgery could not be conducted at 1 UMass provides various medical care services, including administrative duties such as scheduling offsite appointments. 2 Dr. Katz provided services as a contract physician pursuant to the contract between FCC Butner and UMass. 3 Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this appeal. 4 The consulting surgeon also provided services as a contract physician pursuant to the contract between FCC Butner and UMass. 3 that point. The BOP was provided with the consulting surgeon’s notes, and the BOP approved the surgery the same day. Nonetheless, Krembel was not seen again until nearly two months later, on December 2, 2013, two days after he expressed concern to a BOP clinical director. By that point, the cancer on Krembel’s head had spread so much that he was no longer a candidate for Mohs surgery. As a result, Krembel underwent a series of more invasive surgeries and radiation treatment which ultimately left him with complications including physical deficiencies and disfigurement. B. Relationship Between the BOP and UMass Pursuant to the contract between FCC Butner and UMass, UMass provides physicians and other non-medical staff to deliver a variety of medical services to inmates. The BOP has the authority to approve or deny referrals for treatment recommended by UMass contracting physicians, but, significantly, it is undisputed that neither FCC Butner nor the BOP exercise day-to-day control over the medical judgment of the UMass contractors. Likewise, the BOP does not exercise control over UMass scheduling of offsite medical appointments. FCC Butner asserts that it does “not have the time, resources, or available staff, to effectively undertake the responsibilities currently provided by UMass and the contract onsite scheduling coordinators.” J.A. 149. Further, “the onsite scheduling coordinator is compensated by UMass.” Id. at 146. In order for an inmate to receive specialty treatment at an offsite facility, BOP employees enter a consultation request into the BOP electronic medical records system. The consultation request “is then forwarded to a BOP employee 4 who is responsible for ensuring that the request is reviewed by the institution’s Utilization Review Committee (“URC”).” Id. “Once the URC approves a consultation request, the request is then forwarded to the UMass contract onsite scheduling coordinator to schedule the appointment with the specialty provider.” Id. at 147. Pursuant to the contract, “UMass selects [the] onsite scheduling coordinator who is responsible for the scheduling of all offsite community medical appointments.” Id. at 146. UMass is also responsible for cancellations and rescheduling offsite specialty appointments. C. Procedural History Krembel filed a negligence action pursuant to the FTCA, asserting that the BOP negligently delayed his treatment. 5 The Government filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The Government argued that Krembel’s claims were barred by the independent contractor exception to the FTCA. Concluding the record should be more fully developed, the district court denied the motion to dismiss. Discovery ensued. The contract between FCC Butner and UMass came to light during discovery. Because the contract identified UMass as the party solely responsible for scheduling offsite appointments, the Government filed a motion for summary judgment, renewing its independent contractor exception argument. Relying on the newly discovered contract, the district court granted the motion for summary judgment. The district court concluded that 5 Krembel died during the pendency of this appeal, and Appellant took over the case. 5 UMass was responsible for any delays in Krembel’s treatment. Therefore, the district court held it did not have subject matter jurisdiction because the independent contractor exception to the FTCA applied. II. Determining the appropriate standard of review requires analysis of the procedural disposition of the case. The district court erred when it simultaneously concluded that it lacked jurisdiction to hear the claim and granted the Government’s motion for summary judgment. See Williams v. United States, 50 F.3d 299 , 304 (4th Cir. 1995). If the independent contractor or discretionary function exceptions apply to an FTCA claim, then the presiding court lacks subject matter jurisdiction to hear the claim. See Williams, 50 F.3d at 304. Thus, in Williams, we “observe[d] that rather than granting summary judgment pursuant to Rule 56(c), the district court should have dismissed the suit for want of jurisdiction under Rule 12(b)(1) if the United States [was] not liable for Williams’ injury” pursuant to FTCA exceptions. Id. The distinction has “procedural ramifications” that are “more than academic.” Id. “[D]ismissal under Rule 12(b)(1) has two consequences: one, the court may consider the evidence beyond the scope of the pleadings to resolve factual disputes concerning jurisdiction; and two, dismissal for jurisdictional defects has no res judicata effect.” Id. “If, therefore, [UMass] is an independent contractor,” and is the party responsible for the alleged breach, “the United States has not waived its sovereign immunity; accordingly the case should be dismissed for want of jurisdiction under Rule 12(b)(1).” Williams, 50 F.3d at 304. The same principle applies regarding the discretionary function. 6 See id. at 305. In Williams, we concluded that the independent contractor and discretionary function exceptions both applied and, thus, affirmed and modified the district court’s order to a Rule 12(b)(1) dismissal. See id. at 311. Here, because the district court held it lacked jurisdiction pursuant to the FTCA independent contractor exception, we review the decision pursuant to a Rule 12(b)(1) standard. The standard of review for a Rule 12(b)(1) dismissal is de novo. See Robb v. United States, 80 F.3d 884 , 887 (4th Cir. 1996). III. A. By passing the FTCA, Congress waived the United States’ sovereign immunity under limited circumstances where injury is “caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment.” 28 U.S.C. § 1346 (b)(1); see also United States v. Sherwood, 312 U.S. 584 , 586 (1941) (explaining that the United States is immune from suit unless it waives that immunity and consents to be sued). But the FTCA explicitly does not permit suit for liability resulting from the actions of “any contractor with the United States.” 28 U.S.C. § 2671 . Thus, “Congress has not waived the sovereign immunity of the United States for injuries resulting from the actions of independent contractors performing work for the government.” Robb v. United States, 80 F.3d 884 , 887 (4th Cir. 1996). The FTCA waiver of immunity is strictly construed. See id. Consequently, “ambiguities are resolved in favor of the sovereign.” Id. 7  The Supreme Court has instructed that the independent contractor exception should be applied when “the day-to-day operations of the contractor’s facilities [are] in the hands of the contractor.” Logue v. United States, 412 U.S. 521 , 529 (1973). We have strictly construed this principle, explaining the Government’s control over the “primary activity contracted for” is the relevant analysis. Williams v. United States, 50 F.3d 299 , 307 (4th Cir. 1995). Indeed, the “critical element in distinguishing an agency from a contractor is the power of the Federal Government ‘to control the detailed physical performance of the contractor.’” United States v. Orleans, 425 U.S. 807 , 814 (1976) (quoting Logue, 412 U.S. at 528 ). B. Here, the contract between FCC Butner and UMass establishes that the UMass scheduling coordinator is an independent contractor who is solely responsible for scheduling offsite care. Indeed, a BOP clinical director declared that pursuant to the contract, the BOP does not compensate the UMass scheduling coordinator and does not oversee the scheduling coordinator or the scheduling process. Specifically, the BOP clinical director declared, “It is the responsibility of UMass [to] establish administrative systems to ensure smooth scheduling, administration of procedures, and reporting and transcription of results for appointments.” J.A. 148. “The contract between UMass and FCC Butner does not require the FCC Butner medical staff to follow-up with the onsite scheduling coordinator once a request for an appointment has been transmitted to the scheduling coordinator.” Id. 8  Contrary to Appellant’s assertion that no newly discovered evidence warranted the district court’s decision, the contract and declaration are critical developments in the record that occurred during discovery, especially when combined with the fact that the BOP employees promptly reviewed and approved the recommendations for Krembel to receive the recommended surgery. Because the contract does not provide for BOP control or supervision over the UMass scheduler’s contractual duties, we have little trouble concluding that UMass was acting as an independent contractor. Furthermore, the evidence in the record demonstrates that the UMass scheduling coordinator was the party responsible for scheduling Krembel’s surgery, albeit upon the BOP’s approval. Because the BOP diligently discharged its contractual duties when it promptly approved the recommended surgery while the UMass scheduling coordinator delayed scheduling such surgery, UMass was the party at fault here. Thus, the United States cannot be held liable pursuant to the independent contractor exception to the FTCA. C. Appellant attempts to avoid this conclusion primarily by relying on the BOP’s statutory and constitutional duties. Appellant essentially argues that because the standard of care for the BOP is fixed by 18 U.S.C. § 4042 and the Eighth Amendment, the BOP retained a duty owed to Krembel beyond the duties outlined in the contract with UMass. Specifically, Appellant relies on § 1983 cases and argues that allowing the BOP “to contract out all services which it is constitutionally obligated to provide . . . leave[s] its citizens with no means for vindication of those rights.” Opening Br. 15–16 (quoting West 9 v. Atkins, 487 U.S. 42 , 56 n.14 (1988)). But these arguments mistake the nature of an FTCA claim as well as the independent contractor exception. 1. Regarding the Eighth Amendment, Appellant correctly argues “[c]ontracting out prison medical care does not relieve the State of its constitutional duty to provide adequate medical treatment to those in its custody, and it does not deprive the State’s prisoner of the means to vindicate their Eighth Amendment rights.” West, 487 U.S. at 56 . But this does not necessarily lead to a cognizable FTCA claim. The Supreme Court explained the distinction between FTCA claims and constitutional tort claims in FDIC v. Meyer, 510 U.S. 471 (1994). Indeed, to be actionable pursuant to the FTCA, the claim must allege “the United States would be liable to the claimant as a private person in accordance with the law of the place where the act or omission occurred. A constitutional tort claim . . . could not contain such an allegation.” Meyer, 510 U.S. at 477–78 (internal quotation marks omitted). Therefore, “the United States simply has not rendered itself liable under § 1346(b) for constitutional tort claims.” Id. at 478. 2. Regarding the BOP’s statutory duty, Appellant’s theory of the case would significantly undermine the independent contractor exception. Appellant claims that because the BOP has a statutory duty to provide care to its inmates, the BOP has a duty to “follow up” with its independent contractors even though the BOP acted diligently in approving the surgery and the contract between UMass and the BOP required no BOP oversight of the UMass scheduler. Taken to its logical conclusion, such a theory would 10 effectively disallow the Government from hiring independent contractors because the Government would be obligated to exercise supervision and control over its independent contractors. Requiring such supervision is at odds with the definition of an independent contractor. See Orleans, 425 U.S. at 814 (emphasizing that the “critical element in distinguishing an agency from a contractor is the power of the Federal Government to control the detailed physical performance of the contractor” (internal quotation marks omitted)). Thus, our mandatory “broad construal” of the independent contractor exception does not allow us to hold that a general statutory duty cannot be effectively discharged by hiring an independent contractor and then diligently acting pursuant to the responsibilities outlined in the contract. 6 See Robb, 80 F.3d at 887 . By the same reasoning, Appellant’s attempt to rely on the BOP’s policies that incorporate the general statutory duty is equally misplaced. 3. However, the existence of a contract between FCC Butner and UMass standing alone does not necessarily preclude a conclusion that the BOP was negligent regardless of the independent contractor exception. As Appellant’s reliance on Knowles v. United States 6 The district court also held the discretionary function exception precluded a claim that the BOP was negligent in contracting with UMass in the first instance. See Krembel v. United States, No. 5:16-CT-3018-FL, 2019 WL 1429585 , at *6 (E.D.N.C. Mar. 29, 2019) (citing 28 U.S.C. § 2680 (a)). Appellant does not challenge this determination on appeal. Nonetheless, we find the fact that the discretionary function exception contemplates that statutory duties will be discharged by contracting with independent third parties persuasive in reaching our independent contractor conclusion. See Williams, 50 F.3d at 310 (emphasizing that the “decision to hire an independent contractor . . . is precisely the type of decision that the exception is designed to shield from liability”). 11 illustrates, the BOP could still be negligent in upholding its end of the contract. No. 5:12- CT-3212-F, 2015 WL 13214314 (E.D.N.C. Dec. 14, 2015). In Knowles, the plaintiff lost all vision in his right eye because the BOP failed to deliver the plaintiff to an appointment that had been scheduled by an independent contractor working for the BOP. See Knowles, 2015 WL 13214314 at *2. Thus, in Knowles the BOP failed to discharge its duty. In contrast, here, the BOP acted diligently while the independent contractor failed to adequately discharge its duty. Given these facts, we agree with the district court that Knowles is distinguishable from the present case. 4. Finally, Appellant argues that the district court’s rejection of the Government’s independent contractor exception argument in the initial motion to dismiss constituted the law of the case that could not be subsequently overruled. But the law to which Appellant refers explicitly emphasized that the government’s independent contractor exception argument could be renewed “on a more developed record in a fully briefed motion for summary judgment.” Krembel v. United States, No. 5:16-CT-3018-F, 2017 WL 1058179 , at *3 (E.D.N.C. Mar. 20, 2017). Furthermore, as the Government points out, we have recognized “denials of motions to dismiss[] remain open to trial court reconsideration, and do not constitute the law of the case.” Plotkin v. Lehman, No. 98-1638, 1999 WL 259669 at *1 (4th Cir. Apr. 30, 1999) (per curiam) (quoting Perez-Ruiz v. Crespo-Guillen, 25 F.3d 40 , 42 (1st Cir. 1994)). Therefore, the initial denial of the Government’s motion to dismiss did not preclude the district court’s subsequent decision to grant summary judgment. 12  IV. For the reasons set forth herein, 7 the decision of the district court is modified to a Rule 12(b)(1) dismissal without prejudice and AFFIRMED. 7 In closing, we note that while briefing and arguing the case, Appellant repeatedly noted that the contract between FCC Butner and UMass was essentially hidden. Indeed, the contract was filed under seal in this case. It is unclear to us how claimants could successfully bring their claims against negligent independent contractors if government contracts are not open and notorious. Even though dismissing an FTCA claim does not necessarily disturb any potential state law claim against an independent contractor, a meritorious claim could be lost if such a contract could not be discovered until after the statute of limitations has run. It is equally likely that the independent contractor would not be on notice sufficient to allow a pleading amendment to relate back to the original complaint. See Fed. R. Civ. P. 15(c)(1)(C). The Government should be concerned with this inequity, even if the discretionary function insulates it from liability “whether or not the discretion involved be abused.” 28 U.S.C. § 2680 (a). 13 WYNN, Circuit Judge, dissenting: While I agree with my colleagues in the majority that the independent-contractor exception prevents the estate of Michael Krembel from holding the Bureau of Prisons liable for the failure of UMass to properly schedule Krembel’s much-needed surgery, I believe that the Bureau of Prisons violated the statutory duty of care it owed Krembel. Accordingly, I must dissent. The duty of care “owed by the Bureau of Prisons to federal prisoners is fixed by 18 U.S.C. § 4042 , independent of an inconsistent state rule.” United States v. Muniz, 374 U.S. 150 , 164–65 (1963); see also Parrott v. United States, 536 F.3d 629 , 636 (7th Cir. 2008) (same). In relevant part, § 4042 states that the Bureau of Prisons shall “provide suitable quarters and provide for the safekeeping, care, and subsistence of all persons charged with or convicted of offenses against the United States.” 18 U.S.C. § 4042 (a)(2) (emphasis added). Courts have interpreted § 4042 to require prison officials to exercise “ordinary diligence under the circumstances.” Johnson v. U.S. Gov’t, 258 F. Supp. 372 , 376 (E.D. Va. 1966); see also, e.g., Abuhouran v. United States, 595 F. Supp. 2d 588 , 594 n.4 (E.D. Pa. 2009) (explaining that § 4042 requires the Government to “exercise ordinary diligence to keep prisoners safe and free from harm” (quoting Jones v. United States, 534 F.2d 53 , 54 (5th Cir. 1976))); Smith v. United States, 207 F. Supp. 2d 209 , 214 (S.D.N.Y. 2002) (same). Importantly, the Bureau of Prisons owes this duty of care to prisoners irrespective of its decision to contract with independent contractors to provide certain services. See Edison v. United States, 822 F.3d 510 , 518 (9th Cir. 2016) (“[T]he independent contractor 14 exception . . . has no bearing on the United States’ FTCA liability for its own acts or omissions.”). Accordingly, the Bureau of Prisons owed Krembel a duty of ordinary diligence under the circumstances. Here, separate and apart from UMass’s failure to properly schedule Krembel’s surgery, I believe the Bureau of Prisons breached its duty to act with ordinary diligence under the circumstances. The basic facts are remarkable. Krembel was supposed to undergo surgery in the summer of 2013, but by the time he was finally seen by a doctor in December 2013, his cancer had spread so significantly that he was no longer eligible for the needed surgery. During those long intervening months when Krembel was not receiving the medical care he needed, the cancerous mass on his head “gr[ew] quite rapidly,” causing a painful wound to emerge from his scalp, spewing forth a “continuous[,] smelly discharge” that required him to receive medical care every morning. J.A. 72, 223, 342. During these daily appointments with the medical staff, Krembel regularly requested the surgery he had been prescribed. [J.A. 315, 342.] Yet the Bureau of Prisons’s medical staff apparently did nothing at all to determine the cause of delay in his care, much less to remedy it. This months-long period of delay and indifference is made all the more remarkable by several circumstances that, one hopes, will prove unique to this case. First, the Federal Medical Center at Butner, where Krembel was incarcerated, is a specialized medical center whose very purpose is to address the medical needs of its inmates. Second, Krembel was suffering from a particularly aggressive form of cancer. See Balter v. United States, No. 3:09-cv-1409, 2014 WL 1365905 , at *26 (M.D. Pa. Apr. 7, 2014) (finding the Bureau of Prisons’s duty of care to be “heightened where an inmate is known to have a rare condition 15 requiring special treatment”). Third, there was no dispute that Mohs surgery was the best way to treat Krembel’s cancer and that he needed it as soon as possible. Considering these circumstances, I would hold that the Bureau of Prisons did not exercise ordinary diligence under the circumstances when it moved with alacrity to approve Krembel’s requested consultations—but then did nothing further to ensure that he received the surgery he needed while his cancer spread and worsened. In response to Krembel’s argument that the Bureau of Prisons breached its statutory duty of care, the majority concludes that the Bureau of Prisons can have no general “duty to ‘follow up’” on its independent contractors because such a duty “[t]aken to its logical conclusion. . . would effectively disallow the Government from hiring independent contractors.” Maj. Op. at 10–11. I agree that foisting a general “duty to follow up” on the Bureau of Prisons would be inconsistent with the independent-contractor exception and that in many—perhaps most—cases, the Bureau of Prisons’s “general statutory duty can[] be effectively discharged by hiring an independent contractor and then diligently acting pursuant to the responsibilities outlined in the contract.” Id. at 11. However, it does not follow from the premise that the Bureau of Prisons has no general “duty to follow up” that it reasonably cared for Krembel, as required by law. The facts of this matter show that the Bureau of Prisons’s treatment of Krembel fell short of ordinary diligence under the circumstances. Accordingly, I respectfully dissent. 16

2020-12-01 21:00:25.765963+00

http://www.ca4.uscourts.gov/Opinions/191678.U.pdf

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 19-1678 HUMANE SOCIETY OF THE UNITED STATES; HUMANE SOCIETY INTERNATIONAL; CENTER FOR BIOLOGICAL DIVERSITY; BORN FREE USA, Plaintiffs - Appellants, v. UNITED STATES FISH AND WILDLIFE SERVICE; UNITED STATES DEPARTMENT OF THE INTERIOR, Defendants - Appellees. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Liam O’Grady, Senior District Judge. (1:18-cv-01301-LO-JFA) Argued: October 23, 2020 Decided: December 1, 2020 Before THACKER and QUATTLEBAUM, Circuit Judges, and Stephanie A. GALLAGHER, United States District Judge for the District of Maryland, sitting by designation. Affirmed by unpublished per curiam opinion. ARGUED: Neal David Mollen, Alexandria, Virginia, for Appellants. Catherine M. Yang, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia, for Appellees. ON BRIEF: Anna Frostic, THE HUMANE SOCIETY OF THE UNITED STATES, Washington, D.C.; Tanya Sanerib, CENTER FOR BIOLOGICAL DIVERSITY, Seattle, Washington; Charles A. Patrizia, Scott M. Flicker, Noah N. Simmons, PAUL HASTINGS LLP, Washington, D.C., for Appellants. G. Zachary Terwilliger, United States Attorney, R. Trent McCotter, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia, for Appellees. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: This case is about the alleged failure of a government agency to post information in a public online reading room. The Humane Society of the United States, Humane Society International, Center for Biological Diversity, and Born Free USA (collectively, “Appellants”) filed the instant amended complaint (“Amended Complaint”) against the United States Fish and Wildlife Service (“FWS”) and the Department of the Interior (collectively, “Appellees”). Appellants seek to compel FWS to post permit and application documents created pursuant to the Endangered Species Act (“ESA”), 16 U.S.C. §§ 1531 – 44, regarding the import of trophy heads, hides, tusks, or other parts of African lions or elephants. The Amended Complaint is premised on three alleged shortcomings by FWS: (1) its failure to post in an online reading room electronic copies of documents Appellants requested; (2) its “longstanding and ongoing refusal” to comply with disclosure requirements; and (3) its failure to properly index its ESA documents. J.A. 36. 1 Appellants allege that these shortcomings violate the Freedom of Information Act, 5 U.S.C. § 552 (“FOIA”) and the Administrative Procedure Act, 5 U.S.C. §§ 500 , et seq. (“APA”). The district court dismissed the Amended Complaint for two reasons. First, the district court concluded Appellants’ claims regarding failure to post materials online were moot because Appellants’ requests for posting had been fulfilled. Second, the district court concluded Appellants failed to state a claim with regard to the prospective posting of 1 Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this appeal. 3 materials on an ongoing basis and the proper indexing of such materials. For the reasons that follow, we affirm the dismissal of the Amended Complaint. I. A. Legal Background 1. Freedom of Information Act FOIA places on federal agencies “both reactive and affirmative obligations to make information available to the public.” Citizens for Responsibility & Ethics in Washington v. U.S. Dep’t of Justice, 846 F.3d 1235 , 1240 (D.C. Cir. 2017). Agencies are compelled to publish certain categories of materials in the Federal Register, 5 U.S.C. § 552 (a)(1); to make other types of materials “available for public inspection in an electronic format,” id. § 552(a)(2); and to make all other records available upon request from a member of the public, id. § 552(a)(3). Under the more familiar provision of Section 552(a)(3), federal agencies must release records (with certain exceptions) upon a valid and sufficiently specific request by a member of the public. See id. § 552(a)(3)(A); Prison Legal News v. Samuels, 787 F.3d 1142 , 1146 (D.C. Cir. 2015). In subsection (a)(2), FOIA also imposes an affirmative duty on agencies to “make available for public inspection in an electronic format” the following five classes of records: (A) “final opinions, . . . as well as orders, made in the adjudication of cases,” § 552(a)(2)(A); 4  (B) “those statements of policy and interpretations which have been adopted by the agency and are not published in the Federal Register,” § 552(a)(2)(B); (C) “administrative staff manuals and instructions to staff that affect a member of the public,” § 552(a)(2)(C); (D) “copies of all records, regardless of form or format” that (i) “have been released to any person” pursuant to § 552(a)(3); and (ii) “that because of the nature of their subject matter, the agency determines have become or are likely to become the subject of subsequent requests for substantially the same records” or “that have been requested 3 or more times,” § 552(a)(2)(D); and (E) “a general index of the records” posted pursuant to subparagraph (D), § 552(a)(2)(E). These provisions are known as FOIA’s “reading room” provisions and are also sometimes collectively referred to as “eFOIA.” See, e.g., Tax Analysts v. I.R.S., 117 F.3d 607 , 609 (D.C. Cir. 1997); Gov’t Accountability Project v. U.S. Dep’t of Health & Human Servs., 568 F. Supp. 2d 55 , 58 (D.D.C. 2008). “If a document does not fall within one of these categories, then the agency has no affirmative obligation to post the document.” PETA v. U.S. Dep’t of Agriculture, 285 F. Supp. 3d 307 , 314 (D.D.C. 2018), aff’d in part, rev’d in part on other grounds, 918 F.3d 151 (D.C. Cir. 2019). Upon a request for records pursuant to subsections (a)(2) or (a)(3), the agency has 20 days (absent unusual circumstances) to respond. See 5 U.S.C. § 552 (a)(6)(A). If the agency decides to comply with the request, it must make the records “promptly available to such person making such request.” Id. § 552(a)(6)(C)(i). 5  If a requester is not satisfied with the agency’s response to its requests, it may file a complaint in “the district court of the United States in the district in which the complainant resides . . . or in which the agency records are situated.” 5 U.S.C. § 552 (a)(4)(B). In such a case, “the burden is on the agency to sustain its action,” but “a court shall accord substantial weight to an affidavit of an agency concerning the agency’s determination as to technical feasibility [of disclosing the documents].” Id. The district court “has jurisdiction to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant.” Id. 2 . Endangered Species Act Generally, hunters wishing to import into the United States certain trophy animals from Africa, including African elephants and lions, must first submit an application to, and obtain an import permit from, FWS. The application requires information such as demographic details about the applicant, where the animal will be hunted, which safari or outfitting company will be used, and details about the fees that will be paid for the hunt. Once an application is submitted, FWS makes certain determinations on a case-by- case basis, as required by two laws and their corresponding regulations: the ESA, 16 U.S.C. §§ 1531 –44, and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”), Mar. 3, 1973, 27 U.S.T. 1087; see 16 U.S.C. § 1538 (c)(1) (incorporating CITES into domestic law through the ESA). These laws and their regulations allow FWS to issue permits to import trophies of certain African elephants and lions upon a determination that “the killing of the trophy animal will enhance the survival 6 of the species” (known as “enhancement determinations”), 50 C.F.R. § 17.40 (e)(6)(i)(B), and that trade in the species is “non-detrimental” to the species (known as “non-detriment determinations”), id. § 23.61(a); see also 50 C.F.R. § 17.32 (a) (requirements for permits generally). B. Procedural History 1. Complaint and Amended Complaint According to the Amended Complaint, on May 18, 2018, Appellants sent FWS a letter requesting that FWS post in the agency’s online FOIA reading room the following: (1) “copies of all ESA permits issued since January 1, 2016 or in the future for the import of trophies of African elephant or threatened African lions”; (2) “all permit application materials for such permits (prior to permit issuance or denial moving forward)”; and (3) “all enhancement findings supporting the issuance or denial of such permits.” J.A. 56–57. According to Appellants, “[i]n response, FWS neither posted the requested material online nor provided any substantive explanation of its refusal to do so.” Id. at 57 . On October 18, 2018, Appellants filed the initial complaint in this case, asking for the requested FWS documents to be posted pursuant to eFOIA’s online reading room posting requirements, 5 U.S.C. § 552 (a)(2). Appellees filed motions to dismiss that complaint on January 4, 2019. In the motions, Appellees pointed out that some of the records at issue were not within eFOIA’s scope because they had not been both requested three times and actually released to anyone pursuant to § 552(a)(2)(D). See Mem. Supp. 7 Mot. Dismiss at 16, Humane Soc’y v. U.S. Fish & Wildlife Serv., No. 1:18-cv-1301 (E.D. Va. filed Jan. 4, 2019), ECF No. 21. According to Appellants, “[t]o forestall expensive discovery and an unnecessary factual dispute about the breadth and number of Section 552(a)(3) requests made by [Appellants] and others since 2016,” they responded “by serving new, gap-filling Section 552(a)(3) requests, encompassing all relevant records for the entire period from 2016 to the present.” Appellants’ Br. 49 (footnote omitted). Appellants called this a “belt-and- suspenders” approach to obtain posting of the requested records. Id. Appellees, in contrast, characterize Appellants’ new requests as being made to “cover the flaws in their prior submissions.” Appellees’ Br. 12. Either way, it is undisputed that after the initial complaint was filed, Appellants made more FOIA requests under subsection (a)(3) in order to invoke the provisions of eFOIA requiring that the records be “requested 3 or more times” before they must be posted in the reading room. § 552(a)(2)(D)(ii). After these requests were made, Appellants filed the Amended Complaint on January 24, 2019, claiming that Appellees’ failure to post the requested permitting materials online violates eFOIA and the APA. This claim is premised on the initial FOIA requests, the new “belt-and-suspenders” requests, and is purportedly supported by the following allegations: (1) FWS exhibits an “ongoing pattern and practice of failing to comply with eFOIA by not proactively posting copies of all African elephant . . . or African lion . . . trophy import permits or associated findings issued after January 22, 2016 in their online library”; 8  (2) FWS has failed to disclose in its online library: “copies of all ESA or CITES permits issued since January 1, 2016 or proactively for the import of trophies of African elephant . . . or African lions . . .”; “all permit application materials for such permits (prior to permit issuance or denial for those not yet issued or denied)”; and “all enhancement and non-detriment findings supporting the issuance or denial of such permits.” According to Appellants, “[t]hese three categories of records have been requested far more than three times and have been released in the past pursuant to FOIA requests”; and (3) FWS has “only posted a few relevant existing records, and the agency has failed to provide an index or guide to these records as required under eFOIA.” J.A. 63–64. Appellants request the following relief: • A declaration that FWS “violated FOIA by failing to post in FWS’ online reading room[] ESA and CITES permit applications and related materials pertaining to trophy imports of threatened African elephants . . . or lions . . . submitted or created on or after January 1, 2016, records of decision for such permits, and enhancement and non-detriment findings supporting the issuance or denial of such permits, and that [FWS] has otherwise failed to comply with its FOIA obligations.”; • An injunction ordering FWS “immediately to make available via FWS’ online reading room all existing records related to ESA and CITES permit application materials pertaining to trophy imports of threatened African elephants . . . or lions . . . submitted on or after January 1, 2016, records of decision for such permits, and enhancement and non-detriment findings supporting the issuance or denial of such permits”; • An injunction ordering FWS to make ESA and CITES records “available [on an ongoing basis] electronically and in a timely manner after the receipt or creation of such records via FWS’ online reading room, consistent with the eFOIA provision”; and 9  • An injunction ordering FWS “to provide an index or guide to the records it has posted and hereafter posts online pursuant to eFOIA.” J.A. 65–66. Appellants aver that FWS’s “failure to comply with eFOIA harms [Appellants’] and their members’ interests in ensuring that the Endangered Species Act and CITES requirements for importing threatened elephant and lion hunting trophies are strictly implemented.” J.A. 64. Therefore, Appellants brought their claim pursuant to FOIA, 5 U.S.C. § 552 (a)(4)(B). But, alternatively, Appellants claim the APA provides judicial review of “every final agency action for which there is no other adequate remedy in a court.” J.A. 64 (quoting 5 U.S.C. § 706 ). Thus, “[i]f . . . the judicial review provisions of the FOIA are unavailable or inadequate to reach [Appellees’] violations of law fully, the APA provides that remedial authorization.” Id. 2 . District Court’s Dismissal On February 22, 2019, Appellees filed two motions to dismiss the Amended Complaint: one based on mootness pursuant to Federal Rule of Civil Procedure 12(b)(1), and one based on failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). With its briefing, Appellees submitted two sworn declarations confirming that FWS had performed multiple searches and that all requested records from January 1, 2016, to February 20, 2019, had been posted online. See J.A. 84–85 (February 22, 2019 Declaration of Connie Rose, FWS FOIA officer), 216–17 (April 2, 2019 Declaration of Cathy Willis, FWS FOIA officer). 10  On May 16, 2019, the district court granted Appellees’ motions and dismissed the Amended Complaint. First, the district court concluded the claim based on requests for existing records was moot and thus, it lacked jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. In this regard, the district court made a factual finding that, after the Amended Complaint was filed, Appellees “fulfilled [Appellants’] FOIA requests” for the permits issued from January 1, 2016, to the time of the decision. J.A. 250. The district court also addressed Appellants’ argument that “despite the release of the records,” Appellees’ actions “amount[ed] to voluntary cessation” that would “not moot the case.” J.A. 252. It rejected this voluntary cessation argument, explaining Appellants submitted the belt-and-suspenders requests for applications and permits dating back to January 1, 2016, after litigation had begun, and Appellees “complied with [those] requests.” Id. Thus, the doctrine of voluntary cessation does not apply because it was Appellants’ “own doing” that “sap[ped] the controversy of vitality.” Id. (quoting City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278 , 284 n.l (2001)). Second, the district court dismissed the proactive posting claim for failure to state a claim pursuant to Rule 12(b)(6). It rejected Appellants’ argument that FWS was required to proactively post certain documents to the FWS reading room, explaining, “[Section] 552(a)(2)(D) does not require agencies to post records on a rolling basis into the future.” J.A. 253. The district court concluded that language of the statute “indicates [the disclosure requirement] is referring to information that already exists, not information that will be created in the future.” Id. 11  Finally, in a footnote, the district court addressed the claim regarding FWS’s allegedly insufficient indexing system, explaining that there was no case law on the topic, and it deemed organizing records “by animals,” as FWS did here, a sufficient “general index” pursuant to FOIA. J.A. 252 n.1. The district court did not address Appellants’ APA arguments and gave no explanation for its failure to do so. II. We review mootness questions de novo. See Porter v. Clarke, 852 F.3d 358 , 363 (4th Cir. 2017). “We review the district court’s dismissal of [a] complaint de novo, accepting as true all of the factual allegations contained in the complaint and drawing all reasonable inferences in favor of the plaintiff.” Wright v. North Carolina, 787 F.3d 256 , 263 (4th Cir. 2015) (internal quotation marks omitted). III. As mentioned, the Amended Complaint is based on three alleged shortcomings of FWS: (1) its failure to post in an online reading room electronic copies of documents Appellants requested; (2) its “longstanding and ongoing refusal” to comply with disclosure requirements; and (3) its failure to properly index its ESA documents. J.A. 36. We address each in turn. A. Alleged Failure to Post Records We first address the district court’s conclusion that the claims regarding FWS’s failure to post certain records is now moot. 12  1. “The doctrine of mootness constitutes a part of the constitutional limits of federal court jurisdiction,” Porter v. Clarke, 852 F.3d 358 , 363 (4th Cir. 2017) (alterations and internal quotation marks omitted), which extends only to actual cases or controversies, U.S. Const. art. III, § 2. When “a case or controversy ceases to exist -- either due to a change in the facts or the law -- the litigation is moot, and the court’s subject matter jurisdiction ceases to exist also.” Porter, 852 F.3d at 363 (internal quotation marks omitted). Put another way, “a case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Powell v. McCormack, 395 U.S. 486 , 496 (1969); see also Arizonans for Official English v. Arizona, 520 U.S. 43 , 68 n.22 (1997) (“Mootness has been 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).’” (quoting U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 , 397 (1980))). However, there is a “well-recognized exception to the mootness doctrine holding that ‘a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.’” Porter, 852 F.3d at 363 (quoting City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283 , 289 (1982)); see also United States v. W.T. Grant Co., 345 U.S. 629 , 632 (1953) (“[V]oluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot.”). 13  The voluntary cessation exception “traces to the principle that a party should not be able to evade judicial review, or to defeat a judgment, by temporarily altering questionable behavior.” City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278 , 284 n.1 (2001). Accordingly, the exception seeks to prevent “a manipulative litigant immunizing itself from suit indefinitely, altering its behavior long enough to secure a dismissal and then reinstating it immediately after.” Porter, 852 F.3d at 364 (internal quotation marks omitted); see also Knox v. Serv. Emps. Int’l Union, Local 1000, 567 U.S. 298 , 307 (2012) (“The voluntary cessation of challenged conduct does not ordinarily render a case moot because a dismissal for mootness would permit a resumption of the challenged conduct as soon as the case is dismissed.”). Thus, “a defendant claiming that its voluntary compliance moots a case bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Porter, 852 F.3d at 364 (internal quotation marks omitted). 2. Appellants argue a live controversy still exists, maintaining that there remains “a factual dispute regarding FWS’s claim that it has posted to its website all of the documents it currently has.” Appellants’ Br. 45–46. In addition, Appellants contend that “[e]ven as to records FWS has already posted, the agency’s frenzied, post-litigation production-and- posting effort has not mooted the case” because a “‘defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.’” Id. at 14 (quoting City of Mesquite, 455 U.S. at 289 ). 14  a. Issues of Fact Appellees contend this case is moot because Appellants “received their requested relief: the trophy records back to 2016, organized by general index, were posted online in FWS’s reading room” and what Appellants seek is “an advisory opinion about how to interpret the reading-room provisions.” Appellees’ Br. 16, 17. Appellants, however, contend the case is not moot because issues of fact remain as to whether all the records in FWS’s possession have actually been posted. Thus, crucial to the mootness question is whether the records Appellants requested to be posted have, in fact, been posted. This issue can be resolved as a matter of law based on burdens and presumptions set forth in applicable law. “When, as here, a defendant challenges the existence of subject matter jurisdiction in fact, the plaintiff bears the burden of proving the truth of such facts by a preponderance of the evidence.” United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337 , 347 (4th Cir. 2009). Coupled with Appellants’ burden is the idea that “declarations by (or on behalf of) government officials [receive] somewhat higher credence than statements made by private parties” in FOIA cases, lending such declarations a “presumption of legitimacy.” PETA v. U.S. Dep’t of Agriculture, 918 F.3d 151 , 157 (D.C. Cir. 2019). This presumption can only be refuted by “clear evidence to the contrary.” Nat’l Archives & Records Admin. v. Favish, 541 U.S. 157 , 174 (2004). “[T]he [FOIA] requester must produce evidence that would warrant a belief by a reasonable person that the alleged Government impropriety might have occurred.” Id. 15  Finally, the district court made a finding that Appellees “fulfilled [Appellants’] FOIA requests” for the permits issued from January 1, 2016, to the date of that decision. J.A. 250. “On appeal from a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), we review the district court’s factual findings with respect to jurisdiction for clear error . . . .” In re KBR, Inc., Burn Pit Litig., 744 F.3d 326 , 333 (4th Cir. 2014) (internal quotation marks omitted). In short, Appellants have not overcome these burdens. First, Appellants rely on a binder they took to the motion to dismiss hearing, “so that the court could see for itself which records had not been posted.” Appellants’ Br. 53. According to Appellants, the binder contained records not posted online but nonetheless turned over to Appellants. Following is an excerpt from that hearing: [Appellants’ Counsel:] Your Honor, I have got a binder here of 90-some documents, or 89 documents I think it is, that were produced to us in response to our FOIA requests, but were not loaded up on the Web site. We’re happy to provide them to the Court. It can do its own investigation unaided by an index, and I can tell you that it is [in]credibly time-consuming. J.A. 225. Appellees’ counsel, in response, remarked that those documents were disclosed “in response to another batch of requests [Appellants] submitted a few weeks ago asking for January to March 2019 documents.” Id. at 244 . As the district court was closing the hearing, Appellants’ counsel asked, “Your honor, is there any purpose in leaving this [the binder] with your staff?” to which the district court replied, “No, but it was not refuted by [Appellees’ counsel] that that’s what the contents were, as you stated.” Id. at 248 . But the district court made no specific finding and no firm resolution as to the contents of the 16 binder, and this vague aside to Appellants’ counsel is insufficient grounds upon which to find clear error, particularly given Appellees’ sworn declarations and Appellants’ burden to establish jurisdiction in the first place. Importantly, Appellants have not alleged (and do not argue on appeal) that the requests they made and the documents turned over in the binder meet the requirements for posting to the eFOIA reading room. And to the extent Appellants fault Appellees for posting materials in dribs and drabs, they have also admitted that some of these disclosures were in response to their own successive requests made after the filing of the initial complaint. See, e.g., J.A. 246–47 (Appellants’ attorney: “It’s true that a great many of the documents that were posted last night [before the motion to dismiss hearing] were responsive to a request that we made in March. So full credit to the Government on that.”). And in their opening brief, Appellants merely claim that they “represent[]” to the court that as of the time of the filing of the brief, the requested records in the binder had not been posted online. Appellants’ Br. 9 n.10. They also fall back on the inference that, if FWS has failed to post records before, they probably failed to post records again. But it is well established that mere speculation or inferences, without more, cannot even create a genuine issue of material fact, see Barwick v. Celotex Corp., 736 F.2d 946 , 963 (4th Cir. 1984), let alone provide grounds for finding the requisite clear error here. Appellants therefore do not successfully challenge the district court’s conclusion that the aspect of the Amended Complaint dealing with past actions is moot. For these reasons, Appellants have not carried their burden to demonstrate “clear evidence” that any of their requests were not posted in the reading room, nor have they 17 demonstrated the district court clearly erred in so finding. Favish, 541 U.S. at 174 ; see Burn Pit Litig., 744 F.3d at 333. Therefore, we must accept that Appellees have posted online all of Appellees’ requested documents, rendering any claim with regard to past requests for online posting to be moot. b. Voluntary Cessation Appellants next contend that, even if the records have been posted, the voluntary cessation exception to the mootness doctrine applies. Appellants contend the district court’s decision -- that Appellants’ own actions in re-requesting the documents after the initial complaint was filed led to mootness -- “represents a confused application of the voluntary cessation cases.” Appellants’ Br. 50. Rather, they maintain they “have surrendered nothing. After years of delay, FWS grudgingly produced and posted some documents, but only because it had been sued,” and the agency “has not promised to refrain from similar statutory violations in the future.” Id. at 51–52. In response, Appellees rely on PETA v. United States Department of Agriculture, which held that the voluntary cessation doctrine could be defeated “by an agency declaration asserting an intention not to remove the relevant documents from the agency’s web site in the future,” Appellees’ Br. 24 (citing 918 F.3d at 159), and Appellees produced such a document, see J.A. 217 (FOIA officer declaring, “FWS has no intention of removing the [ESA] Applications, Permits, and Findings concerning lions and elephant trophies from its online reading room in the future”). In any event, Appellees contend, the voluntary cessation theory “makes no sense in the FOIA context because FWS already turned over 18 the records to [Appellants] and cannot ‘cease’ that activity in the future.” Appellees’ Br. 26. In other words, there is no way Appellees can “resum[e] the challenged conduct” of failing to post records when they have already posted the records. Id. at 27 (quoting Knox, 567 U.S. at 307 ). With regard to the previously requested and posted documents, this case is an ill fit for the voluntary cessation doctrine. For one thing, the district court was correct that Appellants’ own actions of re-requesting documents and asking that they be posted effectively mooted their claims. Because Appellees “complied with [those] requests,” Appellants’ “own doing” “sap[ped] the controversy of vitality.” City News, 531 U.S. at 284 n.l. Furthermore, the voluntary cessation exception seeks to prevent “a manipulative litigant immunizing itself from suit indefinitely, altering its behavior long enough to secure a dismissal and then reinstating it immediately after.” Porter, 852 F.3d at 364 (internal quotation marks omitted). But the challenged action here is FWS’s failure to post requested documents, and those documents have now been posted. Theoretically, if FWS “alter[ed] its behavior” by posting the documents and swearing that it would not remove those documents (which FWS did), there is no way it could “reinstat[e]” that behavior afterwards. Id. Indeed, Appellants do not contend that FWS removed or will remove records it already posted. For these reasons, the voluntary cessation doctrine does not apply, and we affirm the dismissal of Appellants’ claims based on FWS’s alleged failure to post material to its reading room. 19  B. Alleged Longstanding and Ongoing Refusal to Post We now turn to the Amended Complaint’s requests for injunctive relief based on an alleged “longstanding and ongoing refusal” of FWS to post documents to its reading room. J.A. 36. Central to their requested relief is Appellants’ view that Appellees believe they have “no obligation to post the opinions, orders, or frequently requested documents it generates proactively [and] the lawfulness of that position must be determined.” Appellants’ Br. 45. Appellants ask the court to order Appellees to “make the [elephant and lion permit] records” available “on an ongoing basis” “electronically and in a timely manner after the receipt or creation of such records.” J.A. 65 (emphasis supplied). “[A] Rule 12(b)(6) motion should only be granted if, after accepting all well-pleaded allegations in the plaintiff’s complaint as true and drawing all reasonable factual inferences from those facts in the plaintiff’s favor, it appears certain that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief.” Edwards v. City of Goldsboro, 178 F.3d 231 , 244 (4th Cir. 1999). Even if a cause of action exists, a “complaint might nevertheless be dismissed under Rule 12(b)(6) unless it can be determined that judicial relief is available.” Davis v. Passman, 442 U.S. 228 , 244 (1979). In this case, FOIA does not entitle Appellants to the prospective relief they seek as to documents not yet in existence. FOIA provides that the district court “has jurisdiction to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant.” 5 U.S.C. § 552 (a)(4)(B). As the district court observed, the language of the statute “indicates [the disclosure 20 requirement] is referring to information that already exists, not information that will be created in the future.” J.A. 253. Even the case relied on by Appellants for this proposition demonstrates this point. In Animal Legal Defense Fund v. United States Department of Agriculture, the Ninth Circuit concluded that Section 552(a)(4)(B) “cloaks district courts with the authority to order an agency to post records in an online reading room,” and “authorizes district courts to stop the agency from holding back records it has a duty to make available, which includes requiring an agency to post § 552(a)(2) documents online.” 935 F.3d 858 , 869 (9th Cir. 2019). However, that case dealt with existing agency records that had been removed from online reading rooms and a representation from an agency on appeal that “it [would] no longer post” certain of those records -- not nebulous records that have not yet come to fruition. Id. at 864 . And we have stated that courts are “woefully ill- suited . . . to adjudicate generalized grievances asking us to improve an agency’s performance or operations.” City of New York v. U.S. Dep’t of Def., 913 F.3d 423 , 431 (4th Cir. 2019). By our narrow decision, we do not hold that Appellants can never receive injunctive relief pursuant to Section 552(a)(4)(B). But where all Appellants’ eFOIA requests have been satisfied (per the district court’s finding), and the prospective relief sought is with regard to documents not yet created, we fail to see how FOIA provides any “entitle[ment] . . . to relief.” Edwards, 178 F.3d at 244 . Therefore, we affirm the district court’s Rule 12(b)(6) dismissal. 21  C. Allegedly Improper Indexing Finally, Appellants’ claim that FWS improperly indexed its records suffers from the same fatal flaw as their claim for prospective relief. There is no reasonable reading of the remedial provision that demonstrates entitlement to relief based upon the sufficiency of a FOIA index. In any event, the statute requires a “general index,” § 552(a)(2)(E), which it does not define. The records in this case are delineated by species, and Appellants cite no persuasive authority that this is somehow insufficient. Therefore, this claim fails to state a plausible claim for relief as well. D. The Administrative Procedures Act Appellants contend that if no other source of remedy exists in FOIA, then the APA provides for review in situations “for which there is no other adequate remedy in a court.” 5 U.S.C. § 704 . The district court did not address the APA in its dismissal order, but we are compelled to affirm dismissal under that body of law as well. In this court’s recent decision in City of New York v. United States Department of Defense, major cities across the country filed suit against the Department of Defense (“DOD”) for its failure to provide records in a timely and organized manner to the National Instant Criminal Background Check System. 913 F.3d at 426. The cities asked the district court to compel “more thorough compliance” by the DOD. See id. at 427. We affirmed the dismissal of the claim, rejecting the notion that the “APA authorizes a recipient of government information to initiate a private action to compel governmental conduct that 22 might improve that information’s accuracy or comprehensiveness.” Id. at 430. And “there is simply no basis in the APA’s text for such a broad incursion into internal agency management.” Id. In short, the city plaintiffs failed to “identify specific and discrete governmental conduct” for review, as provided in the APA, and rather, “launch[ed] a broad programmatic attack on the government’s operations.” Id. at 431 (internal quotation marks omitted). So too here. Because the records Appellants requested have been posted, Appellants are left with a challenge to the internal management of FWS and how and when it posts trophy records -- or even more questionable -- how they may or may not manage such information in the future. Therefore, any claims made pursuant to the APA fall short. IV. For the foregoing reasons, we affirm the district court’s dismissal of the Amended Complaint. AFFIRMED 23

2020-12-01 21:00:30.47293+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:20-1634:J:PerCuriam:aut:T:npDp:N:2621356:S:0

NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Argued November 18, 2020 Decided December 1, 2020 Before DIANE S. SYKES, Chief Judge MICHAEL S. KANNE, Circuit Judge DIANE P. WOOD, Circuit Judge No. 20-1634 WILLIAM A. PANGMAN, Appeal from the United States District Plaintiff-Appellant, Court for the Eastern District of Wisconsin. v. No. 19-C-1615 KEITH L. SELLEN and LORRY ELDIEN, Lynn Adelman, Defendants-Appellees. Judge. ORDER William Pangman sued two employees of Wisconsin’s Office of Lawyer Regulation (“OLR”) under 42 U.S.C. § 1983 for alleged violations of his constitutional rights that occurred during an investigation into whether to reinstate his license to practice law. Shortly after Pangman filed this suit, the Wisconsin Supreme Court denied his petition for reinstatement. The district court dismissed the complaint for failure to state a claim upon which relief could be granted. Because Pangman filed his suit before the state-court judgment was entered, the Rooker-Feldman doctrine does not deprive this court of jurisdiction. But the judge correctly determined that Pangman did not state a claim, so we affirm. No. 20-1634 Page 2 In 1998 the Wisconsin Supreme Court suspended Pangman from practicing law for both administrative and disciplinary reasons. Pangman’s conduct in his postdivorce litigation resulted in a disciplinary suspension starting in April 1998. In re Disciplinary Proceedings Against Pangman, 574 N.W 2d 232 (Wis. 1998). The suspension was for 90 days, but Pangman’s license would remain inactive until he paid the costs of the proceeding. Id. at 241 . In June of the same year, the court suspended him for not complying with Wisconsin’s mandatory continuing legal education requirements. His license was suspended again in October for failing to pay bar dues. More than 20 years later, Pangman (who now resides primarily in the Dominican Republic) petitioned for reinstatement from all three suspensions. Pangman’s petition was subject to the rules promulgated by the Wisconsin Supreme Court. When a suspended attorney has not been reinstated after three years, the attorney must file a petition for reinstatement with the Wisconsin Supreme Court. See WIS. S. CT. R. 22.28(1)(c)–(d). The court refers the petition to the OLR to investigate the petitioner’s eligibility for reinstatement and recommend whether the court should grant or deny the petition. See id. R. 10.03(6m)(b); 31.11(1m)(a), (c). The OLR investigation includes whether the petitioner has “good moral character and the fitness to practice law” in Wisconsin. Polk v. Office of Lawyer Regulation, 732 N.W.2d 419 , 421 (Wis. 2007). The OLR must submit a recommendation to the court within 90 days of receiving the petition. See WIS. S. CT. R. 31.11(1m)(c). Several days after receiving Pangman’s petition for reinstatement on July 19, 2019, the OLR opened an investigation. Later that month on the OLR’s recommendation, the Wisconsin Supreme Court reinstated Pangman from his disciplinary suspension after determining that he had been making regular payments toward the costs of the proceeding, but his administrative suspensions remained in effect. Over the next few months, the OLR contacted Pangman several times for further information omitted from his petition. He provided some, but he also argued that the OLR was engaged in “unadopted rule usurpation” and the investigator showed “sentiments of potentially retaliatory resentment” in her questions. Pangman urged the investigator to narrow the scope of the inquiry because it extended beyond the investigative power delegated by the court. On October 16 (the day before the 90-day deadline for submission of the OLR report), the OLR sent a letter to the court (copying Pangman) explaining that because of its back and forth with Pangman about additional information, it could not complete its investigation within the deadline but would submit a recommendation no later than December 1. No. 20-1634 Page 3 Pangman then filed this suit in the Eastern District of Wisconsin on November 4, 2019, against Keith Sellen, the Director of the OLR, and Lorry Eldien, the investigator. Pangman alleged that they deprived him of substantive due process by withholding his law license and of procedural due process by failing to provide proper notice and a hearing or to submit a report within the 90-day time frame. He also asserted that the OLR employees violated the Equal Protection Clause under a class-of-one theory by penalizing Pangman for “conduct for which other attorneys enjoy no such impediment.” Finally, Pangman asserted that the OLR’s role in the attorney reinstatement process is a constitutionally impermissible violation of separation of powers. Pangman sought a court order requiring the OLR to recommend reinstatement. He also requested damages incurred because of the alleged violations, such as loss of potential income during the investigation. The defendants quickly moved to dismiss the complaint. Three weeks after Pangman filed suit, the OLR filed its recommendation against reinstating Pangman with the Wisconsin Supreme Court. The report articulated multiple concerns about his activities over the past 20 years that raised questions about his moral character and fitness to practice law. To give a few examples: The report explained that Pangman had criminal charges filed against him in 2004 for eight counts of failing to pay child support that resulted in a bench warrant when he did not show up for court. It also expressed concern about how Pangman had been supporting himself for two decades; he claimed involvement in different capacities with over 200 companies, but he would not elaborate on the dates of his involvement or what positions he held. The report explained Pangman had unsatisfied tax warrants in several counties in Wisconsin and that he has also not paid United States taxes while residing in the Dominican Republic. Pangman did not file a response, and on February 11, 2020, the Wisconsin Supreme Court denied his petition for reinstatement. The next month the district court dismissed Pangman’s complaint for failure to state a claim. The judge concluded that neither his due-process claim nor his equal- protection claim could survive the defendants’ motion to dismiss. Assuming without deciding that Pangman had a property or liberty interest in the reinstatement of his law license, the judge determined that the OLR did not deprive him of any interest because its role is purely investigatory. The judge also concluded that the equal-protection challenge could not proceed because Pangman did not identify what alleged conduct was discriminatory. He explained that although he would ordinarily grant leave to amend, Pangman’s many filings made it clear he had no viable claim, so amendment would be futile. No. 20-1634 Page 4 On appeal Pangman argues that the judge erred by dismissing his case because he pleaded valid § 1983 claims for due-process violations, an equal-protection class-of- one claim, and a separation-of-powers claim. First, we assure that these claims are not jurisdictionally barred by the Rooker-Feldman doctrine as an attempt to challenge a state-court judgment. See Rooker v. Fid. Tr. Co., 263 U.S. 413 (1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). At first glance the doctrine seems applicable; indeed, as the defendants point out, the case is quite like Feldman. Although Pangman’s arguments focus on the OLR’s procedures rather than directly challenging the Wisconsin Supreme Court’s judgment, the primary wrong Pangman wishes to redress is the court’s refusal to reinstate his law license. Attempts to challenge a final judgment masquerading as attempts to challenge procedures are jurisdictionally barred. See Jakupovic v. Curran, 850 F.3d 898 , 903 (7th Cir. 2017); Kelley v. Med-1 Sols., LLC, 548 F.3d 600 , 605 (7th Cir. 2008). Yet Rooker-Feldman does not apply because Pangman filed his suit before the Wisconsin Supreme Court issued its judgment. As the Supreme Court has explained, the Rooker-Feldman doctrine applies only to suits by state-court losers, whose injuries were caused by state-court judgments “rendered before the district court proceedings commenced.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 , 284 (2005). Here, Pangman filed the complaint in federal court on November 4, 2019, before the Wisconsin Supreme Court denied his petition for reinstatement on February 11, 2020, and even before the OLR submitted its recommendation to the court on November 29, 2019. Although Pangman’s complaint seemed to anticipate the court’s adverse ruling, he was not aggrieved by any judgment at the time he sued. And the Supreme Court has made clear that the entry of a state-court judgment after a federal lawsuit has commenced also does not trigger a jurisdictional bar. See id. at 292 . Because we have jurisdiction, we turn to Pangman’s challenge to the dismissal of his complaint, a decision we review de novo, accepting his factual allegations as true and drawing reasonable inferences in his favor. Tucker v. City of Chicago, 907 F.3d 487 , 491 (7th Cir. 2018). Pangman first contends that he stated a procedural due-process claim against the defendants. He needed to allege that the defendants deprived him of a valid liberty or property interest without adhering to the basic procedural obligations required by the Due Process Clause. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 , 542 (1985); Black Earth Meat Mkt., LLC v. Village of Black Earth, 834 F.3d 841 , 848–49 (7th Cir. 2016). The district court assumed that Pangman had a property interest in his right to practice law. State law dictates whether a professional license is property for purposes No. 20-1634 Page 5 of federal due process. Babchuk v. Ind. Univ. Health, Inc., 809 F.3d 966 , 969 (7th Cir. 2016). Although the Wisconsin Supreme Court has explained that a candidate not admitted to the bar has no liberty or property interest in employment in the legal profession, see In re Martin, 510 N.W.2d 687 , 692–93 (Wis. 1994), it is not clear whether this applies to the reinstatement of a law license. Regardless, even if Pangman had a protected interest in reinstatement, the OLR defendants did not—and could not—deprive him of that interest. For liability to exist under § 1983, an individual must have “personal involvement in the alleged constitutional deprivation.” Colbert v. City of Chicago, 851 F.3d 649 , 657 (7th Cir. 2017) (quoting Minix v. Canarecci, 597 F.3d 824 , 833 (7th Cir. 2010)). Pangman asserts that the OLR employees are personally involved because they failed to conduct a timely investigation, would not provide him with notice or a hearing, and “refus[ed] to lift the suspension.” But the OLR investigates reinstatement petitions and provides a recommendation to the Wisconsin Supreme Court. See WIS. S. CT. R. 31.11(1m)(c). The employees of the OLR have no power to grant or deny Pangman’s petition. See id. R. 21.09(1), 31.11(1m)(a). The OLR’s failure to submit the report within 90 days as required by the Wisconsin Supreme Court also did not violate Pangman’s federal due- process rights. The Constitution “does not enforce compliance with state procedural rules.” Manley v. Law, 889 F.3d 885 , 893 (7th Cir. 2018). Moreover, Pangman himself slowed the process: the OLR explained that it would be several weeks late submitting the report because of difficulty communicating with and gathering additional information from Pangman. Finally, from the complaint it is clear that Pangman received the cornerstones of due process, including notice of the proceedings (he initiated them) and an opportunity to be heard. See Mathews v. Eldridge, 424 U.S. 319 , 333 (1976). But he failed to engage fully with the OLR investigation and did not respond to its filing with the Wisconsin Supreme Court before the court denied his petition. Pangman asserts that the defendants also violated his substantive due-process right (a theory the district court did not address), but this claim cannot proceed either. Substantive due process is very limited in scope and protects against “only the most egregious and outrageous government action.” Campos v. County of Cook, 932 F.3d 972 , 975 (7th Cir. 2019). To state a substantive due-process claim, a plaintiff must allege that the government abused its power in a manner that is “so arbitrary and oppressive that it shocks the conscience.” Catinella v. County of Cook, 881 F.3d 514 , 519 (7th Cir. 2018). Nothing in Pangman’s complaint about the actions of the OLR comes remotely close to shocking the conscience. Rather, the employees requested additional relevant No. 20-1634 Page 6 information and then delivered a report and recommendation to the Wisconsin Supreme Court, as state law requires. See WIS. S. CT. R. 10.03(6m)(b); 31.11(1m)(a), (c). Pangman also argues that he stated an equal-protection claim because the OLR discriminated against him as a “class of one.” To survive a motion to dismiss on a class-of-one claim, a plaintiff must allege that he was “intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment.” D.B. ex rel. Kurtis B. v. Kopp, 725 F.3d 681 , 685–86 (7th Cir. 2013) (quoting Village of Willowbrook v. Olech, 528 U.S. 562 , 564 (2000)). Here, even if the OLR did treat Pangman differently than similarly situated individuals by asking more follow-up questions, his own complaint reveals the rational basis for doing so. See Miller v. City of Monona, 784 F.3d 1113 , 1121 (7th Cir. 2015). Pangman explained that he had been unable to provide documentation about his financial and employment history that other individuals routinely provide to the OLR. The Wisconsin Supreme Court has explained that employment during a suspension is relevant to investigating a petition for reinstatement, see In re Disciplinary Proceedings against Riley, 882 N.W.2d 820 , 832–33 (Wis. 2016), so the OLR had a rational basis for asking Pangman for more information. Pangman also asserts he stated a claim for a violation of “separation of powers.” But the federal doctrine of separation of powers is irrelevant. And the “Constitution does not prescribe any particular separation of powers, or other internal structure, of state government.” Pittman v. Chi. Bd. of Educ., 64 F.3d 1098 , 1102 (7th Cir. 1995). Finally, Pangman asserts that the district court erred by not granting his motion for reinstatement to the bar of the Eastern District of Wisconsin. But the judge properly refrained from acting on this request. As the judge noted at the hearing, federal bar admission is an administrative process determined by the Clerk of Court, not a judge. E.D. WIS. LOCAL R. 83(c)(2). The Eastern District of Wisconsin imposes reciprocal discipline on a lawyer who is suspended from practice by the highest court in a state where the lawyer is licensed, see id., but that, too, has nothing to do with this case, which involves admission to the Wisconsin bar, see WIS. S. CT. R. 21.01-02.1 AFFIRMED 1 The attorney admission roll of the Eastern District of Wisconsin reflects that Pangman is suspended, see https://ecf.wied.uscourts.gov/cgi-bin/BarLookup.pl (last visited Nov. 18, 2020), but he has not informed us whether he ever filed a request for reinstatement. Given the reciprocal discipline rule, it likely would not matter.

2020-06-05 07:03:26.084096+00

https://efast.gaappeals.us/download?filingId=29f71b0a-287a-41bc-bad8-089876e5c947

THIRD DIVISION MCFADDEN, C. J., DOYLE, P. J., and RICKMAN, J. NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. Please refer to the Supreme Court of Georgia Judicial Emergency Order of March 14, 2020 for further information at (https://www.gaappeals.us/rules). June 1, 2020 In the Court of Appeals of Georgia A20A0429. GHALI et al. v. MILES et al. DO-014 DOYLE, Presiding Judge. Adriel Miles, Sr., Adriel Miles, Jr., and Shelby Smith (“the plaintiffs”) sued Jalal K. Ghali and Jinan Ghali (“the Ghalis”) for negligent infliction of emotional distress after their son, Basil Ghali (hereinafter, “Basil”), fired a gun from the balcony of the Ghalis’ home toward the plaintiffs, who were in a boat on a lake. The Ghalis moved for summary judgment, and the trial court denied the motion. This Court granted the Ghalis’s application for interlocutory appeal, and they argue that they had no duty to the plaintiffs and that the plaintiffs suffered no physical impact or pecuniary losses. For the reasons that follow, we reverse. On summary judgment, the movant[s have] the burden to show there is no genuine issue as to any material fact and that [they are] entitled to a judgment as a matter of law. In ruling on a motion for  summary judgment, the opposing part[ies] should be given the benefit of all reasonable doubt, and the court should construe the evidence and all inferences and conclusions arising therefrom most favorably toward the part[ies] opposing the motion.1 So viewed, the record shows that Basil suffered brain damage following malformations in his brain, which required two surgeries. Prior to the incident giving rise to this appeal, Basil was under treatment for anxiety and depression, including receiving multiple prescriptions for medication, including an antipsychotic. Basil had previously been arrested three times: for illegally transporting an AK-47 rifle in the trunk of his car; for making terroristic threats by telling people at a gym that he was going to retrieve a gun from his car and kill people; and for driving under the influence and reckless driving. The Ghalis were aware of all three arrests before the shooting giving rise to this appeal. On March 21, 2015, the Ghalis, both medical doctors, lived on Lake Tobesofkee in Macon with their family, including 25-year-old Basil and several of his eight siblings. Basil consumed a bottle of alcohol outside of his home. He then returned home where his mother and several siblings were; he did not speak with 1 (Punctuation omitted.) Huddle v. Heindel, 347 Ga. App. 819 , 821 (821 SE2d 61) (2018). 2  anyone, and his father was not home. Basil went upstairs to a balcony, which overlooks the lake, where the plaintiffs were fishing in their boat. Basil retrieved his handgun and fired it into the lake, hitting the water and causing it to splash the plaintiffs; neither the plaintiffs nor the boat were struck by bullets.2 Following the shooting, Miles, Sr., suffered from nightmares, sleeplessness, worry, anxiety, headaches, and fear, and he saw his doctor and underwent counseling for post-traumatic stress disorder. Miles, Jr., had headaches, nightmares, sleeplessness, and night sweats as a result of the incident, but he did not seek medical treatment for such. Smith sought counseling for anxiety, sleeplessness, and hypervigilance, and his counselor diagnosed him with post-traumatic stress disorder. The plaintiffs thereafter filed suit against the Ghalis and Basil, alleging that Basil had assaulted them and intentionally inflicted emotional distress upon them and that the Ghalis had negligently inflicted emotional distress, resulting in injuries and pecuniary losses.3 As to the Ghalis, the plaintiffs alleged that they knew that Basil 2 Basil ultimately pleaded guilty to three counts of aggravated assault as a result of the incident, and he was sentenced as a first offender to twenty years, to serve the first six in custody. 3 The plaintiffs also seek punitive damages. The plaintiffs claims against Basil are not at issue in this appeal. 3  “presented a danger to individuals such as [the plaintiffs] while he was on their property but failed to . . . protect others from that danger.” The Ghalis moved for summary judgment, arguing that they had no duty to supervise Basil and that the plaintiffs had suffered no physical impact or pecuniary losses. The trial court denied their motion, and this Court granted the plaintiffs’ application for interlocutory appeal. 1. The Ghalis argue that the trial court erred by concluding that they owed a duty to the plaintiffs. We agree. The threshold issue in any negligence case is whether the defendant owes a duty to the plaintiff.4 “The existence of a legal duty is a question of law for the court.”5 In its order denying summary judgment, the trial court cited to the Restatement (Second) of Torts, § 318 and concluded that “issues of material fact remain regarding whether the [Ghalis] were unable to control their son [and] . . . whether [the Ghalis] knew [that] . . . Basil . . . was in the possession of a handgun [] and knew of his prior criminal record and history of firearm offenses.” 4 See Ceasar v. Wells Fargo Bank, N.A., 322 Ga. App. 529 , 533 (2) (b) (744 SE2d 369) (2013). 5 See Rasnick v. Krishna Hospitality, Inc., 289 Ga. 565 , 567 (713 SE2d 835) (2011). 4  The Restatement (Second) of Torts, § 318 provides: If the actor permits a third person to use land or chattels in his possession otherwise than as a servant, he is, if present, under a duty to exercise reasonable care so to control the conduct of the third person as to prevent him from intentionally harming others or from so conducting himself as to create an unreasonable risk of bodily harm to them, if the actor (a) knows or has reason to know that he has the ability to control the third person, and (b) knows or should know of the necessity and opportunity for exercising such control. The trial court stated in its order that “[i]n Georgia, this provision has been interpreted to require an ‘assumption of a special relationship of control’ to establish liability for an adult child living in the home,” citing Spivey v. Hembree.6 Although no Georgia case explicitly adopts or interprets Section 318,7 Spivey held that “absent a custodian’s assumption of a special relationship of control over an adult child living at home . . . there is no liability for the conduct of such child.”8 A special 6 268 Ga. App. 485 (602 SE2d 246) (2004). 7 Compare Herrington v. Gaulden, 294 Ga. 285 , 287 (751 SE2d 813) (2013) (adopting Section 324A of the Restatement (Second) of Torts). 8 (Citation omitted.) Spivey, 268 Ga. App. at 488 (1) (a), citing Coleman v. Coleman, 240 Ga. 417 , 422-423 (5) (240 SE2d 870) (1977) & Trammel v. Bradberry, 256 Ga. App. 412 , 418 (2) (568 SE2d 715) (2002). 5 relationship may arise between a parent and an adult child (similar to that which may arise between a doctor and a patient), but only if a two-part test is satisfied: (1) the parent must have control over the adult child, and (2) the parent must know or reasonably should have known that the adult child was likely to cause bodily harm to others.9 “Thus, absent being appointed the legal guardian of the person, there must be evidence of actual assumption of physical control as well as knowledge of the danger the person poses to others if the control is not reasonably maintained.”10 Notably, providing a person with a place to live does not create a right or exercise of physical control.11 Here, even assuming the Ghalis knew or reasonably should have known that Basil was likely to cause bodily harm to others, they were not Basil’s legal guardians, and there is no evidence that they had assumed actual physical control over him. The plaintiffs asserts that the Ghalis had control over Basil because they prohibited their adult children from drinking alcohol in the house and because Basil would do whatever his mother asked him to do around the house. But the imposition of these 9 See Trammel, 256 Ga. App. at 417 (2). 10 (Emphasis supplied.) Id. 11 See id. at 418 (2). 6  “house rules” is insufficient, under Georgia law, to impose upon the Ghalis a special relationship of control over Basil: “this is not the control envisioned under the law; otherwise, every parent, owner of realty, or landlord would find themselves in a special relationship of control with an adult living under their roof.”12 Accordingly, the trial court erred by denying the Ghalis’ motion for summary judgment. 2. Our holding in Division 1 renders moot the Ghalis’ argument that the trial court erred by finding that the plaintiffs may be entitled to recover under the pecuniary loss rule. Judgment reversed. McFadden, C. J., and Rickman, J., concur. 12 Id. (reversing the denial of summary judgment to father who provided his son with a place to live and truck and could have conditioned staying at house on surrender of guns because the father did not have son in his physical custody, did not take charge of him, could not force him to take his medication, and had obtained an involuntary commitment order over him). 7

2020-12-01 21:00:30.61727+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:20-1119:J:PerCuriam:aut:T:npDp:N:2621285:S:0

NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Submitted November 18, 2020 Decided December 1, 2020 Before DIANE S. SYKES, Chief Judge MICHAEL S. KANNE, Circuit Judge DIANE P. WOOD, Circuit Judge No. 20-1119 UNITED STATES OF AMERICA, Appeal from the United States District Plaintiff-Appellee, Court for the Northern District of Illinois, Eastern Division. v. No. 1:17-CR-00299(1) TIMOTHY DORSEY, John J. Tharp, Jr., Defendant-Appellant. Judge. ORDER Timothy Dorsey operated a sex-trafficking ring in which his workers, adult men, would perform sexual acts on customers during erotic massages. He pleaded guilty to two counts of knowingly transporting individuals across state lines to engage in prostitution in violation of 18 U.S.C. § 2421 . The judge sentenced him to 120 months in prison. Dorsey appeals and argues that his sentence, which exceeded the high end of the Guidelines range by 79 months, is substantively unreasonable. The judge appropriately found the Sentencing Guidelines “grossly inadequate” to represent the objectives of 18 U.S.C. § 3553 (a) and reasonably justified the above-Guidelines sentence, so we affirm. No. 20-1119 Page 2 From 2011 to 2015, Timothy Dorsey ran a Chicago-based sex-trafficking operation that sent his workers across the country. Dorsey sold the workers for sex by posting online advertisements that offered sensual and erotic massages. Dorsey booked the appointments, informed customers what commercial sex acts his workers would provide, set the prices customers would pay, and coordinated transportation and lodging for his workers. He also collected half the proceeds. According to his workers, Dorsey physically and emotionally abused them and threatened to kill anyone who performed sex work outside the operation. In 2015 Dorsey pleaded guilty to a state pimping charge in Georgia and was incarcerated for almost a year. While in custody he attempted to run his operation by sending postcards to his workers with instructions on how to continue meeting with customers. After his release he was rearrested in Georgia in late 2016 on charges (later dismissed) of pimping and trafficking a female worker. In May 2017 Dorsey was indicted by a grand jury in the Northern District of Illinois on five counts of transporting individuals across state lines to engage in prostitution in violation of 18 U.S.C. § 2421 . Several months later he was indicted in the Middle District of Georgia under the same statute on another count. This indictment was transferred to the Northern District of Illinois. See FED R. CRIM. P. 20. Dorsey pleaded guilty to two counts of transporting individuals across state lines to engage in prostitution. The presentence report recommended a Guidelines range of 24 to 30 months in prison. At sentencing the government pushed for an above-Guidelines sentence of 8 to 10 years in prison to reflect, among other things, Dorsey’s role in the murder of Philip Scheau, one of his former workers. The government presented evidence that Scheau was shot and killed at Dorsey’s direction by one of his workers in a motel parking lot in February 2015—several weeks after Scheau stopped working for Dorsey. The government played excerpts from the shooter’s videorecorded confession to police officers in which he explained that he killed Scheau at Dorsey’s order after Scheau left the operation and started posting his own advertisements for sex work. To corroborate the shooter’s confession, the government introduced cell-phone and credit-card records showing that Dorsey had rented a car and driven from Texas to Illinois (where Scheau was killed) with the shooter around the time of the murder. The government also presented surveillance video of a car identical to Dorsey’s rental with the shooter being dropped off at the motel shortly before the murder. No. 20-1119 Page 3 After calculating the Guidelines range at 33 to 41 months, the judge deemed the range “grossly inadequate” to reflect the sentencing objectives of 18 U.S.C. § 3553 (a) and sentenced him to 120 months. An above-Guidelines sentence was justified, he explained, because of Dorsey’s long history of running his operation using manipulative and abusive tactics toward his victims, the actual danger that he presented to the public, and the risk for recidivism considering that he had continued to facilitate sex trafficking both during and after his Georgia incarceration. In addition, the judge found by a preponderance of the evidence that Dorsey initiated, planned, and directed Scheau’s murder. He acknowledged Dorsey’s mitigation arguments about his difficult childhood and older age (52) but concluded that none of the arguments warranted a lower sentence. The judge also determined that despite Dorsey’s admissions in the plea agreement, he had not fully accepted responsibility for his conduct based on ambivalent statements he made to the probation officer. (He told the probation officer that his business provided “legal companionship to lonely people” and that he turned a “blind eye” to his employees who performed sexual acts.) On appeal Dorsey challenges his above-Guidelines sentence on the ground that the judge focused too narrowly on his role in Scheau’s murder. Rather than address the nature and circumstances surrounding the interstate trafficking offenses for which he pleaded guilty, he asserts that the judge “focused entirely” on his involvement with Scheau’s murder—conduct for which he had not been indicted. Further, his case differs from other cases in which courts apply above-Guidelines sentences for uncharged violent conduct because no violence had been traced to him; the government never argued that he pulled the trigger and killed Scheau. Dorsey misapprehends the basis of the court’s sentence. As the judge explained, “[t]his is not a sentence for murdering Phillip Scheau. This is the sentence you deserve for committing the prostitution crimes that you’ve been charged with and convicted [of].” The judge concluded that the Guidelines range did not encapsulate the full scope of Dorsey’s conduct and his involvement in violent acts and that an above-Guidelines sentence was warranted. See United States v. Gill, 824 F.3d 653 , 665–66 (7th Cir. 2016). Primary in the judge’s determination was the abuse and manipulation that Dorsey imposed in his day-to-day operation of his business. The judge highlighted the nature and circumstances of the charged offenses, particularly Dorsey’s long and undisputed history of running his sex-trafficking operation, his manipulating and threatening tactics toward his victims, the many people involved, and his efforts to conceal the operation and obstruct law enforcement. Although Dorsey did not have an extensive criminal record, the judge pointed out that the year he spent in prison for a pimping No. 20-1119 Page 4 charge did not deter him from sex trafficking. Further, Dorsey’s aloof comments to the probation officer belied acceptance of responsibility for the charged offenses. And while the judge did not “focus entirely” on Dorsey’s role in Scheau’s murder, he did consider it an aggravating factor. This is permissible. Courts may consider relevant, uncharged conduct when imposing a sentence so long as the conduct is proved by a preponderance of the evidence. United States v. Holton, 873 F.3d 589 , 591– 92 (7th Cir. 2017). He had little difficulty concluding that the government had met this burden in the case of Scheau’s murder and that a higher sentence was needed to protect the public. Lastly, Dorsey’s denial that he committed “actual violence” is specious; whether he pulled the trigger does not undermine the judge’s determination that he orchestrated the murder and that it had been carried out at his command. Dorsey also asserts that the judge erred by not giving more weight to his arguments in mitigation, primarily concerning his difficult childhood. He notes that his mother died when he was a toddler, his father did not play an active role in his life, he had a difficult time in foster care, and he was sexually abused by an adult at his work when he was 14. The judge considered these arguments but reasonably concluded that a lesser sentence was not warranted. As a preliminary matter, Dorsey likely waived any procedural challenge by not responding to the judge’s inquiry about whether he had sufficiently addressed his principal arguments in mitigation. See United States v. Donelli, 747 F.3d 936 , 940–41 (7th Cir. 2014); United States v. Garcia-Segura, 717 F.3d 566 , 568–69 (7th Cir. 2013). In any event, the judge reasonably rejected his arguments in mitigation. As the judge explained, despite Dorsey’s background, he “clearly has a lot going for him”—he graduated high school, became a sergeant in the military, and has no documented substance-abuse or mental-health issues—yet he still spent years operating and profiting from his sex-trafficking ring. AFFIRMED

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http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:19-3038:J:Kanne:aut:T:fnOp:N:2621162:S:0

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 19-3038 JAMES A. DONALD, Plaintiff-Appellant, v. WEXFORD HEALTH SOURCES, INC., ANTHONY CARTER, and KURT OSMUNDSON, Defendants-Appellees. ____________________ Appeal from the United States District Court for the Central District of Illinois. No. 16-1481 — James E. Shadid, Judge. ____________________ ARGUED OCTOBER 2, 2020 — DECIDED DECEMBER 1, 2020 ____________________ Before RIPPLE, KANNE, and HAMILTON, Circuit Judges. KANNE, Circuit Judge. When James Donald entered prison, he had two eyes. Now he has one. The immediate cause of the loss of his left eye was an aggressive bacterial infection, but Donald argues that the substandard care of two prison doc- tors is to blame. He sued the doctors (and one of their employ- ers) for deliberate indifference under the Eighth Amendment and medical malpractice under Illinois law. The district court 2 No. 19-3038 granted summary judgment in favor of the defendants on the federal claims and one of the malpractice claims. It then relin- quished jurisdiction over the remaining state-law claims. We agree that summary judgment was proper because (1) the undisputed evidence shows that the defendants did not act with deliberate indifference toward an objectively se- rious medical condition and (2) the district court appropri- ately exercised supplemental jurisdiction to dispose of the malpractice claim. We therefore affirm the district court. I. BACKGROUND James Donald has an unfortunate ocular history. He has glaucoma, a common condition that causes increased pres- sure in the eyes, and he also has keratoconus, a thinning of the cornea that causes distorted vision. And, to treat his kerato- conus, Donald had left-eye corneal transplant surgery in 2011. A few years later, Donald was convicted of drug crimes, and he began his prison sentence at Illinois River Correctional Facility in Canton, Illinois, in September 2014. Before long, his eye problems started flaring up, causing redness and poor vi- sion. So he went to see one of Illinois River’s optometrists, Dr. Anthony Carter, on October 2, 2014. 1 Dr. Carter examined Donald, noted that his corneal transplant “looked excellent,” and referred him to Illinois Eye Center in Peoria for an evalu- ation and a fitting for the contact lens he wore in his left eye. Per Dr. Carter’s referral, Donald went to Illinois Eye Cen- ter on October 27, 2014, and saw Dr. Steven Sicher, an 1 Dr. Carter was employed by an entity called Eye Care Solutions, which subcontracts with Defendant Wexford Health Sources, Inc., to pro- vide care to Illinois River inmates. It is not a party to this case. No. 19-3038 3 ophthalmologist who specializes in the cornea and external diseases. Dr. Sicher assessed Donald’s corneal transplant and found that it was doing well with no signs of graft rejection. Donald also had normal intraocular pressure. Dr. Sicher rec- ommended no changes in care and suggested that Donald continue using eye drops. He also suggested that Donald see the physician who performed his corneal transplant surgery, Dr. Catharine Crockett, “in four months.” He did not recom- mend that Donald see Dr. Crockett for any particular reason other than for “follow-up maintenance of [his] corneal trans- plant and keratoconus” because “continuity of care is im- portant.” Dr. Sicher also recommended that the prison con- tinue to obtain Donald’s contact lenses; apparently, he did not realize that part of the reason Donald had been sent to him was to obtain the prescription for those lenses. When Donald returned to Illinois River, Dr. Carter did not schedule a follow-up appointment with Dr. Crockett because he didn’t think it was necessary; both he and Dr. Sicher had concluded that Donald’s eye conditions were stable. And be- cause Dr. Sicher did not provide Donald’s contact prescrip- tion, Donald filled out a records release form, and Dr. Carter received Donald’s prescription on November 25, 2014. He ap- proved a supply of lenses the next week and then attempted to contact Dr. Crockett’s office to process the order. But de- spite several attempts and “many calls and letters,” his staff could not get ahold of Dr. Crockett. Strangely, during this same period, the Illinois Depart- ment of Corrections received a letter from Dr. Crockett stress- ing the importance of proper treatment and medication for Donald’s corneal transplant. The letter also indicated that Donald needed a contact lens “for vision in his left eye.” 4 No. 19-3038 Donald had apparently told his family that he wasn’t getting proper care, and his family told Dr. Crockett. There is no dep- osition from Dr. Crockett in the record and no evidence that she knew the prison was attempting to get in touch with her or obtain new contacts for Donald. In any event, Donald fi- nally received new lenses in February 2015. When Donald visited Dr. Carter again in May 2015, his eye pressure had increased because of his glaucoma, so Dr. Carter approved a refill of his eye-pressure medication. Dr. Carter continued to monitor Donald’s eye pressure and supply med- ication over the next two months. By July 30, Donald’s eye pressure had improved significantly. On September 17, 2015, Donald reported that his left eye had been red for two weeks, without irritation. Upon exami- nation, Dr. Carter saw that the vision in Donald’s left eye had improved and his corneal transplant was stable, but he also had a papillary reaction—an allergic or histamine response that causes bumps to form under the eyelids. Dr. Carter diag- nosed allergic conjunctivitis in Donald’s left eye and sus- pected that it was caused by either Donald’s eye drops or con- tact lens solution. Dr. Carter instructed Donald to stop using his contacts for a few days to see if his condition improved. A week later, on September 24, 2015, Donald’s eye was still red, still without irritation. Dr. Carter did not suspect corneal rejection because the redness was generalized rather than concentrated around the cornea. Donald’s eye pressure had also continued to improve, his transplant looked good, and there were no signs of infection. He changed Donald’s eye drops to see if they were causing the reaction and told Donald to come back the next month. That was the last time Donald saw Dr. Carter. No. 19-3038 5 On October 19, 2015, Donald saw Dr. Kurt Osmundson for the first time. Dr. Osmundson is a doctor of osteopathic med- icine and is employed by Defendant Wexford Health Sources, Inc. (“Wexford”), which provides medical care to inmates at Illinois prisons. At this visit, Donald complained about in- creased pain and decreased vision. His left eye was cherry red in color, and he noticed some “matter in his eye.” Dr. Os- mundson, who was aware of Donald’s ocular history, diag- nosed a corneal ulcer and made an urgent referral to an offsite ophthalmologist. Donald was immediately transferred to Illinois Eye Cen- ter, but no ophthalmologists were in the office that day. In- stead, an optometrist, 2 Dr. Jacqueline Crow, examined Don- ald’s eye and observed redness, swelling, and poor vision. Be- cause she was not a cornea specialist, she called Dr. Sicher to discuss her observations. 3 Dr. Sicher concluded that Donald’s symptoms were more consistent with a corneal graft rejection than an ulcer. Based on her consultation with Dr. Sicher, Dr. Crow entered a diagnosis of corneal graft rejection. She also recommended that Donald change eye drops and that he re- turn to see Dr. Evan Pike, an ophthalmologist and cornea spe- cialist, in two or three days. When Donald returned to Illinois River—and following Dr. Crow and Dr. Sicher’s diagnosis and recommendations— Dr. Osmundson immediately ordered the change in eye drops 2 Optometrists provide routine eye care and, unlike ophthalmologists, are not medical doctors. 3Dr. Crow first asked the transporting guards if they could move Donald to the office where Dr. Sicher was located, but the request was denied. The record does not reflect who denied the request. 6 No. 19-3038 and scheduled the follow-up appointment with Dr. Pike. He also admitted Donald to the infirmary so he could be moni- tored in the meantime. A few days later, on October 22, 2015, Dr. Pike examined Donald and diagnosed a left-eye corneal ulcer caused by a bacterial infection. He could not determine if the infection and the previously diagnosed graft rejection were related, but in any event, he was forced to treat both conditions at the same time. He therefore ordered antibiotic drops to treat the infec- tion and steroid drops to treat the graft rejection. He asked Donald to return in five to seven days after the medication had some time to kick in. That day, Dr. Osmundson wrote the order recommended by Dr. Pike, and the record indicates that Donald received the prescribed eye drops from a nurse that evening. 4 Over the next three days, Donald reported that he had no vision, yellow drainage, and immense pain, all in his left eye. By October 26, nursing staff confirmed increased pain, bleed- ing, and drainage. Nurses contacted Dr. Osmundson, who di- rected them to call Illinois Eye Center for instructions. Donald was immediately transferred there and seen by Dr. Sicher. Dr. Sicher diagnosed a rupture of the globe: “the corneal graft had come off and … there was a wide opening in the front of his eye with protrusion of iris and intraocular con- tents through the opening in the front of his eye.” This was, in Dr. Sicher’s words, “an irreversible loss of vision. It’s basically a disaster.” Dr. Sicher performed surgery to remove Donald’s 4The nurse and Donald both confirmed this in their depositions, and the nurse documented delivery of the medication that day. Donald’s claim on appeal that he did not promptly receive eye drops is unsupported. No. 19-3038 7 left eye. After surgery, pathological tests revealed that the in- fection that led to the ruptured globe was caused by pseudo- monas aeruginosa, bacteria that can act very quickly and cause perforation in as few as seventy-two hours. On December 16, 2016, Donald sued Dr. Carter, Dr. Os- mundson, and Wexford. He brought claims under 42 U.S.C. § 1983 for deliberate indifference to a serious medical need in violation of the Eighth Amendment and for medical malprac- tice under Illinois law. During discovery, the defendants jointly submitted an ex- pert report from Dr. Lisa Nijm, an ophthalmologist and cor- nea specialist, who opined that, to a reasonable degree of medical certainty, the earliest indication of a possible corneal rejection or infection would have appeared on October 18, 2015, three weeks after Donald had last seen Dr. Carter. She also explained that there was appropriate monitoring and treatment of Donald’s symptoms at all times prior to his in- fection and that there is no connection between glaucoma (or its treatment) and the development of an ulcer. Dr. Carter also submitted an expert report from Dr. Julie DeKinder, an optometrist, who explained that (1) Dr. Carter’s treatment was appropriate and within the standard of care, (2) an optometrist is qualified to treat a patient exhibiting Donald’s symptoms and would not be expected to refer a pa- tient with those symptoms to an ophthalmologist, (3) Dr. Carter’s diagnosis of allergic conjunctivitis was consistent with Donald’s symptoms at the time, (4) there was no evi- dence that Donald was suffering from a corneal infection or rejection at any time that he saw Dr. Carter, and (5) the serious condition that resulted in Donald’s eye loss was unrelated to the conditions managed by Dr. Carter. 8 No. 19-3038 Donald also engaged an expert, Dr. Melvin Ehrhardt, but his testimony was limited to “managing inmate care” and “coordinated care and communication within a prison set- ting.” He was not admitted as an expert in optometry, oph- thalmology, corneal transplants, keratoconus, or corneal ul- cers. Dr. Ehrhardt opined that Donald showed signs of infec- tion and graft rejection and that the defendants breached the standard of care by, among other things, failing to promptly refer Donald to a specialist and failing to provide medications on a timely basis. After discovery, the defendants moved for summary judg- ment. The district court granted the defendants’ motions with respect to the deliberate indifference claims and exercised its supplemental jurisdiction to grant summary judgment on the malpractice claim against Dr. Carter. The court relinquished jurisdiction over the remaining state-law claims against Dr. Osmundson and Wexford. Donald then filed this appeal. II. ANALYSIS We review the district court’s order granting summary judgment de novo. Flexible Steel Lacing Co. v. Conveyor Accesso- ries, Inc., 955 F.3d 632 , 643 (7th Cir. 2020) (citing Ga.-Pac. Con- sumer Prods. LP v. Kimberly-Clark Corp., 647 F.3d 723 , 727 (7th Cir. 2011)). “Summary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(a)). “A genuine dispute of material fact exists if ‘the evidence is such that a reasonable jury could return a ver- dict for the nonmoving party.’ We ‘consider all of the evidence in the record in the light most favorable to the non-moving party, and we draw all reasonable inferences from that evi- dence in favor of the party opposing summary judgment.’” No. 19-3038 9 Dunn v. Menard, Inc., 880 F.3d 899 , 905 (7th Cir. 2018) (first quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 (1986); and then quoting Feliberty v. Kemper Corp., 98 F.3d 274 , 276–77 (7th Cir. 1996)). Donald’s primary contention on appeal is that the district court erred in granting summary judgment on his § 1983 claims for deliberate indifference to a serious medical condi- tion in violation of the Eighth Amendment. “‘[D]eliberate in- difference to serious medical needs’ of a prisoner constitutes the unnecessary and wanton infliction of pain forbidden by the Constitution.” Rodriguez v. Plymouth Ambulance Serv., 577 F.3d 816 , 828 (7th Cir. 2009) (quoting Estelle v. Gamble, 429 U.S. 97 , 104 (1976)). To succeed on his claims, Donald “must estab- lish ‘(1) an objectively serious medical condition; and (2) an official’s deliberate indifference to that condition.’” Gomez v. Randle, 680 F.3d 859 , 865 (7th Cir. 2012) (quoting Arnett v. Web- ster, 658 F.3d 742 , 750, 751 (7th Cir. 2011)). The first, objective element is satisfied by showing that the plaintiff suffered from a condition “that ‘has been diagnosed by a physician as mandating treatment or one that is so obvi- ous that even a lay person would perceive the need for a doc- tor’s attention.’” Gayton v. McCoy, 593 F.3d 610 , 620 (7th Cir. 2010) (quoting Hayes v. Snyder, 546 F.3d 516 , 522 (7th Cir. 2008)). The second element of “[d]eliberate indifference is proven by demonstrating that a prison official knows of a sub- stantial risk of harm to an inmate and ‘either acts or fails to act in disregard of that risk.’” Gomez, 680 F.3d at 865 (quoting Arnett, 658 F.3d at 750 ). This has been called a “high hurdle,” Rosario v. Brawn, 670 F.3d 816 , 821 (7th Cir. 2012), and an “ex- acting” standard, Johnson v. Doughty, 433 F.3d 1001 , 1018 n.6 (7th Cir. 2006) (citing Snipes v. DeTella, 95 F.3d 586 , 591 (7th 10 No. 19-3038 Cir. 1996)); it requires “something approaching a total uncon- cern for the prisoner’s welfare in the face of serious risks,” Ro- sario, 670 F.3d at 821 (quoting Collins v. Seeman, 462 F.3d 757 , 762 (7th Cir. 2006)). A defendant must make a decision that represents “such a substantial departure from accepted pro- fessional judgment, practice, or standards, as to demonstrate that the person responsible actually did not base the decision on such a judgment.” Sain v. Wood, 512 F.3d 886 , 895 (7th Cir. 2008) (quoting Collignon v. Milwaukee County, 163 F.3d 982 , 988 (7th Cir. 1998)). With this framework in mind, we analyze Donald’s claims against each defendant in turn. A. Claims Against Dr. Carter The district court granted summary judgment in favor of Dr. Carter on Donald’s deliberate indifference claim because Donald did not have an objectively serious medical condition while in Dr. Carter’s care and because Dr. Carter provided ad- equate treatment. The court also exercised its supplemental jurisdiction to grant summary judgment in favor of Dr. Carter on Donald’s Illinois tort claim. While some of our reasoning differs, we agree with the district court’s order granting sum- mary judgment in favor of Dr. Carter. 1. Deliberate Indifference The district court granted summary judgment in favor of Dr. Carter on Donald’s deliberate indifference claim for two reasons. First, the court found that Donald failed to show that he suffered from a serious medical condition. The court ex- plained that conjunctivitis is not a serious medical condition, and “no qualified medical expert or medical provider has pro- vided evidence [that Donald] suffered from anything other No. 19-3038 11 than conjunctivitis in September of 2015” or that conjunctivi- tis was linked to the loss of Donald’s eye. Second, the district court found that even if conjunctivitis were a serious condi- tion, Donald offered no evidence to show that Dr. Carter’s treatment represented a “substantial departure from accepted professional judgment, practice, or standards” such that it would amount to deliberate indifference. Id. (quoting Col- lignon, 163 F.3d at 988). We do not completely agree with the district court’s first conclusion. Although other courts have found that conjuncti- vitis alone is not a serious medical condition, see Potter v. Dep- uty Att’ys Under Abraham, 304 Fed. App’x 24, 28 (3d Cir. 2008), Donald did not have conjunctivitis alone. It’s true that Donald generally lacks medical testimony from a qualified expert to establish that he had an objectively serious condition while in Dr. Carter’s care. But the conclusion that Donald did not suf- fer “from anything other than conjunctivitis” at the relevant time somewhat oversimplifies the matter. It is undisputed that, since before entering prison, Donald suffered from glaucoma and keratoconus, the latter of which was treated with a corneal transplant. Add those ailments to the conjunctivitis later diagnosed by Dr. Carter, and it’s clear that Donald’s eye condition was more complex than your av- erage patient’s. And it’s possible that the combination of these afflictions created a condition serious enough to satisfy the objective requirement of a deliberate indifference claim. Gay- ton, 593 F.3d at 620 (“A medical condition need not be life- threatening to be serious; rather, it could be a condition that would result in further significant injury or unnecessary and wanton infliction of pain if not treated.”). 12 No. 19-3038 In fact, we have previously indicated—albeit in an un- published order—that glaucoma “is manifestly a sufficiently serious medical condition to satisfy the objective element of the deliberate indifference standard.” O’Banner v. Bizzell, 151 F.3d 1033 , *2 (7th Cir. 1998) (nonprecedential). Keratoconus, too, has been found to be a serious medical condition. See Nunez v. Spiller, No. 15-CV-00514-SMY, 2015 WL 3419513 , at *2 (S.D. Ill. May 28, 2015); Marshall v. Nickel, No. 06-C-617-C, 2007 WL 5582139 , at *5 (W.D. Wis. Jan. 29, 2007). And the same goes for a stable corneal transplant. Spencer v. Kokor, No. 117CV00597LJOJLTPC, 2018 WL 1305742 , at *3 (E.D. Cal. Mar. 13, 2018); see Henley v. Richter, No. 11-CV-89, 2013 WL 1288035 , at *12 (E.D. Wis. Mar. 26, 2013) (“[Defendants] con- cede that [Plaintiff’s] corneal transplant constitutes a serious medical need … .”). In addition, some evidence in the record supports that Donald’s eye afflictions required ongoing monitoring, if not actual treatment, which indicates a serious medical condition. Gayton, 593 F.3d at 620 . For example, the letter from Dr. Crockett advised that Donald needed to be “regularly as- sessed for any transplant rejection,” and Dr. Carter sent Don- ald to an outside ophthalmologist for an evaluation. Though Donald failed to put forth expert testimony estab- lishing that he had an objectively serious condition while in Dr. Carter’s care, and such testimony would have been bene- ficial, Donald had an undoubtedly unique combination of eye conditions, most of which have been deemed objectively seri- ous even in isolation. We therefore assume without deciding that Donald had a serious medical condition while in Dr. Carter’s care. See Bone v. Drummy, No. 2:12-CV-80-WTL- WGH, 2014 WL 3566576 , at *4 (S.D. Ind. July 18, 2014) No. 19-3038 13 (“[P]reexisting and underlying eye issues,” including g lau- coma and keratoconus, “are objectively serious medical con- cerns.”). But that’s only half the inquiry. Donald must also show that Dr. Carter acted with deliberate indifference toward the risk posed by that serious condition. Arnett, 658 F.3d at 750 . And we agree with the district court’s second conclusion that Donald did not show that Dr. Carter acted with deliberate in- difference. The evidence compels this conclusion. Expert testimony established that Donald’s symptoms while in Dr. Carter’s care—generalized redness with no irritation—were con- sistent with Dr. Carter’s diagnosis of conjunctivitis. Expert testimony also established that optometrists like Dr. Carter are qualified to treat conjunctivitis, along with a stable corneal transplant and glaucoma, and that Dr. Carter acted within his duty of care when treating these conditions. Indeed, the rec- ord shows that Dr. Carter successfully treated Donald’s glau- coma by reducing his eye pressure and continually monitored the status of his corneal transplant. And expert testimony es- tablished that any indication of corneal rejection or infection would have appeared no earlier than October 18, 2015—three weeks after Dr. Carter last saw Donald—so Dr. Carter could not have known about, let alone disregarded, the risk of harm posed by these other ailments. Donald marshalled no expert testimony to contradict the above evidence that Dr. Carter appropriately monitored and treated Donald’s various eye conditions. The one expert Don- ald did retain, Dr. Ehrhardt, was admitted to opine only on “coordinated care and communication within a prison set- ting.” But the district court made clear that Dr. Ehrhardt “is 14 No. 19-3038 not qualified to testify as an optometrist or ophthalmologist concerning specific eye care or conditions,” so his testimony cannot support Donald’s assertions that his symptoms “were consistent with graft rejection or infection of the eye” or that Dr. Carter should have referred Donald to a “qualified corneal specialist physician in light of the complexity of his condi- tion.” We therefore reject Dr. Ehrhardt’s inadmissible state- ments concerning supposed signs of infection or graft rejec- tion and the need for Dr. Carter to promptly refer Donald to a cornea specialist or provide certain medications. See Lewis v. CITGO Petroleum Corp., 561 F.3d 698 , 704 (7th Cir. 2009) (“To defeat a summary judgment motion, … a party may rely only on admissible evidence. This rule applies with equal vigor to expert testimony.” (citing, among other cases, Porter v. White- hall Labs., Inc., 9 F.3d 607 , 612 (7th Cir. 1993))). Given his lack of admissible expert testimony, Donald re- sorts to arguing about the delay in receiving his contact lenses, which he attributes to Dr. Carter. First off, the record shows that Dr. Crockett’s office, not Dr. Carter, was the cause of the delay. At any rate, Donald also fails to explain how that delay is relevant or how it had anything to do with his later eye problems. Worse, Donald borders on misrepresenting the record by repeatedly suggesting that these lenses were “pre- scribed to treat his serious eye condition” and that he “could lose the corneal transplant if the lens … was not supplied.” Those unfounded assertions stem from a mistaken assump- tion made by Dr. Ehrhardt, but Dr. Crockett’s letter explained that the lenses were merely for improved vision: “[Donald] only sees adequately at distance with a myopic contact lens, so if you wish this patient to see anything or not be considered legally blind, you will supply him with the contact lens that he requires for vision in his left eye.” What’s more, Dr. Nijm No. 19-3038 15 confirmed that wearing a contact lens only increases a patient’s risk of developing a corneal ulcer. All of this evidence shows that Dr. Carter did not act with deliberate indifference to any of Donald’s conditions. The dis- trict court therefore appropriately granted summary judg- ment in favor of Dr. Carter on Donald’s deliberate indiffer- ence claim. 2. Medical Malpractice Next, we must determine whether the district court properly exercised supplemental jurisdiction over Donald’s remaining state-law malpractice claim against Dr. Carter. Here, too, we apply de novo review. Groce v. Eli Lilly & Co., 193 F.3d 496 , 499–500 (7th Cir. 1999). When “the federal claim in a case drops out before trial,” a district court usually “relinquish[es] jurisdiction over any supplemental claim to the state courts.” Leister v. Dovetail, Inc., 546 F.3d 875 , 882 (7th Cir. 2008) (citing Brazinski v. Amoco Pe- troleum Additives Co., 6 F.3d 1176 , 1182 (7th Cir. 1993)). But “ju- dicial economy, convenience, fairness and comity may point to federal retention of state-law claims … when it is absolutely clear how the pendent claims can be decided.” Wright v. Asso- ciated Ins. Cos. Inc., 29 F.3d 1244 , 1251 (7th Cir. 1994). “Here, as in any medical malpractice action, [Donald] had the burden of establishing, through expert testimony, the standard of care applicable to [Dr. Carter], to identify the un- skilled or negligent manner in which [Dr. Carter] deviated from that standard, and show a causal connection between that deviation and the injuries sustained.” Jones v. Chi. Osteo- pathic Hosp., 738 N.E.2d 542 , 547 (Ill. App. 2000) (citing Purtill 16 No. 19-3038 v. Hess, 489 N.E.2d 867 , 872 (Ill. 1986); Lloyd v. County of Du Page, 707 N.E.2d 1252 , 1258 (Ill. App. 1999)). “The general rule is that expert testimony is required to establish” the above elements. Prairie v. Univ. of Chi. Hosps., 698 N.E.2d 611 , 615 (Ill. App. 1998). But Donald has no experts competent to testify about the standard of care for an optom- etrist, how Dr. Carter breached that standard, or how that breach caused Donald’s injuries. Nor does he have any evi- dence to rebut the expert testimony that optometrists like Dr. Carter are qualified to evaluate and treat a stable corneal transplant, glaucoma, and conjunctivitis, and that Dr. Carter rendered appropriate care with respect to these conditions. And as explained, Donald lacks evidence that he showed any symptoms of an infection or a graft rejection at any point while in Dr. Carter’s care, or even that such symptoms could have been present at that time. Donald relies heavily on Dr. Ehrhardt’s opinions, but again, these are largely inadmissible. To the extent his opin- ions are limited to the topic on which he was admitted to tes- tify—“coordinated care and communication within a prison setting”—they mean nothing without admissible expert testi- mony that Donald’s condition required more than what Dr. Carter provided or that Donald’s condition at that time was connected to his eventual eye loss. Donald also argues that Dr. Carter was negligent by fail- ing to speedily procure new contact lenses and failing to fol- low Dr. Sicher’s advice to schedule follow-up appointments with Dr. Crockett every four months. We have already re- jected the first of these arguments. As for the second, Dr. Sicher never recommended that Donald see Dr. Crockett every four months; he suggested scheduling one appointment “in No. 19-3038 17 four months” for general “continuity of care” purposes. Nei- ther Dr. Sicher nor Dr. Carter saw any problems with Don- ald’s transplant at the time, and Donald offers no admissible evidence that Dr. Carter’s failure to schedule that check-up somehow breached the standard of care or caused Donald’s eye loss a year later. He simply asserts that Dr. Carter was not qualified to provide routine post-operative care, but this is not supported by any testimony from an optometrist or ophthal- mologist and is, in fact, flatly contradicted by Dr. DeKinder. Given this dearth of evidence, expert or otherwise, Donald cannot prove the elements of an Illinois medical malpractice claim. It is thus “absolutely clear” that summary judgment was appropriate on Donald’s malpractice claim against Dr. Carter in addition to the deliberate indifference claim. Wright, 29 F.3d at 1251 . B. Claims Against Dr. Osmundson The district court dismissed Donald’s deliberate indiffer- ence claim against Dr. Osmundson because Donald lacked ev- idence showing that Dr. Osmundson acted with deliberate in- difference. Again, we agree with the district court. There is no dispute that by the time Donald first saw Dr. Osmundson on October 19, 2015, Donald had developed an objectively serious medical condition. The question is whether Dr. Osmundson responded to that condition with deliberate indifference. An overview of Dr. Osmundson’s actions shows that he was not deliberately indifferent to Donald’s condition. First, he referred Donald to a specialist on an urgent basis the first time he examined him. He next carried out every recommen- dation made by Dr. Crow (in consultation with Dr. Sicher) 18 No. 19-3038 and admitted Donald to the infirmary to be monitored. Then, after Donald saw Dr. Pike, Dr. Osmundson executed each of his recommendations. And when he was informed that Don- ald’s condition had deteriorated, he instructed nurses to con- tact Illinois Eye Center, and Donald was transferred there im- mediately. In short, Dr. Osmundson urgently referred Donald to an outside specialist at the first opportunity and approved every recommendation made by a specialist thereafter. Donald strains to make Dr. Osmundson’s above actions look like “‘something approaching a total unconcern’ for [Donald’s] welfare.” Rosario, 670 F.3d at 822 (quoting Collins, 462 F.3d at 762 ). His argument goes something like this: sure, Dr. Osmundson urgently referred Donald to an ophthalmol- ogist, but Donald only saw an optometrist; Dr. Osmundson must have known that his order was not carried out and should have ensured that it was; he should not have “blindly accepted” Dr. Crow’s graft-rejection “misdiagnosis,” which delayed Donald’s treatment and led to the loss of his eye; and he didn’t personally guarantee that Donald received the eye drops that Dr. Pike recommended. The first problem with these arguments is that there is no competent evidence to support them. Dr. Osmundson testi- fied that he did not know Donald had not seen an ophthal- mologist. Donald’s assertion that a jury could find otherwise is empty, and in any event, Dr. Crow consulted with Dr. Sicher—an ophthalmologist—before rendering a diagnosis. The record reflects that Donald did, in fact, timely receive the eye drops that Dr. Osmundson prescribed. And the unrebut- ted expert testimony establishes that Dr. Osmundson acted appropriately in following the recommendations and diagno- sis received from other doctors. No. 19-3038 19 Second, as a legal matter, Donald’s argument that Dr. Os- mundson should have done more than “blindly accept” spe- cialists’ recommendations is unavailing. To be sure, “[d]elib- erate indifference may occur where a prison official, having knowledge of a significant risk to inmate health or safety, ad- ministers ‘blatantly inappropriate’ medical treatment, acts in a manner contrary to the recommendation of specialists, or delays a prisoner’s treatment for non-medical reasons, thereby exacerbating his pain and suffering.” Perez v. Fenoglio, 792 F.3d 768 , 777 (7th Cir. 2015) (citations omitted) (quoting Edwards v. Snyder, 478 F.3d 827 , 831 (7th Cir. 2007)) (citing Arnett, 658 F.3d at 753 ; McGowan v. Hulick, 612 F.3d 636 , 640 (7th Cir. 2010)). But Donald points to no authority for the proposition that a doctor who follows the advice of a specialist, in circumstances like these, exhibits deliberate indifference. Perhaps Donald could survive summary judgment if he had evidence that Dr. Osmundson knew that the advice he received from Drs. Crow, Sicher, or Pike was “blatantly inap- propriate” and carried it out anyway. Pyles v. Fahim, 771 F.3d 403 , 412 (7th Cir. 2014). But Donald has no such evidence, so he cannot fault Dr. Osmundson for following their recom- mendations. Nor can Dr. Osmundson be liable under a theory that he didn’t micromanage his nurses closely enough. “[N]othing in the record suggests that [any] nurse was anything less than attentive to [Donald’s] condition.” Gilman v. Amos, 445 F. App’x 860, 864 (7th Cir. 2011) (nonprecedential). Regardless, Dr. Osmundson could be liable only if he “kn[e]w about the conduct and facilitate[d] it, approve[d] it, condone[d] it, or turn[ed] a blind eye for fear of what [he] might see.” Jones v. City of Chicago, 856 F.2d 985 , 992 (7th Cir. 1988). There is no 20 No. 19-3038 evidence that Dr. Osmundson knew of inadequate treat- ment—because there was none. We therefore conclude that summary judgment in favor of Dr. Osmundson was proper. C. Monell Claim Against Wexford Finally, we must determine whether the district court properly disposed of Donald’s claim against Wexford for de- liberate indifference under a Monell theory of liability. See Mo- nell v. New York City Dep’t of Soc. Servs., 436 U.S. 658 (1978) (local governments can be held liable for § 1983 violations where the constitutional deprivation results from policy or custom). The district court granted summary judgment in fa- vor of Wexford after concluding that Donald “failed to estab- lish an underlying constitutional violation.” “[W]e’ve held that the Monell theory of municipal liability applies in § 1983 claims brought against private companies that act under color of state law,” such as Wexford, where “‘an official with final policy-making authority’ acted for the cor- poration.” Whiting v. Wexford Health Sources, Inc., 839 F.3d 658 , 664 (7th Cir. 2016) (quoting Thomas v. Cook Cnty. Sheriff’s Dep’t, 604 F.3d 293 , 303 (7th Cir. 2009)). But “if the plaintiff’s theory of Monell liability rests entirely on individual liability,” as Donald’s does here, then “negating individual liability will automatically preclude a finding of Monell liability.” Id. We therefore agree that summary judgment in favor of Wexford was appropriate because Donald failed to establish a deliber- ate indifference claim against Dr. Osmundson individually. III. CONCLUSION For the above reasons, we AFFIRM the decision of the dis- trict court.

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https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/12/01/19-55084.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 1 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT WAYNE WILLIAM WRIGHT, No. 19-55084 Plaintiff-Appellant, D.C. No. 2:15-cv-05805-R-PJW v. CHARLES L. BECK; et al., MEMORANDUM* Defendants-Appellees. Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding Argued and Submitted April 1, 2020 Pasadena, California Before: PAEZ, CALLAHAN, and VANDYKE, Circuit Judges. Wayne Wright appeals the district court’s grant of summary judgment in favor of Defendants-Appellees on his Fourth Amendment claim brought under 42 U.S.C. § 1983.1 The district court concluded the individually named Defendants- Appellees were entitled to qualified immunity. Reviewing de novo, Mendiola– * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. 1 In a separately filed opinion, we address Wright’s Fourteenth Amendment due process claim. Because the facts and procedural history are outlined there, we need not recount them here. Martinez v. Arpaio, 836 F.3d 1239 , 1247 (9th Cir. 2016), we affirm. Although our decision in Brewster v. Beck, 859 F.3d 1194 , 1197 (9th Cir. 2017), may suggest that the government might violate the Fourth Amendment by interfering with one’s property even after conducting a lawful seizure, we decided Brewster three years after the allegedly unlawful conduct here. It thus fails to show the law was clearly established at the time the Los Angeles Police Department officers destroyed Wright’s firearms. Ashcroft v. al-Kidd, 563 U.S. 731 , 741 (2011) (stating law must be clearly established “at the time of the challenged conduct”). Our earlier cases also fail to show the law was “clearly established” because they involve different facts. See, e.g., Jessop v. City of Fresno, 936 F.3d 937 (9th Cir. 2019), pet. for cert. denied, 140 S. Ct. 2793 (May 18, 2020). For example, both United States v. Jacobsen, 466 U.S. 109 (1984), and Lavan v. City of Los Angeles, 693 F.3d 1022 (9th Cir. 2012), involved warrantless seizures, unlike here. Jacobsen, 466 U.S. at 113 , 120–21 & n.3 (1984); Lavan, 693 F.3d at 1032-33. We thus cannot conclude that the law was “clearly established” that the Fourth Amendment protected Wright’s interest against an unreasonable interference with his property.2 2 Because the law was not clearly established, we do not address whether Wright’s Fourth Amendment interest was violated. See Pearson v. Callahan, 555 U.S. 223 , 236 (2009). 2 AFFIRMED. 3

2020-12-01 21:00:33.422609+00

https://cdn.ca9.uscourts.gov/datastore/memoranda/2020/12/01/19-10221.pdf

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 1 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT UNITED STATES OF AMERICA, No. 19-10221 Plaintiff-Appellee, D.C. No. 4:19-cr-00179-JAS-EJM-2 v. SAMANTHA BELLE NUSS, AKA MEMORANDUM* Samantha Nuss, Defendant-Appellant. Appeal from the United States District Court for the District of Arizona James Alan Soto, District Judge, Presiding Submitted November 20, 2020** Phoenix, Arizona Before: BYBEE, MURGUIA, and BADE, Circuit Judges. Samantha Belle Nuss appeals her conviction and sentence for transporting illegal aliens for profit and conspiracy to transport illegal aliens for profit in violation of 8 U.S.C. § 1324 . We have jurisdiction pursuant to 28 U.S.C. § 1291 . * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). We affirm Nuss’s conviction and remand to the district court to conform the written judgment to the orally imposed sentence.1 1. Nuss challenges several of the district court’s evidentiary rulings. First, one of the aliens found in Nuss’s van testified that Farzana Washington, Nuss’s coconspirator, did not seem “surprised” when the aliens entered the van “because [Washington] already knew that she was going to pick [them] up.” Nuss argues that the district court erred in admitting this testimony because the witness had no foundation to testify whether Washington knew she was going to pick up the aliens. Because Nuss preserved this challenge, we review for abuse of discretion. United States v. Gadson, 763 F.3d 1189 , 1199 (9th Cir. 2014). We agree that the district court erred by admitting the alien’s testimony because there is no indication that he had any observations or experience on which to base a statement about Washington’s knowledge. See Fed. R. Evid. 602. The error, however, was harmless. It was an isolated remark about Washington, not Nuss, and overwhelming evidence supported the jury’s finding that Nuss knew about the scheme to transport illegal aliens: for example, one of the women signaled for the group to crouch down in the van; Nuss received a text message 1 The parties are familiar with the factual and procedural background of this matter. Therefore, we recite only those facts necessary for this disposition. 2 advising her of a checkpoint and referencing “refugees”; and the women sped off and led Border Patrol on a high-speed chase. Second, Nuss asserts that the district court improperly excluded her explanation of alleged coconspirator Mo Shellouff’s text message warning her about a checkpoint. She argues that this ruling was inconsistent with the district court’s admission of the alien’s testimony about whether Washington “knew” they were picking up the aliens. But she provides no analysis of this issue. The district court did not abuse its discretion by excluding this testimony. See Gadson, 763 F.3d at 1199. Third, Nuss argues that the district court erred by allowing the government to introduce testimony that one of the aliens in her van was a minor. Because she failed to object at trial, we review for plain error, United States v. Torralba- Mendia, 784 F.3d 652 , 658 (9th Cir. 2015), and we find no error. Contrary to Nuss’s assertion, the government violated neither the district court’s in limine order nor the parties’ pretrial agreement by failing to redact an unsolicited, offhand remark that one alien was a minor. Moreover, apart from a passing reference to “media coverage . . . about the separation of children from their parents at the border,” Nuss fails to explain why this evidence would have been inflammatory or confusing to a jury. Fourth, Nuss argues that the district court erred by admitting a text message 3 from Shellouff reading, “Morning sweetheart sorry I was busy,” because the message was irrelevant, hearsay, and unduly prejudicial. Because Nuss preserved this challenge, we review for abuse of discretion, Gadson, 763 F.3d at 1199, and find no error. The message was relevant as evidence of the close relationship between Nuss and a coconspirator. It was not hearsay because it “was not admitted for the truth of the matter asserted”—that Nuss and her coconspirator were in fact “sweethearts.” See, e.g., United States v. Candoli, 870 F.2d 496 , 508 (9th Cir. 1989). Finally, Nuss offers no reason to conclude that the single use of the nickname “sweetheart” carried prejudicial sexual undertones or would have caused the jury to fixate on a potential romance as opposed to viewing the text message as evidence of a relationship between two coconspirators. Fifth, Nuss argues that the district court improperly admitted evidence that Shellouff failed to respond to investigative subpoenas because the evidence “said nothing about [her] own behavior.” Because she makes this argument for the first time on appeal, we review for plain error. Torralba-Mendia, 784 F.3d at 658. Because Nuss cites no authority supporting her assertion that it is “improper” to bring up a “third party’s failure/inability/refusal to produce subpoenaed records,” she has not shown error, let alone plain error. United States v. Thompson, 82 F.3d 849 , 856 (9th Cir. 1996). Sixth, Nuss argues for the first time on appeal that the district court 4 “permitted the government to improperly sexualize [her] and Washington throughout the trial.” We review for plain error, Torralba-Mendia, 784 F.3d at 658, and find no error. Although several witnesses mentioned the women’s attire when explaining why the women raised their suspicion or how they identified the women, these brief descriptions are not the “snowballing sexualization” that Nuss describes. Nuss also argues that the government improperly admitted evidence that she worked at an adult entertainment establishment. The government, however, redacted the testimony stating that Nuss worked there as an “exotic dancer,” and her place of employment was relevant because it contradicted Nuss’s trial testimony about how she knew Washington.2 2. Next, Nuss argues that the district court erred by imposing a warrantless and suspicionless search condition of supervised release. Because Nuss did not preserve this issue, we review for plain error. United States v. Vega, 545 F.3d 743 , 747 (9th Cir. 2008). Relying on United States v. Cervantes, 859 F.3d 1175 (9th Cir. 2017), Nuss argues that she “comes nowhere close to the Cervantes standard” to justify imposing such a condition. But nothing in Cervantes suggests that a minimum criminal history is required to justify the search condition, id. at 1184 , and we have affirmed a similar condition even when 2 We do not reach Nuss’s cumulative error argument because the district court did not commit multiple errors. United States v. Lindsay, 931 F.3d 852 , 869 (9th Cir. 2019). 5 a defendant had no prior convictions, see United States v. Betts, 511 F.3d 872 , 876 (9th Cir. 2007). Considering the nature of Nuss’s crimes and her significant criminal history involving drugs, the district court did not plainly err in imposing this condition. 3. Finally, Nuss argues that the district court’s written judgment differed from its orally imposed sentence in two respects. First, Nuss argues that the district court orally imposed a supervised release condition forbidding her “from consuming any alcohol or alcoholic beverages . . . while she’s on supervised release,” but stated in its written judgment, “You must not use or possess alcohol or alcoholic beverages” (emphasis added). The government concedes the two conditions differ. Second, Nuss argues that the district court imposed materially different versions of a supervised release condition requiring disclosure of financial information. At the sentencing hearing, the district court stated that it would “order [Nuss] to provide the probation department with any financial information that is requested and to sign, if appropriate, authorizations for release of financial information.” The written judgment, in contrast, reads: “You must provide the probation officer with access to any requested financial information and authorize the release of any financial information. The probation office may share financial information with the U.S. Attorney’s Office [USAO]” (emphasis added). 6  The government argues that the additional provision in the written judgment does not add to Nuss’s obligations; it simply notifies her that the probation office may share information with the USAO. We disagree. Although there may be little functional difference between the probation office unilaterally sharing information with the USAO and the probation office sharing that information after requiring Nuss to authorize it to do so, the oral sentence described a different procedure— arguably one more favorable to Nuss’s privacy and notice interests—than the written judgment did.3 “[W]hen an oral sentence is unambiguous, it controls over a written sentence that differs from it.” United States v. Napier, 463 F.3d 1040 , 1042 (9th Cir. 2006). Because the oral sentence differed materially from the written judgment regarding both the alcohol prohibition and the financial disclosure requirement, we remand for the district court to revise the written judgment in both respects. AFFIRMED IN PART AND REMANDED IN PART. 3 It is unclear whether the district court somehow limited Nuss’s obligation to authorize information-sharing by authorizing the probation office to require her signature only “if appropriate.” But the parties do not address this issue, and we need not reach it. 7

2020-12-01 21:00:37.826757+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201913677.pdf

USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 1 of 7 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-13677 Non-Argument Calendar ________________________ D.C. Docket No. 1:18-cr-20722-KMW-1 UNITED STATES OF AMERICA, Plaintiff - Appellee, versus DALLAS JEROME WIMS, Defendant - Appellant. ________________________ Appeal from the United States District Court for the Southern District of Florida ________________________ (December 1, 2020) Before MARTIN, JORDAN, and ROSENBAUM, Circuit Judges. PER CURIAM: Dallas Wims appeals his sentence of 15-years’ imprisonment for possession of a firearm and ammunition by a convicted felon in violation of 18 U.S.C. §§ 922 (g)(1) and 924(e)(1). Mr. Wims raises two issues on appeal. First, he asserts that the limitations accompanying the First Step Act’s creation of the term “serious  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 2 of 7 drug felony” for sentencing enhancements under the CSA apply also to his ACCA predicate offenses. Second, he argues that his 15-year sentence under the ACCA violates the Eighth Amendment. After a review of the record and the parties’ briefs, we affirm the district court’s sentence.1 I In his appeal, the parties’ dispute centers around the interpretation of three statutes: the Armed Career Criminal Act (“ACCA”), 18 U.S.C. § 924 (e); the Controlled Substances Act (“CSA”), 21 U.S.C. § 801 et seq.; and the First Step Act of 2018, Pub. L. No. 115-391, 132 Stat. 5194 (2018) (“First Step Act”). We summarize the relevant statutes below. The ACCA provides for sentence enhancements for certain felons who are in unlawful possession of a firearm. Under the ACCA, a defendant convicted of being a felon in possession of a firearm in violation of 18 U.S.C. § 922 (g)(1), faces a mandatory minimum 15-year sentence if he has three or more prior convictions for a “violent felony” and/or “serious drug offense.” See 18 U.S.C. § 924 (e)(1). Those offenses, commonly referred to as predicate offenses, are defined in 18 U.S.C. § 924 (e)(2). The district court enhanced Mr. Wims’ sentence under the ACCA. The CSA regulates certain substances under federal law, in part by establishing drug offenses and sentencing enhancements. For example, prior to the 1 As we write for the parties, we set out only what is necessary to address Mr. Wims’ arguments. 2  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 3 of 7 promulgation of the First Step Act, under the CSA a person convicted of distributing 280 grams of crack cocaine was subject to a mandatory minimum sentence of 20 years if he had been previously convicted of committing a “felony drug offense.” See 21 U.S.C. §§ 841 (a), (b)(1)(A) (2012). That prior version of the CSA defined the term “felony drug offense” as “an offense that is punishable by imprisonment for more than one year under any law of the United States or of a State . . . that prohibits or restricts conduct relating to narcotic drugs, marihuana, anabolic steroids, or depressant or stimulant substances.” 21 U.S.C. § 802 (44) (2012). Mr. Wims was not convicted of violating, nor was his sentence enhanced under, the CSA. In 2018, Congress enacted the First Step Act with the goal of reforming the nation’s prison and sentencing systems. As relevant here, § 401 of the First Step Act amended the CSA to replace the term “felony drug offense” with the term “serious drug felony.” See First Step Act § 401(a). See also 21 U.S.C. §§ 802 (57), 841(b)(1)(A). Under the amended version of the CSA, an offense constitutes a “serious drug felony” if it meets three elements. The first element is a foundational one, defining a “serious drug felony” as an offense described in 18 U.S.C § 924(e)(2)—the provision that defines the ACCA’s predicate offenses. See 21 U.S.C. § 802 (57); 18 U.S.C. § 924 (e)(2). The latter two elements are limiting elements. For an offense to constitute a “serious drug felony,” the offender must have (i) served a term of imprisonment of over a year, and (ii) been released from imprisonment no 3  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 4 of 7 more than 15 years prior to the commencement of the instant offense. See 21 U.S.C. § 802 (57). Theoretically, these limiting elements make the application of the CSA’s sentencing enhancements less likely. II Mr. Wims pled guilty to violating 18 U.S.C. §§ 922 (g)(1) and 924(e). In his plea agreement, Mr. Wims stipulated that the district court was required to impose a statutory minimum 15-year term under the ACCA. The district court accordingly applied the ACCA enhancement and sentenced him to that statutory minimum, based on his prior predicate convictions. Mr. Wims first argues that because the foundational element of the term “serious drug felony” in the CSA is a reference to the ACCA’s predicate offenses, we should read § 401 of First Step Act as having incorporated the two limiting elements of the term “serious drug felony” into the definition of the ACCA predicate offenses. According to Mr. Wims, because his ACCA predicate offenses do not meet either of the two limiting elements, his sentence should not have been enhanced under the ACCA. We disagree. We review the district court’s interpretation of a statute de novo. See United States v. Zuniga-Arteaga, 681 F.3d 1220 , 1223 (11th Cir. 2012). The starting point of statutory interpretation is “the language of the statute itself,” and we consider the specific context in which the language at issue is used and the broader context of the 4  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 5 of 7 statute. Id. (internal quotation marks omitted). And “[i]f this analysis reveals that the provision has a plain and unambiguous meaning with regard to the particular dispute in the case and the statutory scheme is coherent and consistent, then the inquiry is complete.” Id. (internal quotation marks omitted). Mr. Wims’ arguments are based solely on policy and lack any analysis of the text of the relevant statutes. And that text is clear: § 401 of the First Step Act replaced the term “felony drug offense” with the term “serious drug felony” in the CSA, see First Step Act § 401(a), and left untouched the definitions of the ACCA’s predicate offenses. Compare 18 U.S.C § 924(e)(2) (2012) with 18 U.S.C § 924(e)(2). Both we and the Fourth Circuit have already so held. See United States v. Smith, 798 Fed. Appx. 473 , 476 (11th Cir. 2020); United States v. Edwards, 767 Fed. Appx. 546 , 546–47 (4th Cir. 2019). Smith is an unpublished opinion, but we agree with it. Because the First Step Act does not change the definition of the ACCA’s predicate offenses, we affirm the district court on this issue.2 III Mr. Wims argues that his ACCA sentencing enhancement violates the Eight 2 Mr. Wims also argues that we should apply the rule of lenity when construing the First Step Act. But the relevant provisions of the First Step Act, the CSA, and the ACCA are clear and unambiguous. Accordingly, the rule of lenity is inapplicable. See United States v. Phifer, 909 F.3d 372 , 383–84 (11th Cir. 2018). 5  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 6 of 7 Amendment’s prohibition on cruel and unusual punishment. According to Mr. Wims, his 15-year sentence under the ACCA is disproportionate because it increased what would otherwise have been 12–18-month sentence for his instant offense based on remote predicate offenses. The government rebuts Mr. Wims’ Eighth Amendment argument on the merits, and also asserts that, as a threshold matter, Mr. Wims waived his right to appeal on this ground in his plea agreement. On the issue of the appeal waiver, Mr. Wims responds with various arguments, including that the government waived its right to enforce the appeal waiver by failing to enforce it at the district court, and that Mr. Wims did not agree to the appeal waiver knowing and voluntarily. Mr. Wims’ Eighth Amendment argument fails. Assuming that he succeeded in his challenge to the appeal waiver, he loses on the merits. Mr. Wims raises his Eighth Amendment challenge for the first time on appeal, and so we review it only for plain error. See United States v. Henderson, 409 F.3d 1293 , 1307 (11th Cir. 2005). Under plain error review we, at our discretion, may correct an error where the defendant demonstrates that (i) an error occurred; (ii) the error was plain; (iii) the error affects substantial rights; and (iv) the error seriously affects the fairness, integrity or public reputation of judicial proceedings. See Rosales-Mireles v. United States, 138 S. Ct. 1897 , 1904-05, 1908-09 (2018). In most scenarios, “there can be no plain error where there is no precedent from the Supreme Court or this Court directly resolving it.” United States v. Lange, 862 F.3d 1290 , 6  USCA11 Case: 19-13677 Date Filed: 12/01/2020 Page: 7 of 7 1296 (11th Cir. 2017) (quoting United States v. Lejarde-Rada, 319 F.3d 1288 , 1291 (11th Cir. 2003)). Mr. Wims has not identified any precedent that would lead us to conclude that the district court plainly erred in sentencing him to the minimum mandatory under the ACCA. On the other hand, we have upheld even longer sentences under the ACCA. See United States v. Lyons, 403 F.3d 1248 , 1257 (11th Cir. 2005) (rejecting an Eighth Amendment challenge to a 235-month sentence under the ACCA). Absent the existence of plain error, Mr. Wims’ Eighth Amendment challenge fails. IV For the foregoing reasons, we affirm Mr. Wims’ sentence of 15 years’ imprisonment under the ACCA. AFFIRMED. 7

2020-12-01 21:00:38.716725+00

http://media.ca11.uscourts.gov/opinions/unpub/files/201913989.pdf

USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 1 of 13 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 19-13989 Non-Argument Calendar ________________________ D.C. Docket No. 1:15-cr-20914-UU-1 UNITED STATES OF AMERICA, Plaintiff-Appellee, versus ANDERSON JEAN, Defendant-Appellant. ________________________ Appeal from the United States District Court for the Southern District of Florida ________________________ (December 1, 2020) Before ROSENBAUM, LAGOA, and BRASHER, Circuit Judges. PER CURIAM:  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 2 of 13 Anderson Jean is a federal prisoner who is serving an 84-month total sentence after pleading guilty to two immigration offenses. In this direct appeal, he seeks to vacate one of his guilty pleas, arguing that the district court violated Rule 11, Fed R. Crim. P., by failing to ensure that an adequate factual basis supported his plea or that he understood the nature of the charge against him. After careful review, we affirm. I. In November 2015, Jean was charged with twelve counts of knowingly encouraging and inducing an alien to enter the United States, 8 U.S.C. § 1324 (a)(1)(A)(iv) (Counts 1-12), and one count of aiding an inadmissible alien who had been convicted of an aggravated felony to enter the United States, 8 U.S.C. § 1327 (Count 13). Specifically, Count 13 charged that Jean Did knowingly aid and assist an alien, CHRISTOVAL REECE, to enter the United States, said alien being inadmissible under Title 8, United States Code, Section 1182(a)(2), as an alien who had been convicted of an aggravated felony. Jean agreed to plead guilty to Counts 1 and 13 in a written plea agreement. In exchange, the government agreed to move to drop the remaining counts after sentencing, to recommend a three-level acceptance-of-responsibility reduction be applied in Jean’s guidelines calculations, and to recommend that his sentences run concurrently with those imposed in two other, unrelated criminal cases. The plea agreement contained an appeal waiver, in which Jean agreed to waive his right to 2  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 3 of 13 “assert any claim that . . . the admitted conduct does not fall within the scope of the statute of conviction.” In a written factual proffer that accompanied the plea agreement, the parties stipulated that the government could prove the following facts if the case proceeded to trial. In March 2015, the U.S. Coast Guard sent a small law-enforcement vessel to intercept a suspicious vessel that was traveling in international waters toward Miami without navigational lights. The vessel did not stop immediately when the law-enforcement vessel activated its lights and sirens, but eventually it did. By the time it had stopped, Jean, who was the master of the vessel, had stepped away from the helm. Officers found approximately $6,000 in Jean’s possession. Thirteen people, including Jean, were onboard, and none had permission to enter the United States. Jean and four other Haitian nationals were transferred to another Coast Guard boat and taken back to Haiti. The remaining individuals were brought ashore for processing by U.S. Border Patrol, which determined that Reece had previously been removed from the United States and had previously been convicted of an aggravated felony. In interviews, several individuals, including Reece, identified Jean as the operator of the vessel and said they had paid money to a smuggler in the Bahamas to be brought to the United States. At the plea colloquy, Jean was placed under oath and testified as follows. He dropped out of school in the sixth grade and was able to read and write in English 3  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 4 of 13 with some difficulty. He had received psychiatric treatment while in prison because he had been shot in the head, which had resulted in some nerve problems. Specifically, he sometimes could not sleep at night because he would hear voices and have bad dreams. He was not taking any medication for his condition, but he was not hearing voices at the hearing. When asked if he understood what his attorney had explained to him about his case, Jean stated “I understand everything.” However, when the court asked if he had any difficulty explaining the facts of his case to his attorney, Jean became confused and explained that he was “kind of slow” and “had special classes in school.” The court stated that it wanted to know if he had been able to discuss the facts of his case with his attorney, and Jean said he had. The court asked Jean’s attorney if he had any reason to doubt Jean’s competence, and Jean’s attorney said he did not. When the court asked Jean if he was fully satisfied with his counsel’s representation, Jean responded, “Yes, Ma’am. I just want to get this over with.” Jean further remarked, “I just . . . want to put it behind me because I can’t live at peace in here to know that I got cases on me.” The court turned to the plea agreement and began to explain the charges against Jean. The following exchange occurred: THE COURT: Listen, Mr. Jean, you know that in this case, the case from 2015, you’re charged with having encouraged and induced several 4  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 5 of 13 aliens to come into the United States, including at least one inadmissible alien. Do you know that? THE DEFENDANT: I understand the case, but I do not know those people. THE COURT: Well, I don’t care whether you know them or not. Do you understand those are the charges against you? THE DEFENDANT: Yes, ma’am. The court turned to the factual proffer, and Jean confirmed that he signed it after reviewing it with his attorney. He confirmed that he agreed with every fact in the proffer. Jean pled guilty to Counts 1 and 13. The district court found that Jean was aware of the nature of the charges, that his pleas were knowing and voluntary, and that his pleas were supported by an independent basis in fact containing each of the essential elements of the offenses. It accepted his pleas and adjudged him guilty. Jean did not object. The district court sentenced Jean to 60 months’ imprisonment as to Count 1 and 84 months’ imprisonment as to Count 13, to run concurrently. It imposed his 84-month total sentence to run concurrently with the sentences for his two unrelated convictions. Upon the government’s motion, it dismissed Counts 2 through 12 of the indictment. Jean now appeals. II. 5  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 6 of 13 Jean contends that the district court violated Rule 11(b)(3), Fed. R. Crim. P., by failing to ensure that his plea of guilty to Count 13 was supported by a sufficient factual basis. He further contends that, because the record contains no evidence as to an essential element of the offense, his guilty plea could not have been knowing and voluntary, in violation of Rule 11(b)(1)(G). Because he did not object to the plea colloquy below, we review for plain error.1 See United States v. Rodriguez, 751 F.3d 1244 , 1251 (11th Cir. 2014) (“We review for plain error when a defendant . . . fails to object in the district court to a claimed Rule 11 violation, including a claim that there was an insufficient factual basis for a guilty plea.”). Under plain-error review, Jean bears the burden of showing (1) an error (2) that is plain and (3) that affects substantial rights. Id. To meet the third prong, the defendant “must show a reasonable probability that, but for the error, he would not have entered the plea.” United States v. Dominguez Benitez, 542 U.S. 74 , 83 (2004). We may “consult the whole record when considering the effect of any error on substantial rights.” United States v. Vonn, 535 U.S. 55 , 59 (2002). A. 1 The government contends that Jean has waived his factual-sufficiency claim through the appeal waiver in his plea agreement. However, we have held that an appeal waiver does not bar a Rule 11 claim of an insufficient factual basis to support a guilty plea. See United States v. Puentes- Hurtado, 794 F.3d 1278 , 1284 (11th Cir. 2015). We also reject the government’s contention that Jean waived this claim by pleading guilty. See id. at 1286-87 . 6  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 7 of 13 First, the factual basis: Ordinarily, “[t]he standard for evaluating challenges to the factual basis for a guilty plea is whether the trial court was presented with evidence from which it could reasonably find that the defendant was guilty.” United States v. Frye, 402 F.3d 1123 , 1128 (11th Cir. 2005) (quotation marks omitted). The purpose of the factual-basis requirement is “to protect a defendant who mistakenly believes that his conduct constitutes the criminal offense to which he is pleading.” Id. (quotation marks omitted). i. Before we turn to Jean’s claim that his guilty plea lacked a sufficient factual basis, we must resolve the parties’ dispute as to what the government needed to prove to convict Jean of violating § 1327. Section 1327 makes it a crime to “knowingly aid[] or assist[] any alien inadmissible under section 1182(a)(2) (insofar as an alien inadmissible under such section has been convicted of an aggravated felony) . . . of this title to enter the United States.” 8 U.S.C. § 1327 . We have held that, to convict a defendant of violating § 1327, the government must prove beyond a reasonable doubt that (1) the defendant knowingly aided or assisted an alien to enter the United States; (2) the defendant knew that the alien was inadmissible; and (3) the alien was inadmissible under 8 U.S.C. § 1182 (a)(2) for having been convicted of an aggravated felony. United States v. Lopez, 590 F.3d 1238 , 1254 (11th Cir. 2009). The government may 7  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 8 of 13 satisfy the second element by proving that the defendant knew the alien was inadmissible for any reason—it does not have to prove that the defendant knew the alien was inadmissible due to a prior aggravated felony conviction. Id. at 1254-55 . In Lopez, we held that it was sufficient that the defendant knew his passengers were seeking to enter the United States without valid entry documents, which made them inadmissible under 8 U.S.C. 1182(a)(7). See id. Jean concedes that Lopez is controlling as to the elements of § 1327 but argues that it was wrongly decided and is no longer good law in light of Rehaif v. United States, 139 S. Ct. 2191 (2019), and McFadden v. United States, 576 U.S. 186 (2015). In Rehaif, the Supreme Court interpreted 18 U.S.C. § 924 (a)(2), which imposes criminal penalties on “whoever knowingly violates” 18 U.S.C. § 922 (g), and held that the word “knowingly” applied to every material element of § 922(g). Rehaif, 139 S. Ct. at 2200 . In McFadden, the Supreme Court held that 21 U.S.C. § 841 (a)(1), which makes it unlawful “for any person knowingly or intentionally to manufacture, distribute, or dispense . . . a controlled substance,” required the government to prove that the defendant knew he was dealing with a controlled substance. McFadden, 576 U.S. at 188-89. Jean argues that, because the word “knowingly” in § 1327 introduces the elements of the crime, it applies to all three of those elements, and the government should be required to prove that he knew that 8  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 9 of 13 Reece was inadmissible because he had committed an aggravated felony. See Rehaif, 139 S. Ct. at 2196 . But under our prior-panel precedent rule, we are bound by Lopez 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. Gillis, 938 F.3d 1181 , 1197 (11th Cir. 2019). To overrule or abrogate a prior panel’s decision, the subsequent Supreme Court or en banc decision “must be clearly on point and must actually abrogate or directly conflict with, as opposed to merely weaken, the holding of the prior panel.” Id. (quotation marks omitted). Rehaif and McFadden do not meet that mark. Neither case is clearly on point, as the statutes they interpret come from different parts of the criminal code and differ in structure from § 1327. See 18 U.S.C. §§ 922 (g); 924(a)(2); 21 U.S.C. § 841 (a)(1). Further, nether case mentions Lopez or § 1327, meaning they do not actually abrogate or directly conflict with our holding. Accordingly, we remain bound by our prior precedent. Next, Jean argues that, regardless of our holding in Lopez, the government was required to prove that he knew Reece was inadmissible as an aggravated felon because his indictment alleged such knowledge in Count 13. But the indictment tracked the language of the statute, which requires only that the government prove that Jean knew Reece was inadmissible. See Lopez, 590 F.3d at 1254-55 . 9  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 10 of 13 Accordingly, before accepting Jean’s guilty plea, the district court was required to ensure that a sufficient factual basis supported these essential elements: (1) Jean knowingly aided or assisted Reece to enter the United States; (2) Jean knew that Reece was inadmissible; and (3) Reece was inadmissible under 8 U.S.C. § 1182 (a)(2) for having been convicted of an aggravated felony. Id.; Fed. R. Crim. P. 11(b)(3). Jean argues that the court plainly erred by failing to do so. We address this argument now. ii. The government concedes that the record contained no direct evidence to support the second element of § 1327—that Jean knew Reece was inadmissible. At the plea colloquy, Jean told the district court that he did not know any of the people he was transporting, and the district court did not follow up to ask if he knew of their inadmissible status. In addition, the factual proffer stated that the individuals interviewed by Border Patrol said that they paid a smuggler, not Jean himself, to be taken to the United States. This distinguishes Jean’s case from Lopez, in which it was “undisputed that Lopez knew . . . that his passengers were undocumented aliens seeking entry to the United States.” Lopez, 590 F.3d at 1255 . Jean argues that, because his knowledge that Reece was inadmissible was an essential element of the offense, it must have been expressly established in the plea 10  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 11 of 13 agreement, factual proffer, or plea colloquy, not silently inferred by the district court based on circumstantial evidence. But our review of the district court’s determination that a plea is supported by sufficient facts is deferential, even when we are not reviewing for plain error. See Frye, 402 F.3d at 1129 (evaluating the appellant’s Rule 11(b)(3) challenge for an abuse of discretion). And under plain-error review, we have upheld a defendant’s guilty plea based on circumstantial evidence. In Puentes Hurtado, the defendant stated that he agreed to “most” of the government’s factual proffer, including that he had transported money to El Paso, Texas, but the district court did not question him further as to which parts he disagreed with before accepting his guilty plea on a drug- trafficking conspiracy charge. Puentes Hurtado, 794 F.3d at 1282-83, 1286. We held that, even if he admitted only to transporting drug proceeds, that action furthered the purpose of the conspiracy and, therefore, provided circumstantial evidence of his knowing participation in the conspiracy. Id. at 1287. Here, Jean admitted in the factual proffer that he was the master of a vessel transporting twelve individuals, including Reece, who had paid a smuggler for passage to the United States. When the Coast Guard attempted to stop his vessel, he did not immediately stop. Jean had $6,000 on his person, and none of the twelve individuals, nor Jean, was admissible to the United States. Although the evidence is circumstantial, the district court could reasonably find, based on the proffer, that 11  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 12 of 13 Jean knew Reece was inadmissible. See Frye, 402 F.3d at 1128; Lopez, 590 F.3d at 1254-55 . Accordingly, it did not plainly err in finding that a sufficient factual basis supported his guilty plea to Count 13. B. Next, Jean argues that his plea to Count 13 was not knowing and voluntary because the district court did not explain the essential elements of § 1327 at the plea colloquy, and he did not otherwise understand them. Rule 11 mandates that courts inform the defendant of, and determine that he understand, “the nature of each charge to which the defendant is pleading.” Fed. R. Crim. P. 11(b)(1)(G). There is no specific way that a district court is required to inform the defendant of the nature of the charges. Puentes-Hurtado, 794 F.3d at 1286. The adequacy of the colloquy depends on various factors, including the complexity of the charges and the defendant’s intelligence and sophistication. Id. Here, Jean cannot show that any error the district court may have made in failing to explain the elements of his § 1327 charge affected his substantial rights. See Dominguez Benitez, 542 U.S. at 83 . He argues that, had he understood the knowledge requirement correctly, he would not have pled guilty to Count 13 and 12  USCA11 Case: 19-13989 Date Filed: 12/01/2020 Page: 13 of 13 would have been subject to only the 60-month statutory maximum in Count 1, making his prison term at least two years lighter. But as we concluded above, the record reasonably supports a finding that Jean knew Reece was inadmissible. And Jean did receive significant benefits by pleading guilty: the government moved to drop eleven of the thirteen counts against him, recommended a three-level acceptance-of-responsibility reduction in his guideline calculation, and recommended that his sentences in this case and his two other, unrelated cases all run concurrently. Plus, Jean received the benefit of having his sentence in this case run concurrently with his sentences in two separate cases against him for illegal reentry after deportation and for being a felon in possession of a firearm. The record also contains no indication that the government would have been willing to allow Jean to plead guilty to only Count 1. In addition, at the plea colloquy, Jean stated numerous times that he “just want[ed] to get this over with.” Jean has not met his burden to show that he would not have pled guilty if the district court had more fully explained the essential elements of § 1327. See Dominguez Benitez, 542 U.S. at 83 . III. For the reasons stated, we reject Jean’s request to vacate his guilty plea as to Count 13, and we affirm his convictions and sentences. AFFIRMED. 13

2020-12-01 21:01:00.242518+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2020cv1475-145

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA INTERNATIONAL UNION, UNITED MINE WORKERS OF AMERICA, Plaintiff, v. CONSOL ENERGY INC., Defendant. Civil Action No. 1:20-cv-01475 (CJN) Civil Action No. 1:20-cv-01476 (CJN) HELVETIA COAL CO., et al., Plaintiffs, v. INTERNATIONAL UNION, UNITED MINE WORKERS OF AMERICA, Defendant. MEMORANDUM OPINION In June 2020, the Southern District of West Virginia transferred two consolidated cases to this District. Mem. Op. and Order (“Transfer Op.”), ECF No. 119. In the first, International Union, United Mine Workers of America (“UMWA”) seeks to enforce a 2017 arbitration award against CNX Resources Corporation, formerly known as CONSOL Energy Inc. (“CONSOL”). See generally 2d Am. Compl., ECF No. 78. In the second, former subsidiaries of CONSOL seek to vacate the same award. See generally Helvetia Coal Co. v. United Mine Workers of Am., Int’l Union, No. 1:20-cv-01476, Am. Compl., ECF No. 25. 1  Pending before the Court are three motions. In the first case, UMWA moves to amend its Second Amended Complaint to add as Defendants those former CONSOL subsidiaries that are Plaintiffs in the second case. Pl.’s Mot. 3d Am. Compl., ECF No. 131. In the second case, UMWA moves to amend its Answer to include a counterclaim seeking enforcement of the award. Def.’s Mot. Am. Answer, ECF No. 132. Finally, third parties involved in the arbitration at issue move to quash a subpoena seeking deposition testimony regarding the arbitration process. Mot. Quash, ECF No. 138. For the reasons explained below, the Court grants all three motions. I. Background The now-consolidated cases before the Court have a long factual and procedural history, most of which has already been summarized by the Southern District of West Virginia. See generally Transfer Op. As relevant to the pending motions, in December 2016, UMWA filed suit in the Southern District of West Virginia seeking an injunction to prevent CONSOL from unilaterally terminating a group health insurance plan. Compl. ¶ 1, ECF No. 1. The plan at issue was governed by a labor agreement between UMWA and a multiemployer bargaining association called the Bituminous Coal Operators’ Association. Transfer Op. at 2–3. That agreement provided certain healthcare benefits to retired coal miners on a permanent lifetime basis and required that disputes be referred to the Trustees of the UMWA 1993 Benefit Plan (“Trustees”) for arbitration in what the Parties refer to as a resolution of disputes mechanism. Mem. Op. and Order (“Inj. Op.”) at 3–4, ECF No. 50. In January 2017, UMWA amended its Complaint to add as Defendants four former CONSOL subsidiaries: Helvetia Coal Company, Island Creek Coal Company, Laurel Run Mining Company, and CONSOL Amonate Facility, LLC (together the “Subsidiaries”). Am. Compl. ¶ 1, ECF No. 16. The Subsidiaries were added to the case on the theory that they are “in active concert 2 or participation with” CONSOL with respect to the conduct at issue. Id. ¶ 4. The Subsidiaries moved to dismiss for lack of personal jurisdiction and improper venue, or, in the alternative, to transfer the case to the Western District of Pennsylvania where a related case was pending. Defs.’ Mot. Dismiss or Transfer at 1–2, ECF No. 40. The Southern District of West Virginia dismissed the Subsidiaries for lack of personal jurisdiction because, although the Subsidiaries conducted mining operations in the state in the past, they lacked sufficient contacts with West Virginia. Inj. Op. at 10–11, 25. The arbitration was conducted in Washington, D.C., and in October 2017, the Trustees issued an award in favor of UMWA. Transfer Op. at 6, 50. Thereafter, UMWA sought both to add the Subsidiaries again as Defendants and to add causes of action to enforce the arbitration award pursuant to Section 301 of the Labor Management Relations Act of 1974 (“LMRA”), 29 U.S.C. § 185 , and Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132 (a)(3). Transfer Op. at 6–10. The Subsidiaries responded to the Trustees’ decision in two ways: first, they moved to dismiss UMWA’s Second Amended Complaint for lack of jurisdiction, Subsidiaries’ Mot. Dismiss Pls.’ 2d Am. Compl., ECF No. 98; and second, they filed suit in the Western District of Pennsylvania to vacate the arbitration award, Helvetia Coal Co. v. United Mine Workers of Am., Int’l Union, No. 1:20-cv-01476, Compl., ECF No. 1. The Western District of Pennsylvania transferred the action seeking vacatur to the Southern District of West Virginia, which ultimately consolidated the cases, Transfer Op. at 55–57; declined to exercise personal jurisdiction over the Subsidiaries, id. at 47–49; and transferred the consolidated cases to this District, id. at 59–63. 3  II. Amended Pleadings A. Legal Standard Rule 15 permits a party to amend its pleading once as a matter of course within twenty-one days of serving it or within twenty-one days of the filing of a responsive pleading. See Fed. R. Civ. P. 15(a)(1). Otherwise, a party may amend its pleading only with the opposing party’s written consent—which has been denied in this case—or the Court’s leave. Fed. R. Civ. P. 15(a)(2). District courts are instructed to “freely give leave [to amend] when justice so requires,” id.; see also Belizan v. Hershon, 434 F.3d 579 , 582 (D.C. Cir. 2006) (explaining that Rule 15 “is to be construed liberally”), and thus the non-movant bears the burden of demonstrating that an amendment should not be permitted, Connecticut v. U.S. Dep’t of the Interior, 363 F. Supp. 3d 45 , 54 (D.D.C. 2019); see also Gudavich v. District of Columbia, 22 F. App’x. 17, 18 (D.C. Cir. 2001) (noting that non-movant “failed to show prejudice from the district court’s action in allowing the [movant’s] motion to amend”). A court may deny leave to amend for undue delay, undue prejudice to the opposing party, futility of amendment, or the movant’s bad faith. See Barkley v. U.S. Marshals Serv. ex rel. Hylton, 766 F.3d 25 , 38 (D.C. Cir. 2014) (citing Foman v. Davis, 371 U.S. 178 , 182 (1962)). When evaluating whether an amendment imposes undue delay or undue prejudice, courts consider “the hardship to the moving party if leave to amend is denied, the reasons for the moving party failing to include the material to be added in the original pleading, and the injustice resulting to the party opposing the motion should it be granted.” 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1487 (3d ed. 2016). Even if an amendment might impose some degree of delay and additional expense, such inconvenience does not necessarily constitute undue prejudice. See Barkley, 766 F.3d at 39. Instead, an amendment may be unduly prejudicial when it “substantially changes the theory on which the case has been proceeding and is proposed late 4 enough so that the opponent would be required to engage in significant new preparation”; would “put [the opponent] to added expense and the burden of a more complicated and lengthy trial”; or raises “issues . . . [that] are remote from the other issues in the case.” Djourabchi v. Self, 240 F.R.D. 5 , 13 (D.D.C. 2006) (quoting 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1487 (2d ed. 1990)). Amendments that do not “radically alter the scope and nature of the action” are therefore generally permitted. See Gilliard v. Gruenberg, 302 F. Supp. 3d 257 , 271 (D.D.C. 2018) (citing United States ex rel. Westrick v. Second Chance Body Armor, Inc., 301 F.R.D. 5 , 8 (D.D.C. 2013)). Amendment may also be inappropriate when the requested amendment would be futile because it would not survive a motion to dismiss, In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213 , 218 (D.C. Cir. 2010), or if the moving party has acted in bad faith in light of the length of the delay between the latest pleading and the amendment sought, as well as the reasons for the movant’s delay, see Djourabchi, 240 F.R.D. at 13. A plaintiff seeking to add new defendants to a case must meet the general amendment standard articulated by Rule 15 as well as the requirements of Rule 20(a)(2), which permits the addition if (1) “any right to relief . . . asserted against [the parties] . . . aris[es] out of the same transaction, occurrence, or series of transactions or occurrences;” and (2) “any question of law or fact common to all defendants will arise in the action.” Fed. R. Civ. P. 20(a)(2). Rule 20’s “same transaction” and “common question” prongs are liberally construed to promote the “just, speedy, and inexpensive determination of the action,” Martinez v. Dep’t of Justice, 324 F.R.D 33, 36 (D.D.C. 2018) (quoting Davidson v. District of Columbia, 736 F. Supp. 2d 115 , 119 (D.D.C. 2010)), and courts should aim to entertain “the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged,” United Mine Workers of Am. v. Gibbs, 383 U.S. 715 , 724 (1966). In furtherance of these goals, the Rule’s 5 “same transaction” requirement is interpreted broadly “to permit all reasonably related claims for relief by or against different parties to be tried in a single proceeding.” Alexander v. Edgewood Mgmt. Corp., 321 F.R.D. 460 , 462 (D.D.C. 2017) (quoting In re Vitamins Antitrust Litig., 2000 WL 1475705 , at *18 (D.D.C. May 9, 2000)). Claims generally satisfy the first requirement if they are “logically related.” Spaeth v. Mich. State Univ. Coll. of Law, 845 F. Supp. 2d 48 , 53 (D.D.C. 2012) (quoting Maverick Entm’t Grp., Inc. v. Does 1–2,115, 810 F. Supp. 2d 1 , 12 (D.D.C. 2011)). The second “common question” element requires “only that there be some common question of law or fact as to all [of plaintiff’s] claims.” Parks v. District of Columbia, 275 F.R.D. 17 , 18 (D.D.C. 2011) (quoting Disparte v. Corp. Exec. Bd., 223 F.R.D. 7 , 11 (D.D.C. 2004)). B. Analysis 1. UMWA’s Motion to Rejoin the Subsidiaries UMWA seeks to amend its Complaint in the enforcement action to add the Subsidiaries as Defendants. See generally Pl.’s Mot. 3d Am. Compl. CONSOL opposes amendment on the grounds that it marks the third time UMWA has attempted to add the Subsidiaries and doing so would not be in the interest of justice. See Def.’s Mem. Opp’n Pl.’s Mot. 3d Am. Compl. at 3–8, ECF No. 134. To be sure, the Southern District of West Virginia dismissed the Subsidiaries on two prior occasions. See Inj. Op.; Transfer Op. But both decisions were based on the court’s conclusion that it could not properly exercise personal jurisdiction over the Subsidiaries. Inj. Op. at 10; Transfer Op. at 40–53. In the first decision, the court determined that the Subsidiaries lacked sufficient contacts with West Virginia to establish either general or specific jurisdiction. Inj. Op. at 10. And in the second, the court declined to exercise pendent personal jurisdiction over the 6 Subsidiaries through a newly-added ERISA claim that the court had decided to dismiss. Transfer Op. at 40–49. 1 None of the due process concerns that led the Southern District of West Virginia to decline to exercise personal jurisdiction over the Subsidiaries is present here. After all, the Subsidiaries participated in the resolution of disputes process in Washington, D.C., and the arbitration award was rendered here. Transfer Op. at 63. Presumably for those reasons, CONSOL and the Subsidiaries previously conceded that the jurisdictional deficiencies present in West Virginia would not exist here, Defs.’ Mem. Supp. Mot. Dismiss and Transfer at 20, ECF No. 112, and the Southern District of West Virginia noted that transfer to this District was in the interest of justice because this Court would have personal jurisdiction over the Subsidiaries, Transfer Op. at 63. The fact that the Subsidiaries were previously dismissed for lack of personal jurisdiction thus fails to demonstrate that adding them as Defendants here would impose undue prejudice. But CONSOL also argues that adding new parties would extend the timeline in a case that has already stretched over two years. Def.’s Mem. Opp’n Pl.’s Mot. 3d Am. Compl. at 5–7. According to CONSOL, adding the Subsidiaries as Defendants would “muddy the waters” and impede the progress already made, including the pruning of UMWA’s Complaint to the LMRA claim, consolidating the cases to ensure consistent judgments under Rule 42, and putting the consolidated cases on an expedited path for judicial review. Id. at 5–6. CONSOL highlights that the passage of time has already impaired the availability of the evidence in this case. 2 1 Judge Faber’s Opinion also noted that the Subsidiaries had not consented to nor waived their objection to the court’s personal jurisdiction and that personal jurisdiction over the Subsidiaries did not exist under an agency or “alter ego” theory. Transfer Op. at 50–51. 2 For example, CONSOL states that one arbitrator “alleged to have not been impartial” in rendering the arbitration award died in 2019 before the Parties were able to preserve his testimony. Def.’s Mem. Opp’n Pl.’s Mot. 3d Am. Compl. at 8. 7  It is certainly the case that adding the Subsidiaries as Defendants may, as with any amendment, cause some degree of delay and additional expense. But that does not necessarily constitute undue prejudice. See Barkley, 766 F.3d at 39. The factors that courts typically point to when identifying undue delay or prejudice—a substantial change in the theory of the case that would require the opponent to engage in significant new preparation, put the opponent to added expense and the burden of a more complicated and lengthy trial, or raise issues that are remote from the other issues in the case—are conspicuously absent here. All of the relevant Parties are already before the Court in the consolidated cases, adding the Subsidiaries to the lead case will not affect the current Scheduling Order, ECF No. 129, and the Parties will still get to the summary judgment stage on the same timeline. The action will progress on the same theory and be grounded in the same issues regarding the enforceability of the arbitration award whether or not the Subsidiaries are added as Defendants. Furthermore, the action seeking vacatur is predicated on the same facts, so limited additional resources, if any, will be required of any Party. In fact, the Southern District of West Virginia noted that transfer to this District may “facilitate the speedy remainder of the proceedings, particularly if plaintiffs attempt to again amend their complaint in some manner to re-join the Subsidiaries.” Transfer Op. at 62. CONSOL’s final argument centers around a corporate reorganization in 2018. CONSOL contends that the Subsidiaries, although once wholly-owned subsidiaries of CONSOL, are now subsidiaries of “an unrelated, publicly-traded corporate parent” and that UMWA’s proposed amendment misstates the Subsidiaries’ present relationship with CONSOL. Def.’s Mem. Opp’n Pl.’s Mot. 3d Am. Compl. at 8. The Court notes that any amended pleadings should lay out the present facts as best understood by each Party, and that UMWA’s pleadings should reflect, to the extent that corporate restructuring by CONSOL and the Subsidiaries is relevant, the facts that serve 8 as the basis for their filings. CONSOL fails to demonstrate, however, that such reorganization somehow renders addition of the Subsidiaries in the enforcement action improper. CONSOL and the Subsidiaries remain free, of course, to argue that the relief UMWA seeks against the Subsidiaries is now unavailable because of the reorganization. 2. UMWA’s Motion to Add a Counterclaim in the Vacatur Action UMWA also seeks to add in the vacatur action a counterclaim to compel enforcement of the arbitration award. See generally Def.’s Mot. Am. Answer. UMWA argues that the counterclaim will enable the Court to grant full relief in the event that UMWA prevails in the dispute over the award’s enforceability. Def.’s Mem. Supp. Mot. Am. Answer at 5, ECF No. 132. The Subsidiaries oppose on the grounds that the counterclaim is a compulsory counterclaim barred by Rule 13, Pls.’ Mem. Opp’n Mot. Am. Answer at 2, ECF No. 135, and waived by UMWA, id. at 6. When a party seeks amendment to add a counterclaim, that amendment—like other amendments—is assessed under Rule 15. While Rule 13(a) provides that a pleading “must state as a counterclaim” any claim that, at the time of its service, the pleader has against an opposing party if the claim “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim” and “does not require adding another party over whom the court cannot acquire jurisdiction,” Fed. R. Civ. P. 13(a)(1), a party may add an omitted counterclaim “with the opposing party’s written consent or the court’s leave,” Fed. R. Civ. P. 15(a)(2). Amendments to add counterclaims are evaluated under Rule 15’s liberal standard and based on “the propriety of amendment on a case by case basis,” Harris v. Sec’y, U.S. Dep’t of Veterans Affairs, 126 F.3d 339 , 344 (D.C. Cir. 1997), in furtherance of Rule 13’s purpose of “prevent[ing] multiplicity of actions and . . . achiev[ing] resolution in a single lawsuit of all disputes arising out of common matters,” Columbia Plaza Corp. v. Sec. Nat. Bank, 525 F.2d 620 , 625 (D.C. Cir. 1975). 9  The Subsidiaries incorrectly presume that Rule 13’s general mandate that a pleading (such as UMWA’s Answer in the vacatur action) “must” state a compulsory counterclaim bars the future addition of a counterclaim that could have been asserted in the initial pleading. Although a defendant’s failure to assert a compulsory counterclaim precludes its assertion in a later action against the plaintiff, that bar operates to prevent future suits, not to bar amendments in the initial suit. See Perkins v. Fort Lincoln II Condo. Ass’n, 2009 WL 10736956 (D.D.C. July 30, 2009) (discussing amendment to add compulsory counterclaim under FRCP 13(a)(1) but making clear that adding counterclaim not barred by technicality of omission in earlier pleading). Instead, amendments that add compulsory counterclaims are properly evaluated under Rule 15. 6 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1430 (3d ed. 2016). If anything, Rule 13’s bar on UMWA’s ability to assert a compulsory counterclaim in a subsequent suit makes UMWA’s Motion, Def.’s Mot. Am. Answer, even more persuasive because the claim could not be asserted in the future (at least in federal court). The Subsidiaries argue that permitting the counterclaim would go against the Federal Rules’ general policy favoring expeditious resolution of litigation and federal labor law’s policy of expediting judicial review of labor arbitration awards to promote labor peace and industrial relations. Pls.’ Mem. Opp’n Mot. Am. Answer at 4. In support of this contention, the Subsidiaries identify a decision from the Western District of Pennsylvania in which the trial court rejected UMWA’s suit to vacate an arbitration award when the suit was brought eleven months after the award was rendered. Id. at 5 n.2 (citing United Mine Workers of Am. v. Jones & Laughlin Steel Corp., 378 F. Supp. 1206 (W.D. Pa. 1974)). Here, in contrast, the counterclaim seeks to enforce the award, not to vacate it; a party seeking to maintain the status quo does not threaten the goals of expeditious resolution of litigation and promotion of labor peace and industrial relations in the 10 way a delayed suit to vacate an arbitration award may threaten those objectives. Moreover, the counterclaim will be asserted in a suit filed the same month the award was issued, and the issues of fact and law relating to the counterclaim are similar (if not identical) to the issues relevant to the Subsidiaries’ claims. And the Subsidiaries can hardly argue that they were not on notice that UMWA was attempting to enforce the award against them; after all, UMWA has repeatedly tried to join the Subsidiaries to the enforcement action. Indeed, UMWA’s repeated attempts to join the Subsidiaries in the enforcement action demonstrate that UMWA’s failure to include the counterclaim in its initial Answer was not an obstructionist tactic to prevent judicial review of the counterclaim in the Western District of Pennsylvania. See Pls.’ Mem. Opp’n Mot. Am. Answer at 3–8. III. Motion to Quash On October 15, 2020, CONSOL and the Subsidiaries served a subpoena on the Funds, a group of six multiemployer benefit plans involved in the resolution of disputes process. Mot. Quash at 1. One of these benefit plans “is the master administrative entity for all the plans in the group,” which referred the initial dispute between CONSOL and UMWA to the Trustees for arbitration. Mot. Quash Mem. at 1, ECF No. 138. The subpoena at issue seeks testimony regarding policies and procedures for processing, assigning, and resolving disputes and specific events and considerations during the arbitration process that culminated in the issuance of the 2017 award. See generally Mot. Quash Ex. 2, ECF No. 138-3. On October 23, 2020, the Trustees and two components of the Funds moved to quash the subpoena because it seeks testimony protected by arbitral immunity and privilege. See generally Mot. Quash. A. Legal Standard A court must quash or modify a subpoena that “requires disclosure of privileged or other protected matter.” Fed. R. Civ. P. 45(d)(3)(A)(iii). Various immunities protect disclosure of 11 certain information and materials during discovery. One such immunity is the doctrine of judicial immunity, which protects courts, judges, law clerks, and court staff to “assure that judges, advocates, and witnesses can perform their respective functions without harassment or intimidation.” Butz v. Economou, 438 U.S. 478 , 511–12 (1978). Courts have extended this immunity to a wide range of persons who play a role in the adjudicative process. See, e.g., id. at 512–13 (“We think that adjudication within a federal administrative agency shares enough of the characteristics of the judicial process that those who participate in such adjudication should also be immune from suits for damages.”); Wagshal v. Foster, 28 F.3d 1249 , 1254 (D.C. Cir. 1994) (extending immunity to mediators). Most circuit courts to address the question have extended this immunity to both individual arbitrators and the arbitral forum. See, e.g., Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, 477 F.3d 1155 , 1159 (10th Cir. 2007) (“[C]ourts uniformly hold that arbitration forums and sponsors, like courts of law, are immune from liability for actions taken in connection with administering arbitration.”); Int’l Med. Grp., Inc. v. Am. Arbitration Ass’n., 312 F.3d 833 , 844 (7th Cir. 2002) (finding arbitration forum immune from suit); New England Cleaning Servs., Inc. v. Am. Arbitration Ass’n, 199 F.3d 542 , 545 (1st Cir. 1999) (“[O]rganizations that sponsor arbitrations, as well as arbitrators themselves, enjoy this immunity from civil liability.”); Hawkins v. Nat’l Ass’n of Sec. Dealers Inc., 149 F.3d 330 , 332 (5th Cir. 1998) (“The [arbitral forum] enjoys arbitral immunity from civil liability for the acts of its arbitrators in the course of conducting contractually agreed-upon arbitration proceedings.”), abrogated on other grounds by Merrill Lynch, Pierce, Fenner & Smith v. Manning, 136 S. Ct. 1562 (2016); Olson v. Nat’l Ass’n of Sec. Dealers, 85 F.3d 381 , 383 (8th Cir. 1996) (“Arbitral immunity protects all acts within the scope of the arbitral process,” including those by “sponsoring organizations.”); Austern v. Chi. Bd. 12 Options Exch., Inc., 898 F.2d 882 , 886 (2d Cir. 1990) (holding that “commercial sponsoring organization” is “entitled to immunity for all functions that are integrally related to the arbitral process”); Corey v. N.Y. Stock Exch., 691 F.2d 1205 , 1211 (6th Cir. 1982) (“Extension of arbitral immunity to encompass boards which sponsor arbitration is a natural and necessary product of the policies underlying arbitral immunity.”). Arbitral immunity is grounded in “the notion that arbitrators acting within their quasi-judicial duties are the functional equivalent of judges, and, as such, should be afforded similar protection.” Young Habliston v. Finra Regulation, Inc., 2017 WL 396580 , at *6 (D.D.C. Jan. 27, 2017) (quoting Pfannenstiel, 477 F.3d at 1158 ). While the D.C. Circuit has apparently not recognized arbitral immunity, the Court finds the foregoing decisions, and their reasoning, persuasive. Arbitral immunity both protects arbitrators and arbitral fora from liability and gives rise to a testimonial privilege which, “subject to exception, has been recognized to protect arbitrators from being subjected to lengthy, costly, and intrusive discovery into decisional matters by way of subpoena and deposition.” United Food & Commercial Workers Int’l Union v. SIPCO, Inc., 1990 WL 364772 , at *2 (S.D. Iowa Oct. 16, 1990). Arbitrators and arbitral fora are thus generally immune from testimony (whether at deposition or trial) unless the party seeking the testimony can demonstrate an exception to the immunity. One such exception arises when there is evidence of bias or misconduct in the arbitration. Some courts permit testimony when there is evidence giving rise to a reasonable inference of partiality, see, e.g., Hamilton Park Health Care Ctr., Ltd. v. 1199 SEIU United Healthcare Workers E., 2013 WL 6050138 , at *5 (D.N.J. Nov. 13, 2013) [hereinafter Hamilton Park]; Admin. Dist. Council 1 of Ill. of the Int’l Union of Bricklayers & Allied Craft-Workers, AFL-CIO v. Masonry Co., Inc., 941 F. Supp. 2d 912 , 917 (N.D. Ill. 2012) [hereinafter Admin. Dist. Council 1], 13 while other courts require “clear evidence” of impropriety or bias, see Lyeth v. Chrysler Corp., 929 F.2d 891 , 899 (2d Cir. 1991); In re EquiMed, Inc., 2005 WL 2850373 , at *2 (E.D. Pa. Oct. 28, 2005). At a minimum, however, the party seeking testimony from an arbitral entity must provide more than a conclusory allegation of partiality. The mere fact that there are circumstances suggesting the possibility of bias is insufficient; the party seeking discovery must demonstrate that partiality is “more than just possible or plausible by pointing to sufficient concrete evidence that would enable a reasonable person to conclude that there is a legitimate question as to the partiality of the arbitrator.” Admin. Dist. Council 1, 941 F. Supp. 2d at 917. B. Analysis CONSOL and the Subsidiaries point to the timing of certain events in the arbitration relative to proceedings in parallel civil litigation as evidence of the arbitrators’ desire to “pre-empt a judicial decision that might invalidate the lower court’s injunction and threshold arbitrary determination . . . [to] eradicate the vestiges of appellate review [thereby] solidifying the UMWA’s preferred, informal forum.” Companies’ Opp’n Mot. Quash at 8, ECF No. 141. According to CONSOL and the Subsidiaries, they have demonstrated that a reasonable person could conclude that there is a legitimate question as to the partiality of the arbitrators. Id. at 8–9. The Court disagrees. General allegations of suspicious timing are not, without more, the type of concrete evidence that courts find sufficient to permit discovery regarding potential bias or partiality in arbitration. For example, in Admin. Dist. Council 1, one of the cases on which CONSOL and the Subsidiaries rely, the party seeking discovery alleged that the arbitrators appeared to be the defendant’s business competitors. 941 F. Supp. 2d at 917–18. The court determined that this allegation and the possible appearance of impropriety were not enough to warrant discovery when there was no evidence that the arbitrators had concealed their relationships with any party or in a 14 way that impacted their partiality, nor that the arbitrators made their decision based on improper motives. Id. Similarly, in Hamilton Park, the district court recognized that discovery may be granted when “plainly relevant to colorable claims of arbitral bias or misconduct,” 2013 WL 6050138 , at *5, but ultimately found that discovery was not warranted when the plaintiff only provided evidence that an arbitrator had conducted ex parte meetings with the parties and received payments from the defendant as a matter of public record, id. at *3–4. To be sure, arbitrator testimony was permitted in Antietam Indus., Inc. v. Morgan Keegan & Co., 2012 WL 4513763 , at *1–2 (M.D. Fla. Oct. 2, 2012), but there specific evidence was proffered that one of the arbitrators made misrepresentations and failed to disclose information suggesting that the arbitrator may have been biased. Arbitrator testimony was also permitted in In re EquiMed, Inc., when specific, nonpublic, undisclosed dealings involving the arbitrator and one of the parties called the arbitrator’s neutrality into question and were discovered only after the arbitration had completed. 2005 WL 2850373 , at *1–2. Here, CONSOL and the Subsidiaries allege an appearance of impartiality due to public scheduling decisions that were known to CONSOL during the arbitration. CONSOL had the opportunity to object to that schedule (and did so). Companies’ Opp’n Mot. Quash at 7. CONSOL and the Subsidiaries do not offer evidence that the arbitrators concealed any part of the arbitration process or that the arbitrators actually made their decision based on improper motives. Based on the information and evidence proffered by CONSOL and the Subsidiaries, the Court cannot conclude that there is even a reasonable inference of partiality sufficient to permit the deposition testimony. 3 3 It is unnecessary for the Court to choose which standard to apply in this case, see supra pp. 13– 14, because there is insufficient evidence to meet even the more lenient standard. 15  IV. Conclusion For the foregoing reasons, UMWA’s Motion to Amend its Second Amended Complaint, ECF No. 131, UMWA’s Motion to Amend its Answer in the vacatur action, ECF No. 132, and the third-party Motion to Quash, ECF No. 138, are GRANTED. An Order will be entered contemporaneously with this Memorandum Opinion. DATE: December 1, 2020 CARL J. NICHOLS United States District Judge 16

2020-12-01 21:03:16.36391+00

http://www.illinoiscourts.gov/Opinions/SupremeCourt/2019/124565.pdf

Digitally signed by Reporter of Decisions Reason: I attest Illinois Official Reports to the accuracy and integrity of this document Supreme Court Date: 2020.12.01 11:51:14 -06'00' Sanders v. Illinois Union Insurance Co., 2019 IL 124565 Caption in Supreme RODELL SANDERS et al., Appellees, v. ILLINOIS UNION Court: INSURANCE COMPANY et al., Appellants. Docket No. 124565 Filed November 21, 2019 Decision Under Appeal from the Appellate Court for the First District; heard in that Review court on appeal from the Circuit Court of Cook County, the Hon. Celia Gamrath, Judge, presiding. Judgment Appellate court judgment reversed. Circuit court judgment affirmed. Counsel on Christopher A. Wadley, of Walker Wilcox Matousek LLP, of Chicago, Appeal for appellant Illinois Union Insurance Company. Agelo L. Reppas and Adam H. Fleischer, of BatesCarey LLP, of Chicago, for appellant Starr Indemnity & Liability Company. Michael Kanovitz, Russell Ainsworth, and Ruth Brown, of Loevy & Loevy, of Chicago, for appellee Rodell Sanders.  Paulette A. Petretti and Darcee C. Williams, of Scariano, Himes and Petrarca, Chtrd., of Chicago, for appellee City of Chicago Heights. Justices JUSTICE THEIS delivered the judgment of the court, with opinion. Chief Justice Burke and Justices Thomas, Kilbride, Garman, and Karmeier concurred in the judgment and opinion. Justice Neville took no part in the decision. OPINION ¶1 In 1994, based on doctored evidence from the City of Chicago Heights Police Department, Rodell Sanders was charged with murder, attempted murder, and armed robbery. Sanders was wrongfully convicted and imprisoned for approximately 20 years before being exonerated in 2014. From November 2011 to November 2014, the City of Chicago Heights obtained primary liability insurance from Illinois Union Insurance Company (Illinois Union) and excess liability insurance from Starr Indemnity & Liability Company (Starr). The primary insurance policy indemnified Chicago Heights for, among other things, damages arising out of the “offense” of “malicious prosecution.” At issue is whether the offense of malicious prosecution occurred during the policy period, thereby triggering the insurers’ obligation to provide coverage. Based on the policy’s terms, we conclude that coverage was triggered when Sanders was prosecuted in 1994. ¶2 BACKGROUND ¶3 On December 15, 1993, at around 2 a.m., two people were seated inside of a parked car when a group of men attacked them. The offenders robbed and shot both victims. One victim died. The survivor later provided Chicago Heights police officers with a description of two of the assailants. Officers arrested Sanders in January 1994. Sanders did not match either physical description provided by the surviving victim, and he had an alibi that was confirmed by alibi witnesses. Nonetheless, officers manipulated the evidence to ensure his conviction. 1 ¶4 For example, after the surviving victim described one of the assailants as tall and skinny, officers altered Sanders’s photograph to make him appear taller and thinner. Then, officers included that image in a photographic lineup so that the surviving victim would identify him as one of the culprits. According to Sanders, officers engaged in this conduct because they bore a grudge against him and sought to protect the real murderer, who was an important witness 1 Although municipalities may not prosecute felonies, a person or entity can be liable for commencing or continuing a malicious prosecution even if they do not ultimately wield prosecutorial power. Under Illinois law, liability for malicious prosecution “extends to all persons who played a significant role in causing the prosecution of the plaintiff, provided all of the elements of the tort are present.” Beaman v. Freesmeyer, 2019 IL 122654 , ¶ 43. That Chicago Heights is liable for malicious prosecution under these principles based on the misconduct of its police officers is undisputed. -2-  for the prosecution in other cases. Upon his conviction in January 1995, Sanders was sentenced to 80 years’ imprisonment. ¶5 Sanders filed a postconviction petition, and in January 2011 the Cook County circuit court overturned the conviction and vacated his sentence. The appellate court affirmed its judgment in May 2012. Meanwhile, at some point in 2012, Chicago Heights provided Illinois Union and Starr with a notice of claim based on their policies from November 1, 2011, through November 1, 2014. 2 ¶6 The prosecution retried Sanders in August 2013, asking the jury to convict him on an additional theory of accountability. The second trial resulted in a mistrial. The prosecution retried Sanders again in July 2014, and the jury acquitted him. Sanders had filed a federal civil rights action against Chicago Heights in January 2013. After the jury acquitted him, Sanders amended the civil rights complaint to add claims of malicious prosecution. ¶7 Illinois Union responded to Chicago Heights’ notice of claim in December 2014. At that time, it notified the city that it was declining to provide coverage because no covered events occurred during the policy periods. One year later, Starr similarly sent a declination, claiming that the malicious prosecution did not fall within the policy periods. Chicago Heights asked the insurers to reconsider their decisions, arguing that the date of Sanders’s exoneration and his trials in August 2013 and July 2014 were discrete dates of loss. ¶8 The “general liability coverage part” of the insurance policy provides: “The Insurer will indemnify the Insured for Damages and Claim Expenses in excess of the Retained Limit for which the Insured becomes legally obligated to pay because of a Claim first arising out of an Occurrence happening during the Policy Period in the Coverage Territory for Bodily Injury, Personal Injury, Advertising Injury, or Property Damage taking place during the Policy Period.” (Emphases in original.) “With respect to Personal Injury,” occurrence was defined as “only those offenses specified in the Personal Injury Definition.” (Emphases in original.) ¶9 “Personal injury” was defined as “one or more of the following offenses *** [f]alse arrest, false imprisonment, wrongful detention or malicious prosecution *** wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of the owner, landlord or lessor.” (Emphasis in original.) The policy provided that “[a]ll damages arising out of substantially the same Personal Injury regardless of frequency, repetition, the number or kind of offenses, or number of claimants, will be considered as arising out of one Occurrence.” (Emphases in original.) ¶ 10 Circuit Court Proceedings ¶ 11 In February 2016, Chicago Heights filed a complaint for declaratory judgment, legal relief, and monetary damages against Illinois Union and Starr. The city sought a declaration that it was entitled to coverage under the insurance policy, thereby requiring the insurers to indemnify it for attorney fees and costs that were paid in excess of the retained limit. Without waiving its right to reassert claims under earlier policies, Chicago Heights focused its claims for coverage on the policies from 2012-13 and 2013-14. 2 Illinois Union was the primary insurer. Starr’s policy was a “follow form excess liability policy,” and thus, its policy relied on the provisions set forth in Illinois Union’s policy. -3- ¶ 12 In September 2016, a consent judgment was entered in Sanders’s favor in the federal civil rights action for $15 million. Chicago Heights agreed to contribute $2 million, and United National Insurance Company (Chicago Heights’ insurer from 1994) agreed to contribute $3 million toward the judgment. Additionally, Chicago Heights assigned its rights against Illinois Union and Starr to Sanders in exchange for his agreement not to seek the remaining $10 million from the city. ¶ 13 Thereafter, Chicago Heights moved the circuit court to voluntarily dismiss its declaratory judgment action without prejudice. In late October 2016, the circuit court granted the city’s dismissal motion, rendering all pending motions and outstanding discovery moot. ¶ 14 In November 2016, under section 2-1008(a) of the Code of Civil Procedure (735 ILCS 5/2- 1008(a) (West 2016)), the circuit court substituted Sanders as a plaintiff in this action. Based on the policy provisions quoted above, Sanders argued that the insurers’ denial of coverage to Chicago Heights was “wrongful, unreasonable, and vexatious.” Because the city had assigned its rights to him, Sanders asserted that Illinois Union and Starr were required to pay him at least the $10 million that was outstanding from the settlement. ¶ 15 The insurers filed an amended motion to dismiss the complaint with prejudice. Illinois Union and Starr noted that Sanders “was maliciously prosecuted in 1994 resulting in his conviction and incarceration for a crime he did not commit.” In their view, his injury predated the effective dates of their policies. Illinois Union and Starr therefore argued that they were neither required to provide coverage for Chicago Heights nor obligated to contribute to its settlement with Sanders. ¶ 16 In January 2018, the circuit court granted the insurers’ amended motion to dismiss. The court observed that, under the policy, Illinois Union and Starr had to provide coverage to Chicago Heights for damages for personal injury first arising out of an occurrence during the policy period. The court determined that the policy focused on a requisite act and injury during the policy period, rather than the accrual of a completed cause of action. The court acknowledged that, to prevail on a tort claim of malicious prosecution, a plaintiff must establish, among other things, that the prior proceeding terminated in his favor. But it also noted that the vast majority of courts to consider the issue have ruled that the filing of the underlying malicious suit was the occurrence causing personal injury under an insurance policy. Sanders and Chicago Heights appealed. ¶ 17 The Appellate Court’s Decision ¶ 18 On appeal, a split panel reversed. The appellate court majority confirmed that the dispute centered on when the “offense” of malicious prosecution was deemed to occur under the policy. 2019 IL App (1st) 180158 , ¶ 17. Offense was not defined in the policy; therefore, relying on Black’s Law Dictionary (10th ed. 2014), the majority concluded that the term referred “to the legal cause of action that arises out of wrongful conduct, not just the wrongful conduct itself.” 2019 IL App (1st) 180158 , ¶ 18. Further, it observed that the list of offenses contained in the policy referred exclusively to legal causes of action by their proper legal names, rather than to the underlying wrongful acts. Id. ¶ 19. Accordingly, the majority ruled that the plain and ordinary meaning of the term offense, as used in relation to the phrase malicious prosecution, referred to the completed cause of action. Id. -4- ¶ 19 The dissent argued that, “[u]nder the clear and unambiguous language of the Illinois Union/Starr policies, the malicious prosecution of Sanders happened in 1994 when he was wrongfully charged with murder; it did not happen in either 2013, when he was retried, or in 2014, when after his third trial, he was acquitted.” Id. ¶ 37 (Mason, P.J., dissenting). In the dissent’s view, “an ‘offense’ is the wrongful conduct or unlawful act,” and that occurred when false charges were brought against Sanders. Id. ¶ 40. It also found “[t]he majority’s attempt to distinguish relevant Illinois authority based on minor differences in policy language *** unpersuasive.” Id. ¶ 44. Finally, the dissent rejected Sanders’s claim that his retrials constituted additional triggers for coverage, noting that his initial prosecution and the retrials all arose out of the same false charges against him. Id. ¶ 49. ¶ 20 This court granted Illinois Union and Starr’s petition for leave to appeal. Ill. S. Ct. R. 315 (eff. July 1, 2018). ¶ 21 ANALYSIS ¶ 22 The question before us is whether the offense of malicious prosecution occurred during the policy period, such that Illinois Union and Starr were required to provide coverage to Chicago Heights. The proper construction of provisions of an insurance policy is a question of law that we review de novo. Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 , 360 (2006). Because an insurance policy is a contract, the rules applicable to contract interpretation govern. Thounsavath v. State Farm Mutual Automobile Insurance Co., 2018 IL 122558 , ¶ 17. Our “primary function is to ascertain and give effect to the intention of the parties, as expressed in the policy language.” Id. ¶ 23 When the terms of a policy are clear and unambiguous, we will ascribe to them their plain and ordinary meaning. Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446 , 455-56 (2010). And as we have previously observed, the fact that a term is undefined does not render it ambiguous. Nicor, Inc. v. Associated Electric & Gas Insurance Services Ltd., 223 Ill. 2d 407 , 417 (2006). Rather, ambiguity exists only if a term is susceptible to more than one reasonable interpretation. Id. As with any contract, we construe an insurance policy as a whole, giving effect to each provision where possible because we must assume that it was intended to serve a purpose. Valley Forge, 223 Ill. 2d at 362 . ¶ 24 The policy in this case provides that Illinois Union and Starr will indemnify Chicago Heights for damages for which Chicago Heights becomes legally obligated to pay because of a claim arising out of the offense of malicious prosecution, happening during the policy period, and taking place during the policy period. Thus, to resolve when the malicious prosecution occurred, our interpretation of the word “offense” becomes central. The parties have proffered different meanings of the term. For example, citing Merriam-Webster’s Online Dictionary, Illinois Union contends that “the term is primarily used to mean something that outrages the moral or physical senses.” For its part, Chicago Heights refers us to Black’s Law Dictionary (10th ed. 2014), which provides that an “offense” is a “violation of the law; a crime, often a minor one.” ¶ 25 Considering the various proposals, we conclude—as another panel of the appellate court recently did under substantially similar circumstances—that the most “straightforward reading of this term [(offense)] indicates that coverage depends upon whether the insured’s offensive -5-  conduct was committed during the policy period.” (Emphasis omitted.) First Mercury Insurance Co. v. Ciolino, 2018 IL App (1st) 171532 , ¶ 30. ¶ 26 In that case, the question was whether an insurance company was required to provide coverage for its insured in an underlying lawsuit for malicious prosecution. Id. ¶ 3. When the wrongfully convicted defendant was framed in 1999, the company was not the insurer; however, it was when he was exonerated in 2014. Id. ¶ 7. Under the policy, the company would cover a “ ‘ “[p]ersonal injury” caused by an offense arising out of your business *** but only if the offense was committed *** during the policy period.’ ” Id. ¶ 8. Personal injury was defined to include malicious prosecution; the term offense was undefined. Id. ¶ 9. The trial court granted summary judgment in favor of the insurer. On appeal, the court was “not convinced that the policy’s use of the word ‘offense’ indicate[d] the parties’ intent that coverage would only be triggered upon fulfillment of all elements of a tort claim under Illinois law.” Id. ¶ 30. Observing that no language in the policy indicated an “intent to limit the meaning of ‘offense’ by requiring the completion of tort law elements,” the appellate court declined to “assume that the policy incorporate[d] tort law.” Id. ¶ 31. ¶ 27 Here, too, we conclude that the word offense in the insurance policy refers to the wrongful conduct underlying the malicious prosecution. In so ruling, we consider both the meaning of the word offense and the contractual requirement that the offense must both happen and take place during the policy period. A malicious prosecution neither happens nor takes place upon exoneration. See, e.g., Mitchinson v. Cross, 58 Ill. 366 , 370 (1871) (“The gist of the action for malicious prosecution is, that the prosecutor acted without probable cause.”); Spiegel v. Zurich Insurance Co., 293 Ill. App. 3d 129 , 134 (1997) (“ ‘Malicious prosecution’ is the bringing of a suit known to be groundless ***.”). Further, courts have found that the “ ‘personal injury’ of ‘malicious prosecution’ ” in the context of an insurance policy differs from “the common-law elements of the tort of malicious prosecution.” County of McLean v. States Self-Insurers Risk Retention Group, Inc., 2015 IL App (4th) 140628 , ¶ 33; see also City of Lee’s Summit v. Missouri Public Entity Risk Management, 390 S.W.3d 214 , 220 (Mo. Ct. App. 2012) (“[I]n the context of insurance, malicious prosecution occurs upon the institution of the underlying action.”). ¶ 28 That this is an occurrence-based policy also weighs heavily into our decision. “A typical occurrence-based policy, containing multiple references to coverage for occurrences or offenses happening during the term of the policy, reflects the intent to insure only for the insured’s acts or omissions that happen during a policy period.” Indian Harbor Insurance Co. v. City of Waukegan, 2015 IL App (2d) 140293 , ¶ 33. If we were to deem exoneration the trigger for coverage of a malicious prosecution insurance claim, liability could be shifted to a policy period in which none of the acts or omissions giving rise to the claim occurred. That would violate the intent of the parties to an occurrence-based policy. ¶ 29 Emphasizing that malicious prosecution is a tort, Chicago Heights and Sanders urge us to find that the policy must have intended for all elements of the tort to be satisfied before finding that the offense has occurred. But as in First Mercury, here, the language of the policy does not require that the elements of the tort be satisfied. Accordingly, we cannot read into it the requirements of a tort claim for malicious prosecution. See St. Paul Fire & Marine Insurance Co. v. City of Zion, 2014 IL App (2d) 131312 , ¶ 22 (observing that “the ‘occurrence’ triggering -6-  insurance coverage of a malicious-prosecution claim may precede the accrual of the cause of action”). 3 ¶ 30 Sanders and Chicago Heights also highlight decisions from the United States Court of Appeals for the Seventh Circuit, such as American Safety Casualty Insurance Co. v. City of Waukegan, 678 F.3d 475 , 479 (7th Cir. 2012), which ruled that exoneration was “the ‘occurrence’ ” for insurance coverage of a malicious prosecution claim. We note that the federal court of appeals relied heavily on Security Mutual Casualty Co. v. Harbor Insurance Co., 65 Ill. App. 3d 198 (1978), a case that we subsequently reversed on other grounds. Although we take no issue with the federal appellate court’s attempt to predict Illinois law, we clarify that the appellate court’s reasoning in Security Mutual does not reflect our approach for determining when coverage for malicious prosecution occurs under an occurrence-based insurance policy. ¶ 31 Separately, Chicago Heights and Sanders contend that his retrials in 2013 and 2014 constituted separate triggers for coverage. That claim is foreclosed by the language of the policy. Under the policy, “[a]ll damages arising out of substantially the same Personal Injury regardless of frequency, repetition, the number or kind of offenses, or number of claimants, will be considered as arising out of one Occurrence.” (Emphases in original.) Although another theory of liability was added during the retrials, the personal injury (i.e., the initiation of a suit based on evidence manufactured by Chicago Heights police officers) remained the same. ¶ 32 Sanders also argues that our decision in Nicor compels a finding that his two retrials were separate occurrences that triggered coverage. It does not. In that case, mercury had spilled out of gas meters and into customers’ homes. Nicor, 223 Ill. 2d at 410-11. In a dispute over insurance coverage, the company argued that each of the 195 spills into different homes constituted a single occurrence. Id. at 414. This court rejected that claim, observing that no evidence established that the spills resulted from a common cause. Id. at 433. Here, by contrast, Chicago Heights officers’ fabrication of evidence to support unfounded charges against Sanders was the single cause of all three trials and, thus, the single relevant occurrence under the policy. ¶ 33 CONCLUSION ¶ 34 We hold that insurance coverage for the underlying malicious prosecution claim was triggered when Sanders was maliciously prosecuted in 1994. Because the triggering event occurred more than a decade before Illinois Union and Starr issued their policies to Chicago Heights, the insurers were not required to indemnify the city for damages under the policies. 3 Our focus remains on the provisions of this contract. Yet it has not escaped our notice that most courts that have considered this issue also have ruled that a malicious prosecution for insurance purposes occurs at the commencement of the prosecution. See, e.g., First Mercury, 2018 IL App (1st) 171532 ; St. Paul Fire & Marine Insurance Co. v. City of Waukegan, 2017 IL App (2d) 160381 ; County of McLean, 2015 IL App (4th) 140628 ; Indian Harbor, 2015 IL App (2d) 140293 ; City of Zion, 2014 IL App (2d) 131312 ; see also, e.g., Genesis Insurance Co. v. City of Council Bluffs, 677 F.3d 806 (8th Cir. 2012); Selective Insurance Co. of South Carolina v. City of Paris, 681 F. Supp. 2d 975 (C.D. Ill. 2010). -7- ¶ 35 Appellate court judgment reversed. ¶ 36 Circuit court judgment affirmed. ¶ 37 JUSTICE NEVILLE took no part in the consideration or decision of this case. -8-

2020-12-01 21:03:19.119266+00

http://www.illinoiscourts.gov/Opinions/SupremeCourt/2019/124155.pdf

Digitally signed by Reporter of Decisions Reason: I attest to Illinois Official Reports the accuracy and integrity of this document Supreme Court Date: 2020.12.01 12:01:15 -06'00' Horsehead Corp. v. Department of Revenue, 2019 IL 124155 Caption in Supreme HORSEHEAD CORPORATION, Appellant, v. THE Court: DEPARTMENT OF REVENUE et al. (The Department of Revenue, Appellee). Docket No. 124155 Filed November 21, 2019 Decision Under Appeal from the Appellate Court for the First District; heard in that Review court on review of order of the Illinois Independent Tax Tribunal. Judgment Appellate court judgment affirmed in part and reversed in part. Tribunal decision affirmed in part and reversed in part. Counsel on JoAnne Mulder Nagjee and Steven M. Cantor, of Kirkland & Ellis Appeal LLP, of Chicago, and Joseph E. Bender, of Difede Ramsdell Bender PLLC, of Washington, D.C., for appellant. Kwame Raoul, Attorney General, of Springfield (Jane Elinor Notz, Solicitor General, and Bridget DiBattista, Assistant Attorney General, of Chicago, of counsel), for appellee Department of Revenue. Michael J. Wynne and Douglas A. Wick, of Jones Day, of Chicago, for amicus curiae Taxpayers’ Federation of Illinois.  Justices JUSTICE THEIS delivered the judgment of the court, with opinion. Chief Justice Burke and Justices Thomas, Kilbride, Garman, Karmeier, and Neville concurred in the judgment and opinion. OPINION ¶1 Petitioner, Horsehead Corporation (Horsehead), filed a petition for review with the Illinois Independent Tax Tribunal of notices of tax liability issued by respondent the Department of Revenue (Department). The notices were issued due to Horsehead’s failure to pay Illinois use tax (35 ILCS 105/1 et seq. (West 2012)) on its out-of-state purchases of metallurgical coke between January 2007 and June 2011. The tax tribunal affirmed the notices of tax liability and the imposition of use tax, interest, late filing penalties, and late payment penalties. The appellate court affirmed the tax tribunal’s decision. 2018 IL App (1st) 172802 , ¶ 31. For the reasons that follow, we affirm in part and reverse in part the judgment of the appellate court. ¶2 BACKGROUND ¶3 Horsehead is a Delaware corporation with its primary place of business in Pittsburgh, Pennsylvania. It has a manufacturing facility located in Calumet City, Illinois, where it operates a zinc refining facility. ¶4 On October 3, 2014, the Department issued Horsehead two notices of tax liability for the period of January 1, 2007, through June 30, 2011, in an amount totalling $1,521,041. This amount constituted use tax, interest, late payment penalties, and late filing penalties related to its out-of-state purchases of metallurgical coke, a solid material consisting almost entirely of carbon, for which it had not paid any Illinois use tax. 1 Use tax is imposed in Illinois on tangible personal property purchased at retail from outside the state. 35 ILCS 105/3 (West 2012). ¶5 On December 1, 2014, Horsehead filed a petition for hearing with the Illinois Independent Tax Tribunal. The company argued that it was exempt from paying use tax on the coke under section 3-5(18) of the Use Tax Act (Act) (id. § 3-5(18)) for machinery and equipment used primarily in the manufacturing of tangible personal property. ¶6 Specifically, Horsehead relied upon the “chemical exemption” found in section 3-50(4) of the Act, which contains, in pertinent part, a definition of “equipment” that includes certain chemicals that are exempt from paying use tax: “(4) ‘Equipment’ includes an independent device or tool separate from machinery but essential to an integrated manufacturing or assembly process ***. Equipment includes chemicals or chemicals acting as catalysts but only if the chemicals or chemicals acting as catalysts effect a direct and immediate change upon a product being manufactured or assembled for wholesale or retail sale or lease.” (Emphases added.) Id. § 3-50(4). 1 The Department assessed $1,210,511 for the unpaid use tax and interest. The remaining assessment of $310,530 constituted late payment and late filing penalties. -2-  Horsehead claimed that it was entitled to this tax exemption because the chemical coke effected “a direct and immediate change” on the zinc and iron products manufactured by it. 2 ¶7 The parties stipulated to the following facts concerning Horsehead’s use of coke in its manufacturing process. ¶8 At its Calumet City facility, Horsehead is primarily in the business of recovering zinc from electric arc furnace dust (EAF dust) generated by steel mill producers. Under a process referred to as the “Waelzing process,” based on the Waelz kiln in which it takes place, rotary kilns are used to reduce and recover the zinc as crude oxide. As part of this overall manufacturing process, Horsehead purchases metallurgical coke outside of Illinois. ¶9 Prior to the start of the Waelzing process, the EAF dust is converted into pellet form. The coke can either be mixed into the EAF dust pellets or can be added separately. The kiln is preheated to initiate the process. The furnace dust and coke mixture is fed into the rotary kiln. Thereafter, a natural gas burner is used as necessary to adjust the process temperature. The process requires the heating of the coke in order to release the carbon in the coke. ¶ 10 When the coke is burned in the oxygen-poor atmosphere of the kiln, some of the carbon forms carbon monoxide. Because the bed in a Waelz kiln is very hot—between 1600 and 2400°F—and contains very little oxygen (less than 0.01%), the carbon in the coke is converted almost entirely to carbon monoxide. The carbon monoxide then reacts with the zinc oxide in the EAF dust. In this chemical reduction reaction, the carbon monoxide produced from the coke acts on the zinc oxide in the EAF dust. The zinc also reacts with oxygen in the air space in the kiln. Secondary reactions between carbon monoxide and cadmium, lead, copper, and iron in the EAF dust also occur. The zinc oxide is ultimately gathered and cooled and moved to the next step of refining for ultimate sale. Separately, the iron and copper remains are collected and also sold by the company. ¶ 11 At the final hearing before the tax tribunal, Horsehead called three witnesses to explain the Waelzing process. Dr. Mark Schlesinger, professor of metallurgical engineering at Missouri University of Science and Technology, testified as an expert witness. John Pusateri, the director of technology at Horsehead, and Reges Zagrocki, an employee who provides technical support to Horsehead’s recycling groups, also testified. ¶ 12 These witnesses established that the overall Waelzing process takes approximately 2½ hours. Virtually all of the coke is consumed in the process, which includes four zones. First, the coke and the EAF dust are pelletized and mixed together at a ratio of approximately 25% coke to dust. Water is added to the mixture to produce pellets that are one-quarter of an inch or less in diameter. The pellets are fed into the kiln. During the second zone, several chemical reactions occur. As the coke burns, carbon from the coke reacts with carbon monoxide. Carbon dioxide is also produced and reacts with the burning carbon to create additional carbon monoxide, through repeated cycles in this zone. In the third zone, iron reacts with the oxygen in the air to reform iron oxide, which generates heat. In the fourth and final zone, the zinc oxidizes. This oxidation leaves small particles of zinc oxide that are gathered and later refined. The iron-rich material created during the process is also collected and similarly sold. 2 Horsehead acknowledged at oral argument that the coke used in its manufacturing process does not act as a catalyst. -3- ¶ 13 All three witnesses testified that carbon monoxide, not carbon from the coke, is the agent that reduces EAF dust to zinc oxide and iron oxide. Dr. Schlesinger acknowledged that heated carbon alone does not create carbon monoxide and explained that carbon reacts with carbon dioxide to produce carbon monoxide. He testified that, if he were to take solid iron oxide and place it next to solid carbon, “nothing would happen.” He further testified that “what actually happens in this process is that as this reaction generates [carbon dioxide], it reacts with the carbon to produce two carbon monoxides. The carbon monoxide is a gas and can diffuse into the solid feed pellets. And when that happens, the carbon monoxide actually reduces the iron oxide to metallic iron and reduce[s] the zinc oxide to zinc vapor.” ¶ 14 After taking the matter under advisement, the tax tribunal issued a written decision affirming the two notices of tax liability. The tax tribunal concluded that the coke did not qualify for the claimed exemption because, in the Waelzing process, the coke does not effect a direct and immediate change upon the product being manufactured. The tax tribunal found that the coke did not react with zinc or zinc oxide directly and immediately. As conceded by Horsehead’s own witness, simply placing coke next to zinc oxide does not create any chemical reaction whatsoever. The coke does not react directly with either the zinc oxide or the iron oxide to reduce them to zinc and iron. ¶ 15 In rejecting Horsehead’s claim that it was entitled to the exemption, the tax tribunal found that Horsehead was attempting to collapse and conflate all steps within the Waelzing process into one continuous and singular chemical reaction. It found that such a simplistic view would “turn the chemical exemption statute on its head.” The tax tribunal concluded that it would render the language “direct and immediate” meaningless and would allow any chemical that is used in the manufacturing process for any reason, at any time, to qualify for the exemption. ¶ 16 Additionally, the tax tribunal upheld the late payment and late filing penalties imposed by the Department under section 12 of the Act (id. § 12), which incorporates portions of the Uniform Penalty and Interest Act (35 ILCS 735/3-1 et seq. (West 2012)). The tax tribunal acknowledged that the Department’s audit file had been admitted into evidence, and it noted Horsehead’s history of tax compliance. It found that Horsehead had shown good conduct in complying with state tax laws and that such conduct carried some weight in supporting the company’s claim of good faith when it failed to pay use tax on the coke. ¶ 17 The tax tribunal declined to abate the penalties, however, because Horsehead did not present any witnesses or evidence to support its claim of good faith in taking the position that it qualified for the chemical exemption. The tax tribunal found that the record was silent as to what Horsehead relied upon to conclude that it was entitled to the exemption other than its claim that the statute was unclear because the term “direct and immediate” is undefined. ¶ 18 Horsehead filed a petition for review of the tax tribunal’s decision in the appellate court, pursuant to section 1-75 of the Illinois Independent Tax Tribunal Act of 2012 (Tax Tribunal Act) (35 ILCS 1010/1-75 (West 2012)). ¶ 19 The appellate court affirmed the tax tribunal’s final order. Reviewing the tribunal’s order for whether it was clearly erroneous, the court found that the tribunal’s ultimate conclusion— that the coke did not effect a direct and immediate change on the zinc and iron in the EAF dust—was supported by the evidence presented at the hearing. The appellate court also held that the tribunal’s finding that Horsehead was not entitled to abatement of penalties was not against the manifest weight of the evidence. 2018 IL App (1st) 172802 , ¶ 28. -4- ¶ 20 We granted Horsehead’s petition for leave to appeal (Ill. S. Ct. R. 315 (eff. July 1, 2018)) and permitted the Taxpayers’ Federation of Illinois to file an amicus curiae brief in support of Horsehead’s position (Ill. S. Ct. R. 345 (eff. Sept. 20, 2010)). ¶ 21 ANALYSIS ¶ 22 I. Standard of Review ¶ 23 Horsehead initially contends that the appellate court erred when it reviewed the tax tribunal’s determination that it was not entitled to the use tax exemption under a “clearly erroneous” standard of review. It argues that the proper standard should be de novo because the tax tribunal has neither rulemaking nor enforcement power with respect to any tax law and it does not qualify for deference to its decision. ¶ 24 The tax tribunal is an independent administrative tribunal. 35 ILCS 1010/1-5(a) (West 2012). Its function is to resolve disputes between the Department and taxpayers for specified tax liability for amounts exceeding $15,000. Id. § 1-45. ¶ 25 The Tax Tribunal Act specifically defines the tribunal as an independent administrative body “with tax expertise” that acts as a “tax-expert forum.” Id. § 1-5(a), (c). In declaring the purpose of the tax tribunal, the legislature provided, in pertinent part: “To increase public confidence in the fairness of the State tax system, the State shall provide an independent administrative tribunal with tax expertise to resolve tax disputes between the Department of Revenue and taxpayers prior to requiring the taxpayer to pay the amounts in issue. By establishing an independent tax tribunal, this Act provides taxpayers with a means of resolving controversies that ensures both the appearance and the reality of due process and fundamental fairness.” Id. § 1-5(a). ¶ 26 The tax tribunal thus has tax expertise by way of its statutory mandate. Additionally, the Tax Tribunal Act specifically requires that administrative law judges who serve on the tribunal have “substantial knowledge of State tax laws and the making of a record in a tax case.” Id. § 1-30. Accordingly, we reject Horsehead’s argument that no deference should be paid to a decision by the tribunal. ¶ 27 That said, the degree of deference afforded to a decision by the tax tribunal turns on whether the issue presented is a question of fact, a question of law, or a mixed question of law and fact. See Elementary School District 159 v. Schiller, 221 Ill. 2d 130 , 142 (2006). A conclusion on a question of law by the tax tribunal is reviewed de novo. Id. A court of review is not bound by the tribunal’s interpretation of a statute, but its interpretation is relevant where there is reasonable debate about the statute’s meaning. Id. A mixed question of law and fact is reviewed under the “clearly erroneous” standard. Id. at 143 . Under that standard, the historical facts are admitted or established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory standard or whether the rule of law as applied to the established facts is or is not violated. AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380 , 391 (2001). ¶ 28 The issue here is whether the tax tribunal properly found the taxpayer was not entitled to the statutory use tax exemption because the coke did not effect a direct and immediate change on the manufactured product. This decision presents a mixed question of law and fact. Accordingly, the decision will be deemed “clearly erroneous” only where the reviewing court, on the entire record, is left with the definite and firm conviction that a mistake has been -5-  committed. Schiller, 221 Ill. 2d at 143 ; see also Comprehensive Community Solutions, Inc. v. Rockford School District No. 205, 216 Ill. 2d 455 , 472 (2005). ¶ 29 Having determined the proper standard of review, we now turn to the central issue on appeal. ¶ 30 II. The Chemical Exemption ¶ 31 Horsehead contends that the tax tribunal erred by holding that its purchases of metallurgical coke did not qualify for the use tax chemical exemption found in section 3-50(4) of the Act. ¶ 32 As we noted earlier, use tax is imposed on the privilege of using in Illinois tangible personal property purchased at retail from outside the state. 35 ILCS 105/3 (West 2012). The purpose of the use tax is “primarily to prevent avoidance of the [sales] tax by people making out-of- state purchases, and to protect Illinois merchants against such diversion of business to retailers outside Illinois.” Performance Marketing Ass’n v. Hamer, 2013 IL 114496 , ¶ 3. ¶ 33 Under Illinois law, taxation is the rule, and exemption is the exception. See Provena Covenant Medical Center v. Department of Revenue, 236 Ill. 2d 368 , 388 (2010) (superseded by statute (see Pub. Act 97-688 (eff. June 14, 2012) (adding 35 ILCS 200/15-86))). The burden of establishing entitlement to a tax exemption rests upon the party seeking it. Id. The burden is a heavy one. Id. All facts are to be construed, and all debatable questions resolved, in favor of taxation. Id. If there is any doubt as to the applicability of an exemption, it must be resolved in favor of requiring that the tax be paid. Id. ¶ 34 Horsehead argues that it is entitled to the use tax chemical exemption because the coke it uses in the manufacturing process has the necessary “direct and immediate change” on the zinc and iron products it sells. Horsehead contends that the tax tribunal’s interpretation and application of the provision is overly restrictive and improperly prohibits all “intervening factors or intermediate steps.” ¶ 35 Turning to the statutory language at issue, section 3-5(18) of the Act contains an exemption from the use tax for the following manufacturing and assembling machinery and equipment: “Manufacturing and assembling machinery and equipment used primarily in the process of manufacturing or assembling tangible personal property for wholesale or retail sale or lease, whether that sale or lease is made directly by the manufacturer or by some other person, whether the materials used in the process are owned by the manufacturer or some other person, or whether that sale or lease is made apart from or as an incident to the seller’s engaging in the service occupation of producing machines, tools, dies, jigs, patterns, gauges, or other similar items of no commercial value on special order for a particular purchaser.” 35 ILCS 105/3-5(18) (West 2012). ¶ 36 Section 3-50 of the Act then contains a definition of “equipment” that includes certain chemicals: “Manufacturing and assembly exemption. The manufacturing and assembling machinery and equipment exemption includes machinery and equipment that replaces machinery and equipment in an existing manufacturing facility as well as machinery and equipment that are for use in an expanded or new manufacturing facility. *** For the purposes of this exemption, terms have the following meanings: *** -6-  (4) ‘Equipment’ includes an independent device or tool separate from machinery but essential to an integrated manufacturing or assembly process ***. Equipment includes chemicals or chemicals acting as catalysts but only if the chemicals or chemicals acting as catalysts effect a direct and immediate change upon a product being manufactured or assembled for wholesale or retail sale or lease.” (Emphases added.) Id. § 3-50(4). ¶ 37 The fundamental rule of statutory interpretation is to ascertain and effectuate the legislature’s intent. Comprehensive Community Solutions, Inc., 216 Ill. 2d at 473 . The plain language of the statute remains the best indication of this intent. Id. Where the language of a statute is clear, we may not read into it exceptions that the legislature did not express, and we will give it effect as written. Id. We also will give undefined statutory terms their ordinary meanings. Id. at 473-74 . ¶ 38 We find the terms “direct” and “immediate” in section 3-50(4) to be clear and unambiguous, so there is no need for us to resort to other aids of statutory construction. To be eligible for the use tax chemical exemption, the coke used by Horsehead in the manufacturing process must effect a change on the zinc and iron in the EAF dust at once and without any intermediate steps. ¶ 39 The Department’s regulations on manufacturing machinery and equipment provide two examples of the types of chemicals that would qualify for the exemption. The only relevant example is the first: 3 “A) Example 1. A chemical acid is used to etch copper off the surface of a printed circuit board during the manufacturing process. The acid causes a direct and immediate change upon the product. The acid qualifies for the exemption.” 86 Ill. Adm. Code 130.330(c)(6)(A), amended at 29 Ill. Reg. 7004 (eff. Apr. 26, 2005). Our interpretation of the chemical exemption is entirely consistent with this example where the acid, without first going through any intermediate chemical changes, directly and at once etches copper off the surface of the circuit board. ¶ 40 We reject Horsehead’s argument that the definition of “proximate cause” should be used to define “direct” in the statute. That legal phrase is a tort concept that appears nowhere in section 3-50(4). This court cannot simply graft the term “proximate cause” onto the statute. This argument also ignores the word “immediate” that appears in the provision along with “direct.” The few cases cited by Horsehead do not inform our decision in any way. They either involve an entirely different manufacturing process or concern dissimilar statutory language. ¶ 41 The tax tribunal concluded that the coke did not qualify for the exemption because it did not directly and immediately cause a change to the zinc or iron being sold by Horsehead. As Horsehead’s own witness acknowledged, simply placing coke next to the solid oxide would not create any chemical reaction. It is undisputed that during the Waelzing process, which occurs over a period of hours, the coke combines with the carbon dioxide in the kiln and creates carbon monoxide. Following that reaction, the zinc oxidizes and leaves small particles of zinc oxide that are gathered and refined. The iron-rich material created during the process is also collected and sold. The witnesses also testified that carbon monoxide, not carbon from the 3 The second example concerns a catalyst that qualifies for the exemption and, therefore, does not inform our decision. -7-  coke, is what reduces EAF dust to zinc oxide and iron oxide. At no time in the described chemical processes and reactions does the coke have a direct and immediate effect on the zinc or iron being manufactured. ¶ 42 Based upon the plain language of section 3-50(4), the legislature chose to limit the exemption to only those chemicals that effect a “direct and immediate change” on the final manufactured product. We reiterate that tax exemptions are to be strictly construed and that any doubts concerning the applicability of such exemption must be resolved in favor of taxation. See Van’s Material Co. v. Department of Revenue, 131 Ill. 2d 196 , 216 (1989). As the tax tribunal recognized, the broad interpretation of the use tax chemical exemption urged by Horsehead would result in virtually any chemical used in the manufacturing process qualifying for the exemption. ¶ 43 For these reasons, we hold that the tax tribunal did not commit clear error in determining that Horsehead’s coke purchases did not qualify for the use tax chemical exemption. ¶ 44 III. Imposition of Penalties ¶ 45 Finally, Horsehead contends that the tax tribunal’s conclusion that it was not entitled to abatement of late payment and late filing penalties was against the manifest weight of the evidence. ¶ 46 The existence of reasonable cause justifying abatement of a tax penalty is a factual determination that is to be decided on a case-by-case basis. Hollinger International, Inc. v. Bower, 363 Ill. App. 3d 313 , 315-16 (2005). If the record contains evidence to support the decision to impose penalties, it should be affirmed. Abrahamson v. Illinois Department of Professional Regulation, 153 Ill. 2d 76 , 88 (1992). The determination as to whether reasonable cause exists in justifying the abatement of a tax penalty will be reversed if the decision was against the manifest weight of the evidence and if the opposite conclusion was clearly evident. Id. ¶ 47 Section 3-8 of the Uniform Penalty and Interest Act provides, in pertinent part: “The penalties imposed under the provisions of Section[ ] *** 3-5 *** of this Act shall not apply if the taxpayer shows that his failure to file a return or pay tax at the required time was due to reasonable cause. Reasonable cause shall be determined in each situation in accordance with the rules and regulations promulgated by the Department.” 35 ILCS 735/3-8 (West 2016). ¶ 48 The Department’s regulation on what should be considered as reasonable cause to avoid penalties provides, in pertinent part: “b) The determination of whether a taxpayer acted with reasonable cause shall be made on a case by case basis taking into account all pertinent facts and circumstances. The most important factor to be considered in making a determination to abate a penalty will be the extent to which the taxpayer made a good faith effort to determine his proper tax liability and to file and pay his proper liability in a timely fashion. c) A taxpayer will be considered to have made a good faith effort to determine and file and pay his proper tax liability if he exercised ordinary business care and prudence in doing so. A determination of whether a taxpayer exercised ordinary business care and prudence is dependent upon the clarity of the law or its interpretation and the taxpayer’s experience, knowledge, and education. Accordingly, reliance on the advice -8-  of a professional does not necessarily establish that a taxpayer exercised ordinary business care and prudence, nor does reliance on incorrect facts such as an erroneous information return.” 86 Ill. Adm. Code 700.400(b), (c) (2001). ¶ 49 Horsehead contends that it satisfied the reasonable cause exception to abate the late filing and payment penalties. It asserts that the position it took on the use tax chemical exemption was not unreasonable due to the absence of any controlling case law or a specific statutory definition providing what it means to “effect a direct and immediate change” upon the product manufactured. ¶ 50 As the Department’s regulation instructs, the determination of whether a taxpayer acted with reasonable cause is to be made on a case-by-case basis, taking into account all pertinent facts and circumstances. We initially note that the late filing and late payment fees imposed on Horsehead constituted almost a quarter of its overall liability to the Department. See generally Abrahamson, 153 Ill. 2d at 99 (holding that a court of review in determining whether a finding is against the manifest weight of the evidence should consider the severity of the sanction imposed). We also note that the tax tribunal recognized that the Department’s audit file had been admitted into evidence and referenced Horsehead’s history of tax compliance. The tribunal specifically held that the company had shown “good conduct” in complying with its tax obligations, which carried some weight in support of its claim that it acted in good faith when it failed to pay use tax on the coke. ¶ 51 The tax tribunal also acknowledged that the term “direct and immediate change” in the use tax chemical exemption has no specific statutory definition. Additionally, for the audit period at issue, there was no caselaw that Horsehead could have turned to for guidance as to how the chemical exemption should be interpreted and applied to the coke used in its manufacturing process. In denying Horsehead’s requested relief, the tax tribunal relied, in large part, on the fact that the taxpayer did not present any witnesses or evidence to support its claim for taking the position that it did on the exemption. As Horsehead asserts, however, a taxpayer seeking abatement under the reasonable cause exception is not specifically required to produce such evidence of its decision-making process or show that it sought guidance on the issue. See 86 Ill. Adm. Code 700.400(b), (c) (2001). ¶ 52 For these reasons, and recognizing the unique factual circumstances surrounding the manufacturing process at issue in this case, we find the tax tribunal’s decision to uphold the Department’s imposition of late payment and filing penalties was against the manifest weight of the evidence. ¶ 53 CONCLUSION ¶ 54 Accordingly, we affirm that portion of the appellate court judgment affirming the imposition of tax liability on Horsehead, and we reverse that portion of the decision affirming the imposition of the late payment penalties and late filing penalties. ¶ 55 Appellate court judgment affirmed in part and reversed in part. ¶ 56 Tribunal decision affirmed in part and reversed in part. -9-

2020-12-01 21:07:56.110492+00

https://juddocumentservice.mt.gov/getDocByCTrackId?DocId=338388

UNuaatiAL 12/01/2020 IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 20-0557 DA 20-0557 FLED STATE OF MONTANA, DEC 0 1 2020 BOWe n Greenwood Court Clerk of Supreme Montana Plaintiff and Appellee, State nf v. ORDER JASON M.PERKINS, Defendant and Appellant. Representing himself, Jason Miles Perkins has filed a verified Petition for an Out-of-Time Appeal, indicating that he discussed filing a timely appeal with his attorney, but that his attorney failed to file it for him. He includes copies of a letter and an affidavit frorn a different attorney advising him to file a motion to withdraw guilty plea in the Twenty-second Judicial District Court, Carbon County. Perkins does not indicate whether he has filed such motion in District Court. M. R. App. P. 4(6) allows this Court to grant an out-of-time appeal "Nil the infrequent harsh case and under extraordinary circumstances amounting to a gross miscarriage ofjustice[d" We secured copies of the Acknowledgement of Rights and Plea Agreement as well as Perkins's Sentence and Judgment. On November 13, 2017, Perlcins, represented by counsel, entered into a plea agreement whereby the two counts offelony sexual assault and felony sexual intercourse without consent were presented for victimizing two minor children, along with the acknowledgment of a possible maximum punishment of300 years in the Montana State Prison. Perkins pleaded guilty to the two counts of sexual assault in exchange for dismissal ofthe third offense. The State and Perkins agreed to recommend a fifteen-year commitment to the Department of Corrections(DOC)with all but five years suspended along with a concurrent, suspended fifteen-year commitment to the District Court. This Plea Agreement specifically stated:  There is a plea agreement under §46-12-211, subsection (1)(c), MCA,which is filed herewith. ... I further understand that, under a lawful sentence which may be imposed for the offenses to which I have pled guilty and, if the Court irnposes a sentence greater than that recommended in the plea agreement, I would not be allowed to withdraw my guilty pleas as a matter of law. Acknowledgement of Rights and Plea Agreement, at 4 (emphasis in original). On September 11, 2018, the District Court, after making a thorough inquiry of Perkins regarding the voluntariness of his pleas, his understanding of his constitutional rights, and the consequences of waiving such rights, sentenced Perkins to fifteen years, with no time suspended, in a prison designated by the DOC, followed by a consecutive, unsuspended fifteen years. Perkins provides no reason why he waited more than two years to seek an appeal of his conviction and sentence. We conclude that Perkins has not demonstrated extraordinary circumstances to warrant an out-of-time appeal, amounting to a gross rniscarriage ofjustice in this denial of his Petition. Accordingly, IT IS ORDERED that Perkins's Petition for an Out-of-Time Appeal is DENIED. The Clerk ofthe Supreme Court is directed to provide a copy ofthis Order to counsel of record; to Rochelle Loyning, Clerk of District Court, Carbon County, under Cause No. DC-16-04; and to Jason Perkins personally. + DATED this -- day of December, 2020. Chief Justice e"c.:2* ° Justices

2021-03-18 21:01:10.411633+00

https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2675-88

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA WILLIAM E. POWELL, Plaintiff, v. Civil Action No. 18-2675 (JEB) INTERNAL REVENUE SERVICE, Defendant. MEMORANDUM OPINION In one of its latest Opinions in this long-running Freedom of Information Act suit, the Court granted summary judgment to Defendant Internal Revenue Service as to almost all of Plaintiff William E. Powell’s claims, but required the Service to conduct a further search for one last IRS form. Having now done so and come up empty, Defendant seeks final judgment here. Powell not only resists, but asks to once again supplement his Complaint. As the time has now come to put this case to bed, the Court will grant Defendant’s Motion and deny Plaintiff’s. I. Background In the last few years, this Court has issued numerous Opinions detailing Powell’s disputes with the IRS and other federal agencies over multiple tax records. See, e.g., Powell v. Social Sec. Admin., No. 18-847, 2018 WL 4840356 , at *1–2 (D.D.C. Oct. 4, 2018); Powell v. IRS, 317 F. Supp. 3d 266 , 270–72 (D.D.C. 2018); Powell v. U.S. Dep’t of Treasury Office of Foreign Assets Control, 317 F. Supp. 3d 551 , 553 (D.D.C. 2018); Powell v. IRS, 280 F. Supp. 3d 155 , 157–59 (D.D.C. 2017). No recitation of that history is necessary here, as the Court focuses solely on the little that remains of the current action. 1  In its July 2, 2020, Memorandum Opinion and separate Order, the Court granted summary judgment to the IRS as to all of Powell’s FOIA requests save one. That was his request for “Form 5147 for the Powell Printing Company[, which was to be found] under Document Locator Number 17953-494-00101-1.” Powell v. IRS, 2020 WL 3605774 , at *12 (D.D.C. July 2, 2020). The Court believed that a further search was necessary because “the analyst who searched for the Form 5147 . . . [did not] tell the Court why he did not use the DLN that Powell provided him to make a request from the [Federal Records Center.]” Id. For the uninitiated, “Form 5147 is, in essence, a paper record of changes made to tax documents over a given time period.” Id. at *4. As ordered by the Court, the IRS conducted a further search and filed a Status Report informing the Court that it had not located any documents. See ECF No. 72. Powell, not surprisingly, was not satisfied by this explanation, and the Court thus ordered summary- judgment briefing on the adequacy of this search. See Minute Order of Oct. 30, 2020. During the briefing, Powell again moved to supplement his Complaint to add claims regarding other subsequent FOIA requests. See ECF No. 76 (Mot. to Supp.). II. Legal Standard A. Summary Judgment Summary judgment must be granted 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). A genuine issue of material fact is one that would change the outcome of the litigation. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242 , 248 (1986) (“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”). In the event of conflicting evidence on a material issue, the court 2 is to construe the conflicting evidence in the light most favorable to the non-moving party. See Sample v. Bureau of Prisons, 466 F.3d 1086 , 1087 (D.C. Cir. 2006). Factual assertions in the moving party’s affidavits or declarations may be accepted as true unless the opposing party submits his own affidavits, declarations, or documentary evidence to the contrary. Neal v. Kelly, 963 F.2d 453 , 456–57 (D.C. Cir. 1992). “FOIA cases typically and appropriately are decided on motions for summary judgment.” Defs. of Wildlife v. U.S. Border Patrol, 623 F. Supp. 2d 83 , 87 (D.D.C. 2009); Bigwood v. U.S. Agency for Int’l Dev., 484 F. Supp. 2d 68 , 73 (D.D.C. 2007). In FOIA cases, the agency bears the ultimate burden of proof to demonstrate the adequacy of its search and that it properly withheld any documents. See Defs. of Wildlife, 623 F. Supp. 2d at 91 . The Court may grant summary judgment based solely on information provided in an agency’s affidavits or declarations when they “describe the documents and the justifications for nondisclosure with reasonably specific detail, demonstrate that the information withheld logically falls within the claimed exemption, and are not controverted by either contrary evidence in the record nor by evidence of agency bad faith.” Military Audit Project v. Casey, 656 F.2d 724 , 738 (D.C. Cir. 1981). Such affidavits or declarations are “accorded a presumption of good faith, which cannot be rebutted by ‘purely speculative claims about the existence and discoverability of other documents.’” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197 , 1200 (D.C. Cir. 1991) (quoting Ground Saucer Watch, Inc. v. CIA, 692 F.2d 770 , 771 (D.C. Cir. 1981)). B. Motions to Supplement Federal Rule of Civil Procedure 15(d) allows the Court, “[o]n motion and reasonable notice . . . [and] on just terms,” to permit a party to serve a supplemental pleading setting forth events that have happened since the filing of its complaint. “Rule 15(d) is used to set forth new 3 facts that update the original pleading or provide the basis for additional relief; to put forward new claims or defenses based on events that took place after the original complaint or answer was filed.” United States v. Hicks, 283 F.3d 380 , 386 (D.C. Cir. 2002) (citing Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (2d ed. 1990)). Rule 15(d)’s intent is “to make pleadings a means to achieve an orderly and fair administration of justice.” Gomez v. Wilson, 477 F.2d 411 , 417 n.34 (D.C. Cir. 1973) (quoting Griffin v. County School Bd., 377 U.S. 218 , 227 (1964)). The Rule “promote[s] as complete an adjudication of the dispute between the parties as is possible.” Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (3d ed. 2020). It seeks “to avoid ‘needlessly remitt[ing] [plaintiffs] to the difficulties of commencing a new action even though events occurring after the commencement of the original action have made clear the right to relief.’” Scahill v. District of Columbia, 909 F.3d 1177 , 1183 (D.C. Cir. 2018) (quoting Fed. R. Civ. P. 15(d), advisory committee notes to 1963 amendment). “It follows that supplementation of pleadings is encouraged ‘when doing so will promote the economic and speedy disposition of the entire controversy between the parties, will not cause undue delay or trial inconvenience, and will not prejudice the rights of any of the other parties to the action.’” U.S. ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1 , 4 (1st Cir. 2015) (quoting Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1504 (3d ed. 2010)). III. Analysis The Court separately considers the IRS’s Motion for Summary Judgment and Powell’s Motion to Supplement Complaint. A. Motion for Summary Judgment In asking for summary judgment here, the Government seeks to hold the Court to its word. Having accomplished all it was required to do by the Court’s last Order, the Service 4 believes its job is done. Tasked with searching for Form 5147 under the particular DLN, Delphine Thomas, an IRS Senior Disclosure Specialist, commenced a complicated process to find the document. See ECF No. 75-3 (Declaration of Delphine Thomas), ¶¶ 7-10. It turns out that Powell’s requested DLN was in error, and no 5147 existed for that DLN. Id., ¶¶ 10-11. Generously believing that his request contained a typo in one digit, Thomas also sought the 5147 for the corrected DLN, which was 17953-494-00101-0, not 17953-494-00101-1. Id., ¶ 12. That did return a document, which the Service had previously released to Plaintiff, id., ¶ 13, but which it nonetheless disclosed again. See ECF No. 75 (Def. MSJ) at 5 n.1. Powell’s rejoinder is difficult to follow, although he does concede that his request contained the typo that Thomas identified. See ECF No. 82 (Pl. Opp. to MSJ) at 2. Much of his Opposition concerns Forms 2553, id. at 2-10, which, while associated with Forms 5147, were not part of what the Court ordered in its July 2, 2020, Opinion. If there are particular Forms 2553 that he still seeks, Powell will have to make a further FOIA request for them. B. Motion to Supplement Although the legal standard cited above is rather liberal in permitting a plaintiff to supplement his complaint, procedural context matters. Powell initially filed this suit, one of at least seven FOIA actions he has brought, in October 2018. See ECF No. 1. He then amended his Complaint in February 2019. See ECF No. 9. On September 30, 2019, the Court permitted supplementation of the Amended Complaint with requests not previously adjudicated. See ECF No. 28. The next month, Plaintiff sought to again amend his Complaint, see ECF No. 32, which the Court permitted once more. See Minute Order of Nov. 12, 2019. On July 10, 2020, he moved to supplement yet another time, see ECF No. 62, which the Court denied as futile. See ECF No. 80. 5  His latest attempt to supplement seeks to add two counts: one for violation of confidentiality under 26 U.S.C. § 6103 and one for withholding additional records in violation of FOIA. See Mot. to Supp. at 5. The Court has explained multiple times that § 6103 does not provide an independent cause of action, including in its last Opinion denying Plaintiff leave to supplement. See ECF No. 81 at 6. Even if he had a viable FOIA claim on the second count, on which point the Court offers no guidance, he cannot be permitted to drag this litigation on interminably. At some point, the door has to close. As the Court pointed out in another case involving Plaintiff, “Were Powell permitted to continue supplementing in this vein, this case could never be resolved.” Powell v. IRS, No. 17-278, ECF No. 41 (Order) at 2. There is no real prejudice in denying his Motion to Supplement, furthermore, because Powell is free to file yet another suit if he so chooses. IV. Conclusion The Court, accordingly, will grant Defendant’s Motion for Summary Judgment and deny Plaintiff’s Motion to Supplement. A separate Order so stating will issue this day. /s/ James E. Boasberg JAMES E. BOASBERG United States District Judge Date: March 18, 2021 6

2020-01-17 22:01:46.30594+00

Lansdon

*832OPINION Lansdon: The respondent contends that the two contracts set forth in our findings of fact are so closely related and so dependent upon each other that the sale of all the property of the petitioner must be regarded as a single transaction which in the circumstances resulted neither ⅛ taxable gain nor deductible loss; since “ The March *8331,1913 value of all the assets (land, timber and plant) was in excess of the cost of such assets and also in excess of the selling price, such selling price being more than the cost but less than the March 1, 1913 value.” The petitioner’s contention is that in the taxable year it made two separate sales of capital assets, one body of which was acquired prior to March 1,1913, and another, different and distinguishable, acquired after that date, and that gain or loss in each case must be ascertained by applying the plain provisions of the statutes to the admitted or proved facts. It now claims that it sustained a net loss in 1921 in the amount of $336,928.15 and asks that such net loss shall be applied to its tax liability which the Commissioner has determined for the years 1922 and 1923. The provisions of the Revenue Act of 1921 which govern here are as follows: Sec. 202. (a) That the basis for ascertaining the gain derived or loss sustained from a sale or other disposition of property, real, personal, or mixed, acquired after February 28, 1913, shall be the cost of such property; except that— (1)In the case of such property, which should be included in the inventory, the basis shall be the last inventory value thereof ; (b) The basis for ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, acquired before March 1, 1913, shall be the same as that provided by subdivision (a) ; but— (1) If its fair market price or value as of March 1, 1913, is in excess of such basis, the gain to be included in the gross income shall be the excess of the amount realized therefor over such fair market price or value; (2) If its fair market price or value as of March 1, 1913, is lower than such basis, the deductible loss is the excess of the fair market price or value as of March 1, 1913, over the amount realized therefor; and (3) If the amount realized therefor is more than such basis but not more than its fair market price or value as of March 1, 1913, or less than such basis but not less than such fair market price or value, no gain shall be included in and no loss deducted from the gross income. It is beyond dispute that the petitioner sold all its assets and business at one time to a single purchaser in pursuance of the terms and conditions set forth in two sale and purchase contracts which so far as we know were simultaneously executed. If these two contracts are so interrelated that they must be regarded as one, we think it follows that the two bodies of assets were disposed of in a single transaction. We have several times held that the effect of such sales or purchases must be determined by the terms and conditions of the instrument of transfer, that the parties are bound by the engagements so effected and that the Board will not construe such agreements contrary to the language therein. See Charles Rubens & Co., 6 B. T. A. 626; Nature's Rival Co., 6 B. T. A. 294; Lafayette-South Side Bank, 7 B. T. A. 1301; United States Envelope Co., 10 B. T. A. 84. To the same effect is Fraser v. Nauts, 8 Fed. (2d) 106. In the *834light of these decided cases the petitioner must prevail, unless the two instruments here involved must be construed as a single contract relating to the same subject matter. A careful study of the two contracts here in question shows that each in its terms refers to the other and that the land contract is a part of the consideration for the sale of the plant and equipment. From the terms of these instruments we think it is clear that the second could not have been executed without the first. Measured only by the terms and conditions therein, it is possible that the first might have been executed without the second, but this possibility vanishes in the light of the fact that the two bodies of assets had a single owner who would not sell the timber and timberland involved in the first contract unless the plant and equipment were disposed of at the same time. The courts, with singular unanimity, have held that two instruments in relation to the same matter, executed at the same time, must be construed as a single instrument. Re Brambrith, 169 N. Y. 437; White v. Miller, 52 Minn. 367. The courts of Arkansas, the jurisdiction in which this controversy arises, have many times considered the signification of two contracts relating to the same subject matter and simultaneously executed and have held that in such conditions the two are to be construed as one. Nick v. Rector, 4. Ark. 251; Vaugine v. Taylor, 18 Ark. 65; Pillow v. Brown, 26 Ark. 240; Haney v. Caldwell, 43 Ark. 184; St. L. I. Mt. & So. Ry. v. Beilder, 45 Ark. 17; cf. Wood v. Kelsey, 90 Ark. 272; 119 S.W. 258. Inasmuch as all the assets constituted all the property used by the petitioner in the single business in which it was engaged, we think the two instruments relate to the same subject matter and we are of the opinion that they must be regarded as a single contract setting forth the terms and conditions of a single transaction. The record discloses that all the land and timber sold in the taxable year was acquired prior to March 1, 1913, and that all the other property was acquired subsequent to that date. It is also clear that the plant, railway tracks and other logging and manufacturing equipment acquired after March 1, 1913, were located on land acquired before that date and that was transferred by the second contract. The logging railroad which, with its equipment, represented an investment of more than $300,000, obviously for the most part must have been located on the timberlands and the lands involved in the timber deeds. In the circumstances it would have been difficult, if not impossible, to segregate the assets transferred by the two contracts in evidence and sell one body to one purchaser and the second to another. This being true, we think no segregation was made or eould have been made ,in the sale of all the property to a *835single purchaser in the circumstances herein. It is in evidence that the purchaser desired to buy only the timber, but the petitioner would consider no proposition that did not include all its property. We think it is clear that the petitioner sold the business and assets which it had operated as a unit for several years in a single transaction and that gain or loss resulting therefrom must be ascertained by comparison of the price received with a single base. Cf. L. G. Cariton, 2 B. T. A. 1115; W. D. Parker, 13 B. T. A. 1239. Having reached the conclusion that the transaction in the taxable year was the sale of a single body of assets, it follows that the fair market value of the property owned at March 1,1913, is the starting’ point in the computation of the basic cost of the property, to which should be added the subsequent additions to the capital invested, with due regard to depletion and depreciation. This is what the Commissioner has done and in the light of the evidence the determination of the resulting deficiency is approved. United States v. Flannery, 268 U. S. 98; B. T. Britt, 2 B. T. A. 53; L. G. Carlton, supra; H. B. Pence, 9 B. T. A. 1189. Reviewed by the Board. Decision will he entered for the respondent. Phillips and Siefkin dissent.

2021-03-18 21:02:46.587929+00

http://www.courts.ca.gov/opinions/documents/B295742M.PDF

Filed 3/18/21 (unmodified opn. attached) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE ALEXANDER PINTO, B295742 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. BC631341) v. ORDER MODIFYING OPINION FARMERS INSURANCE EXCHANGE, [NO CHANGE IN JUDGMENT] Defendant and Appellant. THE COURT: It is ordered that the opinion filed hereon on March 8, 2021, be modified as follows: 1. The date 2019 is changed to 2013 in the first and last paragraphs of page six, the first and third paragraphs of page seven, the last paragraph of page eight, and the second paragraph of page nine. 2. The penultimate sentence of the second paragraph on page five is modified to read: “The report indicated that Martin and Williams said Orcutt was driving, and that a firefighter overheard Orcutt admit she was driving.”  This modification effects no change in the judgment. ____________________________________________________________ ROTHSCHILD, P. J. CHANEY, J. BENDIX, J. 2 Filed 3/8/21 (unmodified opinion) CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION ONE ALEXANDER PINTO, B295742 Plaintiff and Respondent, (Los Angeles County Super. Ct. No. BC631341) v. FARMERS INSURANCE EXCHANGE, Defendant and Appellant. APPEAL from an order of the Superior Court of Los Angeles County, Samantha P. Jessner, Judge. Reversed and remanded. Horvitz & Levy, Mitchell C. Tilner, Karen M. Bray; Haight Brown & Bonesteel, Richard E. Morton, Valerie A. Moore, and Christopher Kendrick for Defendant and Appellant. Sheppard, Mullin, Richter & Hampton, Peter Klee, Charles A. Danaher, John T. Brooks, and Theona Zhordania for Allstate Insurance Company, Crusader Insurance Company, Government Employees Insurance Company, Infinity Insurance Company, Interinsurance Exchange of the Automobile Club, Loya Insurance Company, Mercury Insurance, and Western General Insurance Company as Amici Curiae on behalf of Defendant and Appellant. Hinshaw & Culbertson, Royal F. Oaks, Michael A.S. Newman for Pacific Association of Domestic Insurance Companies, National Association of Mutual Insurance Companies, and American Property Casualty Insurance Association as Amici Curiae on behalf of Defendant and Appellant. Law Office of Bruce Palumbo, Bruce Palumbo; The Yarnall Firm, Delores A. Yarnall; Dewitt Algorri & Algorri, Mark S. Algorri and Carolyn Li-Jun Tan for Plaintiff and Respondent. Shernoff Bidart Echeverria, Ricardo Echeverria, Steven Schuetze, and Kristin Hobbs for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiff and Respondent. ___________________________________ In this case the victim of a single-car traffic accident offered to settle his claim against the vehicle’s owner in exchange for payment of the owner’s insurance policy limits. The insurer failed to accept the offer, which then lapsed. After the victim obtained a judgment against the owner far in excess of policy limits, the owner assigned her claims against the insurer to the victim, who then sued the insurer for bad faith. At trial, extensive evidence was presented by both sides concerning the reasonableness of the insurer’s conduct both in adjusting the victim’s claim and in failing to accept his offer. The special verdict form, however, asked nothing about the reasonableness of the insurer’s conduct, and the jury made no finding that the insurer acted unreasonably in any respect. The jury nevertheless 2 found for the plaintiff, and judgment was entered against the insurer based solely on the special verdict. We reverse. A bad faith claim requires a finding that the insurer acted unreasonably in some respect. Because the jury made no such finding (not having been asked for one), the judgment must be vacated and a contrary judgment entered for the insurer. BACKGROUND A. The Accident and Farmers’ Investigation At about 6:00 p.m. on March 31, 2013, Alaxandrea Martin was a passenger in her pickup truck with Dana Orcutt, Alexander Pinto, and Anthony Williams on the way back from a party at Lake Havasu, Arizona, where drugs and alcohol had been present. The truck went off the road in Arizona and flipped, injuring all four occupants. The truck was covered by a policy issued by Farmers Insurance Exchange, with bodily injury liability limits of $50,000 per person and $100,000 per occurrence. The policy covered Martin and any permissive driver. Martin’s insurance agent reported the accident to Farmers on April 9, 2013, and Farmers appointed Leann Lawler to investigate the accident and evaluate liability and coverage. The next day, Martin’s mother, Laura Martin, reported to Lawler that the vehicle had rolled, causing serious injuries to the occupants. (For clarity, we will sometimes refer to the Martins by their first names.) Alaxandrea, who suffered brain damage in the accident and had only recently emerged from a coma, could remember nothing after 1:00 p.m. on the day of the accident. Laura reported that Orcutt was driving when the truck went off 3 the road, but she (Orcutt) was now denying having been the driver. Laura reported that Pinto had been paralyzed. Alaxandrea told Lawler that she had been drinking before the accident and was currently under heavy medication and could not remember who was driving. Orcutt refused to respond to Lawler’s repeated phone calls or messages. On April 22, 2013, Laura Martin reiterated that Orcutt had been the driver, and said Alaxandrea told her that she (Alaxandrea) initially gave her keys to Pinto to drive, but he gave them to Orcutt, who had also been drinking. Laura stated that Alaxandrea believed Orcutt lacked insurance due to her license having been suspended for a DUI. On April 26, 2013, Lawler called Laura Martin again and asked for contact information for Pinto and Williams, but Laura had none. Farmers then assigned adjustment of any claim to Tanya Cannon. On April 29, 2013, Orcutt reported to Cannon that she had been injured in the accident and could not remember who was driving. She admitted she had driven Martin’s truck in the past, but could not differentiate the latest trip from the 40 to 50 other Havasu trips she and Martin had made. However, she believed she was not the driver in this instance because after receiving a DUI the year before she had resolved never to drink and drive again. Orcutt stated that she had filed an SR-22 (a post-DUI financial responsibility statement), and might have insurance through her mother, with whom she lived. The next day, on April 30, 2013, Alaxandrea Martin told Cannon that she now remembered that Orcutt had been driving, 4 but Alaxandrea still could not recall how she (Orcutt) ended up behind the wheel. Attributing Alaxandrea’s recall difficulty to her traumatic brain injury and to there having been “lots of drugs and alcohol involved that day,” Cannon continued to investigate the accident to determine liability, coverage, and applicable insurance. The Arizona police report stated that Martin’s truck, with Orcutt driving while under the influence of alcohol, swiped a guardrail, went off the road and up a hill with no braking or evasive steering, became airborne, and landed upside down. The report related Orcutt’s statements to police that she could not remember the accident. She told police she believed Williams was supposed to be driving, but said, “but everyone keeps saying I was driving.” The report indicated that a firefighter overheard Orcutt, Martin, and Williams say that Orcutt was driving. The report concluded that Orcutt committed three counts of aggravated assault while under the influence of alcohol. One of the witnesses identified in the report told Cannon that Orcutt was extremely intoxicated at the accident scene, and had said, “ ‘I’m going to jail for what I did.’ ” Cannon tendered the $100,000 bodily injury policy limits to all injured parties except Orcutt, whom Cannon determined was likely the at-fault driver. Cannon requested that Orcutt let Cannon know if she had other coverage, but Orcutt never responded. On July 5, 2013, Laura Martin advised Cannon that Orcutt “had been driving on a SR-22” as a result of a “prior DUI,” and would be prosecuted for assault in Arizona. 5 B. Pinto’s Demand On July 1, 2019, Ernest Algorri, Pinto’s attorney, sent a letter to Cannon offering to settle Pinto’s insurance claim against Alaxandrea Martin. (Cannon did not receive the letter until July 5, because although she had previously given Algorri her fax number, he chose to mail the letter to Farmers’ document center in Oklahoma.) The letter referenced a “Case Name”: Pinto v. Orcutt and Williams, and represented that Pinto had been rendered quadriplegic in the accident. The letter repeatedly referred to Farmers’ “insured,” which the caption identified solely as Alaxandrea Martin, neglecting to include Orcutt as a possible insured under the policy’s permissive driver clause. In the letter, Pinto offered “to accept the liability and medical payment limits in full and complete settlement of [his] personal injury claim.” Pinto demanded that the “insured” provide a release, a declaration that the insured had not been acting within the course and scope of her employment at the time of the accident, and a copy of any applicable insurance policy. The offer stated it would expire in 15 days, on July 16. (With the intervention of two weekends and the July 4 holiday, plus delay caused by Algorri mailing the letter to Oklahoma, this gave Farmers eight workdays to accept the offer.) C. Farmer’s Response to the Demand Cannon assumed that Pinto’s demand was directed to both Martin as the named insured and Orcutt as the permissive driver and additional insured, and forwarded the offer to them the following day, July 6. On July 9, 2019, Algorri told Cannon that he needed to inspect Martin’s truck to evaluate a potential claim against GM. 6  On July 11, 2019, Cannon, still not having heard back from Orcutt, retained a private investigator to locate her and obtain information about the accident and any other insurance she might have. On July 13, the investigator reported that Orcutt had been located. She told the investigator that she had no other insurance and had not been acting within the course and scope of any employment when the accident occurred. Orcutt never responded on this or any other occasion to Cannon’s many requests for a declaration to this effect. Also on July 11, Cannon called Algorri three times and left messages requesting an extension of time on the offer deadline. Algorri never responded. Cannon retained an attorney, Limor Lehavi, to help with Pinto’s claim. On July 15, 2019, Lehavi faxed a letter to Algorri tendering the $50,000 per person bodily injury policy limits to resolve Pinto’s claims “against any and all insureds under the policy.” In the letter, Lehavi asked whether Pinto’s offer pertained to both the named insured and the permissive driver, and informed Algorri that Farmers could not pay policy limits without a release of all of its insureds. Lehavi noted that Algorri had not provided a declaration form as promised, and enclosed a proposed declaration form, asking if it was acceptable. Lehavi asked Algorri to confirm that Farmers providing the text of the policy satisfied Pinto’s demand for policy information, as Orcutt had represented that she possessed no other insurance, and asked whether Pinto intended to pursue a claim against GM, which might expose Farmers’ insureds to a cross-complaint by GM and therefore delay Farmers from paying out policy limits. Lehavi asked whether Pinto had any pending medical liens, which must be resolved as part of any settlement, and asked 7 whether Pinto was married, as any spouse would need to be included in Pinto’s release. Lehavi stated that Farmers had insufficient time to comply with all of the conditions of Pinto’s demand, and requested an extension of 30 days. Algorri responded that “The term ‘insured’ in Mr. Pinto’s offer means all insureds, including the driver, Dana Orcutt.” Algorri informed Lehavi that Pinto was unmarried, and advised that Farmers had until 5:00 p.m. the next day to meet all conditions of the offer. Algorri failed to respond to Lehavi’s other inquiries. Before the 5:00 p.m. deadline on July 16, Farmers hand- delivered a letter to Algorri’s office accepting Pinto’s offer. The letter enclosed a $50,000 check and a form releasing Martin and Orcutt, and stated that “Farmers hereby accepts your client Alexander Pinto’s settlement demand for a release from liability of Alexandrea Martin and Dana Orcutt, and their heirs and assigns, in exchange for a payment of the Farmers per person policy limits of $50,000.” Farmers faxed Algorri a declaration from Martin that same day before the deadline, but was never able to obtain one from Orcutt. On July 17, 2019, Algorri rejected Farmers’ tender on the ground that Farmers had failed to “unconditionally accept [Pinto’s] generous offer to settle his case.” Algorri said, “Farmers apparently failed to perform even the most perfunctory investigation and consequently has been unable to provide my client with the most basic and critical information set forth in his offer: reasonable proof of Ms. Orcutt’s complete policy limits and course and scope status. . . . [M]y client, with his astronomical medical bills and devastating injuries, would be a fool to accept 8 Farmers’ $50,000.00 without knowing the exhaustive policy limits or course and scope[] status of Ms. Orcutt. [¶] . . . . Suit will soon be filed so that my client can discover that information which Farmers failed to provide.” (Italics added.) D. Litigation On August 7, 2019, Pinto sued Orcutt and Martin for negligence. The lawsuit settled, with an agreement that: (1) Orcutt and Martin would assign all their rights against Farmers to Pinto; (2) the settlement would be treated as the equivalent of a $10 million judgment; and (3) the insurers (another insurer had been found for Orcutt) would pay Pinto their combined policy limits of $65,000. Pinto then filed this action against Farmers, asserting claims against the insurer that Martin and Orcutt had assigned to him. Pinto alleged that Farmers acted in bad faith towards its insureds Martin and Orcutt by failing to accept his settlement demand. At trial, much of the evidence concerned Farmers’ claims adjustment prior to and after Pinto’s settlement offer. Farmers repeatedly argued, over Pinto’s repeated objections, that to establish bad faith Pinto had to prove Farmers acted unreasonably in failing to accept his demand. The court declined to so instruct the jury, and the special verdict form contained no question relating to the reasonableness of Farmers’ conduct. The jury made three findings as to Farmers’ conduct toward Martin: (1) Pinto made a reasonable settlement demand; (2) Farmers “fail[ed] to accept a reasonable settlement demand”; and (3) a monetary judgment had been entered against Martin in Pinto’s earlier lawsuit. 9  The jury made those same findings as to Farmers’ conduct toward Orcutt, plus three more: (4) Orcutt failed to cooperate with Farmers; (5) Farmers “use[d] reasonable efforts to obtain Orcutt’s cooperation”; and (6) Orcutt’s lack of cooperation prejudiced Farmers. The jury made no finding that Farmers acted unreasonably in any respect. Following the verdicts, Farmers argued it could not have accepted Pinto’s settlement offer on behalf of Martin alone because Orcutt was also a potential insured. It argued that the jury’s finding that Orcutt failed to cooperate established that Farmers did not act unreasonably, and was thus entitled to judgment on Pinto’s bad faith claim. The court rejected the arguments and entered judgment for Pinto for $9,935,000. Farmers appeals. After oral argument, we invited and received supplemental briefing from the parties. DISCUSSION Farmers contends the judgment must be vacated because the jury did not find, and no evidence established, that it acted unreasonably in failing to settle Pinto’s claim against Martin. Pinto counters that failure to accept a reasonable settlement offer is itself unreasonable per se. I. Whether the Verdict Supports the Judgment The issue is whether, in the context of a third party insurance claim, failing to accept a reasonable settlement offer constitutes bad faith per se. We conclude it does not. 10  A. Legal Principles 1. Bad Faith Liability Requires a Finding that the Insurer Acted Unreasonably “In each policy of liability insurance, California law implies a covenant of good faith and fair dealing. This implied covenant obligates the insurance company, among other things, to make reasonable efforts to settle a third party’s lawsuit against the insured. If the insurer breaches the implied covenant by unreasonably refusing to settle the third party suit, the insured may sue the insurer in tort to recover damages proximately caused by the insurer’s breach.” (PPG Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310 , 312.) In evaluating whether an insurer acted in bad faith, “the critical issue [is] the reasonableness of the insurer’s conduct under the facts of the particular case.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713 , 723.) To hold an insurer liable for bad faith in failing to settle a third party claim, the evidence must establish that the failure to settle was unreasonable. 2. An Insurer’s Failing to Accept a Reasonable Offer is not Unreasonable Per Se An offer to settle an insurance claim is generally multidimensional, the most obvious component being the amount demanded. Other components include the conditions for acceptance and the scope of any release. An insurer’s duty to accept a reasonable settlement offer is not absolute. “ ‘[I]n deciding whether or not to settle a claim, the insurer must take into account the interests of the insured, and when there is a great risk of recovery beyond the policy limits, a good faith consideration of the insured’s interests may require the insurer to settle the claim within the policy limits. An 11 unreasonable refusal to settle may subject the insurer to liability for the entire amount of the judgment rendered against the insured, including any portion in excess of the policy limits. (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654 , 658-661 [(Comunale)].)’ [Citation.]” (Hamilton v. Maryland Casualty Co. (2002) 27 Cal.4th 718 , 724-725, italics added.) Therefore, failing to accept a reasonable settlement offer does not necessarily constitute bad faith. “[T]he crucial issue is . . . the basis for the insurer’s decision to reject an offer of settlement.” (Walbrook Ins. Co. v. Liberty Mutual Ins. Co. (1992) 5 Cal.App.4th 1445 , 1460.) “[M]ere errors by an insurer in discharging its obligations to its insured ‘ “does not necessarily make the insurer liable in tort for violating the covenant of good faith and fair dealing; to be liable in tort, the insurer’s conduct must also have been unreasonable.” ’ ” (Graciano v. Mercury General Corp. (2014) 231 Cal.App.4th 414 , 425.) “[S]o long as insurers are not subject to a strict liability standard, there is still room for an honest, innocent mistake.” (Walbrook, at p. 1460; accord Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269 , 1280 [“erroneous denial of a claim does not alone support tort liability; instead, tort liability requires that the insurer be found to have withheld benefits unreasonably”].) A claim for bad faith based on the wrongful refusal to settle thus requires proof the insurer unreasonably failed to accept an offer. (Critz v. Farmers Ins. Group (1964) 230 Cal.App.2d 788 , 798, disapproved on other grounds in Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425 , 433.) Simply failing to settle does not meet this standard. A facially reasonable demand might go unaccepted due to no 12 fault of the insurer, for example if some emergency prevents transmission of the insurer’s acceptance. 3. Standards of Review When a plaintiff’s verdict is challenged for lack of substantial evidence, we must determine whether there is evidence that is “ ‘ “reasonable in nature, credible, and of solid value; [constituting] ‘substantial’ proof of the essentials which the law requires in a particular case.” ’ ” (DiMartino v. City of Orinda (2000) 80 Cal.App.4th 329 , 336.) To do so, we first resolve all explicit conflicts in the evidence and presume all reasonable inferences in favor of the verdict. (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627 , 1632.) We then determine whether evidence supporting the verdict is substantial. “[T]his does not mean we must blindly seize any evidence in support of the respondent in order to affirm the judgment. The Court of Appeal ‘was not created . . . merely to echo the determinations of the trial court. A decision supported by a mere scintilla of evidence need not be affirmed on review.’ [Citation.] ‘[I]f the word “substantial” [is to mean] anything at all, it clearly implies that such evidence must be of ponderable legal significance. Obviously the word cannot be deemed synonymous with “any” evidence. It must be reasonable . . . , credible, and of solid value . . . .’ ” (Id. at p. 1633.) “The ultimate determination is whether a reasonable trier of fact could have found for the respondent based on the whole record. [Citation.] While substantial evidence may consist of inferences, such inferences must be ‘a product of logic and reason’ and ‘must rest on the evidence’ [citation]; inferences that are the result 13 of mere speculation or conjecture cannot support a finding.” (Ibid.) Although “the reasonableness of an insurer’s claims- handling conduct is ordinarily a question of fact, it becomes a question of law where the evidence is undisputed and only one reasonable inference can be drawn from the evidence.” (Chateau Chamberay Homeowners Ass’n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335 , 346.) The correctness of a special verdict is analyzed as a matter of law and is subject to de novo review. (Zagami, Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083 , 1092.) B. The Verdict was Facially Deficient The special verdict here was facially insufficient to support a bad faith judgment because it included no finding that Farmers acted unreasonably in failing to accept Pinto’s settlement offer. “If a fact necessary to support a cause of action is not included in . . . a special verdict, judgment on that cause of action cannot stand.” (Behr v. Redmond (2011) 193 Cal.App.4th 517 , 531.) As to Martin, the verdict form asked only three questions: Whether Pinto made a reasonable offer; whether Farmers failed to accept the offer; and whether Martin assigned her judgment against Farmers to Pinto. These questions were necessary, but not sufficient. The verdict form failed to ask whether Farmers acted unreasonably in failing to accept Pinto’s offer. The special verdict was patterned on CACI No. 2334, which the trial court gave as follows: “Mr. Pinto claims that he was harmed by Farmers’ breach of the obligation of good 14 faith and fair dealing because Farmers failed to accept a reasonable settlement demand made by Mr. Pinto. To establish this claim, Mr. Pinto must prove all of the following: [¶] 1. That Mr. Pinto made a reasonable settlement demand; [¶] 2. That Farmers failed to accept a reasonable settlement demand for an amount within policy limits; and [¶] 3. A monetary judgment was entered in [Pinto’s underlying case against Martin and Orcutt] for a sum greater than the policy limits that was assigned to Mr. Pinto. “ ‘Policy limits’ means the highest amount available under the Farmers policy for the claim that was assigned to Mr. Pinto. [¶] A settlement demand for an amount within policy limits is reasonable if Farmers knew or should have known at the time the demand was rejected that the potential judgment was likely to exceed the amount of the demand based on Mr. Pinto’s injuries or loss and the insured’s or insureds’ probable liability. However, the demand may be unreasonable for reasons other than the amount demanded.” The enumerated elements of CACI No. 2334 present two issues: Whether the plaintiff was harmed and whether the insurer’s failure to settle caused the harm. No element addresses whether the insurer’s failure to settle was unreasonable. CACI No. 2337, a modified version of which was presented to the jury, lists 16 examples of potentially unreasonable conduct, including failure for improper reasons 1 to settle a claim. But no element from this instruction was 1 CACI No. 2337 instructs, in pertinent part, the following: 15 reflected in the verdict form, and neither it nor or any other instruction nor any authority posits that failure to accept a reasonable settlement is unreasonable per se. Relying on Comunale, supra, Pinto argues that the Supreme Court held in a third-party duty to settle case that a carrier’s failure to accept a reasonable offer to settle within policy limits constitutes a breach of the covenant of good faith and fair dealing as a matter of law. This was not Comunale’s holding. There, an insurer refused to accept a traffic accident victim’s settlement offer. “In determining whether [defendant] acted unreasonably, that is, without proper cause, you may consider whether the defendant did any of [16 specified acts],” including: “[(e) Did not attempt in good faith to reach a prompt, fair, and equitable settlement of [plaintiff]’s claim after liability had become reasonably clear.]”; “[(f) Required [plaintiff] to file a lawsuit to recover amounts due under the policy by offering substantially less than the amount that [plaintiff] ultimately recovered . . .]”; “[(g) Attempted to settle [plaintiff]’s claim for less than the amount to which a reasonable person would have believed [plaintiff] was entitled . . .]”; “[(h) Attempted to settle the claim on the basis of an application that was altered without notice to, or knowledge or consent of, [plaintiff] . . .]”; “[(l) Failed to settle a claim against [plaintiff] promptly once . . . liability had become apparent . . . in order to influence settlements under other portions of the insurance policy coverage.]”; “[(m) Failed to promptly provide a reasonable explanation of its reasons for denying the claim or offering a compromise settlement . . .].” “The presence or absence of any of these factors alone is not enough to determine whether [name of defendant]’s conduct was or was not unreasonable, that is, without proper cause. You must consider [name of defendant]’s conduct as a whole in making this determination.” 16 The Court held that “the implied obligation of good faith and fair dealing requires the insurer to settle in an appropriate case.” (Comunale, supra, 50 Cal.2d at p. 659.) “The insurer, in deciding whether a claim should be compromised, must take into account the interest of the insured and give it at least as much consideration as it does to its own interest. [Citation.] When there is great risk of a recovery beyond the policy limits so that the most reasonable manner of disposing of the claim is a settlement which can be made within those limits, a consideration in good faith of the insured’s interest requires the insurer to settle the claim.” (Ibid.) The Court concluded it is unreasonable for an insurer to reject a settlement demand because of a coverage dispute. Comunale simply held that an insurer may not put its own interests before the insured’s when “the most reasonable manner of disposing of the claim is a settlement.” (Comunale, supra, 50 Cal.2d at p. 659.) The Court did not discuss rejecting settlement for reasons outside of coverage disputes, and did not hold that failure to settle is unreasonable whenever the offer itself is reasonable. Pinto relies on two further Supreme Court cases which are to the same effect as Comunale and no more apposite: Crisci v. Security Ins. Co., supra, 66 Cal.2d 425 , and Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9 .) We reiterate the Court’s latest statement on the matter: “ ‘[A] good faith consideration of the insured’s interests may require the insurer to settle the claim within the policy limits. An unreasonable refusal to settle may subject the insurer to liability for the entire amount of the judgment rendered 17 against the insured, including any portion in excess of the policy limits.’ ” (Hamilton v. Maryland Casualty Co., supra, 27 Cal.4th at pp. 724-725, italics added; see also Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390 , 401 [“An insurer that breaches its implied duty of good faith and fair dealing by unreasonably refusing to accept a settlement offer within policy limits may be held liable for the full amount of the judgment against the insured in excess of its policy limits” (italics added)]; Commercial Union Assurance Companies v. Safeway Stores, Inc. (1980) 26 Cal.3d 912 , 916-917 [“an insurer may be held liable for a judgment against the insured in excess of its policy limits where it has breached its implied covenant of good faith and fair dealing by unreasonably refusing to accept a settlement offer within the policy limits” (italics added)].) The Court has never held that failure to accept a reasonable settlement is per se unreasonable. Although CACI No. 2334 describes three elements necessary for bad faith liability, it lacks a crucial element: Bad faith. To be liable for bad faith, an insurer must not only cause the insured’s damages, it must act or fail to act without proper cause, for example by placing its own interests above those of its insured. C. The Judgment is Defective A special verdict based solely on an insufficient jury instruction cannot support a judgment. The jury was neither asked to nor did find that Farmers acted unreasonably or without proper cause in failing to accept Pinto’s settlement offer. Because a cause of action for bad faith requires a finding that the insurer acted unreasonably, the absence of 18 such a finding precludes judgment for the plaintiff on that claim. (Behr v. Redmond, supra, 193 Cal.App.4th at p. 531.) Pinto argues that Farmers deliberately sabotaged the settlement by injecting Orcutt into it even though she denied being a permissive driver, took no steps to seek coverage, and in fact disqualified herself from coverage by failing to cooperate. The point is irrelevant because the jury made no findings on these supposed facts. In any event, the record indicates it was Pinto who made Orcutt part of his offer by conditioning settlement on receipt of information from “the insured,” which he defined as including both Martin and Orcutt. (He was obliged to do so, as she was likely an additional insured under the policy’s permissive driver clause, notwithstanding actions that might later have disqualified her from coverage.) He then rejected Farmers’ tender solely because it failed to include “reasonable proof of Ms. Orcutt’s complete policy limits and course and scope status,” proof that Farmers had no ability to provide. Pinto recites a litany of other actions Farmers took that establish it unreasonably investigated and settled Martin’s claim, which he argues establish that Farmers put its own interests over Martin’s. These actions too are irrelevant because the jury made no findings on this issue. In any event, no evidence suggested Farmers’ conduct caused the settlement to fail. Farmers attempted to accept Pinto’s settlement offer, and timely tendered both the policy limits and Martin’s declaration. Settlement failed only because Pinto rejected the tender on the ground that it failed to include Orcutt’s declaration. But no evidence established, and the jury did not find, that Farmers should have done 19 more to obtain that declaration. On the contrary, the jury expressly found that Farmers “use[d] reasonable efforts to obtain Orcutt’s cooperation,” and her lack of cooperation prejudiced the insurer. Farmers therefore did all it could to achieve a settlement. (See Lehto v. Allstate Ins. Co. (1994) 31 Cal.App.4th 60 , 73 [“by offering the policy limits in exchange for a release, the insurer has done all within its power to effect a settlement”].) D. Remedy The question remains what to do about the defective judgment. The plaintiff “bear[s] the responsibility for a special verdict submitted to the jury on [his] own case” and must therefore ensure that a special verdict allows the jury to “ ‘resolve all of the ultimate facts’ ” so that “ ‘ “nothing shall remain to the court but to draw from them conclusions of law.” ’ ” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949 , 959-960; 961- 962.) “It is incumbent upon counsel to propose a special verdict that does not mislead a jury into bringing in an improper special verdict.” (Id. at p. 960, fn. 8.) A plaintiff who fails to do so “is bound by the erroneous special verdict.” (Ibid.) Pinto argues that Farmers successfully objected to the very “reasonableness” special verdict question that it now argues was required, Proposed Special Verdict Question No. 7. Under the doctrine of invited error, he argues, Farmers is estopped from urging the defective verdict as a ground for reversal. We disagree. 20  The “ ‘doctrine of invited error’ is an ‘application of the estoppel principle’: ‘Where a party by his conduct induces the commission of error, he is estopped from asserting it as a ground for reversal’ on appeal.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383 , 403.) The purpose of the doctrine is to “prevent[] a party from misleading the trial court and then profiting therefrom in the appellate court.” (Ibid.) The proposed special verdict question at issue, No. 7, which Pinto proposed and to which Farmers objected, asked: “Did FARMERS breach its duty of good faith and fair dealing to [Martin] by acting unreasonably and by failing to give as much consideration to her interests as they gave to their own interests?” If the jury answered “no,” it was instructed to answer Question No. 9, which asked whether Farmers “fail[ed] to accept a reasonable settlement demand for an amount within [Martin’s] policy limits.” Question No. 9 eventually became the foundation of the special verdict form. Farmers objected to Question No. 7, and it was never given. Question No. 7 would not have been the correct reasonableness question because it asked nothing about the settlement offer, which was discussed only in Question No. 9. Although Pinto complained at length about Farmers’ many bad acts, in the end it cured any deficiency by tendering the full $50,000 policy limits. Those acts therefore had nothing to do with Pinto’s damages, which comprised solely the loss of that $50,000. In fact, the jury could not have both answered “yes” to Question No. 7 and made any finding about the settlement 21 offer, because pursuant to Pinto’s protocol, Question No. 9, the only question mentioning the settlement offer, would not be encountered should the jury answer yes to Question No. 7. There is therefore no way Question No. 7 could have cured the verdict. Pinto argues it was Farmers that insisted that the special verdict mirror CACI No. 2334, and is therefore responsible for the error. The record is flatly to the contrary. Farmers proposed that a special verdict question mirroring CACI No. 2334 be modified to ask whether Farmers’ failure to accept Pinto’s settlement offer was “the result of unreasonable conduct by Farmers,” which Farmers at all times argued was essential to Pinto’s bad faith failure-to- settle theory. This would have been the correct question, but Pinto successfully objected to it. We conclude the defective verdict was accomplished at Pinto’s behest. Not only did he fail to propose an appropriate verdict, he also vigorously opposed Farmers’ attempts to clarify the erroneous verdict. The proper remedy is to vacate the judgment and enter a new judgment for Farmers. (See Saxena v. Goffney (2008) 159 Cal.App.4th 316 , 329 [remedy for defective verdict achieved through plaintiff’s efforts is to order judgment notwithstanding the verdict]; see also Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, 13 Cal.App.4th at p. 960, fn. 8 [plaintiff responsible for erroneous special verdict is bound by the error].) 22  DISPOSITION The judgment is reversed and the matter remanded with directions to enter a new judgment for Farmers. Farmers is to recover its costs on appeal. CERTIFIED FOR PUBLICATION CHANEY, J. We concur: ROTHSCHILD, P. J. BENDIX, J. 23

2020-01-17 22:01:43.778047+00

Littleton

OPINION. Littleton : The parties have stipulated that a profit of $2,130 was realized in the redemption of certain bonds, and the only issue to be decided is whether the action of the Commissioner was correct in denying to the petitioner the right of election to have the tax on this gain computed under the provisions of section 206 of the Revenue Act of 1921, which provides for a tax on “ capital gain ” realized on *484the “ sale or exchange of capital assets ” at a different rate than that applicable to ordinary income. The terms “ capital gain ” and “ capital assets ” are defined in section 206 as follows: The term “ capital gain ” means taxable gain from the sale or exchange of capital assets consummated after December 31, 1921; ⅜ ⅜ * # * * # The term “ capital assets ” as used in this section means property acquired and held by the taxpayer for profit or investment for more than two years (whether or not connected with his trade or business), ⅜ * *. The parties are in agreement that the bonds in question constituted property which had been acquired and held by the petitioner for profit or investment for more than two years, and, therefore, were “ capital assets ” within the meaning of the statute to be considered, but they do not agree as to the interpretation to be given to the redemption of the bonds, the petitioner contending that this was a “ sale or exchange ” within the meaning of the foregoing provisions and the Commissioner taking the position that it was not such a sale or exchange. We are of opinion that the redemption of these bonds constituted a sale or exchange ” within the meaning of section 206. Apparently no attempt was made to limit the character of transactions to which section 206 should apply. An examination of the legislative history of the provision in question shows that the'language, defining “capital gain” as finally enacted, appeared in the House Bill and was accepted by the Senate without change. The explanation offered by the Ways and Means Committee (which is substantially the same as that given by the Finance Committee) is found on pages 10 and 11 of its report, as follows: The sale of farms, mineral properties, and other capital assets is now seriously retarded by the fact that gains and profits earned over a series of years are under the present law taxed as a lump sum (and the amount of surtax greatly enhanced thereby) in the year in which the profit is realized. Many such sales, with their possible profit taking and consequent increase of the tax revenue, have been blocked by this feature of the present law. In order to permit such transactions to go forward without fear of a prohibitive tax, the proposed bill, in section 206, adds a new section (207) to the income tax, providing that where the net gain derived from the sale or other disposition of capital assets would, under the ordinary procedure, he subjected to an income tax in excess of 15 per cent, the tax upon capital net gain shall be limited to that rate. It is believed that the passage of this provision would materially increase the revenue, not only because it would stimulate profit-taking transactions hut because the limitation of 15 per cent is also applied to capital losses. Under present conditions there are likely to be more losses than gains. *485Both Committees state that the provision is intended to be applicable to the “ sale or other disposition of capital assets ” and certainly the transaction before us comes within these broad terms. Prior to the redemption of the bonds, the petitioners owned capital assets and by the redemption these assets were converted into cash. The transaction was' in a sense involuntary in character as far as the petitioner was concerned, but no limitation in this respect appears in the statute and when the petitioner purchased the bonds which were subject to “ call ” prior to maturity it must be assumed that he took them subject to their being converted into cash at such election of the debtor corporation. The redemption of the bonds was in effect a compulsory sale thereof. The tax upon the profit should be computed at the rate specified in section 206. Reviewed by the Board. Judgment will be entered umder Rule 50.

2020-01-17 22:01:43.813845+00

Lansdon

*489OPINION. Lansdon: The parties agree that the amount of $29,273.38 was disbursed by the petitioner in 1920, in the circumstances set forth in our findings of fact. There is, of course, no doubt that petitioner’s income for 1920, available for surplus purposes or for the payment of dividends to its shareholders, was reduced by the amount of the payment in controversy. The petitioner contends that the payment in question was an expense that it could not avoid, since it was incurred in an action in equity to which it was a party, and was paid in conformity with the decree of a court of equity clothed with broad discretion as to the matter of assessing costs and fees against parties litigant. The respondent disallowed the deduction in controversy as an expense of the petitioner incurred and paid in the taxable year 1920, argues that the petitioner was not a party to the suit in equity, and suggests that the court transcended its powers in assessing the costs against the petitioner and that the payment was a distribution of surplus for the benefit of all the stockholders. There is no controversy over the facts. We must determine, therefore, as a matter of law, whether the payment is deductible from petitioner’s income for tax purposes. It is clear that the petitioner was a party to the equity proceedings. A- claim for the refund of corporate earnings alleged to have been improperly distributed can always be made a cause of action by stockholders who believe that their rights have' been violated or sacrificed. If the objecting beneficiaries under the trust created by the will of Joel B. Wolfe had prevailed in the suit the decree of the court would have resulted in the payment of more than $500,000 to this petitioner and such payment would have become a part of its surplus to be held for business purposes or distributed to all the stockholders as might be determined by appropriate corporate action. Under the laws of the State of Rhode Island the court properly admitted petitioner as a party to the suit, as shown by the following provisions: Section 12, Chapter 339, General Laws of R. I., 1923, Whenever any bill or proceeding in equity is pending, any person not a party thereto may, upon making it appear to the superior court that he is interested in the subject matter of the suit or proceeding, * * * be allowed to become a party to such suit or proceeding, upon such terms and conditions as the court shall prescribe. In Burrill v. Garst, 19 R. I. 38; 31 Atl. 436, the Supreme Court of the State of Rhode Island, in construing the above statute, said: *490l'lie general rule in equity as to parties is that all persons interested in the subject-matter of the suit or in the object to be attained by it ought to be made parties either as complainants or respondents. It also held that such parties might be brought in upon their own application, the voluntary orders of the court, or— where the defendants already before the court have such an interest in having them made parties as to authorize them to object to proceeding without such parties. In these circumstances and in the light of cited statutes and decisions the argument that petitioner was not a party to the suit in equity is not persuasive. The respondent suggests that the payment in question should be regarded as a distribution of corporation surplus for the benefit of stockholders. Upon the record we are of the opinion that this theory is untenable. Only a part of the stockholders objected to the proposed settlement of the trustees. Many of the nonobjectors were not represented in the suit and incurred no expenses for counsel fees or otherwise in connection therewith. The payment of the costs of the litigation from surplus in nowise benefited them since it discharged no obligations which they had incurred or assumed and reduced their interest in the assets of the petitioner. The legal basis for this theory is not apparent but if it is sound it would seem to follow that a great body of corporate disbursements might be excluded from allowable deductions from income as it must be presumed that every payment lawfully made by a corporation is for the benefit of all the stockholders. In proper circumstances a court may require a corporation to distribute a part or all of its surplus for the benefit of shareholders, but the selection of a special group to receive the benefits of such a distribution at the expense of all the remaining stockholders can not be supported by any principle of law with which we are familiar. It is our opinion that the payment in question can not be regarded as distribution from surplus in which benefits measured by stockhold-ings were enjoyed by all the shareholders of the petitioner. The respondent also argues that in the assessment of the costs and fees here in question against the petitioner the court of equity transcended its discretionary powers and suggests that the petitioner should have appealed against that judgment. This suggestion raises questions in which we have no concern and that in our opinion are outside the field of our limited jurisdiction. It may be that the court was moved by motives of expediency, but it is well settled that in an equity suit the assessment of costs is discretionary with the court. The rule is stated in 15 Corpus Juris 32, 34 as follows: In equity tbe costs are not necessarily adjudged, as at law, against tbe losing party. In tbe absence of statutes providing otherwise, tbe allowance of costs is wholly within the court’s discretion, and such discretion cannot be reviewed or interfered with, unless it has been manifestly abused. *491We are not concerned with the cause or reasons for the assessment against the petitioner, only with the amount in controversy, and are satisfied that the court of equity acted within its proper authority, based upon .section 22, chapter 339, General Laws of Rhode Island, which provides: In any bill or petition in equity wherein construction of a will or trust deed or any part thereof is asked, there may be allowed to each of the parties defendant brought in by such bill or petition, applying therefor, such reasonable sum for expenses and on account of counsel fees as the court in which such case is pending shall deem proper; such allowance shall be taxed as costs in the cause and be paid out of the estate or fund in the hands of the complainant concerning which estate or fund the construction is asked. It is true that the payment here in controversy was not in the nature of an ordinary or recurring expense incident to the production of the petitioner’s operating income in the taxable year, but the courts and this Board have often held that regular recurrence of expenditures is not an essential characteristic of deductible expenses and that unusual, extraordinary and nonrecurring payments, including attorneys’ fees and court costs in connection with suits at law relating to the business of a corporation may be deductible from gross income for Federal tax purposes as operating expense unless it is clear that the obligation requiring such payments was incurred for the purpose of preserving or increasing capital assets, in which event they should be capitalized. The objecting beneficiaries in the suit in equity in this proceeding raised the single question that the income of the trust had been improperly distributed. If they had prevailed the petitioner would have received a large additional income in the taxable year, but its capital structure, except for profits-tax purposes, would not have been affected. Cf. Kornhauser v. United States, 276 U. S. 145; J. W. Forgeus, 6 B. T. A. 291; American Feature Film Co., 11 B. T. A. 1271; O'Day Investment Co., 13 B. T. A. 1230; Peter Frees, Jr., 12 B. T. A. 737; F. Meyer & Brother Co., 4 B. T. A. 481. The petitioner is entitled to deduct the amount of $29,273.38 from its gross income for the year 1920 in the computation of its income-tax liability for such year under the provisions of section 234(a) (1) of the Revenue Act of 1918. In connection with the petitioner’s claim for the deduction of $14,508.81 from its gross .income for 1923, we must decide (1) whether the petitioner’s claim in abatement for the tax liability of such year was-timely made, and (2) if so, whether the deduction claimed is allowable as an ordinary and necessary business expense for the period in question. The petitioner claims that it received notice of the jeopardy assessments of $18,157.17 and $3,218.85 on May 18, 1925, and that about the same time it received a first notice and *492demand for the payment of the assessment for 1920 and that the assessment for 1923 was not included in such demand, and further claims that on or about September 2, 1925, it received notice and demand for the payment of the assessment for 1923 taxes assessed in May of that year. The respondent contends that notice and demand for the assessment of the tax for 1923 was mailed to the petitioner ,in May, 1925, and that petitioner failed to make a claim in abatement thereof accompanied by bond within 10 days of such notice and thereby lost its right to appeal to this Board for redetermination of the tax liability in question. All the undisputed facts relating to the controversy over our jurisdiction are fully set forth in our findings of fact. The issue here is whether the Commissioner included the assessment of each of the years in question in the first notice and demand for payment which was issued in May, 1925, as he asserts, or whether he issued no notice and demand for the payment of the assessment of tax for 1923 until about September 2, 1925, as the petitioner claims. The respondent contends that if the first notice and demand for payment issued in May included both assessments, this proceeding is not properly before the Board as to 1923, since the petitioner admits that it filed no claim in abatement or bond on account thereof until some date in September. The respondent relies entirely on the presumption that his determination is correct unless overcome by positive evidence adduced by the petitioner. This is, of course, the general rule, but in this controversy we are not able to identify the tax determination for which the benefit of the presumption is claimed. In May, 1925, the respondent made an additional jeopardy assessment against this petitioner on account of its tax liability for 1923 in the amount of $3,218.81, which, with the original assessment, increased petitioner’s tax liability to $6,311.46. In his letter of March 26, 1926, which is the basis for this proceeding, he allows a part of the deduction claimed by the petitioner in the amount of $2,318.85, and disallows the remainder in the amount of $12,130.26. This indicates that sometime between May, 1925, and March 26, 1926, the Commissioner considered the petitioner’s claim for the abatement or reconsidered his own determination of the assessment made in May, 1925, and reached the conclusion that the petitioner’s true tax liability for 1923 is $4,608.90. It would appear, therefore, that the determination which we must presume to be correct is that set forth in the letter which is the basis for this proceeding and that such determination results from the denial in part of the petitioner’s claim in abatement on account of the assessment of tax for 1923. In any event we are satisfied that the petitioner has adduced sufficient evidence to establish its contention that the first notice and demand for the payment *493of the assessment for additional tax for the year 1923 was issued about September 2, 1925. It follows, therefore, that the claim in abatement and bond filed on September 10, 1925, were timely, and that the deficiency in controversy is properly before the Board for redetermination. The petitioner’s deduction of the amount of $14,508.81 from its gross income in 1923 as ordinary and necessary expenses incurred in the operation of its trade or business was disallowed in part and allowed by the Commissioner in part. The disallowance was based on the theory that liability for the amount disallowed was incurred in the promotion and incorporation of the Dutch company to which the petitioner transferred its business and assets on August 31, 1923. The evidence discloses that Shearman & Mitchell were the regular attorneys of the petitioner, and that for the performance of routine legal services they were ordinarily paid $250 per year, and that a settlement in full had been made with them after the termination of the suit in equity in 1920. Thereafter, they continued to render routine legal services through 1921, 1922, and to August 31,1923, and the evidence establishes the fact that for such time such services were worth not more than $2,000. During the same period this firm advised with and assisted the petitioner in the matter of winding up its affairs preparatory to the incorporation of the Dutch corporation. From the evidence we conclude that only a comparatively small part of the amount paid to Shearman & Mitchell in 1923 was compensation for services rendered in connection with the trade or business of the petitioner. Coudert Brothers were not employed by the petitioner until sometime in 1922. This firm rendered no service except in connection with the plans for winding up the business in this country and in the investigation of the corporation laws of European countries. A careful consideration of the record convinces us that the greater part of the attorneys’ fees paid in 1923 had no relation to the trade or business of the petitioner in 1921, 1922, and 1923, but were compensation for services rendered in connection with the proposed reincorporation. In these circumstances we are of the opinion that the bulk of these payments should be regarded as organization expenses incurred and paid in connection with the promotion and incorporation of the new company to which the petitioner transferred its assets and business and must, therefore, be regarded as capital expenditures. On this issue the evidence fails to overcome the presumption that the deficiency asserted by the respondent for the year 1923 is correct. First National Bank of St. Louis, 3 B. T. A. 807; Emerson Electric Manufacturing Co., 3 B. T. A. 932; Weber-Bunke-Lange Coal Co., 11 B. T. A. 503; Clarence Whitman & Sons, Inc., 11 B. T. A. 1192. Decision will be entered under Rule 50.

2020-01-17 22:01:43.868228+00

*496OPINION. Tetjssell : The petitioner contends that certain losses, paid in cash during 1921 and 1922, are subject to the provisions of section 204 of the Revenue Act of 1921, allowing the deduction of net losses from net income of succeeding years. The amounts of the losses are not in controversy and it is not disputed that they are deductible from income for the year’in which sustained. The question for decision is whether the losses resulted from a business, as they must have to come within the statutory definition of “net loss,” in section 204(a) of the Revenue Act of 1921, reading, so far as material here, as follows: That as used in this section the terra “ net loss ” means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer ⅜ ⅜ *. The pertinent regulations of the Commissioner are contained in article 1601 of Regulations 62, and provide: The term “ net loss ” as used in the statute means only a net loss resulting from the operation during the taxable year of any trade or business regularly carried on by the taxpayer. ⅜ ⅞ * In order to be entitled to claim an allowance for a “ net loss ” the taxpayer must have suffered an actual net loss in a trade or business during the taxable year. * * * The petitioner was active during 1920, 1921, and 1922, in the purchase and sale of cotton futures and corporate stock. The transactions were conducted through a firm of cotton merchants and brokers with whom he had been dealing since the fall of 1917. The extent of these activities prior to 1920 is not shown, but we do know that the purchases and the sales, considered as separate transactions, amounted in number as follows: during 1920, 71 transactions; during 1921,71 transactions; during nine months of 1922, 58 transactions. In point of time the petitioner devoted about 75 per cent of his business hours to the dealings in cotton futures. The transactions were all separately authorized by him and they were the results of his constant personal attention to the business. The purchases and sales occurred with regularity throughout the .years and period. The futures were uniformly disposed of prior to the delivery dates. The net results of the transactions were disastrous, financially. Losses were suffered, the amounts of which are set out in the findings. The respondent argues that the petitioner, in order to sustain his contention, must show that he was 'regularly engaged in the business of buying and selling cotton futures and that such transactions constituted a trade or business. We are in agreement with this and, furthermore, we are of opinion that the petitioner has amply qualified in regularity, whether tested by the number of transactions, in *497the amount of his personal time and efforts devoted to the business, or in the duration of the period in which he was active. . Since the statute extends the benefit of the section to any business it is not greatly material that we are satisfied that the dealings in cotton futures were, at least for 1921, the principal activity of the petitioner. What constitutes a business has previously been considered in a number of cases. 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 Dict. 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 and Tracy, 220 U. S. 107; Von Baumbach v. Sargent Land Co., 242 U. S. 503. In J. J. Harrington, 1 B. T. A. 11, we distinguished between isolated transactions and activities constituting a vocation, finding against the taxpayer upon the fact that the transactions were few and isolated. See also R. J. Palmer, 4 B. T. A. 1028; Fridolin Pabst, 6 B. T. A. 843; Harry J. Gutman, 7 B. T. A. 500; Louis M. Goldberg, 9 B. T. A. 1355; Isadore Finkelstein, 10 B. T. A. 585; Margaret B. McLaughlin, Executrix, 12 B. T. A. 19; Monte v. Eisner, 266 Fed. 161. In Bryce v. Keith, 257 Fed. 133, a loss was found to have been “ incurred in trade ” where the period was of some length; the transactions complicated, the sum of money involved large, and much time and attention were required. The court cited with approval the wording of Treasury Decision 1989, which it set out, as follows: Losses actually sustained during the year incurred in trade are limited by the language of the act itself. In trade is synonymous with business; business has been defined as that which occupies and engages the time, attention and labor of any one for the purposes of livelihood, profit, or improvement; that which is his personal concern or interest; employment, regular occupation, but it is not necessary that it should be his sole occupation or employment. The doing of a single act incidental or of necessity not pertaining to the particular business of the person doing the same will not be considered engaging in or carrying on the business. It is therefore held that no losses are deductible in a return of income save and only those losses permitted and provided for by the statute, viz, those actually sustained during the year, which are incurred in trade. The respondent cites Monte v. Eisner, supra, a case in which a member of a firm of manufacturers of jute bags, etc., engaged in buying and selling cotton for his individual account in no way connected with the business of the firm. The court cited Treasury Decision 2090 as follows: Loss, to be deductible, must be an absolute loss, not a speculative or fluctuating valuation of continuing investment, but must be an actual loss, actually sustained and ascertained, during the tax year for which the deduction is sought to be *498made; it must be incurred in trade and be determined and ascertained upon an actual, a completed, a closed transaction. Tbe term “ in trade,” as used in the law, is held to mean the trade or trades in which the person making the return is engaged; that is, in which he has invested money otherwise than for the purpose of being employed in isolated transactions, and to which he devotes at least a part of his time and attention. A person may engage in more than one trade, and may deduct losses incurred in all of them: Provided that in each trade the above requirements are met. As to losses on stocks, grain, cotton, etc., if these are incurred by a person engaged in trade, to which the buying and selling of stocks, etc., are incident as a part of the business, as by a member of a stock, grain, or cotton exchange, such losses may be deducted. A person can be engaged in more than one business, but it must be clearly shown in such cases that he is actually a dealer, or trader, or manufacturer, or whatever the occupation may be, and is actually engaged in one or more lines of recognized business, before losses can be claimed with respect to either or more than one line of business, and his status as such dealer must be clearly established. And was of the opinion: We think that the language “ losses incurred in trade ” are correctly construed by the Treasury Department as meaning in the actual business of the taxpayer, as distinguished from isolated transactions. The court was further of the opinion that the transactions in that ease were in fact isolated, therefore, not incurred in trade. The respondent also cites Lederer v. Cadwalader, 274 Fed. 753, and Woods v. Lewellyn, 289 Fed. 498, cases under section 209 of the Revenue Act of 1917, involving questions of the rate of taxability of income from a trade or business. In both cases article 8 of Regulations 41 was cited, providing as follows: Trade ” in the Case of Individuals. — In the case of an individual, the terms “trade,” ‘“business,” and “trade or business” comprehend all his activities for gain, profit, or livelihood, entered into with sufficient frequency, or occupying such portion of his time or attention as to constitute a vocation, including occupations and professions. When such activities constitute a vocation they shall be construed to be a trade or business whether continuously carried on during the taxable year or not, and all the income arising therefrom shall be included in his return for excess profits tax. In the following cases the gain or income is not subject to excess profits tax; and the capital from which such gain or income is derived shall not be included in “ invested capital ” ; (a) Gains or profits from transactions entered into for profit, but which are isolated, incidental, or so infrequent as not to constitute an occupation; and (b) the income from property arising merely from ownership, including interest, rent, and similar income from investments except in those cases in which the management of such investments really constitute a trade or business. In the Woods v. Lewellyn case the court approved of this regulation, saying: The foregoing in our opinion, is a fair common sense construction of Section 209 of the Act of October 30, 1917. ⅜ * * It taxes only income derived from activities in the exercise of the regular occupation, not sums earned incidentally by activities outside that regular occupation. *499In both cases the court decided that the income was derived from isolated or incidental transactions, consequently they were not from a trade or business. We think these decisions and the Commissioner’s regulations are all in substantial agreement in principle. Incidental or isolated transactions are uniformly excluded in a consideration of income derived or losses incurred in trade or business, but where, as in the instant ease, the activities amount to a vocation, then the operating results are attributable to a “ trade or business.” We have no doubt that the purchase and sale of cotton futures and margin transactions in stocks carried on through the medium of regular brokers may and often do constitute a vocation, a trade, or a business in which men engage for the purpose of producing a livelihood, and we believe that the evidence in this case warrants the finding that the petitioner was engaged in such trade or business during the calendar years 1921 and 1922, and that his losses during those years should be taken into account in determining net income and also statutory net losses under the provisions of section 204 of the Revenue Act of 1921. Petitioner’s net loss for the year 1921, and also for the year 1922, in the event that a recomputation for that year in accordance with this opinion results in a net loss, should be recomputed on the basis of losses sustained in cotton futures and margin stock transactions closed during each of said years respectively. Cf. Monroe Washer, 12 B. T. A. 632. Judgment will he entered under Ride 50.

2020-01-17 22:01:43.90413+00

Lansdon

*500OPINION. LaNsdon: In this proceeding the petitioner asks for a redeter-mination of a deficiency in income and profits tax which the Commissioner has asserted for the year 1920 in the amount of $14,077.44. The single issue is whether the petitioner is entitled to deduct $36,000 from its gross income in the taxable year as ordinary and necessary expenses incurred or paid in the conduct of its trade or business. The Commissioner has allowed a part of the deduction claimed in the amount of $3,593.90, disallowed the remainder, and determined the deficiency here in controversy. The petitioner was a New York corporation, with its principal office in the City of New York. Its business has since been taken over by Golding Brothers, Inc. In the taxable year it was engaged in buying gray cotton fabrics for conversion into cretonne and other prints and in the sale of the finished product to customers throughout the United States and Canada. It operated no plants or factories but utilized the services of various fabric printing mills in Massachusetts and Bhode Island for the conversion of plain goods into the printed material which it sold to its customers. It had three stockholders who were also its directors. Alfred Hahn, the president, owned 50 per cent of the common and all the preferred stock. Joseph Golding and Samuel Golding, also directors, each owned 25 per cent of the common stock. Hahn was the office and financial manager and the Goldings traveled the country and sold the petitioner’s products to the retail and wholesale trade, principally to the manufacturers of mattresses and other beddings. On December 15, 1820, a special meeting of the stockholders and directors of the petitioner, held at the office in New York, considered the expenditures incurred by each of the stockholders on behalf of the company in that year and authorized the payment to each of the amount of $12,000 as reimbursement for disbursements made in the interest of the petitioner. In certain schedules submitted to the Board and received in evidence the petitioner sets out the actual amounts claimed to have been so expended by the three directors. The statement of amounts alleged to have been expended by Alfred Hahn in the interest of the petitioner in 1920 includes three items: Chicago convention, $2,750; 32 trips tó mills, $6,400; bonuses to mill help, $3,300; or a total of $12,450. The statement of the expenses alleged to have been incurred by Joseph Golding in the year 1920 in the interest of the petitioner includes eight items: Chicago convention, $2,800; New York and New England trip, January 23 to February 14, $1,144.68; coast trip, February 15 to April 27, $2,624.01; middle western trip, May 2 to June 30, $4,617.44; second coast trip, July 5 to August 30, $2,852.01; Cana*501dian trip, September 8 to September 22, $1,104.96; second middle western trip, October 3 to November 25, $3,914.44; second New England trip, November 27 to December 17, $853.68; or a total of $19,911.22. The statement of the expenses alleged to have been incurred and paid by Samuel Golding in the taxable year in the interest of the petitioner includes four items: Chicago convention, $3,150; coast trip February 15 to April 27, $6,543.01; middle western trip, May 10 to June 23, $3,680.16; second coast trip, August 28 to December 21, $5,311.01; or a total of $18,684.18. The complete schedule of the Canadian trip made by Joseph Golding is as follows: Sept. 8 Chicago, Ills. Sept. 14 Red Dier (Red Deer). 9 Calgary, Can. 15 St. Johns. 10 Botbwell, Ont. 16 Stratford, Ont. Chesley, Ont. 17 Toronto, Ont. Hamilton, Ont. 18 Van Couver, B. C. Kitchner, Ont. 19 Waterloo, Ont. London, Ont. Windsor, Ont. 11-12 Montreal, P. Q. 20 Halifax, N. S: New Glasgow, P. Q. 21 Winnipeg, Manitoba. Ottawa, Ont. 22 Chicago, Ills. 13 Quebec, P. Q. $1,104.96 The copy of the corporate minutes of the meeting of December 15, 1920, of stockholders and directors, in which payments to Alfred Hahn, Joseph Golding, and Samuel Golding in reimbursement of expenses were authorized, recites that “ all the directors and stockholders were present in person,” and is signed by Sam Golding, secretary, and A. Hahn, president. The schedules of travel introduced in evidence show that on the day of such meeting Sam Golding and Joe Golding were in Chicago, and Springfield, Mass., respectively. In the income and profits-tax return of the petitioner for 1920 it is set forth and sworn to by the president of the petitioner that Alfred Hahn, Sam Golding and Joe Golding each devoted his entire time to the affairs of the petitioner in that taxable year and that each received a salary of $5,500. In the income and profits-tax return for the same year of Golding Brothers, a corporation owned by the same parties and engaged in similar business and later the successor of this petitioner, it is set forth that Sam Golding and Joe Golding each devoted his entire time to the business of such Golding Brothers, and that each received a salary in the amount of $24,000 for his services. The theory upon which the petitioner bases its claim of right to take the deduction in controversy is that the year 1920 was an extraordinarily hazardous period in the cotton-converting trade and that without heroic measures of some sort its business was likely to be *502destroyed. Large purchases of gray goods had been, made in advance at prices that prevailed when raw cotton sold for something like 40 cents per pound, and products to be developed from such purchases had been sold in advance at correspondingly high prices. Early in the year cotton prices began to decline and some of the customers of the petitioner sought to cancel their contracts and some refused to accept merchandise after it had been shipped and invoiced to them. In these conditions the petitioner sought to save its business by having its officers personally call on its customers for the purpose of persuading them to accept shipments and make payments on contracts previously entered into. It was also necessary to speed up production at the printing mills in order that a large volume of deliveries might be made before customers could realize the situation and take measures for evading their contractual obligations. Petitioner admits that the greater part of the amount of $50,000 which it claims was spent by its officers in the taxable year was used for the entertainment of its customers and as largesses, tips or bonuses to encourage mill employees to speed up the delivery of its finished product. Supporting its claim by the facts and allegations set forth above, the petitioner asks this Board to determine that it is entitled to deduct from its gross income in the taxable year the amount of $36,000 alleged to have been authorized or incurred by proper corporate action on December 15 of such year as ordinary and necessary expenses incurred in its trade or business. In proceedings which involve only the determination of facts it is not our custom to engage in any extended analysis of the bases for our conclusions, but in the instant case the deficiency is substantial, the circumstances are so unusual, and the evidence is so extraordinary in its nature and implications that we think it best to depart from our usual method and discuss in some detail the assertions and allegations of the petition, the oral testimony of the witness, and the documentary and other evidence submitted for our consideration. In the detailed schedule of his trip through Canada, from September 8 until September 22, Joseph Golding at a cost of only $1,104.96 made a remarkable record as a traveler. This schedule shows that on September 8 Joseph was in Chicago, and that on the next day he was in Calgary, Canada,' after a one-night journey of more than 2,000 miles. That jump shows some expedition in moving about, but gives only a faint picture of the ease and speed with which this earnest and tireless traveler transferred himself from one point to another in the very considerable area included in the Dominion of Canada. After spending September 9 in Calgary, we find that on the 10th he was in Bothwell, Chesley, Hamilton, Kitchener and London, Ontario. The shortest distance between Calgary and the *503nearest of these towns is much more than 2,000 miles, and that all four of them were made in a singde day notwithstanding the fatigue incident to the long journey of the night before eloquently testifies to the industry and zeal of a man who shrank from no labor or privation necessary to save his business from disaster. On the 17th of September Joseph ivas in Toronto, and the 18th in Vancouver, only about 2,700 miles away. From Vancouver he jumped, flew or skipped back to Ontario, where he spent the 19th at Waterloo and Windsor. On the 20th he was in Halifax, N. S., on the 21st in Winnipeg, Manitoba, and on the 22nd he was back in Chicago, after having completed a trade trip which any fair minded man must admit was one of the most strenuous and remarkable tours in the history of the business of cotton converting or of any other commercial enterprise, even in this era of aviation, radio and television. Such an accomplishment is all but miraculous. Upon the record it is also conclusively established that Joseph Golding is a fast worker as well as a remarkable traveler. His schedule shows that he spent the 17th of September in Toronto, and that on that day he called on the Arrow Bedding Co., A. Bradshaw7 & Son, Canadian Feather & Mattress Co., Gold Medal Furniture Co., Marshall Ventilated Mattress Co., National Mattress Felt & Batting Co., Beliable Mattress Co., Simmons Co., Standard Bedding Co., Toronto Bedding Co., Toronto Feather & Dovra Co., Whitworth & Bestall, and McLeod Bros., or a total of some 14 concerns, and all this notwithstanding the fact that he must have been greatly fatigued by his long trip from St. Johns, N. B., where he was on the 15th, with a stop on the way back to call on a couple of concerns at Stratford, Ontario. It appears from the itineraries submitted in evidence that Samuel and Joseph Golding traveled together on the first trip to the Pacific Coast in 1920. They left Chicago on February 15 and returned to that city on April 27, and each visited the same towns on the same dates. Just which of the two rendered the more efficient service in persuading customers that contracts should not be canceled is not apparent from the schedule or from any evidence adduced at the hearing, but the claim is made that on this trip of some 75 days Sam spent $6,543.01 and that Joseph got by with the comparatively small outlay of $2,624.01, or approximately $4,000 less than it cost his brother Sam, who presumably rode the same trains and stopped at the same hotels. It is a fair inference, therefore, that Joe did his persuading by personal contact and argument and that Sam relied largely on the soothing and softening effect of entertainment. Later in the year each of the brothers made a second visit to the coast. On his trip Joseph left Chicago on July 5 and returned to that place on August 28, at a cost of $2,852.01. On the same day that Joe got back *504Sam started on his second coast trip, visited exactly the same towns and presumably the same customers that had just been seen by Joe and completed the round trip to Chicago on December 24, at a cost of $5,311.01. It will be noted that the total of each account is a certain number of dollars plus one cent, which possibly may be regarded as evidence of the meticulous care exercised in keeping track of every item of expense that was incurred in the operation of the trade or business in which these two remarkable travelers were engaged. The several trips to the coast were made with a good deal of speed, but in no instance is Joseph’s tour through Canada equaled or even approached for celerity and dispatch, although it appears that on such journeys each of the brothers was able to do business in Salt Lake City and in Portland, Oreg., and in Seattle, Wash., and Sacramento, Calif., on successive days, notwithstanding the fact that the fastest railroad trains require more than 24 hours to cover the distance traveled between one town and the next. Alfred Hahn was the president and office manager of the petitioner in the taxable year. The product sold was printed in mills in Massachusetts and Rhode Island. He testified on oath at the hearing, and furnished a statement which was accepted for the record, that he made 32 trips to the mill towns for the purpose of hurrying up production in the taxable year and that such trips cost him $6,400, or an average of $200 a trip. As none of these towns is as far as 200 miles from New York City, it is obvious that the railway fares paid could not have averaged more than $10 a round trip, or a total of $320 for all the journeys to the mills. This leaves a balance of a little more than $6,000 which Hahn must have spent for subsistence and for the entertainment of customers or mill managers who were printing fabrics for the petitioner, or in the purchase of certain automobiles which he testifies he presented to some persons in his eager and zealous efforts to save his business from irretrievable disaster. Hahn also swore that he paid the amount of $3,300 to mill help as bonuses to encourage speed in getting out his orders. If other customers of the same printing mills were equally generous it is clear that the mill managers and mill help must have been well entertained and well bonused during 1920 and that wages from their employers may have been only a negligible part of the earnings of one group of New England mill executives and operatives in that year. January 9 to 17, 1920, all three of the principal stockholders and officers of the petitioner attended a trade convention of bedding concerns in Chicago. At this convention the petitioner claims that its representatives spent approximately $3,000 each, or a total of $8,100 for travel, subsistence and the entertainment of customers. The record includes no itemized statement of the cost of travel and sub*505sistence, but allowing $10 per day for room and board and making generous provision for railway and Pullman fares, meals and tips en route, it is certain tliat the ordinary and necessary expenses of the round trip from New York to Chicago could not- have been more than $300 per man, or a total of $900. This leaves approximately $8,000 that was spent in entertaining customers. Hahn testified that this entertainment consisted of a series of banquets at each of which there were from 30 to 50 invited guests, the supply of “ booze ” purchased for the use of customers and after-midnight theater parties and other undescribed diversions for customers. As the slump in business and decline in cotton prices did not begin until about the 1st of May, it is obvious either that the expenditures were not incurred in warding off a business disaster then known to be impending, or that if so, the officers of the petitioner must have been gifted with a second sight which enabled them to foresee a situation not even suspected by other business men. In his brief counsel for the respondent harshly criticizes the ethics of the petitioner’s method of securing and holding business and suggests that it is an insult to the dignity and intelligence of this Board to ask that amounts spent in the purchase of liquors, in securing illicit entertainment for the diversion of customers, and in tips or bonuses to the employees of printing mills should be regarded as ordinary and necessary business expenses. It may bo that this is true, but, subject to the provisions of the law and our rules, every appellant before this Board is entitled to try his case in his own way. This proceeding was instituted in all seriousness, was zealously prosecuted by counsel, and can hardly be characterized as a mere frivolous attempt further to postpone the payment of taxes already overdue. In these circumstances we are not inclined to indulge in any criticism of the petitioner or its counsel, or take any action other than to consider the evidence, weigh the arg-ument of counsel, and decide the question submitted. The law provides for deduction from gross income of ordinary and necessary expenses incurred or paid in the operation of a trade or business. Whenever a taxpayer takes such deductions it is the duty of the Commissioner to determine whether the amounts so claimed fall within the intendment of Congress as expressed in the taxing statutes. In the instant proceeding such determination denies the contention of the petitioner and adds to income certain amounts deducted in the petitioner’s return for the taxable year. Under the law and our rules of procedure the determination of the Commissioner establishes a prima facie case for the Government. To prevail in this controversy the petitioner must adduce evidence sufficient to overcome the presumption that the action of the respondent is correct. It is asserted that on December 15, 1920, the petitioner, by appro*506priate corporate action, was duly authorized to pay $12,000 to each of its three stockholders to reimburse them for costs of travel and entertainment of customers which they had theretofore advanced from their own funds. There is no persuasive evidence that such advances were authorized by the company, that the amounts thereof were actually expended as alleged, or that the petitioner paid anything to its stockholders on account thereof either in the taxable year or at any other time. It is true that documents purporting to be itemized statements of the expenditures alleged to have been made by the officers of the petitioner when traveling in its interest have been submitted in evidence. In such statements, however, there are no segregations showing amounts paid for railway fares, hotel bills, and other expenses ordinarily incurred by commercial travelers. Apparently recognizing the infirmity of the evidence, both as to the nature of the alleged expenditures and as to whether as a matter of fact they were ever made, counsel for the petitioner develops and advances the theory that the corporate authorization to reimburse stockholders for amounts which the petitioner is satisfied were expended in its interest is enough to establish deductibility. In his brief he thus states his theory: In other words, in the case at issue it would not be necessary for the petitioner to prove any further facts than that it paid to its officers certain amounts as reimbursement for expenses incurred by such officers. The character of the traveling, entertainment or outlays of any kind by the officers would not be necessary. The only proof necessary to sustain this case would be that appropriate resolutions wore passed and that the sums set forth in the resolution were paid. We are unable to accept this theory. We think the taxing officers of the Government very properly may require proof that deductions claimed as herein fall within the commonly accepted and legally determined definition of ordinary and necessary expenses incurred in a trade or business. Obviously the principle and procedure suggested by counsel would be satisfactory to tins petitioner, since in our opinion it would permit stockholders to withdraw profits undiminished by taxes paid at the source, and that as reimbursements for advances would not be income taxable to the recipients. The circumstances of this proceeding clearly indicate that the rule devised by counsel could not be applied without jeopardizing the collection of revenues due to the Republic and essential to its safety. The clever and ingenious argument of the learned counsel fails to convince us that his theory is either sound or safe. After a careful consideration of the evidence and the arguments of counsel, we are of the opinion that the petitioner has failed to overcome the presumption that the determination of the respondent is correct. Decision will fe entered for the respondent.

2020-01-17 22:01:43.971981+00

Artjndell

*508OPINION. ARtjndell : We have in this proceeding two petitions for redeter-mination of deficiencies for the year 1922. One petition, that in Docket No. 10188, is based on respondent’s notice dated October 23, 1925, in which a deficiency of $18,033.52 was found. The other is based on respondent’s notice of April 14, 1927, finding a deficiency in the amount of $23,955.74. The second petition contains the same allegation of error, though stated differently, as the earlier one and which is given as allegation of error (a) in our preliminary statement. Upon motion of counsel for respondent, the two proceedings were consolidated and we will here consider them as one proceeding involving a deficiency in the amount of $23,955.74. See G. S. Crilly, 15 B. T. A. 389. On the first issue counsel for petitioner rested his case on the pleadings. The facts gathered therefrom are, in brief, that in 1922 the corporation in which petitioner was the principal stockholder declared a 130 per cent dividend and that petitioner’s share thereof *509was later returned by him to the corporation. There is nothing in these facts to indicate that the amount received was not a dividend. The second claim of petitioner rests on that part of section 201(b) of the Revenue Act of 1921, which provides that: * ⅝ * Any earnings or profits accumulated or increase in value of property accrued prior to March 1, 1913, may be distributed exempt from the tax, after the earnings and profits accumulated since February 28, 1913, have been distributed. Under this second claim alternative arguments are made. First, that the contracts for construction work on the Field Museum represented an increase in the value of property accrued prior to March 1, 1913, which may be distributed tax-free, and, second, that the contracts were capital which the corporation is entitled to have returned before computing the earnings thereunder available for dividends. These arguments are predicated on the idea that the contracts had a determinable value on March 1, 1913. The only evidence offered as to the value of the contracts was the testimony of petitioner, to which, for reasons here set forth, we ascribe but little weight. While petitioner has had many years experience as a contractor and was able to state the factors to be taken into consideration in computing contract prices and the profit to be realized from the performance of construction contracts, his experience in valuing contracts for purposes of purchase or sale was exceedingly limited. In fact he had participated in but one such transaction, when some 10 years prior to March 1, 1913, he had purchased a contract involving a comparatively small amount. At that time, according to the testimony, labor and material costs were radically different from what they were in 1913. Moreover, the contingencies involved in these contracts can not be overlooked. It was not known at March 1, 1913, when construction would begin, but it was known that in all likelihood it would not be for several years, due to the necessity of securing authorization for location on the newly proposed site and other delays incident to the change of location. Further, the corporation could not assign the contracts except with the consent of the other contracting party. These considerations lead us, in weighing the evidence, to seriously doubt the soundness of the conclusion of the witness, and we are not convinced that the contracts had the value claimed for them. But, aside from this, and assuming that the contracts did have some value, on the authority of the decided cases we would still be compelled to deny the relief sought. In Edwards v. Kieth, 231 Fed. 110, and Woods v. Lewellyn, 252 Fed. 106, the question here presented was decided adversely to petitioner’s claims. In the latter case the court found that the taxpayer “ had a property right that had value.” *510In W. F. Workman, 14 B. T. A. 1414, the March 1, 1913, value of the anticipated receipts was determined. In all of these cases it was uniformly held that the amounts received after March 1, 1913, pursuant to contracts entered into before that date, were income in their entirety, regardless of whether- or not the contracts had a measurable value on that date. In some of the decided cases at least a part of the service contracted for had been rendered. Here, no part of the corporation’s obligation under the contract had been performed; the contract was wholly executory, and the compensation entirely contingent. Judgment will be entered for the respondent.

2020-12-01 22:01:13.599795+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:20-1634:J:PerCuriam:aut:T:npDp:N:2621356:S:0

NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Argued November 18, 2020 Decided December 1, 2020 Before DIANE S. SYKES, Chief Judge MICHAEL S. KANNE, Circuit Judge DIANE P. WOOD, Circuit Judge No. 20-1634 WILLIAM A. PANGMAN, Appeal from the United States District Plaintiff-Appellant, Court for the Eastern District of Wisconsin. v. No. 19-C-1615 KEITH L. SELLEN and LORRY ELDIEN, Lynn Adelman, Defendants-Appellees. Judge. ORDER William Pangman sued two employees of Wisconsin’s Office of Lawyer Regulation (“OLR”) under 42 U.S.C. § 1983 for alleged violations of his constitutional rights that occurred during an investigation into whether to reinstate his license to practice law. Shortly after Pangman filed this suit, the Wisconsin Supreme Court denied his petition for reinstatement. The district court dismissed the complaint for failure to state a claim upon which relief could be granted. Because Pangman filed his suit before the state-court judgment was entered, the Rooker-Feldman doctrine does not deprive this court of jurisdiction. But the judge correctly determined that Pangman did not state a claim, so we affirm. No. 20-1634 Page 2 In 1998 the Wisconsin Supreme Court suspended Pangman from practicing law for both administrative and disciplinary reasons. Pangman’s conduct in his postdivorce litigation resulted in a disciplinary suspension starting in April 1998. In re Disciplinary Proceedings Against Pangman, 574 N.W 2d 232 (Wis. 1998). The suspension was for 90 days, but Pangman’s license would remain inactive until he paid the costs of the proceeding. Id. at 241 . In June of the same year, the court suspended him for not complying with Wisconsin’s mandatory continuing legal education requirements. His license was suspended again in October for failing to pay bar dues. More than 20 years later, Pangman (who now resides primarily in the Dominican Republic) petitioned for reinstatement from all three suspensions. Pangman’s petition was subject to the rules promulgated by the Wisconsin Supreme Court. When a suspended attorney has not been reinstated after three years, the attorney must file a petition for reinstatement with the Wisconsin Supreme Court. See WIS. S. CT. R. 22.28(1)(c)–(d). The court refers the petition to the OLR to investigate the petitioner’s eligibility for reinstatement and recommend whether the court should grant or deny the petition. See id. R. 10.03(6m)(b); 31.11(1m)(a), (c). The OLR investigation includes whether the petitioner has “good moral character and the fitness to practice law” in Wisconsin. Polk v. Office of Lawyer Regulation, 732 N.W.2d 419 , 421 (Wis. 2007). The OLR must submit a recommendation to the court within 90 days of receiving the petition. See WIS. S. CT. R. 31.11(1m)(c). Several days after receiving Pangman’s petition for reinstatement on July 19, 2019, the OLR opened an investigation. Later that month on the OLR’s recommendation, the Wisconsin Supreme Court reinstated Pangman from his disciplinary suspension after determining that he had been making regular payments toward the costs of the proceeding, but his administrative suspensions remained in effect. Over the next few months, the OLR contacted Pangman several times for further information omitted from his petition. He provided some, but he also argued that the OLR was engaged in “unadopted rule usurpation” and the investigator showed “sentiments of potentially retaliatory resentment” in her questions. Pangman urged the investigator to narrow the scope of the inquiry because it extended beyond the investigative power delegated by the court. On October 16 (the day before the 90-day deadline for submission of the OLR report), the OLR sent a letter to the court (copying Pangman) explaining that because of its back and forth with Pangman about additional information, it could not complete its investigation within the deadline but would submit a recommendation no later than December 1. No. 20-1634 Page 3 Pangman then filed this suit in the Eastern District of Wisconsin on November 4, 2019, against Keith Sellen, the Director of the OLR, and Lorry Eldien, the investigator. Pangman alleged that they deprived him of substantive due process by withholding his law license and of procedural due process by failing to provide proper notice and a hearing or to submit a report within the 90-day time frame. He also asserted that the OLR employees violated the Equal Protection Clause under a class-of-one theory by penalizing Pangman for “conduct for which other attorneys enjoy no such impediment.” Finally, Pangman asserted that the OLR’s role in the attorney reinstatement process is a constitutionally impermissible violation of separation of powers. Pangman sought a court order requiring the OLR to recommend reinstatement. He also requested damages incurred because of the alleged violations, such as loss of potential income during the investigation. The defendants quickly moved to dismiss the complaint. Three weeks after Pangman filed suit, the OLR filed its recommendation against reinstating Pangman with the Wisconsin Supreme Court. The report articulated multiple concerns about his activities over the past 20 years that raised questions about his moral character and fitness to practice law. To give a few examples: The report explained that Pangman had criminal charges filed against him in 2004 for eight counts of failing to pay child support that resulted in a bench warrant when he did not show up for court. It also expressed concern about how Pangman had been supporting himself for two decades; he claimed involvement in different capacities with over 200 companies, but he would not elaborate on the dates of his involvement or what positions he held. The report explained Pangman had unsatisfied tax warrants in several counties in Wisconsin and that he has also not paid United States taxes while residing in the Dominican Republic. Pangman did not file a response, and on February 11, 2020, the Wisconsin Supreme Court denied his petition for reinstatement. The next month the district court dismissed Pangman’s complaint for failure to state a claim. The judge concluded that neither his due-process claim nor his equal- protection claim could survive the defendants’ motion to dismiss. Assuming without deciding that Pangman had a property or liberty interest in the reinstatement of his law license, the judge determined that the OLR did not deprive him of any interest because its role is purely investigatory. The judge also concluded that the equal-protection challenge could not proceed because Pangman did not identify what alleged conduct was discriminatory. He explained that although he would ordinarily grant leave to amend, Pangman’s many filings made it clear he had no viable claim, so amendment would be futile. No. 20-1634 Page 4 On appeal Pangman argues that the judge erred by dismissing his case because he pleaded valid § 1983 claims for due-process violations, an equal-protection class-of- one claim, and a separation-of-powers claim. First, we assure that these claims are not jurisdictionally barred by the Rooker-Feldman doctrine as an attempt to challenge a state-court judgment. See Rooker v. Fid. Tr. Co., 263 U.S. 413 (1923); D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983). At first glance the doctrine seems applicable; indeed, as the defendants point out, the case is quite like Feldman. Although Pangman’s arguments focus on the OLR’s procedures rather than directly challenging the Wisconsin Supreme Court’s judgment, the primary wrong Pangman wishes to redress is the court’s refusal to reinstate his law license. Attempts to challenge a final judgment masquerading as attempts to challenge procedures are jurisdictionally barred. See Jakupovic v. Curran, 850 F.3d 898 , 903 (7th Cir. 2017); Kelley v. Med-1 Sols., LLC, 548 F.3d 600 , 605 (7th Cir. 2008). Yet Rooker-Feldman does not apply because Pangman filed his suit before the Wisconsin Supreme Court issued its judgment. As the Supreme Court has explained, the Rooker-Feldman doctrine applies only to suits by state-court losers, whose injuries were caused by state-court judgments “rendered before the district court proceedings commenced.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 , 284 (2005). Here, Pangman filed the complaint in federal court on November 4, 2019, before the Wisconsin Supreme Court denied his petition for reinstatement on February 11, 2020, and even before the OLR submitted its recommendation to the court on November 29, 2019. Although Pangman’s complaint seemed to anticipate the court’s adverse ruling, he was not aggrieved by any judgment at the time he sued. And the Supreme Court has made clear that the entry of a state-court judgment after a federal lawsuit has commenced also does not trigger a jurisdictional bar. See id. at 292 . Because we have jurisdiction, we turn to Pangman’s challenge to the dismissal of his complaint, a decision we review de novo, accepting his factual allegations as true and drawing reasonable inferences in his favor. Tucker v. City of Chicago, 907 F.3d 487 , 491 (7th Cir. 2018). Pangman first contends that he stated a procedural due-process claim against the defendants. He needed to allege that the defendants deprived him of a valid liberty or property interest without adhering to the basic procedural obligations required by the Due Process Clause. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 , 542 (1985); Black Earth Meat Mkt., LLC v. Village of Black Earth, 834 F.3d 841 , 848–49 (7th Cir. 2016). The district court assumed that Pangman had a property interest in his right to practice law. State law dictates whether a professional license is property for purposes No. 20-1634 Page 5 of federal due process. Babchuk v. Ind. Univ. Health, Inc., 809 F.3d 966 , 969 (7th Cir. 2016). Although the Wisconsin Supreme Court has explained that a candidate not admitted to the bar has no liberty or property interest in employment in the legal profession, see In re Martin, 510 N.W.2d 687 , 692–93 (Wis. 1994), it is not clear whether this applies to the reinstatement of a law license. Regardless, even if Pangman had a protected interest in reinstatement, the OLR defendants did not—and could not—deprive him of that interest. For liability to exist under § 1983, an individual must have “personal involvement in the alleged constitutional deprivation.” Colbert v. City of Chicago, 851 F.3d 649 , 657 (7th Cir. 2017) (quoting Minix v. Canarecci, 597 F.3d 824 , 833 (7th Cir. 2010)). Pangman asserts that the OLR employees are personally involved because they failed to conduct a timely investigation, would not provide him with notice or a hearing, and “refus[ed] to lift the suspension.” But the OLR investigates reinstatement petitions and provides a recommendation to the Wisconsin Supreme Court. See WIS. S. CT. R. 31.11(1m)(c). The employees of the OLR have no power to grant or deny Pangman’s petition. See id. R. 21.09(1), 31.11(1m)(a). The OLR’s failure to submit the report within 90 days as required by the Wisconsin Supreme Court also did not violate Pangman’s federal due- process rights. The Constitution “does not enforce compliance with state procedural rules.” Manley v. Law, 889 F.3d 885 , 893 (7th Cir. 2018). Moreover, Pangman himself slowed the process: the OLR explained that it would be several weeks late submitting the report because of difficulty communicating with and gathering additional information from Pangman. Finally, from the complaint it is clear that Pangman received the cornerstones of due process, including notice of the proceedings (he initiated them) and an opportunity to be heard. See Mathews v. Eldridge, 424 U.S. 319 , 333 (1976). But he failed to engage fully with the OLR investigation and did not respond to its filing with the Wisconsin Supreme Court before the court denied his petition. Pangman asserts that the defendants also violated his substantive due-process right (a theory the district court did not address), but this claim cannot proceed either. Substantive due process is very limited in scope and protects against “only the most egregious and outrageous government action.” Campos v. County of Cook, 932 F.3d 972 , 975 (7th Cir. 2019). To state a substantive due-process claim, a plaintiff must allege that the government abused its power in a manner that is “so arbitrary and oppressive that it shocks the conscience.” Catinella v. County of Cook, 881 F.3d 514 , 519 (7th Cir. 2018). Nothing in Pangman’s complaint about the actions of the OLR comes remotely close to shocking the conscience. Rather, the employees requested additional relevant No. 20-1634 Page 6 information and then delivered a report and recommendation to the Wisconsin Supreme Court, as state law requires. See WIS. S. CT. R. 10.03(6m)(b); 31.11(1m)(a), (c). Pangman also argues that he stated an equal-protection claim because the OLR discriminated against him as a “class of one.” To survive a motion to dismiss on a class-of-one claim, a plaintiff must allege that he was “intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment.” D.B. ex rel. Kurtis B. v. Kopp, 725 F.3d 681 , 685–86 (7th Cir. 2013) (quoting Village of Willowbrook v. Olech, 528 U.S. 562 , 564 (2000)). Here, even if the OLR did treat Pangman differently than similarly situated individuals by asking more follow-up questions, his own complaint reveals the rational basis for doing so. See Miller v. City of Monona, 784 F.3d 1113 , 1121 (7th Cir. 2015). Pangman explained that he had been unable to provide documentation about his financial and employment history that other individuals routinely provide to the OLR. The Wisconsin Supreme Court has explained that employment during a suspension is relevant to investigating a petition for reinstatement, see In re Disciplinary Proceedings against Riley, 882 N.W.2d 820 , 832–33 (Wis. 2016), so the OLR had a rational basis for asking Pangman for more information. Pangman also asserts he stated a claim for a violation of “separation of powers.” But the federal doctrine of separation of powers is irrelevant. And the “Constitution does not prescribe any particular separation of powers, or other internal structure, of state government.” Pittman v. Chi. Bd. of Educ., 64 F.3d 1098 , 1102 (7th Cir. 1995). Finally, Pangman asserts that the district court erred by not granting his motion for reinstatement to the bar of the Eastern District of Wisconsin. But the judge properly refrained from acting on this request. As the judge noted at the hearing, federal bar admission is an administrative process determined by the Clerk of Court, not a judge. E.D. WIS. LOCAL R. 83(c)(2). The Eastern District of Wisconsin imposes reciprocal discipline on a lawyer who is suspended from practice by the highest court in a state where the lawyer is licensed, see id., but that, too, has nothing to do with this case, which involves admission to the Wisconsin bar, see WIS. S. CT. R. 21.01-02.1 AFFIRMED 1 The attorney admission roll of the Eastern District of Wisconsin reflects that Pangman is suspended, see https://ecf.wied.uscourts.gov/cgi-bin/BarLookup.pl (last visited Nov. 18, 2020), but he has not informed us whether he ever filed a request for reinstatement. Given the reciprocal discipline rule, it likely would not matter.

2020-12-01 22:01:13.822885+00

http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2020/D12-01/C:20-1119:J:PerCuriam:aut:T:npDp:N:2621285:S:0

NONPRECEDENTIAL DISPOSITION To be cited only in accordance with Fed. R. App. P. 32.1 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 Submitted November 18, 2020 Decided December 1, 2020 Before DIANE S. SYKES, Chief Judge MICHAEL S. KANNE, Circuit Judge DIANE P. WOOD, Circuit Judge No. 20-1119 UNITED STATES OF AMERICA, Appeal from the United States District Plaintiff-Appellee, Court for the Northern District of Illinois, Eastern Division. v. No. 1:17-CR-00299(1) TIMOTHY DORSEY, John J. Tharp, Jr., Defendant-Appellant. Judge. ORDER Timothy Dorsey operated a sex-trafficking ring in which his workers, adult men, would perform sexual acts on customers during erotic massages. He pleaded guilty to two counts of knowingly transporting individuals across state lines to engage in prostitution in violation of 18 U.S.C. § 2421 . The judge sentenced him to 120 months in prison. Dorsey appeals and argues that his sentence, which exceeded the high end of the Guidelines range by 79 months, is substantively unreasonable. The judge appropriately found the Sentencing Guidelines “grossly inadequate” to represent the objectives of 18 U.S.C. § 3553 (a) and reasonably justified the above-Guidelines sentence, so we affirm. No. 20-1119 Page 2 From 2011 to 2015, Timothy Dorsey ran a Chicago-based sex-trafficking operation that sent his workers across the country. Dorsey sold the workers for sex by posting online advertisements that offered sensual and erotic massages. Dorsey booked the appointments, informed customers what commercial sex acts his workers would provide, set the prices customers would pay, and coordinated transportation and lodging for his workers. He also collected half the proceeds. According to his workers, Dorsey physically and emotionally abused them and threatened to kill anyone who performed sex work outside the operation. In 2015 Dorsey pleaded guilty to a state pimping charge in Georgia and was incarcerated for almost a year. While in custody he attempted to run his operation by sending postcards to his workers with instructions on how to continue meeting with customers. After his release he was rearrested in Georgia in late 2016 on charges (later dismissed) of pimping and trafficking a female worker. In May 2017 Dorsey was indicted by a grand jury in the Northern District of Illinois on five counts of transporting individuals across state lines to engage in prostitution in violation of 18 U.S.C. § 2421 . Several months later he was indicted in the Middle District of Georgia under the same statute on another count. This indictment was transferred to the Northern District of Illinois. See FED R. CRIM. P. 20. Dorsey pleaded guilty to two counts of transporting individuals across state lines to engage in prostitution. The presentence report recommended a Guidelines range of 24 to 30 months in prison. At sentencing the government pushed for an above-Guidelines sentence of 8 to 10 years in prison to reflect, among other things, Dorsey’s role in the murder of Philip Scheau, one of his former workers. The government presented evidence that Scheau was shot and killed at Dorsey’s direction by one of his workers in a motel parking lot in February 2015—several weeks after Scheau stopped working for Dorsey. The government played excerpts from the shooter’s videorecorded confession to police officers in which he explained that he killed Scheau at Dorsey’s order after Scheau left the operation and started posting his own advertisements for sex work. To corroborate the shooter’s confession, the government introduced cell-phone and credit-card records showing that Dorsey had rented a car and driven from Texas to Illinois (where Scheau was killed) with the shooter around the time of the murder. The government also presented surveillance video of a car identical to Dorsey’s rental with the shooter being dropped off at the motel shortly before the murder. No. 20-1119 Page 3 After calculating the Guidelines range at 33 to 41 months, the judge deemed the range “grossly inadequate” to reflect the sentencing objectives of 18 U.S.C. § 3553 (a) and sentenced him to 120 months. An above-Guidelines sentence was justified, he explained, because of Dorsey’s long history of running his operation using manipulative and abusive tactics toward his victims, the actual danger that he presented to the public, and the risk for recidivism considering that he had continued to facilitate sex trafficking both during and after his Georgia incarceration. In addition, the judge found by a preponderance of the evidence that Dorsey initiated, planned, and directed Scheau’s murder. He acknowledged Dorsey’s mitigation arguments about his difficult childhood and older age (52) but concluded that none of the arguments warranted a lower sentence. The judge also determined that despite Dorsey’s admissions in the plea agreement, he had not fully accepted responsibility for his conduct based on ambivalent statements he made to the probation officer. (He told the probation officer that his business provided “legal companionship to lonely people” and that he turned a “blind eye” to his employees who performed sexual acts.) On appeal Dorsey challenges his above-Guidelines sentence on the ground that the judge focused too narrowly on his role in Scheau’s murder. Rather than address the nature and circumstances surrounding the interstate trafficking offenses for which he pleaded guilty, he asserts that the judge “focused entirely” on his involvement with Scheau’s murder—conduct for which he had not been indicted. Further, his case differs from other cases in which courts apply above-Guidelines sentences for uncharged violent conduct because no violence had been traced to him; the government never argued that he pulled the trigger and killed Scheau. Dorsey misapprehends the basis of the court’s sentence. As the judge explained, “[t]his is not a sentence for murdering Phillip Scheau. This is the sentence you deserve for committing the prostitution crimes that you’ve been charged with and convicted [of].” The judge concluded that the Guidelines range did not encapsulate the full scope of Dorsey’s conduct and his involvement in violent acts and that an above-Guidelines sentence was warranted. See United States v. Gill, 824 F.3d 653 , 665–66 (7th Cir. 2016). Primary in the judge’s determination was the abuse and manipulation that Dorsey imposed in his day-to-day operation of his business. The judge highlighted the nature and circumstances of the charged offenses, particularly Dorsey’s long and undisputed history of running his sex-trafficking operation, his manipulating and threatening tactics toward his victims, the many people involved, and his efforts to conceal the operation and obstruct law enforcement. Although Dorsey did not have an extensive criminal record, the judge pointed out that the year he spent in prison for a pimping No. 20-1119 Page 4 charge did not deter him from sex trafficking. Further, Dorsey’s aloof comments to the probation officer belied acceptance of responsibility for the charged offenses. And while the judge did not “focus entirely” on Dorsey’s role in Scheau’s murder, he did consider it an aggravating factor. This is permissible. Courts may consider relevant, uncharged conduct when imposing a sentence so long as the conduct is proved by a preponderance of the evidence. United States v. Holton, 873 F.3d 589 , 591– 92 (7th Cir. 2017). He had little difficulty concluding that the government had met this burden in the case of Scheau’s murder and that a higher sentence was needed to protect the public. Lastly, Dorsey’s denial that he committed “actual violence” is specious; whether he pulled the trigger does not undermine the judge’s determination that he orchestrated the murder and that it had been carried out at his command. Dorsey also asserts that the judge erred by not giving more weight to his arguments in mitigation, primarily concerning his difficult childhood. He notes that his mother died when he was a toddler, his father did not play an active role in his life, he had a difficult time in foster care, and he was sexually abused by an adult at his work when he was 14. The judge considered these arguments but reasonably concluded that a lesser sentence was not warranted. As a preliminary matter, Dorsey likely waived any procedural challenge by not responding to the judge’s inquiry about whether he had sufficiently addressed his principal arguments in mitigation. See United States v. Donelli, 747 F.3d 936 , 940–41 (7th Cir. 2014); United States v. Garcia-Segura, 717 F.3d 566 , 568–69 (7th Cir. 2013). In any event, the judge reasonably rejected his arguments in mitigation. As the judge explained, despite Dorsey’s background, he “clearly has a lot going for him”—he graduated high school, became a sergeant in the military, and has no documented substance-abuse or mental-health issues—yet he still spent years operating and profiting from his sex-trafficking ring. AFFIRMED